§1004 Royalty Payments

Summary

The first person who makes and sells, or imports and sells, a digital audio recording device in the United States must pay a royalty equal to 2% of the device’s transfer price. If the device is sold as part of a package, the royalty is figured differently: if the device is built into a single unit, use the unit’s transfer price but subtract any royalty already paid on included devices that were sold earlier on their own; if the device is separate and similar devices were sold on their own in the past 4 calendar quarters, use the average transfer price from those 4 quarters; if no similar devices were sold separately in the past 4 quarters, use a constructed price that reflects the device’s share of the whole package. Each device royalty must be at least $1 and no more than $8, except a physically integrated unit with more than one device cannot exceed $12. Starting in the 6th year after the law takes effect and then at most once a year, an interested party can ask the Copyright Royalty Judges to raise the maximum. If over 20% of payments reach the maximum, the Judges must raise it for future payments so that no more than 10% hit the new maximum, and any percentage increase cannot be larger than the percent rise in the Consumer Price Index for the review period. The first person who makes and sells, or imports and sells, a digital audio recording medium in the United States must pay a royalty equal to 3% of the medium’s transfer price. Only that first manufacturer or importer is required to pay.