32274 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

(b) Definitions. As used in this to the compulsory license for digital administer this new blanket-licensing section, designated representative music providers to make and distribute system beginning on the ‘‘license means a Coast Guard Patrol digital phonorecord deliveries. For the availability date,’’ that is, January 1, Commander, including a Coast Guard reasons published in this document, the 2021.5 As detailed further below, the petty officer, warrant or commissioned Register designates Mechanical MLC, through its board of directors and officer on board a Coast Guard vessel or Licensing Collective, Inc. as the task-specific committees, will be on board a federal, state, or local law mechanical licensing collective and responsible for a variety of duties, enforcement vessel assisting the Captain Digital Licensee Coordinator, Inc. as the including receiving usage reports from of the Port (COTP), Delaware Bay in the digital licensee coordinator, including digital music providers, collecting and enforcement of the safety zone. their individual proposed board distributing royalties associated with (c) Regulations. (1) Under the general members. those uses, identifying musical works safety zone regulations in subpart C of DATES: Effective July 8, 2019. embodied in particular sound this part, you may not enter the safety recordings, administering a process by FOR FURTHER INFORMATION CONTACT: zone described in paragraph (a) of this which copyright owners can claim Regan A. Smith, General Counsel and section unless authorized by the COTP ownership of musical works (and shares Associate Register of Copyrights, by or the COTP’s designated representative. of such works), and establishing a email at [email protected], Steve (2) To seek permission to enter or musical works database relevant to Ruwe Assistant General Counsel, by remain in the zone, contact the COTP or these activities.6 email at [email protected], or Jason the COTP’s representative via VHF–FM By statute, digital music providers E. Sloan, Assistant General Counsel, by channel 16 or 215–271–4807. Those in will bear the reasonable costs of email at [email protected]. Each can be the safety zone must comply with all establishing and operating the MLC contacted by telephone by calling (202) lawful orders or directions given to through an administrative assessment, 707–8350. them by the COTP or the COTP’s to be determined if necessary by the designated representative. SUPPLEMENTARY INFORMATION: Copyright Royalty Judges (‘‘CRJs’’) in a (3) This section applies to all vessels I. Background separate proceeding.7 The MMA also except those engaged in law allows, but does not require, the enforcement, aids to navigation On October 11, 2018, the Orrin G. Register to designate a digital licensee servicing, and emergency response Hatch-Bob Goodlatte Music coordinator (‘‘DLC’’) to represent operations. Modernization Act (the ‘‘MMA’’) was 1 licensees in this proceeding, to serve as (d) Enforcement. The U.S. Coast signed into law. Title I of the MMA a non-voting member of the MLC, and Guard may be assisted in the patrol and addresses the efficiency and fairness of to carry out other functions.8 enforcement of the safety zone by the section 115 ‘‘mechanical’’ license for Federal, State, and local agencies. the reproduction and distribution of A. MLC Designation Requirements, (e) Enforcement period. This zone musical works embodied in digital Duties, and Functions will be enforced from approximately phonorecord deliveries, including The entity designated as the MLC (but no earlier than) 5 p.m. to permanent downloads, limited must be: 2 approximately (but not later than) 9 downloads, and interactive streams. In • A single nonprofit entity that is p.m. on July 14, 2019. relevant part, it eliminates the song-by- created by copyright owners to carry out song notice of intention process for such Dated: June 28, 2019. its statutory responsibilities; uses and creates a new blanket • Scott E. Anderson, ‘‘endorsed by, and enjoy[ ] compulsory licensing system for digital substantial support from, musical work Captain, U.S. Coast Guard, Captain of the music providers engaged in digital copyright owners that together represent Port Delaware Bay. 3 phonorecord deliveries. The blanket the greatest percentage of the licensor [FR Doc. 2019–14420 Filed 7–5–19; 8:45 am] licensing structure is designed to reduce market for uses of such works in BILLING CODE 9110–04–P the transaction costs associated with covered activities, as measured over the song-by-song licensing by commercial preceding 3 full calendar years;’’ 9 services that strive to offer ‘‘as much • able to demonstrate to the LIBRARY OF CONGRESS music as possible,’’ while ‘‘ensuring fair Copyright Office that, by the license and timely payment to all creators’’ of U.S. Copyright Office availability date, it will have the the musical works used on these digital administrative and technological services.4 37 CFR Part 210 capabilities to perform the required The MMA directs the Register of functions; and [Docket No. 2018–11] Copyrights to designate a nonprofit • governed by a board of directors entity operated by copyright owners, and include committees that are Designation of Music Licensing referred to by statute as the mechanical composed of a mix of voting and non- Collective and Digital Licensee licensing collective (‘‘MLC’’), to voting members as directed by the Coordinator statute.10 1 Public Law 115–264, 132 Stat. 3676 (2018). AGENCY: U.S. Copyright Office, Library 2 See S. Rep. No. 115–339, at 1–2 (2018); Report If no single entity meets each of these of Congress. and Section-by-Section Analysis of H.R. 1551 by the statutory criteria, the Register must Chairmen and Ranking Members of Senate and designate as the MLC the entity that ACTION: Final rule. House Judiciary Committees, at 1 (2018), https:// www.copyright.gov/legislation/mma_conference_ 5 SUMMARY: Pursuant to title I of the Orrin report.pdf (‘‘Conf. Rep.’’); see also H.R. Rep. No. 17 U.S.C. 115(d)(2)(B), (d)(3)(B); see also id. at G. Hatch-Bob Goodlatte Music 115–651, at 2 (2018) (detailing the House Judiciary 115(e)(15). 6 Modernization Act, and following a Committee’s efforts to review music copyright Id. at 115(d)(3)(C). 7 Id. at 115(d)(7)(D). solicitation of proposals and public laws). 3 The MMA retains the ability of record 8 Id. at 115(d)(5)(B); see also id. at comment on those proposals, the companies to obtain an individual download 115(d)(3)(D)(i)(IV), (d)(5)(C). Register is designating the entities who license on a song-by-song basis. 17 U.S.C. 115(b)(3). 9 Id. at 115(d)(3)(A)(ii). will perform certain functions relating 4 S. Rep. No. 115–339, at 4, 8. 10 Id. at 115(d)(3)(A), (d)(3)(D)(i).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32275

most nearly fits these qualifications.11 relating to the governance of the to assist the MLC in its efforts to locate After five years, the Register will collective, following statutory criteria.18 and identify copyright owners of commence a periodic review of this By statute, the MLC board must unmatched musical works (and shares designation.12 establish three committees. First, an of such works) by encouraging digital The MMA enumerates a number of operations advisory committee will music providers to publicize the required functions for the MLC.13 A core make recommendations concerning the existence of the collective and the aspect of the MLC’s responsibilities operations of the collective, ‘‘including ability of copyright owners to claim includes identifying musical works and the efficient investment in and unclaimed accrued royalties, including copyright owners, matching them to deployment of information technology by posting contact information for the sound recordings (and addressing and data resources.’’ 19 Second, an collective at reasonably prominent disputes), and ensuring that a copyright unclaimed royalties oversight locations on digital music provider owner gets paid as he or she should. To committee will establish policies and websites and applications, and that end, the MLC will create and procedures necessary to undertake a fair conducting in-person outreach activities maintain a free, public database of distribution of unclaimed royalties.20 with songwriters. The DLC is authorized musical work and sound recording Third, a dispute resolution committee to participate in proceedings before the ownership information. The MLC will will establish policies and procedures CRJs to determine the administrative administer processes by which for copyright owners to address disputes assessment to be paid by digital music copyright owners can claim ownership relating to ownership interests in providers, and before the Copyright of musical works (and shares of such musical works, including a mechanism Office with respect to the blanket works), and by which royalties for to hold disputed funds pending the mechanical license. works for which the owner is not resolution of the dispute.21 identified or located are equitably C. Designation Process and the Role of distributed to known copyright owners B. DLC Designation Criteria and the Copyright Office. Functions on a market share basis after a required The Register is to designate the MLC, holding period.14 The MLC will Similar to the MLC, the DLC must: along with the DLC (as applicable), by participate in proceedings before the • Be a single nonprofit entity created publishing a notice in the Federal CRJs to establish the administrative to carry out certain statutory Register that sets forth ‘‘the identity of assessment that will fund the MLC’s responsibilities; and contact information for the . . . • activities, as well as proceedings before be endorsed by digital music collective,’’ and ‘‘the reasons for the the Copyright Office with respect to the service providers and significant designation.’’ 26 These designations are foregoing activities.15 nonblanket licensees that together subject to the approval of the Librarian The board of the MLC shall consist of represent the greatest percentage of the of Congress pursuant to section 702 of fourteen voting members and three licensee market for uses of musical title 17.27 The legislative history states nonvoting members.16 Ten voting works in covered activities, as measured that ‘‘the Register is expected to allow members shall be representatives of over the preceding 3 calendar years; and the public to submit comments on • music publishers that have been possess the administrative and whether the individuals and their assigned exclusive rights of technological capabilities necessary to affiliations meet the criteria specified in reproduction and distribution of carry out a wide array of authorities and the legislation; make some effort of its musical works with respect to covered functions.22 own as it deems appropriate to verify activities, and four other voting The Register is directed to designate that the individuals and their members shall be professional the DLC following substantially the affiliations actually meet the criteria songwriters who have retained and same procedure described for specified in the legislation; and allow exercise exclusive rights of reproduction designation of the MLC.23 Unlike the the public to submit comments on and distribution for musical works they MLC, in the event the Register is unable whether they support such individuals have authored. There are also three to identify an entity that fulfills the being appointed for these positions.’’ 28 nonvoting members that will represent criteria for the DLC, the Register may On December 21, 2018, the Office the interests of songwriters, music decline to designate a DLC; in that issued a Notice of Inquiry (‘‘NOI’’) publishers, and digital licensees via event, the statutory references to the setting forth the functions of the MLC representatives of relevant trade DLC go without effect unless or until a 24 and DLC and the statutory criteria for associations or, in the case of licensees, DLC is designated. designation, and solicited proposals the DLC, if one has been designated.17 The DLC is tasked with coordinating 25 from entities meeting such criteria and Within one year of designation, the MLC the activities of the licensees. The DLC seeking to be designated as the MLC or must establish publicly available bylaws shall make reasonable, good faith efforts DLC, as well as relevant public comments.29 The name and affiliation of 11 18 Id. at 115(d)(3)(D)(ii). Id. at 115(d)(3)(B)(iii). each proposed board and committee 12 Id. at 115(d)(3)(B)(ii); see also H.R. Rep. No. 19 Id. at 115(d)(3)(D)(iv). This committee will have 115–651, at 6 (noting that continuity is expected to an equal number of musical work copyright owners member established by the MLC were be beneficial so long as the designated entity has and digital music provider representatives, ‘‘regularly demonstrated its efficient and fair respectively appointed by the MLC and DLC. 26 Id. at 115(d)(3)(B)(II), (d)(5)(B)(i)–(ii). 20 administration,’’ whereas evidence of ‘‘fraud, waste, Id. at 115(d)(3)(D)(v), (d)(3)(J)(ii). This 27 Id. at 115(d)(3)(A)(iv) (‘‘with the approval of the or abuse,’’ or failure to adhere to relevant committee of ten will have an equal number of Librarian of Congress pursuant to section 702, in regulations should ‘‘raise serious concerns’’ musical work copyright owners and professional accordance with subparagraph (B)’’); id. at regarding whether re-designation is appropriate); S. songwriters. (d)(5)(A)(iv) (same); see id. at 702. Rep. No. 115–339, at 5–6 (same). 21 Id. at 115(d)(3)(D)(vi), (d)(3)(H)(ii), (d)(3)(K). 28 H.R. Rep. No. 115–651, at 5; S. Rep. No. 115– 13 17 U.S.C. 115(d)(3)(C)(i), (iii) (enumerating This committee will consist of at least six members, 339, at 5; Conf. Rep. at 4; see H.R. Rep. No. 115– thirteen functions, in addition to permission to again equally divided among musical work 651, at 26 (‘‘This requirement is not waivable by the administer voluntary licenses). copyright owners and professional songwriters. Register and is not subject to the alternate 14 Id. at 115(d)(3)(E). 22 Id. at 115(d)(5)(A)(i)–(iii). designation language.’’); S. Rep. No. 115–339, at 23 15 Id. at 115(d)(3)(C)(i)(IX)–(X). 23 Id. at 115(d)(5)(B). (same). 16 Id. at 115(d)(3)(D)(i). 24 Id. at 115(d)(5)(B)(iii). 29 83 FR 65747 (Dec. 21, 2018) (‘‘NOI’’); see 17 17 Id. 25 See generally id. at 115(d)(5)(C). U.S.C. 115(d)(3)(B), (d)(3)(D)(iv)–(vi), (d)(5)(B).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32276 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

solicited as part of the designation ‘‘the need to protect the public’s interest statutory responsibilities, only MLCI process.30 with the need to let the new collective satisfies the endorsement criteria, and The Office received one proposal for operate without over-regulation.’’ 39 MLCI also has made a better showing as designation as the DLC and two to its prospective administrative and II. Register’s Designation and Analysis proposals for designation as the MLC, technological capabilities. The Register which, in accordance with the NOI, the A. Mechanical Licensing Collective is thus designating MLCI, including its public was invited to comment upon. The Office received proposals from individual board members, with the The response was considerable; the two entities seeking to be designated as Librarian’s approval. Office received over 600 comments the MLC: (1) The ‘‘Mechanical Licensing As both proposals demonstrate, the addressing these proposals, including, Collective, Inc.’’ referred to here as new collective must undertake but not limited to, musical work ‘‘MLCI’’; and (2) the ‘‘American Music formidable responsibilities copyright owners endorsing one or more Licensing Collective,’’ referred to here expeditiously and conscientiously to of the entities seeking designation. As as ‘‘AMLC.’’ 40 The candidates’ establish a number of operational noticed in the NOI, the Office also respective submissions take differing functions critical to implementation of considered whether to utilize approaches to demonstrating the new blanket licensing system. While information meetings subject to compliance with the statutory criteria. the comprehensive MLCI proposal established guidelines for such ex parte MLCI provides a detailed outline of its signals its understanding of the full communications.31 Determining that proposed organizational structure, scope of this project and its importance follow-up with each of the three business plan, and overall activities. It to songwriters and others in the music candidates would be valuable, the provided flowcharts and other community, a successful collective will Office issued such guidelines, and on illustrative materials setting forth in- undoubtedly benefit from input from May 28 and 29, the Office met with the depth plans for executing the MLC’s that broader community much in the three proponents seeking designation as way the MMA itself was enacted in a administrative and technological 44 the DLC or MLC, allowing the responsibilities, including managing spirit of consensus and compromise. proponents to supplement their written compulsory and voluntary licenses, The Register welcomes the prospect of submissions, but not to address matters matching songwriters to musical works, MLCI working with the broader wholly outside the record; summaries of and collecting and distributing royalties. community of musical work copyright those meetings were posted on the It describes its submission as the ‘‘music owners and other songwriters, as well as Office’s website.32 industry consensus proposal’’ and the DLC and individual digital music Beyond the Office’s role in contends that its selection would providers, to realize the promise of the designating the MLC and DLC, Congress facilitate valuable cooperative efforts MLC as envisioned by Congress. intended to invest the Register with across the industry.41 AMLC focuses 1. Organization, Board and Committee ‘‘broad regulatory authority’’ to create more specifically on matching Composition, and Governance policies and conduct proceedings as unidentified songwriters to their necessary to effectuate the MMA.33 The As the statute requires, both MLCI compositions for payment purposes. It and AMLC are constructed as nonprofit statute enumerates several regulations argues that the expertise of its proposed that the Register is specifically directed entities created by copyright owners to board and vendors makes it best carry out the MLC’s statutory to promulgate, including regulations 42 positioned to advance that goal, which responsibilities.45 The analysis below regarding the form of the notices of the Conference Report describes as ‘‘the will focus on relevant board and license and notices of nonblanket highest responsibility of the collective’’ committee composition and governance activity,34 usage reports and beyond efficient and accurate collection issues. adjustments,35 information to be and distribution of royalties.43 included in the musical works The Copyright Office assessed the i. Board and Committee Composition 36 database, requirements for the extent to which each candidate satisfies a. MLCI usability, interoperability, and usage the statutory requirements for restrictions of that database,37 and the designation, which can be grouped into In accordance with the statute, MLCI’s disclosure and use of confidential three categories: (1) Organization, board proposed board includes four information.38 The legislative history and committee composition, and professional songwriters: Kara contemplates that the Register will both governance; (2) endorsement and DioGuardi, Oak Fielder, Kevin Kadish, 46 ‘‘thoroughly review[ ]’’ policies and substantial support from musical work and Tim Nichols. MLCI notes that procedures established by the MLC, and copyright owners; and (3) these members were selected by a promulgate regulations that balance administrative and technological songwriter advisory panel consisting of capabilities. As detailed below, the two professional songwriters from each 30 17 U.S.C. 115(d)(3)(B)(i)(I). Office concludes that while both of the Nashville Songwriters 31 NOI at 65753–54. candidates meet the statutory criteria to Association International (‘‘NSAI’’), 32 See U.S. Copyright Office, Ex Parte be a nonprofit created to carry out its Songwriters of North America Communications, https://www.copyright.gov/ (‘‘SONA’’), Songwriters Guild of rulemaking/mma-designations/ex-parte- 39 H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. No. America (‘‘SGA’’), American Society of communications.html (last visited June 24, 2019); 115–339, at 5, 15; see also 17 U.S.C. 115(d)(12). NOI at 65753–54. Given the relatively robust record, 40 44 with over 600 written comments received regarding The incorporator’s contact information for See, e.g., Conf. Rep. at 2 (‘‘Songwriters, artists, the proposals, and in light of the statutory deadline, these entities are: Benjamin K. Semel, Pryor publishers, producers, distributors, and other the Office elected to limit meetings to the three Cashman LLP, 7 Times Square, New York, NY stakeholders involved in the creation and 10036 (MCLI); Derek C. Crownover, Dickinson candidates. distribution of music collaborated with legislators Wright, PLLC, 54 Music Square East, Suite 303, in both the Senate and the House to find a path 33 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. 115– Nashville, TN 37203 (AMLC); and Allison Stillman, forward on music reform.’’). 339, at 5; see also 17 U.S.C. 115(d)(12). Mayer Brown LLP, 1221 Avenue of the Americas, 45 34 MLCI Proposal at Ex. 1 (Certificate of 17 U.S.C. 115(d)(2)(A)(i), (d)(6)(A)(i). New York, NY 10020 (DLCI). Incorporation under Delaware law); AMLC Proposal 35 Id. at 115(d)(4)(A)(iv). 41 MLCI Proposal at 5, 8. at Schedule B (Certificate of Incorporation under 36 Id. at 115(d)(3)(E)(ii)(V), (d)(3)(E)(iii)(II). 42 Id. at 2–5. New York law). 37 Id. at 115(d)(3)(E)(vi). 43 Conf. Rep. at 7; H.R. Rep. No. 115–651, at 9 46 Id. at 67–68 (a biography is included for each 38 Id. at 115(d)(12)(C). (same); S. Rep. No. 115–339, at 9 (same). songwriter board member).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32277

Composers, Authors and Publishers non-voting board member will be a appointment to the board.60 In addition, (‘‘ASCAP’’), and Broadcast Music, Inc. representative of the DLC.55 MLCI’s submission indicates that its 47 (‘‘BMI’’). No members of the advisory MLCI also submits proposed members selection procedures were carefully panel were themselves candidates for for each of the three statutorily required designed to ensure transparency and 48 the board or any committee. NSAI committees. For the operations advisory input from a broad range of industry reports that the panel considered nearly committee, MLCI has selected copyright sectors, as well as to avoid any 300 songwriter applicants as part of this owners who have substantial experience likelihood of self-selection. MLCI also 49 selection process. with license administration, rights designed its committee selection process such that committee members To satisfy the requirement of ten management operations, and the do not also serve on the board, helping music publisher representatives, MLCI’s relevant technology.56 For the guard against potential conflicts of proposed board includes the following unclaimed royalties oversight interest or undue influence. members: Jeff Brabec (BMG); Peter committee, the proposed members Brodsky (Sony/ATV Music Publishing); likewise have extensive experience b. AMLC Bob Bruderman (Kobalt); Tim Cohan relevant to that committee’s task of AMLC’s submission provides less (peermusic); Alisa Coleman (ABKCO); ‘‘establish[ing] policies and procedures information on the mechanics of its Scott Cutler (Pulse Music Group); Paul for the distribution of unclaimed board and committee selection Kahn (Warner/Chappell Music accrued royalties and accrued processes. For its professional Publishing); David Kokakis (Universal interest.’’ 57 Each publisher songwriter members, AMLC’s board Music Publishing Group); Mike Molinar representative on the unclaimed includes Rick Carnes, Imogen Heap, Zoe (Big Machine Music); and Evelyn royalties committee is affiliated with an Keating, and Maria Schneider.61 For its Paglinawan (Concord Music). MLCI independent music publisher, as music publisher members, AMLC’s notes that these members were selected opposed to a major music publisher, board includes Maximo Aguirre by an advisory panel comprised of which will help to ensure that smaller (Maximo Aguirre Music Publishing, professionals associated with rightsholders have a voice in MLC Inc.), Wally Badarou (ISHE sarl Music), independent music publishers.50 The functions.58 Finally, consistent with the John Barker (ClearBox Rights, LLC), panel ‘‘carefully vetted candidates to statute, MLCI proposes a dispute Marti Cuevas (Mayimba Music), Joerg ensure that the representatives selected resolution committee made of five Evers (Eversongs), Brownlee Ferguson to serve on the Board (a) have the professional songwriters and five (Bluewater Music Corp.), Henry requisite expertise and experience to musical work copyright owners.59 Gradstein (listed as an attorney and govern MLC; (b) individually and Based on the biographies and other independent publisher), Lisa Klein together faithfully reflect the entire information submitted regarding these Moberly (Optic Noise), Ricardo Ordonez music publisher community; and (c) are proposed board and committee (Union Music Group), and Jeff Price motivated to serve on the Board and members, the Copyright Office (Audiam, Inc.).62 AMLC reports that understand and do not underestimate determines that the proposed these members were selected following the serious responsibilities entrusted to composition of MLCI’s board and an ‘‘active recruitment campaign’’ and 51 them.’’ As described by MLCI, the committees satisfies the statutory that each selected member was required publisher board members represent a requirements, and moreover, that each to have ‘‘proven skill sets and practical broad range of publishing interests— of its proposed directors possesses the hands-on work experience’’ in various from a ‘‘thirty-employee company qualifications necessary for industry sectors, as well as ‘‘first-hand established and run by creatives with a work experience and knowledge of catalog of approximately 10,000 songs’’ 55 Id. at 75. music rights organizations and how they 52 63 to the largest global publishers. 56 Id. at 76–78 (committee members are Joe operate.’’ MLCI’s required nonvoting board Conyers III (Songtrust and Downtown Music Publishing), Scott Farrant (Kobalt), Rell Lafargue 60 AMLC does not dispute that these proposed members are Danielle Aguirre (NMPA), (Reservoir Media Management), Michael Lau members possess the required qualifications. The as a representative of the nonprofit trade (Round Hill Music), John Reston (Universal Music Office received one comment from a songwriter association of music publishers that Publishing Group), and Bill Starke (Sony/ATV who allegedly observed ‘‘collusion’’ while ‘‘serving represents the greatest percentage of the Music Publishing)). on the selection committee for the NMPA’s MLC,’’ licensor market for uses of musical 57 17 U.S.C. 115(d)(3)(J)(ii); see MLCI Proposal at without providing substantiation. See Michelle 78 (‘‘This Committee includes individuals who Shocked Reply at 1. While the Office takes such 53 works in covered activities; and Bart have experience in royalty and payment accounting matters seriously, MLCI’s submission did not list Herbison (NSAI), as a representative of and administration, have served on the boards of this commenter as a member of its songwriter a nationally recognized nonprofit trade independent music publishing trade groups, and advisory panel and other songwriters praised the association whose mission is advocacy have litigated (on behalf of songwriters) the failure selection process. See, e.g., SONA Reply at 2 of digital music providers to pay royalties due to (signed by Michelle Lewis, a MLCI songwriter 54 on behalf of songwriters. The third a claimed inability to identify or ‘match’ recordings advisory panel member, and over twenty other to musical works.’’). songwriters); MLCI Proposal at Ex. 8 (statement of 58 NSAI). In the absence of more specific information, 47 Id. at 67–69. MLCI Proposal at 79–80 (committee members these allegations do not factor into the Office’s 48 are songwriters busbee, Kay Hanley, David Lowery, Id. at 68; NSAI Reply at 4–5 (discussing analysis. conflicts of interest approach). Dan Navarro, and Tom Shapiro and copyright owner representatives Phil Cialdella (Atlas Music 61 AMLC Proposal at 35. 49 NSAI Reply at 5. Publishing), Patrick Curley (Third Side Music), 62 Id. at 35, 49–75 (A biography is included for 50 MLCI Proposal at 69; see also NSAI Reply at Michael Eames (PEN Music Group), Frank Liwall each board member). 4–5 (advisory selection panel contained ‘‘only (The Royalty Network, Inc.), and Kathryn Ostien 63 Id. at 38. Following its meeting with AMLC, the independent music publishers whose interests are (The Richmond Organization/Essex Music Group)). Office understands that an initial core of board best served by selecting the most efficient back 59 MLCI Proposal at 84–86 (committee members members, namely Mr. Barker, Mr. Price, Mr. office systems, and who have vast experience with are songwriters Aime´e Allen, Odie Blackmon, Gary Ferguson, and Ms. Moberly, served to vet additional potential vendors’’). Burr, David Hodges, and Jennifer Schott and members. See AMLC Ex Parte Meeting Summary at 51 MLCI Proposal at 69–70 (A biography is copyright owner representatives Alison Koerper 22 (June 5, 2019) (‘‘Board member searches were included for each music publisher board member). (Disney Music Group), Ed Leonard (Daywind Music conducted via personal relationships, 52 Id. at 70. Group), Sean McGraw (Downtown Music recommendations, and invitations to submit 53 Id. at 74. Publishing), Debbie Rose (Shapiro, Bernstein & Co.), inquiries of interest via public posting on the AMLC 54 Id. at 74–75. and Jason Rys (Wixen Music Publishing)). Continued

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32278 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

AMLC includes only one of the three musical work copyright owners and background similarly demonstrates required nonvoting board members, three professional songwriters.71 relevant experience, it is not clear that David Wolfert of MusicAnswers, as a MLCI argues that certain AMLC board he meets the statutory criteria, as MCLI representative of a nationally recognized members do not in fact satisfy the raises a colorable argument that nonprofit trade organization whose relevant statutory criteria.72 MLCI representatives of ‘‘[e]ntities that do not primary mission is advocacy on behalf specifically questions AMLC proposed have a relevant ownership interest in of songwriters in the United States.64 board members John Barker, Joerg Evers, the copyright to musical works (either AMLC notes that one additional and Wally Badarou’s status as by virtue of assignment or exclusive nonvoting board member will be a ‘‘publisher representatives,’’ contending license) do not meet the statutory representative of the DLC, and another that the entities with which they claim criteria.’’ 80 Under that reading, if Mr. will be filled by NMPA as a affiliation do not appear to be music Barker’s company merely administers representative of the nonprofit trade publishers.73 MLCI also challenges the licenses on behalf of copyright owners, association of music publishers.65 characterization of Henry Gradstein as but has not itself been assigned In response, MLCI contends that an ‘‘independent publisher’’ on the copyrights, he would not constitute a AMLC’s proposed board does not ground that he is a litigation attorney for publisher representative within the adequately represent the entire music whom no publisher affiliation is meaning of the statute. publisher community, as it lacks provided either in AMLC’s submission Ultimately, the Copyright Office need representatives from large or mid-size or on his law firm’s website.74 not resolve this issue because the publishers.66 The Office notes, however, The Office raised these issues in its specific proposal of Mr. Barker does not that AMLC has offered to replace one of meeting with AMLC representatives. In factor heavily into the Office’s its current publisher board members response, AMLC provided specific assessment. Any conflict with the with a representative of a major information regarding the entities with statute could be cured by replacing him publisher if such an organization were which these individuals are affiliated. with a publisher representative; indeed, to request a voting seat.67 AMLC stated that Mr. Barker is the the Office appreciates AMLC’s offer to AMLC also submits proposed owner and CEO of ClearBox Rights, accommodate a major publisher that members for each of the designated LLC, an ‘‘independent copyright wishes to join its board. A greater committees. Unlike MLCI, some of the administration company,’’ which is the concern, however, is the lack of specific members on each committee include ‘‘‘exclusive’ agent for licensing and information provided by AMLC on its proposed board members—a structure collection of royalties for all types of membership selection processes. Even that potentially could diminish the uses.’’ 75 Under AMLC’s interpretation, assuming that its ultimate selections committees’ ability to provide Mr. Barker would be qualified to serve would satisfy the statutory independent recommendations to the on the board because he represents requirements, AMLC’s submissions board.68 As required, AMLC provides music publishers through his describe a somewhat ad hoc decision four members for the operations administration company.76 AMLC making process in this area. While many advisory committee, and five further provided company names and of the proposed AMLC board members professional songwriters and five ASCAP or BMI IPI numbers for demonstrate commendable experience musical work copyright owners for the publishing companies owned by Mr. to perform the relevant duties, the unclaimed royalties oversight Evers, Mr. Badarou, and Mr. Office appreciates MLCI’s more committee.69 AMLC notes that the Gradstein.77 comprehensive approach to identifying proposed members of the latter Based on this information, the and selecting potential members, who committee ‘‘have years of experience Register will assume for purposes of this themselves each appear highly dealing with double claims, counter designation that Mr. Evers, Mr. Badarou, experienced and able to perform the claims and registration of song data both and Mr. Gradstein qualify as required duties. in the US and internationally.’’ 70 For ‘‘representatives of music the dispute resolution committee, publishers.’’ 78 While Mr. Gradstein in ii. Representation and Diversity AMLC provides three representatives of particular appears to be primarily a The Institute of Intellectual Property litigator, he is also the owner of a music and Social Justice (‘‘IIPSJ’’), in website.’’). MLCI, however, raised questions as to a publishing company. For the music comments co-signed by several dozen lack of transparency and potential conflicts of publishing representatives, the statute artists and other music industry interest in AMLC’s selection process. See MLCI Reply at 16–18. does not appear to require that music stakeholders, urged the Register to 64 AMLC Proposal at 35. publishing is a full-time occupation, ensure that the MLC includes 65 Id. and Mr. Gradstein has focused his ‘‘meaningful and significant 66 MLCI Reply at 18. career on issues relevant to his proposed representatives from the African- 67 AMLC Proposal at 35. board service.79 While Mr. Barker’s American, Latino-American and Asian- 68 Id. (AMLC’s proposed Operations Advisory American songwriting and music Committee members are Frank Liddell (Carnival 71 Id. at 36 (committee members are songwriters publishing communities, selected by Music), Caleb Shreve (Killphonic Music), and board Wally Badarou, Imogen Heap, and Jon Siebels and such communities, and encompassing members Brownlee Ferguson (Bluewater Music copyright owners Peter Roselli (Bluewater Music Corp.) and Jeff Price (Audiam, Inc.)). Corp.), Hakim Draper (Boogie Shack Music Group), 69 Id. at 35–36 (AMLC’s proposed Unclaimed and Jonathan Segel (Copyright Owner)). (regarding ‘‘professional songwriters who have Royalties Oversight Committee members are 72 MLCI Reply at 19–20. retained and exercise exclusive rights of songwriters Joerg Evers, Rick Carnes, Zoe Keating, 73 Id. at 20. reproduction and distribution with respect to Stewart Copeland, He´le`ne Muddiman, and Anna covered activities with respect to musical works 74 Id. at 19. Rose Menken and copyright owners Ricardo they have authored’’) (emphasis added); see also 75 Ordonez (Union Music Group), Gian Caterine AMLC Ex Parte Meeting Summary at 6. MLCI Proposal at 67 (‘‘In MLC’s view, the (American Music Partners West), Carlos Martin 76 Id. requirement that four voting board members of MLC Carle (Mayimba Music), Juan Hidalgo (Juan y 77 Id. be ‘‘professional songwriters’’ means that the Nelson Entertainment), Al Staehely (listed as an 78 17 U.S.C. 115(d)(3)(D)(i)(I). songwriter board members must be songwriters who entertainment lawyer and copyright owner), and 79 In contrast, the songwriter board members must earn a living primarily through their songwriting David Bander (Ultra Music & Ultra International be ‘‘professional[s],’’ which the Office regards as a activities.’’). Music Publishing)). requirement that such board members must be 80 MLCI Reply at 20; see also 17 U.S.C. 70 Id. at 41. primarily songwriters. Id. at 115(d)(3)(D)(i)(II) 115(d)(3)(D)(i)(I).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32279

representation from the Hip-Hop, R&B, The Copyright Office recognizes the successive board members, MLCI Latin, Reggae, Jazz and Gospel/Christian entertainment industry as a whole has proposes that songwriter members music genres.’’ 81 Pointing to the been grappling with the question of how would be appointed from a slate of growing influence of Hip-Hop and best to diversify its leadership and candidates chosen by songwriters, and Latino music, IIPSJ suggests that the provide opportunities to a broader range prospective music publisher members statute requires ‘‘diverse cultural of creators. The Office believes that the would be appointed from candidates representation’’ for the board.82 IIPSJ MLC can play a role in helping to chosen by music publishers.95 A similar believes that the proposed boards of advance these goals within the music process would be followed for 89 both MLCI and AMLC lack sufficient industry. The Office accordingly committees.96 MLCI proposes that the representation from these expects the designated MLC to ensure board conduct regular elections as well 83 communities. engagement with a broad spectrum of as address interim vacancies though an The Office takes representation musical work copyright owners, election process based on those including from those communities that concerns seriously and agrees that they nominations.97 should be considered as part of the MLC IIPSJ asserts are underrepresented. The AMLC has adopted bylaws that detail board and committee selection Office intends to work with the MLC to 90 board members’ obligations with regard processes. In meetings with the Office, help it achieve these goals. to related party transactions and both MLCI and AMLC expressed a iii. Bylaws, Conflicts of Interest, and conflicts of interest, including commitment to ensuring diversity in Other Governance Issues disclosure requirements and procedures their memberships, though, both Both submissions address the questioned the premises of IIPSJ’s letter for review by fellow board members, statutory requirement to establish although ALMC recognizes that it may with regards to the sufficiency of bylaws within one year of designation, representation in their proposed board have ‘‘to ameliorate or conform the including with respect to succession of bylaws’’ if they are not consistent with slates. In addition, MLCI noted that its 91 board members. MLCI has not yet the MMA, the Register’s yet-to-be draft bylaws ‘‘contain a diversity adopted bylaws, but it does have draft provision that calls for a biannual report promulgated regulations, or the New bylaws that it will make public ‘‘well in York State Not-for-Profit Corporation on the diversity of the board, including 92 advance of the statutory deadline.’’ In Law.98 diversity as to gender/race/ethnicity, addition, although it has ‘‘not finalized income, musical genre, geography and a management structure for daily AMLC proposes that replacement 84 expertise/experience.’’ The report’s operations,’’ MLCI has already board members can be nominated by conclusions ‘‘are to be used by the established a number of ‘‘foundational’’ either the departing member or any nominating committees in choosing policies and procedures designed to other voting members, and that AMLC’s future candidates’’ to be proposed for ensure accountability, transparency, board would select committee members 85 the board. MLCI further emphasized fairness and confidentiality, including by a majority vote, but its bylaws do not its capacity to reach a variety of that: (1) All committee otherwise detail how committee communities, noting ‘‘the extensive recommendations will be subject to candidates will be nominated.99 Beyond participation that it has developed board approval; (2) annual reports will these statutorily prescribed committees, through its Board and Committee be released to the public; (3) the AMLC proposes four ‘‘additional members and many endorsers,’’ and that committees will maintain their statutory support committees’’—Audit and ‘‘many groups supporting MLC[I] have composition; (4) MLCI will maintain a Finance, Education and Outreach, international offices that can assist in public list of all unmatched works and Technology and Security, and 86 global outreach.’’ AMLC responded engage in public outreach to enhance International.100 It appears there is some by reiterating the diverse nature of its legitimate ownership claims; and (5) the potential for overlap, as, for example, board members and their experience board will adopt a comprehensive set of strategic technology issues appear to fall with broad array of genres and creator written codes, policies, and procedures 87 under both the Technology and Security communities. AMLC believes that its to govern the board and committees.93 Committee and the Operations board members’ experiences would MLCI also commits to ‘‘safeguard[ing] Oversight Committee, and matters prove beneficial in the development of private, sensitive, or confidential relating to budgeting, vendor contracts, educational and outreach efforts 94 information.’’ With regard to and general operations appear to be targeting diverse creators, including germane to the Operations Oversight those overseas.88 Both candidates 89 Cf. Cal. Corp. Code sec. 301.3 (under California Committee as well as the Executive and agreed that securing engagement and law, publicly held corporations whose principal Audit and Finance Committees.101 The trust among varied communities, executive offices are located in California must include female board members). Office notes that any additional musical genres, and geographical 90 See H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. locations would prove critical to the standing committees should not conflict No. 115–339, at 5, 15. with the functions of the statutorily MLC’s core project of encouraging 91 17 U.S.C. 115(d)(3)(D)(ii)(I). musical work copyright owners with 92 MLCI Proposal at 86; MLCI Ex Parte Meeting mandated committees, which are unclaimed accrued royalties to come Summary at 3 (referencing draft bylaws). MLCI subject to strict board composition forward and claim such monies. correctly notes that it is not required to have requirements to ensure adequate adopted bylaws at this stage. See MLCI Proposal at representation of interests (e.g., 115. 81 IIPSJ Initial at 3. 93 MLCI Proposal at 86–91 (noting the board’s songwriters, digital music providers) in 82 Id. at 3–4. forthcoming sets of written codes, policies, and 83 IIPSJ Reply at 4–6. procedures, including: Code of Conduct and Ethics; 95 Id. at 87. Conflict of Interest Policy; Investment Policy 84 MLCI Ex Parte Meeting Summary at 3 (June 4, 96 Id. (including an Anti-Comingling Policy); 97 2019). Confidentiality Policy; Whistleblower Policy; Id. 85 Id. Document Retention Policy; Technology and 98 AMLC Proposal at 78, 88–91 (AMLC bylaws). 86 Id. Security Policy; Non-Discrimination Policy; Anti- 99 Id. at 79–80 (AMLC bylaw art. 4.3). 87 AMLC Ex Parte Meeting Summary at 3–4, 15– Sexual Harassment Policy; Social Media Policy; and 100 Id. at 36, 85 (AMLC bylaw art. 6.5.5–6.5.8). 17. Gift Acceptance Policy). 101 Id. at 84–85 (AMLC bylaw art. 6.5.1, 6.5.4, 88 Id. at 15–17. 94 Id. at 92–93. 6.5.5, 6.5.7).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32280 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

the matters handled by those will establish guidelines and polices to board members, a more substantial committees.102 reduce conflicts.111 explanation of the relevant business With respect to conflicts of interest, MLCI suggests that AMLC has serious relationships may be required if AMLC MLCI will require all board members conflicts of interest of its own, alleging were the candidate that otherwise most and employees to comply with a that AMLC board members have nearly satisfied the statutory criteria. conflicts policy to be adopted at a later undisclosed ties to its proposed The Office thus need not resolve date.103 The policy ‘‘will require vendors, in violation of AMLC’s own whether any specific affiliations of disclosure of all actual or potential bylaws.112 These claims, echoed by AMLC board members would, in fact, conflicts,’’ including ‘‘having a financial NSAI,113 involve allegations that certain present material conflicts of interest interest (direct or indirect) in any AMLC board members have financial with respect to its intended primary contemplated MLC transaction, or interests in the Society of Composers, vendor. relationship with any counterparty to Authors and Music Publishers of More generally, the Copyright Office such transaction.’’ 104 MLCI also states Canada (‘‘SOCAN’’), which owns appreciates that both proponents have that it ‘‘expects all associated persons to AMLC’s intended vendor partner pledged to operate under bylaws that fully comply with all applicable law,’’ DataClef.114 AMLC responded that will address conflicts of interest and including fiduciary and ethical while Mr. Barker previously was in a appropriate disclosures in accordance obligations, and that it ‘‘will enforce consulting position with SOCAN, that with applicable state laws and such obligations, which may include relationship ended prior to AMLC’s professional duties of care.119 Following removal for cause, in the event of a formation.115 AMLC acknowledges that this designation process, and including demonstrated violation.’’ 105 Mr. Price is the founder and CEO of through the various statutorily required AMLC disputes that these measures Audiam, a company acquired by a rulemakings, the Register intends to are sufficient to prevent conflicts in the SOCAN holding company, but asserts exercise her oversight role as it pertains event MLCI were designated. AMLC that the companies are managed to matters of governance, including argues that there is a serious conflict of separately and that ‘‘Audiam is not a through promulgation of regulations so interest when a MLC board member is vendor and is not going to be one.’’ 116 that the MLC’s bylaws include an eligible to receive a significant portion AMLC also generally asserted that avenue to ensure that subsequent board of the accrued but unpaid royalties—a AMLC’s board members currently have member selections are made in concern that AMLC believes is salient ‘‘no ties or fiduciary responsibilities to compliance with all relevant legal given the number of major publishers any shareholders.’’ 117 requirements.120 106 Taking all of this information into represented on MLCI’s board. Other 2. Endorsement and Support commenters, some of whom appear account, both MLCI and AMLC have affiliated with AMLC, raise similar adopted policies and procedures that As noted, the MLC must be ‘‘endorsed by, and enjoy[ ] substantial support concerns.107 In response, NSAI argues appear broadly consistent with the from, musical work copyright owners that the unclaimed royalties oversight statutory requirements on matters of that together represent the greatest committee will protect against such governance. Both submissions show a percentage of the licensor market for concerns, noting that MLCI does not serious commitment to transparency, uses of such works in covered activities, include a major publisher on that accountability, and the protection of 118 as measured over the preceding 3 full committee.108 MLCI further suggests confidential information. calendar years.’’ 121 The Copyright this concern would attach to any board With respect to the purported Office made two preliminary member regardless of which entity is conflicts of interest of individual board interpretations regarding this clause in designated, noting that every copyright members, although these claims raise the NOI.122 First, the Office explained owner and songwriter on any designated serious issues, they ultimately have little impact on the Office’s evaluation that because the section 115 license MLC will be eligible to receive a applies to uses of phonorecords in the distribution of unclaimed accrued of the candidates’ proposals. Regarding 109 MLCI’s board composition, the Office United States, the relevant market is the royalties. United States market for making and For its part, AMLC sets forth agrees that the unclaimed royalties oversight committee will help mitigate distributing phonorecords of musical procedures for disclosing, addressing, works. Thus, endorsement may be and documenting conflicts of interest in potential conflicts. As discussed below, 110 the Office expects ongoing regulatory shown by including musical work its bylaws. It asserts that its board copyright owners located outside the will consider such issues carefully in and other implementation efforts to further extenuate the risk of self-interest United States so long as they control the establishing governance procedures and relevant rights to works played or that the unclaimed royalties committee with respect to the distribution of unclaimed accrued royalties. As to the otherwise distributed in the United States. Second, the Office stated that 102 See, e.g., 17 U.S.C. 115(d)(3)(D)(iv)–(vi); see allegations regarding individual AMLC also Conf. Rep. at 19 (‘‘Since the Board of Directors because the statute refers to support and committee member requirements . . . are 111 Id. at 19. from ‘‘musical work copyright owners,’’ statutory in nature, these requirements are not 112 MLCI Reply at 30–32. the relevant support should come from waivable by the Register or subject to modification 113 NSAI Reply at 5. parties who have a relevant ownership by the Board of Directors.’’). 114 MLCI Reply at 30–31. 103 MLCI Proposal at 91–92. 115 AMLC Ex Parte Meeting Summary at 23 119 104 See, e.g., Del. Code Ann. tit. 8, sec. 144(a); Id. (AMLC further offered that ‘‘Mr. Barker continues N.Y. Not-for-Profit Corp. L. sec. 715. 105 Id. at 92. to have an arm’s-length business relationship with 120 See 17 U.S.C. 115(d)(12); see id. at 106 AMLC Proposal at 19, 45–46. SOCAN for certain collection activity’’). 115(d)(3)(D)(i)(I)–(IV); see also H.R. Rep. No. 115– 107 Robert Allen Reply at 3–4; Cameron Ford 116 Id. Despite the assertion that Audiam has its 651, at 5–6; S. Rep. No. 115–339, at 5; Conf. Rep. Reply at 1–2; MusicAnswers Reply at 1–3; Maria own management, AMLC does not state that the at 4. The Office notes that many commenters Schneider Reply at 1; Rhonda Seegal Reply at 2– Audiam board contains no SOCAN executives. See supported the Office performing a meaningful 3; SGA Reply at 5–8. id. (noting that Audiam’s board of directors oversight role to the extent permissible under the 108 NSAI Reply at 4. ‘‘includes non-SOCAN executives’’). statute. See, e.g., Maria Schneider Reply at 2–3; 109 MLCI Reply at 33. 117 Id. SGA Reply at 7. 110 AMLC Proposal at 89–90 (AMLC bylaw art. 118 See, e.g., MLCI Proposal at 88–93; AMLC 121 17 U.S.C. 115(d)(3)(A)(ii). 14). Proposal at 17, 42, 78. 122 NOI at 65753.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32281

interest in the copyright to musical to [m]arket [s]hare.’’ 129 Section and able to endorse an MLC,’’ 134 works (or shares of such works), in 115(d)(3)(J) states that after unclaimed endorsement should be measured by contrast to parties who do not possess accrued royalties have been held for the counting each musical work copyright any ownership interest in musical requisite period of time, the MLC is to owner as one vote.135 As evidence of works but only the ability to administer distribute the royalties to identified such support, it relies on a list of (in the works. Neither MLC candidate copyright owners ‘‘in a transparent and some cases, appending supporting disagrees with these conclusions.123 equitable manner based on data letters from) purported endorsers.136 Under section 115(d)(3)(A)(ii), only indicating the relative market shares of In contrast, MLCI argues that the those copyright owners comprising a such copyright owners as reflected in endorsement provision is unambiguous, portion of ‘‘the licensor market for uses reports of usage provided by digital and that the ‘‘only reasonable of such works in covered activities, as music providers for covered activities interpretation . . . is that the collective measured over the preceding 3 full for the periods in question.’’ 130 AMLC shall be the entity that has the calendar years,’’ count for purposes of notes that, unlike the endorsement endorsement and support of copyright endorsement.124 The Office also noted provision, section 115(d)(3)(J) expressly owners that together received during the in the NOI that it understood there refers to ‘‘relative market share.’’ In its statutory three-year period the largest might be conflicting views regarding view, ‘‘[i]f Congress, in articulating the aggregate percentage of total mechanical how the indicia of endorsement and endorsement criteria, intended for the royalties of any entity seeking support should be measured.125 This words ‘licensor market’ to mean designation as the collective.’’ 137 MLCI understanding proved correct, as MLCI ‘relative market share’ (or some primarily relies on the statutory text to and AMLC offer competing equivalent), Congress would have assert that ‘‘percentage of the . . . interpretations. While MLCI argues that included the words ‘relative market market’’ means ‘‘market share,’’ that the the measurement is to be based on share,’ the methodology to calculate phrase ‘‘for uses of [musical] works in market share and licensing revenue, same and the corresponding covered activities’’ denotes a AMLC disagrees. The Office will confidentiality language it included measurement based on usage, and that address these disputed issues of later on when specifically referring to such usage should be measured by 131 statutory construction before making its ‘relative market share.’ ’’ looking at licensor revenue from evidentiary findings. AMLC also makes the policy applicable royalty payments.138 argument that ‘‘[a]n inherent conflict of MLCI contends that other potential i. Statutory Interpretation interest would be created if the MLC metrics—i.e., number of licenses, a. Candidates’ Views were primarily endorsed and/or number of copyright owners, and constituted by the largest and/or ‘major’ number of musical works—are not AMLC argues that the endorsement publishers’’ because, ‘‘[s]ince unclaimed supported by the legislative history and provision ‘‘should be interpreted so that or ‘black box’ royalties are to be are unworkable as a practical matter.139 the relevant ‘licensor market’ from distributed based on market share, those It disagrees with AMLC’s analysis of which the ‘greatest percentage’ is taken publishers would be dis-incentivized to section 115(d)(3)(J)’s use of the phrase is the endorsing group of copyright account to independent songwriters and ‘‘relative market share,’’ arguing that owners who, via the greatest number of independent publishers accurately, i.e., that section ‘‘supports, rather than licenses, have made musical works the major publishers would be refutes, the fact that the endorsement available for covered activities as incentivized to create a larger ‘black criterion looks to royalty market share, measured over the preceding 3 full box’ from which they could then as both are examples of the MMA’s use calendar years.’’ 126 AMLC contends that participate.’’ 132 AMLC argues that of such market share to guide processes the statutory language is ambiguous but ‘‘[w]ere [these copyright owners] to be under the statute.’’ 140 that its reading is confirmed by the in control of such process, the resulting As a policy matter, MLCI suggests legislative history. It notes that ‘‘[t]he situation would repeat the incentive ‘‘that the group of copyright owners [Senate Judiciary] Committee explained problem involving digital music with the most royalties at stake—the that the MLC should be ‘endorsed by services that the statute intended to fix,’’ largest aggregate share of the royalty and enjoy[ ] support from the majority of and that ‘‘the purposes of the MMA pool that the collective will have [the] musical works copyright owners as would not be best fulfilled if proper authority to license—should voice who measured over the preceding three incentives are not aligned.’’ 133 is entrusted with that authority.’’ 141 It years.’ ’’ 127 From this, AMLC asserts In AMLC’s view, because would ‘‘make[ ] a mockery of the that Congress intended that ‘‘the parties ‘‘songwriters . . . are the greatest language of the statute,’’ MLCI contends, eligible to endorse the proposed MLC number of copyright owners relevant to to construe the provision to mean that are the musical works copyright ‘‘owners of musical works that are not owners.’’ 128 129 Id. at 44. 130 being streamed or earning royalties AMLC also points to a separate 17 U.S.C. 115(d)(3)(J)(II). 131 could be deemed to have the same provision of the statute, section AMLC Proposal at 44–45 (emphasis omitted) (‘‘Generally, statutory language should be internally market share as owners of works that are 115(d)(3)(J), to argue that the consistent and considered in light of full statutory endorsement provision ‘‘[c]annot [r]efer context. As such, courts will generally read as 134 Id. at 46–47. meaningful ‘the exclusion of language from one 135 See AMLC Ex Parte Meeting Summary at 24 statutory provision that is included in other 123 (‘‘AMLC response is based on the number of See AMLC Proposal at 46; MLCI Proposal at provisions of the same statute.’ ’’) (quoting Hamdan copyright owners, not the total number of 96–97, 113–14. v. Rumsfeld, 548 U.S. 557, 578 (2006), superseded 124 copyrights.’’). MLCI agrees that a ‘‘relevant copyright owner’’ by statute on other grounds, Military Commissions 136 is ‘‘an owner of musical works copyrights licensed Act of 2006, Public Law 109–366, 120 Stat. 2600 AMLC Proposal at 46–48, 94–107. for covered activities over the preceding three full (2006)). 137 MLCI Proposal at 96; see also id. at 108; MLCI calendar years.’’ MLCI Reply at 9. 132 Id. at 45. Reply at 5 (‘‘[T]he only reasonable reading of this 125 language is the plain English reading.’’). NOI at 65753. 133 Id. at 46 (contending that ‘‘copyright owners 138 126 AMLC Proposal at 43 (emphasis omitted). controlling the greatest percentage of ‘relative See MLCI Proposal at 107–113. 127 Id. at 46 (quoting S. Rep. No. 115–339, at 22) market share’ were not intended to be in control of 139 Id. at 108–113; see MLCI Reply at 5–6. (emphasis AMLC’s). the process of locating and paying copyright owners 140 MLCI Reply at 6–7. 128 Id. who are owed unclaimed royalties’’). 141 MLCI Proposal at 107.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32282 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

streamed billions of times and earn activities.’’ 146 Moreover, Congress’s is no omission and Congress merely substantial royalties.’’ 142 inclusion of the phrase ‘‘uses of used synonyms.151 [musical] works’’ suggests that the The Office is likewise unpersuaded b. Copyright Office’s Analysis proper metric is one of licensing that these synonyms should be read Legal Interpretation. Taking all revenue (i.e., royalties), rather than differently simply because the comments into consideration, the numbers of licenses, copyright owners, unclaimed royalties provision contains Copyright Office concludes that the or works. Under the compulsory license, different details regarding calculation endorsement provision in section royalties are calculated based on use, and confidentiality than the 115(d)(3)(A)(ii) mandates that the entity suggesting that Congress intended to endorsement provision. While both designated as the MLC be endorsed and define the market for ‘‘uses’’ according provisions use a similar market share supported by musical work copyright to the royalty revenues generated.147 metric, the contexts are different, such owners that together earned the largest In contrast, counting up just the that it makes sense that Congress would aggregate percentage (among MLC number of endorsing copyright provide different instructions. Section candidates) of total royalties from the owners—from an amateur part-time 115(d)(3)(J) explains how the MLC is to use of their musical works in covered songwriter whose works have been distribute unclaimed royalties after the activities in the U.S. during the streamed a handful of times to a major blanket license becomes available. It is statutory three-year period. In other music publisher that has earned unsurprising that Congress would words, the Office agrees with MLCI that millions of dollars from millions of provide detailed requirements to govern the endorsement criterion is a plurality streams of millions of works—says how those payments are to be allocated. requirement based on market share, nothing about the actual ‘‘uses of [the In contrast, the designation of an entity measured by applicable licensing owners’ musical] works.’’ Such an to be the MLC involves a higher-level revenue. The Office draws this interpretation impermissibly reads that inquiry into the aggregate market share conclusion from the plain meaning of language out of the statute.148 Similarly, of each candidate’s endorsing copyright the statutory text, which, after careful looking only to the number of works owners. Congress could have given the review of the statute as a whole, the owned by endorsing copyright owners Office detailed instructions as to how to Office concludes is unambiguous.143 would not accurately reflect use because perform this analysis, but it instead left First, the phrase ‘‘percentage of the it does not differentiate between works the matter to the Office’s expertise and . . . market’’ clearly refers to market streamed once or twice and works reasonable discretion. There is nothing share; indeed, it is the actual definition streamed millions of times. In the inconsistent with Congress establishing of ‘‘market share.’’ 144 And market share Office’s view, the same kinds of differing approaches to accomplishing is ordinarily calculated using earned problems exist with counting the these different tasks. sales revenue.145 Here, the statute makes number of licenses. The legislative history does not clear that endorsement is a metric of The Office is unpersuaded by AMLC’s counsel differently. The relevant ‘‘licensor’’ revenue earned specifically argument concerning section language, which appears in House and ‘‘for uses of [musical] works in covered 115(d)(3)(J). There is no substantive Senate Judiciary Committee Reports, distinction between the use of ‘‘market states that the MLC must be ‘‘endorsed 142 Id. at 110, n.31. share[ ]’’ in that provision and the use of by and enjoy[ ] support from the 143 See Star Athletica, L.L.C. v. Varsity Brands, ‘‘percentage of the . . . market’’ in the majority of musical works copyright Inc., 137 S. Ct. 1002, 1010 (2017) (‘‘We thus begin endorsement provision. One is the very and end our inquiry with the text, giving each word owners as measured over the preceding 152 its ordinary, contemporary, common meaning.’’) definition of the other. AMLC relies three years.’’ This language can best (internal quotation marks omitted). AMLC upon the canon of statutory be understood as an imprecise summary incorrectly suggests that the Office ‘‘has interpretation under which Congress is of the statutory text, for if it is taken acknowledged an ambiguity in the statute.’’ AMLC presumed to have acted intentionally Proposal at 46. The Office only acknowledged that literally, it directly conflicts with the ‘‘there may be conflicting views’’ on the matter. NOI when it excludes ‘‘language from one statute, which refers to ‘‘endorse[ment] at 65753. statutory provision that is included in by[ ] and . . . substantial support from[ ] 144 See, e.g., Market Share, Merriam-Webster, other provisions of the same statute.’’ 149 musical work copyright owners that https://www.merriam-webster.com/dictionary/ But that canon is inapplicable here, as together represent the greatest market%20share (last visited June 24, 2019) the cases AMLC cites involve only the (Market share is ‘‘the percentage of the market for percentage of the licensor market for a product or service that a company supplies.’’); wholesale omission of an item from a uses of such works in covered Market Share, Investopedia, https:// statutory provision; 150 they do not activities.’’ 153 For the statute to mean www.investopedia.com/terms/m/marketshare.asp speak to situations where, as here, there what the legislative history seems to (last visited June 24, 2019) (‘‘Market share represents the percentage of an industry, or a say, ‘‘substantial’’ could be deleted, 146 market’s total sales, that is earned by a particular 17 U.S.C. 115(d)(3)(A)(ii). ‘‘greatest percentage’’ would need to be company over a specified time period.’’). 147 See 37 CFR 385.11, 385.21. MLCI notes that replaced with ‘‘majority,’’ and ‘‘of the ‘‘[p]ractically speaking, a metric based on user 145 See, e.g., Market Share, Merriam-Webster, licensor market for uses of such works https://www.merriam-webster.com/dictionary/ usage is going to align with a metric based on market%20share (last visited June 24, 2019) (noting licensor revenues, as the statutory royalty rates for in covered activities’’ could also be the formula for market share as ‘‘Market Share = both streaming and downloading are tied to usage,’’ deleted. It does not seem reasonable for (Particular Company’s Sales Revenue in Time and that ‘‘a musical work with more usage will the Office to interpret the statute in this wind up with more royalty revenues.’’ See MLCI Period X)/(Relevant Market’s Total Sales Revenue way.154 in Time Period X)’’); Market Share, Investopedia, Proposal at 111–12 & n.34. While not all uses are https://www.investopedia.com/terms/m/ subject to the same royalty rate, the royalties are 151 marketshare.asp (last visited June 24, 2019) (noting nonetheless connected to use. See, e.g., United States v. Sioux, 362 F.3d that in calculating a company’s market share, you 148 See, e.g., Advocate Health Care Network v. 1241, 1246 (9th Cir. 2004) (‘‘It is an elementary must ‘‘divide the company’s total revenues by its Stapleton, 137 S. Ct. 1652, 1659 (2017) (‘‘Our principle of statutory construction that similar industry’s total sales’’); Market Share, The practice . . . is to give effect, if possible, to every language in similar statutes should be interpreted American Heritage Dictionary of the English clause and word of a statute.’’) (internal quotation similarly.’’). Language, https://ahdictionary.com/word/ marks omitted). 152 H.R. Rep. No. 115–651, at 26; S. Rep. No. 115– search.html?q=market+share (last visited June 24, 149 AMLC Proposal at 44 (citing Hamdan, 548 339, at 22; see also Conf. Rep. at 18 (similar). 2019) (Market share is ‘‘[t]he proportion of industry U.S. at 578). 153 17 U.S.C. 115(d)(3)(A)(ii). sales of a good or service that is controlled by a 150 See Hamdan, 548 U.S. at 578–79; City of Chi. 154 See, e.g., Nat’l Ass’n of Mfrs. v. Dep’t of Def., company.’’). v. Envtl. Def. Fund, 511 U.S. 328, 334–37 (1994). 138 S. Ct. 617, 634 n.9 (2018) (‘‘[A]mbiguous

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32283

Policy Considerations. With respect to claimed.159 The MLC must ‘‘engage in ‘‘evidence of fraud, waste, or abuse, AMLC’s policy arguments, they mirror diligent, good-faith efforts to publicize, including the failure to follow the the same conflict-of-interest concerns throughout the music industry,’’ the relevant regulations adopted by the raised by AMLC and discussed in existence of the MLC, procedures to Copyright Office, over the prior five connection with board composition. claim unclaimed royalties, any transfer years should raise serious concerns The Office takes these concerns of royalties under section 115(d)(10)(B), within the Copyright Office as to seriously, but they do not compel a and any pending distribution of whether that same entity has the different interpretation of the plain text unclaimed accrued royalties and administrative capabilities necessary to of the statute.155 Rather, there are other accrued interest not less than 90 days perform the required functions of the ways that the statute addresses these before distribution.160 More generally, collective,’’ and that in such cases, the issues and protects smaller independent the statute expressly requires the MLC Office should consider selecting a new songwriters, as the following examples to ‘‘ensure that the policies and entity ‘‘even if not all criteria are met illustrate.156 practices of the [MLC] are transparent pursuant to section 115(d)(3)(B)(iii).’’ 168 First, the statute provides for equal and accountable.’’ 161 The MLC must The Office thus agrees that ‘‘it seems representation of musical work issue a detailed annual report, including highly implausible . . . that Congress copyright owners and professional describing ‘‘how royalties are collected intended that the ‘licensor market songwriters on the unclaimed royalties and distributed,’’ and ‘‘the efforts of the support’ criterion be the primary, oversight committee, which is charged [MLC] to locate and identify copyright deciding factor as to whether a full with ‘‘establish[ing] policies and owners of unmatched musical works investigation and analysis by the procedures for the distribution of (and shares of works).’’ 162 And every Register and the Copyright Office of unclaimed accrued royalties and five years, the MLC must retain an each serious [MLC] candidate is accrued interest.’’ 157 By law, any independent auditor to ‘‘examine the necessary.’’ 169 The Office believes that, copyright owner receiving such a books, records, and operations of the among other scenarios, if the designated distribution must pay or credit to an [MLC]’’ and prepare a report addressing, entity were to make unreasonable individual songwriter no ‘‘less than 50 among other things, ‘‘the distributions of unclaimed royalties, percent of the payment received by the implementation and efficacy of that could be grounds for concern and copyright owner attributable to usage of procedures’’ ‘‘for the receipt, handling, may call into question whether the musical works (or shares of works) of and distribution of royalty funds, entity has the ‘‘administrative and that songwriter.’’ 158 including any amounts held as technological capabilities to perform the Second, the statute requires the MLC unclaimed royalties,’’ and ‘‘to guard required functions of the [MLC].’’ 170 to undertake a number of duties with against fraud, abuse, waste, and the Fifth, Congress has asked the Office to respect to unclaimed royalties, unreasonable use of funds.’’ 163 study the issue of unclaimed royalties including maintaining a public online Third, the Copyright Office has been and to provide a report by July 2021 that list of unmatched musical works provided with ‘‘broad regulatory recommends best practices for the MLC through which ownership can be authority’’ to conduct proceedings as to identify and locate copyright owners necessary to effectuate the statute with with unclaimed royalties, encourage legislative history cannot trump clear statutory the Librarian’s approval.164 In addition copyright owners to claim their language.’’) (internal quotation marks omitted); R.R. to the regulations that the Office is royalties, and reduce the incidence of Comm’n of Wis. v. Chi., Burlington & Quincy R.R. specifically directed to promulgate, the unclaimed royalties.171 The MLC must Co., 257 U.S. 563, 589 (1922) (‘‘Committee reports and explanatory statements of members in charge legislative history contemplates that the give ‘‘substantial weight’’ to these made in presenting a bill for passage have been held Office will ‘‘thoroughly review[]’’ recommendations when establishing its to be a legitimate aid to the interpretation of a policies and procedures established by procedures to identify and locate statute where its language is doubtful or obscure. the MLC.165 The legislative history copyright owners and to distribute But when taking the act as a whole, the effect of 172 the language used is clear to the court, extraneous suggests that the Office promulgate the unclaimed royalties. aid like this can not control the interpretation. Such necessary regulations in a way that Sixth, in addition to the various ways aids are only admissible to solve doubt and not to ‘‘balances the need to protect the the MLC is required to publicize create it.’’ (internal citations omitted)); see also public’s interest with the need to let the unclaimed royalties,173 the DLC must Pattern Makers’ League of N. Am., AFL–CIO v. assist with publicity for unclaimed N.L.R.B., 473 U.S. 95, 112 (1985) (finding new collective operate without over- ‘‘ambiguous legislative history’’ to ‘‘fall[ ] far short regulation.’’ 166 The Office intends to royalties by encouraging digital music of showing that the [agency’s] interpretation of the conduct its oversight role in a fair and providers to publicize information on [statute] is unreasonable’’). impartial manner; songwriters are the existence of the MLC and on 155 Cf. Fourth Estate Pub. Benefit Corp. v. Wall- encouraged to participate in these future claiming royalties on websites and Street.com, LLC, 139 S. Ct. 881, 892 (2019) (noting that ‘‘the statutory scheme has not worked as rulemakings. applications, and conducting in-person 174 Congress likely envisioned,’’ but that ‘‘[u]nfortunate Fourth, the MLC must be redesignated outreach activities with songwriters. as [that] may be, that factor does not allow us to every five years.167 In the legislative The Copyright Office, too, is tasked with revise [the statute’s] congressionally composed history, Congress explained that engaging in public outreach and text’’). 156 See SGA Reply at 3 (‘‘SGA is far more 159 168 concerned with ensuring that music creator rights 17 U.S.C. 115(d)(3)(J)(iii)(I). H.R. Rep. No. 115–651, at 6; S. Rep. No. 115– 160 are fully protected against conflicts of interest and Id. at 115(d)(3)(J)(iii)(II). 339, at 5–6; Conf. Rep. at 4. 169 impingements upon the rights and interests of 161 Id. at 115(d)(3)(D)(ix)(I)(aa). SGA Reply at 9. songwriters and composers under all 162 Id. at 115(d)(3)(D)(vii)(bb), (hh). 170 17 U.S.C. 115(d)(3)(A)(iii). circumstances, than in supporting one or the other 163 Id. at 115(d)(3)(D)(ix)(II). 171 Public Law 115–264, sec. 102(f), 132 Stat. at candidate vying to be selected as the Mechanical 164 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. 3722–23. Collective.’’). 115–339, at 5; Conf. Rep. at 4; see 17 U.S.C. 172 Id. at sec. 102(f)(2), 132 Stat. at 3723. 157 17 U.S.C. 115(d)(3)(D)(v), (d)(3)(J)(ii). 115(d)(12). 173 17 U.S.C. 115(d)(3)(J)(iii) (including 158 Id. at 115(d)(3)(J)(iv)(II); see also S. Rep. No. 165 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. maintenance of an online list of unmatched works 115–339, at 14 (‘‘The 50% payment or credit . . . 115–339, at 5; Conf. Rep. at 4; see 17 U.S.C. through which ownership can be claimed, is intended to be treated as a floor, not a ceiling, 115(d)(12). notification prior to any distribution, and and is not meant to override any applicable 166 H.R. Rep. No. 115–651, at 14; S. Rep. No. 115– participation in music industry conferences and contractual arrangement providing for a higher 339, at 15; Conf. Rep. at 12. events). payment or credit of such monies to a songwriter.’’). 167 17 U.S.C. 115(d)(3)(B)(ii). 174 Id. at 115(d)(5)(C)(i)(VII), (d)(5)(C)(iii).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32284 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

educational activities that must MLCI provides multiple data points published songwriters, meaning they are specifically include ‘‘educating regarding the market share of its not signed to or affiliated with a music songwriters and other interested endorsers. publisher and manage their own parties’’ about how ‘‘a copyright owner For purposes of calculating market musical work copyrights’’—they are not may claim ownership of musical works share, MLCI counts 132 musical work included in MLCI’s market share (and shares of such works)’’ and how copyright owners it calls the calculations.183 ‘‘royalties for works for which the ‘‘Supporting Copyright Owners.’’ 179 According to MLCI, ‘‘[i]ndustry data, owner is not identified or located shall According to MLCI: including revenue information that be equitably distributed to known The Supporting Copyright Owners include NMPA collects from its members on an copyright owners.’’ 175 copyright owners of all sizes who own the annual basis and publicly available Finally, the Office suggests there may relevant rights in musical works covering the data, demonstrates that the Supporting be other reasons for the statutory spectrum of musical genres—including pop, Copyright Owners represent between requirement that the MLC enjoy rap, hip hop, R&B, country, rock, metal, 85% and 90% of the licensor market for ‘‘substantial support’’ from the largest reggae, folk, electronic, jazz, classical—and all uses of musical works during the market share of musical work copyright from every era—including popular current [statutory three-year period from 2016 owners. Without minimizing the hits and ‘‘evergreen standards.’’ Their sizes through 2018].’’ 184 Additionally, Mr. range from major music publishers who own importance of ensuring that Israelite’s declaration provides data unidentified copyright owners have the the relevant rights to millions of songs, to small, family-owned companies that focus on from Billboard Magazine showing the opportunity to come forward and a particular genre or sub-genre. The average combined market share of effectively claim their works to receive Supporting Copyright Owners own the Supporting Copyright Owners appearing accrued royalties, there are other duties mechanical rights to, at a minimum, well in Billboard’s quarterly top ten rankings of the MLC that also serve the over seven million musical works.180 of music publishers over the last three paramount goal of ‘‘ensuring that a A sworn declaration from David M. years to be 87.83%.185 songwriter actually gets paid.’’ 176 As Israelite of the NMPA states that the Mr. Israelite states that these data MLCI notes, already identified copyright Supporting Copyright Owners ‘‘own[ ] figures are ‘‘a fair proxy for estimating owners have an interest in ensuring the the U.S. mechanical rights to millions of the Supporting Copyright Owners’ efficient and accurate collection and works’’ and ‘‘have confirmed that they market share for uses of musical works distribution of royalties.177 Further, the exclusively endorse MLC[I] to be the in covered activities, as there is no MLC will participate in proceedings collective, and have pledged to provide reason to believe that the Supporting before the CRJs, and having the support substantial support to MLC[I].’’ 181 A Copyright Owners’ market share for uses of publishers with prior experience group endorsement letter from the of their musical works in covered before the CRJs may be beneficial. Supporting Copyright Owners further activities should deviate significantly Establishment of the statutorily-required states that they ‘‘all own, and have from their market share for their uses of database will likely also benefit from musical works generally.’’ 186 In initial support of music publishers and during the preceding three years owned, exclusive rights to license musical support, MLCI states that ‘‘NMPA was other relevant copyright owners with able to confirm from information large quantities of authoritative versions works for use in covered activities in the United States and have licensed those regarding the U.S. mechanical royalties of data for works that together will 182 paid by Apple Music and Spotify—the comprise the bulk of royalty rights to digital music providers.’’ The Supporting Copyright Owners thus largest and most popular services in the distributions.178 As these examples market—that the Supporting Copyright illustrate, having strong support from appear to be relevant copyright owners who may be counted for endorsement Owners have together received the key copyright owners may assist in substantial majority of total mechanical ensuring that the MLC is in the best purposes. While MLCI states that it is also endorsed by ‘‘over 2,400 royalties for uses of musical works in possible position to succeed in covered activities in the U.S. during the effectively carrying out the whole of its songwriters’’—of whom ‘‘[o]ver 1,400’’ ‘‘have reported that they are self- [statutory three-year period from 2016 assigned responsibilities. through 2018].’’ 187 As discussed below, ii. Evidentiary Findings 179 Id. at 98. Digital Licensee Coordinator, Inc. 180 (‘‘DLCI’’) follows a similar market share- a. Market Share Id. (citations omitted); see id. at Ex. 11–8–9 (stating that ‘‘a partial count of information based approach to establish its With respect to the information obtained from less than half of the Supporting endorsement by digital music providers submitted in the proceeding, AMLC Copyright Owners shows that together they own 188 (now and over the preceding 3 full calendar years) and significant non-blanket licensees. does not provide market share data for the right to reproduce and distribute over 7.3 AMLC does not contest these market its endorsing copyright owners. Nor do million musical works in Section 115 covered share figures; indeed, a comment its endorsers provide sufficient activities in the U.S.’’) (declaration of David M. supporting AMLC submitted on behalf information from which the Office can Israelite). 181 Id. at Ex. 11–5. reasonably determine their aggregate 183 Id. at 98–99 & n.22. 182 Id. at Ex. 11–A–1; see, e.g., id. at Ex. 11–B– applicable market share. In contrast, 184 Id. at 99 (citation omitted); see also id. at Ex. 1 (‘‘Sony owns the exclusive rights to license 11–5–7 (declaration of David M. Israelite). millions of musical works written by tens of 185 175 Public Law 115–264, sec. 102(e)(2), 132 Stat. thousands of songwriters, including for use in Id. at Ex. 11–6–7. The Office notes that at 3722. Section 115 covered activities. Sony has for well Billboard appears to only ‘‘measure the market 176 164 Cong. Rec. S6292, 6292 (daily ed. Sept. 25, over the last three years licensed these rights to share . . . of the top 100 radio airplay songs.’’ See, 2018) (statement of Sen. Hatch). digital services through the Section 115 compulsory e.g., Ed Christman, Music Publishers’ 4th Quarter Report: Top 3 Companies Have the Same No. 1 177 MLCI Proposal at 107. licensing process and, in some cases, through Song, Billboard (Feb. 3, 2017), https:// 178 For example, a number of MLCI’s largest voluntary licenses.’’); id. at Ex. 11–D–1 (‘‘Reel www.billboard.com/articles/business/7677913/ endorsers state that each intends to work with MLCI Muzik Werks is the owner or the exclusive licensee music-publishers-4th-quarter-report. to incorporate its musical work data into the of the rights to engage and to license others to 186 musical works database. See, e.g., MLCI Proposal at engage in Section 115 covered activities .... Reel MLCI Proposal at Ex. 11–7. Exs. 11–B–2 (Sony/ATV Music Publishing), 11–C– Muzik Werks has during the last three full calendar 187 Id. at 99–100; see also id. at Ex. 11–7–8 2 (Kobalt Music Publishing America, Inc.), 11–N– years licensed its rights in and to musical works to (describing methodology) (declaration of David M. 2 (Warner/Chappell Music, Inc.), 11–P–2 (Universal digital music providers for use in covered Israelite). Music Publishing Group). activities.’’). 188 See DLCI Proposal at 4–7.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32285

of a group of songwriters that includes soul.194 These songwriters include Independent Music, the major record two AMLC board members concedes writers of #1 hit songs, Grammy Award labels, and SoundExchange.197 Lastly, that ‘‘Sony/EMI, Warner, and winners and nominees, a Rock and Roll in one of the few comments from an Universal’’—each of which exclusively Hall of Fame inductee, members of the organization that waited to review the endorse MLCI—‘‘control about 65% of Nashville Songwriters Hall of Fame, proposals before endorsing a candidate, the market for music publishing.’’ 189 film and television composers, and the Recording Academy, whose The Office notes that other sources numerous less established or part-time membership includes ‘‘thousands of confirm that MLCI is supported by a writers. working songwriters and composers, majority of the music publishing The Office also heard from a broad many of whom are independent, self- market; according to Music & assortment of trade groups and other published, or unaffiliated songwriters,’’ Copyright’s annual survey ‘‘based on organizations (some of which the Office states that it ‘‘believes that the MLC[I] revenue,’’ Sony,190 Universal, and understands to be members or submission is best equipped to satisfy Warner/Chappell together had an subgroups of each other) representing the statutory requirements of the average combined global market share of publisher and songwriter interests. MMA.’’ 198 58.65% for 2017 and 2018.191 Groups listed as supporting AMLC As noted above, and as both Based on the foregoing, the Office include international alliances and candidates agree, not every commenter finds that there is substantial evidence collectives like the Music Creators of can be counted for purposes of the to demonstrate that MLCI is endorsed North America (‘‘MCNA’’), European endorsement provision—even under and supported by the required plurality Composer and Songwriter Alliance, AMLC’s interpretation. If the statue of relevant endorsing copyright owners, Pan-African Composers’ and were to require only a headcount, it based on applicable market share. Given Songwriters’ Alliance, Asia-Pacific would still be a headcount of relevant the overwhelming majority market share Music Creators Alliance, and Alianza copyright owners. In this proceeding, of MLCI’s Supporting Copyright Owners Latinoamericana de Compositores y some endorsers, for example, are and the data from Apple Music and Autores de Mu´ sica, and other groups attorneys that give no indication that Spotify, and in the absence of any like the Songwriters Guild of America, they are also relevant copyright evidence to the contrary, the above- Screen Composers Guild of Canada, owners.199 Some endorsers do not give discussed market share figures appear American Composers Forum, and Music any indication of their connection to the more likely than not to be a sufficient Answers.195 Groups listed as supporting industry.200 And some endorsers who proxy for estimating market share based MLCI include the National Music state that they are songwriters are not on royalties earned from covered Publishers’ Association, Association of clear about whether they are also activities in the U.S. Even if that were Independent Music Publishers, relevant copyright owners for their not the case, the Office finds, based on International Confederation of Music songs.201 Many of the endorsements the foregoing, that MLCI would still be Publishers, Nashville Songwriters contain ambiguities such as these. ‘‘the entity that most nearly fulfills’’ the Association International, Songwriters A separate issue concerns the section 115(d)(3)(A)(ii) qualification.192 of North America, Music Publishers treatment of the international alliances, Association, American Composers performing rights organizations, trade b. Number of Copyright Owners Alliance, Gospel Music Association, groups, and other endorsing In any event, even under the metric Church Music Publishers Association, organizations. MLCI does not contend for which AMLC provides evidence— Americana Music Association, that these types of organizations are 202 number of copyright owners—AMLC Copyright Alliance, and Creative relevant copyright owners. AMLC, on would not be the candidate that satisfies Future.196 In addition, performing rights the other hand, appears to count not the endorsement provision. organizations ASCAP, BMI, SESAC, and only each of its supporting The Office received comments from a Global Music Rights all endorse MLCI, organizations, but the individual significant portion of the music as do many representatives from the members of each of those 203 industry, voicing support for either recorded music industry, including the organizations. MLCI strongly 204 MLCI or AMLC. Endorsements came Recording Industry Association of disapproves of this approach. The from a diverse array of large and small America, the American Association of Office finds it difficult to credit these publishers 193 as well as from thousands purported endorsements, as there is of songwriters from across the country 194 See, e.g., AMLC Proposal at 47–75; MLCI insufficient evidence to demonstrate and beyond representing virtually every Proposal at Exs. 5–A, 6–10; Robert Allen Reply; that every member of each of these major genre, including pop, hip hop, Board of Directors of NSAI Reply; Maria Schneider Reply; Spence Burton Reply; Michael Busbee Reply; 197 MLCI Proposal at 100, Ex. 11–X rap, rock, country, R&B, alternative, Britt Daley Reply; Barry DeVorzon Reply; Jerry 198 Recording Academy Reply at 1, 3. electronic, dance, folk, jazz, classical, Emanuel Reply; Beckie Foster Reply; Jan Garrett 199 Broadway/musical theatre, blues, Reply; Ben Glover Reply; Dan Gutenkauf Reply; See, e.g., Jay A. Rosenthal et al. Reply. 200 Christian, gospel, Latin, bluegrass, and John Harding Reply; Aaron Johns Reply; Brett Jones See, e.g., Jared Burton Reply; Brandon Dudley Reply; Amy Kinast Reply; Wayne Kirkpatrick Reply; Earl Vickers Reply. Reply; Sonia Kiva Reply; Bill LaBounty Reply; 201 See, e.g., Ashley Gorley Reply; Chris Myers 189 Robert Allen Reply at 6. David Lauver Reply; Daniel Leathersich Reply; Reply; Jeff Rodman Reply; Chris Xefos Reply. 190 See Global Recorded-music and Music Alejandro Martinez Reply; Dennis Matkosky Reply; 202 See MLCI Proposal at 100, Ex. 11–9 (referring Publishing Market Share Results for 2018, Music & Steve Miller Reply; Clay Mills Reply; Vincent to them as ‘‘non-musical work copyright owner[ ] Copyright (May 8, 2019), https://musicand Mullin Reply; Kerry Muzzey Reply; Rick Nowels groups’’). copyright.wordpress.com/2019/05/08/global- Reply; Melissa Peirce Reply, Jim Photoglo Reply; 203 See AMLC Proposal at 47–48 (claiming its recorded-music-and-music-publishing-market- Deric Ruttan Reply; Jerry Schneyer Reply; Joie Scott endorsers ‘‘represent hundreds of thousands of share-results-for-2018/. Reply; Pamela Schuler Reply; Karen Sotomayor separate and unique music publishers whose music 191 Id. (this calculation includes figures from Reply; Miki Speer Reply; Even Stevens Reply; Paris is distributed on digital streaming services in the Sony/ATV, Sony Music Publishing Japan, and EMI Strachan Reply; Eleisa Trampler Reply; Kelly United States’’). Music Publishing and includes all revenue, not just Triplett Reply; Danny Wells Reply; Anna Wilson 204 See MLCI Reply at 11 (‘‘MLC[I] would never for covered activities). Reply. claim that, simply by virtue of a trade group 192 17 U.S.C. 115(d)(3)(B)(iii). 195 AMLC Proposal at 47–48; see generally id. at endorsement, each songwriter and publisher 193 See, e.g., MLCI Proposal at 98, Ex. 11–A–X; 94–107. member of the trade group can be deemed to KDE LLC Reply at 1 (supporting AMLC); Secretly 196 MLCI Proposal at 100, Ex. 11–X; International endorse and support MLC[I], as that would be Publishing Reply at 1 (supporting MLCI). Confederation of Music Publishers Reply at 1. misleading.’’).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32286 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

organizations actually endorses AMLC. Additionally, without a list of member these assumptions, AMLC would have While surely each referenced names, the Office cannot determine around 1,000 endorsements, while association on a general level represents whether individual members are being MLCI would have about three times that the interests of their members, none of counted more than once due to number. Even if based only on MLCI’s AMLC’s group endorsements indicate membership in multiple endorsing Supporting Copyright Owners and the that they have the authority to endorse organizations or because the individual songwriters listed in MLCI’s proposal an MLC candidate on their members’ filed his or her own comment with the who identified as self-published, MLCI behalf. For example, the submissions do Copyright Office directly.209 By not would still have hundreds more not indicate that any kind of resolution identifying purported endorsing endorsers than all of the comments to endorse was passed by their members, the possibility also exists for submitted in support of AMLC. Thus, members, and if one was, whether their conflicting endorsements.210 For under both the proper metric of market members voted unanimously (as would example, AMLC board members Zoe share, and the alternative metric of be necessary to claim that every member Keating, Maria Schneider, and Rick number of copyright owners, MLCI is should be counted). In many cases, Carnes appear to be affiliated with the candidate that satisfies the moreover, it is difficult to tell whether ASCAP,211 which endorses MLCI. These endorsement requirement. the endorsements are submitted on individuals presumably would object to As noted in conclusion below, the behalf of the organization, or from MLCI counting them among its MMA was enacted only after an individuals associated with the endorsers merely because ASCAP has extensive effort to build consensus organizations acting in their personal endorsed MLCI. amongst musical work copyright owners capacities or in their capacity as an Lastly, AMLC’s proposal refers to and songwriters with various, individual board member.205 In fact, ‘‘100+ various individual composers/ sometimes competing, interests. The two organizations listed by AMLC as writers/publishers/organizations who Register expects that the designated endorsers in its proposal subsequently have signed an AMLC endorsement MLC will endeavor to equally represent disavowed the purported endorsements document’’ and ‘‘600+ endorsements via the interests of those who did not and clarified that they do not in fact [the] AMLC website,’’ which suffer from endorse it, and that interested sides will support AMLC.206 the same kinds of practical problems.212 continue to come together to make the If the Office were to credit these kinds Because these individuals are not implementation of this historic new of endorsements, it would raise specifically identified, the Office cannot licensing scheme a success, building unresolvable practical problems. For determine their precise number or if any upon the cooperative spirit that many of these organizations, no of them additionally submitted facilitated the MMA’s passage.214 membership numbers are provided,207 comments directly to the Office such 3. Administrative and Technological and for others, only an indefinite range that they may be counted more than Capabilities or rounded figure is given, making a once. precise headcount impossible.208 Nonetheless, even if these ambiguities The statute requires that the are resolved in favor of counting each designated entity ‘‘has, or will have 205 See, e.g., AMLC Proposal at 95 (letter from the endorsement (except for the individual prior to the license availability date, the Chairman of the Asia-Pacific Music Creators members of the endorsing organizations administrative and technological Alliance, providing no information about the discussed above and the two organization or its membership, and stating that ‘‘I capabilities to perform the required hereby voice my support to’’ AMLC) (emphasis organizations that repudiated their functions of the mechanical licensing added); id. at 98 (same with respect to Alianza purported endorsements), AMLC still collective.’’ 215 The NOI requested that Latinoamericana de Compositores y Autores de would have substantially fewer each proposal include specific Mu´ sica); id. at 103 (same with respect to Pan- endorsements than MLCI.213 Applying African Composers’ and Songwriters’ Alliance); see information to demonstrate the also AMLC Ex Parte Meeting Summary at 24 candidate’s ability to meet this (‘‘Some [organizational] endorsements were 50,000 professional composers and songwriters’’); interpreted to be an endorsement by the individual, id. at 100 (stating that MCNA has an ‘‘approximate by AMLC and MLCI in their respective proposals, and others on behalf of the entire membership.’’). collective membership of between 7,500 to 8,500 including counting all proposed board and 206 See APRA AMCOS Reply at 1 (clarifying that songwriters and composers’’); id. at 105 (stating that committee members. Then, the Office counted APRA AMCOS does not endorse AMLC and was Music Answers has ‘‘more than 3,500 supporters’’); every endorsement contained in other comments. ‘‘misrepresented in the AMLC’s submission,’’ and SGA Reply at 1 (‘‘membership ranges between 3,500 The Office did not, however, count the individual that the letter appended to AMLC’s proposal was and 5,000 members’’). members of any endorsing groups or organizations ‘‘signed by a single writer director of the APRA 209 For example, it seems that the memberships of for the reasons stated above. To be as equitable as board and does not represent the commitment or SGA and Screen Composers Guild of Canada may possible, the Office treated every endorsement as support of our organization, nor does the letter state be subsumed within the membership of MCNA. See coming from a relevant copyright owner, except anywhere that APRA itself has offered any such AMLC Proposal at 100 (listing SGA and SCGC as where the record affirmatively stated otherwise. institutional endorsement’’); Statement from CISAC ‘‘member organizations’’ of MCNA). Because AMLC did not provide the identities of the and CIAM on the U.S. Music Licensing Collective, 210 While the Office made clear in the NOI that bulk of their endorsers, the Office could not International Confederation of Societies of Authors endorsements need not be exclusive, this is a compare most of the endorsers from AMLC’s and Composers (Apr. 5, 2019), https:// different issue that speaks to whether the candidate proposal to the individual endorsements received www.cisac.org/Newsroom/Articles/Statement-from- is in fact supported by an individual. in the comments, meaning the Office could not CISAC-and-CIAM-on-the-U.S.-Music-Licensing- 211 See Sue (or In a Season of Crime), ACE ascertain whether there might be duplicate Collective (‘‘For the avoidance of doubt and in view Repertory, https://www.ascap.com/repertory#ace/ endorsements. Because the Office could not of the different rumours circulating, CIAM and search/workID/888244289 (last visited June 24, deduplicate AMLC’s endorsements, the Office did CISAC wish to clarify that the organisations have 2019) (listing Maria Schneider’s PRO affiliation as not deduplicate MLCI’s endorsements either, so as not endorsed either of the competing companies for ASCAP); Across the Street (Live), ACE Repertory, to apply a consistent methodology to both the U.S. MLC.’’). https://www.ascap.com/repertory#ace/search/ candidates. 207 See, e.g., AMLC Proposal at 95 (Asia-Pacific workID/886237406 (last visited June 24, 2019) 214 See, e.g. Music Policy Issues: A Perspective Music Creators Alliance); id. at 98 (Alianza (listing Zoe Keating’s PRO affiliation as ASCAP); from Those Who Make It: Hearing on H.R. 4706, Latinoamericana de Compositores y Autores de Hangin Around, ACE Repertory, https:// H.R. 3301, H.R. 831 and H.R. 1836 Before the H. Mu´ sica); id. at 102 (Society of Authors and www.ascap.com/repertory#ace/search/workID/ Comm. on the Judiciary, 115th Cong. 4 (2018) Composers of Colombia); id. at 104 (Screen 380230553 (last visited June 24, 2019) (listing Rick (statement of Ranking Member Nadler); 164 Cong. Composers Guild of Canada); id. at 106 Carnes’s PRO affiliation as ASCAP). Rec. S501, 502 (daily ed. Jan. 24, 2018) (statement (ABRAMUS/ALCAM). 212 AMLC Proposal at 48. of Sen. Hatch); 164 Cong. Rec. H3522, 3536 (daily 208 See, e.g., id. at 99 (stating that European 213 The Office’s methodology was as follows. ed. Apr. 25, 2018) (statement of Rep. Goodlatte). Composer and Songwriter Alliance ‘‘represents over First, the Office counted all endorsements provided 215 17 U.S.C. 115(d)(3)(A)(iii).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32287

requirement, organized into enumerated communicating information in ‘‘necessary support capabilities and categories. accordance with the Common Works processes, usually typical of most Registration (‘‘CWR’’) format and DDEX businesses (payroll, legal, etc.).’’ 229 i. Overview of Proposals, Including standards, and a willingness to explore These categories in turn comprise ten Business Planning and Budgeting other relevant existing or emerging functions that the MLC will carry out on The Office requested that each entity standards or open protocols.224 behalf of songwriters, musical works provide ‘‘a business plan, including a Similarly, AMLC and MLCI each owners, and the public, explained by a statement of purpose or principles, express an understanding of the need to series of detailed flow charts.230 proposed schedule, and available address policies and actions related to While MLCI has not yet determined budgetary projections, for the distributions of unclaimed accrued the precise management structure for establishment and operation of the royalties with care, including providing daily operations or full staffing, it proposed MLC for the first five years of adequate notice before such includes a series of organizational its existence.’’ 216 The NOI noted that distributions occur.225 They commit to charts, which propose fifty-five although the MLC designation process is engage in education and outreach efforts employees.231 It also has retained separate from the establishment of an to publicize the collective, including consultant support in overseeing administrative assessment by the CRJs, procedures by which copyright owners technology strategy, the RFI/RFP ‘‘understanding the proposed funding may identify themselves to claim process, and operations design, and for the MLC (in advance of the accrued royalties.226 They both reports that its board members have establishment of the administrative appropriately focus on the need to dedicated a considerable amount of time assessment)’’ and budgetary planning operate a user-friendly claiming portal, to this planning process.232 generally can be ‘‘important to for, as the legislative history notes, ‘‘the MLCI intends to ‘‘utilize a single confirming that the MLC will be ready simple way to avoid any distribution to primary vendor for core usage to adequately perform its required other copyright owners and artists is to processing functions, with functions by the license availability date step forward and identify oneself and consideration of secondary vendors to 217 and beyond.’’ Accordingly, the one’s works to the collective, an augment in specific areas.’’ 233 Sixteen Office’s interest in the candidates’ exceedingly low bar to claiming one’s vendors participated in its RFI process, budgetary materials is ‘‘for the purposes royalties.’’ 227 and MLCI selected seven of those to of this designation process only, and Although the proposals share certain participate in the RFP process.234 MLCI without prejudice to the future commonalities, they diverge on details, notes that, in aggregate, these RFI administrative assessment sometimes significantly, including at participants ‘‘have processed nearly 20 218 proceeding.’’ times on the level or evidence of trillion lines of sound recording usage Considering both proposals at a very planning disclosed in response to the and more than $4.2 billion in royalties high level, there are a number of NOI. These differences were reflected in for the U.S. territory over the past 3 similarities, including a shared the proposed budgetary estimates, calendar years, and have more than 20 intention to set up offices in or near 219 including the specific line items, put million unique works in rights Nashville, Tennessee. Both forth by each candidate. databases and existing connectivity with candidates envision using a primary approximately 50,000 publishers.’’ 235 vendor to build out the required musical a. MLCI MLCI estimates its total startup costs works database, and to varying degrees Out of the two candidates, MLCI through the license availability date to signaled intentions or openness to provides a more detailed organizational be between $26 and $48 million, with 220 working with additional vendors. In model for its operations and reports that annual operating costs between $25 and recognition that the creation of a it ‘‘has already begun the process of $40 million.236 To obtain funding, it has comprehensive musical works database assuring the timely acquisition of these engaged in ‘‘good faith negotiations with has long been an aim of various capabilities’’ 228 necessary to fulfill the the major licensee services in an attempt segments of the music community, both statutory functions. This framework is to reach agreement on voluntary candidates plan to ‘‘utilize systems that organized into three categories of 237 221 contributions.’’ If such an agreement are tested’’ or ‘‘leverage[ ] existing activities: Strategic Processes, defined as is not realized, MLCI will participate in technology and data providers’’ 222 Both ‘‘the management processes that the assessment proceeding.238 In that propose to rely on automated processes empower the operational capabilities of for the bulk of identifying songs the collective’’; Core Processes, defined 229 Id. at 12. recorded and matching them to as ‘‘capabilities and processes in the 230 Id. at 13. copyright holders, augmented with 231 Id. at 25; see id. at 25–29 (detailed description 223 core tasks’’ including ‘‘how the MLC manual processing as needed. To that performs the central ownership and of employee roles). 232 end, both note the importance of license administration responsibilities’’; Id. at 3–4; see also MLCI Ex Parte Meeting compatibility with existing music Summary at 2. and Foundational Processes, defined as 233 industry standards, including MLCI Ex Parte Meeting Summary at 2. 234 MLCI Proposal at 55 (listing RFI participants 224 MLCI Proposal at 35, 38, 57–58; AMLC ASCAP, AxisPoint, BackOffice, BMI, BMAT, 216 NOI at 65751 (requesting each plan also Proposal at 15; see also Berklee College of Music Crunch Digital, DDEX, Gracenote, ICE, Music include ‘‘a description of the intended & MIT Connection Science Comments at 2–5. Reports, Inc. (‘‘MRI’’), Open Music Initiative (OMI), technological and/or business methods’’ for 225 See, e.g., MLCI Proposal at 43–44; AMLC Sacem/IBM, SESAC/HFA, SOCAN/DataClef, accomplishing the MLC’s statutory obligations). Proposal at 18–19; AMLC Ex Parte Meeting SourceAudio, and SXWorks); id. at 59 (listing RFP 217 Id. at 65752. Summary at 14. participants ASCAP, BackOffice, ICE, MRI, SESAC/ 218 Id. 226 MLCI Proposal at 62–63; AMLC Proposal at HFA, SXWorks, and Sacem/IBM); id.at Exs. 3, 4 219 MLCI Proposal at 66; AMLC Proposal at 48, 30–33. (providing RFI and RFP). MLCI did not include 76. 227 S. Rep. No. 115–339, at 14 (2018) (stating that copies of RFI or RFP responses, stating they are 220 MLCI Ex Parte Meeting Summary at 2; AMLC ‘‘[t]his process ensures that copyright owners and subject to nondisclosure agreements and include Ex Parte Meeting Summary at 7–9. artists benefit’’ in contrast to views of ‘‘some confidential information. Id. at 59. 221 MLCI Proposal at 39. copyright owners and/or artists who would prefer 235 Id. at 56–57. 222 AMLC Proposal at 5. that such money be escrowed indefinitely until 236 Id. at 31–32. 223 MLCI Proposal at 18–19, 41; AMLC Proposal claimed’’). 237 Id. at 59. at 10–11. 228 MLCI Proposal at 7. 238 Id. at 61.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32288 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

event, it ‘‘will seek bridge funding to songwriters; has worked with at least and unrealistic.255 Noting that AMLC’s cover any gaps,’’ and expresses one of the major digital service cost projections are far below the $30 confidence that ‘‘its extensive network providers (‘‘DSPs’’); and has distributed million annual cost estimate provided of support and trust throughout the at least $100 million to rightsholders by the Congressional Budget Office industry, and the reputations of its each year for the last two years.246 (‘‘CBO’’),256 MLCI argues that AMLC’s leadership, will assist it in obtaining Having held discussions with four budget ‘‘would result in a grossly support for its continued primary vendors, AMLC ‘‘expects to underfunded collective that could not operations.’’ 239 MLCI expects to have engage foundational vendors’’ DataClef diligently protect the rights and no need to apply unclaimed royalties to and MRI to enable it to provide a royalties of songwriters and copyright defray costs, though it notes that the comprehensive interoperable owners.’’ 257 Other commenters, some 247 statute permits it to do so on an interim database. It notes that DataClef has but not all affiliated with AMLC, 240 basis. access to the CIS–NET Works praised AMLC’s approach as reflecting Information Database (‘‘WID’’), which b. AMLC the advantages of a startup or small includes over 81.1 million musical company, or otherwise favored its AMLC aspires to adopt a leaner 248 works. Beyond these vendors, AMLC proposed budget.258 approach to these issues. Upon its states that additional incumbent entities launch, it will rely on incumbent employed by DSPs have confirmed that Indeed, in some instances it is unclear services and vendors that have been if AMLC is designated, they would play whether AMLC’s budget estimates ‘‘vetted and approved’’ by the Digital a role if requested or needed.249 anticipate each of its statutorily required Media Association (‘‘DiMA’’).241 It In response, MLCI expresses concern activities in the manner it envisions intends to add technology applications, regarding the perceived lack of executing them, which makes it difficult features, and solution providers explanation of AMLC’s RFI process, and to assess AMLC’s degree of advance incrementally over time ‘‘as a series of doubts the ability of the potential AMLC planning. For instance, AMLC does not steps on top of [this] pre-existing solid vendors to provide key capabilities such indicate which expenditures are foundation.’’ 242 AMLC reports that it as access to relevant databases, encompassed by its ‘‘OpEx’’ budget ‘‘has taken significant input from key specifically challenging whether AMLC item, which averages approximately stakeholders, potential vendors, will be legally entitled to access the $600,000 per year during its first two performing rights organizations, labels, WID for its purposes.250 full years.259 By comparison, MLCI’s and most importantly, publishers and AMLC submitted substantially lower estimated operational costs include songwriters in formulating [its] cost estimates for its activities, specific line items for premises, office technology plan,’’ and states that it will estimating total costs of approximately expenses, accounting services, finance have further discussions in designing $43.9 million for its first five years, and insurance, and travel expenses, and implementing solutions if it is broken out across fewer categories than among other expenditures.260 The 243 251 designated. It intends to hire eleven MLCI. Like MLCI, AMLC intends to comparative lack of specificity calls into employees, and ha engaged a technology negotiate with DiMA on a final budget question the extent to which AMLC consultant.244 However, AMLC cautions to be submitted to the CRJs for considered the full range of the MLC’s that ‘‘although there ha[ve] been approval.252 AMLC does not intend to necessary operational costs. Similarly, significant discussions and planning utilize debt, except perhaps during the AMLC projects annual expenditures of . . . much of the details need to be initial MLC startup phase.253 AMLC formalized once the mandate decision is believes it is inappropriate to apply approximately $600,000 to $730,000 for made.’’ 245 songwriters’ and publishers’ royalties to licensing and legal activities for the first 261 AMLC established several cover the MLC’s operating costs, but five years of its operation. It is requirements that potential vendors states that interest income earned from unclear whether these allocated must meet, including that the entity is the unclaimed accrued royalties may be amounts fully anticipate the MLC’s ‘‘in good standing’’; has no pending used to defer initial operating costs statutory obligations in this area, which litigation; has worked with or for the during the startup phase.254 include participating in Copyright major music publishers, independent MLCI characterizes AMLC’s budget Office rulemakings and the CRJs’ music publishers, and self-published and development timeframe as vague administrative assessment proceedings, and ‘‘[e]ngag[ing] in legal and other 239 Id. 246 AMLC Ex Parte Meeting Summary at 7–8. efforts to enforce rights and obligations’’ 240 Id. at 61–62 (citing 17 U.S.C. 115(d)(7)(C)). 247 AMLC Proposal at 4; see also AMLC Ex Parte under section 115(d), ‘‘including by 241 AMLC Proposal at 4. Meeting Summary at 8–9 (indicating AMLC filing bankruptcy proofs of claims for 242 Id. selected DataClef as their vendor, as well as a amounts owed under licenses’’ or 243 Id. at 6. continued willingness to consider other vendors). 248 commencing actions for damages and 244 Id. at 26. AMLC Proposal at 7–8. It is unclear how DataClef qualifies as a vendor under AMLC’s 262 245 Id. at 6. AMLC subsequently reported that injunctive relief in federal court. criteria, as it was launched in late 2018 and would although several vendors have agreed to work with not have distributed at least $100 million over the 255 it in the event it is selected as the MLC, many ‘‘were last two years. See SOCAN Launches Dataclef MLCI Reply at 25–29. concerned [that] they would suffer negative Music Services (Oct. 22, 2018), https:// 256 CBO, Congressional Budget Office Cost consequences if they were listed in the AMLC www.socan.com/socan-launches-dataclef-music- Estimate, S. 2823 Music Modernization Act (Sept. application.’’ AMLC Ex Parte Meeting Summary at services/. 12, 2018, revised Sept. 17, 2018), https:// 8. To the extent such vendors believe they are 249 AMLC Proposal at 4. www.cbo.gov/system/files/2018-09/s2823.pdf. prohibited from contracting with both candidates, 250 257 MLCI Reply at 25. that understanding is not supported by the statute. MLCI Reply at 22–24 (‘‘Access to the CIS–NET 258 See Peter Jessel Reply at 1; Peter Resnikoff As noted in the NOI, ‘‘while the statutory language WID is a benefit for CISAC member societies, but Reply at 1; H. Hendricks Reply at 1; Alfons authorizes the MLC to arrange for services of a CISAC member like SOCAN would not have Karabuda Reply at 1; Betsy Tinney Reply at 1. outside vendors, nothing suggests that such a authority to sublicense the WID to anyone else it 259 vendor must offer exclusive services to that MLC wants, be it DataClef or the collective.’’). See AMLC Proposal at 28. 251 candidate.’’ NOI at 65749. At the same time, the AMLC Proposal at 28. 260 See MLCI Proposal at 32. statute does not regulate parties’ ability to enter into 252 Id. 261 AMLC Proposal at 28. exclusive relationships or other arrangements that 253 Id. at 28–29 (outlining potential sources of 262 17 U.S.C. 115(d)(3)(C)(i)(VIII)–(XI); id. at may affect the information that can be disclosed in debt financing). 115(d)(6)(C)(i); see also AIPLA, 2017 Report of the the candidates’ submissions. 254 Id. at 29. Economic Survey 44 (2017).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32289

ii. Ownership Information, Matching, MLCI ‘‘would undertake targeted formats.278 In its meeting with the and Claiming Process activities to clean and improve the Office, MLCI reiterated its intention to As noted, a key aspect of the MLC’s initial ownership and matching data accept submission of data in multiple collection and distribution using independent data assets . . . formats as a way to accommodate the responsibilities includes ingesting data drawing on MLC[I]’s unparalleled needs and technical sophistication of a regarding musical works and uses under access to data resources from its wide array of copyright owners. It also 271 the license, and identifying musical industry supporters.’’ While noting affirmed its commitment to education works and copyright owners, matching that all usage data would be run through and outreach, noting that such efforts them to sound recordings, and ensuring matching software, MLCI notes that it will inform the design of its rights portal plans to develop policies to address that a copyright owner gets paid as he and options for data submission.279 263 issues related to calibration of or she should. AMLC commits to continually Both proposals appropriately focus on confidence levels to ensure reliable this core task.264 As noted, both AMLC matching, and prioritization of manual engaging with stakeholders to monitor and MLCI intend to employ established processing through the operations and review new frameworks, and has and standard data formats and advisory committee in the context of established an advisory technology architectural practices to support data specific unmatched pools.272 MLCI committee comprised of members with exchange functions, including asserts that for at least two years beyond significant technology backgrounds.280 development of Application the license availability date, and AMLC plans to ‘‘build a robust interface Programming Interfaces (‘‘APIs’’) to perhaps longer, any previously accrued to allow for bulk transitions of catalog allow bulk processing of data for larger unmatched uses will be analyzed by the or individual ownership changes . . . to users 265 and supporting a variety of MLC matching systems and will be be properly updated through the chosen formats for new submissions ‘‘to publicly available on the rights portal authoritative data partners and 273 accommodate copyright owners who are for members of the public to claim. vendors.’’ 281 AMLC professes that its unable to convert data to standard MLCI adds that it intends to make system will be designed in part for self- formats themselves.’’ 266 Each expresses repeated attempts to match ‘‘until such published songwriters, who represent time as the Unclaimed Royalties a willingness to utilize current and the largest percentage of music owners Committee and the Board of Directors emerging technologies to match sound but in many cases have the lowest level recordings to musical works, including . . . determine that a distribution of those unmatched royalties is fair and of understanding of copyright hashes and watermarking or requirements.282 AMLC anticipates that 267 appropriate under the statute.’’ 274 fingerprinting technologies. Finally, incomplete DSP data will be analyzed both wisely point to usage reporting as MLCI contends that ‘‘[t]here is no and segmented based on the distributor the primary determinant with respect to standard format for modeling musical of the underlying recording, and prioritization of matching resources.268 works ownership agreement information In terms of populating ownership in databases,’’ as there is disagreement repeatedly expresses optimism that the information, MLCI envisions updates to over which terms are important to MLC and DSPs could work the database being built into industry capture, a problem paralleled in collaboratively to address such deals involving assignment of copyright capturing chain of title data.275 MLCI issues.283 interests, and by establishing a simple, therefore presumes a necessity to merge Regarding the claiming process user-friendly, and ADA-compliant web ‘‘information between databases,’’ specifically, MLCI is confident that its 269 which ‘‘can require complex portal. According to MLCI, ‘‘[o]nce ownership claiming portal will be reformatting of data.’’ 276 In response, the rights database, claiming portal, and usable by stakeholders of any license administration are fully DiMA suggested that ‘‘it may be more effective and efficient to focus efforts on sophistication level, and it will dedicate operational, the industry will have a staff to assist copyright owners with single, transparent, publicly-accessible increasing the accuracy of automated methods.’’ 277 DiMA also suggests that troubleshooting and claims resource for establishing and identifying submission.284 Likewise, AMLC intends ownership of mechanical rights.’’ 270 improving the standardization of metadata might be achievable at lower to utilize DataClef’s pre-built ‘‘claiming portal,’’ allowing copyright owners to 263 Indeed, many interested commenters focused cost by making such issues a focus of on these ‘‘core’’ or ‘‘principal’’ duties. See, e.g., education and outreach efforts, as search a database of unmatched and/or Recording Academy Reply at 3; DiMA Reply at 2. distinguished from the more labor- and partial ownership recordings, and 264 See Recording Academy Reply at 3 (‘‘Both cost-intensive approach of allowing data identify recordings of their have also demonstrated a clear commitment to the 285 rights of songwriters.’’). submission in a variety of different compositions. AMLC envisions 265 MLCI Proposal at 34–35, 37; AMLC Proposal implementing a change management at 5, 11, 15. Berklee College of Music and MIT 271 Id. module and reliance upon ‘‘chosen Connection Science also noted the importance of 272 Id. at 41; see also MLCI Ex Parte Meeting authoritative data partners and the MLC using standardized APIs open protocols Summary at 3 (stressing ‘‘the importance of robust 286 and accessibility. Berklee College of Music & MIT manual efforts to match uses and locate owners of vendors.’’ It proposes that its portal Connection Science at 2–5. works’’). will stream 30-second preview clips to 266 MLCI Proposal at 37; see AMLC Proposal at 10 273 MLCI Proposal at 43–44. (similar, referencing need to ingest comma 274 Id. at 44. The Recording Academy urged the 278 Id. at 10–11. separated values (‘‘CSV’’) files, Excel files, DDEX Register to seek further information on MLCI’s 279 MLCI Ex Parte Meeting Summary at 2–3. files, or data via an online user interface with fields commitments to match works and on when such 280 AMLC Proposal at 15–16, 36. that the end user will populate). commitments may reasonably be exhausted. See 281 267 AMLC Proposal at 16; MLCI Proposal at 48. Recording Academy Reply at 4–5. In its ex parte Id. at 10. 268 MLCI Proposal at 41 (stating ‘‘[t]otal royalties meeting with the Office, MLCI reiterated its 282 Id. accrued has been a common metric for intention to ‘‘exceed the statutory minimums 283 See, e.g., id. at 4 (‘‘our first priority is to meet prioritization, simply because it aims to minimize related to notice and distribution in order to with DiMA members and other DSPs to collaborate, the total amount of unmatched royalties’’ and that maximize matching success.’’ MLCI Ex Parte white-board, diagram/discuss and further work ‘‘[u]sage and vintage of usage are metrics that are Meeting Summary at 3. through technology topics’’). related to total royalties’’); AMLC Proposal at 12. 275 MLCI Proposal at 36. 284 MLCI Proposal at 37 & n.6. 269 MLCI Proposal at 37 & n.6. 276 Id. 285 AMLC Proposal at 9. 270 Id. at 34. 277 DiMA Reply at 10. 286 Id. at 9–10.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32290 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

allow rightsholders to confirm iii. Dispute Resolution handle large data sets.302 They also each matches.287 commit to establishing an information In response to the Office’s request for As noted, the MLC dispute resolution security management system that is ‘‘target goals or estimates for matching committee will establish policies and certified with ISO/IEC 27001 and meets works in each of the first five years,’’ 288 procedures for copyright owners to the EU General Data Protection MLCI states that its target ‘‘is, and will address disputes relating to ownership Regulation requirements, and other always be, 100% success.’’ 289 But it interests in musical works. Neither applicable laws, and to employing argues that because match rates are candidate has developed detailed redundancy practices to minimize data easily manipulated, ‘‘the critical procedures governing this committee’s loss.303 question is not match rate, but the activities, but both provided sufficient While its policies and procedures for quality of matches.’’ 290 Therefore, MLCI information regarding their accessing information in the databases will ‘‘fine-tune[ ]’’ its algorithms based understanding of the scope of its are not yet finalized, MLCI commits to on system complaints, feedback, and responsibilities. following the regulations promulgated disputes, and will investigate inaccurate MLCI will address disputed claims of by the Register concerning ‘‘the matches.291 MLCI also notes that it will ownership using existing tools usability, interoperability, and usage explore developments in algorithms, commonly used in the industry, restrictions of the musical works machine learning, and artificial including algorithms used to detect database.’’ 304 intelligence.292 fraud, establishing a process by which AMLC proposes two types of access to For its part, AMLC believes that it can users can be authenticated, and tracking the musical works database. First, the establish a dataset of 80 million works changes made by MLCI employees.296 It general public would have access to ‘‘a and recordings, ‘‘with corresponding notes that its dispute resolution minimal amount of data that is generally works that are matched with high committee and board have extensive available to the public already.’’ 305 confidence to recordings of experience in ownership matters, Second, AMLC will offer ‘‘DSPs and approximately 70%, or 56 million including the role of abandoned other key constituents’’ access to feeds 293 works.’’ It estimates that the property laws, processes for validating with ‘‘more comprehensive data that is percentage of works matched will copyrighted arrangements of public generally not public, but necessary for 294 exceed 90% by 2024. AMLC’s domain works, public domain fraud, proper royalty and ownership estimates are based on several key and implementation of legal holds.297 processing (such as splits, territorial assumptions, including 15% growth per 306 Similarly, AMLC states that its rights etc.).’’ It proposes to develop year in works and recordings used in data access rules ‘‘in collaboration covered activities.295 conflict resolution committee will recommend and implement policies to between publishers’’ to ensure Based on these submissions, the confidentiality and compliance with Copyright Office finds that both address discrepancies, disputes, and fraudulent claims.298 It reiterates that it domestic and international privacy and candidates have demonstrated a data security policies.307 AMLC’s reasonable ability to acquire and build will work with DSPs to identify the origin of false claims and create submission does not explicitly the necessary data processing acknowledge the statutory requirements capabilities for ownership incentives for distributors to reduce fraud.299 As noted above, it also for provision of access, although identification, matching, and claiming elsewhere AMLC has pledged to processes. In particular, the Office envisions employing a robust data 300 conform any policies to subsequent appreciates the level of detail provided change management module. regulatory activities.308 by both entities on their approach to In ex parte meetings, both MLCI and Based on this information, the Office matching works, description of plans to AMLC confirmed their understanding finds that both MLCI and AMLC have implement public claiming portals, and that the dispute resolution committee’s the capability to maintain and provide commitment to prioritizing usage, or role does not include adjudicating access to the required public database of total royalties accrued, when focusing ownership disputes on the merits. musical works. The Office appreciates on minimizing the incidence of Rather, both expressed their each entity’s commitment to ensure unmatched sound recordings. The understanding that the committee’s compliance with all relevant legal Office also appreciates that both function is limited to the establishment obligations with respect to privacy and candidates intend to adhere to of policies and procedures to govern the security. established formats for data transfers, as resolution of such disputes. well as use standard identifiers v. Notices of License, Collection and currently used by the global music iv. Maintenance of Musical Works Distribution of Royalties, Including industry. The Office expects the Database Unclaimed Accrued Royalties selected designee to follow through on The Office requested input regarding The MLC’s administrative role these commitments, to continue to the operation and maintenance of a includes accepting notices of license explore technological developments in well-functioning database, including (and terminating them when the matching works, and to publicly specific information on how each entity licensee is in default), and collecting disclose and update the methods used would address issues of security, and distributing royalties for covered in its matching efforts. redundancy, privacy, and transparency.301 Both depict a 302 AMLC Proposal at 16; MLCI Proposal at 49; 287 Id. at 9. technological approach that is fully see also DiMA Reply at 9–10 (addressing potential 288 NOI at 65751. scalable and reliable, with the ability to volume of transactions to be processed by the MLC). 289 MLCI Proposal at 42. 303 MLCI Proposal at 50; AMLC Proposal at 17. 290 Id. at 43. 304 MLCI Proposal at 50 (quoting 17 U.S.C. 291 MLCI Proposal at 43; see also MLCI Ex Parte 296 MLCI Proposal at 44–45. 115(d)(3)(E)(vi)). Meeting Summary at 2–3. 297 Id. at 45–46. 305 AMLC Proposal at 17 (detailing fields with 292 MLCI Proposal at 39. 298 AMLC Proposal at 14. respect to musical works and sound recordings). 293 AMLC Proposal at 12. 299 Id. 306 Id. 294 Id. at 12. 300 Id. at 10. 307 Id. 295 Id. at 12–13. 301 NOI at 65751. 308 Id. at 78 (AMLC bylaw art. 3).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32291

activities, including unclaimed funds collection of valid documentation (e.g., reasons, MLCI has made a more after the prescribed holding period.309 IRS Forms W–8 and W–9), persuasive showing with respect to With respect to notices of license, administration of information these requirements. MLCI reports that it ‘‘will strictly statements and other reporting With respect to the distribution of enforce the monthly reporting requirements (e.g., IRS Forms 1099 and unclaimed, accrued royalties, the requirements under Section 1042), and, where applicable, the Copyright Office agrees with MLCI that 115(d)(4)(A), and will promptly issue accurate withholding and depositing of the statute does not permit the first such notices of default and terminations of U.S. tax payments.’’ 317 It also notes that distribution to occur before January 1, licenses where applicable.’’ 310 It adds its board members have experience 2023.324 The Office also agrees that that it will distribute royalty pools overseeing all aspects of royalty unclaimed accrued royalties may be obtained through legal proceedings to payment processing.318 retained beyond the statutory holding copyright holders based on usage AMLC does not specifically address period.325 reports and that where funds do not timing of initial and annual distribution vi. Education and Outreach match the full amount of royalties due, of unclaimed royalties, instead they would be distributed on a pro rata emphasizing that it intends to keep Both candidates appear to have basis.311 AMLC notes that its board distribution of unclaimed royalties to developed multifaceted education and the lowest possible limit, and to only outreach plans to fulfill this statutory members have ‘‘extensive experience in 326 all matters of resolution of royalty make such distributions ‘‘as a last resort duty. MLCI notes that it is already collections and payments, including after every possible effort is put into engaged in significant education and identifying the rights holder(s).’’ 319 It outreach efforts to inform the relevant bankruptcy proceedings,’’ and therefore 327 it will be well positioned to adopt further notes that its unclaimed industries and the general public. It policies ‘‘to manage all known royalties committee will seek to develop plans to continue these efforts through the MLC’s launch, and thereafter will situations’’ related to licensee and a policy ‘‘to ensure the reserve fund is ‘‘provide regular information and licensor payments.312 sized and managed appropriately.’’ 320 updates to the public,’’ including With respect to distributions, MLCI In addition, AMLC plans to use through ‘‘press releases, social media, intends to provide ‘‘prompt, complete, actuarial data to make more accurate articles and advertisements in trade and accurate payments to all copyright projections regarding accrued and publications, and speaking engagements owners.’’ 313 It interprets section unclaimed liquidations, interest earned, at music industry events, conferences, 115(d)(3)(J)(i)(I)—which provides that and potential claims.321 and festivals.’’ 328 MLCI notes that its the first distribution of unclaimed AMLC will outsource royalty payment board includes prominent music accrued royalties ‘‘shall occur on or to established payment vendors, ‘‘or an industry professionals who will use entity that . . . has built the needed after January 1 of the second full their expertise and connections to workflow/infrastructure into the calendar year to commence after the ensure that information is disseminated existing work process that can be license availability date’’—to provide throughout the industry.329 that no such distribution shall occur repurposed for AMLC distributions, AMLC has developed a strategy 314 322 prior to 2023. Additionally, MLCI such as . . . MRI and/or DataClef.’’ focused on three tasks: Engagement, This entity ‘‘will also be responsible for interprets the statute as providing education, and follow-up efforts.330 It the storage of personal information discretion to retain unclaimed accrued seeks to reach as many potential users (including tax ID, name, address, bank royalties beyond the statutory holding as possible through a variety of info etc.) under security compliant period to allow for additional efforts at channels, including advertising, social systems.’’ 323 matching and claiming, and promises to media, industry conferences, and In general, the Office is persuaded do so where there is ‘‘reasonable sponsorships, and relying on its own that both candidates, through vendors or evidence’’ that such efforts may bear board members’ connections.331 It 315 a combination of vendors and in-house fruit. It is committed to diligent specifically commits to making capabilities, are capable of carrying out efforts to match uses and works, information available in ‘‘English, functions relating to collection and including ‘‘robustly and relentlessly’’ Spanish, and additional languages on an deploying its matching system with distribution of royalties. As with some other requirements, however, MLCI’s respect to unmatched works, and 324 See 17 U.S.C. 115(d)(3)(J)(i)(I) (‘‘The first such holding unclaimed accrued royalties submission provides a more thorough distribution shall occur on or after January 1 of the beyond the statutory eligibility for explanation of how it would approach second full calendar year to commence after the distribution, to obtain more matches, these matters. It articulates several license availability date, with not less than 1 such policies it intends to implement to distribution to take place during each calendar year and distribute more royalties to rightful thereafter.’’). 316 owners. maximize matching, including holding 325 See id. at 115(d)(3)(H)(i) (‘‘The mechanical MLCI further states that its royalty accrued royalties beyond the statutory licensing collective shall hold accrued royalties payment systems will comply with holding period, making information on associated with particular musical works (and unmatched works available on a public shares of works) that remain unmatched for a relevant tax law obligations, ‘‘including period of not less than 3 years after the date on portal, and undertaking outreach and which the funds were received by the mechanical 309 17 U.S.C. 115(d)(3)(C)(i)(I)–(II). education efforts. Moreover, AMLC does licensing collective, or not less than 3 years after 310 MLCI Proposal at 51. not specifically address MLC functions the date on which the funds were accrued by a 311 Id. at 52. regarding notices, recordkeeping, and digital music provider that subsequently transferred 312 AMLC Proposal at 18. collection under the license. For these such funds to the mechanical licensing collective 313 MLCI Proposal at 52. pursuant to paragraph (10)(B), whichever period expires sooner.’’) (emphasis added). 314 17 U.S.C. 115(d)(3)(J)(i)(I); MLCI Proposal at 317 Id. at 51. 326 52. See generally, MLCI Proposal at 62–63; AMLC 318 Id. Proposal at 30–33. 315 Id. at 52–53. 319 AMLC Proposal at 18–19. 327 MLCI Proposal at 62. 316 Id. at 43–44, 53–54 (discussing ‘‘mak[ing] 320 328 information on its unmatched works available to Id. at 19. Id. at 63. the public on its rights portal’’ and undertaking 321 Id. 329 Id. ‘‘significant outreach to educate the public on 322 Id. at 18. 330 AMLC Proposal at 30–33. accessing this information and making claims’’). 323 Id. 331 Id. at 30.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32292 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

as needed basis for targeted songwriting vii. Copyright Office’s Analysis of) the statutory license, under legally- communities where the MLC mandated timeframes. determines special outreach is Overall, the submissions suggest that MLCI’s proposal as a whole reflects a needed.’’ 332 AMLC also plans to both MLCI and AMLC have or will have more realistic understanding of the produce a series of tutorial videos on the basic administrative and MLC’s responsibilities under this new specific aspects of the royalty collection technological capabilities to perform the system and indicates that it is better and distribution process.333 required functions under the statute. For positioned to undertake and execute the the reasons discussed above, however, full range of administrative functions The Recording Academy asserts that MLCI has demonstrated a greater required of the MLC within these ‘‘[w]ithout an effective outreach capacity to carry out several of these critical first five years.344 The Office program, the Collective will not responsibilities. In particular, it is expects that MLCI will build upon its 334 succeed.’’ While noting that both apparent that MLCI has established a considerable planning in a flexible and proposals contain information regarding more detailed operational framework conscientious manner that also public outreach, the Recording and has garnered input from a broader considers input from the to-be- Academy suggests that both are set of interested parties. MLCI’s designated DLC non-voting or insufficiently detailed with respect to submission reflects substantially more committee members, as well as the clear and executable plans, and how detailed planning with respect to broader musical work copyright owner each will measure the effectiveness of organizational structure, vendor and songwriting communities. outreach.335 The Office questioned each selection, and collection and B. Digital Licensee Coordinator candidate about specific plans and distribution procedures. metrics in subsequent meetings. AMLC The Office received one proposal, by Indeed, the Recording Academy, a 345 expressed a variety of ambitious rare organization to withhold DLCI, for designation as the DLC. DLCI’s founding members are five of the outreach ideas, although it was not endorsement until it was able to study largest digital music providers—Spotify necessarily clear whether it had yet each candidates’ proposals, weighed in USA Inc., Apple Inc., Amazon Digital established a specific plan and timeline on the perceived capabilities of the two Services LLC, Google LLC, and Pandora (or whether all intended activities were proposals, ultimately endorsing MLCI 336 Media, LLC. DLCI’s submission includes reflected in its budget planning). ‘‘upon careful consideration of both a proposal directly responding to the MLCI represented that ‘‘numerous submissions.’’ 341 While praising the NOI, and a variety of supporting educational and outreach documents AMLC’s commitment and role in documents such as a certificate of have been drafted and release is ‘‘opening up dialogue’’ on issues with incorporation, bylaws, and a five-year pending the determination on respect to transparency and board designation.’’ 337 It plans to utilize focus business plan.346 For the reasons representation, the Academy noted that described below, the Register has groups with respect to design of the MLCI’s ‘‘submission embodies a rights portal, and leverage its board and concluded that DLCI meets each of the thoughtful, meticulous, and statutory criteria required of the digital committee members, as well as comprehensive approach,’’ concluding endorsers, in national and international licensee coordinator, and that each of its that it was ‘‘best equipped to satisfy’’ individual board members are well- outreach.338 342 the duties of the MMA. qualified to perform the statutory Ultimately, the Office finds that both For somewhat similar reasons, the functions. Accordingly, the Register candidates have the capability to Copyright Office concludes that MLCI is designates DLCI and its members, with undertake the education and outreach better equipped to operationalize the the Librarian’s approval. efforts required of the MLC. Following many statutory functions required by As noted above, in designating a DLC, this designation, the selected entity the MMA. To be sure, AMLC’s goals and the Register must apply similar statutory should work with the Office, the DLC, principles are laudable, and its criteria regarding nonprofit status, and other stakeholders to ensure that submission includes a number of ideas endorsement (from digital music rightsholders are adequately informed that should be given further providers in this instance), and ability about the new licensing framework and consideration. But while AMLC’s leaner to perform the DLC’s administrative the MLC’s functions. These efforts approach potentially could provide capabilities. Unlike the MLC, the should include ‘‘clear benchmarks that certain benefits, MLCI’s planning and Register may decline to designate a DLC measure [the MLC’s] outreach organizational detail provide a more if she is unable to identify an entity that effectiveness so that it can modify and reliable basis for concluding that it will fulfills each of the statutory adapt its strategies and tactics to best be able to meet the MLC’s qualifications; in that event, the serve the entire songwriter administrative obligations by the license statutory references to the DLC go community.’’ 339 In addition, as per availability date.343 The MLC is not a without effect unless or until a DLC is Congress’s directive, the Office will start-up venture or small business that designated.347 But designation of a DLC consider best practices in education and can adjust its rollout timing or pivot its would allow that entity to start doing outreach efforts as part of its study on focus; rather, it is tasked with important work. The DLC’s authorities unclaimed royalties.340 establishing, for the first time, a and functions include enforcing notice complex and highly regulated and payment obligations with respect to 332 Id. administrative framework designed to the administrative assessment, 333 Id. at 32–33. serve all who are subject to (or make use publicizing the ability of copyright 334 Recording Academy Reply at 5. owners to claim unmatched musical 335 Id. at 5–6. 341 Recording Academy Reply at 2–3. The 336 See AMLC Ex Parte Meeting Summary at 17– Recording Academy noted that it represents 344 Indeed, MLCI has pointed out that its budget 20. ‘‘thousands of working songwriters and composers, is far more in line with the CBO estimate than is 337 MLCI Ex Parte Meeting Summary at 3. many of whom are independent, self-published, or AMLC’s. MLCI Reply at 25. 338 Id. unaffiliated songwriters.’’ Id. at 1. 345 DLCI Proposal at Ex. A–1–2 (certificate of 339 Recording Academy Reply at 5. 342 Id. at 3. incorporation). 340 Public Law 115–264, sec. 102(f), 132 Stat. at 343 AMLC’s failure to file a reply comment in this 346 See DLCI Proposal. 3722–23. proceeding underscores this conclusion. 347 17 U.S.C. 115(d)(5)(B)(iii).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32293

work royalties through the MLC, director.352 ‘‘Subject to input from and a meeting schedule, and a structure for appointing representatives of digital discussion with the MLC,’’ DLCI collecting dues and funding the DLC.363 music providers to the MLC’s operations anticipates designating a non-director, 2. Endorsement advisory committee and generally officer, or employee to serve as the non- representing digital music providers’ voting member of the MLC board; this Under the second designation interests as a non-voting member on the potentially may be DiMA’s CEO.353 criterion, the DLC must be ‘‘endorsed by MLC board, and participating in and enjoy[ ] substantial support from In response to a request from the proceedings before the CRJs and the digital music providers and significant Office, DLCI named its representatives Copyright Office.348 As a result, it is nonblanket licensees that together to the MLC’s operations advisory represent the greatest percentage of the important that the DLC is a well- 354 qualified representative of both digital committee. Because MLCI and AMLC licensee market for uses of musical music providers who take advantage of proposed different numbers of their own works in covered activities, as measured the section 115 blanket license and representatives to the operations over the preceding 3 calendar years.’’ 364 significant nonblanket licensees who advisory committee (six and four, The Office asked for ‘‘an explanation of will benefit from the new MLC database. respectively), DLCI stated that it will how the proposed DLC has verified, ‘‘work with the [designated] MLC to calculated, and documented such 1. Organization, Board Composition, finalize the appointees to the Committee endorsement and substantial support, and Governance following designation.’’ 355 DLCI also including how the licensee market was calculated.’’ 365 In response, DLCI Beginning with the first required anticipates creating several committees indicated that it interprets the statutory statutory qualification, DLCI’s proposal not required by the MMA. The term ‘‘uses’’ as referring to ‘‘actual use sufficiently demonstrates that it is a Executive Committee will exercise the of music pursuant to covered activities,’’ nonprofit created to carry out powers of the board, if and when the 356 and that such use could be measured in responsibilities under the MMA. DLCI is board exceeds nine members. The ‘‘number of subscribers, number of a Delaware nonprofit ‘‘organized to Compliance Committee will be streams, or amount of royalties represent digital music providers in responsible for ‘‘receiving and following paid.’’ 366 DLCI stated that Congress connection with the administration of up on reports from the MLC of non- 357 could have chosen a different term if it the mechanical license provided under compliant nonblanket licensees.’’ wanted to measure endorsement by Section 115 of the United States The Regulatory Committee will engage reference to, for example, a percentage Copyright Act.’’ 349 DLCI thus satisfies in both CRJ and Copyright Office of music providers engaged in covered the first statutory criterion that it be a proceedings.358 And the Re-Designation activities or the number of musical single nonprofit entity created to carry Committee will prepare for a possible works available.367 DLCI did not out certain statutory responsibilities.350 redesignation of DLCI as the DLC.359 disclose usage metrics for its member DLCI’s board is composed of the DLCI’s bylaws outline rules governing companies, stating that for ‘‘any following initial members: Nick membership eligibility, voting, and individual music service’’ usage metrics Williamson (Apple, Inc.), Lisa Selden dues; meetings and schedules; its board, are ‘‘extremely confidential and (Spotify), Sarah Rosenbaum (Google), committees, and officers; and other proprietary.’’ 368 Instead, DLCI offered James Duffett-Smith (Amazon Music), rules and operational provisions. DLCI aggregated metrics provided by the and Cynthia Greer (Sirius XM Radio creates three classes of membership Harry Fox Agency (‘‘HFA’’) and MRI. Inc., the parent of Pandora Media, LLC). (principal, charter, and general); until This information indicated that DLCI Collectively and individually, these 2024, the principal members are DLCI’s members ‘‘represented by [HFA and individuals have a significant and founding members.360 Beginning in MRI] combined had over 84% of the diverse background in the music 2024, the principal members will be aggregate streams, over 94% of the licensing marketplace, including determined on a share basis by those aggregate subscribers, and over 88% of representing digital music providers and charter members with the five highest the aggregate royalties paid’’ over the in music database administration, and stream counts, determined every two last three years.369 thus qualify for appointment to the years.361 Charter members are those The Copyright Office is tasked with board.351 DLCI has selected three who have adhered to the mission and evaluating the support of both digital officers: James Duffett-Smith as board standards of DLCI for at least two years music providers who will use the chair, Sarah Rosenbaum as treasurer, and have paid relevant dues.362 The blanket license as well as significant and Lisa Selden as secretary, and bylaws also set out the voting structure, nonblanket licensees.370 But since it is anticipates hiring an executive currently before the license availability 352 DLCI Ex Parte Meeting Summary at 1 (June 4, date, it is unclear which digital music 348 See generally, id. at 115(d)(5)(C). 2019); DLCI Proposal at Ex. B–18. providers will be taking advantage of 349 DLCI Proposal at Ex. C–1; id. at Ex. A–1 353 DLCI Proposal at 8; see id. at Ex. B–16–18. (certificate of incorporation) (stating that ‘‘[n]o part 354 Letter from DLCI to U.S. Copyright Office at 363 Meetings will be as-needed and at least of the net earnings of [DLCI] shall inure to the 1 (June 13, 2019) (proposed committee members are annual, with specified advance notice. Id. at Ex. B– benefit of, or be distributable to, its members, Lisa Selden (Spotify), Nick Williamson (Apple 7. All members have one vote, with some trustees, directors, officers or other private Music), Alan Jennings (Amazon), Alex Winck exceptions. Id. at Ex. B–4. DLCI’s annual budget is persons.’’). (Pandora Media LLC), and Jennifer Rosen (Google dues-funded; at least 60% of is paid for by Charter 350 17 U.S.C. 115(d)(5)(A)(i). Play Music and YouTube Music)); see also DLCI Members and not more than 40% will be paid for 351 DLCI Proposal at Ex. C–14–17 (for example, Proposal at Ex. C–12. by General Members. Id. at Ex. B–5. The board may Williamson previously headed the ‘‘music industry 355 Letter from DLCI to U.S. Copyright Office at also approve special assessments under certain technical standards body, DDEX’’; Selden works to 1. circumstances. Id. at Ex. B–5–6. improve copyright matching at Spotify and, while 356 DLCI Proposal at Ex. B–13–14. 364 17 U.S.C. 115(d)(5)(A)(ii). at ASCAP, processed royalties ‘‘for Amazon, Apple, 357 Id. at Ex. C–7. 365 NOI at 65753. Pandora and YouTube’’; Rosenbaum has experience 358 Id. at Ex. C–11. 366 DLCI Proposal at 4–5. at both Google and Music Reports, where she 359 367 launched a section 115 rights-claiming portal; and Id. at Ex. C–12–13. Id. at 4. Duffett-Smith and Greer each have over fifteen 360 Id. at Ex. B–2–3. 368 Id. at 5. years of experience licensing music for digital 361 Id. at Ex. B–3. 369 Id. at 5–6 (emphasis omitted). services). 362 Id. at Ex. B–2–3. 370 17 U.S.C. 115(d)(5)(A)(ii).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32294 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

the blanket license. DLCI does not music services relating to the designated.’’ 381 Should the describe whether its founding members mechanical license provided under administrative assessment be decided would qualify as significant nonblanket Section 115, including through the by the CRJs, DLCI suggests it is licensees or blanket licensees but states specific authorities and functions ‘‘uniquely positioned to support the that it is ‘‘committed to soliciting other identified in the statute.’’ 374 It will [Copyright Royalty Board] in its interested licensee services to ‘‘fairly represent digital licensee assessments of ‘reasonable costs,’ based participate in all aspects of the DLC’’ services, and effectively coordinate with on its members’ experience with large- and plans to ‘‘bolster its support and the MLC, to help realize the goals of the scale data management practices.’’ 382 endorsement’’ going forward.371 MMA to provide licensing efficiency While it does not endorse either In submitting the aggregated HFA and and transparency, and to ensure that the candidate for the MLC, DLCI has been MCI metrics, DLCI offers three different new blanket licensing system is, and communicating with the two MLC criteria for evaluation (i.e., subscribers, remains, workable for digital music candidates ‘‘to support the development streams, or royalties paid). As the providers as well as copyright of efficient MLC operations and foster a statutory language here is similar to the owners.’’ 375 DLCI describes its collaborative working relationship’’ MLC endorsement/support criteria,372 administrative capabilities as being regarding payment enforcement the Office believes that the DLC ‘‘managed by subject-matter experts responsibilities.383 endorsement/support standard is with relevant industry experience and MLC Participation. DLCI hopes that intended to parallel the MLC standard. relationships’’ to ‘‘carry out its statutory its representatives ‘‘will be able to help Thus, the entity designated as the DLC functions and help ensure that the facilitate discussions between the MLC should be endorsed and supported by blanket licensing system is and DLC regarding the ongoing digital music providers and significant implemented successfully, to the benefit evaluation of the administrative nonblanket licensees that together paid of all stakeholders in the industry.’’ 376 assessment, and help streamline any the largest aggregate percentage (among Membership. Although DLCI potential [Copyright Royalty Board DLC candidates) of total royalties from represents a large swath of the relevant assessment] proceedings’’ and the use of their musical works in licensee market, it does not represent all apportionment.384 While the covered activities in the United States licensees, and presumably the market administrative assessment proceeding during the statutory three-year period. will see new entrants over the next five will be conducted by the CRJs and its In any event, DLCI is the sole candidate, years.377 Indeed, DLCI’s membership is cost is beyond the ambit of the and each criterion signals support over identical to DiMA’s membership. DLCI designation process, the Office notes 80% of the relevant pool. DLCI thus has explained that it is committed to that in some areas, DiMA—whose satisfies the second statutory criterion growing its membership to other DSPs membership is coextensive with DLCI’s for designation. and it is confident it will do so, noting founding and current members— 3. Administrative and Technical that any digital music provider or appeared to envision a narrower range Capabilities significant nonblanket licensee can of activities, such as those related to become a member of DLCI and smaller manual claims processing and General. In response to questions enforcement, than either of the MLC regarding its administrative capabilities, licensees will enjoy some protections, as the bylaws require certain actions to be candidates.385 Given the nascent status DLCI submitted a five-year business of operations, the Office would expect plan, which includes plans for passed by a supermajority of members.378 DLCI’s bylaws further DLCI’s participation on the MLC board establishing and enforcing to be flexible, as the Office expects from administrative assessment payment outline how different membership tiers will be charged dues, and its business the MLC. In any event, DLCI suggested obligations, identifying unmatched that coordination and communication musical work owners, including plan explains that operating expenses will be ‘‘modest, and intend[ed] to may improve following conclusion of outreach, participating in MLC the designation process. governance and CRJ proceedings, minimize overhead costs to the extent possible.’’ 379 Confidentiality. To fulfill its statutory maintaining records of its activities, and function of records maintenance, DLCI 373 Administrative Assessment. DLCI an anticipated budget. selected a secretary who will be asserts that it wishes to ‘‘minimize the DLCI’s ‘‘primary purpose will be to responsible for ‘‘ensuring that books, need for contested proceedings or coordinate the activities of the digital reports, statements, certificates, and all enforcement actions, by prioritizing other documents and records are 371 negotiations and cooperation among DLCI Proposal at 6–7; see also Oversight of the properly kept and filed’’ 386 and for U.S. Copyright Office, Hearing Before the H. Comm. licensees and the MLC.’’ 380 DLCI is on the Judiciary, 116th Cong. (2019) (statement of developing an agreement regarding the ‘‘managing the confidentiality and Rep. Escobar) (indicating that the DLC should not security of sensitive information’’ overlook smaller digital platforms and new market apportionment of the administrative 387 assessment among the digital music shared between it and the MLC. With entrants). respect to confidentiality and the DLC 372 Compare 17 U.S.C. 115(d)(5)(A)(ii) (The DLC licensees and significant non-blanket shall be ‘‘a single entity that . . . is endorsed by licensees ‘‘and expects to be able to representative on the MLC board, DLCI and enjoys substantial support from digital music states that in addition to designating a providers and significant nonblanket licensees that establish a plan for that allocation before—or shortly after—the DLC is together represent the greatest percentage of the 381 Id. at Ex. C–4, C–5. licensee market for uses of musical works in 382 Id. at Ex. C–6. covered activities, as measured over the preceding 374 DLCI Proposal at Ex. C–1. 383 3 calendar years.’’), with id. at 115(d)(3)(A)(ii) (The Id. at Ex. C–3. 375 Id. at Ex. C–2. 384 MLC shall be ‘‘a single entity that . . . is endorsed Id. at Ex. C–9–10. 376 by, and enjoys substantial support from, musical Id. at Ex. C–13. 385 Compare DiMA Reply Comments at 10, and work copyright owners that together represent the 377 For example, DLCI membership does not DLCI Ex Parte Meeting Summary at 2, with MLCI greatest percentage of the licensor market for uses include TIDAL, Deezer, Soundcloud, iHeartRadio, Proposal at 36 (‘‘Merging data from multiple of such works in covered activities, as measured or Napster. sources on conflicts will require significant manual over the preceding 3 full calendar years.’’). 378 DLCI Proposal at Ex. C–13–14; DLCI Ex Parte processing and will be very resource-intensive.’’). 373 See NOI at 65753; DLCI Proposal at Ex. C; see Meeting Summary at 2. 386 DLCI Proposal at Ex. C–11; DLCI Ex Parte also 17 U.S.C. 115(d)(5)(C) (outlining authorities 379 DLCI Proposal at Ex. C–18. Meeting Summary at 1. and functions of DLC regarding these topics). 380 Id. at Ex. C–3. 387 DLCI Proposal at Ex. C–12.

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations 32295

non-DLCI director, officer, or employee, continued refinement. Overall, the that it is time to roll up sleeves, it plans on ‘‘establishing, through Office concludes that DLCI satisfies the sustained dedication to these worthy agreement, appropriate limitations on third statutory criterion for designation goals will be critical as the MLC and the information that may be shared as the DLC and has demonstrated a DLC turn to the many tasks involved in between [the MLC and DLC], as well as commitment to building out its preparation for the license availability procedures for shielding information operations and execution of its statutory date. concerning individual licensee service functions. The Copyright Office looks forward to members of the DLC from other licensee working with the MLC, DLC, and other C. Conclusion service members.’’ 388 If necessary, DLCI interested parties on next steps in MMA states that it could address any For the reasons set forth above, the implementation. As noted, the MLC and confidentiality or administration issues Register is selecting and designating DLC, along with the Copyright Office, with the MLC’s vendors in specific MLCI and DLCI, and their individual are asked to facilitate education and agreements.389 The Copyright Office is board members, which Librarian outreach regarding the new blanket hopeful that relevant parties will agree approves. MLCI has demonstrated it licensing system to the broader on appropriate procedures to protect meets each of the statutory criteria; songwriting community. In the coming confidential, proprietary, or otherwise indeed, it is the only candidate that months, the Office will initiate sensitive information, and notes that the satisfies the requirement of being additional regulatory activities required Register has ultimate responsibility to endorsed by, and enjoying substantial under the statute and begin planning its proscribe regulations related to the support from, musical work copyright public policy study regarding best protection of confidential information owners that represent the greatest practices, which the MLC may by the MLC, DLC, and their employees, percentage of the licensor market for implement to identify musical work committees, or board members.390 covered activities in the past three copyright owners with unclaimed Education and Outreach. DLCI years. Further, by articulating a more accrued royalties and reduce the expects to ‘‘develop standardized text thoughtful, methodical, and incidence of unclaimed royalties. Future identifying and providing contact comprehensive approach towards information regarding those activities information for the MLC, and executing the many important will be made available at: https:// instructions for how a songwriter or administrative and technological duties www.copyright.gov/music- other copyright owner of musical of the collective, MLCI has also modernization/. compositions can claim accrued demonstrated that it is better positioned Finally, the Copyright Office finds royalties by providing the necessary to perform the required functions. The that there is good cause to make the information to the MLC’’ for digital Register has reviewed and determined codification of this designation effective on publication. Timely designation of licensees to post on their services.391 that each of MLCI’s individual board the MLC and DLC are vital to the DLCI generally expressed intentions to members are well-qualified to serve on success of Congress’s reform of the engage in educational efforts and plans the board in accordance with the section 115 statutory license. Indeed, by to coordinate outreach efforts with the statutory criteria. Similarly, DLCI has the statutory language, the designation MLC to inform songwriters and demonstrated that it fulfills each of the would be timely based solely upon the publishers of the MLC and how to claim statutory criteria for designation, and date of publication in the Federal royalties, including by ‘‘develop[ing] a that its individual board members are Register, but reflecting the designation protocol to guide its members’ well-qualified to serve on its board in Copyright Office regulations will be individual outreach’’ and pursuant to the statute. helpful to the public.395 The statutory ‘‘participat[ing] in songwriter and Importantly, both the MLCI and the DLCI submissions acknowledge that designation deadline is the same publisher industry events, including deadline for the CRJs to commence a those organized by the MLC.’’ 392 DLCI their intended roles carry the responsibility to broadly represent the has also committed to participating in reforms issued by key music industry leaders earlier outreach events with the Copyright interests of musical work copyright this month. Many of these measures, such as the Office.393 owners and songwriters, or digital CLASSICS Act and the Music Modernization Act, The Office finds that DLCI has music providers, respectively, with are supported by stakeholders on both sides, by respect to the section 115 mechanical digital service providers as well as by music addressed the main issues regarding its creators. This emerging consensus gives us hope administrative capabilities. DLCI license. In particular, the Office that this committee can start to move beyond the proposed a thorough and thoughtful appreciates AMLC’s proposal. The review stage toward legislative action.’’); 164 Cong. governance structure, criteria for Office hopes that MLCI will consider Rec. H3522, 3537 (daily ed. Apr. 25, 2018) (statement of Rep. Collins) (‘‘[This bill] comes to the membership, and dues structure, and whether any aspects of the AMLC’s floor with an industry that many times couldn’t appears well-positioned to participate in proposal should be incorporated into its even decide that they wanted to talk to each other an administrative assessment future planning. about things in their industry, but who came proceeding if necessary. Other DLCI As the legislative history amply together with overwhelming support and said this is where we need to be.’’); 164 Cong. Rec. S501, 502 functions, such as educational and documents, this historic music (daily ed. Jan. 24, 2018) (statement of Sen. Hatch) outreach efforts, plans to enforce notice copyright legislation was enacted only (‘‘I don’t think I have ever seen a music bill that and payment obligations, and ensuring in the wake of significant consensus- has had such broad support across the industry. All that DLCI has the broadest possible building and cooperation across a wide sides have a stake in this, and they have come 394 together in support of a commonsense, consensus support of the licensee market, appear berth of industry stakeholders. Now bill that addresses challenges throughout the music more inchoate and may benefit from industry.’’); 164 Cong. Rec. H3522, 3536 (daily ed. 394 See, e.g., Music Policy Issues: A Perspective Apr. 25, 2018) (statement of Rep. Goodlatte) (‘‘I 388 NOI at 65753; DLCI Proposal at 8; see also id. from Those Who Make It: Hearing on H.R. 4706, tasked the industry to come together with a unified at Ex. C–9. H.R. 3301, H.R. 831 and H.R. 1836 Before H. Comm. reform bill and, to their credit, they delivered, albeit On the Judiciary, 115th Cong. 4 (2018) (statement with an occasional bump along the way.’’); 164 389 DLCI Proposal at 10. of Rep. Nadler) (‘‘For the last few years, I have been Cong. Rec. S6259, 6260 (daily ed. Sept. 18, 2018) 390 17 U.S.C. 115(d)(12)(C). imploring the music community to come together (statement of Sen. Alexander on behalf of Sen. 391 DLCI Proposal at Ex. C–8. in support of a common policy agenda, so it was Grassley) (‘‘This bill is the product of long and hard 392 Id. music to my ears to see—to hear, I suppose—the negotiations and compromise.’’). 393 DLCI Ex Parte Meeting Summary at 2. unified statement of support for a package of 395 17 U.S.C. 115(d)(3)(B)(i), (d)(5)(B)(i).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00041 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES 32296 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations

proceeding to establish the initial § § 210.2–210.10 [Reserved] while recommending certain administrative assessment, which adjustments, many of which the Judges Dated: July 1, 2019. anticipates MLC and DLC accept as improvements to the rules as participation.396 Further, given the Karyn A. Temple, originally proposed. The Judges hereby license availability date of January 1, Register of Copyrights and Director of the adopt the proposed rules as amended. 2021, the MLC has a tight deadline to U.S. Copyright Office. become fully operational, and both the Approved by: Background Carla D. Hayden, MLC and DLC have important roles in The MMA amended title 17 of the educating the public on the royalty Librarian of Congress. United States Code (Copyright Act) to claiming process, which may be [FR Doc. 2019–14376 Filed 7–5–19; 8:45 am] authorize, among other things, unnecessarily encumbered if BILLING CODE 1410–30–P designation by the Register of designation were delayed.397 The public Copyrights (with the approval of the had ample opportunity to comment on Librarian of Congress) of a Mechanical the proposals for parties to be named LIBRARY OF CONGRESS Licensing Collective (MLC). 17 U.S.C. the MLC and DLC and did, in fact, file 115(d)(3)(A)(iv) and 17 U.S.C. over six hundred comments in response Copyright Royalty Board 115(d)(3)(B)(i). The MLC is to be a to the different proposals. 37 CFR Parts 303, 350, 355, 370, 380, nonprofit entity created by copyright List of Subjects in 37 CFR Part 210 382, 383, 384, and 385 owners to carry out responsibilities set Copyright, Phonorecords. forth in sec. 115 of the Copyright Act. [Docket No. 18–CRB–0012 RM] 17 U.S.C. 115(d)(3)(A)(i). The Copyright Final Regulations Act sets forth the governance of the Copyright Royalty Board Regulations For the reasons set forth in the MLC, which shall include Regarding Procedures for preamble, the Copyright Office amends representatives of songwriters and Determination and Allocation of 37 CFR part 210 as follows: music publishers (with nonvoting Assessment To Fund Mechanical members representing licensees of PART 210—COMPULSORY LICENSE Licensing Collective and Other musical works and trade associations). FOR MAKING AND DISTRIBUTING Amendments Required by the Hatch- 17 U.S.C. 115(d)(3)(D). The MLC is PHYSICAL AND DIGITAL Goodlatte Music Modernization Act authorized expressly to carry out several PHONORECORDS OF NONDRAMATIC AGENCY: Copyright Royalty Board, functions under the Copyright Act, MUSICAL WORKS Library of Congress. including offering and administering blanket licenses and collecting and ■ 1. The authority citation for part 210 ACTION: Final rule. distributing royalties. 17 U.S.C. continues to read as follows: SUMMARY: The Copyright Royalty Judges 115(d)(3)(C)(i) and (iii). Authority: 17 U.S.C. 115, 702. (Judges) adopt regulations governing Section 115(d)(5)(A) of the MMA ■ 2. Add subpart A, consisting of proceedings to determine the defines a second entity, the Digital §§ 210.1 through 210.10, to read as reasonableness of, and allocate Licensee Coordinator (‘‘DLC’’), a single follows: responsibility to fund, the operating nonprofit entity not owned by any other budget of the Mechanical Licensing entity, created to carry out Subpart A—Blanket Compulsory Collective authorized by the Music responsibilities under the MMA. The License, Mechanical Licensing Modernization Act (MMA). The Judges DLC must be endorsed by and enjoy Collective, and Digital Licensee also adopt proposed amendments to substantial support from digital music Coordinator extant rules as required by the MMA. providers and significant nonblanket DATES: Sec. Effective July 8, 2019. licensees that together represent the 210.1 Designation of the Mechanical FOR FURTHER INFORMATION CONTACT: greatest percentage of the licensee Licensing Collective and Digital Licensee Anita Blaine, CRB Program Specialist, market for uses of musical works in Coordinator. by telephone at (202) 707–7658 or email covered activities, as measured over the 210.2–210.10 [Reserved] at [email protected]. preceding three calendar years. 17 § 210.1 Designation of the Mechanical SUPPLEMENTARY INFORMATION: On March U.S.C. 115(d)(5)(A). The DLC will be Licensing Collective and Digital Licensee 13, 2019, the Copyright Royalty Judges designated by the Register, with the Coordinator. (Judges) published proposed regulations approval of the Librarian, and is The following entities are designated governing proceedings to determine the authorized to perform certain functions pursuant to 17 U.S.C. 115(d)(3)(B) and reasonableness of, and allocate under the Copyright Act, including (d)(5)(B). Additional information responsibility to fund, the operating establishing a governance structure, regarding these entities will be made budget of the Mechanical Licensing criteria for membership, and dues to be available on the Copyright Office’s Collective authorized by the Music paid by its members.2 The DLC is also website. Modernization Act (MMA). The Judges authorized to engage in efforts to (a) Mechanical Licensing Collective, also proposed amendments to extant enforce notice and payment obligations Inc., incorporated in Delaware on March rules as required by the MMA. 84 FR with respect to the administrative 5, 2019, is designated as the Mechanical 9053. The Judges received comments assessment, including by receiving Licensing Collective; and from the Digital Music Association information from and coordinating with (b) Digital Licensee Coordinator, Inc., (DiMA), The National Music Publishers the MLC. The DLC is also authorized to incorporated in Delaware on March 20, Association (NMPA), and initiate and participate in proceedings 2019, is designated as the Digital SoundExchange, Inc.1 The commenters before the Judges to establish the Licensee Coordinator. generally support the Judges’ proposal 2 The Register may decline to designate a DLC if 396 Id. at 115(d)(3)(B)(i), (d)(5)(B)(i), 1 The proposal was further to a Notice of Inquiry she is unable to identify an entity that fulfills the (d)(7)(D)(iii)(I). that the Judges published on November 5, 2018. 83 qualifications for the DLC set forth in the MMA. 17 397 See id. at 115(d)(3)(J)(iii), (d)(5)(C)(iii). FR 55334. U.S.C. 115(d)(5)(B)(iii).

VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 jbell on DSK3GLQ082PROD with RULES