§1004 Royalty Payments

Summary

Manufacturers or importers who are the first to sell a digital audio recording device must pay a royalty equal to 2% of its transfer price (the sale price). If the device is sold as part of a combined unit, the royalty is based on the unit price but reduced by any royalty already paid for devices inside the unit. If the device is separate and similar devices were sold separately in the past four calendar quarters, the royalty uses the average price from those four quarters. If no similar separate sales happened in those four quarters, the royalty uses a constructed price that reflects the device’s share of the whole product’s value. Each device royalty must be at least $1 and no more than a cap: $8 per device, or $12 for an integrated unit with more than one device. In the sixth year after the law starts, and no more than once a year after that, an interested party may ask the Copyright Royalty Judges to raise the cap. If more than 20% of payments hit the cap, the Judges must raise it so no more than 10% will hit the new cap, but any raise cannot exceed the percent increase in the Consumer Price Index for the period reviewed. For digital audio recording media, the first maker or importer who distributes it must pay a royalty of 3% of its transfer price.