This act is an addition to the United States Copyright Law. The addition is chapter 10 which is "Digital Audio Recording Devices and Media." The act is broken up into four subchapters A, B, C and D.
Subchapter A gives definitions of terms that are used within the act. The terms are clearly defined so that they can be used within the explaination of the act itself with little confusion. For example, A digital audio copied recording is defined as "a reproduction in a digital recording format of a digital musical recording, whether that reproduction is made directly from another digital musical recording or indirectly from a transmission."
Subchapter B gets into the main point of the act stating what can and cannot be copied. This section states that it is illegal to import, manufacture, or distribute any digital audio recording device that does not comply with the Serial Copy Management System or any other similar system. The device must also meet the standards set by the Secretary of Commerce. Finally, digital music recordings cannot be encoded with inaccurate information.
Subchapter C deals with royalty payments. It explains who pays them, how much is payed under certain conditions , and who receives these payments. According to this section, the amount of royalty payment for each recording device is two percent of the transfer price. Also only the first person to manufacture or import and distribute a device is required to pay the royalty. A royalty tax of 8 dollars is required for each digital recording machine. The royalty tax is paid by the manufacturers of the digital media devices and then distributed to copyright owners whose music is being copied. Because of this tax, copyright owners cannot claim copyright infringement against the use of audio recording devices in the home.
Subchapter D explains the arbitration for violations regarding the terms set up in the previous sections.
This act gave guidance to the music industry but it did not include computers because they are not considered digital audio recording devices. This poses a problem because of the explosion of the internet which occured in subsequent years.