license or transfer of copyright ownership or under the limitations on exclusive rights in sound recordings specified by section 114(a). The ephemeral recording exemption should apply to broadcast radio and television stations when they make nonsubscription digital broadcasts permitted by the DPRSRA. The existing language of the ephemeral recording exemption (redesignated as 112(a)(1)) has therefore been changed to extend explicitly to broadcasters the same privilege they already enjoy with respect to analog broadcasts.

The second of these issues is the relationship between the ephemeral recording exemption and the anticircumvention provisions that the bill adds as section 1201 of the title 17. Concerns were expressed that if use of copy protection technologies became widespread, a transmitting organization might be prevented from engaging in its traditional activities of assembling transmission programs and making ephemeral recordings permitted by section 112 for purposes of its own transmissions within its local service area and of archival preservation and security. To address this concern, a new paragraph has been added to section 112 that permits transmitting organizations to engage in activities that otherwise would violate section 1201(a)(1) in certain limited circumstances when necessary for the exercise of the transmitting organization's privilege to make ephemeral recordings under redesignated section 112(a)(1). By way of example, if a radio station could not make a permitted ephemeral recording from a commercially available phonorecord without violating section 1201(a)(1), then the radio station could request from the copyright owner the necessary means of making a permitted ephemeral recording. If the copyright owner did not then either provide a phonorecord that could be reproduced or otherwise provide the necessary means of making a permitted ephemeral recording from the phonorecord already in the possession of the radio station, the radio station would not be liable for violating section 1201(a)(1) for taking the steps necessary for engaging in activities permitted under section 112(a)(1). The radio station would, of course, be liable for violating section 1201(a)(1) if it engaged in activities prohibited by that section in other than the limited circumstances permitted by section 112(a)(1).

Section 412: Limitations on Exclusive Rights: Distance Education. Section 412(a) directs the Register of Copyrights to consult with representatives of copyright owners, nonprofit educational institutions, and nonprofit libraries and archives and to submit recommendations to the Congress no later than 6 months after the date of enactment of the bill on how to promote distance education through digital technologies, including interactive digital networks, while maintaining an appropriate balance between the rights of copyright owners and the needs of users. Where appropriate, the Register shall include legislative recommendations to achieve those objectives.

Section 412(b) specifies considerations which the Register shall take into account in formulating such recommendations.

Section 413: Exemption for Libraries and Archives.

Section 108 of the Copyright Act (17 U.S.C. 108) permits libraries and archives of the type described in that section to make and, in some cases, distribute a limited number of copies of certain types of copyrighted works, without the permission of the copyright holder, for specified purposes relating to these entities' functions as repositories of such works for public reference. Section 413 of the bill updates section 108 to allow these entities to take advantage of digital technologies when engaging in specified preservation activities. Except for the amendment to subsection (a)(3), which deals with the inclusion of copyright notice on all copies or phonorecords of works made or distributed pursuant to section 108, the amendments revise either subsection (b), which addresses the reproduction and distribution of a copy or phonorecord of an unpublished work for purposes of preservation and security or for deposit for research use in another library or archive of the type described; or subsection (c), which addresses the reproduction of a copy or phonorecord of a published work for the purpose of replacement of a copy of that work that is damaged, deteriorating, lost, or stolen, if an unused replacement copy cannot be obtained at a fair price.

The amendment to subsection (a)(3) of section 108 is intended to ease the burden on libraries and archives of the current law's requirement that a notice of copyright be included on copies that are reproduced under section 108. Under this amendment, such notice would be required only where the particular copy that is reproduced by the library or archives itself bears a notice. In other words, a notice appearing on the material copied would still need to be maintained, and could not be deleted. On the other hand, if the copy being reproduced does not bear a copyright notice, the library or archives would fully satisfy its obligation under this section by simply placing on the reproduction a legend that states "this work may be protected by copyright," or words to that effect. This minimal obligation is similar to those found in subsections (e) and (f) of existing section 108, which condition the exemption in those subsections on the display of a general notice or warning of potential copyright protection.

Subsection (b) currently permits a library or archive under this section to make and distribute one copy or phonorecord of an unpublished work solely for purposes of preservation and security or for deposit for research use in another library or archives, provided that the duplication of the work occurs "in facsimile form." The legislative history to that section makes clear that, when this language was enacted more than twenty years ago, Congress intended to permit the copy to be made by microfilm or electrostatic photocopying process, but not in a computerized form i.e., “in machine readable language for storage in an information system." See H.R. Rep. No. 1476, 94th Cong., 2d Sess. (1976). The amendment to subsection (b) permits a library or archive to make (for itself or another library or archive of the type described by clause (2) of subsection (a)) up to 3 copies or phonorecords for these purposes, rather than just one, and permits such copies or phonorecords to be made in digital as well as analog formats. In recognition of the risk that uncontrolled public access to the copies or phonorecords in digital formats could substantially harm the interests of the copyright

owner by facilitating immediate, flawless and widespread reproduction and distribution of additional copies or phonorecords of the work, the amendment provides that any copy of a work that the library or archive makes in a digital format must not be otherwise distributed in that format and must not be made available in that format to the public outside the premises of the library or archives. In this way, the amendment permits the utilization of digital technologies solely for the purposes of this subsection.

Similarly, subsection (c) currently permits a library or archives under this section to make one copy or phonorecord of any published work solely for purposes of replacement of a copy or phonorecord that is damaged, deteriorating, lost or stolen, provided that the library or archive has determined after a reasonable effort that an unused replacement cannot be obtained at a fair price, and provided that the duplication of the work occurs "in facsimile form.' As in subsection (b), the amendment to subsection (c) permits a library or archive to make and use three copies or phonorecords for these purposes, rather than just one, and permits such copies or phonorecords to be made in digital as well as analog formats, with the proviso that any copy of a work that the library or archive makes in a digital format must not be made available to the public in that format except for use on the premises of a library or archives in lawful possession of such copy. This proviso is necessary to ensure that the amendment strikes the appropriate balance, permitting the use of digital technology by libraries and archives while guarding against the potential harm to the copyright owner's market from patrons obtaining unlimited access to digital copies from any location.

The amendment to subsection (c) also broadens its coverage to allow the updating of obsolete formats. It permits the making of such copies or phonorecords of a work "if the existing format in which the work is stored has become obsolete." This provision is intended to permit libraries and archives to ensure that copies of works in their collections continue to be accessible and useful to their patrons. In order to ensure that the provision does not inadvertently result in the suppression of ongoing commercial offerings of works in still-usable formats, the amendment explicitly provides that, for purposes of this subsection, a format will be considered obsolete only if the machine or device necessary to render perceptible a work stored in that format is no longer manufactured or reasonably available in a commercial marketplace. Under this language, if the needed machine or device can only be purchased in secondhand stores, it should not be considered "reasonably available."

Finally, these amendments make clear that, just as when section 108 of the Copyright Act was first enacted, the term "libraries" and "archives" as used and described in this provision still refer to such institutions only in the conventional sense of entities that are established as, and conduct their operations through, physical premises in which collections of information may be used by researchers and other members of the public. Although online interactive digital networks have since given birth to online digital "libraries" and "archives" that exist only in the virtual (rather than physical) sense on websites, bulletin boards and homepages across the Internet, it is not intended that section 108 as revised apply to such col

lections of information. The ease with which such sites are established online literally allows anyone to create his or her own digital "library" or "archives." The extension of the application of section 108 to all such sites would be tantamount to creating an exception to the exclusive rights of copyright holders that would permit any person who has an online website, bulletin board or a homepage to freely reproduce and distribute copyrighted works. Such an exemption would swallow the general rule and severely impair the copyright owners' right and ability to commercially exploit their copyrighted works. Consequently, references to "the premises of the library or archives" in amended sections 108 (b)(2) and (c)(2) mean only physical premises.

Section 414: Fair Use

Section 414 amends section 107 of title 17, which codifies the "fair use" doctrine. Under this section, 107 is amended by striking the words "including such use by reproduction in copies or phonorecords or by any other means specified in that section" from the general fair use limitation. The sole purpose of this section is to assure that fair use, as defined in section 107 of the Copyright Act, will continue to apply as it does today in the digital environment. Some concern has been expressed that because section 107 currently mentions by name the reproduction right and not other exclusive rights contained in section 106 such as the distribution right, that somehow it may not apply equally to all of the exclusive rights contained in section 106. Although there is no case or legislative history that supports this assertion, this provision was added to this legislation to assure all interested parties that fair use applies equally to all of the exclusive rights contained in section 106 and that the distribution right is no less limited by fair use in the digital environment than the reproduction right. The deletion of words by this amendment should therefore not be interpreted to imply a lessening of the application of fair use to the reproduction right. All of the exclusive rights contained in section 106 are equally limited by fair use under 107 today, and all of them will continue to be equally limited under these amendments. The changes contained in this section are clarifying only and make no substantive change to the Copyright Act.

Section 415: Scope of Exclusive Rights in Sound Recordings: Ephemeral Recordings.

The amendments to sections 112 and 114 of the Copyright Act that are contained in this section of the bill are intended to achieve two purposes: first, to further a stated objective of Congress when it passed the Digital Performance Right in Sound Recordings Act of 1995 (DPRSRĂ) to ensure that recording artists and record companies will be protected as new technologies affect the ways in which their creative works are used; and second, to create fair and efficient licensing mechanisms that address the complex issues facing copyright owners and copyright users as a result of the rapid growth of digital audio services. This amendment accomplishes both of these objectives by creating two statutory licenses for certain performances and reproductions of sound recordings in the digital environment.

In the few years since Congress enacted the DPRSRA, there has been a remarkable proliferation of music services offering digital transmissions of sound recordings to the public. The primary area of this growth has been services using the Internet as a transmission medium. In particular, services commonly known as "webcasters" have begun offering the public multiple highly-themed genre channels of sound recordings on a nonsubscription basis.

Although the DPRSRA's amendments to section 114 were intended to provide a digital performance right for sound recordings subject to specific exemptions, some nonsubscription digital audio services raised questions about that Act's application to them. At the same time, both sound recording copyright owners and webcasters faced the challenge of constructing fair and efficient licensing mechanisms. This amendment to sections 112 and 114 clarifies that the digital sound recording performance right applies to nonsubscription digital audio services such as webcasting, addresses unique programming and other issues raised by Internet transmissions, and creates statutory licensing to ease the administrative and legal burdens of constructing efficient licensing systems. While an impetus for this legislation was the licensing difficulties and legal issues raised by webcasters in particular, it is Congress' intent that this legislation apply generally to otherwise nonexempt nonsubscription digital audio services on the Internet and in other media.

The phenomenal growth of the Internet is having a profound effect on many industries, and the recording industry is certainly no exception. As more and more people turn to the Internet for entertainment, the demand for and use of music is skyrocketing. Whereas just a few years ago the transmission of music on the Internet was limited largely to the time-consuming downloading of music files, today a marketplace for the real-time performance of fulllength recordings is evolving rapidly.

The explosive growth of music services on the Internet can be traced to the many advantages that the Internet offers as a transmission medium. The Internet offers novel ways to deliver music and interact with the public unavailable from other media. Most significantly, the Internet enables a music service to interact with its listeners so that listeners have the ability to hear their favorite music whenever they wish, select certain sound recordings or programs, skip to the recordings of their choice, and to create personalized channels that are customized to their specific tastes.

Webcasters, in particular, have utilized these advantages to offer a diverse range of programming. Webcasters generally offer multiple (sometimes more than one hundred) channels of sound recordings that are programmed by genre, usually broken down by time period, geography, artist or topic. Many webcasters also offer certain types of programming, such as archived and continuous programming, that permit listeners to hear the same recordings repeatedly and anytime the listener chooses. Still others offer an individual music customized to that person's tastes. Other webcasters provide graphic and text information about sound recordings, artists and songwriters, and enable listeners to purchase the recordings they perform through online retailers.