This topic is so important that I thought it merited its own question.
Maybe websearcher can field this question? Anyway, here goes:

Very often students and professionals come to me to record one or more
pieces which are to be put on a CD and sent to a University or a
Contest site as an audition CD. I might make one or at most two copies
of the CD. Is there any exclusion to the requirement for a mechanical
license for this type of recording? Of course the CDs are never sold
and are never distributed publicly (and I have read that this makes no
difference) but in all the reading of the sites you sent me to review
I think I saw this exclusion mentioned only once and now (of course) I
can't find the reference again.

If I were required to obtain a mechanical license (and one for 1000
copies of Debussy L'isle Joyeuse cost me $109) for each audition work,
students would stop coming to me to record and this would be
unfortunate.

Hello again, beauregard.

Sorry for the delay in getting to this question. (I was "offline" this
weekend for Orthodox Easter.)

I have good news and bad news. First the bad news...

There are no exceptions to having to license music if you are
recording a cover song. It doesn't matter whether you are planning on
selling the limited number of copies you make (even one or two) or
using them as audition/promo material.

The good news?

What you discovered from the previous question I answered for you is
that if you are using a licensing service like Harry Fox, that they
are only interested in putting through your mechanical license if you
are looking to produce 500 or even 1000 copies or more! As you've
noted, that would be unsustainably expensive for audition recordings.

However, that does not mean that there are not ways to obtain
mechanical licenses for one or two copies only. What I suggest you do
is apply for a "compulsory mechanical license". That's the avenue I
suggested in the previous question for if you contacted a copyright
holder directly and were "rebuffed".

More about how compulsory licenses work can be found at:

The Cover Song Quagmire
http://www.getmemusic.com/article_info.php?articles_id=34

And here:

Securing Permission to Use Musical Works Protected by Copyright FAQs
URL: http://www.copyright.iupui.edu/permfaq.htm
Quote: "o A cover song may be created either by getting permission
from the mechanical rights owner or through a compulsory mechanical
license. Once the copyright owner of a musical composition records and
distributes the work to the public, or allows another to do so, anyone
that wishes to record and distribute that same work may do so without
permission (subject to certain limitations) by issuing the copyright
owner a notice of intention to obtain a compulsory license. The cover
song is subject to a compulsory mechanical license which provides the
copyright owner an automatic royalty payment for every recording
created and sold. The cover artist may negotiate with the copyright
owner to secure better terms than what the compulsory license affords
the cover artist. However, the copyright owner cannot disallow the
cover artist from reproducing and distributing that work if the cover
artist is willing to pay the compulsory license. Compulsory licenses
do not encompass covers of dramatic works (e.g. operas and musicals)
or synchronized works (e.g. movie soundtracks and other music used in
conjunction with visual images)."

The official scoop from the government on compulsory licenses can be found at: 

Circular 73 - Compulsory License for Making and Distributing Phonorecords
URL: http://www.copyright.gov/circs/circ73.pdf

The following website provides a handy form letter to send to the
copyright holder to notify them of your intention to use the song in a
cover:

Notice of Intention to Obtain Compulsory License for Making and
Distributing Sound Recordings
URL: http://bignoize.net/Docs/cmplicns.rtf

A more complete, step-by-step explanation of the compulsory mechanical
licensing process can be found at:

How to Legally Sell Downloads of Cover Songs
URL: http://www.cdbaby.net/dd?f=8
Note: Just ignore the bits about distributing over the Internet - the
rules are the same as for making audition recordings. The rates you
need to pay per copy (whether they are sold or not) are also listed in
this page.

Search Strategy (on Google):
* "mechanical license" "not for sale"
* "mechanical license" promotional
* "mechanical license" "one copy"
* "mechanical license" exceptions
* "compulsory license"
* "compulsory license" music
* "compulsory license" music cover

Please bear in mind that we're not lawyers here at Google Answers and
that we don't provide legal advice. If you are indeed going to be
making the plunge into creating your own recording studio, it would
probably be a good idea to use the services of a copyright lawyer at
some point. At the very least, with the information I've provided to
you, you should have a good head-start on what to ask him/her.

Thanks!

websearcher

---

Clarification of Answer by websearcher-ga on 03 May 2005 06:27 PDT

Hi beauregard: 

Another thought occurred to me last night....

If enlisting the services of a copyright lawyer are more expensive
than you care to spend at this time, another avenue for getting useful
advice might be joining a local recording industry group/association.
Basically, take advantage of the experience of others who have been
through the same situations.

websearcher

As before, your answer is complete and to the point. I think your
suggestion to hire a copyright lawyer is right on and I will do this.
I can't thank you enough for this information. It is excellent and is
much appreciated.