Designation of Music Licensing Collective and Digital Licensee Coordinator
| Published date | 08 July 2019 |
| Citation | 84 FR 32274 |
| Record Number | 2019-14376 |
| Section | Rules and Regulations |
| Court | U.s. Copyright Office |
Federal Register, Volume 84 Issue 130 (Monday, July 8, 2019)
[Federal Register Volume 84, Number 130 (Monday, July 8, 2019)]
[Rules and Regulations]
[Pages 32274-32296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14376]
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LIBRARY OF CONGRESS
U.S. Copyright Office
37 CFR Part 210
[Docket No. 2018-11]
Designation of Music Licensing Collective and Digital Licensee
Coordinator
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Final rule.
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SUMMARY: Pursuant to title I of the Orrin G. Hatch-Bob Goodlatte Music
Modernization Act, and following a solicitation of proposals and public
comment on those proposals, the Register is designating the entities
who will perform certain functions relating to the compulsory license
for digital music providers to make and distribute digital phonorecord
deliveries. For the reasons published in this document, the Register
designates Mechanical Licensing Collective, Inc. as the mechanical
licensing collective and Digital Licensee Coordinator, Inc. as the
digital licensee coordinator, including their individual proposed board
members.
DATES: Effective July 8, 2019.
FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and
Associate Register of Copyrights, by email at [email protected],
Steve Ruwe Assistant General Counsel, by email at [email protected],
or Jason E. Sloan, Assistant General Counsel, by email at
[email protected]. Each can be contacted by telephone by calling (202)
707-8350.
SUPPLEMENTARY INFORMATION:
I. Background
On October 11, 2018, the Orrin G. Hatch-Bob Goodlatte Music
Modernization Act (the ``MMA'') was signed into law.\1\ Title I of the
MMA addresses the efficiency and fairness of the section 115
``mechanical'' license for the reproduction and distribution of musical
works embodied in digital phonorecord deliveries, including permanent
downloads, limited downloads, and interactive streams.\2\ In relevant
part, it eliminates the song-by-song notice of intention process for
such uses and creates a new blanket compulsory licensing system for
digital music providers engaged in digital phonorecord deliveries.\3\
The blanket licensing structure is designed to reduce the transaction
costs associated with song-by-song licensing by commercial services
that strive to offer ``as much music as possible,'' while ``ensuring
fair and timely payment to all creators'' of the musical works used on
these digital services.\4\
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\1\ Public Law 115-264, 132 Stat. 3676 (2018).
\2\ See S. Rep. No. 115-339, at 1-2 (2018); Report and Section-
by-Section Analysis of H.R. 1551 by the Chairmen and Ranking Members
of Senate and House Judiciary Committees, at 1 (2018), https://www.copyright.gov/legislation/mma_conference_report.pdf (``Conf.
Rep.''); see also H.R. Rep. No. 115-651, at 2 (2018) (detailing the
House Judiciary Committee's efforts to review music copyright laws).
\3\ The MMA retains the ability of record companies to obtain an
individual download license on a song-by-song basis. 17 U.S.C.
115(b)(3).
\4\ S. Rep. No. 115-339, at 4, 8.
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The MMA directs the Register of Copyrights to designate a nonprofit
entity operated by copyright owners, referred to by statute as the
mechanical licensing collective (``MLC''), to administer this new
blanket-licensing system beginning on the ``license availability
date,'' that is, January 1, 2021.\5\ As detailed further below, the
MLC, through its board of directors and task-specific committees, will
be responsible for a variety of duties, including receiving usage
reports from digital music providers, collecting and distributing
royalties associated with those uses, identifying musical works
embodied in particular sound recordings, administering a process by
which copyright owners can claim ownership of musical works (and shares
of such works), and establishing a musical works database relevant to
these activities.\6\
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\5\ 17 U.S.C. 115(d)(2)(B), (d)(3)(B); see also id. at
115(e)(15).
\6\ Id. at 115(d)(3)(C).
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By statute, digital music providers will bear the reasonable costs
of establishing and operating the MLC through an administrative
assessment, to be determined if necessary by the Copyright Royalty
Judges (``CRJs'') in a separate proceeding.\7\ The MMA also allows, but
does not require, the Register to designate a digital licensee
coordinator (``DLC'') to represent licensees in this proceeding, to
serve as a non-voting member of the MLC, and to carry out other
functions.\8\
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\7\ Id. at 115(d)(7)(D).
\8\ Id. at 115(d)(5)(B); see also id. at 115(d)(3)(D)(i)(IV),
(d)(5)(C).
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A. MLC Designation Requirements, Duties, and Functions
The entity designated as the MLC must be:
A single nonprofit entity that is created by copyright
owners to carry out its statutory responsibilities;
``endorsed by, and enjoy[ ] substantial support from,
musical work copyright owners that together represent the greatest
percentage of the licensor market for uses of such works in covered
activities, as measured over the preceding 3 full calendar years;'' \9\
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\9\ Id. at 115(d)(3)(A)(ii).
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able to demonstrate to the Copyright Office that, by the
license availability date, it will have the administrative and
technological capabilities to perform the required functions; and
governed by a board of directors and include committees
that are composed of a mix of voting and non-voting members as directed
by the statute.\10\
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\10\ Id. at 115(d)(3)(A), (d)(3)(D)(i).
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If no single entity meets each of these statutory criteria, the
Register must designate as the MLC the entity that
[[Page 32275]]
most nearly fits these qualifications.\11\ After five years, the
Register will commence a periodic review of this designation.\12\
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\11\ Id. at 115(d)(3)(B)(iii).
\12\ Id. at 115(d)(3)(B)(ii); see also H.R. Rep. No. 115-651, at
6 (noting that continuity is expected to be beneficial so long as
the designated entity has ``regularly demonstrated its efficient and
fair administration,'' whereas evidence of ``fraud, waste, or
abuse,'' or failure to adhere to relevant regulations should ``raise
serious concerns'' regarding whether re-designation is appropriate);
S. Rep. No. 115-339, at 5-6 (same).
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The MMA enumerates a number of required functions for the MLC.\13\
A core aspect of the MLC's responsibilities includes identifying
musical works and copyright owners, matching them to sound recordings
(and addressing disputes), and ensuring that a copyright owner gets
paid as he or she should. To that end, the MLC will create and maintain
a free, public database of musical work and sound recording ownership
information. The MLC will administer processes by which copyright
owners can claim ownership of musical works (and shares of such works),
and by which royalties for works for which the owner is not identified
or located are equitably distributed to known copyright owners on a
market share basis after a required holding period.\14\ The MLC will
participate in proceedings before the CRJs to establish the
administrative assessment that will fund the MLC's activities, as well
as proceedings before the Copyright Office with respect to the
foregoing activities.\15\
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\13\ 17 U.S.C. 115(d)(3)(C)(i), (iii) (enumerating thirteen
functions, in addition to permission to administer voluntary
licenses).
\14\ Id. at 115(d)(3)(E).
\15\ Id. at 115(d)(3)(C)(i)(IX)-(X).
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The board of the MLC shall consist of fourteen voting members and
three nonvoting members.\16\ Ten voting members shall be
representatives of music publishers that have been assigned exclusive
rights of reproduction and distribution of musical works with respect
to covered activities, and four other voting members shall be
professional songwriters who have retained and exercise exclusive
rights of reproduction and distribution for musical works they have
authored. There are also three nonvoting members that will represent
the interests of songwriters, music publishers, and digital licensees
via representatives of relevant trade associations or, in the case of
licensees, the DLC, if one has been designated.\17\ Within one year of
designation, the MLC must establish publicly available bylaws relating
to the governance of the collective, following statutory criteria.\18\
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\16\ Id. at 115(d)(3)(D)(i).
\17\ Id.
\18\ Id. at 115(d)(3)(D)(ii).
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By statute, the MLC board must establish three committees. First,
an operations advisory committee will make recommendations concerning
the operations of the collective, ``including the efficient investment
in and deployment of information technology and data resources.'' \19\
Second, an unclaimed royalties oversight committee will establish
policies and procedures necessary to undertake a fair distribution of
unclaimed royalties.\20\ Third, a dispute resolution committee will
establish policies and procedures for copyright owners to address
disputes relating to ownership interests in musical works, including a
mechanism to hold disputed funds pending the resolution of the
dispute.\21\
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\19\ Id. at 115(d)(3)(D)(iv). This committee will have an equal
number of musical work copyright owners and digital music provider
representatives, respectively appointed by the MLC and DLC.
\20\ Id. at 115(d)(3)(D)(v), (d)(3)(J)(ii). This committee of
ten will have an equal number of musical work copyright owners and
professional songwriters.
\21\ Id. at 115(d)(3)(D)(vi), (d)(3)(H)(ii), (d)(3)(K). This
committee will consist of at least six members, again equally
divided among musical work copyright owners and professional
songwriters.
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B. DLC Designation Criteria and Functions
Similar to the MLC, the DLC must:
Be a single nonprofit entity created to carry out certain
statutory responsibilities;
be endorsed by digital music service providers and
significant nonblanket licensees that together represent the greatest
percentage of the licensee market for uses of musical works in covered
activities, as measured over the preceding 3 calendar years; and
possess the administrative and technological capabilities
necessary to carry out a wide array of authorities and functions.\22\
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\22\ Id. at 115(d)(5)(A)(i)-(iii).
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The Register is directed to designate the DLC following
substantially the same procedure described for designation of the
MLC.\23\ Unlike the MLC, in the event the Register is unable to
identify an entity that fulfills the criteria for the DLC, the Register
may decline to designate a DLC; in that event, the statutory references
to the DLC go without effect unless or until a DLC is designated.\24\
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\23\ Id. at 115(d)(5)(B).
\24\ Id. at 115(d)(5)(B)(iii).
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The DLC is tasked with coordinating the activities of the
licensees.\25\ The DLC shall make reasonable, good faith efforts to
assist the MLC in its efforts to locate and identify copyright owners
of unmatched musical works (and shares of such works) by encouraging
digital music providers to publicize the existence of the collective
and the ability of copyright owners to claim unclaimed accrued
royalties, including by posting contact information for the collective
at reasonably prominent locations on digital music provider websites
and applications, and conducting in-person outreach activities with
songwriters. The DLC is authorized to participate in proceedings before
the CRJs to determine the administrative assessment to be paid by
digital music providers, and before the Copyright Office with respect
to the blanket mechanical license.
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\25\ See generally id. at 115(d)(5)(C).
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C. Designation Process and the Role of the Copyright Office.
The Register is to designate the MLC, along with the DLC (as
applicable), by publishing a notice in the Federal Register that sets
forth ``the identity of and contact information for the . . .
collective,'' and ``the reasons for the designation.'' \26\ These
designations are subject to the approval of the Librarian of Congress
pursuant to section 702 of title 17.\27\ The legislative history states
that ``the Register is expected to allow the public to submit comments
on whether the individuals and their affiliations meet the criteria
specified in the legislation; make some effort of its own as it deems
appropriate to verify that the individuals and their affiliations
actually meet the criteria specified in the legislation; and allow the
public to submit comments on whether they support such individuals
being appointed for these positions.'' \28\
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\26\ Id. at 115(d)(3)(B)(II), (d)(5)(B)(i)-(ii).
\27\ Id. at 115(d)(3)(A)(iv) (``with the approval of the
Librarian of Congress pursuant to section 702, in accordance with
subparagraph (B)''); id. at (d)(5)(A)(iv) (same); see id. at 702.
\28\ H.R. Rep. No. 115-651, at 5; S. Rep. No. 115-339, at 5;
Conf. Rep. at 4; see H.R. Rep. No. 115-651, at 26 (``This
requirement is not waivable by the Register and is not subject to
the alternate designation language.''); S. Rep. No. 115-339, at 23
(same).
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On December 21, 2018, the Office issued a Notice of Inquiry
(``NOI'') setting forth the functions of the MLC and DLC and the
statutory criteria for designation, and solicited proposals from
entities meeting such criteria and seeking to be designated as the MLC
or DLC, as well as relevant public comments.\29\ The name and
affiliation of each proposed board and committee member established by
the MLC were
[[Page 32276]]
solicited as part of the designation process.\30\
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\29\ 83 FR 65747 (Dec. 21, 2018) (``NOI''); see 17 U.S.C.
115(d)(3)(B), (d)(3)(D)(iv)-(vi), (d)(5)(B).
\30\ 17 U.S.C. 115(d)(3)(B)(i)(I).
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The Office received one proposal for designation as the DLC and two
proposals for designation as the MLC, which, in accordance with the
NOI, the public was invited to comment upon. The response was
considerable; the Office received over 600 comments addressing these
proposals, including, but not limited to, musical work copyright owners
endorsing one or more of the entities seeking designation. As noticed
in the NOI, the Office also considered whether to utilize information
meetings subject to established guidelines for such ex parte
communications.\31\ Determining that follow-up with each of the three
candidates would be valuable, the Office issued such guidelines, and on
May 28 and 29, the Office met with the three proponents seeking
designation as the DLC or MLC, allowing the proponents to supplement
their written submissions, but not to address matters wholly outside
the record; summaries of those meetings were posted on the Office's
website.\32\
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\31\ NOI at 65753-54.
\32\ See U.S. Copyright Office, Ex Parte Communications, https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html (last visited June 24, 2019); NOI at 65753-54.
Given the relatively robust record, with over 600 written comments
received regarding the proposals, and in light of the statutory
deadline, the Office elected to limit meetings to the three
candidates.
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Beyond the Office's role in designating the MLC and DLC, Congress
intended to invest the Register with ``broad regulatory authority'' to
create policies and conduct proceedings as necessary to effectuate the
MMA.\33\ The statute enumerates several regulations that the Register
is specifically directed to promulgate, including regulations regarding
the form of the notices of license and notices of nonblanket
activity,\34\ usage reports and adjustments,\35\ information to be
included in the musical works database,\36\ requirements for the
usability, interoperability, and usage restrictions of that
database,\37\ and the disclosure and use of confidential
information.\38\ The legislative history contemplates that the Register
will both ``thoroughly review[ ]'' policies and procedures established
by the MLC, and promulgate regulations that balance ``the need to
protect the public's interest with the need to let the new collective
operate without over-regulation.'' \39\
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\33\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5;
see also 17 U.S.C. 115(d)(12).
\34\ 17 U.S.C. 115(d)(2)(A)(i), (d)(6)(A)(i).
\35\ Id. at 115(d)(4)(A)(iv).
\36\ Id. at 115(d)(3)(E)(ii)(V), (d)(3)(E)(iii)(II).
\37\ Id. at 115(d)(3)(E)(vi).
\38\ Id. at 115(d)(12)(C).
\39\ H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, at
5, 15; see also 17 U.S.C. 115(d)(12).
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II. Register's Designation and Analysis
A. Mechanical Licensing Collective
The Office received proposals from two entities seeking to be
designated as the MLC: (1) The ``Mechanical Licensing Collective,
Inc.'' referred to here as ``MLCI''; and (2) the ``American Music
Licensing Collective,'' referred to here as ``AMLC.'' \40\ The
candidates' respective submissions take differing approaches to
demonstrating compliance with the statutory criteria. MLCI provides a
detailed outline of its proposed organizational structure, business
plan, and overall activities. It provided flowcharts and other
illustrative materials setting forth in-depth plans for executing the
MLC's administrative and technological responsibilities, including
managing compulsory and voluntary licenses, matching songwriters to
musical works, and collecting and distributing royalties. It describes
its submission as the ``music industry consensus proposal'' and
contends that its selection would facilitate valuable cooperative
efforts across the industry.\41\ AMLC focuses more specifically on
matching unidentified songwriters to their compositions for payment
purposes. It argues that the expertise of its proposed board and
vendors makes it best positioned to advance that goal,\42\ which the
Conference Report describes as ``the highest responsibility of the
collective'' beyond efficient and accurate collection and distribution
of royalties.\43\
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\40\ The incorporator's contact information for these entities
are: Benjamin K. Semel, Pryor Cashman LLP, 7 Times Square, New York,
NY 10036 (MCLI); Derek C. Crownover, Dickinson Wright, PLLC, 54
Music Square East, Suite 303, Nashville, TN 37203 (AMLC); and
Allison Stillman, Mayer Brown LLP, 1221 Avenue of the Americas, New
York, NY 10020 (DLCI).
\41\ MLCI Proposal at 5, 8.
\42\ Id. at 2-5.
\43\ Conf. Rep. at 7; H.R. Rep. No. 115-651, at 9 (same); S.
Rep. No. 115-339, at 9 (same).
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The Copyright Office assessed the extent to which each candidate
satisfies the statutory requirements for designation, which can be
grouped into three categories: (1) Organization, board and committee
composition, and governance; (2) endorsement and substantial support
from musical work copyright owners; and (3) administrative and
technological capabilities. As detailed below, the Office concludes
that while both candidates meet the statutory criteria to be a
nonprofit created to carry out its statutory responsibilities, only
MLCI satisfies the endorsement criteria, and MLCI also has made a
better showing as to its prospective administrative and technological
capabilities. The Register is thus designating MLCI, including its
individual board members, with the Librarian's approval.
As both proposals demonstrate, the new collective must undertake
formidable responsibilities expeditiously and conscientiously to
establish a number of operational functions critical to implementation
of the new blanket licensing system. While the comprehensive MLCI
proposal signals its understanding of the full scope of this project
and its importance to songwriters and others in the music community, a
successful collective will undoubtedly benefit from input from that
broader community much in the way the MMA itself was enacted in a
spirit of consensus and compromise.\44\ The Register welcomes the
prospect of MLCI working with the broader community of musical work
copyright owners and other songwriters, as well as the DLC and
individual digital music providers, to realize the promise of the MLC
as envisioned by Congress.
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\44\ See, e.g., Conf. Rep. at 2 (``Songwriters, artists,
publishers, producers, distributors, and other stakeholders involved
in the creation and distribution of music collaborated with
legislators in both the Senate and the House to find a path forward
on music reform.'').
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1. Organization, Board and Committee Composition, and Governance
As the statute requires, both MLCI and AMLC are constructed as
nonprofit entities created by copyright owners to carry out the MLC's
statutory responsibilities.\45\ The analysis below will focus on
relevant board and committee composition and governance issues.
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\45\ MLCI Proposal at Ex. 1 (Certificate of Incorporation under
Delaware law); AMLC Proposal at Schedule B (Certificate of
Incorporation under New York law).
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i. Board and Committee Composition
a. MLCI
In accordance with the statute, MLCI's proposed board includes four
professional songwriters: Kara DioGuardi, Oak Fielder, Kevin Kadish,
and Tim Nichols.\46\ MLCI notes that these members were selected by a
songwriter advisory panel consisting of two professional songwriters
from each of the Nashville Songwriters Association International
(``NSAI''), Songwriters of North America (``SONA''), Songwriters Guild
of America (``SGA''), American Society of
[[Page 32277]]
Composers, Authors and Publishers (``ASCAP''), and Broadcast Music,
Inc. (``BMI'').\47\ No members of the advisory panel were themselves
candidates for the board or any committee.\48\ NSAI reports that the
panel considered nearly 300 songwriter applicants as part of this
selection process.\49\
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\46\ Id. at 67-68 (a biography is included for each songwriter
board member).
\47\ Id. at 67-69.
\48\ Id. at 68; NSAI Reply at 4-5 (discussing conflicts of
interest approach).
\49\ NSAI Reply at 5.
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To satisfy the requirement of ten music publisher representatives,
MLCI's proposed board includes the following members: Jeff Brabec
(BMG); Peter Brodsky (Sony/ATV Music Publishing); Bob Bruderman
(Kobalt); Tim Cohan (peermusic); Alisa Coleman (ABKCO); Scott Cutler
(Pulse Music Group); Paul Kahn (Warner/Chappell Music Publishing);
David Kokakis (Universal Music Publishing Group); Mike Molinar (Big
Machine Music); and Evelyn Paglinawan (Concord Music). MLCI notes that
these members were selected by an advisory panel comprised of
professionals associated with independent music publishers.\50\ The
panel ``carefully vetted candidates to ensure that the representatives
selected to serve on the Board (a) have the requisite expertise and
experience to govern MLC; (b) individually and together faithfully
reflect the entire music publisher community; and (c) are motivated to
serve on the Board and understand and do not underestimate the serious
responsibilities entrusted to them.'' \51\ As described by MLCI, the
publisher board members represent a broad range of publishing
interests--from a ``thirty-employee company established and run by
creatives with a catalog of approximately 10,000 songs'' to the largest
global publishers.\52\
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\50\ MLCI Proposal at 69; see also NSAI Reply at 4-5 (advisory
selection panel contained ``only independent music publishers whose
interests are best served by selecting the most efficient back
office systems, and who have vast experience with potential
vendors'').
\51\ MLCI Proposal at 69-70 (A biography is included for each
music publisher board member).
\52\ Id. at 70.
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MLCI's required nonvoting board members are Danielle Aguirre
(NMPA), as a representative of the nonprofit trade association of music
publishers that represents the greatest percentage of the licensor
market for uses of musical works in covered activities; \53\ and Bart
Herbison (NSAI), as a representative of a nationally recognized
nonprofit trade association whose mission is advocacy on behalf of
songwriters.\54\ The third non-voting board member will be a
representative of the DLC.\55\
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\53\ Id. at 74.
\54\ Id. at 74-75.
\55\ Id. at 75.
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MLCI also submits proposed members for each of the three
statutorily required committees. For the operations advisory committee,
MLCI has selected copyright owners who have substantial experience with
license administration, rights management operations, and the relevant
technology.\56\ For the unclaimed royalties oversight committee, the
proposed members likewise have extensive experience relevant to that
committee's task of ``establish[ing] policies and procedures for the
distribution of unclaimed accrued royalties and accrued interest.''
\57\ Each publisher representative on the unclaimed royalties committee
is affiliated with an independent music publisher, as opposed to a
major music publisher, which will help to ensure that smaller
rightsholders have a voice in MLC functions.\58\ Finally, consistent
with the statute, MLCI proposes a dispute resolution committee made of
five professional songwriters and five musical work copyright
owners.\59\
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\56\ Id. at 76-78 (committee members are Joe Conyers III
(Songtrust and Downtown Music Publishing), Scott Farrant (Kobalt),
Rell Lafargue (Reservoir Media Management), Michael Lau (Round Hill
Music), John Reston (Universal Music Publishing Group), and Bill
Starke (Sony/ATV Music Publishing)).
\57\ 17 U.S.C. 115(d)(3)(J)(ii); see MLCI Proposal at 78 (``This
Committee includes individuals who have experience in royalty and
payment accounting and administration, have served on the boards of
independent music publishing trade groups, and have litigated (on
behalf of songwriters) the failure of digital music providers to pay
royalties due to a claimed inability to identify or `match'
recordings to musical works.'').
\58\ MLCI Proposal at 79-80 (committee members are songwriters
busbee, Kay Hanley, David Lowery, Dan Navarro, and Tom Shapiro and
copyright owner representatives Phil Cialdella (Atlas Music
Publishing), Patrick Curley (Third Side Music), Michael Eames (PEN
Music Group), Frank Liwall (The Royalty Network, Inc.), and Kathryn
Ostien (The Richmond Organization/Essex Music Group)).
\59\ MLCI Proposal at 84-86 (committee members are songwriters
Aim[eacute]e Allen, Odie Blackmon, Gary Burr, David Hodges, and
Jennifer Schott and copyright owner representatives Alison Koerper
(Disney Music Group), Ed Leonard (Daywind Music Group), Sean McGraw
(Downtown Music Publishing), Debbie Rose (Shapiro, Bernstein & Co.),
and Jason Rys (Wixen Music Publishing)).
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Based on the biographies and other information submitted regarding
these proposed board and committee members, the Copyright Office
determines that the proposed composition of MLCI's board and committees
satisfies the statutory requirements, and moreover, that each of its
proposed directors possesses the qualifications necessary for
appointment to the board.\60\ In addition, MLCI's submission indicates
that its selection procedures were carefully designed to ensure
transparency and input from a broad range of industry sectors, as well
as to avoid any likelihood of self-selection. MLCI also designed its
committee selection process such that committee members do not also
serve on the board, helping guard against potential conflicts of
interest or undue influence.
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\60\ AMLC does not dispute that these proposed members possess
the required qualifications. The Office received one comment from a
songwriter who allegedly observed ``collusion'' while ``serving on
the selection committee for the NMPA's MLC,'' without providing
substantiation. See Michelle Shocked Reply at 1. While the Office
takes such matters seriously, MLCI's submission did not list this
commenter as a member of its songwriter advisory panel and other
songwriters praised the selection process. See, e.g., SONA Reply at
2 (signed by Michelle Lewis, a MLCI songwriter advisory panel
member, and over twenty other songwriters); MLCI Proposal at Ex. 8
(statement of NSAI). In the absence of more specific information,
these allegations do not factor into the Office's analysis.
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b. AMLC
AMLC's submission provides less information on the mechanics of its
board and committee selection processes. For its professional
songwriter members, AMLC's board includes Rick Carnes, Imogen Heap, Zoe
Keating, and Maria Schneider.\61\ For its music publisher members,
AMLC's board includes Maximo Aguirre (Maximo Aguirre Music Publishing,
Inc.), Wally Badarou (ISHE sarl Music), John Barker (ClearBox Rights,
LLC), Marti Cuevas (Mayimba Music), Joerg Evers (Eversongs), Brownlee
Ferguson (Bluewater Music Corp.), Henry Gradstein (listed as an
attorney and independent publisher), Lisa Klein Moberly (Optic Noise),
Ricardo Ordonez (Union Music Group), and Jeff Price (Audiam, Inc.).\62\
AMLC reports that these members were selected following an ``active
recruitment campaign'' and that each selected member was required to
have ``proven skill sets and practical hands-on work experience'' in
various industry sectors, as well as ``first-hand work experience and
knowledge of music rights organizations and how they operate.'' \63\
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\61\ AMLC Proposal at 35.
\62\ Id. at 35, 49-75 (A biography is included for each board
member).
\63\ Id. at 38. Following its meeting with AMLC, the Office
understands that an initial core of board members, namely Mr.
Barker, Mr. Price, Mr. Ferguson, and Ms. Moberly, served to vet
additional members. See AMLC Ex Parte Meeting Summary at 22 (June 5,
2019) (``Board member searches were conducted via personal
relationships, recommendations, and invitations to submit inquiries
of interest via public posting on the AMLC website.''). MLCI,
however, raised questions as to a lack of transparency and potential
conflicts of interest in AMLC's selection process. See MLCI Reply at
16-18.
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[[Page 32278]]
AMLC includes only one of the three required nonvoting board
members, David Wolfert of MusicAnswers, as a representative of a
nationally recognized nonprofit trade organization whose primary
mission is advocacy on behalf of songwriters in the United States.\64\
AMLC notes that one additional nonvoting board member will be a
representative of the DLC, and another will be filled by NMPA as a
representative of the nonprofit trade association of music
publishers.\65\
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\64\ AMLC Proposal at 35.
\65\ Id.
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In response, MLCI contends that AMLC's proposed board does not
adequately represent the entire music publisher community, as it lacks
representatives from large or mid-size publishers.\66\ The Office
notes, however, that AMLC has offered to replace one of its current
publisher board members with a representative of a major publisher if
such an organization were to request a voting seat.\67\
---------------------------------------------------------------------------
\66\ MLCI Reply at 18.
\67\ AMLC Proposal at 35.
---------------------------------------------------------------------------
AMLC also submits proposed members for each of the designated
committees. Unlike MLCI, some of the members on each committee include
proposed board members--a structure that potentially could diminish the
committees' ability to provide independent recommendations to the
board.\68\ As required, AMLC provides four members for the operations
advisory committee, and five professional songwriters and five musical
work copyright owners for the unclaimed royalties oversight
committee.\69\ AMLC notes that the proposed members of the latter
committee ``have years of experience dealing with double claims,
counter claims and registration of song data both in the US and
internationally.'' \70\ For the dispute resolution committee, AMLC
provides three representatives of musical work copyright owners and
three professional songwriters.\71\
---------------------------------------------------------------------------
\68\ Id. (AMLC's proposed Operations Advisory Committee members
are Frank Liddell (Carnival Music), Caleb Shreve (Killphonic Music),
and board members Brownlee Ferguson (Bluewater Music Corp.) and Jeff
Price (Audiam, Inc.)).
\69\ Id. at 35-36 (AMLC's proposed Unclaimed Royalties Oversight
Committee members are songwriters Joerg Evers, Rick Carnes, Zoe
Keating, Stewart Copeland, H[eacute]l[egrave]ne Muddiman, and Anna
Rose Menken and copyright owners Ricardo Ordonez (Union Music
Group), Gian Caterine (American Music Partners West), Carlos Martin
Carle (Mayimba Music), Juan Hidalgo (Juan y Nelson Entertainment),
Al Staehely (listed as an entertainment lawyer and copyright owner),
and David Bander (Ultra Music & Ultra International Music
Publishing)).
\70\ Id. at 41.
\71\ Id. at 36 (committee members are songwriters Wally Badarou,
Imogen Heap, and Jon Siebels and copyright owners Peter Roselli
(Bluewater Music Corp.), Hakim Draper (Boogie Shack Music Group),
and Jonathan Segel (Copyright Owner)).
---------------------------------------------------------------------------
MLCI argues that certain AMLC board members do not in fact satisfy
the relevant statutory criteria.\72\ MLCI specifically questions AMLC
proposed board members John Barker, Joerg Evers, and Wally Badarou's
status as ``publisher representatives,'' contending that the entities
with which they claim affiliation do not appear to be music
publishers.\73\ MLCI also challenges the characterization of Henry
Gradstein as an ``independent publisher'' on the ground that he is a
litigation attorney for whom no publisher affiliation is provided
either in AMLC's submission or on his law firm's website.\74\
---------------------------------------------------------------------------
\72\ MLCI Reply at 19-20.
\73\ Id. at 20.
\74\ Id. at 19.
---------------------------------------------------------------------------
The Office raised these issues in its meeting with AMLC
representatives. In response, AMLC provided specific information
regarding the entities with which these individuals are affiliated.
AMLC stated that Mr. Barker is the owner and CEO of ClearBox Rights,
LLC, an ``independent copyright administration company,'' which is the
```exclusive' agent for licensing and collection of royalties for all
types of uses.'' \75\ Under AMLC's interpretation, Mr. Barker would be
qualified to serve on the board because he represents music publishers
through his administration company.\76\ AMLC further provided company
names and ASCAP or BMI IPI numbers for publishing companies owned by
Mr. Evers, Mr. Badarou, and Mr. Gradstein.\77\
---------------------------------------------------------------------------
\75\ AMLC Ex Parte Meeting Summary at 6.
\76\ Id.
\77\ Id.
---------------------------------------------------------------------------
Based on this information, the Register will assume for purposes of
this designation that Mr. Evers, Mr. Badarou, and Mr. Gradstein qualify
as ``representatives of music publishers.'' \78\ While Mr. Gradstein in
particular appears to be primarily a litigator, he is also the owner of
a music publishing company. For the music publishing representatives,
the statute does not appear to require that music publishing is a full-
time occupation, and Mr. Gradstein has focused his career on issues
relevant to his proposed board service.\79\ While Mr. Barker's
background similarly demonstrates relevant experience, it is not clear
that he meets the statutory criteria, as MCLI raises a colorable
argument that representatives of ``[e]ntities that do not have a
relevant ownership interest in the copyright to musical works (either
by virtue of assignment or exclusive license) do not meet the statutory
criteria.'' \80\ Under that reading, if Mr. Barker's company merely
administers licenses on behalf of copyright owners, but has not itself
been assigned copyrights, he would not constitute a publisher
representative within the meaning of the statute.
---------------------------------------------------------------------------
\78\ 17 U.S.C. 115(d)(3)(D)(i)(I).
\79\ In contrast, the songwriter board members must be
``professional[s],'' which the Office regards as a requirement that
such board members must be primarily songwriters. Id. at
115(d)(3)(D)(i)(II) (regarding ``professional songwriters who have
retained and exercise exclusive rights of reproduction and
distribution with respect to covered activities with respect to
musical works they have authored'') (emphasis added); see also MLCI
Proposal at 67 (``In MLC's view, the requirement that four voting
board members of MLC be ``professional songwriters'' means that the
songwriter board members must be songwriters who earn a living
primarily through their songwriting activities.'').
\80\ MLCI Reply at 20; see also 17 U.S.C. 115(d)(3)(D)(i)(I).
---------------------------------------------------------------------------
Ultimately, the Copyright Office need not resolve this issue
because the specific proposal of Mr. Barker does not factor heavily
into the Office's assessment. Any conflict with the statute could be
cured by replacing him with a publisher representative; indeed, the
Office appreciates AMLC's offer to accommodate a major publisher that
wishes to join its board. A greater concern, however, is the lack of
specific information provided by AMLC on its membership selection
processes. Even assuming that its ultimate selections would satisfy the
statutory requirements, AMLC's submissions describe a somewhat ad hoc
decision making process in this area. While many of the proposed AMLC
board members demonstrate commendable experience to perform the
relevant duties, the Office appreciates MLCI's more comprehensive
approach to identifying and selecting potential members, who themselves
each appear highly experienced and able to perform the required duties.
ii. Representation and Diversity
The Institute of Intellectual Property and Social Justice
(``IIPSJ''), in comments co-signed by several dozen artists and other
music industry stakeholders, urged the Register to ensure that the MLC
includes ``meaningful and significant representatives from the African-
American, Latino-American and Asian-American songwriting and music
publishing communities, selected by such communities, and encompassing
[[Page 32279]]
representation from the Hip-Hop, R&B, Latin, Reggae, Jazz and Gospel/
Christian music genres.'' \81\ Pointing to the growing influence of
Hip-Hop and Latino music, IIPSJ suggests that the statute requires
``diverse cultural representation'' for the board.\82\ IIPSJ believes
that the proposed boards of both MLCI and AMLC lack sufficient
representation from these communities.\83\
---------------------------------------------------------------------------
\81\ IIPSJ Initial at 3.
\82\ Id. at 3-4.
\83\ IIPSJ Reply at 4-6.
---------------------------------------------------------------------------
The Office takes representation concerns seriously and agrees that
they should be considered as part of the MLC board and committee
selection processes. In meetings with the Office, both MLCI and AMLC
expressed a commitment to ensuring diversity in their memberships,
though, both questioned the premises of IIPSJ's letter with regards to
the sufficiency of representation in their proposed board slates. In
addition, MLCI noted that its draft bylaws ``contain a diversity
provision that calls for a biannual report on the diversity of the
board, including diversity as to gender/race/ethnicity, income, musical
genre, geography and expertise/experience.'' \84\ The report's
conclusions ``are to be used by the nominating committees in choosing
future candidates'' to be proposed for the board.\85\ MLCI further
emphasized its capacity to reach a variety of communities, noting ``the
extensive participation that it has developed through its Board and
Committee members and many endorsers,'' and that ``many groups
supporting MLC[I] have international offices that can assist in global
outreach.'' \86\ AMLC responded by reiterating the diverse nature of
its board members and their experience with broad array of genres and
creator communities.\87\ AMLC believes that its board members'
experiences would prove beneficial in the development of educational
and outreach efforts targeting diverse creators, including those
overseas.\88\ Both candidates agreed that securing engagement and trust
among varied communities, musical genres, and geographical locations
would prove critical to the MLC's core project of encouraging musical
work copyright owners with unclaimed accrued royalties to come forward
and claim such monies.
---------------------------------------------------------------------------
\84\ MLCI Ex Parte Meeting Summary at 3 (June 4, 2019).
\85\ Id.
\86\ Id.
\87\ AMLC Ex Parte Meeting Summary at 3-4, 15-17.
\88\ Id. at 15-17.
---------------------------------------------------------------------------
The Copyright Office recognizes the entertainment industry as a
whole has been grappling with the question of how best to diversify its
leadership and provide opportunities to a broader range of creators.
The Office believes that the MLC can play a role in helping to advance
these goals within the music industry.\89\ The Office accordingly
expects the designated MLC to ensure engagement with a broad spectrum
of musical work copyright owners, including from those communities that
IIPSJ asserts are underrepresented. The Office intends to work with the
MLC to help it achieve these goals.\90\
---------------------------------------------------------------------------
\89\ Cf. Cal. Corp. Code sec. 301.3 (under California law,
publicly held corporations whose principal executive offices are
located in California must include female board members).
\90\ See H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339,
at 5, 15.
---------------------------------------------------------------------------
iii. Bylaws, Conflicts of Interest, and Other Governance Issues
Both submissions address the statutory requirement to establish
bylaws within one year of designation, including with respect to
succession of board members.\91\ MLCI has not yet adopted bylaws, but
it does have draft bylaws that it will make public ``well in advance of
the statutory deadline.'' \92\ In addition, although it has ``not
finalized a management structure for daily operations,'' MLCI has
already established a number of ``foundational'' policies and
procedures designed to ensure accountability, transparency, fairness
and confidentiality, including that: (1) All committee recommendations
will be subject to board approval; (2) annual reports will be released
to the public; (3) the committees will maintain their statutory
composition; (4) MLCI will maintain a public list of all unmatched
works and engage in public outreach to enhance legitimate ownership
claims; and (5) the board will adopt a comprehensive set of written
codes, policies, and procedures to govern the board and committees.\93\
MLCI also commits to ``safeguard[ing] private, sensitive, or
confidential information.'' \94\ With regard to successive board
members, MLCI proposes that songwriter members would be appointed from
a slate of candidates chosen by songwriters, and prospective music
publisher members would be appointed from candidates chosen by music
publishers.\95\ A similar process would be followed for committees.\96\
MLCI proposes that the board conduct regular elections as well as
address interim vacancies though an election process based on those
nominations.\97\
---------------------------------------------------------------------------
\91\ 17 U.S.C. 115(d)(3)(D)(ii)(I).
\92\ MLCI Proposal at 86; MLCI Ex Parte Meeting Summary at 3
(referencing draft bylaws). MLCI correctly notes that it is not
required to have adopted bylaws at this stage. See MLCI Proposal at
115.
\93\ MLCI Proposal at 86-91 (noting the board's forthcoming sets
of written codes, policies, and procedures, including: Code of
Conduct and Ethics; Conflict of Interest Policy; Investment Policy
(including an Anti-Comingling Policy); Confidentiality Policy;
Whistleblower Policy; Document Retention Policy; Technology and
Security Policy; Non-Discrimination Policy; Anti-Sexual Harassment
Policy; Social Media Policy; and Gift Acceptance Policy).
\94\ Id. at 92-93.
\95\ Id. at 87.
\96\ Id.
\97\ Id.
---------------------------------------------------------------------------
AMLC has adopted bylaws that detail board members' obligations with
regard to related party transactions and conflicts of interest,
including disclosure requirements and procedures for review by fellow
board members, although ALMC recognizes that it may have ``to
ameliorate or conform the bylaws'' if they are not consistent with the
MMA, the Register's yet-to-be promulgated regulations, or the New York
State Not-for-Profit Corporation Law.\98\
---------------------------------------------------------------------------
\98\ AMLC Proposal at 78, 88-91 (AMLC bylaws).
---------------------------------------------------------------------------
AMLC proposes that replacement board members can be nominated by
either the departing member or any other voting members, and that
AMLC's board would select committee members by a majority vote, but its
bylaws do not otherwise detail how committee candidates will be
nominated.\99\ Beyond these statutorily prescribed committees, AMLC
proposes four ``additional support committees''--Audit and Finance,
Education and Outreach, Technology and Security, and
International.\100\ It appears there is some potential for overlap, as,
for example, strategic technology issues appear to fall under both the
Technology and Security Committee and the Operations Oversight
Committee, and matters relating to budgeting, vendor contracts, and
general operations appear to be germane to the Operations Oversight
Committee as well as the Executive and Audit and Finance
Committees.\101\ The Office notes that any additional standing
committees should not conflict with the functions of the statutorily
mandated committees, which are subject to strict board composition
requirements to ensure adequate representation of interests (e.g.,
songwriters, digital music providers) in
[[Page 32280]]
the matters handled by those committees.\102\
---------------------------------------------------------------------------
\99\ Id. at 79-80 (AMLC bylaw art. 4.3).
\100\ Id. at 36, 85 (AMLC bylaw art. 6.5.5-6.5.8).
\101\ Id. at 84-85 (AMLC bylaw art. 6.5.1, 6.5.4, 6.5.5, 6.5.7).
\102\ See, e.g., 17 U.S.C. 115(d)(3)(D)(iv)-(vi); see also Conf.
Rep. at 19 (``Since the Board of Directors and committee member
requirements . . . are statutory in nature, these requirements are
not waivable by the Register or subject to modification by the Board
of Directors.'').
---------------------------------------------------------------------------
With respect to conflicts of interest, MLCI will require all board
members and employees to comply with a conflicts policy to be adopted
at a later date.\103\ The policy ``will require disclosure of all
actual or potential conflicts,'' including ``having a financial
interest (direct or indirect) in any contemplated MLC transaction, or
relationship with any counterparty to such transaction.'' \104\ MLCI
also states that it ``expects all associated persons to fully comply
with all applicable law,'' including fiduciary and ethical obligations,
and that it ``will enforce such obligations, which may include removal
for cause, in the event of a demonstrated violation.'' \105\
---------------------------------------------------------------------------
\103\ MLCI Proposal at 91-92.
\104\ Id.
\105\ Id. at 92.
---------------------------------------------------------------------------
AMLC disputes that these measures are sufficient to prevent
conflicts in the event MLCI were designated. AMLC argues that there is
a serious conflict of interest when a MLC board member is eligible to
receive a significant portion of the accrued but unpaid royalties--a
concern that AMLC believes is salient given the number of major
publishers represented on MLCI's board.\106\ Other commenters, some of
whom appear affiliated with AMLC, raise similar concerns.\107\ In
response, NSAI argues that the unclaimed royalties oversight committee
will protect against such concerns, noting that MLCI does not include a
major publisher on that committee.\108\ MLCI further suggests this
concern would attach to any board member regardless of which entity is
designated, noting that every copyright owner and songwriter on any
designated MLC will be eligible to receive a distribution of unclaimed
accrued royalties.\109\
---------------------------------------------------------------------------
\106\ AMLC Proposal at 19, 45-46.
\107\ Robert Allen Reply at 3-4; Cameron Ford Reply at 1-2;
MusicAnswers Reply at 1-3; Maria Schneider Reply at 1; Rhonda Seegal
Reply at 2-3; SGA Reply at 5-8.
\108\ NSAI Reply at 4.
\109\ MLCI Reply at 33.
---------------------------------------------------------------------------
For its part, AMLC sets forth procedures for disclosing,
addressing, and documenting conflicts of interest in its bylaws.\110\
It asserts that its board will consider such issues carefully in
establishing governance procedures and that the unclaimed royalties
committee will establish guidelines and polices to reduce
conflicts.\111\
---------------------------------------------------------------------------
\110\ AMLC Proposal at 89-90 (AMLC bylaw art. 14).
\111\ Id. at 19.
---------------------------------------------------------------------------
MLCI suggests that AMLC has serious conflicts of interest of its
own, alleging that AMLC board members have undisclosed ties to its
proposed vendors, in violation of AMLC's own bylaws.\112\ These claims,
echoed by NSAI,\113\ involve allegations that certain AMLC board
members have financial interests in the Society of Composers, Authors
and Music Publishers of Canada (``SOCAN''), which owns AMLC's intended
vendor partner DataClef.\114\ AMLC responded that while Mr. Barker
previously was in a consulting position with SOCAN, that relationship
ended prior to AMLC's formation.\115\ AMLC acknowledges that Mr. Price
is the founder and CEO of Audiam, a company acquired by a SOCAN holding
company, but asserts that the companies are managed separately and that
``Audiam is not a vendor and is not going to be one.'' \116\ AMLC also
generally asserted that AMLC's board members currently have ``no ties
or fiduciary responsibilities to any shareholders.'' \117\
---------------------------------------------------------------------------
\112\ MLCI Reply at 30-32.
\113\ NSAI Reply at 5.
\114\ MLCI Reply at 30-31.
\115\ AMLC Ex Parte Meeting Summary at 23 (AMLC further offered
that ``Mr. Barker continues to have an arm's-length business
relationship with SOCAN for certain collection activity'').
\116\ Id. Despite the assertion that Audiam has its own
management, AMLC does not state that the Audiam board contains no
SOCAN executives. See id. (noting that Audiam's board of directors
``includes non-SOCAN executives'').
\117\ Id.
---------------------------------------------------------------------------
Taking all of this information into account, both MLCI and AMLC
have adopted policies and procedures that appear broadly consistent
with the statutory requirements on matters of governance. Both
submissions show a serious commitment to transparency, accountability,
and the protection of confidential information.\118\
---------------------------------------------------------------------------
\118\ See, e.g., MLCI Proposal at 88-93; AMLC Proposal at 17,
42, 78.
---------------------------------------------------------------------------
With respect to the purported conflicts of interest of individual
board members, although these claims raise serious issues, they
ultimately have little impact on the Office's evaluation of the
candidates' proposals. Regarding MLCI's board composition, the Office
agrees that the unclaimed royalties oversight committee will help
mitigate potential conflicts. As discussed below, the Office expects
ongoing regulatory and other implementation efforts to further
extenuate the risk of self-interest with respect to the distribution of
unclaimed accrued royalties. As to the allegations regarding individual
AMLC board members, a more substantial explanation of the relevant
business relationships may be required if AMLC were the candidate that
otherwise most nearly satisfied the statutory criteria. The Office thus
need not resolve whether any specific affiliations of AMLC board
members would, in fact, present material conflicts of interest with
respect to its intended primary vendor.
More generally, the Copyright Office appreciates that both
proponents have pledged to operate under bylaws that will address
conflicts of interest and appropriate disclosures in accordance with
applicable state laws and professional duties of care.\119\ Following
this designation process, and including through the various statutorily
required rulemakings, the Register intends to exercise her oversight
role as it pertains to matters of governance, including through
promulgation of regulations so that the MLC's bylaws include an avenue
to ensure that subsequent board member selections are made in
compliance with all relevant legal requirements.\120\
---------------------------------------------------------------------------
\119\ See, e.g., Del. Code Ann. tit. 8, sec. 144(a); N.Y. Not-
for-Profit Corp. L. sec. 715.
\120\ See 17 U.S.C. 115(d)(12); see id. at 115(d)(3)(D)(i)(I)-
(IV); see also H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339,
at 5; Conf. Rep. at 4. The Office notes that many commenters
supported the Office performing a meaningful oversight role to the
extent permissible under the statute. See, e.g., Maria Schneider
Reply at 2-3; SGA Reply at 7.
---------------------------------------------------------------------------
2. Endorsement and Support
As noted, the MLC must be ``endorsed by, and enjoy[ ] substantial
support from, musical work copyright owners that together represent the
greatest percentage of the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years.'' \121\ The Copyright Office made two preliminary
interpretations regarding this clause in the NOI.\122\ First, the
Office explained that because the section 115 license applies to uses
of phonorecords in the United States, the relevant market is the United
States market for making and distributing phonorecords of musical
works. Thus, endorsement may be shown by including musical work
copyright owners located outside the United States so long as they
control the relevant rights to works played or otherwise distributed in
the United States. Second, the Office stated that because the statute
refers to support from ``musical work copyright owners,'' the relevant
support should come from parties who have a relevant ownership
[[Page 32281]]
interest in the copyright to musical works (or shares of such works),
in contrast to parties who do not possess any ownership interest in
musical works but only the ability to administer the works. Neither MLC
candidate disagrees with these conclusions.\123\
---------------------------------------------------------------------------
\121\ 17 U.S.C. 115(d)(3)(A)(ii).
\122\ NOI at 65753.
\123\ See AMLC Proposal at 46; MLCI Proposal at 96-97, 113-14.
---------------------------------------------------------------------------
Under section 115(d)(3)(A)(ii), only those copyright owners
comprising a portion of ``the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years,'' count for purposes of endorsement.\124\ The Office also noted
in the NOI that it understood there might be conflicting views
regarding how the indicia of endorsement and support should be
measured.\125\ This understanding proved correct, as MLCI and AMLC
offer competing interpretations. While MLCI argues that the measurement
is to be based on market share and licensing revenue, AMLC disagrees.
The Office will address these disputed issues of statutory construction
before making its evidentiary findings.
---------------------------------------------------------------------------
\124\ MLCI agrees that a ``relevant copyright owner'' is ``an
owner of musical works copyrights licensed for covered activities
over the preceding three full calendar years.'' MLCI Reply at 9.
\125\ NOI at 65753.
---------------------------------------------------------------------------
i. Statutory Interpretation
a. Candidates' Views
AMLC argues that the endorsement provision ``should be interpreted
so that the relevant `licensor market' from which the `greatest
percentage' is taken is the endorsing group of copyright owners who,
via the greatest number of licenses, have made musical works available
for covered activities as measured over the preceding 3 full calendar
years.'' \126\ AMLC contends that the statutory language is ambiguous
but that its reading is confirmed by the legislative history. It notes
that ``[t]he [Senate Judiciary] Committee explained that the MLC should
be `endorsed by and enjoy[ ] support from the majority of musical works
copyright owners as measured over the preceding three years.' '' \127\
From this, AMLC asserts that Congress intended that ``the parties
eligible to endorse the proposed MLC are the musical works copyright
owners.'' \128\
---------------------------------------------------------------------------
\126\ AMLC Proposal at 43 (emphasis omitted).
\127\ Id. at 46 (quoting S. Rep. No. 115-339, at 22) (emphasis
AMLC's).
\128\ Id.
---------------------------------------------------------------------------
AMLC also points to a separate provision of the statute, section
115(d)(3)(J), to argue that the endorsement provision ``[c]annot
[r]efer to [m]arket [s]hare.'' \129\ Section 115(d)(3)(J) states that
after unclaimed accrued royalties have been held for the requisite
period of time, the MLC is to distribute the royalties to identified
copyright owners ``in a transparent and equitable manner based on data
indicating the relative market shares of such copyright owners as
reflected in reports of usage provided by digital music providers for
covered activities for the periods in question.'' \130\ AMLC notes
that, unlike the endorsement provision, section 115(d)(3)(J) expressly
refers to ``relative market share.'' In its view, ``[i]f Congress, in
articulating the endorsement criteria, intended for the words `licensor
market' to mean `relative market share' (or some equivalent), Congress
would have included the words `relative market share,' the methodology
to calculate same and the corresponding confidentiality language it
included later on when specifically referring to `relative market
share.' '' \131\
---------------------------------------------------------------------------
\129\ Id. at 44.
\130\ 17 U.S.C. 115(d)(3)(J)(II).
\131\ AMLC Proposal at 44-45 (emphasis omitted) (``Generally,
statutory language should be internally consistent and considered in
light of full statutory context. As such, courts will generally read
as meaningful `the exclusion of language from one statutory
provision that is included in other provisions of the same statute.'
'') (quoting Hamdan v. Rumsfeld, 548 U.S. 557, 578 (2006),
superseded by statute on other grounds, Military Commissions Act of
2006, Public Law 109-366, 120 Stat. 2600 (2006)).
---------------------------------------------------------------------------
AMLC also makes the policy argument that ``[a]n inherent conflict
of interest would be created if the MLC were primarily endorsed and/or
constituted by the largest and/or `major' publishers'' because,
``[s]ince unclaimed or `black box' royalties are to be distributed
based on market share, those publishers would be dis-incentivized to
account to independent songwriters and independent publishers
accurately, i.e., the major publishers would be incentivized to create
a larger `black box' from which they could then participate.'' \132\
AMLC argues that ``[w]ere [these copyright owners] to be in control of
such process, the resulting situation would repeat the incentive
problem involving digital music services that the statute intended to
fix,'' and that ``the purposes of the MMA would not be best fulfilled
if proper incentives are not aligned.'' \133\
---------------------------------------------------------------------------
\132\ Id. at 45.
\133\ Id. at 46 (contending that ``copyright owners controlling
the greatest percentage of `relative market share' were not intended
to be in control of the process of locating and paying copyright
owners who are owed unclaimed royalties'').
---------------------------------------------------------------------------
In AMLC's view, because ``songwriters . . . are the greatest number
of copyright owners relevant to and able to endorse an MLC,'' \134\
endorsement should be measured by counting each musical work copyright
owner as one vote.\135\ As evidence of such support, it relies on a
list of (in some cases, appending supporting letters from) purported
endorsers.\136\
---------------------------------------------------------------------------
\134\ Id. at 46-47.
\135\ See AMLC Ex Parte Meeting Summary at 24 (``AMLC response
is based on the number of copyright owners, not the total number of
copyrights.'').
\136\ AMLC Proposal at 46-48, 94-107.
---------------------------------------------------------------------------
In contrast, MLCI argues that the endorsement provision is
unambiguous, and that the ``only reasonable interpretation . . . is
that the collective shall be the entity that has the endorsement and
support of copyright owners that together received during the statutory
three-year period the largest aggregate percentage of total mechanical
royalties of any entity seeking designation as the collective.'' \137\
MLCI primarily relies on the statutory text to assert that ``percentage
of the . . . market'' means ``market share,'' that the phrase ``for
uses of [musical] works in covered activities'' denotes a measurement
based on usage, and that such usage should be measured by looking at
licensor revenue from applicable royalty payments.\138\
---------------------------------------------------------------------------
\137\ MLCI Proposal at 96; see also id. at 108; MLCI Reply at 5
(``[T]he only reasonable reading of this language is the plain
English reading.'').
\138\ See MLCI Proposal at 107-113.
---------------------------------------------------------------------------
MLCI contends that other potential metrics--i.e., number of
licenses, number of copyright owners, and number of musical works--are
not supported by the legislative history and are unworkable as a
practical matter.\139\ It disagrees with AMLC's analysis of section
115(d)(3)(J)'s use of the phrase ``relative market share,'' arguing
that that section ``supports, rather than refutes, the fact that the
endorsement criterion looks to royalty market share, as both are
examples of the MMA's use of such market share to guide processes under
the statute.'' \140\
---------------------------------------------------------------------------
\139\ Id. at 108-113; see MLCI Reply at 5-6.
\140\ MLCI Reply at 6-7.
---------------------------------------------------------------------------
As a policy matter, MLCI suggests ``that the group of copyright
owners with the most royalties at stake--the largest aggregate share of
the royalty pool that the collective will have [the] authority to
license--should voice who is entrusted with that authority.'' \141\ It
would ``make[ ] a mockery of the language of the statute,'' MLCI
contends, to construe the provision to mean that ``owners of musical
works that are not being streamed or earning royalties could be deemed
to have the same market share as owners of works that are
[[Page 32282]]
streamed billions of times and earn substantial royalties.'' \142\
---------------------------------------------------------------------------
\141\ MLCI Proposal at 107.
\142\ Id. at 110, n.31.
---------------------------------------------------------------------------
b. Copyright Office's Analysis
Legal Interpretation. Taking all comments into consideration, the
Copyright Office concludes that the endorsement provision in section
115(d)(3)(A)(ii) mandates that the entity designated as the MLC be
endorsed and supported by musical work copyright owners that together
earned the largest aggregate percentage (among MLC candidates) of total
royalties from the use of their musical works in covered activities in
the U.S. during the statutory three-year period. In other words, the
Office agrees with MLCI that the endorsement criterion is a plurality
requirement based on market share, measured by applicable licensing
revenue. The Office draws this conclusion from the plain meaning of the
statutory text, which, after careful review of the statute as a whole,
the Office concludes is unambiguous.\143\
---------------------------------------------------------------------------
\143\ See Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S.
Ct. 1002, 1010 (2017) (``We thus begin and end our inquiry with the
text, giving each word its ordinary, contemporary, common
meaning.'') (internal quotation marks omitted). AMLC incorrectly
suggests that the Office ``has acknowledged an ambiguity in the
statute.'' AMLC Proposal at 46. The Office only acknowledged that
``there may be conflicting views'' on the matter. NOI at 65753.
---------------------------------------------------------------------------
First, the phrase ``percentage of the . . . market'' clearly refers
to market share; indeed, it is the actual definition of ``market
share.'' \144\ And market share is ordinarily calculated using earned
sales revenue.\145\ Here, the statute makes clear that endorsement is a
metric of ``licensor'' revenue earned specifically ``for uses of
[musical] works in covered activities.'' \146\ Moreover, Congress's
inclusion of the phrase ``uses of [musical] works'' suggests that the
proper metric is one of licensing revenue (i.e., royalties), rather
than numbers of licenses, copyright owners, or works. Under the
compulsory license, royalties are calculated based on use, suggesting
that Congress intended to define the market for ``uses'' according to
the royalty revenues generated.\147\
---------------------------------------------------------------------------
\144\ See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/market%20share (last visited June
24, 2019) (Market share is ``the percentage of the market for a
product or service that a company supplies.''); Market Share,
Investopedia, https://www.investopedia.com/terms/m/marketshare.asp
(last visited June 24, 2019) (``Market share represents the
percentage of an industry, or a market's total sales, that is earned
by a particular company over a specified time period.'').
\145\ See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/market%20share (last visited June
24, 2019) (noting the formula for market share as ``Market Share =
(Particular Company's Sales Revenue in Time Period X)/(Relevant
Market's Total Sales Revenue in Time Period X)''); Market Share,
Investopedia, https://www.investopedia.com/terms/m/marketshare.asp
(last visited June 24, 2019) (noting that in calculating a company's
market share, you must ``divide the company's total revenues by its
industry's total sales''); Market Share, The American Heritage
Dictionary of the English Language, https://ahdictionary.com/word/search.html?q=market+share (last visited June 24, 2019) (Market
share is ``[t]he proportion of industry sales of a good or service
that is controlled by a company.'').
\146\ 17 U.S.C. 115(d)(3)(A)(ii).
\147\ See 37 CFR 385.11, 385.21. MLCI notes that ``[p]ractically
speaking, a metric based on user usage is going to align with a
metric based on licensor revenues, as the statutory royalty rates
for both streaming and downloading are tied to usage,'' and that ``a
musical work with more usage will wind up with more royalty
revenues.'' See MLCI Proposal at 111-12 & n.34. While not all uses
are subject to the same royalty rate, the royalties are nonetheless
connected to use.
---------------------------------------------------------------------------
In contrast, counting up just the number of endorsing copyright
owners--from an amateur part-time songwriter whose works have been
streamed a handful of times to a major music publisher that has earned
millions of dollars from millions of streams of millions of works--says
nothing about the actual ``uses of [the owners' musical] works.'' Such
an interpretation impermissibly reads that language out of the
statute.\148\ Similarly, looking only to the number of works owned by
endorsing copyright owners would not accurately reflect use because it
does not differentiate between works streamed once or twice and works
streamed millions of times. In the Office's view, the same kinds of
problems exist with counting the number of licenses.
---------------------------------------------------------------------------
\148\ See, e.g., Advocate Health Care Network v. Stapleton, 137
S. Ct. 1652, 1659 (2017) (``Our practice . . . is to give effect, if
possible, to every clause and word of a statute.'') (internal
quotation marks omitted).
---------------------------------------------------------------------------
The Office is unpersuaded by AMLC's argument concerning section
115(d)(3)(J). There is no substantive distinction between the use of
``market share[ ]'' in that provision and the use of ``percentage of
the . . . market'' in the endorsement provision. One is the very
definition of the other. AMLC relies upon the canon of statutory
interpretation under which Congress is presumed to have acted
intentionally when it excludes ``language from one statutory provision
that is included in other provisions of the same statute.'' \149\ But
that canon is inapplicable here, as the cases AMLC cites involve only
the wholesale omission of an item from a statutory provision; \150\
they do not speak to situations where, as here, there is no omission
and Congress merely used synonyms.\151\
---------------------------------------------------------------------------
\149\ AMLC Proposal at 44 (citing Hamdan, 548 U.S. at 578).
\150\ See Hamdan, 548 U.S. at 578-79; City of Chi. v. Envtl.
Def. Fund, 511 U.S. 328, 334-37 (1994).
\151\ See, e.g., United States v. Sioux, 362 F.3d 1241, 1246
(9th Cir. 2004) (``It is an elementary principle of statutory
construction that similar language in similar statutes should be
interpreted similarly.'').
---------------------------------------------------------------------------
The Office is likewise unpersuaded that these synonyms should be
read differently simply because the unclaimed royalties provision
contains different details regarding calculation and confidentiality
than the endorsement provision. While both provisions use a similar
market share metric, the contexts are different, such that it makes
sense that Congress would provide different instructions. Section
115(d)(3)(J) explains how the MLC is to distribute unclaimed royalties
after the blanket license becomes available. It is unsurprising that
Congress would provide detailed requirements to govern how those
payments are to be allocated. In contrast, the designation of an entity
to be the MLC involves a higher-level inquiry into the aggregate market
share of each candidate's endorsing copyright owners. Congress could
have given the Office detailed instructions as to how to perform this
analysis, but it instead left the matter to the Office's expertise and
reasonable discretion. There is nothing inconsistent with Congress
establishing differing approaches to accomplishing these different
tasks.
The legislative history does not counsel differently. The relevant
language, which appears in House and Senate Judiciary Committee
Reports, states that the MLC must be ``endorsed by and enjoy[ ] support
from the majority of musical works copyright owners as measured over
the preceding three years.'' \152\ This language can best be understood
as an imprecise summary of the statutory text, for if it is taken
literally, it directly conflicts with the statute, which refers to
``endorse[ment] by[ ] and . . . substantial support from[ ] musical
work copyright owners that together represent the greatest percentage
of the licensor market for uses of such works in covered activities.''
\153\ For the statute to mean what the legislative history seems to
say, ``substantial'' could be deleted, ``greatest percentage'' would
need to be replaced with ``majority,'' and ``of the licensor market for
uses of such works in covered activities'' could also be deleted. It
does not seem reasonable for the Office to interpret the statute in
this way.\154\
---------------------------------------------------------------------------
\152\ H.R. Rep. No. 115-651, at 26; S. Rep. No. 115-339, at 22;
see also Conf. Rep. at 18 (similar).
\153\ 17 U.S.C. 115(d)(3)(A)(ii).
\154\ See, e.g., Nat'l Ass'n of Mfrs. v. Dep't of Def., 138 S.
Ct. 617, 634 n.9 (2018) (``[A]mbiguous legislative history cannot
trump clear statutory language.'') (internal quotation marks
omitted); R.R. Comm'n of Wis. v. Chi., Burlington & Quincy R.R. Co.,
257 U.S. 563, 589 (1922) (``Committee reports and explanatory
statements of members in charge made in presenting a bill for
passage have been held to be a legitimate aid to the interpretation
of a statute where its language is doubtful or obscure. But when
taking the act as a whole, the effect of the language used is clear
to the court, extraneous aid like this can not control the
interpretation. Such aids are only admissible to solve doubt and not
to create it.'' (internal citations omitted)); see also Pattern
Makers' League of N. Am., AFL-CIO v. N.L.R.B., 473 U.S. 95, 112
(1985) (finding ``ambiguous legislative history'' to ``fall[ ] far
short of showing that the [agency's] interpretation of the [statute]
is unreasonable'').
---------------------------------------------------------------------------
[[Page 32283]]
Policy Considerations. With respect to AMLC's policy arguments,
they mirror the same conflict-of-interest concerns raised by AMLC and
discussed in connection with board composition. The Office takes these
concerns seriously, but they do not compel a different interpretation
of the plain text of the statute.\155\ Rather, there are other ways
that the statute addresses these issues and protects smaller
independent songwriters, as the following examples illustrate.\156\
---------------------------------------------------------------------------
\155\ Cf. Fourth Estate Pub. Benefit Corp. v. Wall-Street.com,
LLC, 139 S. Ct. 881, 892 (2019) (noting that ``the statutory scheme
has not worked as Congress likely envisioned,'' but that
``[u]nfortunate as [that] may be, that factor does not allow us to
revise [the statute's] congressionally composed text'').
\156\ See SGA Reply at 3 (``SGA is far more concerned with
ensuring that music creator rights are fully protected against
conflicts of interest and impingements upon the rights and interests
of songwriters and composers under all circumstances, than in
supporting one or the other candidate vying to be selected as the
Mechanical Collective.'').
---------------------------------------------------------------------------
First, the statute provides for equal representation of musical
work copyright owners and professional songwriters on the unclaimed
royalties oversight committee, which is charged with ``establish[ing]
policies and procedures for the distribution of unclaimed accrued
royalties and accrued interest.'' \157\ By law, any copyright owner
receiving such a distribution must pay or credit to an individual
songwriter no ``less than 50 percent of the payment received by the
copyright owner attributable to usage of musical works (or shares of
works) of that songwriter.'' \158\
---------------------------------------------------------------------------
\157\ 17 U.S.C. 115(d)(3)(D)(v), (d)(3)(J)(ii).
\158\ Id. at 115(d)(3)(J)(iv)(II); see also S. Rep. No. 115-339,
at 14 (``The 50% payment or credit . . . is intended to be treated
as a floor, not a ceiling, and is not meant to override any
applicable contractual arrangement providing for a higher payment or
credit of such monies to a songwriter.'').
---------------------------------------------------------------------------
Second, the statute requires the MLC to undertake a number of
duties with respect to unclaimed royalties, including maintaining a
public online list of unmatched musical works through which ownership
can be claimed.\159\ The MLC must ``engage in diligent, good-faith
efforts to publicize, throughout the music industry,'' the existence of
the MLC, procedures to claim unclaimed royalties, any transfer of
royalties under section 115(d)(10)(B), and any pending distribution of
unclaimed accrued royalties and accrued interest not less than 90 days
before distribution.\160\ More generally, the statute expressly
requires the MLC to ``ensure that the policies and practices of the
[MLC] are transparent and accountable.'' \161\ The MLC must issue a
detailed annual report, including describing ``how royalties are
collected and distributed,'' and ``the efforts of the [MLC] to locate
and identify copyright owners of unmatched musical works (and shares of
works).'' \162\ And every five years, the MLC must retain an
independent auditor to ``examine the books, records, and operations of
the [MLC]'' and prepare a report addressing, among other things, ``the
implementation and efficacy of procedures'' ``for the receipt,
handling, and distribution of royalty funds, including any amounts held
as unclaimed royalties,'' and ``to guard against fraud, abuse, waste,
and the unreasonable use of funds.'' \163\
---------------------------------------------------------------------------
\159\ 17 U.S.C. 115(d)(3)(J)(iii)(I).
\160\ Id. at 115(d)(3)(J)(iii)(II).
\161\ Id. at 115(d)(3)(D)(ix)(I)(aa).
\162\ Id. at 115(d)(3)(D)(vii)(bb), (hh).
\163\ Id. at 115(d)(3)(D)(ix)(II).
---------------------------------------------------------------------------
Third, the Copyright Office has been provided with ``broad
regulatory authority'' to conduct proceedings as necessary to
effectuate the statute with the Librarian's approval.\164\ In addition
to the regulations that the Office is specifically directed to
promulgate, the legislative history contemplates that the Office will
``thoroughly review[]'' policies and procedures established by the
MLC.\165\ The legislative history suggests that the Office promulgate
the necessary regulations in a way that ``balances the need to protect
the public's interest with the need to let the new collective operate
without over-regulation.'' \166\ The Office intends to conduct its
oversight role in a fair and impartial manner; songwriters are
encouraged to participate in these future rulemakings.
---------------------------------------------------------------------------
\164\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5;
Conf. Rep. at 4; see 17 U.S.C. 115(d)(12).
\165\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5;
Conf. Rep. at 4; see 17 U.S.C. 115(d)(12).
\166\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15;
Conf. Rep. at 12.
---------------------------------------------------------------------------
Fourth, the MLC must be redesignated every five years.\167\ In the
legislative history, Congress explained that ``evidence of fraud,
waste, or abuse, including the failure to follow the relevant
regulations adopted by the Copyright Office, over the prior five years
should raise serious concerns within the Copyright Office as to whether
that same entity has the administrative capabilities necessary to
perform the required functions of the collective,'' and that in such
cases, the Office should consider selecting a new entity ``even if not
all criteria are met pursuant to section 115(d)(3)(B)(iii).'' \168\ The
Office thus agrees that ``it seems highly implausible . . . that
Congress intended that the `licensor market support' criterion be the
primary, deciding factor as to whether a full investigation and
analysis by the Register and the Copyright Office of each serious [MLC]
candidate is necessary.'' \169\ The Office believes that, among other
scenarios, if the designated entity were to make unreasonable
distributions of unclaimed royalties, that could be grounds for concern
and may call into question whether the entity has the ``administrative
and technological capabilities to perform the required functions of the
[MLC].'' \170\
---------------------------------------------------------------------------
\167\ 17 U.S.C. 115(d)(3)(B)(ii).
\168\ H.R. Rep. No. 115-651, at 6; S. Rep. No. 115-339, at 5-6;
Conf. Rep. at 4.
\169\ SGA Reply at 9.
\170\ 17 U.S.C. 115(d)(3)(A)(iii).
---------------------------------------------------------------------------
Fifth, Congress has asked the Office to study the issue of
unclaimed royalties and to provide a report by July 2021 that
recommends best practices for the MLC to identify and locate copyright
owners with unclaimed royalties, encourage copyright owners to claim
their royalties, and reduce the incidence of unclaimed royalties.\171\
The MLC must give ``substantial weight'' to these recommendations when
establishing its procedures to identify and locate copyright owners and
to distribute unclaimed royalties.\172\
---------------------------------------------------------------------------
\171\ Public Law 115-264, sec. 102(f), 132 Stat. at 3722-23.
\172\ Id. at sec. 102(f)(2), 132 Stat. at 3723.
---------------------------------------------------------------------------
Sixth, in addition to the various ways the MLC is required to
publicize unclaimed royalties,\173\ the DLC must assist with publicity
for unclaimed royalties by encouraging digital music providers to
publicize information on the existence of the MLC and on claiming
royalties on websites and applications, and conducting in-person
outreach activities with songwriters.\174\ The Copyright Office, too,
is tasked with engaging in public outreach and
[[Page 32284]]
educational activities that must specifically include ``educating
songwriters and other interested parties'' about how ``a copyright
owner may claim ownership of musical works (and shares of such works)''
and how ``royalties for works for which the owner is not identified or
located shall be equitably distributed to known copyright owners.''
\175\
---------------------------------------------------------------------------
\173\ 17 U.S.C. 115(d)(3)(J)(iii) (including maintenance of an
online list of unmatched works through which ownership can be
claimed, notification prior to any distribution, and participation
in music industry conferences and events).
\174\ Id. at 115(d)(5)(C)(i)(VII), (d)(5)(C)(iii).
\175\ Public Law 115-264, sec. 102(e)(2), 132 Stat. at 3722.
---------------------------------------------------------------------------
Finally, the Office suggests there may be other reasons for the
statutory requirement that the MLC enjoy ``substantial support'' from
the largest market share of musical work copyright owners. Without
minimizing the importance of ensuring that unidentified copyright
owners have the opportunity to come forward and effectively claim their
works to receive accrued royalties, there are other duties of the MLC
that also serve the paramount goal of ``ensuring that a songwriter
actually gets paid.'' \176\ As MLCI notes, already identified copyright
owners have an interest in ensuring the efficient and accurate
collection and distribution of royalties.\177\ Further, the MLC will
participate in proceedings before the CRJs, and having the support of
publishers with prior experience before the CRJs may be beneficial.
Establishment of the statutorily-required database will likely also
benefit from initial support of music publishers and other relevant
copyright owners with large quantities of authoritative versions of
data for works that together will comprise the bulk of royalty
distributions.\178\ As these examples illustrate, having strong support
from key copyright owners may assist in ensuring that the MLC is in the
best possible position to succeed in effectively carrying out the whole
of its assigned responsibilities.
---------------------------------------------------------------------------
\176\ 164 Cong. Rec. S6292, 6292 (daily ed. Sept. 25, 2018)
(statement of Sen. Hatch).
\177\ MLCI Proposal at 107.
\178\ For example, a number of MLCI's largest endorsers state
that each intends to work with MLCI to incorporate its musical work
data into the musical works database. See, e.g., MLCI Proposal at
Exs. 11-B-2 (Sony/ATV Music Publishing), 11-C-2 (Kobalt Music
Publishing America, Inc.), 11-N-2 (Warner/Chappell Music, Inc.), 11-
P-2 (Universal Music Publishing Group).
---------------------------------------------------------------------------
ii. Evidentiary Findings
a. Market Share
With respect to the information submitted in the proceeding, AMLC
does not provide market share data for its endorsing copyright owners.
Nor do its endorsers provide sufficient information from which the
Office can reasonably determine their aggregate applicable market
share. In contrast, MLCI provides multiple data points regarding the
market share of its endorsers.
For purposes of calculating market share, MLCI counts 132 musical
work copyright owners it calls the ``Supporting Copyright Owners.''
\179\ According to MLCI:
---------------------------------------------------------------------------
\179\ Id. at 98.
The Supporting Copyright Owners include copyright owners of all
sizes who own the relevant rights in musical works covering the
spectrum of musical genres--including pop, rap, hip hop, R&B,
country, rock, metal, reggae, folk, electronic, jazz, classical--and
from every era--including popular current hits and ``evergreen
standards.'' Their sizes range from major music publishers who own
the relevant rights to millions of songs, to small, family-owned
companies that focus on a particular genre or sub-genre. The
Supporting Copyright Owners own the mechanical rights to, at a
minimum, well over seven million musical works.\180\
---------------------------------------------------------------------------
\180\ Id. (citations omitted); see id. at Ex. 11-8-9 (stating
that ``a partial count of information obtained from less than half
of the Supporting Copyright Owners shows that together they own (now
and over the preceding 3 full calendar years) the right to reproduce
and distribute over 7.3 million musical works in Section 115 covered
activities in the U.S.'') (declaration of David M. Israelite).
A sworn declaration from David M. Israelite of the NMPA states that
the Supporting Copyright Owners ``own[ ] the U.S. mechanical rights to
millions of works'' and ``have confirmed that they exclusively endorse
MLC[I] to be the collective, and have pledged to provide substantial
support to MLC[I].'' \181\ A group endorsement letter from the
Supporting Copyright Owners further states that they ``all own, and
have during the preceding three years owned, exclusive rights to
license musical works for use in covered activities in the United
States and have licensed those rights to digital music providers.''
\182\ The Supporting Copyright Owners thus appear to be relevant
copyright owners who may be counted for endorsement purposes. While
MLCI states that it is also endorsed by ``over 2,400 songwriters''--of
whom ``[o]ver 1,400'' ``have reported that they are self-published
songwriters, meaning they are not signed to or affiliated with a music
publisher and manage their own musical work copyrights''--they are not
included in MLCI's market share calculations.\183\
---------------------------------------------------------------------------
\181\ Id. at Ex. 11-5.
\182\ Id. at Ex. 11-A-1; see, e.g., id. at Ex. 11-B-1 (``Sony
owns the exclusive rights to license millions of musical works
written by tens of thousands of songwriters, including for use in
Section 115 covered activities. Sony has for well over the last
three years licensed these rights to digital services through the
Section 115 compulsory licensing process and, in some cases, through
voluntary licenses.''); id. at Ex. 11-D-1 (``Reel Muzik Werks is the
owner or the exclusive licensee of the rights to engage and to
license others to engage in Section 115 covered activities . . . .
Reel Muzik Werks has during the last three full calendar years
licensed its rights in and to musical works to digital music
providers for use in covered activities.'').
\183\ Id. at 98-99 & n.22.
---------------------------------------------------------------------------
According to MLCI, ``[i]ndustry data, including revenue information
that NMPA collects from its members on an annual basis and publicly
available data, demonstrates that the Supporting Copyright Owners
represent between 85% and 90% of the licensor market for all uses of
musical works during the [statutory three-year period from 2016 through
2018].'' \184\ Additionally, Mr. Israelite's declaration provides data
from Billboard Magazine showing the average combined market share of
Supporting Copyright Owners appearing in Billboard's quarterly top ten
rankings of music publishers over the last three years to be
87.83%.\185\
---------------------------------------------------------------------------
\184\ Id. at 99 (citation omitted); see also id. at Ex. 11-5-7
(declaration of David M. Israelite).
\185\ Id. at Ex. 11-6-7. The Office notes that Billboard appears
to only ``measure the market share . . . of the top 100 radio
airplay songs.'' See, e.g., Ed Christman, Music Publishers' 4th
Quarter Report: Top 3 Companies Have the Same No. 1 Song, Billboard
(Feb. 3, 2017), https://www.billboard.com/articles/business/7677913/music-publishers-4th-quarter-report.
---------------------------------------------------------------------------
Mr. Israelite states that these data figures are ``a fair proxy for
estimating the Supporting Copyright Owners' market share for uses of
musical works in covered activities, as there is no reason to believe
that the Supporting Copyright Owners' market share for uses of their
musical works in covered activities should deviate significantly from
their market share for their uses of musical works generally.'' \186\
In support, MLCI states that ``NMPA was able to confirm from
information regarding the U.S. mechanical royalties paid by Apple Music
and Spotify--the largest and most popular services in the market--that
the Supporting Copyright Owners have together received the substantial
majority of total mechanical royalties for uses of musical works in
covered activities in the U.S. during the [statutory three-year period
from 2016 through 2018].'' \187\ As discussed below, Digital Licensee
Coordinator, Inc. (``DLCI'') follows a similar market share-based
approach to establish its endorsement by digital music providers and
significant non-blanket licensees.\188\
---------------------------------------------------------------------------
\186\ MLCI Proposal at Ex. 11-7.
\187\ Id. at 99-100; see also id. at Ex. 11-7-8 (describing
methodology) (declaration of David M. Israelite).
\188\ See DLCI Proposal at 4-7.
---------------------------------------------------------------------------
AMLC does not contest these market share figures; indeed, a comment
supporting AMLC submitted on behalf
[[Page 32285]]
of a group of songwriters that includes two AMLC board members concedes
that ``Sony/EMI, Warner, and Universal''--each of which exclusively
endorse MLCI--``control about 65% of the market for music publishing.''
\189\ The Office notes that other sources confirm that MLCI is
supported by a majority of the music publishing market; according to
Music & Copyright's annual survey ``based on revenue,'' Sony,\190\
Universal, and Warner/Chappell together had an average combined global
market share of 58.65% for 2017 and 2018.\191\
---------------------------------------------------------------------------
\189\ Robert Allen Reply at 6.
\190\ See Global Recorded-music and Music Publishing Market
Share Results for 2018, Music & Copyright (May 8, 2019), https://musicandcopyright.wordpress.com/2019/05/08/global-recorded-music-and-music-publishing-market-share-results-for-2018/.
\191\ Id. (this calculation includes figures from Sony/ATV, Sony
Music Publishing Japan, and EMI Music Publishing and includes all
revenue, not just for covered activities).
---------------------------------------------------------------------------
Based on the foregoing, the Office finds that there is substantial
evidence to demonstrate that MLCI is endorsed and supported by the
required plurality of relevant endorsing copyright owners, based on
applicable market share. Given the overwhelming majority market share
of MLCI's Supporting Copyright Owners and the data from Apple Music and
Spotify, and in the absence of any evidence to the contrary, the above-
discussed market share figures appear more likely than not to be a
sufficient proxy for estimating market share based on royalties earned
from covered activities in the U.S. Even if that were not the case, the
Office finds, based on the foregoing, that MLCI would still be ``the
entity that most nearly fulfills'' the section 115(d)(3)(A)(ii)
qualification.\192\
---------------------------------------------------------------------------
\192\ 17 U.S.C. 115(d)(3)(B)(iii).
---------------------------------------------------------------------------
b. Number of Copyright Owners
In any event, even under the metric for which AMLC provides
evidence--number of copyright owners--AMLC would not be the candidate
that satisfies the endorsement provision.
The Office received comments from a significant portion of the
music industry, voicing support for either MLCI or AMLC. Endorsements
came from a diverse array of large and small publishers \193\ as well
as from thousands of songwriters from across the country and beyond
representing virtually every major genre, including pop, hip hop, rap,
rock, country, R&B, alternative, electronic, dance, folk, jazz,
classical, Broadway/musical theatre, blues, Christian, gospel, Latin,
bluegrass, and soul.\194\ These songwriters include writers of #1 hit
songs, Grammy Award winners and nominees, a Rock and Roll Hall of Fame
inductee, members of the Nashville Songwriters Hall of Fame, film and
television composers, and numerous less established or part-time
writers.
---------------------------------------------------------------------------
\193\ See, e.g., MLCI Proposal at 98, Ex. 11-A-X; KDE LLC Reply
at 1 (supporting AMLC); Secretly Publishing Reply at 1 (supporting
MLCI).
\194\ See, e.g., AMLC Proposal at 47-75; MLCI Proposal at Exs.
5-A, 6-10; Robert Allen Reply; Board of Directors of NSAI Reply;
Maria Schneider Reply; Spence Burton Reply; Michael Busbee Reply;
Britt Daley Reply; Barry DeVorzon Reply; Jerry Emanuel Reply; Beckie
Foster Reply; Jan Garrett Reply; Ben Glover Reply; Dan Gutenkauf
Reply; John Harding Reply; Aaron Johns Reply; Brett Jones Reply; Amy
Kinast Reply; Wayne Kirkpatrick Reply; Sonia Kiva Reply; Bill
LaBounty Reply; David Lauver Reply; Daniel Leathersich Reply;
Alejandro Martinez Reply; Dennis Matkosky Reply; Steve Miller Reply;
Clay Mills Reply; Vincent Mullin Reply; Kerry Muzzey Reply; Rick
Nowels Reply; Melissa Peirce Reply, Jim Photoglo Reply; Deric Ruttan
Reply; Jerry Schneyer Reply; Joie Scott Reply; Pamela Schuler Reply;
Karen Sotomayor Reply; Miki Speer Reply; Even Stevens Reply; Paris
Strachan Reply; Eleisa Trampler Reply; Kelly Triplett Reply; Danny
Wells Reply; Anna Wilson Reply.
---------------------------------------------------------------------------
The Office also heard from a broad assortment of trade groups and
other organizations (some of which the Office understands to be members
or subgroups of each other) representing publisher and songwriter
interests. Groups listed as supporting AMLC include international
alliances and collectives like the Music Creators of North America
(``MCNA''), European Composer and Songwriter Alliance, Pan-African
Composers' and Songwriters' Alliance, Asia-Pacific Music Creators
Alliance, and Alianza Latinoamericana de Compositores y Autores de
M[uacute]sica, and other groups like the Songwriters Guild of America,
Screen Composers Guild of Canada, American Composers Forum, and Music
Answers.\195\ Groups listed as supporting MLCI include the National
Music Publishers' Association, Association of Independent Music
Publishers, International Confederation of Music Publishers, Nashville
Songwriters Association International, Songwriters of North America,
Music Publishers Association, American Composers Alliance, Gospel Music
Association, Church Music Publishers Association, Americana Music
Association, Copyright Alliance, and Creative Future.\196\ In addition,
performing rights organizations ASCAP, BMI, SESAC, and Global Music
Rights all endorse MLCI, as do many representatives from the recorded
music industry, including the Recording Industry Association of
America, the American Association of Independent Music, the major
record labels, and SoundExchange.\197\ Lastly, in one of the few
comments from an organization that waited to review the proposals
before endorsing a candidate, the Recording Academy, whose membership
includes ``thousands of working songwriters and composers, many of whom
are independent, self-published, or unaffiliated songwriters,'' states
that it ``believes that the MLC[I] submission is best equipped to
satisfy the statutory requirements of the MMA.'' \198\
---------------------------------------------------------------------------
\195\ AMLC Proposal at 47-48; see generally id. at 94-107.
\196\ MLCI Proposal at 100, Ex. 11-X; International
Confederation of Music Publishers Reply at 1.
\197\ MLCI Proposal at 100, Ex. 11-X
\198\ Recording Academy Reply at 1, 3.
---------------------------------------------------------------------------
As noted above, and as both candidates agree, not every commenter
can be counted for purposes of the endorsement provision--even under
AMLC's interpretation. If the statue were to require only a headcount,
it would still be a headcount of relevant copyright owners. In this
proceeding, some endorsers, for example, are attorneys that give no
indication that they are also relevant copyright owners.\199\ Some
endorsers do not give any indication of their connection to the
industry.\200\ And some endorsers who state that they are songwriters
are not clear about whether they are also relevant copyright owners for
their songs.\201\ Many of the endorsements contain ambiguities such as
these.
---------------------------------------------------------------------------
\199\ See, e.g., Jay A. Rosenthal et al. Reply.
\200\ See, e.g., Jared Burton Reply; Brandon Dudley Reply; Earl
Vickers Reply.
\201\ See, e.g., Ashley Gorley Reply; Chris Myers Reply; Jeff
Rodman Reply; Chris Xefos Reply.
---------------------------------------------------------------------------
A separate issue concerns the treatment of the international
alliances, performing rights organizations, trade groups, and other
endorsing organizations. MLCI does not contend that these types of
organizations are relevant copyright owners.\202\ AMLC, on the other
hand, appears to count not only each of its supporting organizations,
but the individual members of each of those organizations.\203\ MLCI
strongly disapproves of this approach.\204\ The Office finds it
difficult to credit these purported endorsements, as there is
insufficient evidence to demonstrate that every member of each of these
[[Page 32286]]
organizations actually endorses AMLC. While surely each referenced
association on a general level represents the interests of their
members, none of AMLC's group endorsements indicate that they have the
authority to endorse an MLC candidate on their members' behalf. For
example, the submissions do not indicate that any kind of resolution to
endorse was passed by their members, and if one was, whether their
members voted unanimously (as would be necessary to claim that every
member should be counted). In many cases, moreover, it is difficult to
tell whether the endorsements are submitted on behalf of the
organization, or from individuals associated with the organizations
acting in their personal capacities or in their capacity as an
individual board member.\205\ In fact, two organizations listed by AMLC
as endorsers in its proposal subsequently disavowed the purported
endorsements and clarified that they do not in fact support AMLC.\206\
---------------------------------------------------------------------------
\202\ See MLCI Proposal at 100, Ex. 11-9 (referring to them as
``non-musical work copyright owner[ ] groups'').
\203\ See AMLC Proposal at 47-48 (claiming its endorsers
``represent hundreds of thousands of separate and unique music
publishers whose music is distributed on digital streaming services
in the United States'').
\204\ See MLCI Reply at 11 (``MLC[I] would never claim that,
simply by virtue of a trade group endorsement, each songwriter and
publisher member of the trade group can be deemed to endorse and
support MLC[I], as that would be misleading.'').
\205\ See, e.g., AMLC Proposal at 95 (letter from the Chairman
of the Asia-Pacific Music Creators Alliance, providing no
information about the organization or its membership, and stating
that ``I hereby voice my support to'' AMLC) (emphasis added); id. at
98 (same with respect to Alianza Latinoamericana de Compositores y
Autores de M[uacute]sica); id. at 103 (same with respect to Pan-
African Composers' and Songwriters' Alliance); see also AMLC Ex
Parte Meeting Summary at 24 (``Some [organizational] endorsements
were interpreted to be an endorsement by the individual, and others
on behalf of the entire membership.'').
\206\ See APRA AMCOS Reply at 1 (clarifying that APRA AMCOS does
not endorse AMLC and was ``misrepresented in the AMLC's
submission,'' and that the letter appended to AMLC's proposal was
``signed by a single writer director of the APRA board and does not
represent the commitment or support of our organization, nor does
the letter state anywhere that APRA itself has offered any such
institutional endorsement''); Statement from CISAC and CIAM on the
U.S. Music Licensing Collective, International Confederation of
Societies of Authors and Composers (Apr. 5, 2019), https://www.cisac.org/Newsroom/Articles/Statement-from-CISAC-and-CIAM-on-the-U.S.-Music-Licensing-Collective (``For the avoidance of doubt
and in view of the different rumours circulating, CIAM and CISAC
wish to clarify that the organisations have not endorsed either of
the competing companies for the U.S. MLC.'').
---------------------------------------------------------------------------
If the Office were to credit these kinds of endorsements, it would
raise unresolvable practical problems. For many of these organizations,
no membership numbers are provided,\207\ and for others, only an
indefinite range or rounded figure is given, making a precise headcount
impossible.\208\ Additionally, without a list of member names, the
Office cannot determine whether individual members are being counted
more than once due to membership in multiple endorsing organizations or
because the individual filed his or her own comment with the Copyright
Office directly.\209\ By not identifying purported endorsing members,
the possibility also exists for conflicting endorsements.\210\ For
example, AMLC board members Zoe Keating, Maria Schneider, and Rick
Carnes appear to be affiliated with ASCAP,\211\ which endorses MLCI.
These individuals presumably would object to MLCI counting them among
its endorsers merely because ASCAP has endorsed MLCI.
---------------------------------------------------------------------------
\207\ See, e.g., AMLC Proposal at 95 (Asia-Pacific Music
Creators Alliance); id. at 98 (Alianza Latinoamericana de
Compositores y Autores de M[uacute]sica); id. at 102 (Society of
Authors and Composers of Colombia); id. at 104 (Screen Composers
Guild of Canada); id. at 106 (ABRAMUS/ALCAM).
\208\ See, e.g., id. at 99 (stating that European Composer and
Songwriter Alliance ``represents over 50,000 professional composers
and songwriters''); id. at 100 (stating that MCNA has an
``approximate collective membership of between 7,500 to 8,500
songwriters and composers''); id. at 105 (stating that Music Answers
has ``more than 3,500 supporters''); SGA Reply at 1 (``membership
ranges between 3,500 and 5,000 members'').
\209\ For example, it seems that the memberships of SGA and
Screen Composers Guild of Canada may be subsumed within the
membership of MCNA. See AMLC Proposal at 100 (listing SGA and SCGC
as ``member organizations'' of MCNA).
\210\ While the Office made clear in the NOI that endorsements
need not be exclusive, this is a different issue that speaks to
whether the candidate is in fact supported by an individual.
\211\ See Sue (or In a Season of Crime), ACE Repertory, https://www.ascap.com/repertory#ace/search/workID/888244289 (last visited
June 24, 2019) (listing Maria Schneider's PRO affiliation as ASCAP);
Across the Street (Live), ACE Repertory, https://www.ascap.com/repertory#ace/search/workID/886237406 (last visited June 24, 2019)
(listing Zoe Keating's PRO affiliation as ASCAP); Hangin Around, ACE
Repertory, https://www.ascap.com/repertory#ace/search/workID/380230553 (last visited June 24, 2019) (listing Rick Carnes's PRO
affiliation as ASCAP).
---------------------------------------------------------------------------
Lastly, AMLC's proposal refers to ``100+ various individual
composers/writers/publishers/organizations who have signed an AMLC
endorsement document'' and ``600+ endorsements via [the] AMLC
website,'' which suffer from the same kinds of practical problems.\212\
Because these individuals are not specifically identified, the Office
cannot determine their precise number or if any of them additionally
submitted comments directly to the Office such that they may be counted
more than once.
---------------------------------------------------------------------------
\212\ AMLC Proposal at 48.
---------------------------------------------------------------------------
Nonetheless, even if these ambiguities are resolved in favor of
counting each endorsement (except for the individual members of the
endorsing organizations discussed above and the two organizations that
repudiated their purported endorsements), AMLC still would have
substantially fewer endorsements than MLCI.\213\ Applying these
assumptions, AMLC would have around 1,000 endorsements, while MLCI
would have about three times that number. Even if based only on MLCI's
Supporting Copyright Owners and the songwriters listed in MLCI's
proposal who identified as self-published, MLCI would still have
hundreds more endorsers than all of the comments submitted in support
of AMLC. Thus, under both the proper metric of market share, and the
alternative metric of number of copyright owners, MLCI is the candidate
that satisfies the endorsement requirement.
---------------------------------------------------------------------------
\213\ The Office's methodology was as follows. First, the Office
counted all endorsements provided by AMLC and MLCI in their
respective proposals, including counting all proposed board and
committee members. Then, the Office counted every endorsement
contained in other comments. The Office did not, however, count the
individual members of any endorsing groups or organizations for the
reasons stated above. To be as equitable as possible, the Office
treated every endorsement as coming from a relevant copyright owner,
except where the record affirmatively stated otherwise. Because AMLC
did not provide the identities of the bulk of their endorsers, the
Office could not compare most of the endorsers from AMLC's proposal
to the individual endorsements received in the comments, meaning the
Office could not ascertain whether there might be duplicate
endorsements. Because the Office could not deduplicate AMLC's
endorsements, the Office did not deduplicate MLCI's endorsements
either, so as to apply a consistent methodology to both candidates.
---------------------------------------------------------------------------
As noted in conclusion below, the MMA was enacted only after an
extensive effort to build consensus amongst musical work copyright
owners and songwriters with various, sometimes competing, interests.
The Register expects that the designated MLC will endeavor to equally
represent the interests of those who did not endorse it, and that
interested sides will continue to come together to make the
implementation of this historic new licensing scheme a success,
building upon the cooperative spirit that facilitated the MMA's
passage.\214\
---------------------------------------------------------------------------
\214\ See, e.g. Music Policy Issues: A Perspective from Those
Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836
Before the H. Comm. on the Judiciary, 115th Cong. 4 (2018)
(statement of Ranking Member Nadler); 164 Cong. Rec. S501, 502
(daily ed. Jan. 24, 2018) (statement of Sen. Hatch); 164 Cong. Rec.
H3522, 3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte).
---------------------------------------------------------------------------
3. Administrative and Technological Capabilities
The statute requires that the designated entity ``has, or will have
prior to the license availability date, the administrative and
technological capabilities to perform the required functions of the
mechanical licensing collective.'' \215\ The NOI requested that each
proposal include specific information to demonstrate the candidate's
ability to meet this
[[Page 32287]]
requirement, organized into enumerated categories.
---------------------------------------------------------------------------
\215\ 17 U.S.C. 115(d)(3)(A)(iii).
---------------------------------------------------------------------------
i. Overview of Proposals, Including Business Planning and Budgeting
The Office requested that each entity provide ``a business plan,
including a statement of purpose or principles, proposed schedule, and
available budgetary projections, for the establishment and operation of
the proposed MLC for the first five years of its existence.'' \216\ The
NOI noted that although the MLC designation process is separate from
the establishment of an administrative assessment by the CRJs,
``understanding the proposed funding for the MLC (in advance of the
establishment of the administrative assessment)'' and budgetary
planning generally can be ``important to confirming that the MLC will
be ready to adequately perform its required functions by the license
availability date and beyond.'' \217\ Accordingly, the Office's
interest in the candidates' budgetary materials is ``for the purposes
of this designation process only, and without prejudice to the future
administrative assessment proceeding.'' \218\
---------------------------------------------------------------------------
\216\ NOI at 65751 (requesting each plan also include ``a
description of the intended technological and/or business methods''
for accomplishing the MLC's statutory obligations).
\217\ Id. at 65752.
\218\ Id.
---------------------------------------------------------------------------
Considering both proposals at a very high level, there are a number
of similarities, including a shared intention to set up offices in or
near Nashville, Tennessee.\219\ Both candidates envision using a
primary vendor to build out the required musical works database, and to
varying degrees signaled intentions or openness to working with
additional vendors.\220\ In recognition that the creation of a
comprehensive musical works database has long been an aim of various
segments of the music community, both candidates plan to ``utilize
systems that are tested'' \221\ or ``leverage[ ] existing technology
and data providers'' \222\ Both propose to rely on automated processes
for the bulk of identifying songs recorded and matching them to
copyright holders, augmented with manual processing as needed.\223\ To
that end, both note the importance of compatibility with existing music
industry standards, including communicating information in accordance
with the Common Works Registration (``CWR'') format and DDEX standards,
and a willingness to explore other relevant existing or emerging
standards or open protocols.\224\
---------------------------------------------------------------------------
\219\ MLCI Proposal at 66; AMLC Proposal at 48, 76.
\220\ MLCI Ex Parte Meeting Summary at 2; AMLC Ex Parte Meeting
Summary at 7-9.
\221\ MLCI Proposal at 39.
\222\ AMLC Proposal at 5.
\223\ MLCI Proposal at 18-19, 41; AMLC Proposal at 10-11.
\224\ MLCI Proposal at 35, 38, 57-58; AMLC Proposal at 15; see
also Berklee College of Music & MIT Connection Science Comments at
2-5.
---------------------------------------------------------------------------
Similarly, AMLC and MLCI each express an understanding of the need
to address policies and actions related to distributions of unclaimed
accrued royalties with care, including providing adequate notice before
such distributions occur.\225\ They commit to engage in education and
outreach efforts to publicize the collective, including procedures by
which copyright owners may identify themselves to claim accrued
royalties.\226\ They both appropriately focus on the need to operate a
user-friendly claiming portal, for, as the legislative history notes,
``the simple way to avoid any distribution to other copyright owners
and artists is to step forward and identify oneself and one's works to
the collective, an exceedingly low bar to claiming one's royalties.''
\227\
---------------------------------------------------------------------------
\225\ See, e.g., MLCI Proposal at 43-44; AMLC Proposal at 18-19;
AMLC Ex Parte Meeting Summary at 14.
\226\ MLCI Proposal at 62-63; AMLC Proposal at 30-33.
\227\ S. Rep. No. 115-339, at 14 (2018) (stating that ``[t]his
process ensures that copyright owners and artists benefit'' in
contrast to views of ``some copyright owners and/or artists who
would prefer that such money be escrowed indefinitely until
claimed'').
---------------------------------------------------------------------------
Although the proposals share certain commonalities, they diverge on
details, sometimes significantly, including at times on the level or
evidence of planning disclosed in response to the NOI. These
differences were reflected in the proposed budgetary estimates,
including the specific line items, put forth by each candidate.
a. MLCI
Out of the two candidates, MLCI provides a more detailed
organizational model for its operations and reports that it ``has
already begun the process of assuring the timely acquisition of these
capabilities'' \228\ necessary to fulfill the statutory functions. This
framework is organized into three categories of activities: Strategic
Processes, defined as ``the management processes that empower the
operational capabilities of the collective''; Core Processes, defined
as ``capabilities and processes in the core tasks'' including ``how the
MLC performs the central ownership and license administration
responsibilities''; and Foundational Processes, defined as ``necessary
support capabilities and processes, usually typical of most businesses
(payroll, legal, etc.).'' \229\ These categories in turn comprise ten
functions that the MLC will carry out on behalf of songwriters, musical
works owners, and the public, explained by a series of detailed flow
charts.\230\
---------------------------------------------------------------------------
\228\ MLCI Proposal at 7.
\229\ Id. at 12.
\230\ Id. at 13.
---------------------------------------------------------------------------
While MLCI has not yet determined the precise management structure
for daily operations or full staffing, it includes a series of
organizational charts, which propose fifty-five employees.\231\ It also
has retained consultant support in overseeing technology strategy, the
RFI/RFP process, and operations design, and reports that its board
members have dedicated a considerable amount of time to this planning
process.\232\
---------------------------------------------------------------------------
\231\ Id. at 25; see id. at 25-29 (detailed description of
employee roles).
\232\ Id. at 3-4; see also MLCI Ex Parte Meeting Summary at 2.
---------------------------------------------------------------------------
MLCI intends to ``utilize a single primary vendor for core usage
processing functions, with consideration of secondary vendors to
augment in specific areas.'' \233\ Sixteen vendors participated in its
RFI process, and MLCI selected seven of those to participate in the RFP
process.\234\ MLCI notes that, in aggregate, these RFI participants
``have processed nearly 20 trillion lines of sound recording usage and
more than $4.2 billion in royalties for the U.S. territory over the
past 3 calendar years, and have more than 20 million unique works in
rights databases and existing connectivity with approximately 50,000
publishers.'' \235\
---------------------------------------------------------------------------
\233\ MLCI Ex Parte Meeting Summary at 2.
\234\ MLCI Proposal at 55 (listing RFI participants ASCAP,
AxisPoint, BackOffice, BMI, BMAT, Crunch Digital, DDEX, Gracenote,
ICE, Music Reports, Inc. (``MRI''), Open Music Initiative (OMI),
Sacem/IBM, SESAC/HFA, SOCAN/DataClef, SourceAudio, and SXWorks); id.
at 59 (listing RFP participants ASCAP, BackOffice, ICE, MRI, SESAC/
HFA, SXWorks, and Sacem/IBM); id.at Exs. 3, 4 (providing RFI and
RFP). MLCI did not include copies of RFI or RFP responses, stating
they are subject to nondisclosure agreements and include
confidential information. Id. at 59.
\235\ Id. at 56-57.
---------------------------------------------------------------------------
MLCI estimates its total startup costs through the license
availability date to be between $26 and $48 million, with annual
operating costs between $25 and $40 million.\236\ To obtain funding, it
has engaged in ``good faith negotiations with the major licensee
services in an attempt to reach agreement on voluntary contributions.''
\237\ If such an agreement is not realized, MLCI will participate in
the assessment proceeding.\238\ In that
[[Page 32288]]
event, it ``will seek bridge funding to cover any gaps,'' and expresses
confidence that ``its extensive network of support and trust throughout
the industry, and the reputations of its leadership, will assist it in
obtaining support for its continued operations.'' \239\ MLCI expects to
have no need to apply unclaimed royalties to defray costs, though it
notes that the statute permits it to do so on an interim basis.\240\
---------------------------------------------------------------------------
\236\ Id. at 31-32.
\237\ Id. at 59.
\238\ Id. at 61.
\239\ Id.
\240\ Id. at 61-62 (citing 17 U.S.C. 115(d)(7)(C)).
---------------------------------------------------------------------------
b. AMLC
AMLC aspires to adopt a leaner approach to these issues. Upon its
launch, it will rely on incumbent services and vendors that have been
``vetted and approved'' by the Digital Media Association
(``DiMA'').\241\ It intends to add technology applications, features,
and solution providers incrementally over time ``as a series of steps
on top of [this] pre-existing solid foundation.'' \242\ AMLC reports
that it ``has taken significant input from key stakeholders, potential
vendors, performing rights organizations, labels, and most importantly,
publishers and songwriters in formulating [its] technology plan,'' and
states that it will have further discussions in designing and
implementing solutions if it is designated.\243\ It intends to hire
eleven employees, and ha engaged a technology consultant.\244\ However,
AMLC cautions that ``although there ha[ve] been significant discussions
and planning . . . much of the details need to be formalized once the
mandate decision is made.'' \245\
---------------------------------------------------------------------------
\241\ AMLC Proposal at 4.
\242\ Id.
\243\ Id. at 6.
\244\ Id. at 26.
\245\ Id. at 6. AMLC subsequently reported that although several
vendors have agreed to work with it in the event it is selected as
the MLC, many ``were concerned [that] they would suffer negative
consequences if they were listed in the AMLC application.'' AMLC Ex
Parte Meeting Summary at 8. To the extent such vendors believe they
are prohibited from contracting with both candidates, that
understanding is not supported by the statute. As noted in the NOI,
``while the statutory language authorizes the MLC to arrange for
services of outside vendors, nothing suggests that such a vendor
must offer exclusive services to that MLC candidate.'' NOI at 65749.
At the same time, the statute does not regulate parties' ability to
enter into exclusive relationships or other arrangements that may
affect the information that can be disclosed in the candidates'
submissions.
---------------------------------------------------------------------------
AMLC established several requirements that potential vendors must
meet, including that the entity is ``in good standing''; has no pending
litigation; has worked with or for the major music publishers,
independent music publishers, and self-published songwriters; has
worked with at least one of the major digital service providers
(``DSPs''); and has distributed at least $100 million to rightsholders
each year for the last two years.\246\ Having held discussions with
four primary vendors, AMLC ``expects to engage foundational vendors''
DataClef and MRI to enable it to provide a comprehensive interoperable
database.\247\ It notes that DataClef has access to the CIS-NET Works
Information Database (``WID''), which includes over 81.1 million
musical works.\248\ Beyond these vendors, AMLC states that additional
incumbent entities employed by DSPs have confirmed that if AMLC is
designated, they would play a role if requested or needed.\249\
---------------------------------------------------------------------------
\246\ AMLC Ex Parte Meeting Summary at 7-8.
\247\ AMLC Proposal at 4; see also AMLC Ex Parte Meeting Summary
at 8-9 (indicating AMLC selected DataClef as their vendor, as well
as a continued willingness to consider other vendors).
\248\ AMLC Proposal at 7-8. It is unclear how DataClef qualifies
as a vendor under AMLC's criteria, as it was launched in late 2018
and would not have distributed at least $100 million over the last
two years. See SOCAN Launches Dataclef Music Services (Oct. 22,
2018), https://www.socan.com/socan-launches-dataclef-music-services/
.
\249\ AMLC Proposal at 4.
---------------------------------------------------------------------------
In response, MLCI expresses concern regarding the perceived lack of
explanation of AMLC's RFI process, and doubts the ability of the
potential AMLC vendors to provide key capabilities such as access to
relevant databases, specifically challenging whether AMLC will be
legally entitled to access the WID for its purposes.\250\
---------------------------------------------------------------------------
\250\ MLCI Reply at 22-24 (``Access to the CIS-NET WID is a
benefit for CISAC member societies, but a CISAC member like SOCAN
would not have authority to sublicense the WID to anyone else it
wants, be it DataClef or the collective.'').
---------------------------------------------------------------------------
AMLC submitted substantially lower cost estimates for its
activities, estimating total costs of approximately $43.9 million for
its first five years, broken out across fewer categories than
MLCI.\251\ Like MLCI, AMLC intends to negotiate with DiMA on a final
budget to be submitted to the CRJs for approval.\252\ AMLC does not
intend to utilize debt, except perhaps during the initial MLC startup
phase.\253\ AMLC believes it is inappropriate to apply songwriters' and
publishers' royalties to cover the MLC's operating costs, but states
that interest income earned from the unclaimed accrued royalties may be
used to defer initial operating costs during the startup phase.\254\
---------------------------------------------------------------------------
\251\ AMLC Proposal at 28.
\252\ Id.
\253\ Id. at 28-29 (outlining potential sources of debt
financing).
\254\ Id. at 29.
---------------------------------------------------------------------------
MLCI characterizes AMLC's budget and development timeframe as vague
and unrealistic.\255\ Noting that AMLC's cost projections are far below
the $30 million annual cost estimate provided by the Congressional
Budget Office (``CBO''),\256\ MLCI argues that AMLC's budget ``would
result in a grossly underfunded collective that could not diligently
protect the rights and royalties of songwriters and copyright owners.''
\257\ Other commenters, some but not all affiliated with AMLC, praised
AMLC's approach as reflecting the advantages of a startup or small
company, or otherwise favored its proposed budget.\258\
---------------------------------------------------------------------------
\255\ MLCI Reply at 25-29.
\256\ CBO, Congressional Budget Office Cost Estimate, S. 2823
Music Modernization Act (Sept. 12, 2018, revised Sept. 17, 2018),
https://www.cbo.gov/system/files/2018-09/s2823.pdf.
\257\ MLCI Reply at 25.
\258\ See Peter Jessel Reply at 1; Peter Resnikoff Reply at 1;
H. Hendricks Reply at 1; Alfons Karabuda Reply at 1; Betsy Tinney
Reply at 1.
---------------------------------------------------------------------------
Indeed, in some instances it is unclear whether AMLC's budget
estimates anticipate each of its statutorily required activities in the
manner it envisions executing them, which makes it difficult to assess
AMLC's degree of advance planning. For instance, AMLC does not indicate
which expenditures are encompassed by its ``OpEx'' budget item, which
averages approximately $600,000 per year during its first two full
years.\259\ By comparison, MLCI's estimated operational costs include
specific line items for premises, office expenses, accounting services,
finance and insurance, and travel expenses, among other
expenditures.\260\ The comparative lack of specificity calls into
question the extent to which AMLC considered the full range of the
MLC's necessary operational costs. Similarly, AMLC projects annual
expenditures of approximately $600,000 to $730,000 for licensing and
legal activities for the first five years of its operation.\261\ It is
unclear whether these allocated amounts fully anticipate the MLC's
statutory obligations in this area, which include participating in
Copyright Office rulemakings and the CRJs' administrative assessment
proceedings, and ``[e]ngag[ing] in legal and other efforts to enforce
rights and obligations'' under section 115(d), ``including by filing
bankruptcy proofs of claims for amounts owed under licenses'' or
commencing actions for damages and injunctive relief in federal
court.\262\
---------------------------------------------------------------------------
\259\ See AMLC Proposal at 28.
\260\ See MLCI Proposal at 32.
\261\ AMLC Proposal at 28.
\262\ 17 U.S.C. 115(d)(3)(C)(i)(VIII)-(XI); id. at
115(d)(6)(C)(i); see also AIPLA, 2017 Report of the Economic Survey
44 (2017).
---------------------------------------------------------------------------
[[Page 32289]]
ii. Ownership Information, Matching, and Claiming Process
As noted, a key aspect of the MLC's collection and distribution
responsibilities includes ingesting data regarding musical works and
uses under the license, and identifying musical works and copyright
owners, matching them to sound recordings, and ensuring that a
copyright owner gets paid as he or she should.\263\
---------------------------------------------------------------------------
\263\ Indeed, many interested commenters focused on these
``core'' or ``principal'' duties. See, e.g., Recording Academy Reply
at 3; DiMA Reply at 2.
---------------------------------------------------------------------------
Both proposals appropriately focus on this core task.\264\ As
noted, both AMLC and MLCI intend to employ established and standard
data formats and architectural practices to support data exchange
functions, including development of Application Programming Interfaces
(``APIs'') to allow bulk processing of data for larger users \265\ and
supporting a variety of formats for new submissions ``to accommodate
copyright owners who are unable to convert data to standard formats
themselves.'' \266\ Each expresses a willingness to utilize current and
emerging technologies to match sound recordings to musical works,
including hashes and watermarking or fingerprinting technologies.\267\
Finally, both wisely point to usage reporting as the primary
determinant with respect to prioritization of matching resources.\268\
---------------------------------------------------------------------------
\264\ See Recording Academy Reply at 3 (``Both have also
demonstrated a clear commitment to the rights of songwriters.'').
\265\ MLCI Proposal at 34-35, 37; AMLC Proposal at 5, 11, 15.
Berklee College of Music and MIT Connection Science also noted the
importance of the MLC using standardized APIs open protocols and
accessibility. Berklee College of Music & MIT Connection Science at
2-5.
\266\ MLCI Proposal at 37; see AMLC Proposal at 10 (similar,
referencing need to ingest comma separated values (``CSV'') files,
Excel files, DDEX files, or data via an online user interface with
fields that the end user will populate).
\267\ AMLC Proposal at 16; MLCI Proposal at 48.
\268\ MLCI Proposal at 41 (stating ``[t]otal royalties accrued
has been a common metric for prioritization, simply because it aims
to minimize the total amount of unmatched royalties'' and that
``[u]sage and vintage of usage are metrics that are related to total
royalties''); AMLC Proposal at 12.
---------------------------------------------------------------------------
In terms of populating ownership information, MLCI envisions
updates to the database being built into industry deals involving
assignment of copyright interests, and by establishing a simple, user-
friendly, and ADA-compliant web portal.\269\ According to MLCI,
``[o]nce the rights database, claiming portal, and license
administration are fully operational, the industry will have a single,
transparent, publicly-accessible resource for establishing and
identifying ownership of mechanical rights.'' \270\ MLCI ``would
undertake targeted activities to clean and improve the initial
ownership and matching data using independent data assets . . . drawing
on MLC[I]'s unparalleled access to data resources from its industry
supporters.'' \271\ While noting that all usage data would be run
through matching software, MLCI notes that it plans to develop policies
to address issues related to calibration of confidence levels to ensure
reliable matching, and prioritization of manual processing through the
operations advisory committee in the context of specific unmatched
pools.\272\ MLCI asserts that for at least two years beyond the license
availability date, and perhaps longer, any previously accrued unmatched
uses will be analyzed by the MLC matching systems and will be publicly
available on the rights portal for members of the public to claim.\273\
MLCI adds that it intends to make repeated attempts to match ``until
such time as the Unclaimed Royalties Committee and the Board of
Directors . . . determine that a distribution of those unmatched
royalties is fair and appropriate under the statute.'' \274\
---------------------------------------------------------------------------
\269\ MLCI Proposal at 37 & n.6.
\270\ Id. at 34.
\271\ Id.
\272\ Id. at 41; see also MLCI Ex Parte Meeting Summary at 3
(stressing ``the importance of robust manual efforts to match uses
and locate owners of works'').
\273\ MLCI Proposal at 43-44.
\274\ Id. at 44. The Recording Academy urged the Register to
seek further information on MLCI's commitments to match works and on
when such commitments may reasonably be exhausted. See Recording
Academy Reply at 4-5. In its ex parte meeting with the Office, MLCI
reiterated its intention to ``exceed the statutory minimums related
to notice and distribution in order to maximize matching success.''
MLCI Ex Parte Meeting Summary at 3.
---------------------------------------------------------------------------
MLCI contends that ``[t]here is no standard format for modeling
musical works ownership agreement information in databases,'' as there
is disagreement over which terms are important to capture, a problem
paralleled in capturing chain of title data.\275\ MLCI therefore
presumes a necessity to merge ``information between databases,'' which
``can require complex reformatting of data.'' \276\ In response, DiMA
suggested that ``it may be more effective and efficient to focus
efforts on increasing the accuracy of automated methods.'' \277\ DiMA
also suggests that improving the standardization of metadata might be
achievable at lower cost by making such issues a focus of education and
outreach efforts, as distinguished from the more labor- and cost-
intensive approach of allowing data submission in a variety of
different formats.\278\ In its meeting with the Office, MLCI reiterated
its intention to accept submission of data in multiple formats as a way
to accommodate the needs and technical sophistication of a wide array
of copyright owners. It also affirmed its commitment to education and
outreach, noting that such efforts will inform the design of its rights
portal and options for data submission.\279\
---------------------------------------------------------------------------
\275\ MLCI Proposal at 36.
\276\ Id.
\277\ DiMA Reply at 10.
\278\ Id. at 10-11.
\279\ MLCI Ex Parte Meeting Summary at 2-3.
---------------------------------------------------------------------------
AMLC commits to continually engaging with stakeholders to monitor
and review new frameworks, and has established an advisory technology
committee comprised of members with significant technology
backgrounds.\280\ AMLC plans to ``build a robust interface to allow for
bulk transitions of catalog or individual ownership changes . . . to be
properly updated through the chosen authoritative data partners and
vendors.'' \281\ AMLC professes that its system will be designed in
part for self-published songwriters, who represent the largest
percentage of music owners but in many cases have the lowest level of
understanding of copyright requirements.\282\ AMLC anticipates that
incomplete DSP data will be analyzed and segmented based on the
distributor of the underlying recording, and repeatedly expresses
optimism that the MLC and DSPs could work collaboratively to address
such issues.\283\
---------------------------------------------------------------------------
\280\ AMLC Proposal at 15-16, 36.
\281\ Id. at 10.
\282\ Id.
\283\ See, e.g., id. at 4 (``our first priority is to meet with
DiMA members and other DSPs to collaborate, white-board, diagram/
discuss and further work through technology topics'').
---------------------------------------------------------------------------
Regarding the claiming process specifically, MLCI is confident that
its ownership claiming portal will be usable by stakeholders of any
sophistication level, and it will dedicate staff to assist copyright
owners with troubleshooting and claims submission.\284\ Likewise, AMLC
intends to utilize DataClef's pre-built ``claiming portal,'' allowing
copyright owners to search a database of unmatched and/or partial
ownership recordings, and identify recordings of their
compositions.\285\ AMLC envisions implementing a change management
module and reliance upon ``chosen authoritative data partners and
vendors.'' \286\ It proposes that its portal will stream 30-second
preview clips to
[[Page 32290]]
allow rightsholders to confirm matches.\287\
---------------------------------------------------------------------------
\284\ MLCI Proposal at 37 & n.6.
\285\ AMLC Proposal at 9.
\286\ Id. at 9-10.
\287\ Id. at 9.
---------------------------------------------------------------------------
In response to the Office's request for ``target goals or estimates
for matching works in each of the first five years,'' \288\ MLCI states
that its target ``is, and will always be, 100% success.'' \289\ But it
argues that because match rates are easily manipulated, ``the critical
question is not match rate, but the quality of matches.'' \290\
Therefore, MLCI will ``fine-tune[ ]'' its algorithms based on system
complaints, feedback, and disputes, and will investigate inaccurate
matches.\291\ MLCI also notes that it will explore developments in
algorithms, machine learning, and artificial intelligence.\292\
---------------------------------------------------------------------------
\288\ NOI at 65751.
\289\ MLCI Proposal at 42.
\290\ Id. at 43.
\291\ MLCI Proposal at 43; see also MLCI Ex Parte Meeting
Summary at 2-3.
\292\ MLCI Proposal at 39.
---------------------------------------------------------------------------
For its part, AMLC believes that it can establish a dataset of 80
million works and recordings, ``with corresponding works that are
matched with high confidence to recordings of approximately 70%, or 56
million works.'' \293\ It estimates that the percentage of works
matched will exceed 90% by 2024.\294\ AMLC's estimates are based on
several key assumptions, including 15% growth per year in works and
recordings used in covered activities.\295\
---------------------------------------------------------------------------
\293\ AMLC Proposal at 12.
\294\ Id. at 12.
\295\ Id. at 12-13.
---------------------------------------------------------------------------
Based on these submissions, the Copyright Office finds that both
candidates have demonstrated a reasonable ability to acquire and build
the necessary data processing capabilities for ownership
identification, matching, and claiming processes. In particular, the
Office appreciates the level of detail provided by both entities on
their approach to matching works, description of plans to implement
public claiming portals, and commitment to prioritizing usage, or total
royalties accrued, when focusing on minimizing the incidence of
unmatched sound recordings. The Office also appreciates that both
candidates intend to adhere to established formats for data transfers,
as well as use standard identifiers currently used by the global music
industry. The Office expects the selected designee to follow through on
these commitments, to continue to explore technological developments in
matching works, and to publicly disclose and update the methods used in
its matching efforts.
iii. Dispute Resolution
As noted, the MLC dispute resolution committee will establish
policies and procedures for copyright owners to address disputes
relating to ownership interests in musical works. Neither candidate has
developed detailed procedures governing this committee's activities,
but both provided sufficient information regarding their understanding
of the scope of its responsibilities.
MLCI will address disputed claims of ownership using existing tools
commonly used in the industry, including algorithms used to detect
fraud, establishing a process by which users can be authenticated, and
tracking changes made by MLCI employees.\296\ It notes that its dispute
resolution committee and board have extensive experience in ownership
matters, including the role of abandoned property laws, processes for
validating copyrighted arrangements of public domain works, public
domain fraud, and implementation of legal holds.\297\
---------------------------------------------------------------------------
\296\ MLCI Proposal at 44-45.
\297\ Id. at 45-46.
---------------------------------------------------------------------------
Similarly, AMLC states that its conflict resolution committee will
recommend and implement policies to address discrepancies, disputes,
and fraudulent claims.\298\ It reiterates that it will work with DSPs
to identify the origin of false claims and create incentives for
distributors to reduce fraud.\299\ As noted above, it also envisions
employing a robust data change management module.\300\
---------------------------------------------------------------------------
\298\ AMLC Proposal at 14.
\299\ Id.
\300\ Id. at 10.
---------------------------------------------------------------------------
In ex parte meetings, both MLCI and AMLC confirmed their
understanding that the dispute resolution committee's role does not
include adjudicating ownership disputes on the merits. Rather, both
expressed their understanding that the committee's function is limited
to the establishment of policies and procedures to govern the
resolution of such disputes.
iv. Maintenance of Musical Works Database
The Office requested input regarding the operation and maintenance
of a well-functioning database, including specific information on how
each entity would address issues of security, redundancy, privacy, and
transparency.\301\ Both depict a technological approach that is fully
scalable and reliable, with the ability to handle large data sets.\302\
They also each commit to establishing an information security
management system that is certified with ISO/IEC 27001 and meets the EU
General Data Protection Regulation requirements, and other applicable
laws, and to employing redundancy practices to minimize data loss.\303\
---------------------------------------------------------------------------
\301\ NOI at 65751.
\302\ AMLC Proposal at 16; MLCI Proposal at 49; see also DiMA
Reply at 9-10 (addressing potential volume of transactions to be
processed by the MLC).
\303\ MLCI Proposal at 50; AMLC Proposal at 17.
---------------------------------------------------------------------------
While its policies and procedures for accessing information in the
databases are not yet finalized, MLCI commits to following the
regulations promulgated by the Register concerning ``the usability,
interoperability, and usage restrictions of the musical works
database.'' \304\
---------------------------------------------------------------------------
\304\ MLCI Proposal at 50 (quoting 17 U.S.C. 115(d)(3)(E)(vi)).
---------------------------------------------------------------------------
AMLC proposes two types of access to the musical works database.
First, the general public would have access to ``a minimal amount of
data that is generally available to the public already.'' \305\ Second,
AMLC will offer ``DSPs and other key constituents'' access to feeds
with ``more comprehensive data that is generally not public, but
necessary for proper royalty and ownership processing (such as splits,
territorial rights etc.).'' \306\ It proposes to develop data access
rules ``in collaboration between publishers'' to ensure confidentiality
and compliance with domestic and international privacy and data
security policies.\307\ AMLC's submission does not explicitly
acknowledge the statutory requirements for provision of access,
although elsewhere AMLC has pledged to conform any policies to
subsequent regulatory activities.\308\
---------------------------------------------------------------------------
\305\ AMLC Proposal at 17 (detailing fields with respect to
musical works and sound recordings).
\306\ Id.
\307\ Id.
\308\ Id. at 78 (AMLC bylaw art. 3).
---------------------------------------------------------------------------
Based on this information, the Office finds that both MLCI and AMLC
have the capability to maintain and provide access to the required
public database of musical works. The Office appreciates each entity's
commitment to ensure compliance with all relevant legal obligations
with respect to privacy and security.
v. Notices of License, Collection and Distribution of Royalties,
Including Unclaimed Accrued Royalties
The MLC's administrative role includes accepting notices of license
(and terminating them when the licensee is in default), and collecting
and distributing royalties for covered
[[Page 32291]]
activities, including unclaimed funds after the prescribed holding
period.\309\
---------------------------------------------------------------------------
\309\ 17 U.S.C. 115(d)(3)(C)(i)(I)-(II).
---------------------------------------------------------------------------
With respect to notices of license, MLCI reports that it ``will
strictly enforce the monthly reporting requirements under Section
115(d)(4)(A), and will promptly issue notices of default and
terminations of licenses where applicable.'' \310\ It adds that it will
distribute royalty pools obtained through legal proceedings to
copyright holders based on usage reports and that where funds do not
match the full amount of royalties due, they would be distributed on a
pro rata basis.\311\ AMLC notes that its board members have ``extensive
experience in all matters of resolution of royalty collections and
payments, including bankruptcy proceedings,'' and therefore it will be
well positioned to adopt policies ``to manage all known situations''
related to licensee and licensor payments.\312\
---------------------------------------------------------------------------
\310\ MLCI Proposal at 51.
\311\ Id. at 52.
\312\ AMLC Proposal at 18.
---------------------------------------------------------------------------
With respect to distributions, MLCI intends to provide ``prompt,
complete, and accurate payments to all copyright owners.'' \313\ It
interprets section 115(d)(3)(J)(i)(I)--which provides that the first
distribution of unclaimed accrued royalties ``shall occur on or after
January 1 of the second full calendar year to commence after the
license availability date''--to provide that no such distribution shall
occur prior to 2023.\314\ Additionally, MLCI interprets the statute as
providing discretion to retain unclaimed accrued royalties beyond the
statutory holding period to allow for additional efforts at matching
and claiming, and promises to do so where there is ``reasonable
evidence'' that such efforts may bear fruit.\315\ It is committed to
diligent efforts to match uses and works, including ``robustly and
relentlessly'' deploying its matching system with respect to unmatched
works, and holding unclaimed accrued royalties beyond the statutory
eligibility for distribution, to obtain more matches, and distribute
more royalties to rightful owners.\316\
---------------------------------------------------------------------------
\313\ MLCI Proposal at 52.
\314\ 17 U.S.C. 115(d)(3)(J)(i)(I); MLCI Proposal at 52.
\315\ Id. at 52-53.
\316\ Id. at 43-44, 53-54 (discussing ``mak[ing] information on
its unmatched works available to the public on its rights portal''
and undertaking ``significant outreach to educate the public on
accessing this information and making claims'').
---------------------------------------------------------------------------
MLCI further states that its royalty payment systems will comply
with relevant tax law obligations, ``including collection of valid
documentation (e.g., IRS Forms W-8 and W-9), administration of
information statements and other reporting requirements (e.g., IRS
Forms 1099 and 1042), and, where applicable, the accurate withholding
and depositing of U.S. tax payments.'' \317\ It also notes that its
board members have experience overseeing all aspects of royalty payment
processing.\318\
---------------------------------------------------------------------------
\317\ Id. at 51.
\318\ Id.
---------------------------------------------------------------------------
AMLC does not specifically address timing of initial and annual
distribution of unclaimed royalties, instead emphasizing that it
intends to keep distribution of unclaimed royalties to the lowest
possible limit, and to only make such distributions ``as a last resort
after every possible effort is put into identifying the rights
holder(s).'' \319\ It further notes that its unclaimed royalties
committee will seek to develop a policy ``to ensure the reserve fund is
sized and managed appropriately.'' \320\ In addition, AMLC plans to use
actuarial data to make more accurate projections regarding accrued and
unclaimed liquidations, interest earned, and potential claims.\321\
---------------------------------------------------------------------------
\319\ AMLC Proposal at 18-19.
\320\ Id. at 19.
\321\ Id.
---------------------------------------------------------------------------
AMLC will outsource royalty payment to established payment vendors,
``or an entity that . . . has built the needed workflow/infrastructure
into the existing work process that can be repurposed for AMLC
distributions, such as . . . MRI and/or DataClef.'' \322\ This entity
``will also be responsible for the storage of personal information
(including tax ID, name, address, bank info etc.) under security
compliant systems.'' \323\
---------------------------------------------------------------------------
\322\ Id. at 18.
\323\ Id.
---------------------------------------------------------------------------
In general, the Office is persuaded that both candidates, through
vendors or a combination of vendors and in-house capabilities, are
capable of carrying out functions relating to collection and
distribution of royalties. As with some other requirements, however,
MLCI's submission provides a more thorough explanation of how it would
approach these matters. It articulates several policies it intends to
implement to maximize matching, including holding accrued royalties
beyond the statutory holding period, making information on unmatched
works available on a public portal, and undertaking outreach and
education efforts. Moreover, AMLC does not specifically address MLC
functions regarding notices, recordkeeping, and collection under the
license. For these reasons, MLCI has made a more persuasive showing
with respect to these requirements.
With respect to the distribution of unclaimed, accrued royalties,
the Copyright Office agrees with MLCI that the statute does not permit
the first such distribution to occur before January 1, 2023.\324\ The
Office also agrees that unclaimed accrued royalties may be retained
beyond the statutory holding period.\325\
---------------------------------------------------------------------------
\324\ See 17 U.S.C. 115(d)(3)(J)(i)(I) (``The first such
distribution shall occur on or after January 1 of the second full
calendar year to commence after the license availability date, with
not less than 1 such distribution to take place during each calendar
year thereafter.'').
\325\ See id. at 115(d)(3)(H)(i) (``The mechanical licensing
collective shall hold accrued royalties associated with particular
musical works (and shares of works) that remain unmatched for a
period of not less than 3 years after the date on which the funds
were received by the mechanical licensing collective, or not less
than 3 years after the date on which the funds were accrued by a
digital music provider that subsequently transferred such funds to
the mechanical licensing collective pursuant to paragraph (10)(B),
whichever period expires sooner.'') (emphasis added).
---------------------------------------------------------------------------
vi. Education and Outreach
Both candidates appear to have developed multifaceted education and
outreach plans to fulfill this statutory duty.\326\ MLCI notes that it
is already engaged in significant education and outreach efforts to
inform the relevant industries and the general public.\327\ It plans to
continue these efforts through the MLC's launch, and thereafter will
``provide regular information and updates to the public,'' including
through ``press releases, social media, articles and advertisements in
trade publications, and speaking engagements at music industry events,
conferences, and festivals.'' \328\ MLCI notes that its board includes
prominent music industry professionals who will use their expertise and
connections to ensure that information is disseminated throughout the
industry.\329\
---------------------------------------------------------------------------
\326\ See generally, MLCI Proposal at 62-63; AMLC Proposal at
30-33.
\327\ MLCI Proposal at 62.
\328\ Id. at 63.
\329\ Id.
---------------------------------------------------------------------------
AMLC has developed a strategy focused on three tasks: Engagement,
education, and follow-up efforts.\330\ It seeks to reach as many
potential users as possible through a variety of channels, including
advertising, social media, industry conferences, and sponsorships, and
relying on its own board members' connections.\331\ It specifically
commits to making information available in ``English, Spanish, and
additional languages on an
[[Page 32292]]
as needed basis for targeted songwriting communities where the MLC
determines special outreach is needed.'' \332\ AMLC also plans to
produce a series of tutorial videos on specific aspects of the royalty
collection and distribution process.\333\
---------------------------------------------------------------------------
\330\ AMLC Proposal at 30-33.
\331\ Id. at 30.
\332\ Id.
\333\ Id. at 32-33.
---------------------------------------------------------------------------
The Recording Academy asserts that ``[w]ithout an effective
outreach program, the Collective will not succeed.'' \334\ While noting
that both proposals contain information regarding public outreach, the
Recording Academy suggests that both are insufficiently detailed with
respect to clear and executable plans, and how each will measure the
effectiveness of outreach.\335\ The Office questioned each candidate
about specific plans and metrics in subsequent meetings. AMLC expressed
a variety of ambitious outreach ideas, although it was not necessarily
clear whether it had yet established a specific plan and timeline (or
whether all intended activities were reflected in its budget
planning).\336\ MLCI represented that ``numerous educational and
outreach documents have been drafted and release is pending the
determination on designation.'' \337\ It plans to utilize focus groups
with respect to design of the rights portal, and leverage its board and
committee members, as well as endorsers, in national and international
outreach.\338\
---------------------------------------------------------------------------
\334\ Recording Academy Reply at 5.
\335\ Id. at 5-6.
\336\ See AMLC Ex Parte Meeting Summary at 17-20.
\337\ MLCI Ex Parte Meeting Summary at 3.
\338\ Id.
---------------------------------------------------------------------------
Ultimately, the Office finds that both candidates have the
capability to undertake the education and outreach efforts required of
the MLC. Following this designation, the selected entity should work
with the Office, the DLC, and other stakeholders to ensure that
rightsholders are adequately informed about the new licensing framework
and the MLC's functions. These efforts should include ``clear
benchmarks that measure [the MLC's] outreach effectiveness so that it
can modify and adapt its strategies and tactics to best serve the
entire songwriter community.'' \339\ In addition, as per Congress's
directive, the Office will consider best practices in education and
outreach efforts as part of its study on unclaimed royalties.\340\
---------------------------------------------------------------------------
\339\ Recording Academy Reply at 5.
\340\ Public Law 115-264, sec. 102(f), 132 Stat. at 3722-23.
---------------------------------------------------------------------------
vii. Copyright Office's Analysis
Overall, the submissions suggest that both MLCI and AMLC have or
will have the basic administrative and technological capabilities to
perform the required functions under the statute. For the reasons
discussed above, however, MLCI has demonstrated a greater capacity to
carry out several of these responsibilities. In particular, it is
apparent that MLCI has established a more detailed operational
framework and has garnered input from a broader set of interested
parties. MLCI's submission reflects substantially more detailed
planning with respect to organizational structure, vendor selection,
and collection and distribution procedures.
Indeed, the Recording Academy, a rare organization to withhold
endorsement until it was able to study each candidates' proposals,
weighed in on the perceived capabilities of the two proposals,
ultimately endorsing MLCI ``upon careful consideration of both
submissions.'' \341\ While praising the AMLC's commitment and role in
``opening up dialogue'' on issues with respect to transparency and
board representation, the Academy noted that MLCI's ``submission
embodies a thoughtful, meticulous, and comprehensive approach,''
concluding that it was ``best equipped to satisfy'' the duties of the
MMA.\342\
---------------------------------------------------------------------------
\341\ Recording Academy Reply at 2-3. The Recording Academy
noted that it represents ``thousands of working songwriters and
composers, many of whom are independent, self-published, or
unaffiliated songwriters.'' Id. at 1.
\342\ Id. at 3.
---------------------------------------------------------------------------
For somewhat similar reasons, the Copyright Office concludes that
MLCI is better equipped to operationalize the many statutory functions
required by the MMA. To be sure, AMLC's goals and principles are
laudable, and its submission includes a number of ideas that should be
given further consideration. But while AMLC's leaner approach
potentially could provide certain benefits, MLCI's planning and
organizational detail provide a more reliable basis for concluding that
it will be able to meet the MLC's administrative obligations by the
license availability date.\343\ The MLC is not a start-up venture or
small business that can adjust its rollout timing or pivot its focus;
rather, it is tasked with establishing, for the first time, a complex
and highly regulated administrative framework designed to serve all who
are subject to (or make use of) the statutory license, under legally-
mandated timeframes.
---------------------------------------------------------------------------
\343\ AMLC's failure to file a reply comment in this proceeding
underscores this conclusion.
---------------------------------------------------------------------------
MLCI's proposal as a whole reflects a more realistic understanding
of the MLC's responsibilities under this new system and indicates that
it is better positioned to undertake and execute the full range of
administrative functions required of the MLC within these critical
first five years.\344\ The Office expects that MLCI will build upon its
considerable planning in a flexible and conscientious manner that also
considers input from the to-be-designated DLC non-voting or committee
members, as well as the broader musical work copyright owner and
songwriting communities.
---------------------------------------------------------------------------
\344\ Indeed, MLCI has pointed out that its budget is far more
in line with the CBO estimate than is AMLC's. MLCI Reply at 25.
---------------------------------------------------------------------------
B. Digital Licensee Coordinator
The Office received one proposal, by DLCI, for designation as the
DLC.\345\ DLCI's founding members are five of the largest digital music
providers--Spotify USA Inc., Apple Inc., Amazon Digital Services LLC,
Google LLC, and Pandora Media, LLC. DLCI's submission includes a
proposal directly responding to the NOI, and a variety of supporting
documents such as a certificate of incorporation, bylaws, and a five-
year business plan.\346\ For the reasons described below, the Register
has concluded that DLCI meets each of the statutory criteria required
of the digital licensee coordinator, and that each of its individual
board members are well-qualified to perform the statutory functions.
Accordingly, the Register designates DLCI and its members, with the
Librarian's approval.
---------------------------------------------------------------------------
\345\ DLCI Proposal at Ex. A-1-2 (certificate of incorporation).
\346\ See DLCI Proposal.
---------------------------------------------------------------------------
As noted above, in designating a DLC, the Register must apply
similar statutory criteria regarding nonprofit status, endorsement
(from digital music providers in this instance), and ability to perform
the DLC's administrative capabilities. Unlike the MLC, the Register may
decline to designate a DLC if she is unable to identify an entity that
fulfills each of the statutory qualifications; in that event, the
statutory references to the DLC go without effect unless or until a DLC
is designated.\347\ But designation of a DLC would allow that entity to
start doing important work. The DLC's authorities and functions include
enforcing notice and payment obligations with respect to the
administrative assessment, publicizing the ability of copyright owners
to claim unmatched musical
[[Page 32293]]
work royalties through the MLC, appointing representatives of digital
music providers to the MLC's operations advisory committee and
generally representing digital music providers' interests as a non-
voting member on the MLC board, and participating in proceedings before
the CRJs and the Copyright Office.\348\ As a result, it is important
that the DLC is a well-qualified representative of both digital music
providers who take advantage of the section 115 blanket license and
significant nonblanket licensees who will benefit from the new MLC
database.
---------------------------------------------------------------------------
\347\ 17 U.S.C. 115(d)(5)(B)(iii).
\348\ See generally, id. at 115(d)(5)(C).
---------------------------------------------------------------------------
1. Organization, Board Composition, and Governance
Beginning with the first required statutory qualification, DLCI's
proposal sufficiently demonstrates that it is a nonprofit created to
carry out responsibilities under the MMA. DLCI is a Delaware nonprofit
``organized to represent digital music providers in connection with the
administration of the mechanical license provided under Section 115 of
the United States Copyright Act.'' \349\ DLCI thus satisfies the first
statutory criterion that it be a single nonprofit entity created to
carry out certain statutory responsibilities.\350\
---------------------------------------------------------------------------
\349\ DLCI Proposal at Ex. C-1; id. at Ex. A-1 (certificate of
incorporation) (stating that ``[n]o part of the net earnings of
[DLCI] shall inure to the benefit of, or be distributable to, its
members, trustees, directors, officers or other private persons.'').
\350\ 17 U.S.C. 115(d)(5)(A)(i).
---------------------------------------------------------------------------
DLCI's board is composed of the following initial members: Nick
Williamson (Apple, Inc.), Lisa Selden (Spotify), Sarah Rosenbaum
(Google), James Duffett-Smith (Amazon Music), and Cynthia Greer (Sirius
XM Radio Inc., the parent of Pandora Media, LLC). Collectively and
individually, these individuals have a significant and diverse
background in the music licensing marketplace, including representing
digital music providers and in music database administration, and thus
qualify for appointment to the board.\351\ DLCI has selected three
officers: James Duffett-Smith as board chair, Sarah Rosenbaum as
treasurer, and Lisa Selden as secretary, and anticipates hiring an
executive director.\352\ ``Subject to input from and discussion with
the MLC,'' DLCI anticipates designating a non-director, officer, or
employee to serve as the non-voting member of the MLC board; this
potentially may be DiMA's CEO.\353\
---------------------------------------------------------------------------
\351\ DLCI Proposal at Ex. C-14-17 (for example, Williamson
previously headed the ``music industry technical standards body,
DDEX''; Selden works to improve copyright matching at Spotify and,
while at ASCAP, processed royalties ``for Amazon, Apple, Pandora and
YouTube''; Rosenbaum has experience at both Google and Music
Reports, where she launched a section 115 rights-claiming portal;
and Duffett-Smith and Greer each have over fifteen years of
experience licensing music for digital services).
\352\ DLCI Ex Parte Meeting Summary at 1 (June 4, 2019); DLCI
Proposal at Ex. B-18.
\353\ DLCI Proposal at 8; see id. at Ex. B-16-18.
---------------------------------------------------------------------------
In response to a request from the Office, DLCI named its
representatives to the MLC's operations advisory committee.\354\
Because MLCI and AMLC proposed different numbers of their own
representatives to the operations advisory committee (six and four,
respectively), DLCI stated that it will ``work with the [designated]
MLC to finalize the appointees to the Committee following
designation.'' \355\ DLCI also anticipates creating several committees
not required by the MMA. The Executive Committee will exercise the
powers of the board, if and when the board exceeds nine members.\356\
The Compliance Committee will be responsible for ``receiving and
following up on reports from the MLC of non-compliant nonblanket
licensees.'' \357\ The Regulatory Committee will engage in both CRJ and
Copyright Office proceedings.\358\ And the Re-Designation Committee
will prepare for a possible redesignation of DLCI as the DLC.\359\
---------------------------------------------------------------------------
\354\ Letter from DLCI to U.S. Copyright Office at 1 (June 13,
2019) (proposed committee members are Lisa Selden (Spotify), Nick
Williamson (Apple Music), Alan Jennings (Amazon), Alex Winck
(Pandora Media LLC), and Jennifer Rosen (Google Play Music and
YouTube Music)); see also DLCI Proposal at Ex. C-12.
\355\ Letter from DLCI to U.S. Copyright Office at 1.
\356\ DLCI Proposal at Ex. B-13-14.
\357\ Id. at Ex. C-7.
\358\ Id. at Ex. C-11.
\359\ Id. at Ex. C-12-13.
---------------------------------------------------------------------------
DLCI's bylaws outline rules governing membership eligibility,
voting, and dues; meetings and schedules; its board, committees, and
officers; and other rules and operational provisions. DLCI creates
three classes of membership (principal, charter, and general); until
2024, the principal members are DLCI's founding members.\360\ Beginning
in 2024, the principal members will be determined on a share basis by
those charter members with the five highest stream counts, determined
every two years.\361\ Charter members are those who have adhered to the
mission and standards of DLCI for at least two years and have paid
relevant dues.\362\ The bylaws also set out the voting structure, a
meeting schedule, and a structure for collecting dues and funding the
DLC.\363\
---------------------------------------------------------------------------
\360\ Id. at Ex. B-2-3.
\361\ Id. at Ex. B-3.
\362\ Id. at Ex. B-2-3.
\363\ Meetings will be as-needed and at least annual, with
specified advance notice. Id. at Ex. B-7. All members have one vote,
with some exceptions. Id. at Ex. B-4. DLCI's annual budget is dues-
funded; at least 60% of is paid for by Charter Members and not more
than 40% will be paid for by General Members. Id. at Ex. B-5. The
board may also approve special assessments under certain
circumstances. Id. at Ex. B-5-6.
---------------------------------------------------------------------------
2. Endorsement
Under the second designation criterion, the DLC must be ``endorsed
by and enjoy[ ] substantial support from digital music providers and
significant nonblanket licensees that together represent the greatest
percentage of the licensee market for uses of musical works in covered
activities, as measured over the preceding 3 calendar years.'' \364\
The Office asked for ``an explanation of how the proposed DLC has
verified, calculated, and documented such endorsement and substantial
support, including how the licensee market was calculated.'' \365\ In
response, DLCI indicated that it interprets the statutory term ``uses''
as referring to ``actual use of music pursuant to covered activities,''
and that such use could be measured in ``number of subscribers, number
of streams, or amount of royalties paid.'' \366\ DLCI stated that
Congress could have chosen a different term if it wanted to measure
endorsement by reference to, for example, a percentage of music
providers engaged in covered activities or the number of musical works
available.\367\ DLCI did not disclose usage metrics for its member
companies, stating that for ``any individual music service'' usage
metrics are ``extremely confidential and proprietary.'' \368\ Instead,
DLCI offered aggregated metrics provided by the Harry Fox Agency
(``HFA'') and MRI. This information indicated that DLCI members
``represented by [HFA and MRI] combined had over 84% of the aggregate
streams, over 94% of the aggregate subscribers, and over 88% of the
aggregate royalties paid'' over the last three years.\369\
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\364\ 17 U.S.C. 115(d)(5)(A)(ii).
\365\ NOI at 65753.
\366\ DLCI Proposal at 4-5.
\367\ Id. at 4.
\368\ Id. at 5.
\369\ Id. at 5-6 (emphasis omitted).
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The Copyright Office is tasked with evaluating the support of both
digital music providers who will use the blanket license as well as
significant nonblanket licensees.\370\ But since it is currently before
the license availability date, it is unclear which digital music
providers will be taking advantage of
[[Page 32294]]
the blanket license. DLCI does not describe whether its founding
members would qualify as significant nonblanket licensees or blanket
licensees but states that it is ``committed to soliciting other
interested licensee services to participate in all aspects of the DLC''
and plans to ``bolster its support and endorsement'' going
forward.\371\
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\370\ 17 U.S.C. 115(d)(5)(A)(ii).
\371\ DLCI Proposal at 6-7; see also Oversight of the U.S.
Copyright Office, Hearing Before the H. Comm. on the Judiciary,
116th Cong. (2019) (statement of Rep. Escobar) (indicating that the
DLC should not overlook smaller digital platforms and new market
entrants).
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In submitting the aggregated HFA and MCI metrics, DLCI offers three
different criteria for evaluation (i.e., subscribers, streams, or
royalties paid). As the statutory language here is similar to the MLC
endorsement/support criteria,\372\ the Office believes that the DLC
endorsement/support standard is intended to parallel the MLC standard.
Thus, the entity designated as the DLC should be endorsed and supported
by digital music providers and significant nonblanket licensees that
together paid the largest aggregate percentage (among DLC candidates)
of total royalties from the use of their musical works in covered
activities in the United States during the statutory three-year period.
In any event, DLCI is the sole candidate, and each criterion signals
support over 80% of the relevant pool. DLCI thus satisfies the second
statutory criterion for designation.
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\372\ Compare 17 U.S.C. 115(d)(5)(A)(ii) (The DLC shall be ``a
single entity that . . . is endorsed by and enjoys substantial
support from digital music providers and significant nonblanket
licensees that together represent the greatest percentage of the
licensee market for uses of musical works in covered activities, as
measured over the preceding 3 calendar years.''), with id. at
115(d)(3)(A)(ii) (The MLC shall be ``a single entity that . . . is
endorsed by, and enjoys substantial support from, musical work
copyright owners that together represent the greatest percentage of
the licensor market for uses of such works in covered activities, as
measured over the preceding 3 full calendar years.'').
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3. Administrative and Technical Capabilities
General. In response to questions regarding its administrative
capabilities, DLCI submitted a five-year business plan, which includes
plans for establishing and enforcing administrative assessment payment
obligations, identifying unmatched musical work owners, including
outreach, participating in MLC governance and CRJ proceedings,
maintaining records of its activities, and an anticipated budget.\373\
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\373\ See NOI at 65753; DLCI Proposal at Ex. C; see also 17
U.S.C. 115(d)(5)(C) (outlining authorities and functions of DLC
regarding these topics).
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DLCI's ``primary purpose will be to coordinate the activities of
the digital music services relating to the mechanical license provided
under Section 115, including through the specific authorities and
functions identified in the statute.'' \374\ It will ``fairly represent
digital licensee services, and effectively coordinate with the MLC, to
help realize the goals of the MMA to provide licensing efficiency and
transparency, and to ensure that the new blanket licensing system is,
and remains, workable for digital music providers as well as copyright
owners.'' \375\ DLCI describes its administrative capabilities as being
``managed by subject-matter experts with relevant industry experience
and relationships'' to ``carry out its statutory functions and help
ensure that the blanket licensing system is implemented successfully,
to the benefit of all stakeholders in the industry.'' \376\
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\374\ DLCI Proposal at Ex. C-1.
\375\ Id. at Ex. C-2.
\376\ Id. at Ex. C-13.
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Membership. Although DLCI represents a large swath of the relevant
licensee market, it does not represent all licensees, and presumably
the market will see new entrants over the next five years.\377\ Indeed,
DLCI's membership is identical to DiMA's membership. DLCI has explained
that it is committed to growing its membership to other DSPs and it is
confident it will do so, noting that any digital music provider or
significant nonblanket licensee can become a member of DLCI and smaller
licensees will enjoy some protections, as the bylaws require certain
actions to be passed by a supermajority of members.\378\ DLCI's bylaws
further outline how different membership tiers will be charged dues,
and its business plan explains that operating expenses will be
``modest, and intend[ed] to minimize overhead costs to the extent
possible.'' \379\
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\377\ For example, DLCI membership does not include TIDAL,
Deezer, Soundcloud, iHeartRadio, or Napster.
\378\ DLCI Proposal at Ex. C-13-14; DLCI Ex Parte Meeting
Summary at 2.
\379\ DLCI Proposal at Ex. C-18.
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Administrative Assessment. DLCI asserts that it wishes to
``minimize the need for contested proceedings or enforcement actions,
by prioritizing negotiations and cooperation among licensees and the
MLC.'' \380\ DLCI is developing an agreement regarding the
apportionment of the administrative assessment among the digital music
licensees and significant non-blanket licensees ``and expects to be
able to establish a plan for that allocation before--or shortly after--
the DLC is designated.'' \381\ Should the administrative assessment be
decided by the CRJs, DLCI suggests it is ``uniquely positioned to
support the [Copyright Royalty Board] in its assessments of `reasonable
costs,' based on its members' experience with large-scale data
management practices.'' \382\
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\380\ Id. at Ex. C-3.
\381\ Id. at Ex. C-4, C-5.
\382\ Id. at Ex. C-6.
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While it does not endorse either candidate for the MLC, DLCI has
been communicating with the two MLC candidates ``to support the
development of efficient MLC operations and foster a collaborative
working relationship'' regarding payment enforcement
responsibilities.\383\
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\383\ Id. at Ex. C-3.
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MLC Participation. DLCI hopes that its representatives ``will be
able to help facilitate discussions between the MLC and DLC regarding
the ongoing evaluation of the administrative assessment, and help
streamline any potential [Copyright Royalty Board assessment]
proceedings'' and apportionment.\384\ While the administrative
assessment proceeding will be conducted by the CRJs and its cost is
beyond the ambit of the designation process, the Office notes that in
some areas, DiMA--whose membership is coextensive with DLCI's founding
and current members--appeared to envision a narrower range of
activities, such as those related to manual claims processing and
enforcement, than either of the MLC candidates.\385\ Given the nascent
status of operations, the Office would expect DLCI's participation on
the MLC board to be flexible, as the Office expects from the MLC. In
any event, DLCI suggested that coordination and communication may
improve following conclusion of the designation process.
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\384\ Id. at Ex. C-9-10.
\385\ Compare DiMA Reply Comments at 10, and DLCI Ex Parte
Meeting Summary at 2, with MLCI Proposal at 36 (``Merging data from
multiple sources on conflicts will require significant manual
processing and will be very resource-intensive.'').
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Confidentiality. To fulfill its statutory function of records
maintenance, DLCI selected a secretary who will be responsible for
``ensuring that books, reports, statements, certificates, and all other
documents and records are properly kept and filed'' \386\ and for
``managing the confidentiality and security of sensitive information''
shared between it and the MLC.\387\ With respect to confidentiality and
the DLC representative on the MLC board, DLCI states that in addition
to designating a
[[Page 32295]]
non-DLCI director, officer, or employee, it plans on ``establishing,
through agreement, appropriate limitations on the information that may
be shared between [the MLC and DLC], as well as procedures for
shielding information concerning individual licensee service members of
the DLC from other licensee service members.'' \388\ If necessary, DLCI
states that it could address any confidentiality or administration
issues with the MLC's vendors in specific agreements.\389\ The
Copyright Office is hopeful that relevant parties will agree on
appropriate procedures to protect confidential, proprietary, or
otherwise sensitive information, and notes that the Register has
ultimate responsibility to proscribe regulations related to the
protection of confidential information by the MLC, DLC, and their
employees, committees, or board members.\390\
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\386\ DLCI Proposal at Ex. C-11; DLCI Ex Parte Meeting Summary
at 1.
\387\ DLCI Proposal at Ex. C-12.
\388\ NOI at 65753; DLCI Proposal at 8; see also id. at Ex. C-9.
\389\ DLCI Proposal at 10.
\390\ 17 U.S.C. 115(d)(12)(C).
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Education and Outreach. DLCI expects to ``develop standardized text
identifying and providing contact information for the MLC, and
instructions for how a songwriter or other copyright owner of musical
compositions can claim accrued royalties by providing the necessary
information to the MLC'' for digital licensees to post on their
services.\391\ DLCI generally expressed intentions to engage in
educational efforts and plans to coordinate outreach efforts with the
MLC to inform songwriters and publishers of the MLC and how to claim
royalties, including by ``develop[ing] a protocol to guide its members'
individual outreach'' and ``participat[ing] in songwriter and publisher
industry events, including those organized by the MLC.'' \392\ DLCI has
also committed to participating in outreach events with the Copyright
Office.\393\
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\391\ DLCI Proposal at Ex. C-8.
\392\ Id.
\393\ DLCI Ex Parte Meeting Summary at 2.
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The Office finds that DLCI has addressed the main issues regarding
its administrative capabilities. DLCI proposed a thorough and
thoughtful governance structure, criteria for membership, and dues
structure, and appears well-positioned to participate in an
administrative assessment proceeding if necessary. Other DLCI
functions, such as educational and outreach efforts, plans to enforce
notice and payment obligations, and ensuring that DLCI has the broadest
possible support of the licensee market, appear more inchoate and may
benefit from continued refinement. Overall, the Office concludes that
DLCI satisfies the third statutory criterion for designation as the DLC
and has demonstrated a commitment to building out its operations and
execution of its statutory functions.
C. Conclusion
For the reasons set forth above, the Register is selecting and
designating MLCI and DLCI, and their individual board members, which
Librarian approves. MLCI has demonstrated it meets each of the
statutory criteria; indeed, it is the only candidate that satisfies the
requirement of being endorsed by, and enjoying substantial support
from, musical work copyright owners that represent the greatest
percentage of the licensor market for covered activities in the past
three years. Further, by articulating a more thoughtful, methodical,
and comprehensive approach towards executing the many important
administrative and technological duties of the collective, MLCI has
also demonstrated that it is better positioned to perform the required
functions. The Register has reviewed and determined that each of MLCI's
individual board members are well-qualified to serve on the board in
accordance with the statutory criteria. Similarly, DLCI has
demonstrated that it fulfills each of the statutory criteria for
designation, and that its individual board members are well-qualified
to serve on its board pursuant to the statute.
Importantly, both the MLCI and the DLCI submissions acknowledge
that their intended roles carry the responsibility to broadly represent
the interests of musical work copyright owners and songwriters, or
digital music providers, respectively, with respect to the section 115
mechanical license. In particular, the Office appreciates AMLC's
proposal. The Office hopes that MLCI will consider whether any aspects
of the AMLC's proposal should be incorporated into its future planning.
As the legislative history amply documents, this historic music
copyright legislation was enacted only in the wake of significant
consensus-building and cooperation across a wide berth of industry
stakeholders.\394\ Now that it is time to roll up sleeves, sustained
dedication to these worthy goals will be critical as the MLC and DLC
turn to the many tasks involved in preparation for the license
availability date.
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\394\ See, e.g., Music Policy Issues: A Perspective from Those
Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836
Before H. Comm. On the Judiciary, 115th Cong. 4 (2018) (statement of
Rep. Nadler) (``For the last few years, I have been imploring the
music community to come together in support of a common policy
agenda, so it was music to my ears to see--to hear, I suppose--the
unified statement of support for a package of reforms issued by key
music industry leaders earlier this month. Many of these measures,
such as the CLASSICS Act and the Music Modernization Act, are
supported by stakeholders on both sides, by digital service
providers as well as by music creators. This emerging consensus
gives us hope that this committee can start to move beyond the
review stage toward legislative action.''); 164 Cong. Rec. H3522,
3537 (daily ed. Apr. 25, 2018) (statement of Rep. Collins) (``[This
bill] comes to the floor with an industry that many times couldn't
even decide that they wanted to talk to each other about things in
their industry, but who came together with overwhelming support and
said this is where we need to be.''); 164 Cong. Rec. S501, 502
(daily ed. Jan. 24, 2018) (statement of Sen. Hatch) (``I don't think
I have ever seen a music bill that has had such broad support across
the industry. All sides have a stake in this, and they have come
together in support of a commonsense, consensus bill that addresses
challenges throughout the music industry.''); 164 Cong. Rec. H3522,
3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte) (``I
tasked the industry to come together with a unified reform bill and,
to their credit, they delivered, albeit with an occasional bump
along the way.''); 164 Cong. Rec. S6259, 6260 (daily ed. Sept. 18,
2018) (statement of Sen. Alexander on behalf of Sen. Grassley)
(``This bill is the product of long and hard negotiations and
compromise.'').
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The Copyright Office looks forward to working with the MLC, DLC,
and other interested parties on next steps in MMA implementation. As
noted, the MLC and DLC, along with the Copyright Office, are asked to
facilitate education and outreach regarding the new blanket licensing
system to the broader songwriting community. In the coming months, the
Office will initiate additional regulatory activities required under
the statute and begin planning its public policy study regarding best
practices, which the MLC may implement to identify musical work
copyright owners with unclaimed accrued royalties and reduce the
incidence of unclaimed royalties. Future information regarding those
activities will be made available at: https://www.copyright.gov/music-modernization/.
Finally, the Copyright Office finds that there is good cause to
make the codification of this designation effective on publication.
Timely designation of the MLC and DLC are vital to the success of
Congress's reform of the section 115 statutory license. Indeed, by the
statutory language, the designation would be timely based solely upon
the date of publication in the Federal Register, but reflecting the
designation in Copyright Office regulations will be helpful to the
public.\395\ The statutory designation deadline is the same deadline
for the CRJs to commence a
[[Page 32296]]
proceeding to establish the initial administrative assessment, which
anticipates MLC and DLC participation.\396\ Further, given the license
availability date of January 1, 2021, the MLC has a tight deadline to
become fully operational, and both the MLC and DLC have important roles
in educating the public on the royalty claiming process, which may be
unnecessarily encumbered if designation were delayed.\397\ The public
had ample opportunity to comment on the proposals for parties to be
named the MLC and DLC and did, in fact, file over six hundred comments
in response to the different proposals.
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\395\ 17 U.S.C. 115(d)(3)(B)(i), (d)(5)(B)(i).
\396\ Id. at 115(d)(3)(B)(i), (d)(5)(B)(i), (d)(7)(D)(iii)(I).
\397\ See id. at 115(d)(3)(J)(iii), (d)(5)(C)(iii).
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List of Subjects in 37 CFR Part 210
Copyright, Phonorecords.
Final Regulations
For the reasons set forth in the preamble, the Copyright Office
amends 37 CFR part 210 as follows:
PART 210--COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL
AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS
0
1. The authority citation for part 210 continues to read as follows:
Authority: 17 U.S.C. 115, 702.
0
2. Add subpart A, consisting of Sec. Sec. 210.1 through 210.10, to
read as follows:
Subpart A--Blanket Compulsory License, Mechanical Licensing
Collective, and Digital Licensee Coordinator
Sec.
210.1 Designation of the Mechanical Licensing Collective and Digital
Licensee Coordinator.
210.2-210.10 [Reserved]
Sec. 210.1 Designation of the Mechanical Licensing Collective and
Digital Licensee Coordinator.
The following entities are designated pursuant to 17 U.S.C.
115(d)(3)(B) and (d)(5)(B). Additional information regarding these
entities will be made available on the Copyright Office's website.
(a) Mechanical Licensing Collective, Inc., incorporated in Delaware
on March 5, 2019, is designated as the Mechanical Licensing Collective;
and
(b) Digital Licensee Coordinator, Inc., incorporated in Delaware on
March 20, 2019, is designated as the Digital Licensee Coordinator.
Sec. Sec. 210.2-210.10 [Reserved]
Dated: July 1, 2019.
Karyn A. Temple,
Register of Copyrights and Director of the U.S. Copyright Office.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2019-14376 Filed 7-5-19; 8:45 am]
BILLING CODE 1410-30-P
