Small Webcaster Settlement Act of 2002 (SWSA), Pub. L. No. 107-321, 116 Stat. 2780 (Dec. 4, 2002), codified at 17 U.S.C. 114 (full-text).
In 1998, Congress amended the Copyright Act, title 17 of the U.S. Code, to make clear that an eligible nonsubscription service may publicly perform copyrighted sound recordings by means of digital audio transmissions under a statutory license, 17 U.S.C. §114, provided that the service pays the appropriate royalty fee and complies with the terms of the license. At the same time, Congress created a second statutory license (17 U.S.C. §112(e)) to allow for the making of ephemeral reproductions for the purpose of facilitating the digital audio transmissions made by the nonsubscription services under the section 114 license. Rates and terms for both licenses were set after a hearing before a Copyright Arbitration Royalty Panel (CARP). However, some small webcasters, including some noncommercial webcasters, did not participate in that proceeding and expressed reservations about the fee structure adopted through that process.
In response to those concerns, Congress passed this Act, amending the Section 112 and Section 114 statutory licenses as they relate to small commercial webcasters and noncommercial webcasters. Specifically, the SWSA authorizes SoundExchange], an unincorporated division of the Recording Industry Association of America, Inc. and the Receiving Agent designated by the Librarian of Congress in the initial rate setting proceeding, to enter into agreements on behalf of all copyright owners and performers for the purpose of establishing an alternative payment structure for small commercial webcasters and noncommercial webcasters operating under the section 112 and section 114 statutory licenses.
The Act set no specific royalty rates or fees for the digital distribution of music over the Internet, but instead granted both small webcasters and copyright holders the right to enter into voluntary licensing agreements and permitted SoundExchange, the receiving agent designated in earlier legislation, to negotiate on behalf of the sound recording copyright holders.
Under the Act, small commercial webcasters reached an agreement with copyright owners that included the option of paying royalties for the period of October 28, 1998, to December 31, 2004, on the basis of a percentage of their revenues, expenses, a combination of both, or a minimum fee rather than paying the royalty rates set by the Librarian of Congress. The small webcasters were represented by Voice of Webcasters, a coalition of small commercial webcasters.
The rates and terms set forth in such agreements apply only to the time periods specified in the agreement and have no precedential value in any proceeding concerned with the setting of rates and terms for the public performance or reproduction in ephemeral phonorecords or copies of sound recordings. To make this point clear, Congress included language expressly addressing the precedential value of such agreements. Specifically, section 114(f)(5)(C), as added by the SWSA, states that:
|“||Neither subparagraph (A) nor any provisions of any agreement entered into pursuant to subparagraph (A), including any rate structure, fees, terms, conditions, or notice and recordkeeping requirements set forth therein, shall be admissible as evidence or otherwise taken into account in any administrative, judicial, or other government proceeding involving the setting or adjustment of the royalties payable for the public performance or reproduction in ephemeral recordings or copies of sound recordings, the determination of terms or conditions related thereto, or the establishment of notice and recordkeeping requirements by the Librarian of Congress under paragraph (4) or section 112(e)(4). It is the intent of Congress that any royalty rates, rate structure, definitions, terms, conditions, or notice and recordkeeping requirements, included in such agreements shall be considered as a compromise motivated by the unique business, economic and political circumstances of small webcasters, copyright owners, and performers rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller, or otherwise meet the objectives set forth in section 801(b).||”|