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(l) Voluntary agreements with ADDRESSES: For reasons of government owners, the blanket license will cover mechanical licensing collective to alter efficiency, the Copyright Office is using all musical works available for process. Subject to the provisions of 17 the regulations.gov system for the compulsory licensing and will be U.S.C. 115, a significant nonblanket submission and posting of public centrally administered by a mechanical licensee and the mechanical licensing comments in this proceeding. All licensing collective (‘‘MLC’’), which has collective may agree to vary or comments are therefore to be submitted been designated by the Register of supplement the procedures described in electronically through regulations.gov. Copyrights.3 Under the MMA, this section, including but not limited to Specific instructions for submitting compulsory licensing of phonorecords pursuant to an agreement to administer comments are available on the that are not DPDs (e.g., CDs, vinyl, a voluntary license, provided that any Copyright Office website at https:// tapes, and other types of physical such change does not materially www.copyright.gov/rulemaking/mma- phonorecords) (the ‘‘non-blanket prejudice copyright owners owed royalty-statements. If electronic license’’) continues to operate on a per- royalties due under a blanket license. submission of comments is not feasible work, song-by-song basis, the same as The procedures surrounding the due to lack of access to a computer and/ before.4 certification requirements of paragraph or the internet, please contact the Office By statute, digital music providers (h) of this section may not be altered by using the contact information below for will bear the reasonable costs of agreement. special instructions. establishing and operating the MLC Dated: April 15, 2020. FOR FURTHER INFORMATION CONTACT: through an administrative assessment, Regan A. Smith, Regan A. Smith, General Counsel and to be determined, if necessary, by the General Counsel and Associate Register of Associate Register of Copyrights, by Copyright Royalty Judges (‘‘CRJs’’).5 As Copyrights. email at [email protected] or Terry permitted under the MMA, the Office [FR Doc. 2020–08379 Filed 4–17–20; 4:15 pm] Hart, Assistant General Counsel, by designated a digital licensee coordinator email at [email protected]. Each can BILLING CODE 1410–30–P (‘‘DLC’’) to represent licensees in be contacted by telephone by calling proceedings before the CRJs and the (202) 707–8350. Copyright Office, to serve as a non- LIBRARY OF CONGRESS SUPPLEMENTARY INFORMATION: voting member of the MLC, and to carry 6 I. Background out other functions. U.S. Copyright Office Title I of the Music Modernization A. Reporting and Payment Obligations 37 CFR Part 210 Act (‘‘MMA’’), the Musical Works Under Non-Blanket License Modernization Act, substantially The proposed rule is informed by the [Docket No. 2020–6] modifies the compulsory ‘‘mechanical’’ preexisting section 115 regulations that license for making and distributing Reporting and Distribution of Royalties still apply to non-blanket licenses. phonorecords of nondramatic musical to Copyright Owners by the Under a non-blanket license, copyright works available under 17 U.S.C. 115. Mechanical Licensing Collective owners receive royalties and statements Prior to the MMA, a compulsory license of account directly from compulsory AGENCY: U.S. Copyright Office, Library was obtained by licensees on a per- licensees. Timely payment and of Congress. work, song-by-song basis, and required statements of account are a condition of a licensee to serve a notice of intention ACTION: Notice of proposed rulemaking. the non-blanket compulsory license, to obtain a compulsory license (‘‘NOI’’) and failure to comply with the SUMMARY: The U.S. Copyright Office is on the relevant copyright owner (or file requirements could lead to default.7 issuing a notice of proposed rulemaking the NOI with the Copyright Office if the Default can subject a licensee to the regarding the obligations of the Office’s public records did not identify remedies provided by sections 502 mechanical licensing collective to report the copyright owner and include an through 506 for infringement.8 The and distribute royalties paid by digital address at which notice could be statute requires licensees to make music providers under the blanket served) and then pay applicable monthly and annual statements of license to musical work copyright royalties accompanied by accounting account, along with payment of owners under title I of the Orrin G. statements.1 royalties, in compliance with Hatch–Bob Goodlatte Music The MMA amends this regime in regulations promulgated by the Office.9 Modernization Act. After soliciting multiple ways, most significantly by public comments through a notification establishing a new blanket compulsory Regulations covering monthly and of inquiry, the Office is now proposing license that digital music providers annual statements of account prescribe, regulations establishing the timing, (‘‘DMPs’’) may obtain to make digital among other things, requirements form, delivery, and certification of phonorecord deliveries (‘‘DPDs’’) of regarding the content such statements statements accompanying royalty musical works, including in the form of distributions to musical work copyright permanent downloads, limited 3 17 U.S.C. 115(d)(1), (3); 84 FR 32274 (July 8, 2019). owners. The Office solicits additional 2 downloads, or interactive streams. 4 17 U.S.C. 115(b)(1); see H.R. Rep. No. 115–651, public comments on the proposed rule. Instead of licensing one song at a time at 3 (noting ‘‘[t]his is the historical method by This notice concerns only royalty by serving NOIs on individual copyright which record labels have obtained compulsory statements and distributions regarding licenses’’); S. Rep. No. 115–339, at 3 (same); see also U.S. Copyright Office, Orrin G. Hatch-Bob Goodlatte matched uses of musical works 1 See 17 U.S.C. 115(b)(1), (c)(5) (2017); U.S. Music Modernization Act, https:// Copyright Office, Copyright and the Music embodied in sound recordings and does www.copyright.gov/music-modernization/ (last Marketplace 28–31 (2015), https:// not address issues related to the visited Apr. 2, 2020). www.copyright.gov/policy/musiclicensingstudy/ 5 distribution of unclaimed, accrued copyright-and-the-music-marketplace.pdf 17 U.S.C. 115(d)(7)(D). royalties. (describing operation of prior section 115 license). 6 Id. at 115(d)(5)(B); 84 FR at 32274; see also 17 2 17 U.S.C. 115(d)(1), (e)(7); see H.R. Rep. No. U.S.C.115(d)(3)(D)(i)(IV), (d)(5)(C). DATES: 7 Written comments must be 115–651, at 4–6 (describing operation of the blanket 17 U.S.C. 115(c)(2)(J). received no later than 11:59 Eastern license and the new mechanical licensing 8 Id. Time on May 22, 2020. collective); S. Rep. No. 115–339, at 3–6 (same). 9 Id. at 115(c)(2)(I). See generally 37 CFR 210.11.

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must contain along with timing, MLC will, in turn, ‘‘distribute royalties blanket license, prescribe specific delivery, and certification obligations.10 to copyright owners in accordance with obligations for royalty distributions or The regulations for monthly and the usage and other information statements of account, such as form, annual statements of account for the contained in such reports, as well as the timing, delivery, or certification non-blanket license were most recently ownership and other information requirements by the MLC. Nor does it amended in 2014, in response to legal contained in the records of the delegate specific rulemaking authority and marketplace developments, collective.’’ 15 to the Office for prescribing distribution ‘‘including the Copyright Royalty Because some percentage of musical or statement requirements specific to Board’s adoption of newer percentage- works reported by blanket licensees will the MLC. Separately, though, in a of-revenue royalty rate structures for not be initially matched to their general provision largely retained from certain digital music services, and respective copyright owners, the MLC the pre-MMA section 115 related to changes in accounting and industry will also engage in ongoing matching license terms and conditions, the practice in the years since the rules efforts to identify copyright owners of Register is directed to prescribe were last substantially amended.’’ 11 musical works where the identity of the regulations related to monthly Among the changes made to payment copyright owner is unknown and payments, and that provision states that and reporting of royalties relevant to provide a mechanism for copyright ‘‘regulations covering both the monthly this proceeding, the rule was amended owners to claim unmatched works.16 and the annual statements of account ‘‘to allow copyright owners and When a copyright owner who is owed shall prescribe the form, content, and licensees to independently agree to unmatched royalties becomes identified manner of certification with respect to alternative payment methods, including and located, the statute directs the MLC the number of records made and the electronic payment’’; allow a copyright to pay applicable accrued royalties to number of records distributed.’’ 19 owner to ‘‘notify a licensee of its the copyright owner, ‘‘accompanied by There appears to be no dispute willingness to accept statements by a cumulative statement of account means of electronic transmission’’; regarding the propriety or authority of reflecting usage of such work and the Office to promulgate regulations permit ‘‘copyright owners to elect the accrued royalties based on information format (paper or electronic) in which related to royalty statements issued by provided by digital music providers to the MLC; indeed, the MLC itself has they receive statements’’; set a ‘‘default the mechanical licensing collective.’’ 17 minimum payment threshold of up to proposed regulatory language As noted below, the Office is separately 20 $5 for payments to any copyright encompassing this activity. But as addressing the issue of unclaimed background and to aid commenters, the owner’’; require ‘‘reporting of ISRCs accrued royalties, including through an [‘‘International Standard Recording Office believes it may be helpful to ongoing policy study, and this situate this specific proposed rule Code’’] when that information is proceeding does not address known’’; permit ‘‘the reporting of other within the broader regulatory distribution procedures for those framework set out in the MMA. unique identifiers, such as the royalties that remain unmatched after International Standard Name Identifier the prescribed holding period. The statute creates a general legal (‘‘ISNI’’) of the writer, or the Finally, as reflected in the separate framework that supports rules regarding International Standard Musical Work rulemaking regarding reporting by distribution and reporting of royalties Code (‘‘ISWC’’) for the musical work’’; DMPs, blanket licensees may at times under the blanket license. In order to and revise the existing certification need to make adjustments to royalties establish sufficient oversight and regulations. paid in prior reporting periods since it accountability, Congress obligated the B. Blanket License is not unusual for the exact amount of MLC to ‘‘ensure that the policies and royalties owed for a particular month to practices of the collective are In creating a blanket license 21 be known until after the close of the transparent and accountable.’’ In administered by the MLC, the MMA month.18 Ultimately, those adjustments furtherance of that goal, Congress vested establishes a different legal framework will be reported to copyright owners by the Register of Copyrights with the for the payment and accounting of the MLC, along with any applicable authority to periodically review the royalties. Under the MMA, when the credits or deductions to royalty designation of the entity serving as the blanket license becomes available on distributions. MLC and designate a new entity if January 1, 2021, DMPs taking advantage Although the MLC is obligated to needed.22 The MLC is required by of the blanket license will report usage collect and distribute royalties, the statute to be a nonprofit entity that ‘‘is of musical works and pay royalties to statute does not, as it does for the non- endorsed by, and enjoys substantial the MLC—instead of directly to support from, musical work copyright copyright owners—on a monthly 15 owners’’ 23 and ‘‘is able to demonstrate 12 17 U.S.C. 115(d)(3)(G)(i)(II). basis. The data contained in the 16 The statute authorizes a number of functions to the Register of Copyrights that the DMP’s reports of usage is governed by related to matching works, including ‘‘[e]ngage in entity has . . . the administrative and both the statute 13 and regulations efforts to identify musical works (and shares of such works) embodied in particular sound recordings, technological capabilities to perform the currently being promulgated by the required functions of the mechanical Office in a separate proceeding.14 The and to identify and locate the copyright owners of such musical works (and shares of such works); licensing collective.’’ 24 [m]aintain the musical works database and other 10 Regulations for monthly statements of account information relevant to the administration of 19 appear in 37 CFR 210.16 and annual statements of licensing activities under this section[, and 17 U.S.C. 115(c)(2)(I). While applicability of account appear in 37 CFR 210.17. a]dminister a process by which copyright owners this provision excepts requirements for reports of 11 79 FR 56190 (Sept. 18, 2014). can claim ownership of musical works (and shares use and payments by blanket licensees, which are addressed separately by statute, it does not address 12 17 U.S.C. 115(d)(4)(A)(i). of such works), and a process by which royalties either way whether these requirements extend to 13 for works for which the owner is not identified or Id. at 115(d)(4). statements of account provided by the MLC. 14 U.S. Copyright Office, Notice of Proposed located are equitably distributed to known copyright owners.’’ Id. at 115 (d)(3)(C)(i)(III)–(V). 20 MLC Initial at 27–29. Rulemaking, Music Modernization Act Notices of 21 License, Notices of Nonblanket Activity, Data 17 Id. at 115(d)(3)(I)(ii). 17 U.S.C. 115(d)(3)(D)(ix)(I)(aa). Collection and Delivery Efforts, and Reports of 18 See DLC Initial at 15–16; 17 U.S.C. 22 Id. at 115(d)(3)(B)(ii). Usage and Payment, Dkt. No. 2020–5, published 115(d)(4)(A)(iv)(II) (contemplating adjustments for 23 Id. at 115(d)(3)(A)(ii). elsewhere in this issue of the Federal Register. overpayment or underpayment). 24 Id. at 115(d)(3)(A)(iii).

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Additionally, Congress provided (the ‘‘license availability date’’).29 On Copyright to adopt regulations, general authority to the Register of December 7, 2018, the Office issued including: Form and substance of Copyrights to ‘‘conduct such interim regulations, directed at that notices of license that digital music proceedings and adopt such regulations transition period, that amended existing providers are required to submit to the as may be necessary or appropriate to regulations pertaining to the mechanical licensing collective; 34 form effectuate the provisions of this compulsory license to conform to the and substance of notices of non-blanket subsection.’’ 25 The legislative history new law, including with respect to the activity; 35 information to be reported on states, operation of notices of intention and usage reports,36 format and maintenance 37 the Register is expected to promulgate the statements of account.30 Of relevance of reports, and mechanisms to account necessary regulations required by the here, the interim rule detailed the for adjustments; 38 information to be legislation in a manner that balances the requirements for DMPs to report and included in the mechanical licensing need to protect the public’s interest with the pay royalties regarding previously collective’s database; 39 database need to let the new collective operate unmatched works for purposes of usability, interoperability, and usage without over-regulation. The Copyright eligibility for the limitation on liability restrictions; 40 and the handling of Office has the knowledge and expertise for making unauthorized DPDs during confidential information.41 regarding music licensing through its past The Office also solicited comments rulemakings and recent assistance to the the transition period before the blanket Committee during the drafting of this license becomes available. The interim regarding the following issues not legislation. Although the legislation provides regulations largely restated the statutory mentioned explicitly in the statute: ‘‘the specific criteria for the collective to operate, requirements, specifying that the DMP MLC’s payment and reporting it is to be expected that situations will arise must pay royalties and provide obligations with respect to royalties that that were not contemplated by the cumulative statements as if they were a have been matched to copyright owners, legislation. The Office is expected to use its compulsory licensee under the non- both for works that are matched at the best judgement in determining the time the MLC receives payment from appropriate steps in those situations.26 blanket license. The interim rule also required DMPs to identify the total digital music providers and works that It is the Office’s judgment that it is period covered by the cumulative are matched later during the statutorily consistent with the larger goals of the statement and the total royalty payable prescribed holding period for MMA to prescribe specific royalty for the period. Finally, the interim rule unmatched works.’’ 42 reporting and distribution requirements also required that such cumulative Specifically, the Office asked for through regulation, that the Register of statements be certified in the same input on ‘‘what reporting should be Copyrights has the authority to manner as monthly statements of required of the MLC when distributing promulgate these rules under the account under existing Office royalties to matched copyright owners general rulemaking authority in the regulations for the non-blanket in the ordinary course under section MMA, and it can take into consideration license.31 The Office welcomed ‘‘public 115(d)(3)(G)(i)(II), as well as input how well the MLC carried out those comment on these amendments and any concerning the timing of such regular obligations when reviewing the 43 other specific technical amendments distributions.’’ It also solicited input designation.27 Regulations establish a that stakeholders would like the Office ‘‘on any issues that should be baseline for transparency and to consider.’’ 32 It received no considered relating to the cumulative accountability, and the rulemaking comments. statements of account to be provided process allows all stakeholders— under section 115(d)(3)(I)(ii), relating to particularly musical work copyright D. Music Modernization Act payments due to copyright owners of a owners and songwriters—to Implementing Regulations for the previously unmatched work (or share communicate the specific transparency Blanket License for Digital Uses and thereof) who is later identified and and accountability obligations they Mechanical Licensing Collective located by the MLC, including what expect of the MLC.28 Notification of Inquiry additional material, if any, may be C. Transitional Period On September 24, 2019, the Copyright required in these statements as compared to routine periodic The MMA created a transitional Office issued a notification of inquiry to distributions for already matched period between its date of enactment initiate this current proceeding works.’’ 44 and January 1, 2021, the date when the regarding implementing regulations for 33 In response to the notification of blanket license first becomes available the blanket license. The Office invited public comment on regulations that the inquiry, the Office received fifteen initial comments and twenty-nine reply 25 MMA directs it to adopt, as well as Id. at 115(d)(12). comments.45 Of those, seven addressed 26 S. Rep. No. 115–339, at 15. additional regulations to promulgate 27 The legislative history states that when under its general authority as may be 34 determining whether to redesignate an entity to necessary or appropriate to effectuate 17 U.S.C. 115(d)(2)(A)(i). serve as the collective, ‘‘the failure to follow the 35 Id. at 115(d)(6)(A)(i). relevant regulations adopted by the Copyright the new blanket licensing structure. 36 Id. at 115(d)(4)(A)(ii)(III). Office[] over the prior five years should raise The notification of inquiry sought 37 Id. at 115(d)(4)(A)(iii). serious concerns within the Copyright Office as to comment on areas where the MMA 38 Id. at 115(d)(4)(A)(iv). whether that same entity has the administrative explicitly directs the Register of 39 Id. at 115(d)(3)(E)(ii)(V). capabilities necessary to perform the required 40 Id. at 115(d)(3)(E)(vi). functions of the collective.’’ S. Rep. No. 115–339, 29 41 at 5; see also H.R. Rep. No. 115–651, at 6 (same). H.R. Rep. No. 115–651, at 10; S. Rep. No. 115– Id. at 115(d)(12)(C). 339, at 10. 42 28 See Future of Music Coalition (‘‘FMC’’) Reply 84 FR at 49972. 30 at 3 (‘‘[W]e urge the Office to balance this concern 83 FR 63061, 63065 (Dec. 7, 2018); 37 CFR 43 Id. at 49973. for pragmatism and flexibility against the need to 210.20. 44 Id. at 49972–73. provide as much clear guidance and oversight as 31 See id.; 17 U.S.C. 115(d)(10)(B)(iv)(II)(aa), 45 All rulemaking activity, including public possible to encourage trust. A good question to ask (III)(aa) (cumulative statements to be provided ‘‘in comments, as well as educational material of any potential rule: ‘would including this item accordance with this section and applicable regarding the Music Modernization Act, can help music creators have confidence in the new regulations, including the requisite certification currently be accessed via navigation from https:// system and trust that they will successfully get the under subsection (c)(2)(I)’’). www.copyright.gov/music-modernization/. money they are owed?’ If the answer is yes, it 32 83 FR at 63062. Comments received in response to the September should be included.’’). 33 84 FR 49966 (Sept. 24, 2019). Continued

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the MLC’s reporting and payment better than status quo mechanical either as it processes reports of usage obligations. In its initial comments, the licensing practices. received from blanket licensees or MLC, provided proposed regulatory II. Proposed Rule through its ongoing matching efforts. It language for reporting and payment does not address the distribution of obligations. Several commenters A. General unclaimed accrued royalties after the responded to specific aspects of the Having reviewed and carefully expiration of the prescribed holding MLC’s proposal, as discussed in considered all relevant comments in period.49 The Office is currently respective sections below. response to the September 2019 engaged in a study to determine the best The accurate distribution of royalties notification of inquiry, the Office now practices that the MLC may implement under the blanket license to copyright issues a proposed rule and invites to effectively identify copyright owners owners is a core objective of the MLC.46 further public comment. This proposed and unclaimed royalties of musical The payment of royalties, and the rule concerns the reporting and royalty works while encouraging copyright statements that accompany those distribution obligations of the MLC for owners to claim royalties and ultimately the blanket license. The regulatory reduce the occurrence of unclaimed payments, serve as the most visible and 50 tangible connection many copyright language is intended to ensure that royalties. The Office may in the future owners will have with the MLC and the copyright owners receive the royalties separately consider promulgating regulations regarding the ultimate blanket license created by the MMA. they are entitled to in a timely fashion distribution of unclaimed royalties.51 Copyright owners of musical works with statements that provide them with accurate data regarding how their works have experience with the preexisting B. Terminology: ‘‘Royalty statement’’ are being used under the blanket mechanical license and have built up license. The existing requirements for Instead of ‘‘statement of account’’ certain expectations regarding how they reporting under the non-blanket license receive royalties and statements under Although the proposed rule regarding provide a useful starting point. statements issued by the MLC to that license, on either a compulsory or At the same time, the Office 47 copyright owners under the blanket voluntary licensing basis. The goal of recognizes that the MLC is responsible the MMA is to address significant license is based upon the existing for implementing an unprecedented regulations pertaining to ‘‘statements of shortcomings that arose in licensing licensing regime from scratch, and the mechanical reproductions by DMPs and account’’ required under the non- MMA is intended to address problems blanket compulsory license, the improve the functioning of the licensing that accumulated under the non-blanket regime in the digital ecosystem. So proposed rule uses an alternate term licensing regime. Certain features of the ‘‘royalty statements.’’ musical work copyright owners should non-blanket licensing regime may be reasonably anticipate royalty inappropriate to use as benchmarks. This is not intended to indicate any distributions and statements that look Where appropriate, then, the Office is substantive change, but rather to avoid and operate materially the same or striving to retain flexibility in the potential ambiguity with other regulations for the MLC, particularly references to ‘‘statements of account’’ 2019 notification of inquiry are available at https:// when it is in its early stages of pertaining to the non-blanket license. www.regulations.gov/docketBrowser?rpp=25& operations, while ensuring high For example, the terms ‘‘Monthly po=0&dct=PS&D=COLC-2019-0002&refD=COLC- Statement of Account’’ and ‘‘Annual 2019-0002-0001. References to these comments and standards of accuracy and service to letters are by party name (abbreviated where copyright owners.48 The Office is also Statement of Account’’ are defined appropriate), followed by either ‘‘Initial,’’ ‘‘Reply,’’ considering promulgating this rule on elsewhere in current regulations for the or ‘‘Ex Parte Letter,’’ as appropriate. Guidelines for an interim basis, to facilitate adjustment non-blanket compulsory license and ex parte communications, along with records of expressly apply only to the statements such communications, are available at https:// on topics noticed in this rulemaking if www.copyright.gov/rulemaking/mma- necessary once the MLC begins issuing required under the non-blanket 52 implementation/ex-parte-communications.html. royalty statements to copyright owners. license. The MMA itself does not use The Office encourages parties to refrain from To be clear, this rulemaking only the term ‘‘statement of account’’ when requesting ex parte meetings on this proposed rule addresses the reporting and distribution outlining the MLC’s general royalty and until they have submitted written comments. As 53 stated in the guidelines, ex parte meetings with the of royalties that are matched by the MLC reporting obligations, though it does Office are intended to provide an opportunity for use the term ‘‘cumulative statement of participants to clarify evidence and/or arguments 48 See S. Rep. No. 115–339, at 15 (‘‘Pursuant to account’’ when prescribing obligations made in prior written submissions, and to respond paragraph (12) of subsection (d), the Register is for distributing accrued royalties for to questions from the Office on those matters. expected to promulgate the necessary regulations previously unmatched works.54 To 46 See Letter from Lindsey Graham, U.S. Senator, required by the legislation in a manner that South Carolina, to Karyn Temple, Register of balances the need to protect the public’s interest avoid confusion, the Office will use the Copyrights, U.S. Copyright Office (Nov. 1, 2019). with the need to let the new collective operate generic term ‘‘royalty statement’’ in the 47 Prior to the MMA, the Office studied the without over-regulation.’’); SoundExchange Initial section 115 license and noted: ‘‘Although the use at 15 (‘‘SoundExchange urges the Office to be 49 17 U.S.C. 115(d)(3)(J). of the section 115 statutory license has increased in cautious in regulating the MLC and avoid the 50 U.S. Copyright Office, Unclaimed Royalties recent years with the advent of digital providers temptation to write into regulations every good idea Study, https://www.copyright.gov/policy/ seeking to clear large quantities of licenses, that comes out of this proceeding. Through unclaimed-royalties/ (last visited Apr. 2, 2020). The mechanical licensing is still largely accomplished SoundExchange’s history there have been numerous study was initiated by an all-day educational through voluntary licenses that are issued through instances where well-intentioned regulations have symposium held by the Office on December 6, 2019. a mechanical licensing agency such as HFA or by not worked out quite as intended, and the inflexible Materials related to the symposium, including a the publisher directly.’’ U.S. Copyright Office, nature of the rulemaking process has caused transcript and video of the proceedings can be Copyright and the Music Marketplace 30–31 (2015), obsolete rules to persist.’’); DLC Reply at 26–27 found at the aforementioned web page. https://www.copyright.gov/policy/musiclicensing (‘‘Although these regulations largely affect the 51 study/copyright-and-the-music-marketplace.pdf. relationship between the MLC and individual 84 FR at 49974 (‘‘the Office is tentatively Including because the MLC has selected HFA as a copyright owners, licensees will be funding the inclined to wait until after the policy study is core vendor and because of the potential that operations of the MLC through the administrative underway to finalize rules with respect to this services may prefer to make use of the blanket assessment. DLC therefore has a strong interest in important duty of the MLC.’’). compulsory license over voluntary arrangements, ensuring appropriate regulations are in place to 52 37 CFR 210.12(a), (b). See 17 U.S.C. 115(c)(2)(I), the Office believes that identifying common encourage a cost-effective approach to MLC’s (J). industry expectations with regard to direct payments and statements of account to rights 53 See 17 U.S.C. 115(d)(3)(C)(i)(II), (G). licensing will be relevant to the proposed rule. owners.’’). 54 Id. at 115(d)(3)(I)(ii).

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regulations for those reporting ii. Cumulative Statements of Account Such adjustments, and the original obligations. For cumulative statements of account reporting period being adjusted, will ultimately be reported by the MLC to C. Reporting and Payment Obligations that report previously accrued royalties for newly matched musical works, the copyright owners in a separate and 1. Scope of Periodic Reports proposed rule asks the MLC to provide clearly identified section of their a statement substantially similar to the monthly statements. As noted below, The MLC must distribute two sets of statement for royalties matched in the this proposal is a change from the non- royalty payments. The first set includes ordinary course. This information blanket license processes, where royalties for works that it matches upon would be sent to copyright owners at copyright owners receive adjustments receipt of monthly reports of usage from the same time as the regular monthly on an annual basis. The Office is DMPs.55 The second set includes royalty statements, in a segregated proposing this change in light of the accrued royalties for works that were manner. Like royalty statement DLC’s comments related to the unmatched when they were reported by information relating to works matched frequency of necessary adjustments. blanket licensees and where the in the ordinary course, the cumulative copyright owner is subsequently 2. Monthly Reporting and Timing 56 reporting would indicate the monthly Considerations identified and located. Blanket reporting period that royalties originally The proposed rule would require licensees may also need to adjust prior accrued in. Cumulative royalty reporting and distribution of royalties reports of usage, which may result in statements would also report the by the MLC on a monthly basis. This overpayment or underpayment of amount of interest accrued and a clear approach, supported by the MLC,62 is royalties from those prior periods, and identification of the total period also consistent with the regulations for the results of those adjustments must covered.58 similarly be passed through to copyright the non-blanket license, which requires owners.57 iii. Adjustments monthly statements that ‘‘include all royalties for the month next The rule proposes that the MLC report In initial comments to the September preceding.’’ 63 these three items—(1) royalties for 2019 notification of inquiry, the DLC notes several reasons why ‘‘it is often (if Some commenters raised concerns regularly matched works, (2) cumulative that the MMA increases the amount of statements of account for accrued not usually) the case that the exact amounts of royalty payments owed to time for when a blanket licensee has to royalties of previously unmatched report usage at the end of a monthly works, and (3) any adjustments to the MLC for a given month cannot be known with precision until well after reporting period. As Music Reports, Inc. royalties from prior periods—to (‘‘Music Reports’’) noted ‘‘[t]he MMA’s copyright owners simultaneously, if the close of the month—and sometimes not for months afterwards.’’ 59 Thus, requirement that DMPs report and pay each category is applicable to a given royalties to the MLC ‘not later than 45 owner. The reporting for each should be DMPs may need to adjust the amount of royalties paid in prior periods, and the calendar days after the end of the clearly delineated in the statements calendar month being reported’ inserts a themselves, but the intent is to MMA provides authority to the Register of Copyrights to adopt regulations substantial delay into the royalty minimize and simplify administration reporting and payment process required for both the MLC and copyright owners. ‘‘regarding adjustments to reports of usage by digital music providers, under Section 115 prior to the MMA, i. Periodic Matched Works including mechanisms to account for which required that such payments overpayment and underpayment of occur ‘on or before the twentieth day of As stated above, DMPs taking 64 royalties in prior periods.’’ 60 The Office each month.’ ’’ Music Reports advantage of the blanket license will is currently promulgating such explained that prior to the MMA, it report usage of musical works and pay regularly was able to issue ‘‘monthly regulations in a separate proceeding.61 royalties to the MLC on a monthly basis. statements of account and royalty It is anticipated that the MLC will be 58 Id. at 115(d)(3)(I)(ii). payments no more than ten days able to match the majority of works 59 DLC Initial at 15. The DLC cites at least two following’’ receipt of usage and royalty reported to the copyright owners who reasons this occurs. First, ‘‘the royalty rate can . . . accounting data from DMPs, and it are entitled to receive their respective be a function of a variety of variables, including believed that ‘‘through the use of royalties upon processing these reports certain service revenues, royalties paid for modern accounting systems managed by performance rights, consideration paid to record of usage, based on the information labels, and the number of subscribers, where a professional staff, the MLC should be reported and the information the MLC applicable.’’ Id. at 15–16. Some of these variables able to render monthly statements and has in its own records. As such, the may not be known until the end of a particular year royalty payments to copyright owners reporting of these regularly matched and may retroactively affect section 115 royalty no more than 10 days after it receives calculations. Second, ‘‘many licensees have works will be the primary subject of voluntary licenses with publishers, and the MMA usage and other supporting data from royalty statements from the MLC to continues to accommodate such direct deals. But in DMPs.’’ 65 It noted that even assuming copyright owners. These statements will some circumstances—for instance, new releases— the MLC could accomplish this within be in a format familiar to copyright neither the digital music provider nor the MLC may 10 days, copyright owners would still know at the time the payment and report of usage owners who currently receive is initially due whether a particular track is statements for mechanical associated with a direct deal publisher or is Collection and Delivery Efforts, and Reports of reproductions of musical works either licensed under the blanket license or is licensed Usage and Payment, Dkt. No. 2020–5, published elsewhere in this issue of the Federal Register. under the non-blanket compulsory across some combination of a direct deal and the blanket license. As a result, a digital music provider 62 MLC Initial at 28. license or voluntary licenses. The that is administering its own voluntary agreements 63 17 U.S.C. 115(c)(2)(I). The non-blanket license specific content that will be reported in (or using a non-MLC vendor) may inadvertently also imposes a deadline on reporting, requiring the statements, along with the timing of make a payment to the MLC that should have been monthly statements of account and payments to be statements, is discussed below. made directly to a publisher under the terms of a made within 20 calendar days of the end of the voluntary agreement.’’ Id. at 16. reporting period. The proposed rule does not 60 17 U.S.C. 115(d)(4)(A)(iv)(II). propose a date certain for reporting by the MLC. 55 Id. at 115(d)(3)(G)(i). 61 U.S. Copyright Office, Notice of Proposed 64 Music Reports Initial at 7 (quoting 17 U.S.C. 56 Id. at 115(d)(3)(I)(ii). Rulemaking, Music Modernization Act Notices of 115(d)(4)(A)(i) and 17 U.S.C. 115(c)(2)(I)). 57 Id. at 115(d)(4)(A)(iv)(II). License, Notices of Nonblanket Activity, Data 65 Music Reports Initial at 7.

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have to ‘‘wait 35 days longer to receive matched royalties to copyright owners robust and useable data—data provided payment from the MLC than they were every month so that copyright owners in electronic statements can, for accustomed to waiting prior to the can rely on the expectation that they example, be filtered and analyzed by license availability date,’’ given the will receive regularly-scheduled copyright owners in ways that is much statutory 45-day period for digital music payments. Given the unprecedented more difficult with paper statements. provider reporting.66 project of the blanket license and Electronic statements are also less costly MLC opposed Music Report’s associated transactional challenges, the to generate and distribute then paper proposal, calling it an ‘‘unreasonably Office declines at this time to impose a statements. The Office understands that tight timeline,’’ and stating: 67 further timing requirement for in some cases, the only reason paper [A] 10-day turnaround from the time the distribution of royalties, and credits statements are still used under current MLC receives monthly usage reports from MLC’s description of the material licenses is because of existing DMPs is not realistic given the sheer volume differences between its project and pre- contractual conditions which are not of transactions that the MLC will be blanket processing of matched royalties. applicable here. Nevertheless, the Office reporting. While Music Reports argues that it The MLC faces both known and appreciates that a small number of generally issued monthly statements and unknown challenges when it begins copyright owners may prefer paper royalty payment within 10 days of receipt of administering the blanket license, and a statements, so the regulations allow that DMPs usage reporting, this comparison does strict timing requirement for reporting option by request. not take into account the difference in the and distributing royalties may Additionally, as suggested by the volume of data it was processing (from a compound those challenges. DLC, the regulations would allow for a limited number of DMPs), versus the exponentially larger volume of data being The proposed rule takes the same copyright owner to request a separate, processed by the MLC. Nor does it take into approach for reporting of cumulative simplified report or to access their account the MLC’s obligations to carve out royalties. The Office notes that, statements through an online password- voluntary licenses and individual download beginning on the license availability protected portal.73 These options may licenses from blanket license usage. Nor does date, the MLC will receive cumulative be more attractive to some copyright it consider that, unlike the pre-blanket usage reports of unmatched accrued owners and would likely reduce license process, the blanket license process royalties from DMPs covering as much printing and postage costs. The Office does not include pre-matching of individual as two years of usage at the same time invites comment on these issues. sound recordings as licenses are requested, it must begin processing royalties in the and therefore, the MLC will be matching 4. Content many transactions for the very first time ordinary course. As with the regularly matched portion of monthly royalty The proposed rule specifies the when it processes usage. Nor does it consider content the MLC is required, at a that the MLC was created precisely to fix the statements, it is expected that the MLC serious problems that arose from prior will make timely payments of accrued minimum, to provide to copyright practices in royalty processing, and those royalties for newly matched musical owners when reporting royalties. In problematic practices are not the appropriate works, but the proposed rule does not general, the statement will allow benchmarks for determining what should be otherwise include a timing requirement copyright owners to see royalties best practices for the nationwide blanket with respect to reporting and paying accrued for each blanket licensee’s license administered by the MLC under the cumulative royalties after they have offerings for every musical work owned new MMA regime.68 been identified. by the copyright owner embodied in a MLC therefore reiterated support for For both revenue streams, significant sound recording. The statement will the proposal it offered in its initial nonregulatory incentives are also in clearly indicate the usage period when comments, which is silent on a place to ensure timely distribution of the royalties being distributed 74 reporting deadline.69 royalties. For one, the MLC represented accrued. Identifying information for The Office appreciates the points in its designation proposal that it musical works and the sound recordings made by both Music Reports and the ‘‘intends to provide ‘prompt, complete, in which they are embodied, if available MLC, and tentatively concludes that the and accurate payments to all copyright to the MLC, will also be included in the better regulatory approach is to ensure owners.’ ’’ 70 In addition, because the statement. the MLC has sufficient flexibility to MLC is governed by the very copyright The list proposed by the Office maximize its matching efforts before owners that it will be serving,71 and provides for every musical work distributing royalties, subject to the because it must maintain the support of identified as owned by a copyright owner for which there has been reported commitment to report royalties on a copyright owners,72 it shares their usage, a line-by-line statement of monthly basis. Put another way, the interest in prompt reporting and royalties earned by service offering and proposed rule allows the MLC to distribution. The Office reserves the sound recording that embodies the determine the pace at which it will right to revisit a potential timing musical work. The content is a process monthly reports of use received obligation in the future, and solicits combination of what the regulations for from DMPs (e.g., whether it takes the comment on this aspect of the proposed MLC 10 days or 30 days for its routine rule. 73 matching efforts), but not the DLC Reply at 27 (‘‘The MLC should also be 3. Method of Delivery permitted to satisfy the requirement for electronic frequency—once processing and delivery of statements by providing an online distribution starts, the proposed rule The Office proposes that royalty password protected portal, accompanied by email requires the MLC to report and pay statements be delivered to copyright notification of the availability of the statement in owners electronically by default, with the portal.’’). 74 See Lowery Reply at 6 (‘‘If the MLC reports do 66 Id. See also Monica Corton Consulting Reply at the option to receive them by mail by not designate which period the payment 2 (‘‘Having the DSP’s account 45 days after each request. Copyright owners benefit from corresponds to, there will be no way for songwriters month is totally changing the time frame for final electronic statements in several ways, to know what they are being paid for. This boils payments from the MLC to the publishers and will including faster delivery and more down to receiving a statement that says, here’s some create a huge lag time in mechanical payments from money, or worse, no money for you. If there is no the publishers to the songwriters.’’). explanation of when the royalties were earned or 67 MLC Reply at 40. 70 84 FR at 32291. last paid on a service-by-service basis, there is no 68 Id. at 40–41. 71 17 U.S.C. 115(d)(3)(D). way for songwriters to know if any service is 69 Id. at 41. 72 Id. at 115(d)(3)(A)(ii). current.’’).

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statements of account under the non- license will be matched to their correct Recording Industry Association of blanket license require and a list copyright owners. The statements that America, Inc. (‘‘RIAA’’) identified a proposed by MLC, and is intended to accompany the distribution of royalties potential source of confusion with the provide reporting information to copyright owners will communicate term, given that the legal owner of a consistent with industry standards.75 this information to copyright owners. As sound recording copyright is not always Where the language of the Office’s reflected in the MLC’s proposal and the same as the party identified as the proposed rule departs from the MLC, incorporated into the proposed rule, it sound recording copyright owner in the departure is not intended to be will include identifying information for royalty metadata currently used in the substantive, but rather to conform with the copyright owner, including any digital music marketplace.86 At a existing language in title 17 and standard identifiers associated with the minimum, the Office recognizes that for associated regulatory provisions, as well owner, such as an Interested Parties musical work copyright owners as terminology used in other pending Identification (‘‘IPI’’) number.81 The receiving royalty statements, ‘‘sound rulemakings regarding content to be statement will include information recording copyright owner’’ may not be provided by the DMPs as well as identifying the musical work for which as important to know for recordkeeping information included in the MLC’s royalties are being distributed, purposes as other fields identifying the database. including any alternative or sound recording, such as record label, The initial source of much parenthetical titles for the work known and the Office seeks comment on information reported in statements will to the MLC. It will also include whether it is necessary to require come from the blanket licensees identification of the composers and reporting of sound recording copyright themselves in the reports of usage that songwriters of the musical work, which owner on royalty statements. they will provide to the MLC every one commenter noted was essential to The proposed rule is not intended to month.76 The MMA lists a number of ensuring songwriters are properly paid be an exhaustive list of everything the types of information required to be under common publishing MLC will report to copyright owners, included in reports of usage and also agreements.82 but rather set a baseline of fields that, provides the Register of Copyrights with In addition, the statement will at a minimum, will be included in the authority to require additional include information about the royalty statements. The MLC will likely information by regulation, which the individual sound recordings embodying report additional information to Office is promulgating under a separate the musical works, including such copyright owners based on standard rulemaking proceeding.77 Under the information as the sound recording industry practices or customer statute, information will also be name (including, as with musical works, expectations.87 For example, the obtained by the MLC through additional any alternative and parenthetical titles), proposed rule would encourage, but not sources. The MLC itself has an the names of the featured artists, and the require, the MLC to report additional obligation to ‘‘engage in efforts to record label. The proposed rule would identifying information for sound identify the musical works embodied in also require the statement to identify the recordings, including playing time, particular sound recordings, as well as sound recording copyright owner, an album title, album artist (which may be to identify and locate the copyright item the statute directs DMPs to include different than the featured artist of the owners of such works (and shares in the usage reports sent to the MLC 83 individual sound recording, particularly thereof), and update such data as and directs the MLC to include in its in the case of compilations or appropriate.’’ 78 The MLC will also musical works database.84 The Office is soundtracks), record label, distributor, a ingest information related to musical separately considering the meaning of Universal Product Code (UPC) for works copyright ownership, including the term ‘‘sound recording copyright albums, version number, release date, by ‘‘[a]dminister[ing] a process by owner’’ in rulemakings addressing usage producer(s), catalog number, and any which copyright owners can claim reports and the musical works database, other standard identifiers in the MLC’s ownership of musical works (and shares and the term will carry the same records. It is the Office’s understanding of such works).’’ 79 And musical work meaning here.85 At the same time, the that the MLC does intend to report copyright owners have an obligation to additional information, and so the ‘‘engage in commercially reasonable 81 The regulations make clear that certain types of efforts to deliver to the mechanical information—which are not required by the statute elsewhere in this issue of the Federal Register; U.S. licensing collective, including for use in for copyright owners to receive royalties they are Copyright Office, Notification of Inquiry, entitled to under the blanket license, such as IPI Transparency of the Mechanical Licensing the musical works database, to the numbers or International Standard Name Identifiers Collective and Its Database of Musical Works extent such information is not then (‘‘ISNI’’)—will be reported if provided by a Information, Dkt. No. 2020–8, published elsewhere available in the database, information copyright owner, but they are not a prerequisite to in this issue of the Federal Register. receiving royalties. Some commenters raised 86 RIAA Initial at 2 (‘‘In the digital music space, regarding the names of the sound concerns about such standard identifiers, which recordings in which that copyright DMPs are required to pay royalties in exchange for independent or self-represented songwriters may access to valuable sound recordings. DMPs are owner’s musical works (or shares not necessarily have, becoming de facto instructed to whom to send those royalties via a thereof) are embodied, to the extent requirements for receiving royalties from the MLC. specialized DDEX message known as the ERN (or practicable.’’ 80 This combination of See, e.g., North Music Group Reply at 1. Electronic Release Notification), which includes a 82 North Music Group Ex Parte Letter at 1 (‘‘Major information will be used by the MLC to field labeled sound recording copyright owner publisher deals often include language that allows (‘SRCO’). Importantly, as a matter of business ensure that royalties generated by the publisher to not pay the writer if the data within custom and practice, the SRCO field is typically covered activities under the blanket the royalty statement delivered to the publisher populated with information about the party that is does not include the writer’s name. The MLC must entitled to receive royalties (who may or may not deliver the writer’s name in statements in order to 75 be the actual legal copyright owner), because that The content required to be included in provide the writer the best chance of receiving his/ statements of account under the non-blanket is the information that is relevant to the business her royalties from the publisher.’’). relationship between record labels and DMPs. The compulsory license is prescribed in 37 CFR 83 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa). SRCO data in the ERN message is not meant to be 210.16(b)–(c). 84 Id. at 115(d)(3)(E)(ii). used to make legal determinations of ownership.’’); 76 17 U.S.C. 115(d)(4)(A)(ii). 85 See U.S. Copyright Office, Notice of Proposed see also Sony Music & RIAA Ex Parte Letter at 1– 77 Id. at 115(d)(4)(A)(ii)(III). Rulemaking, Music Modernization Act Notices of 2; Universal Music Group & RIAA Ex Parte Letter 78 Id. at 115(d)(3)(E)(i). License, Notices of Nonblanket Activity, Data at 2–3. 79 Id. at 115(d)(3)(C)(i)(V). Collection and Delivery Efforts, and Reports of 87 See MLC Ex Parte Letter Mar. 24, 2020 (‘‘MLC 80 Id. at 115(d)(3)(E)(iv). Usage and Payment, Dkt. No. 2020–5, published Ex Parte Letter #3’’) at 2.

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proposed rule would provide it some a separate notice of inquiry regarding are subject to audit by any copyright flexibility to be responsive to copyright the MLC’s public database.90 The Office owner.’’ 96 Additionally, it noted that owner needs. If, however, it becomes seeks comments on whether ‘‘known to the requirement ‘‘would be unduly appropriate for regulations to require the MLC’’ is an appropriate standard for burdensome and costly.’’ 97 the reporting of additional fields, either triggering an obligation to report While the requirement that DMPs through the initial adoption of specific information. certify the statements made in their regulations or through adjustment of an The Office invites comments on the usage reports to the MLC will provide interim rule if practical experience proposed information to be reported to a measure of quality control for much of demonstrates such an additional need, copyright owners, including whether the information that eventually flows to this proposed language could be the rule should require any additional copyright owners, the Office tentatively adjusted. information, or conversely, whether concludes that it may not provide Finally, for each separate service, certain fields should be excluded from sufficient safeguards for copyright activity, or offering that is reported by the rule, with the MLC retaining owners. The MLC is required to engage blanket licensees to the MLC, royalty discretion to include them based on its in additional processing of the information regarding the identification experiences and judgment. statements made in usage reports when of the blanket licensee, the particular it receives them, including 5. Certification service where the musical work was ‘‘identify[ing] the musical works used under the blanket license, the Under the non-blanket license, embodied in sound recordings reflected royalty rate, total usage, and total licensees are required to certify to the in such reports, and the copyright amount of royalties to be distributed, truth of the statements made in monthly owners of such musical works (and will be provided to copyright owners. In statements of account.91 The MMA is shares thereof) . . . confirm[ing] uses of some cases, the actual blanket licensee silent on any certification requirement musical works subject to voluntary may be an infrastructure provider or for blanket license royalty statements, licenses and individual download ‘‘white label’’ service that provides all and the MLC proposal did not require licenses, and the corresponding pro rata the necessary elements of a digital certification of royalty statements. amounts to be deducted from royalties music provider to a consumer-facing Music Reports replied in favor of that would otherwise be due under the service. Such white label services may retaining a certification requirement for blanket license[,] and confirm[ing] in fact serve multiple consumer-facing the MLC royalty statements, saying, proper payment of royalties due.’’ 98 services. In such cases, the name of the ‘‘[t]he same logic, ethical obligations, Certification by the MLC may thus help customer-facing service is just as useful and need for accounting rigor that apply ensure the accuracy of this additional (if not more useful) to copyright owners, to monthly, cumulative, and annual accounting done by the MLC before who are likely to be more familiar with statements of account in the pre-license distributing royalties. While the MMA those services than the underlying availability date period should also provides copyright owners with the licensees.88 Thus, the regulations would apply to such statements when they are right to audit the MLC to verify the require identification of any trade or prepared and rendered to copyright accuracy of royalty payments, this new consumer-facing brand names of such owners by the MLC.’’ 92 Music Reports audit right does not ameliorate the value services if they are different from the noted in particular that ‘‘[h]istorically, of certification.99 As one commenter name of the blanket licensee. music rights owners and digital music noted, audits are limited to no more The rule proposes that certain providers have been in contractual than one a year for any individual identifying information for musical privity with one another through the copyright owner and may be costly and works and sound recordings, such as mechanism of the compulsory lengthy.100 Interested Parties Information (‘‘IPI’’), mechanical license.’’ 93 That privity is The proposed rule would require the International Standard Work Code lost with the creation of the blanket MLC to certify monthly royalty (‘‘ISWC’’), International Standard license and transfer of blanket license statements under the blanket license the Recording Code (‘‘ISRC’’), and record functions to the MLC. The MLC same way monthly statements of label, are only required to the extent disagreed with Music Report’s proposal, account must be currently certified by they are known to the MLC, since there saying certification of usage reports by non-blanket licensees using the may be copyright owners and musical the DMPs, which is required under the compulsory license. This requirement works that do not have this information statute,94 ‘‘should be sufficient.’’ 95 would provide copyright owners with associated with them. This threshold— Certification, it said, ‘‘is unjustified the same level of certification by the requiring reporting information only ‘‘to given that the underlying data is processor of their royalties that they the extent it is known to the mechanical certified by the DMPs, and the nonprofit enjoy under the existing non-blanket licensing collective’’—is intended to MLC has no financial interest in license. The Office recognizes this will ensure the MLC includes such underpayment, and MLC accountings add an additional process step upon the information that it has determined is MLC. To address that concern, the reliable enough to be reported as 90 U.S. Copyright Office, Notification of Inquiry, Office is proposing a minimum Transparency of the Mechanical Licensing ‘‘known,’’ but does not imply any Collective and Its Database of Musical Works threshold of royalties due that triggers further obligations to seek out such Information, Dkt. No. 2020–8, published elsewhere the certification requirement. Under the information beyond what is already in this issue of the Federal Register. proposed rule, only statements where 91 required of it.89 This proposed approach 37 CFR 210.16(f). the total royalties to be distributed 92 Music Reports Initial at 5. is similar to the standard articulated in 93 Id. 96 Id. at 40. 94 17 U.S.C. 115 (d)(4)(A)(i) provides that ‘‘[a] 97 88 See, e.g., id. digital music provider shall report and pay royalties Id. 89 This proceeding is not intended to create any to the mechanical licensing collective under the 98 17 U.S.C. 115(d)(3)(G)(i)(I). rules regarding when a work is considered blanket license on a monthly basis in accordance 99 Id. at 115(d)(3)(L). ‘‘matched’’ as that term is used in 17 U.S.C. 115. with clause (ii) and subsection (c)(2)(I).’’ Section 100 See, e.g., Lowery Reply at 7 (‘‘Auditing years As noted above, the Office is currently undergoing 115(c)(2)(I) in turn requires that reports be made after the fact is not going to get it done .... The a study on unclaimed royalties, which may provide under oath and according to regulations prescribing audit language is simply not fit for purpose in a an avenue for members of the public to comment ‘‘the manner of certification.’’ world of trillions of individual transactions rather upon that standard in greater detail. 95 MLC Reply at 39. than hundreds of millions of CDs.’’).

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during the period covered by the thresholds are set at $1 and $100, license than under the non-blanket statement exceed $100 are required to respectively; 107 for BMI, the thresholds license. be certified by the MLC. The Office are $2 and $100.108 Based on these As with the type of information this seeks comment on this proposal. benchmarks, the Office proposes rule requires the MLC to report to 6. Payment Thresholds establishing a minimum payment copyright owners, this rule establishes threshold of $5 for direct deposit, $100 only minimum reporting obligations. Under the proposed rule, the MLC for paper checks, and $250 for wire The MLC may choose to provide will be required to provide copyright transfer. In any case, the copyright copyright owners with annual owners with a statement for every owner would retain the ability under statements if it sees a value in doing so. period in which there is activity the regulations to request payment for The rule is silent on the requirement to relevant to the distribution of royalties accrued royalties that fall below the preserve maximum flexibility to the under the blanket license. To promote threshold set by the MLC. The Office MLC for providing statements beyond efficiency, royalties will not be seeks comment on this threshold, what the Office has identified as considered payable to copyright owners required to ensure transparency and until the total royalties collected equal including whether amounts proposed are appropriate. accountability. The Office seeks at least one cent. comment on this proposal. Separately, the DLC commented that 7. Annual Royalty Statement it would be inefficient to send ‘‘tens of 8. Disclosures; Education and Outreach thousands of penny checks’’ and At this time, the Office is not Under the MMA, the MLC is required suggested setting a default royalty proposing including a requirement for 101 to engage in certain outreach and payment threshold of $25. The annual royalty statements. Although educational efforts, including, current regulations for monthly section 115 requires non-blanket ‘‘engag[ing] in diligent, good-faith statements of account under the non- licensees to provide an annual efforts to publicize, throughout the blanket license allow a compulsory statement of account to copyright music industry—the existence of the licensee to defer the payment date for owners, there is a key difference in how collective and the ability to claim royalties until the cumulative unpaid adjustments to royalties distributed in unclaimed accrued royalties for royalties exceed $5.102 The Office set prior reporting periods are proposed to unmatched musical works (and shares the threshold at $5 after a proposal to be reported under the blanket license. of such works) held by the collective; set it at $50.103 The Office concluded Under the non-blanket license, licensees the procedures by which copyright that although it lacked express statutory are required to serve an amended owners may identify themselves and authority to set a threshold, it could annual statement of account when provide contact, ownership, and other create one through its ‘‘inherent royalties are adjusted.109 Under the authority to allow the withholding of relevant information to the collective in blanket license, to facilitate timely order to receive payments of accrued amounts it determines are de payment of royalties to copyright 104 royalties; any transfer of accrued minimis.’’ It determined that a owners, the proposed rule would threshold of $5 was permitted under royalties for musical works under 105 provide for adjustments to be reported paragraph (10)(B), not later than 180 that standard. to copyright owners with their regular In light of the additional general days after the date on which the transfer monthly statements, as the MLC rulemaking authority delegated to the is received; and any pending receives and processes reports of distribution of unclaimed accrued Register of Copyrights under section 110 115(d)(12)(A), it appears that the Office adjustments from the DMPs. Thus, royalties and accrued interest, not less would not be similarly constrained in the proposed rule ensures copyright than 90 days before the date on which establishing a minimum threshold for owners continue to receive the same the distribution is made.’’ 111 Royalty royalty payments and can set a information under the blanket license statements provide a valuable avenue threshold higher than $5. Indeed, it may they expect under the non-blanket for communicating with copyright be appropriate to provide for different license, just in a different type of owners. The Office is not proposing any thresholds depending on the payment statement. In fact, since the Office is specific disclosures, but encourages the method, given that there are different proposing that adjustments be reported MLC to use royalty statements as part of costs associated with processing by DMPs to the MLC and subsequently, its educational and outreach obligations payments by direct deposit, physical from the MLC to copyright owners, in a under the statute. more frequent manner than once a year, check, or wire transfer, and such tiered III. Subjects of Inquiry structures are standard in comparable the Office hopes that adjustments will distributions. At this point, there are be made and any additional royalties Before promulgating a final rule, the insufficient data regarding how much it paid out more quickly under the blanket Copyright Office seeks additional public will cost the MLC to process payments, comment on all aspects of the proposed but existing thresholds within the 107 ASCAP, Performance Periods and Payment rule, including the specific subjects market provide a useful starting point. Methods, https://www.ascap.com/help/royalties- below: and-payment/payment/payment (last visited Apr. 2, 1. Should the regulations require For example, SoundExchange has a 2020). minimum payment threshold of $10 for 108 BMI, How We Pay Royalties, https:// distribution and reporting of royalties to electronic payments and $100 for paper www.bmi.com/creators/royalty/general_information occur within a specified time period? checks.106 For ASCAP, the minimum (last visited Apr. 2, 2020). 2. Should the rule establish electronic 109 37 CFR 210.17(d)(2)(iii). delivery of statements by default, with 110 101 DLC Reply at 27. The Office is proposing that DMPs report the option to request paper statements? adjustments on a monthly basis in a separate, 102 37 CFR 210.16(g)(6). concurrent rulemaking. See U.S. Copyright Office, 3. Is ‘‘known to the MLC’’ an 103 79 FR at 56198. Notice of Proposed Rulemaking, Music appropriate standard for triggering an 104 Id. Modernization Act Notices of License, Notices of obligation to report information that the 105 Id. at 56198–99. Nonblanket Activity, Data Collection and Delivery MLC is not expected to have for all 106 SoundExchange, General FAQs, https:// Efforts, and Reports of Usage and Payment, Dkt. No. www.soundexchange.com/about/general-faqs/ (last 2020–5, published elsewhere in this issue of the visited Apr. 2, 2020). Federal Register. 111 17 U.S.C. 115(d)(3)(J)(iii)(II).

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musical works, sound recordings, and/ matched in the month next preceding mechanical licensing collective by a or copyright owners? and a proportionate amount of accrued copyright owner or its administrator. 4. Is there any additional content that interest associated with that work; and (v) The name(s) of the songwriter(s), should be reported to copyright owners, (iii) Any overpayment or to the extent they are known to the or, conversely, is there any content underpayment of royalties in prior mechanical licensing collective. proposed to be reported that is periods based on adjustments to reports (vi) ISNI(s) and IPI(s) of each unnecessary to require by regulation? of usage by digital music providers. songwriter, to the extent either is known 5. Are the minimum payment (2) Royalty distributions shall be to the mechanical licensing collective. thresholds ($2 for direct deposit, $100 accompanied by a royalty statement (vii) The percentage share of musical for paper checks, and $250 for wire containing the information set forth in work owned or controlled by the transfer) for distribution of royalties paragraph (c) of this section. copyright owner. appropriate? (c) Content—(1) General content of (viii) For each sound recording 6. Should the mechanical licensing royalty statements. Accompanying the embodying the musical work, the collective be required to send annual distribution of royalties to a copyright identifying information enumerated in statements in addition to monthly owner, the mechanical licensing paragraph (c)(3) of this section and the royalty statements? collective shall provide to the copyright royalty information enumerated in paragraph (c)(4) of this section. List of Subjects in 37 CFR Part 210 owner a statement that includes, at a minimum, the following information: (3) Sound recording information. For Copyright, Phonorecords, Recordings. (i) The period (month and year) each sound recording embodying a Proposed Regulations covered by the statement. musical work included in a royalty (ii) The name and address of the statement, the mechanical licensing For the reasons set forth in the mechanical licensing collective. collective shall report the following preamble, the Copyright Office proposes (iii) The name and mechanical information: amending 37 CFR part 210 as follows: licensing collective identification (i) The sound recording name(s), number of the copyright owner. including primary and all known PART 210—COMPULSORY LICENSE (iv) ISNI and IPI name and alternative and parenthetical titles for FOR MAKING AND DISTRIBUTING identification number of the copyright the sound recording. PHYSICAL AND DIGITAL owner, to the extent it has been (ii) The featured artist(s). PHONORECORDS OF NONDRAMATIC provided to the mechanical licensing (iii) The record label name(s), to the MUSICAL WORKS collective by a copyright owner. extent it is known to the mechanical ■ 1. The authority citation for part 210 (v) The name and mechanical licensing collective. continues to read as follows: licensing collective identification (iv) ISRC, to the extent it is known to number of the copyright owner’s the mechanical licensing collective. Authority: 17 U.S.C. 115, 702. administrator (if applicable), to the (v) The sound recording copyright extent one has been provided to the owner(s). Subpart B—Blanket Compulsory mechanical licensing collective by a (vi) The MLC is encouraged to include License for Digital Uses, Mechanical copyright owner. other information commonly used in the Licensing Collective, and Digital (vi) ISNI and IPI of the copyright industry to identify sound recordings, Licensee Coordinator owner’s administrator, to the extent one such as any other unique identifier(s) ■ 2. Add § 210.29 to read as follows: has been provided to the mechanical for or associated with the sound licensing collective by a copyright recording, including any unique § 210.29 Reporting and distribution of owner, songwriter, or administrator. identifier(s) for any associated album, royalties to copyright owners by the (vii) Payment information, such as including but not limited to: mechanical licensing collective. check number, ACH identification, or (A) Playing time. (a) General. This section prescribes wire transfer number. (B) Album title(s) or product name(s). reporting obligations of the mechanical (viii) The total royalty payable to the (C) Album or product featured licensing collective to copyright owners relevant copyright owner for the month artist(s), if different from sound for the distribution of royalties for covered by the royalty statement. recording featured artist(s). musical works, licensed under the (2) Musical work information. For (D) Distributor(s). blanket license for digital uses each matched musical work owned by (4) Royalty information. The prescribed in 17 U.S.C. 115(d)(1), that the copyright owner for which mechanical licensing collective shall have been matched, either through the accompanying royalties are being separately report, for each service, processing by the mechanical licensing distributed to that copyright owner, the offering, or activity reported by a collective upon receipt of a report of mechanical licensing collective shall blanket licensee, the following royalty usage and royalty payment from a report the following information: information for each sound recording digital music provider, or during the (i) The musical work name, including embodying a musical work included in holding period for unmatched works as primary and any alternative and a royalty statement: defined in 17 U.S.C. 115(d)(3)(H)(i). parenthetical titles for the musical work (i) The name of the blanket licensee (b) Distribution of royalties and known to the mechanical licensing and, if different, the trade or consumer- royalty statements. (1) Royalty collective. facing brand name(s) of the service(s), distributions shall be made on a (ii) ISWC for the musical work, to the including any specific offering(s), monthly basis and shall include: extent it is known to the mechanical through which the blanket licensee (i) All royalties to a copyright owner licensing collective. engages in covered activities. for a musical work matched in the (iii) The mechanical licensing (ii) The service tier or service ordinary course under 17 U.S.C. collective identification number of the description. 115(d)(3)(G)(i)(II) for the month next musical work. (iii) The use type (download or preceding; (iv) The administrator’s unique stream). (ii) All accrued royalties for any identifier for the musical work, to the (iv) The number of payable units, particular musical work that has been extent one has been provided to the including, as applicable, permanent

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downloads, plays, and constructive (B) Statement two: Dated: April 15, 2020. plays. This statement was prepared by the Regan A. Smith, (v) The royalty rate and amount. Mechanical Licensing Collective and/or its General Counsel and Associate Register of (vi) The interest amount. Copyrights. (vii) The distribution amount. agent using processes and internal controls (d) Cumulative statements of account, that were subject to an examination, during [FR Doc. 2020–08375 Filed 4–17–20; 4:15 pm] and adjustments. (1) For royalties the past year, by a licensed Certified Public BILLING CODE 1410–30–P reported under paragraph (b)(1)(ii) of Accountant in accordance with the this section, the mechanical licensing attestation standards established by the collective shall provide a cumulative American Institute of Certified Public LIBRARY OF CONGRESS statement of account that includes, in Accountants, the opinion of whom was that the processes and internal controls were U.S. Copyright Office addition to the information in paragraph suitably designed to generate monthly (c) of this section, a clear identification statements that accurately reflect, in all 37 CFR Part 210 of the total period covered and the total material respects, the blanket licensee’s usage royalty payable for the period. [Docket No. 2020–7] of musical works, the statutory royalties (2) For adjustments reported under applicable thereto, and any other data that is paragraph (b)(1)(iii) of this section, the Treatment of Confidential Information necessary for the proper calculation of the mechanical licensing collective shall by the Mechanical Licensing Collective statutory royalties in accordance with 17 clearly indicate the original reporting and Digital Licensee Coordinator U.S.C. 115 and applicable regulations. period of the royalties being adjusted. AGENCY: U.S. Copyright Office, Library (e) Delivery of royalty statements. (h) Delivery. (1) Subject to paragraph of Congress. Royalty statements may be delivered (h)(2) of this section, a separate royalty ACTION: Notice of proposed rulemaking. electronically or, upon written request statement shall be provided for each of the copyright owner, by mail. month during which there is any SUMMARY: The U.S. Copyright Office is Nothing in this section shall prevent the activity relevant to the distribution of issuing a notice of proposed rulemaking mechanical licensing collective from royalties under the blanket license. regarding the protection of confidential alternatively providing, upon written information by the mechanical licensing request of the copyright owner: (2) Royalties under the blanket license shall not be considered payable, and no collective and digital licensee (1) A separate, simplified report coordinator under title I of the Orrin G. royalty statement shall be required, containing fewer data fields that may be Hatch-Bob Goodlatte Music until the cumulative unpaid royalties more understandable for the copyright Modernization Act. After soliciting collected for the copyright owner equal owner; or public comments through a notification at least one cent. Moreover, in any case (2) Access to statements through an of inquiry, the Office is now proposing in which the cumulative unpaid online password protected portal, regulations identifying appropriate accompanied by email notification of royalties under the blanket license that procedures to ensure that confidential, the availability of the statement in the would otherwise be distributed by the private, proprietary, or privileged portal. mechanical licensing collective to the information contained in the records of (f) Clear statements. The information copyright owner are less than $2 if the the mechanical licensing collective and required by paragraph (c) of this section copyright owner receives payment by digital licensee coordinator is not requires intelligible, legible, and direct deposit, $100 if the copyright improperly disclosed or used. The unambiguous statements in the royalty owner receives payment by physical Office solicits additional public statements without incorporation of check, or $250 if the copyright owner comments on the proposed rule, facts or information contained in other receives payment by wire transfer and including regarding the use of documents or records. the copyright owner has not notified the confidentiality designations and (g) Certification. (1) Each royalty mechanical licensing collective in statement in which the total royalty nondisclosure agreements. writing that it wishes to receive royalty DATES: Written comments must be payable to the relevant copyright owner statements reflecting payments of less for the month covered is equal to or received no later than 11:59 Eastern than the threshold, the mechanical Time on June 8, 2020. greater than $100 shall be accompanied licensing collective may choose to defer ADDRESSES: For reasons of government by: the payment date for such royalties and (i) The name of the person who is efficiency, the Copyright Office is using provide no royalty statements until the signing and certifying the statement. the regulations.gov system for the (ii) A signature of a duly authorized earlier of the time for rendering the submission and posting of public officer of the mechanical licensing royalty statement for the month in comments in this proceeding. All collective. which the unpaid royalties under the comments are therefore to be submitted (iii) The date of signature and blanket license for the copyright owner electronically through regulations.gov. certification. exceed the threshold, at which time the Specific instructions for submitting (iv) The title or official position held mechanical licensing collective may comments are available on the by the person who is signing and provide one statement and payment Copyright Office website at https:// certifying the statement. covering the entire period for which copyright.gov/rulemaking/mma- (v) One of the following statements: royalty payments were deferred. confidentiality. If electronic submission (A) Statement one: (3) If the mechanical licensing of comments is not feasible due to lack I certify that (1) I am duly authorized to collective is required, under applicable of access to a computer and/or the sign this royalty statement on behalf of the tax law and regulations, to make backup internet, please contact the Office using mechanical licensing collective; (2) I have withholding from its payments required the contact information below for examined this royalty statement; and (3) All special instructions. statements of fact contained herein are true, hereunder, the mechanical licensing complete, and correct to the best of my collective shall indicate the amount of FOR FURTHER INFORMATION CONTACT: knowledge, information, and belief, and are such withholding on the royalty Regan A. Smith, General Counsel and made in good faith; or statement or on or with the distribution. Associate Register of Copyrights, by

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