Music Modernization Act Notices of License, Notices of Nonblanket Activity, Data Collection and Delivery Efforts, and Reports of Usage and Payment
| Published date | 28 December 2020 |
| Citation | 85 FR 84243 |
| Record Number | 2020-28505 |
| Section | Rules and Regulations |
| Court | U.s. Copyright Office |
Federal Register, Volume 85 Issue 248 (Monday, December 28, 2020)
[Federal Register Volume 85, Number 248 (Monday, December 28, 2020)]
[Rules and Regulations]
[Pages 84243-84245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28505]
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LIBRARY OF CONGRESS
U.S. Copyright Office
37 CFR Part 210
[Docket No. 2020-5]
Music Modernization Act Notices of License, Notices of Nonblanket
Activity, Data Collection and Delivery Efforts, and Reports of Usage
and Payment
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Supplemental interim rule with request for comments.
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SUMMARY: The U.S. Copyright Office is amending its regulations
governing certain reporting requirements of digital music providers and
significant nonblanket licensees pursuant to title I of the Orrin G.
Hatch-Bob Goodlatte Music Modernization Act. This amendment will create
a temporary exception to certain provisions concerning the reporting of
information about permanent download pass-through licenses in light of
recent requests that an accommodation to current reporting rules be
made to avoid potential market disruption. Based on these requests
received following the adoption of the current requirements, the
Copyright Office has determined that there is a legitimate need to make
this amendment effective immediately to govern these matters while it
considers further potential adjustments. The Copyright Office solicits
public comment on how, or whether, it should further adjust these
particular reporting requirements.
DATES: The supplemental interim rule is effective December 28, 2020.
Written comments must be received no later than 11:59 p.m. Eastern Time
on January 27, 2021.
ADDRESSES: For reasons of Government efficiency, the Copyright Office
is using the regulations.gov system for the submission and posting of
public comments in this proceeding. All comments are therefore to be
submitted electronically through regulations.gov. Specific instructions
for submitting comments are available on the Copyright Office's website
at https://www.copyright.gov/rulemaking/mma-notices-reports/. If
electronic submission of comments is not feasible due to lack of access
to a computer and/or the internet, please contact the Copyright Office
using the contact information below for special instructions.
FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and
Associate Register of Copyrights, by email at [email protected],
Jason E. Sloan, Assistant General Counsel, by email at
[email protected], or Cassandra G. Sciortino, Attorney-Advisor, 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 President signed into law the Orrin G.
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') which, among
other things, substantially modifies the compulsory ``mechanical''
license for making and distributing phonorecords of nondramatic musical
works under 17 U.S.C. 115.\1\ It does so by switching from a song-by-
song licensing system to a blanket licensing regime that will become
available on January 1, 2021 (the ``license availability date''), and
will be administered by a mechanical licensing collective (``MLC'')
designated by the Copyright Office (the ``Office''). Digital music
providers (``DMPs'') will be able to obtain the new compulsory blanket
license to make digital phonorecord deliveries (``DPDs'') of musical
works, including in the form of permanent downloads, limited downloads,
or interactive streams (referred to in the statute as ``covered
activity'' where such activity qualifies for a compulsory license),
subject to compliance with various requirements, including reporting
obligations.\2\ DMPs may also continue to engage in those activities
solely through voluntary, or direct, licensing with copyright owners,
in which case the DMP may be considered a significant nonblanket
licensee (``SNBL'') under the statute, subject to separate reporting
obligations.
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\1\ Public Law 115-264, 132 Stat. 3676 (2018).
\2\ As permitted under the MMA, the Office designated a digital
licensee coordinator (``DLC'') to represent licensees in proceedings
before the Copyright Royalty Judges (``CRJs'') and the Office, to
serve as a non-voting member of the MLC, and to carry out other
functions. 17 U.S.C. 115(d)(5)(B); 84 FR 32274 (July 8, 2019); see
also 17 U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C).
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On September 17, 2020, the Office issued an interim rule adopting
regulations concerning certain types of reporting required under the
statute after the license availability date: Notices of license and
reports of usage by DMPs, and notices of nonblanket activity and
reports of usage by SNBLs.\3\ Those interim regulations include
requirements to report certain information about certain permanent
download licenses.\4\ They were adopted to help ensure that the MLC
receives sufficient information to be able to fulfill its statutory
obligations, including under section 115(d)(3)(G)(i)(I)(bb), and to
effectuate the reporting requirements of section 115(d)(4)(A)(ii)(II).
The Office assumes familiarity with the interim rule and all related
Federal Register documents.
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\3\ 85 FR 58114 (Sept. 17, 2020).
\4\ 37 CFR 210.24(b)(8), 210.25(b)(6), 210.27(c)(5),
210.28(c)(5).
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After the adoption of these rules, which involved multiple rounds
of public comments through a notification of inquiry,\5\ notice of
proposed rulemaking,\6\ and an ex parte communications process,\7\ the
DLC raised a new concern with respect to the applicability of these
particular reporting provisions to ``pass-through'' licenses for
permanent downloads.\8\ The DLC explained that ``all [DMPs operating]
download stores operate exclusively under so-called `pass-through'
licenses received from record labels, where the label obtains the
[[Page 84244]]
mechanical licenses from musical work copyright owners and then
authorizes downstream distributors to make and distribute permanent
downloads.'' \9\ The Office notes that this reflects that the scope of
``pass-through'' licensing under section 115 shrank under the MMA,
which eliminated the ability of record labels to ``pass-through''
section 115 licenses for streaming or limited downloads.\10\
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\5\ 84 FR 49966 (Sept. 24, 2019).
\6\ 85 FR 22518 (Apr. 22, 2020).
\7\ Guidelines for ex parte communications, along with records
of such communications, including those referenced herein, are
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. All rulemaking
activity, including public comments, as well as educational material
regarding the Music Modernization Act, can currently be accessed via
navigation from https://www.copyright.gov/music-modernization/.
\8\ See DLC Ex Parte Letter Nov. 10, 2020 at 4-7.
\9\ Id. at 4.
\10\ See H.R. Rep. No. 115-651, at 4 (2018) (``Subsection (b)(3)
maintains the `pass-through' license for record labels to obtain and
pass through mechanical license rights for individual permanent
downloads. Under the Music Modernization Act, a record label will no
longer be eligible to obtain and pass through a Section 115 license
to a digital music provider to engage in activities related to
interactive streams or limited downloads.''); S. Rep. No. 115-339,
at 4 (2018); Report and Section-by-Section Analysis of H.R. 1551 by
the Chairmen and Ranking Members of Senate and House Judiciary
Committees, at 3 (2018), https://www.copyright.gov/legislation/_conference_report.pdf; U.S. Copyright Office, Copyright and the
Music Marketplace at 27-28 (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf
(describing previous pass-through licensing practices).
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The underlying mechanical license pursuant to which the DMP has
been given authority for permanent downloads by a record label can be a
compulsory license or a voluntary license. Under the MMA, the
compulsory version is defined as an ``individual download license,''
which is ``a compulsory license obtained by a record company to make
and distribute, or authorize the making and distribution of, permanent
downloads embodying a specific individual musical work.'' \11\ The non-
compulsory version (a ``voluntary pass-through license'') does not
appear to be directly addressed by the MMA, but in general the MMA
provides for preexisting voluntary licenses to remain in effect after
the license availability date.\12\
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\11\ 17 U.S.C. 115(e)(12).
\12\ See id. at 115(d)(9)(C).
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The DLC raised the concern that the relevant reporting requirements
set forth in the interim regulations require DMPs and SNBLs operating
under the authority of pass-through licenses to report certain
information about such licenses, including identification and contact
information for relevant musical work copyright owners that they do not
have.\13\ The DLC stated that:
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\13\ DLC Ex Parte Letter Nov. 10, 2020 at 4-6.
This information is not provided by record labels to download
stores through existing reporting mechanisms . . . and for this to
occur would require record labels and digital music providers to
invest resources to build entirely new systems. The reality is that
services are not likely to make those investments, especially
because purchases of permanent downloads, while still significant,
are declining. It is far more likely that download stores would
simply cease operations.\14\
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\14\ Id. at 5-6.
The DLC submitted proposed regulatory amendments to address their
concerns, which the MLC does not object to.\15\ The MLC and DLC are in
agreement that ``allowing the existing rules to go into effect without
alteration would cause market disruption for permanent download
offerings.'' \16\ The DLC's proposal is available in Addendum B of the
ex parte letter available at: https://www.copyright.gov/rulemaking/mma-implementation/ex-parte/mlc-and-dlc.pdf.
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\15\ DLC & MLC Ex Parte Letter Dec. 9, 2020 at 4, add. B.
\16\ Id. at 4.
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II. Supplemental Interim Rule and Request for Comments
The Office tentatively agrees that this issue needs to be addressed
and is therefore noticing the matter for public comment. In the
meantime, the Office finds it necessary and appropriate under its
authority pursuant to 17 U.S.C. 115 and 702 to adjust the interim rule,
effective immediately, to prevent potential market disruption that the
MLC and DLC are concerned about occurring while the Office solicits
comments and continues to consider how best to proceed with respect to
this issue.\17\ The supplemental interim rule creates a temporary
exception to the previously adopted reporting requirements with respect
to individual download licenses and voluntary pass-through licenses,
such that the failure to report that particular information will not
otherwise impact a DMP's or SNBL's compliance with their various
requirements under the MMA and the Office's related regulations (e.g.,
the MLC cannot use the failure to provide that particular information
as a basis to reject an otherwise compliant notice of license or serve
a notice of default on an otherwise compliant blanket licensee). The
supplemental interim rule further provides that after the temporary
exception is no longer in effect, the MLC can take action against a DMP
or SNBL who benefitted from the exception if any amended reporting
requirements adopted by the Office are not complied with by the DMP or
SNBL within 45 days after the effective date of such an amendment (or
an alternate date subsequently adopted by the Office, whichever is
later). The MLC and DLC indicated that they respectively do not oppose
the Office employing this approach while considering this matter.\18\
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\17\ Because of the short amount of time remaining before the
January 1, 2021 license availability date, the Office finds there is
good cause to adopt the temporary supplemental interim rule without
public notice and comment, and to make it effective immediately upon
publication. See 5 U.S.C. 553(b)(3)(B), (d)(3); see also DLC & MLC
Ex Parte Letter Dec. 9, 2020 at 4 (supporting adoption of a
temporary rule while the Office further considers this issue and
agreeing that ``allowing the existing rules to go into effect
without alteration would cause market disruption for permanent
download offerings'').
\18\ DLC & MLC Ex Parte Letter Dec. 9, 2020 at 4.
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With respect to the DLC's concerns, the Office solicits comments on
the DLC's proposal. As the Office understands it, the proposal would
basically exempt individual download licenses and voluntary pass-
through licenses from the relevant reporting requirements under the
interim regulations, and would instead impose alternative requirements
that the DLC views as more appropriate but that still ensure that the
MLC has sufficient information to fulfill its statutory duties. In
particular, the Office seeks comments regarding its authority to adopt
the DLC's proposal in light of 17 U.S.C. 115(d)(4)(A)(ii)(II), which
requires DMPs to ``identify and provide contact information for all
musical work copyright owners for works embodied in sound recordings as
to which a voluntary license, rather than the blanket license, is in
effect with respect to the uses being reported.'' While the DLC argues
that the statute is ``at least . . . ambiguous'' and that the Office
can ``exercise its general regulatory authority to clarify this
issue,'' \19\ the Office is cautious about potentially concluding that
the term ``voluntary license'' in that provision excludes voluntary
pass-through licenses, and thus seeks further comments to aid its
statutory analysis.\20\ Relatedly, the Office seeks comments as to
whether there are any concerns, as a matter of statutory
interpretation, with interpreting the term ``voluntary license'' in
section 115(d)(4)(A)(ii)(II) in the manner the DLC requests while
reading the same term more broadly elsewhere in section 115, such as in
the introductory paragraph of section 115(d)(4)(A)(ii).
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\19\ DLC Ex Parte Letter Nov. 10, 2020 at 6-7.
\20\ A ``voluntary license'' is a defined term under 17 U.S.C.
115(e)(36).
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The Office seeks clarification from the MLC and DLC, and comments
from other interested stakeholders, regarding their proposed inclusion
of language seeming to qualify the proposed exceptions to ``where [the
DMP's] authority applies to the exclusion of the blanket license
authority pursuant to 17
[[Page 84245]]
U.S.C. 115(d)(1)(C)(i).'' \21\ This proposed language seems to suggest
that the DLC and MLC believe there are types of voluntary licenses,
authorizing DMPs to make and distribute permanent downloads, that would
not apply to the exclusion of the blanket license. It is not entirely
clear to the Office what is meant by this aspect of the proposal, but
the Office observes that section 115(d)(1)(C) says ``[a] voluntary
license for covered activities entered into by or under the authority
of 1 or more copyright owners and 1 or more digital music providers, or
authority to make and distribute permanent downloads of a musical work
obtained by a digital music provider from a sound recording copyright
owner pursuant to an individual download license, shall be given effect
in lieu of a blanket license under this subsection with respect to the
musical works (or shares thereof) covered by such voluntary license or
individual download authority.'' \22\
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\21\ See DLC & MLC Ex Parte Letter Dec. 9, 2020 add. B at 2, 3,
10.
\22\ 17 U.S.C. 115(d)(1)(C).
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Beyond the DLC's proposal, the Office invites comments more
generally on how to address, or whether the Office should address, the
pass-through license issue that has been raised, including whether a
different approach should be taken. One potential alternative approach
the Office seeks comment on could be for the Office to adopt a rule
providing that any failure to comply with the previously adopted
reporting requirements in 37 CFR 210.24(b)(8), 210.25(b)(6),
210.27(c)(5), or 210.28(c)(5) with respect to individual download
licenses or voluntary pass-through licenses may not be construed as
material noncompliance with the statute or regulations, but rather
would be considered to be harmless errors, if appropriate alternative
information--perhaps the information the DLC proposed--is timely
reported instead. This would mean that in such cases, the harmless
error provisions in place for notices of license (Sec. 210.24(e)),
notices of nonblanket activity (Sec. 210.25(e)), and SNBL-submitted
reports of usage (Sec. 210.28(k)) would apply to protect the DMP or
SNBL; the statutory default provision in 17 U.S.C. 115(d)(4)(E)(i)(III)
would similarly protect a DMP from being in default under the blanket
license with respect to its reports of usage.
List of Subjects in 37 CFR Part 210
Copyright, Phonorecords, Recordings.
Interim 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 Sec. 210.30 to read as follows:
Sec. 210.30 Temporary exception to certain reporting requirements
about certain permanent download licenses.
(a) Subject to paragraph (b) of this section, where a requirement
of Sec. 210.24(b)(8), Sec. 210.25(b)(6), Sec. 210.27(c)(5), or Sec.
210.28(c)(5) has not been satisfied with respect to an individual
download license or voluntary pass-through license, such failure shall
not:
(1) Render an otherwise compliant notice of license, notice of
nonblanket activity, or report of usage invalid; or
(2) Provide a basis for the mechanical licensing collective to
reject an otherwise compliant notice of license, serve a notice of
default on an otherwise compliant blanket licensee, terminate an
otherwise compliant blanket license, or engage in legal enforcement
efforts against an otherwise compliant significant nonblanket licensee.
Note 1 to paragraph (a): Paragraph (a) of this section is a
transitional exception that shall cease to apply in accordance with
such further regulations as the Copyright Office may adopt.
(b) After paragraph (a) of this section is no longer applicable,
the mechanical licensing collective may take such action(s) against a
beneficiary of paragraph (a) of this section as had been prohibited by
paragraph (a) when it was applicable, if an amendment adopted by the
Copyright Office to a requirement of Sec. 210.24(b)(8), Sec.
210.25(b)(6), Sec. 210.27(c)(5), or Sec. 210.28(c)(5) with respect to
individual download licenses or voluntary pass-through licenses is not
complied with by such a beneficiary within 45 calendar days after the
effective date of such an amendment, or an alternate date subsequently
adopted by the Office, whichever is later. Any deadline otherwise
applicable to any such action by the mechanical licensing collective
shall be tolled with respect to a beneficiary of paragraph (a) of this
section until the conclusion of such 45-day or alternate period.
(c) For purposes of this section, a voluntary pass-through license
is a voluntary license obtained by a licensor of sound recordings to
make and distribute, or authorize the making and distribution of,
permanent downloads embodying musical works through which a digital
music provider or significant nonblanket licensee has obtained
authority from such licensor of sound recordings to make and distribute
permanent downloads of musical works embodied in such sound recordings.
Dated: December 16, 2020.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2020-28505 Filed 12-23-20; 8:45 am]
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