Music Modernization Act Transition Period Transfer and Reporting of Royalties to the Mechanical Licensing Collective
| Citation | 85 FR 43517 |
| Record Number | 2020-15591 |
| Published date | 17 July 2020 |
| Section | Proposed rules |
| Court | Library Of Congress,U.s. Copyright Office |
Federal Register, Volume 85 Issue 138 (Friday, July 17, 2020)
[Federal Register Volume 85, Number 138 (Friday, July 17, 2020)]
[Proposed Rules]
[Pages 43517-43526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15591]
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LIBRARY OF CONGRESS
U.S. Copyright Office
37 CFR Part 210
[Docket No. 2020-12]
Music Modernization Act Transition Period Transfer and Reporting
of Royalties to the Mechanical Licensing Collective
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The U.S. Copyright Office is issuing a notice of proposed
rulemaking regarding digital music providers' obligations to transfer
and report accrued royalties for unmatched musical works (or shares) to
the mechanical licensing collective for purposes of being eligible for
the limitation on liability for prior unlicensed uses under title I of
the Orrin G. Hatch-Bob Goodlatte Music Modernization Act. Having
solicited public comments through multiple prior notices, the Office is
now proposing an update to regulations concerning the transfer and
reporting of such royalties, namely the content, format, and delivery
of cumulative statements of account to be submitted by digital music
providers to the mechanical licensing collective at the conclusion of
the statutory transition period.
DATES: Written comments must be received no later than 11:59 p.m.
Eastern Time on August 17, 2020.
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-transition-reporting. If
electronic submission of comments is not feasible due to lack of access
to a computer and/or the internet, please contact the 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]ght.gov,
John R. Riley, 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
This notice of proposed rulemaking (``NPRM'') is being issued
subsequent to a notification of inquiry, published in the Federal
Register on September 24, 2019, that describes in detail the
legislative background and regulatory scope of the present rulemaking
proceeding.\1\ The Copyright Office assumes familiarity with that
document, and encourages anyone reading this NPRM who has not reviewed
that notice to do so before continuing here.
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\1\ 84 FR 49966 (Sept. 24, 2019). All rulemaking activity,
including public comments, as well as legislative history and
educational material regarding the Music Modernization Act, can
currently be accessed via navigation from https://www.copyright.gov/music-modernization/. Comments received in response to the September
2019 notification of inquiry are available at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2019-0002&refD=COLC-2019-0002-0001. Related ex parte letters are
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. References to these
comments and letters are by party name (abbreviated where
appropriate), followed by ``Initial,'' ``Reply,'' or ``Ex Parte
Letter'' as appropriate.
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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.\2\ 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
be administered by a mechanical licensing collective (``MLC'')
designated by the Copyright 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.\3\
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\2\ Public Law 115-264, 132 Stat. 3676 (2018).
\3\ 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 Copyright
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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Prior to the MMA, DMPs obtained a section 115 compulsory license on
a per-work, song-by-song basis, by serving a notice of intention to
obtain a compulsory license (``NOI'') on the copyright owner (or filing
it with the Copyright Office if the Office's public records did not
identify the copyright owner) and then paying applicable royalties
accompanied by accounting statements.\4\ The MMA includes a
``transition period'' for the period following the new law's enactment,
before the blanket license becomes available.\5\ During this transition
period, anyone seeking to obtain a compulsory license to make DPDs must
continue to do so on a song-by-song basis by serving NOIs on copyright
owners ``if the identity and location of the musical work copyright
owner is known,'' and paying them applicable royalties accompanied by
statements of account.\6\ If the musical work copyright owner is
unknown, a DMP may no longer file an NOI with the Copyright Office, but
instead may rely on a limitation on liability that requires the DMP to
``continue[ ] to search for the musical work copyright owner'' using
good-faith, commercially reasonable efforts and bulk electronic
matching processes.\7\ The DMP must eventually either account for and
pay accrued royalties to the relevant musical work copyright owner(s)
when found or, if they are not found before the end of the transition
period, account for and transfer the royalties to the MLC at that
time.\8\ Congress believed that the liability limitation, which limits
recovery in lawsuits commenced on or after January 1, 2018 to the
statutory royalty due, would ``ensure that more artist royalties will
be paid than otherwise would be the case through continual litigation''
\9\ and viewed this provision as a ``key component that was
[[Page 43518]]
necessary'' to ensure support for legislative change.\10\
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\4\ See 17 U.S.C. 115(b)(1), (c)(5) (2017).
\5\ H.R. Rep. No. 115-651, at 10 (2018); S. Rep. No. 115-339, at
10 (2018).
\6\ 17 U.S.C. 115(b)(2)(A), (c)(2)(I); see H.R. Rep. No. 115-
651, at 4; S. Rep. No. 115-339, at 3.
\7\ 17 U.S.C. 115(b)(2)(A), (d)(9)(D)(i), (d)(10)(A)-(B); see
H.R. Rep. No. 115-651, at 4, 10; S. Rep. No. 115-339, at 3, 10, 22.
\8\ 17 U.S.C. 115(d)(10)(B); see H.R. Rep. No. 115-651, at 4,
10; S. Rep. No. 115-339, at 3, 10.
\9\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 14-15;
Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen
and Ranking Members of Senate and House Judiciary Committees, at 12
(2018), https://www.copyright.gov/legislation/mma_conference_report.pdf (``Conf. Rep.'').
\10\ H.R. Rep. No. 115-651, at 13; S. Rep. No. 115-339, at 14;
Conf. Rep. at 12.
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With respect to the specific reporting and payment requirements to
be eligible for the limitation on liability, the statute details three
scenarios. First, if the matching efforts are successful in identifying
and locating a copyright owner of a musical work (or share) by the end
of the calendar month in which the DMP first makes use of the work, the
DMP must provide statements of account and pay royalties to that
copyright owner in accordance with section 115 and applicable
regulations.\11\ The second and third scenarios apply if the copyright
owner is not identified or located by the end of the calendar month in
which the DMP first makes use of the work.\12\ In such cases, the DMP
must accrue and hold applicable statutory royalties in accordance with
usage of the work, from the initial use of the work until these
royalties can be paid to the copyright owner or are required to be
transferred to the MLC.\13\ If a copyright owner of an unmatched
musical work (or share) is identified and located by or to the DMP
before the license availability date, the DMP must, among other things,
pay the copyright owner all accrued royalties accompanied by a
cumulative statement of account that includes the information that
would have been provided to the copyright owner had the DMP been
providing monthly statements of account to the copyright owner from
initial use of the work in accordance with section 115 and applicable
regulations.\14\ If a copyright owner of an unmatched musical work (or
share) is not identified and located by the license availability date,
the DMP must, among other things, transfer, no later than 45 calendar
days after the license availability date, all accrued royalties to the
MLC accompanied by a cumulative statement of account that includes the
information that would have been provided to the copyright owner had
the DMP been serving monthly statements of account on the copyright
owner ``from initial use of the work in accordance with [section 115]
and applicable regulations,'' including the certification that would
have been provided to an identified copyright owner as well as an
additional certification attesting to the DMP's matching efforts during
the transition period.\15\
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\11\ 17 U.S.C. 115(d)(10)(B)(iii).
\12\ Id. at 115(d)(10)(B)(iv).
\13\ Id.
\14\ Id. at 115(d)(10)(B)(iv)(II).
\15\ Id. at 115(d)(10)(B)(iv)(III).
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In December 2018, the Office published an interim rule and
requested comments to address the current transition period.\16\ With
respect to the payment and reporting obligations to be eligible for the
limitation on liability, the Office adopted regulations specifying that
DMPs must pay royalties and provide cumulative statements of account to
copyright owners and the MLC in compliance with the Office's
preexisting monthly statement of account regulations in 37 CFR
210.16.\17\ The Office required that cumulative statements of account
include ``a clear identification of the total period covered by the
cumulative statement and the total royalty payable for the period.''
\18\ The Office did not receive any comments in response to this public
rulemaking and finalized the rule in March 2019.\19\ In promulgating
the rule, the Office observed that ``[t]he intent of the legislation
does not signal to the Office that it should be overhauling its
existing regulations during the transition period before the blanket
license becomes available.'' \20\ But the rule did separate provisions
regarding the reporting of cumulative statements of account and payment
of royalties for matched works provided to copyright owners on the one
hand from the reporting of cumulative unmatched usages and transfer of
associated royalties to the MLC on the other. This approach includes
the extra step of statutorily required certifications for reports
provided to the MLC.\21\
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\16\ 83 FR 63061 (Dec. 7, 2018).
\17\ 37 CFR 210.20.
\18\ Id. at 210.20(b)(2)(i), (3)(i).
\19\ See 84 FR 10685 (Mar. 22, 2019).
\20\ 83 FR at 63062.
\21\ See 83 FR at 63065-66; 37 CFR 210.16, 210.20.
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Following the adoption of this rule, in September 2019, the Office
issued a notification of inquiry regarding multiple topics related to
MMA implementation.\22\ Noting the ``persistent concern about the
`black box' of unclaimed royalties, including its amount and treatment
by digital music providers and the MLC,'' the Office provided another
opportunity for the public to comment on the regulations governing the
reporting of cumulative statements of account and generally on ``any
issues that should be considered relating to the transfer and reporting
of unclaimed royalties by digital music providers to the MLC.'' \23\
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\22\ 84 FR 49966 (Sept. 24, 2019).
\23\ Id. at 49971.
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In response to this later inquiry, both the MLC and the DLC
provided comments. The MLC proposed that the cumulative statements of
account to be delivered to the MLC at the end of the transition period,
instead of complying with the Office's preexisting monthly statement of
account regulations in 37 CFR 210.16, should include the same
information and be in the same format as required for monthly reports
of usage under the blanket license.\24\ The MLC also proposed requiring
these cumulative statements to include: (1) Per-play allocations or
other applicable rates and amounts allocated to identified usage, and
perpetually unique DMP transaction identifiers for usage; (2)
information about matched shares of a musical work where unmatched
shares for the work are reported; (3) information about any applicable
earned interest; and (4) information about any claimed or applied
deductions or adjustments to the aggregate accrued royalties
payable.\25\ The DLC proposed that DMPs not be ``required to accrue any
royalties that are required to be paid to copyright owners of musical
works pursuant to any agreements entered into prior to the effective
date of the [MMA]'' and that those royalties not be treated as
``accrued royalties'' under the statute.\26\
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\24\ MLC Reply App. D at 19; see also MLC Initial at 23; MLC
Reply at 27-28; MLC Ex Parte Letter at 2 (June 17, 2020).
\25\ MLC Reply App. D at 19; see also MLC Initial at 22-23; MLC
Reply at 27-28; MLC Ex Parte Letter at 3-4 (June 17, 2020).
\26\ DLC Reply App. at A-24; see also DLC Initial at 18-19.
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Having reviewed and carefully considered all relevant comments, the
Office now issues a proposed rule and invites further public comment.
While all public comments are welcome, as applicable, should commenters
disagree with language in the proposed rule, the Office encourages
commenters to offer alternate potential regulatory language.
II. Proposed Rule
A. Cumulative Statement of Account Content and Format
General. The MLC proposed requiring cumulative statements of
account to ``include[ ] all of the information, and [be] in the same
format, as required to be provided in the monthly usage reports
pursuant to [section] 115(d)(4)(A)(i)-(iii), as supplemented by [the
reports of usage regulations].'' \27\ The MLC explained that it needs
the additional information to properly administer the transferred
royalties.\28\
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\27\ MLC Reply App. D at 19.
\28\ MLC Initial at 22; see also MLC Ex Parte Letter at 2 & n.1
(June 17, 2020).
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In response, the DLC suggested that the Copyright Office is
restricted in its ability to require DMPs to provide
[[Page 43519]]
additional information in a different format than what was required by
the Office's preexisting monthly statement of account regulations,
because doing so ``is contrary to the MMA, which requires the digital
music provider to only provide `the information that would have been
provided to the copyright owner had the digital music provider been
serving monthly statements of account on the copyright owner.' '' \29\
The DLC further claimed that the MLC's proposal was ``impractical,''
explaining that ``digital music providers have maintained usage
information . . . with the existing statement of account regulations in
mind.'' \30\
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\29\ DLC Reply at 24 (quoting 17 U.S.C.
115(d)(10)(B)(iv)(III)(aa)).
\30\ Id. at 24.
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The MLC noted that the cited clause ``does not imply that DMPs
should not report anything additional or otherwise limit the Copyright
Office's general authority under [s]ection 115(d)(12)(A) to adopt
regulations necessary or appropriate to effectuate the provisions of
[s]ection 115(d)'' and that regulations to ``effectuate the proper
disposition of accrued unclaimed royalties'' are ``necessary or
appropriate'' for the MLC to execute its functions under section
115(d).\31\
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\31\ MLC Ex Parte Letter at 2 n.1 (June 17, 2020).
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After considering the issue, the Office tentatively concludes that
it would be within its regulatory authority and in clear furtherance of
the statute's goals and the legislative intent to update the rule
concerning cumulative statements of account as proposed below. In the
course of analyzing these public comments and promulgating a related
rule concerning post-blanket license monthly reporting of usage
information, the Office's review indicates that updating certain
requirements related to the content and delivery of cumulative
statements may help the MLC more effectively identify and locate the
copyright owners of unmatched works to ensure they are paid the
royalties due to them. Congress has signaled this is a core task of the
MLC.\32\ Where statements of account provided to copyright owners have
historically been intended to ``increase the protection of copyright
proprietors against economic harm from companies which might refuse or
fail to pay their just obligations,'' \33\ cumulative statement
reporting to the MLC is meant to facilitate the additional critical
function of matching DMP usage to musical works and their owners--a
task already accomplished where a statement is being served by the DMP
directly on the copyright owner.\34\ The legislative history of the MMA
is in accord, providing that reporting accompanying unmatched royalties
transferred to the MLC at the end of the transition period should
contain ``as much information about usage and ownership information as
possible.'' \35\ The present rule for cumulative statements of account
differentiates between reports provided to copyright owners and reports
provided to the MLC by requiring DMPs to certify to the MLC that they
have engaged in good faith efforts to obtain a variety of statutorily
mandated categories of sound recording and musical work
information.\36\ The current rule also separately addresses transfer of
royalties and reporting to the MLC. To some extent, then, the MLC's
request for additional information related to partially matched works
(not least, when partial payments have occurred) and the identity of
these unmatched works may be viewed as an extension of these provisions
regarding transfer and certification of efforts to obtain additional
information about these works.\37\
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\32\ See H.R. Rep. No. 115-651, at 9 (The MLC's duty to
``identify the musical works embodied in particular sound
recordings, as well as to identify and locate the copyright owners
of such works'' is its ``highest responsibility'' next to the
``efficient and accurate collection and distribution of
royalties.''); S. Rep. No. 115-339, at 9 (same); Conf. Rep. at 7
(same); see also Letter from Lindsey Graham, Chairman, Senate
Judiciary Committee, to Karyn Temple, Register of Copyrights 1 (Nov.
1, 2019) (on file with Copyright Office) (``Reducing unmatched funds
is the measure by which the success of this important legislation
should be measured.'').
\33\ H.R. Rep. No. 94-1476, at 111 (1976).
\34\ 17 U.S.C. 115(d)(3)(C)(i)(II)-(III).
\35\ H.R. Rep. No. 115-651, at 29 (emphasis added); S. Rep. No.
115-339, at 26 (same); Conf. Rep. at 22 (same).
\36\ 17 U.S.C. 115(d)(B)(i)(I)(aa)-(bb).
\37\ See id.
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Accordingly, to effectuate the provisions of section 115(d)(10),
and against that provision's specific reference to ``regulations'' as
well as the MMA's broad grant of regulatory authority to the Copyright
Office, the Office tentatively concludes that it is necessary and
appropriate to require DMPs to provide additional information to aid
the MLC in fulfilling its statutory duty to identify and locate the
copyright owners of unmatched works and pay the royalties due to
them.\38\ The proposed rule employs the MLC's preferred approach of
generally importing the requirements that are eventually adopted for
monthly reports of usage under the blanket license. While those
regulations are still under consideration in a separate proceeding,\39\
it seems reasonable to harmonize these rules in places, since the MLC
is tasked with the same mission of matching works and distributing
royalties, and DMPs, too, may benefit from consistency in reporting
usage information in a similar manner (to the extent they have acquired
such information).\40\ Accordingly, the Office is proposing adjustments
to requirements, such as those addressing format, royalty payment and
accounting information, and sound recording and musical work
information, that largely mirror the requirements proposed for reports
of usage.\41\ Notably, several categories of sound recording and
musical work information proposed to be imported from the reports of
usage regulations are already required under the current rule,\42\
including artist,\43\ playing time,\44\ ISRC,\45\ ISWC,\46\
songwriter,\47\ ISNI,\48\ and ownership share.\49\ In other respects,
the proposed rule reorganizes and clarifies preexisting requirements,
generally by replacing cross references to section 210.16 with the
relevant regulatory language.\50\ For example, while the current
provision incorporates by reference section 210.16's provision with
respect to performance royalty estimates, the proposed rule
specifically addresses use of such estimates in the context of
cumulative statements, which unlike monthly statements delivered to
copyright owners, are not reconciled via annual statements of
account.\51\ Additionally, recognizing the function served by the
cumulative statements, the proposed rule requires reporting of data
related to partially paid shares of musical works and information
needed to reconcile any deviation between royalty statements and the
amounts transferred to the MLC.
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\38\ See id. at 115(d)(10)(B)(iv)(III); id. at 115(d)(12)(A).
\39\ See generally 85 FR 22518 (Apr. 22, 2020).
\40\ In fact, cumulative statements of account will be due
around the same time as the first monthly reports of usage begin to
come in, and so it may create some efficiencies for DMPs, as well as
the MLC, if these reports follow similar requirements.
\41\ See 85 FR at 22540-46.
\42\ See 37 CFR 210.20(b)(3)(i) (referring to ``the information
and certification required by Sec. 210.16'').
\43\ See id. at 210.16(c)(3)(iv).
\44\ See id. at 210.16(c)(3)(v).
\45\ See id. at 210.16(c)(3)(iii).
\46\ See id. at 210.16(c)(3)(viii).
\47\ See id. at 210.16(c)(3)(vii).
\48\ See id.
\49\ See id. at 210.16(c)(3)(vi).
\50\ See, e.g., id. at 210.16(e) (``clear statements''
requirement); id. at 210.16(d)(3)(i) (performance royalty
estimates); id. at 210.16(d)(3)(ii) (NOI reference number); id. at
210.16(f) (certification requirement).
\51\ See id. at 210.16(d)(3)(i).
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Regarding the DLC's assertion that DMPs have been maintaining
certain
[[Page 43520]]
information with only the preexisting statement of account regulations
in mind, under the proposed rule, required information is generally
limited to items that are either equivalent to the information required
by section 210.16 or otherwise ``to the extent acquired'' by a DMP.\52\
The Office believes that this qualification reasonably addresses the
DLC's concern.
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\52\ Compare id. at 210.16(c) with 85 FR at 22541-42.
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Where the NPRM imports the proposed reports of usage requirements,
the Office's intent is for both rules to remain largely harmonized when
finalized. After considering the MLC's suggestion, the Office declines
to simply cross reference the reports of usage regulations because they
may change over time after becoming effective (especially if adopted on
an interim basis as has been proposed); \53\ whereas the cumulative
statement of account requirements, tied to the license availability
date, will not change. To minimize duplication, commenters may cross
reference or incorporate by reference comments submitted in the
separate reports of usage proceeding as appropriate, and focus their
comments here on items uniquely relevant to cumulative statements of
account. To the extent commenters believe a separate approach is
appropriate for cumulative statements of account compared to the
proposed rule regarding reports of usage, they are encouraged to
identify those areas of differentiation and explain their position.
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\53\ See 85 FR at 22519 (noting that an interim rule would offer
``more flexibly to make necessary modifications in response to new
evidence, unforeseen issues, or where something is otherwise not
functioning as intended'').
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Format. While the rule adopted in December 2018 was silent as to
method of delivery, now that the MLC has been designated and is further
along in its operational activities, the Office proposes to carry over
the proposed reports of usage format provision, which would require
delivery to the MLC in a machine-readable format that is compatible
with its information technology systems, as reasonably determined by
the MLC and taking into consideration relevant industry standards. If a
large amount of musical works remain unmatched after the transition
period, the MLC may be required to ingest a significant amount of
cumulative statements of account from DMPs. As the MLC explains, using
the same format will ensure efficient processing and ultimately support
``efficient and accurate reporting.'' \54\ Further, as the MLC points
out, ``a workflow will already have to be developed by the DMPs and the
MLC for reporting in this format'' to process reports of usage,\55\ and
the MLC is ``mindful of the varying data formats used by DMPs with
varying resources and intends to coordinate with the DMP community to
ensure the most appropriate version of data standards is selected.''
\56\ The Office notes that current monthly statement of account
regulations already allow a copyright owner to ``demand that Monthly
Statements of Account be submitted in a readily accessible electronic
format consistent with prevailing industry practices applicable to
comparable electronic delivery of comparable financial information.''
\57\
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\54\ MLC Initial at 20.
\55\ MLC Ex Parte Letter at 2 (June 17, 2020).
\56\ MLC Initial at 20.
\57\ 37 CFR 210.16(g)(2).
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Certifications and clear statements. The Office does not propose
any substantive changes to the certifications required under the
previously adopted rule for cumulative statements of account.\58\ The
rule proposes a technical change to include the actual language for
clarity (with appropriate conforming edits), rather than merely
referring to the ``certification required by Sec. 210.16.'' The Office
has moved the other required certification--``that the digital music
provider has fulfilled the requirements of 17 U.S.C. 115(d)(10)(B)(i)
and (ii) but has not been successful in locating or identifying the
copyright owner''--to be in the same paragraph as the language from
section 210.16. The proposed rule also imports the ``clear statements''
requirement from the preexisting regulations.\59\
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\58\ See id. at 210.20(b)(3)(i). As noted, to the extent the
proposed rule would obligate DMPs to engage in reporting additional
sound recording and musical works information, the statute requires
DMPs to certify that they have attempted to acquire much of this
information, and so an alternate method of providing this
information to the MLC may be to require reporting the fruits of
these inquiries in the certification.
\59\ Id. at 210.16(e).
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Estimates and adjustments. Under the previously adopted cumulative
statement of account regulation, DMPs could make estimates to the
extent currently permitted by 37 CFR 210.16(d)(3)(i) (covering where
the final public performance royalty has not yet been determined), and
there would be no adjustments mechanism. The Office proposes to retain
this status quo rather than conform to the estimates and adjustments
provisions proposed for reports of usage, given the one-time nature of
the cumulative statements, compared to the proposed regulatory
structure designed for ongoing reporting. The Office does propose,
however, that any overpayment (whether resulting from an estimate or
otherwise) should be credited to the DMP's account, or refunded upon
request.
Response files and invoices. In light of the DLC's comments
concerning the value of receiving invoices and response files,\60\ the
proposed rule allows a DMP to request and obtain a response file and/or
invoice from the MLC. Because the MLC will be ingesting a large amount
of data all around the same time, the rule proposes that any requested
invoices and/or response files be delivered to DMPs within a
``reasonable'' period of time in lieu of imposing a strict deadline.
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\60\ See DLC Comments at 12-13, Music Modernization Act Notices
of License, Notices of Nonblanket Activity, Data Collection and
Delivery Efforts, and Reports of Usage and Payment, Docket No. 2020-
5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0012&attachmentNumber=1&contentType=pdf (``Invoices and
response files are critically important to licensees and their
accounting processes.''); see also 85 FR at 22528.
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NOI reference numbers. The proposed rule restates a provision
currently incorporated by reference to section 210.16(c)(3)(ii), which
requires a DMP to provide a reference number or code identifying the
relevant NOI if it, or its agent, provided such a number or code on its
relevant NOI. The Office proposes to retain this provision because
records of past NOIs issued may be helpful inputs for the MLC in
identifying unmatched works (or shares).
Sound recording and musical work information. As noted, the
proposed rule generally harmonizes with the reporting requirements
proposed for DMPs' monthly reports of usage to be delivered to the MLC
following the transition to the blanket license. In many cases, this
information is already required to be reported under the current rule,
and in others, DMPs must certify that they have tried to obtain this
information to receive the limitation on liability.\61\ In some cases,
additional fields are proposed to be required, including certain
categories pertaining to identifying information for the sound
recording that embodies a particular musical work.\62\ As noted below,
the obligation to report these additional fields is generally cabined
by the extent the DMP has acquired this information,
[[Page 43521]]
and, in some instances, is further limited by whether the DMP is
already reporting this information.
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\61\ 17 U.S.C. 115(d)(10)(B)(i)(I)(aa)-(bb), (iv)(III)(aa); see
37 CFR 210.20(b)(3)(i) (referring to ``the information and
certification required by Sec. 210.16''); id. at 210.16(c)(3)
(addressing e.g., artist, playing time, ISRC, ISWC, songwriter,
ISNI, and ownership share).
\62\ For example, sound recording name(s), producer(s),
version(s), release date(s), album title(s), and distributor(s).
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Altered data and practicability of reporting. For sound recording
and musical work information, the rule proposes to require identifying
whether the reported data has been modified by the DMP, compared to
being passed through in its original, as-received form. This concept
was suggested by the MLC and others.\63\ As noted above, the Office is
still considering comments in the reports of usage rulemaking and
incorporation of the MLC's suggestion here should not indicate that the
Office has made any conclusions in either this rulemaking or the
reports of usage rulemaking on this subject. The Office also proposes
to import the practicability limitation concerning the reporting of
sound recording and musical work information that was proposed in the
reports of usage proceeding.\64\ Under that proposal, much of the
enumerated sound recording and musical work information would only need
to be reported by a DMP ``to the extent practicable,'' which is defined
in reference to categories of information that are statutorily
required, required by a data standard used by the DMP, or were
otherwise already being reported by the relevant DMP.\65\ As with
altered data, the inclusion of this limitation in the proposed rule
should not indicate that the Office has finalized its approach with
respect to this aspect of the reports of usage rulemaking. The Office
recognizes that these are potential areas where it may make sense to
consider whether the monthly and cumulative reporting rules should
diverge, and invites comment on these issues.\66\
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\63\ MLC Comments at 26, Music Modernization Act Notices of
License, Notices of Nonblanket Activity, Data Collection and
Delivery Efforts, and Reports of Usage and Payment, Docket No. 2020-
5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0014&attachmentNumber=1&contentType=pdf; A2IM & RIAA Initial at
2-3 (noting provenance issues with using DMP-sourced sound recording
data); Paul Jessop Initial at 2-3 (same); SoundExchange Comments at
4-5, Music Modernization Act Notices of License, Notices of
Nonblanket Activity, Data Collection and Delivery Efforts, and
Reports of Usage and Payment, Docket No. 2020-5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0006&attachmentNumber=1&contentType=pdf (same).
\64\ See 85 FR at 22541-42.
\65\ See id.; see also id. at 22531-32. As proposed, it would be
``practicable'' to provide the enumerated information if: (1) it
belongs to a category of information expressly required by the
enumerated list of information contained in 17 U.S.C.
115(d)(4)(A)(ii)(I)(aa) or (bb); (2) where the MLC has adopted a
particular nationally or internationally recognized reporting or
data standard or format (e.g., DDEX) that is being used by the
particular DMP, it belongs to a category of information required to
be reported under such standard or format; (3) it belongs to a
category of information that is reported by the particular DMP
pursuant to any voluntary license or individual download license; or
(4) it belongs to a category of information that was periodically
reported by the particular DMP prior to the license availability
date.
\66\ For example, the Office has inquired whether a reasonable
transition period may be appropriate with respect to certain monthly
usage reporting requirements. See Letter from Copyright Office to
Alliance for Recorded Music, DLC, MLC, and SoundExchange, Inc., at
3-4 (June 30, 2020), https://www.copyright.gov/rulemaking/mma-implementation/copyright-office-letters/2020-5-june-30-2020.pdf.
Since cumulative statements of account are reported only once,
shortly after the license availability date, such a period would
make less sense for this proposed rule, and reporting obligations
for cumulative statements may need to be cognizant of the time
period within which DMPs will ready such statements.
---------------------------------------------------------------------------
Partially matched works. The MLC requested that cumulative
statements of account include information about matched shares of a
musical work where unmatched shares for the work are reported, by
proposing the following regulatory language:
for each track for which a share of a musical work has been matched
and for which accrued royalties have been paid in accordance with
section [210.20(b)(2)], but for which one or more shares of a
musical work remains unmatched, identification of [the total period
covered by the cumulative statement and the per-play allocation and
unique DMP transaction identifier], and a clear identification of
the share(s) that have been matched, the owner(s) of such matched
shares, and the amount of such accrued royalties paid in accordance
with section [210.20(b)(2)].\67\
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\67\ MLC Reply App. D at 19.
The MLC explained that, in practice, a DMP may have paid one
copyright owner their royalty share, and held accrued royalties for any
remaining unmatched share(s).\68\ The MLC is concerned that upon
transfer of such unmatched royalties, if the paid share is not properly
identified, there is a risk that a paid co-owner would be able to
collect a portion of an unpaid co-owner's share.\69\
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\68\ MLC Ex Parte Letter at 3 (June 17, 2020) (giving the
example of an identified 50% co-owner being paid their 50% share by
a DMP, and then subsequently being paid half of the remaining share
by the MLC due to lack of record of the first payment; stating that
``reporting on partially-matched works and the respective shares
that the DMP already paid is essential to allow the MLC to properly
credit share owners who have been paid and avoid double payments'').
\69\ MLC Ex Parte Letter at 3 (June 17, 2020).
---------------------------------------------------------------------------
The DLC does not appear to disagree with the MLC's description of
the issue, but stated that ``[t]his sort of operational detail should
be worked out between the MLC and individual digital music providers.''
\70\ The DLC suggested that DMPs' third-party vendors, who are subject
to ``strict contractual confidentiality restrictions,'' may have this
information and not the DMPs themselves.\71\ Although it did not
propose suggested language, it asked the Office to ``account for these
[confidentiality] restrictions and protect digital music providers from
any liability related to their breach,'' were it to promulgate a
regulation.\72\ The MLC presumed that the DLC's confidentiality concern
``relates to the amounts of royalties paid under voluntary licenses''
and offered to amend their proposal to limit share reporting ``to the
share percentage and the owner of the share that was paid, [and]
omitting the precise amount of royalties paid under the voluntary
license terms.'' \73\
---------------------------------------------------------------------------
\70\ DLC Reply at 25.
\71\ Id.
\72\ Id.
\73\ MLC Ex Parte Letter at 4 (June 17, 2020).
---------------------------------------------------------------------------
The Copyright Office finds the MLC's proposal to be reasonable in
light of the statutory function of cumulative statements of account.
Current regulations already allow a compulsory licensee to elect to
allocate monthly royalty payments between co-owners and serve
statements on each co-owner reflecting the percentage share paid to
that co-owner.\74\ Further, the MMA contemplates that if a DMP's
matching efforts are successful during the transition period as to a
share of a work, it will pay royalties to the owner of that share,
while holding the unmatched remainder for further matching efforts and,
if ultimately unsuccessful, eventual transfer to the MLC.\75\ Thus, the
situation the MLC anticipates seems likely to occur, and having the
matched share information will be important. The proposed rule largely
follows the MLC's language, although it does not include the MLC's
proposed limitation to instances where royalty shares are paid in
accordance with Sec. 210.20(b)(2), which concerns payments related to
musical works matched during the transition period. It seems that all
instances of partial payment of royalty interests may be relevant to
the MLC's identification and royalty distribution functions for the
remaining unmatched share(s). The Office welcomes comments on all
aspects of this proposed rule, and is interested in whether the MLC's
suggestion to omit a requirement to report the amount of royalties paid
to matched shares under voluntary licenses adequately addresses the
DLC's concerns. To that end, the Office solicits comments regarding
whether the rule should also permit the MLC and individual DMPs to
enter into
[[Page 43522]]
agreements to alter this process, provided that any such change does
not materially prejudice the MLC's efforts with respect to locating and
identifying copyright owners owed a portion of these accrued royalties.
The Office has proposed a similar provision with respect to monthly
reports of usage.\76\
---------------------------------------------------------------------------
\74\ 37 CFR 210.16(g)(1).
\75\ See 17 U.S.C. 115(d)(10)(B).
\76\ See 85 FR 22546 (proposed 37 CFR 210.27(n)).
---------------------------------------------------------------------------
Reconciliation. The MLC requested reporting of information
concerning any applicable interest earned by DMPs on accrued royalties,
and also ``any claimed or applied deductions or adjustments'' to
applicable royalties ``with a description of the nature of, and basis
for, such claimed deduction or adjustment.'' \77\ The DLC responded
that interest ``was purposefully not included in the statute'' and
``was specifically negotiated out of the draft legislation.'' \78\ In
particular, the DLC objected to the inclusion of deductions or
adjustments because it ``is not aware of any deductions or adjustments
that would be made to accrued royalties.'' \79\
---------------------------------------------------------------------------
\77\ MLC Reply App. D at 19.
\78\ DLC Reply at 24.
\79\ Id. at 25.
---------------------------------------------------------------------------
The MLC subsequently clarified that it ``does not purport to
dictate where interest must be applied or what would be applicable
interest,'' but wished to ``ensure[] that any such interest paid over
is also reported, so that the MLC can know to which copyright owners
those moneys should ultimately be paid.'' \80\ Similarly, for
deductions or adjustments, the MLC explained that it does not ``intend
to approve or condone of applying deductions, but merely wants to
ensure that any such changes are properly reported, again so that the
MLC can understand and exactly match the reporting to the payments.''
\81\ The MLC contended that these provisions are needed because ``it is
essential that the reporting on unclaimed accrued royalties match the
accompanying royalty payments to the penny.'' \82\
---------------------------------------------------------------------------
\80\ MLC Ex Parte Letter at 4 (June 17, 2020).
\81\ Id.
\82\ Id.
---------------------------------------------------------------------------
Recognizing the DLC's comments regarding specific references to
interest, adjustments, and deductions, the Copyright Office also
appreciates the broader principle advanced by the MLC that it has an
operational need for royalty statements to match the royalties
transferred to the MLC, or at least minimize unexplained deviations.
While not adopting the MLC's proposed language, the rule proposes that
if the total royalties turned over to the MLC do not reconcile with the
corresponding cumulative statement of account (for whatever reason),
the DMP should include a clear and detailed explanation of the
deviation. The Office has previously adopted a similar rule in the
context of annual statements of account.\83\
---------------------------------------------------------------------------
\83\ See 37 CFR 210.17(d)(2)(ii).
---------------------------------------------------------------------------
Per-play allocation and unique transaction identifiers. The MLC
proposed that cumulative statements of account be required to include
``[t]he per-play allocation or any other applicable rates and amounts
allocated to the identified usage, and a perpetually unique DMP
transaction identifier for the usage.'' \84\ During a subsequent ex
parte meeting, the MLC explained that while the proposed reports of
usage requirements do not explicitly include references to these items,
this information would nonetheless be adequately captured if the Office
applied those proposed requirements.\85\ As a result, the Office has
not included the MLC's proposed language.\86\
---------------------------------------------------------------------------
\84\ MLC Reply App. D at 19.
\85\ See MLC Ex Parte Letter at 3 (June 17, 2020).
\86\ The proposed rule adopts the same approach with respect to
reporting of partially matched works. See MLC Reply App. D at 19.
---------------------------------------------------------------------------
B. Treatment of Negotiated Agreements
As described above, in addition to the MLC's request for additional
reporting, the DLC asked for a ``regulatory clarification'' related to
negotiated agreements that predate the MMA's enactment.\87\ In its
words, certain music publishers ``negotiated agreements with several of
the major digital music providers to liquidate accrued royalties for
unmatched works through payments based on market share, or other
mechanisms not based on matching to specific compositions that
generated the royalties,'' and some of these agreements have continued
in force through the MMA's enactment date such that ``some digital
music providers will continue to be obligated to pay some amount of
accrued unmatched royalties to publishers with whom they have direct
deals.'' \88\ According to the DLC, ``[t]his creates a conflict between
the terms of those preexisting agreements and the MMA's directions in
section 115(d)(10) regarding the accrual of unmatched royalties.'' \89\
To address this, and the DLC's overarching concern that ``[i]n no event
should digital music providers be made to pay double,'' \90\ the DLC
proposed adding the following regulatory language:
---------------------------------------------------------------------------
\87\ DLC Initial at 18.
\88\ Id. at 18-19.
\89\ Id. at 18.
\90\ Id. at 19.
Notwithstanding anything in this section to the contrary, digital
music providers are not required to accrue any royalties that are
required to be paid to copyright owners of musical works pursuant to
any agreements entered into prior to the effective date of the Music
Modernization Act, and such royalties shall not be treated as
``accrued royalties'' for purposes of this section or 17 U.S.C.
115(d)(10).\91\
---------------------------------------------------------------------------
\91\ Id.
The MLC objected, stating that this proposed regulation would both
``conflict[] with the statute's requirement that all royalties accrued
from initial use of the unmatched work be transferred'' to the MLC and
``exceed the Copyright Office's authority.'' \92\ The MLC stated that
``[w]hile prior to the enactment of the MMA, certain DMPs entered into
settlement agreements with certain music publishers in connection with
disputes arising from their failure to license, match and/or pay
royalties due, such settlement payments were definitively not the
proper payment of royalties to copyright owners of unmatched uses,''
and were ``more likely consideration for releases from liability for
copyright infringement or covenants not to sue.'' \93\ The MLC further
argued that royalties lose their ``unclaimed'' status only when they
are matched.\94\
---------------------------------------------------------------------------
\92\ MLC Reply at 27-30.
\93\ Id. at 29.
\94\ Id.
---------------------------------------------------------------------------
The proposed rule does not include regulatory language specifically
addressing the relationship between private settlement agreements and
whether works are required to be reported on cumulative statements of
account (with accompanying payment of accrued royalties). The statute
is somewhat instructive to this issue. Provisions regarding the
treatment of voluntary licenses and accrued, unclaimed royalties were
carefully negotiated during the legislative process.\95\ To maintain
eligibility for the limitation on liability, when making available a
sound recording of a musical work via a covered activity, a digital
music provider must accrue and hold royalties for each musical work for
which a copyright owner has not been identified or located.\96\ At the
end of this current holding period, all accrued royalties for which ``a
copyright owner of an unmatched musical work (or share thereof) is not
identified and located'' must be transferred to the MLC along with
associated reporting.\97\ Works are
[[Page 43523]]
considered ``matched'' when ``the copyright owner of such work (or
share thereof) has been identified and located.'' \98\ The law further
states that ``[v]oluntary license[s]'' will ``remain in effect'' by
their respective terms notwithstanding the license availability date,
and by implication, DMPs would not retain accrued royalties (as defined
in the MMA) for works licensed under private agreements.\99\
---------------------------------------------------------------------------
\95\ See H.R. Rep. No. 115-651, at 9-10, 24; S. Rep. No. 115-
339, at 10-11, 33-34.
\96\ 17 U.S.C. 115(d)(10).
\97\ Id. at 115(d)(10)(B)(iv)(III); see id. at 115(e)(2) (``The
term `accrued royalties' means royalties accrued for the
reproduction or distribution of a musical work (or share thereof) in
a covered activity, calculated in accordance with the applicable
royalty rate under this section.'').
\98\ Id. at 115(e)(17); see also id. at 115(e)(35) (defining
``unmatched'').
\99\ Id. at 115(e)(36) (``The term `voluntary license' means a
license for use of a musical work (or share thereof) other than a
compulsory license obtained under this section.''); id. at
115(d)(9)(C) (describing transition to blanket license). The MLC
will ``confirm uses of musical works subject to voluntary licenses
and individual download licenses, and the corresponding pro rata
amounts to be deducted from royalties that would otherwise be due
under the blanket license.'' Id. at 115(d)(3)(G)(i)(I)(bb). The
Office has proposed a rule that would require DMPs to provide a
description (including the start and end dates, the musical work
copyright owner, and either a list of all covered musical works or
an identification of any applicable catalog exclusions) of any
applicable voluntary licenses to the MLC so that the MLC can confirm
such uses for DMPs. See 85 FR 22537, 22541.
---------------------------------------------------------------------------
The Office understands the DLC's concerns to center around whether
payments made pursuant to various private settlement agreements can
extinguish the obligation to deliver accrued royalties to the MLC. In
light of the statutory language, these questions may be best resolved
by determining whether a given agreement constitutes a valid license to
the work(s) at issue (and if so, the scope of the license).\100\ In
such cases, the work(s) licensed under such agreements could be
considered ``matched'' and may not need to be reported at the close of
the transition period. In the case of jointly authored works, a further
potential wrinkle may be determining whether any license extended
pursuant to a settlement agreement was conveyed to the entirety of the
work, or only to a partial interest in a co-owned work.\101\
---------------------------------------------------------------------------
\100\ While in some cases, the terms of a settlement agreement
may provide continuing license authority, the Second Circuit has
opined that, ``absent clear language to the contrary, they are not
licenses for future use.'' Compare Davis v. Blige 505 F.3d 90, 102-
04 (2d Cir. 2007) (holding that ``a license or assignment in
copyright can only act prospectively,'' and that a co-owner cannot
convey ``his co-owners' right to prosecute past infringements'')
with Jacobs v. Nintendo of Am., Inc., 370 F.3d 1097, 1101 (Fed. Cir.
2004) (holding that a settlement with an unrestricted grant to
engage in patented activities carried with it an implied
sublicense); see also United States v. Youngstown Sheet & Tube Co.,
171 F.2d 103, 111 (6th Cir. 1948) (``A release for wrongs done in
the past is not the equivalent of a license to do rightfully the
same thing in the future.'').
\101\ For a background discussion on considerations related to
licensing co-owned works in the performance royalty context, see
U.S. Copyright Office, Views of the United States Copyright Office
Concerning PRO Licensing of Jointly Owned Works (Jan. 2016), https://www.copyright.gov/policy/pro-licensing.pdf. As a starting point,
``[j]oint authors co-owning copyright in a work . . . `each hav[e]
an independent right to use or [non-exclusively] license the
copyright, subject only to a duty to account to the other co-owner
for any profits earned thereby.' '' Cmty. for Creative Non-Violence
v. Reid, 846 F.2d 1485, 1498 (DC Cir. 1988). Collaborators can and
sometimes do ``alter this statutory allocation of rights and
liabilities by contract,'' including with respect to licensing. Paul
Goldstein, 1 Goldstein on Copyright sec. 4.2 (3d. ed. 2020); see,
e.g., Corbello v. DeVito, 832 F. Supp. 2d 1231, 1244 (D. Nev. 2011).
---------------------------------------------------------------------------
The Office appreciates the DMP's motivation for further guidance on
this important issue, but must be careful to avoid speaking over either
the statue or private transactions. It would seem that the specific
terms of each agreement would be highly relevant to addressing this
issue, and that questions regarding the interpretation of various
private contracts may be better resolved by the relevant parties rather
than a blanket rule by the Copyright Office.\102\ To the extent that
preexisting settlement agreements may be, as the DLC asserts, in
``conflict'' with ``the MMA's directions in section 115(d)(10)
regarding the accrual of unmatched royalties,'' \103\ the statutory
directive could not yield to such agreements, but the Office offers no
opinion as to whether this is indeed the case. Additionally, if a DMP
is unsure about its obligations under the statute vis-a-vis a given
agreement (or with respect to a particular musical work or share of a
work) and inadvertently transfers royalties later determined to have
indeed been properly matched and paid by the DMP, the Office has
proposed a provision that, as noted, would require the MLC to credit or
refund any overpayment back to the DMP. For these reasons, based on the
current record, the Office tentatively declines the DLC's suggestion to
offer regulatory language regarding the interaction of preexisting
settlement agreements and cumulative reporting obligations.\104\ The
Office recognizes that the DLC's comments arise out of a complicated
and nuanced treatment of private transactions and remains available to
dialogue further, in accordance with the public process for written
comments and/or ex parte meetings.
---------------------------------------------------------------------------
\102\ The Office has not been provided copies of these
settlement agreements.
\103\ DLC Initial at 18.
\104\ Further, while the Office appreciates the DLC's view that
enactment of the MMA was not intended to result in services
``pay[ing] double'' to the same parties for the same activities, id.
at 19, its specific proposed regulatory language may conflict with
the statutory definition of ``accrued royalties'' and lack precision
with respect to scenarios where a payment does not extinguish
royalty entitlements for all copyright owners for the relevant
works; that is, where usage remains fully or partially ``unmatched''
within the meaning of the statute.
---------------------------------------------------------------------------
III. Subjects of Inquiry
The proposed rule is designed to reasonably implement regulatory
duties assigned to the Copyright Office under the MMA and facilitate
the administration of the compulsory licensing system. The Office
solicits additional public comment on all aspects of the proposed rule.
List of Subjects in 37 CFR Part 210
Copyright, Phonorecords, Recordings.
Proposed Regulations
For the reasons set forth in the preamble, the Copyright Office
proposes amending 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. Amend Sec. 210.12 by revising paragraph (k) and removing paragraphs
(i) through (o).
The revision reads as follows:
Sec. 210.12 Definitions.
* * * * *
(k) Any terms not otherwise defined in this section shall have the
meanings set forth in 17 U.S.C. 115(e).
0
3. Amend Sec. 210.20 by revising paragraph (b)(3)(i) and adding
paragraphs (c) through (j) to read as follows:
Sec. 210.20 Statements required for limitation on liability for
digital music providers for the transition period prior to the license
availability date.
* * * * *
(b) * * *
(3) * * *
(i) Not later than 45 calendar days after the license availability
date, transfer all accrued royalties to the mechanical licensing
collective (as required by paragraph (i)(2) of this section), such
payment to be accompanied by a cumulative statement of account that:
(A) Includes all of the information required by paragraphs (c)
through (e) of this section covering the period starting from initial
use of the work;
(B) Is delivered to the mechanical licensing collective as required
by paragraph (i)(1) of this section; and
[[Page 43524]]
(C) Is certified as required by paragraph (j) of this section; and
* * * * *
(c) Each cumulative statement of account delivered to the
mechanical licensing collective under paragraph (b)(3)(i) of this
section shall be clearly and prominently identified as a ``Cumulative
Statement of Account for Making and Distributing Phonorecords,'' and
shall include a clear statement of the following information:
(1) The period (months and years) covered by the cumulative
statement of account.
(2) The full legal name of the digital music provider and, if
different, the trade or consumer-facing brand name(s) of the
service(s), including any specific offering(s), through which the
digital music provider engages, or has engaged at any time during the
period identified in paragraph (c)(1) of this section, in covered
activities. If the digital music provider has a unique DDEX identifier
number, it must also be provided.
(3) The full address, including a specific number and street name
or rural route, of the place of business of the digital music provider.
A post office box or similar designation will not be sufficient except
where it is the only address that can be used in that geographic
location.
(4) For each sound recording embodying a musical work for which
accrued royalties must be transferred to the mechanical licensing
collective under paragraph (b)(3)(i) of this section, a detailed
cumulative statement, from which the mechanical licensing collective
may separate reported information for each month and year for each
applicable activity or offering including as may be defined in part 385
of this title, of all of:
(i) The royalty payment and accounting information required by
paragraph (d) of this section; and
(ii) The sound recording and musical work information required by
paragraph (e) of this section.
(5) The total royalty payable by the digital music provider for the
period identified in paragraph (c)(1) of this section for the sound
recordings embodying musical works identified in paragraph (c)(4) of
this section, computed in accordance with the requirements of this
section and part 385 of this title, and including detailed information
regarding how the royalty was computed, with such total royalty payable
broken down by month and year and by each applicable activity or
offering including as may be defined in part 385 of this title.
(6) If the total royalty payable under paragraph (c)(5) of this
section does not reconcile with the royalties actually transferred to
the mechanical licensing collective, a clear and detailed explanation
of the difference and the basis for it.
(d) The royalty payment and accounting information called for by
paragraph (c)(4)(i) of this section shall consist of the following:
(1) A detailed and step-by-step accounting of the calculation of
royalties payable by the digital music provider under applicable
provisions of this section and part 385 of this title, sufficient to
allow the mechanical licensing collective to assess the manner in which
the digital music provider determined the royalty owed and the accuracy
of the royalty calculations, including but not limited to the number of
payable units, including, as applicable, permanent downloads, plays,
and constructive plays, for each reported sound recording.
(2) A digital music provider may, in cases where the final public
performance royalty has not yet been determined, compute the public
performance royalty component based on the interim public performance
royalty rate, if established; or alternatively, on a reasonable
estimation of the expected royalties to be paid in accordance with
GAAP.
(3) All information and calculations provided pursuant to paragraph
(d) of this section shall be made in good faith and on the basis of the
best knowledge, information, and belief of the digital music provider
at the time the cumulative statement of account is delivered to the
mechanical licensing collective, and subject to any additional
accounting and certification requirements under 17 U.S.C. 115 and this
section.
(e)(1) The following information must be provided for each sound
recording embodying a musical work required to be reported under
paragraph (c)(4)(ii) of this section:
(i) Identifying information for the sound recording, including but
not limited to:
(A) Sound recording name(s), including, to the extent practicable,
all known alternative and parenthetical titles for the sound recording;
(B) Featured artist(s);
(C) Unique identifier(s) assigned by the digital music provider, if
any, including any code(s) that can be used to locate and listen to the
sound recording through the digital music provider's public-facing
service;
(D) Playing time; and
(E) To the extent acquired by the digital music provider in
connection with its use of sound recordings of musical works to engage
in covered activities, and to the extent practicable:
(1) Sound recording copyright owner(s);
(2) Producer(s);
(3) International standard recording code(s) (ISRC);
(4) Any other unique identifier(s) for or associated with the sound
recording, including any unique identifier(s) for any associated album,
including but not limited to:
(i) Catalog number(s);
(ii) Universal product code(s) (UPC); and
(iii) Unique identifier(s) assigned by any distributor;
(5) Version(s);
(6) Release date(s);
(7) Album title(s);
(8) Label name(s);
(9) Distributor(s); and
(10) Other information commonly used in the industry to identify
sound recordings and match them to the musical works the sound
recordings embody.
(ii) Identifying information for the musical work embodied in the
reported sound recording, to the extent acquired by the digital music
provider in the metadata provided by sound recording copyright owners
or other licensors of sound recordings in connection with the use of
sound recordings of musical works to engage in covered activities, and
to the extent practicable:
(A) Information concerning authorship and ownership of the
applicable rights in the musical work embodied in the sound recording,
including but not limited to:
(1) Songwriter(s);
(2) Publisher(s) with applicable U.S. rights;
(3) Musical work copyright owner(s);
(4) International standard name identifier(s) (ISNI) and interested
parties information code(s) (IPI) for each such songwriter, publisher,
and musical work copyright owner; and
(5) Respective ownership shares of each such musical work copyright
owner;
(B) International standard musical work code(s) (ISWC) for the
musical work embodied in the sound recording; and
(C) Musical work name(s) for the musical work embodied in the sound
recording, including any alternative or parenthetical titles for the
musical work.
(iii) Whether the digital music provider, or any corporate parent
or subsidiary of the digital music provider, is a copyright owner of
the musical work embodied in the sound recording.
(iv) A reference number or code identifying the relevant Notice of
[[Page 43525]]
Intention, if the digital music provider, or its agent, chose to
include such a number or code on its relevant Notice of Intention for
the compulsory license.
(2) Subject to paragraph (e)(3) of this section, where any of the
information called for by paragraph (e)(1) of this section is acquired
by the digital music provider from sound recording copyright owners or
other licensors of sound recordings (or their representatives), and the
digital music provider revises, re-titles, or otherwise edits or
modifies the information, it shall be sufficient for the digital music
provider to report either the originally acquired version or the
modified version of such information (but any modified information must
be identified as such) to satisfy its obligations under paragraph
(e)(1) of this section, unless one or more of the following scenarios
apply, in which case either the unaltered version or both versions must
be reported:
(i) If the mechanical licensing collective has adopted a particular
nationally or internationally recognized reporting or data standard or
format (e.g., DDEX) that is being used by the particular digital music
provider, and either the unaltered version or both versions are
required to be reported under such standard or format.
(ii) Either the unaltered version or both versions are reported by
the particular digital music provider pursuant to any voluntary license
or individual download license.
(iii) Either the unaltered version or both versions were
periodically reported by the particular digital music provider prior to
the license availability date.
(3) Notwithstanding paragraph (e)(2) of this section, a digital
music provider shall not be able to satisfy its obligations under
paragraph (e)(1) of this section by reporting a modified version of any
information belonging to a category of information that was not
periodically revised, re-titled, or otherwise edited or modified by the
particular digital music provider prior to the license availability
date, and in no case shall a modified version of any unique identifier
(including but not limited to ISRC and ISWC), playing time, or release
date be sufficient to satisfy the digital music provider's obligations
under paragraph (e)(1) of this section.
(4) Any obligation under paragraph (e)(1) of this section
concerning information about sound recording copyright owners may be
satisfied by reporting the information for applicable sound recordings
provided to the digital music provider by sound recording copyright
owners or other licensors of sound recordings (or their
representatives) contained in each of the following DDEX fields: DDEX
Party Identifier (DPID), LabelName, and PLine. Where a digital music
provider acquires this information in addition to other information
identifying a relevant sound recording copyright owner, all such
information must be reported to the extent practicable.
(5) As used in this paragraph (e), it is practicable to provide the
enumerated information if:
(i) It belongs to a category of information expressly required by
the enumerated list of information contained in 17 U.S.C.
115(d)(4)(A)(ii)(I)(aa) or (bb);
(ii) Where the mechanical licensing collective has adopted a
particular nationally or internationally recognized reporting or data
standard or format (e.g., DDEX) that is being used by the particular
digital music provider, it belongs to a category of information
required to be reported under such standard or format;
(iii) It belongs to a category of information that is reported by
the particular digital music provider pursuant to any voluntary license
or individual download license; or
(iv) It belongs to a category of information that was periodically
reported by the particular digital music provider prior to the license
availability date.
(6) Notwithstanding any information reported under paragraph
(e)(1)(ii)(A)(5) of this section, for each track for which a share of a
musical work has been matched and for which accrued royalties for such
share have been paid, but for which one or more shares of the musical
work remains unmatched and unpaid, the digital music provider must
provide a clear identification of the share(s) that have been matched,
the owner(s) of such matched shares, and, for shares other than those
paid pursuant to a voluntary license, the amount of such accrued
royalties paid.
(f) The information required by paragraphs (c) through (e) of this
section requires intelligible, legible, and unambiguous statements in
the cumulative statements of account, without incorporation by
reference of facts or information contained in other documents or
records.
(g) References to part 385 of this title, as used in paragraphs (c)
and (d) of this section, refer to the rates and terms of royalty
payments as in effect as to each particular reported use based on when
the use occurred.
(h) If requested by a digital music provider, the mechanical
licensing collective shall deliver an invoice and/or a response file to
the digital music provider within a reasonable period of time after the
cumulative statement of account and related royalties are received. The
response file shall contain such information as is common in the
industry to be reported in response files, backup files, and any other
similar such files provided to digital music providers by applicable
third-party administrators.
(i)(1) Each cumulative statement of account delivered to the
mechanical licensing collective under paragraph (b)(3)(i) of this
section shall be delivered in a machine-readable format that is
compatible with the information technology systems of the mechanical
licensing collective as reasonably determined by the mechanical
licensing collective and set forth on its website, taking into
consideration relevant industry standards and the potential for
different degrees of sophistication among digital music providers. The
mechanical licensing collective must offer at least two options, where
one is dedicated to smaller digital music providers that may not be
reasonably capable of complying with the requirements of a reporting or
data standard or format that the mechanical licensing collective may
see fit to adopt for larger digital music providers with more
sophisticated operations. Nothing in this section shall be construed as
prohibiting the mechanical licensing collective from adopting more than
two reporting or data standards or formats.
(2) Royalty payments shall be delivered to the mechanical licensing
collective in such manner and form as the mechanical licensing
collective may reasonably determine and set forth on its website. A
cumulative statement of account and its related royalty payment may be
delivered together or separately, but if delivered separately, the
payment must include information reasonably sufficient to allow the
mechanical licensing collective to match the cumulative statement of
account to the payment.
(3) In the case of an overpayment of royalties, the mechanical
licensing collective shall appropriately credit or offset the excess
payment amount and apply it to the digital music provider's account. As
an alternative to a credit, a digital music provider may request a
refund for an overpayment of royalties, which the mechanical licensing
collective shall pay within a reasonable period of time.
(j) Each cumulative statement of account delivered to the
mechanical licensing collective under paragraph (b)(3)(i) of this
section shall be accompanied by:
[[Page 43526]]
(1) The name of the person who is signing and certifying the
cumulative statement of account.
(2) A signature, which in the case of a digital music provider that
is a corporation or partnership, shall be the signature of a duly
authorized officer of the corporation or of a partner.
(3) The date of signature and certification.
(4) If the digital music provider is a corporation or partnership,
the title or official position held in the partnership or corporation
by the person who is signing and certifying the cumulative statement of
account.
(5) One of the following statements:
(i) Statement one:
I certify that (1) I am duly authorized to sign this cumulative
statement of account on behalf of the digital music provider; (2) I
have examined this cumulative statement of account; and (3) all
statements of fact contained herein are true, complete, and correct
to the best of my knowledge, information, and belief, and are made
in good faith.
(ii) Statement two:
I certify that (1) I am duly authorized to sign this cumulative
statement of account on behalf of the digital music provider, (2) I
have prepared or supervised the preparation of the data used by the
digital music provider and/or its agent to generate this cumulative
statement of account, and (3) such data is true, complete, and
correct to the best of my knowledge, information, and belief, and
was prepared in good faith, and (4) this cumulative statement of
account was prepared by the digital music provider and/or its agent
using processes and internal controls that were subject to an
examination, during the past year, by a licensed certified public
accountant in accordance with the attestation standards established
by the American Institute of Certified Public Accountants, the
opinion of whom was that the processes and internal controls were
suitably designed to generate monthly reports of usage that
accurately reflect, in all material respects, the digital music
provider's usage of musical works, the statutory royalties
applicable thereto, and any other data that is necessary for the
proper calculation of the statutory royalties in accordance with 17
U.S.C. 115 and applicable regulations.
(6) A certification by a duly authorized officer of the digital
music provider that the digital music provider has fulfilled the
requirements of 17 U.S.C. 115(d)(10)(B)(i) and (ii) but has not been
successful in locating or identifying the copyright owner.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2020-15591 Filed 7-16-20; 8:45 am]
BILLING CODE 1410-30-P
