Request for Information on Designation of Mechanical Licensing Collective and Digital Licensee Coordinator
| Published date | 21 December 2018 |
| Record Number | 2018-27743 |
| Court | Copyright Office,Library Of Congress |
Federal Register, Volume 83 Issue 245 (Friday, December 21, 2018)
[Federal Register Volume 83, Number 245 (Friday, December 21, 2018)]
[Notices]
[Pages 65747-65754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27743]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2018-11]
Request for Information on Designation of Mechanical Licensing
Collective and Digital Licensee Coordinator
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Notice of inquiry.
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SUMMARY: The U.S. Copyright Office is issuing a notice of inquiry
regarding the Musical Works Modernization Act, title I of the Orrin G.
Hatch-Bob Goodlatte Music Modernization Act (``MMA''), enacted on
October 11, 2018. The MMA made significant modifications to the
compulsory license in section 115 of title 17 for making and
distributing phonorecords of musical works (the ``mechanical
license''). Among the many changes to the section 115 compulsory
license, the MMA calls for establishing a collective to manage a new
blanket licensing system governing licensed uses of musical works by
digital music providers. The Register of Copyrights is directed to
designate the mechanical licensing collective and the digital licensee
coordinator that will carry out key functions under the new blanket
license.
The Office now solicits information to identify the appropriate
entities to be designated. The information received in response to this
notice of inquiry will be publicly posted, and interested members of
the public may publicly comment on the submissions. After consideration
of the record material, the Register will publish a notice in the
Federal Register setting forth the identity of and contact information
for the mechanical licensing collective and digital licensee
coordinator, and the reasons for the designations.
DATES: Initial written proposals must be received no later than 11:59
p.m. Eastern Time on March 21, 2019. Written reply comments must be
received no later than 11:59 p.m. Eastern Time on April 22, 2019.
Following submission of these written comments, the Office may provide
for proponents of written proposals to supplement or amend their
initial submission, in accordance with specific instructions
established by the Office at https://www.copyright.gov/rulemaking/mma-designations/. The Office reserves the option to seek additional public
input prior to making a designation, to be announced by separate notice
in the future. Rather than reserving time for potential extensions of
time to file comments, commenting parties should be aware that the
Office has already established what it believes to be the most
reasonable deadlines consistent with the statutory deadlines by which
it must promulgate the regulations described in this notice of inquiry.
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 in response to this
notice 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-designations/. 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.
[[Page 65748]]
FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and
Associate Register of Copyrights, by email at regans@copyright.gov,
Steve Ruwe Assistant General Counsel, by email at sruwe@copyright.gov,
or Jason E. Sloan, Assistant General Counsel, by email at
jslo@copyright.gov. 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'').\1\ Title I of
the MMA addresses the efficiency and fairness of the section 115
mechanical license for the reproduction and distribution of musical
works embodied in digital phonorecord deliveries by establishing a
blanket licensing system governing such uses by digital music
providers.\2\ Prior to passage of the MMA, a digital music provider
seeking to use a protected musical work was required to either obtain a
voluntary license from the copyright owner to use the work or obtain a
compulsory license by filing a notice of intention to obtain a
compulsory license on a song-by-song basis. A notice of intention could
be filed with the copyright owner or, under certain circumstances in
which the owner could not be identified, with the U.S. Copyright
Office.\3\
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\1\ Public Law 115-264, 132 Stat. 3676 (2018).
\2\ See S. Rep. No. 115-339, at 1-2 (2018) (``The current
statutory scheme applies inconsistent rules that place certain
technologies at a disadvantage and result in inequitable
compensation variances for music creators. These inconsistencies
have drawn criticism that music copyright and licensing laws are too
difficult to comply with and do not adequately reward the artists
and professionals responsible for creating American music.'');
Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen
and Ranking Members of Senate and House Judiciary Committees, at 1
(2018), https://judiciary.house.gov/wp-content/uploads/2018/04/Music-Modernization-Act.pdf (``Conf. Rep.''); see also H.R. Rep. No.
115-651, at 2 (2018) (detailing the House Judiciary Committee's
efforts to review music copyright laws).
\3\ See 17 U.S.C. 115(b)(1), (c)(5) (2017); S. Rep. No. 115-339,
at 3; U.S. Copyright Office, Copyright and the Music Marketplace 28-
31 (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf (describing operation of
prior section 115 license).
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The MMA creates a new blanket license for the reproduction and
distribution of musical works by digital music providers in the form of
digital phonorecord deliveries, including permanent downloads, limited
downloads, and interactive streams, and eliminates the song-by-song
notice of intention process for such uses.\4\ Instead of obtaining
compulsory licenses on an individual song-by-song basis, the MMA
directs the Office to designate a nonprofit entity, the mechanical
licensing collective (``MLC'') to administer this new blanket-licensing
system starting in January 2021.\5\ As set forth in more detail below,
the MLC, through its board of directors and task-specific committees,
will be responsible for a variety of duties, including collecting and
distributing royalties from digital music providers, establishing a
musical works database relevant to the new blanket license, and
administering a process by which copyright owners can claim ownership
of musical works (and shares of such works).\6\
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\4\ The MMA retains the ability of record companies to obtain an
individual download license on a song-by-song basis. 17 U.S.C.
115(b)(3) (2018).
\5\ Id. at 115(d)(3)(B); see also id. at 115(e)(15). The MLC
will begin to administer the blanket license on the ``license
availability date,'' envisioned by the statute as January 1, 2021.
\6\ Id. at 115(d)(3)(C). The Copyright Office is provided with
``broad regulatory authority'' to conduct proceedings as necessary
to effectuate the statute; in addition to a number of regulations
that the Register is specifically directed to promulgate, the
legislative history contemplates that the Register will ``thoroughly
review'' policies and procedures established by the MLC. H.R. Rep.
No. 115-651, at 5-6; S. Rep. No. 115-339, at 5; see 17 U.S.C.
115(d)(12). The legislative history further suggests that the
Register promulgate the necessary regulations in a way that
``balances the need to protect the public's interest with the need
to let the new collective operate without over-regulation.'' H.R.
Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15.
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Licensees will bear the reasonable costs of establishing and
operating the new MLC. The Copyright Royalty Judges will conduct a
proceeding to determine the amount of an administrative assessment fee
to be paid by blanket and significant nonblanket licensees for the
reasonable costs of starting up and continuing to operate the new
MLC.\7\ A digital licensee coordinator (``DLC'') may be designated to
represent digital music providers in the administration of the license,
including by serving as a nonvoting board member of the MLC, and
participating in proceedings before the Copyright Royalty Judges to
determine the administrative assessment fee.\8\ To facilitate public
comment, this notice sets forth a brief explanation of the designation
process and key functions and responsibilities of the MLC, its board
and committees, and the DLC.
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\7\ 17 U.S.C. 115(d)(7)(D).
\8\ Id. at 115(d)(3)(D)(i)(IV), (d)(5).
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A. Designation Process
The statute directs the Register of Copyrights to designate the MLC
within 270 days of enactment of the MMA.\9\ To aid in this process, the
statute requires the Register to publish notice in the Federal Register
soliciting information to assist in identifying the appropriate entity
to serve as the MLC within 90 days of enactment. The notice must
solicit information regarding potential board members of the MLC, the
operations advisory committee, the unclaimed royalties oversight
committee and the dispute resolution committee.\10\
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\9\ Id. at 115(d)(3)(B)(i).
\10\ Id. at 115(d)(3)(B), (d)(3)(D)(iv)-(vi).
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By law, in order to be designated as the MLC, the entity should be:
A single nonprofit entity that is created by copyright
owners to carry out its statutory responsibilities;
Endorsed by and enjoying substantial support from musical
work copyright owners that represent the greatest percentage of the
licensor market for uses of such works in covered activities over the
preceding 3 years;
Able to demonstrate to the Copyright Office that, by the
license availability date, it will have the administrative and
technological capabilities to perform the required functions; and
Governed by a board of directors that is composed of a mix
of voting and non-voting members as directed by the statute.\11\
\11\ Id. at 115(d)(3)(A), (d)(3)(D)(i).
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If no entity meets all of these statutory criteria, the Register must
designate as the MLC the entity that most nearly fits these
qualifications.\12\ After 5 years, the Register will commence a
periodic review of this designation.\13\
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\12\ Id. at 115(d)(3)(B)(iii).
\13\ Id. at 115(d)(3)(B)(ii); see also H.R. Rep. No. 115-651, at
6 (noting that continuity is expected to be beneficial so long as
the designated entity has ``regularly demonstrated its efficient and
fair administration,'' whereas evidence of ``fraud, waste, or
abuse,'' or failure to adhere to relevant regulations should ``raise
serious concerns'' regarding whether re-designation is appropriate),
S. Rep. No. 115-339, at 5-6 (same).
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The Register is also directed to designate the DLC not later than
270 days after the enactment date, following substantially the same
procedure described for designation of the MLC.\14\ Unlike the MLC, in
the event the Register is unable to identify an entity that fulfills
the criteria for the DLC, the Register may decline to designate a
DLC.\15\
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\14\ 17 U.S.C. 115(d)(5)(B).
\15\ Id. at 115(d)(5)(B)(iii).
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Under the statutory selection criteria, the name and affiliation of
each board member and each committee established by the MLC must be
solicited by the Register as part of the designation
[[Page 65749]]
process.\16\ The legislative history states ``the Register is expected
to allow the public to submit comments on whether the individuals and
their affiliations meet the criteria specified in the legislation; make
some effort of its own as it deems appropriate to verify that the
individuals and their affiliations actually meet the criteria specified
in the legislation; and allow the public to submit comments on whether
they support such individuals being appointed for these positions.''
\17\ Accordingly, as addressed below, the Copyright Office expects
interested members of the public to comment upon the proposed
governance board in response to this inquiry.
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\16\ Id. at 115(d)(3)(B)(i).
\17\ H.R. Rep. No. 115-651, at 5; S. Rep. No. 115-339, at 5;
Conf. Rep. at 4; see H.R. Rep. No. 115-651, at 26 (``This
requirement is not waivable by the Register and is not subject to
the alternate designation language.''); S. Rep. No. 115-339, at 23
(same).
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Similar to the endorsement criteria discussed below, the statute
does not preclude prospective board members, vendors, or other
affiliates of a prospective MLC from being included in submissions from
multiple competing entities. Indeed, based on the statutory criteria
requiring representative of certain publisher or songwriter
associations to serve as non-voting board members, there may be some
representatives that might logically serve on the board of any proposed
MLC.\18\ Similarly, while the statutory language authorizes the MLC to
arrange for services of outside vendors, nothing suggests that such a
vendor must offer exclusive services to that MLC candidate (let alone
one that is yet-to-be designated).
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\18\ See 17 U.S.C. 115(d)(3)(D)(i).
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B. MLC Duties and Functions
The MMA enumerates a number of functions for the MLC.\19\ The MLC
must be a single nonprofit entity created by copyright owners and
endorsed by musical work copyright owners, and it must possess the
administrative and technological capabilities necessary to carry out a
wide array of responsibilities in administering blanket licenses.\20\
This administrative role includes accepting or rejecting notices of
license, and exercising authority to terminate licenses when the
licensee is in default.\21\ The MLC has 30 days to reject a notice in
writing, listing with specificity why such notice was rejected, either
because it does meet the statutory requirements or applicable
regulations,\22\ or if the digital music provider has had a blanket
license terminated by the collective within the past three years.\23\
The MLC will also accept notices of nonblanket activity; that is, a
notice that the licensee has been engaging in making digital
phonorecord deliveries of musical works without using the blanket
license, from significant nonblanket licensees.\24\
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\19\ Id. at 115(d)(3)(C)(i)-(iii) (enumerating thirteen
functions, in addition to permission to administer voluntary
licenses).
\20\ Id. at 115(d)(3)(A)(i)-(iii); see also id. at
115(d)(3)(B)(iii).
\21\ Id. at 115(d)(33)(F).
\22\ Id. at 115(d)(2)(A)(iii)(I).
\23\ Id. at 115(d)(2)(A)(iii)(II), and (d)(33)(F).
\24\ Id. at 115(d)(3)(F), (e)(23).
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For digital music providers that are blanket licensees, the MLC
will receive reports of usage, and collect and distribute royalties for
covered activities.\25\ A key aspect of the MLC's collection and
distribution responsibilities includes identifying musical works and
copyright owners, matching them to sound recordings (and addressing
disputes), and ensuring that a copyright owner gets paid as he or she
should. To that end, the MLC will create and maintain a free, public
database of musical work and sound recording ownership information. The
MLC will administer processes by which copyright owners can claim
ownership of musical works (and shares of such works), and by which
royalties for works for which the owner is not identified or located
are equitably distributed to known copyright owners on a market share
basis after a required holding period. The MLC unclaimed royalties
oversight committee is tasked with establishing policies and procedures
for such distributions, subject to the approval of the MLC board of
directors.
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\25\ See generally id. at 115(d)(3)(C)(i).
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To fulfill its responsibilities, the MLC is statutorily authorized
to invest in relevant resources, and arrange for services of outside
vendors and others, to support the activities of the MLC.\26\ It may
engage in legal and other efforts to enforce rights and obligations set
forth under the license, including by filing bankruptcy proofs of
claims for amounts owed under licenses, and by acting in coordination
with the digital licensee coordinator.\27\ The MLC may be audited by
copyright owners due royalties from the MLC, and so must maintain
records of its activities and engage in and respond to audits.\28\ And,
the MLC may audit licensees.\29\
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\26\ Id.
\27\ Id.
\28\ Id.; see also id. at 115(d)(3)(L).
\29\ Id. at 115(d)(4)(D).
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The MLC may also administer voluntary licenses issued by, or
individual download licenses obtained from, copyright owners only for
reproduction or distribution rights in musical works for covered
activities and the MLC shall charge reasonable fees for such
services.\30\ But the MLC may only issue blanket licenses for digital
uses pursuant to section 115(d)(1), and administer blanket licenses for
reproduction or distribution rights in musical works for covered
activities.\31\
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\30\ Id. at 115(d)(3)(C)(iii).
\31\ Id. at 115(d)(3)(C)(ii).
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The MLC is authorized to initiate and participate in proceedings
before the Copyright Royalty Judges to establish the administrative
assessment that will fund the MLC activities. The MLC may gather and
provide documentation for use in proceedings before the Copyright
Royalty Judges to set rates and terms for the section 115 license. And,
finally, the MLC may initiate and participate in proceedings before the
Copyright Office with respect to the foregoing activities.\32\
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\32\ Id. at 115(d)(3)(C)(i).
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C. MLC Board
The board of the MLC shall consist of 14 voting members and 3
nonvoting members.\33\ Ten voting members shall be representatives of
music publishers to which songwriters have assigned exclusive rights of
reproduction and distribution of musical works with respect to covered
activities, and none of which may be owned by, or under common control
with, any other board member. Four voting members shall be professional
songwriters who have retained and exercise exclusive rights of
reproduction and distribution with respect to covered activities with
respect to musical works they have authored. One nonvoting member shall
be a representative of the nonprofit trade association of music
publishers that represents the greatest percentage of the licensor
market for uses of musical works in covered activities, as measured for
the 3-year period preceding the date on which the member is appointed.
One nonvoting member shall be the digital licensing coordinator, if one
has been designated, or otherwise, the nonprofit trade association of
digital licensees that represents the greatest percentage of the
licensee market for uses of musical works in covered activities, as
measured over the preceding 3 full calendar years. One nonvoting member
shall be a representative of a nationally recognized nonprofit trade
association whose
[[Page 65750]]
primary mission is advocacy on behalf of songwriters in the United
States.\34\
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\33\ For the statutory requirements regarding the board
described in this paragraph, see 17 U.S.C. 115(d)(3)(D)(i).
\34\ Id.
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As the legislative history notes, ``[s]ervice on the Board or its
committees is not a reward for past actions, but is instead a serious
responsibility that must not be underestimated . . . . It has been
agreed to by all parties that songwriters should be responsible for
identifying and choosing representatives that faithfully reflect the
entire songwriting community on the Board.'' \35\
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\35\ S. Rep. No. 115-339, at 5.
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The MLC board is authorized to adopt bylaws for the selection of
new directors subsequent to the initial designation of the MLC.\36\ The
Presidential Signing Statement accompanying enactment of the MMA states
that directors of the MLC are inferior officers under the Appointments
Clause of the Constitution, and that the Librarian of Congress must
approve each subsequent selection of a new director.\37\ It also
suggests that the Register work with the MLC, once designated, to
address issues related to board succession.\38\
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\36\ 17 U.S.C. 115(d)(3)(D)(ii).
\37\ Statement on Signing the Orrin G. Hatch-Bob Goodlatte Music
Modernization Act, 2018 Daily Comp. Pres. Doc. 692 (Oct. 11, 2018),
https://www.gpo.gov/fdsys/pkg/DCPD-201800692/pdf/DCPD-201800692.pdf
(``MMA Signing Statement'').
\38\ Id.
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An individual serving as an officer of the MLC may not, at the same
time, also be an employee or agent of any member of the board of
directors of the collective or any entity represented by a member of
the board of directors.\39\
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\39\ 17 U.S.C. 115(d)(3)(D)(viii).
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Not later than one year after the date on which the MLC is
initially designated, the MLC shall establish publicly available bylaws
to determine issues relating to the governance of the collective. The
MLC bylaws shall address the length of the term for each MLC board
member, the staggering of the terms of the board members, a process for
filling a seat on the board that is vacated before the end of the set
term, a process for electing a board member, and a management structure
for daily operation of the collective.\40\
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\40\ Id. at 115(d)(3)(D)(ii).
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D. MLC Committees
The MMA requires the board to establish three committees, and the
Office to solicit names of prospective committee members in this
notice. The statute does not address whether members may serve on
multiple committees or whether members of the board may also serve on a
committee.
Operations Advisory Committee. The MLC board of directors is
required to establish an operations advisory committee consisting of
not fewer than six members to make recommendations to the board
concerning the operations of the collective, including the efficient
investment in and deployment of information technology and data
resources.\41\ This committee is required to have an equal number of
members who are musical work copyright owners, to be appointed by the
MLC board, and representatives of digital music providers, to be
appointed by the DLC.\42\
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\41\ Id. at 115(d)(3)(D)(iv).
\42\ Id.
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Unclaimed Royalties Oversight Committee. The MLC board is required
to establish and appoint an unclaimed royalties oversight committee
consisting of ten members, five of which shall be musical work
copyright owners and five of which shall be professional songwriters
whose works are used in covered activities.\43\ This committee is
responsible for establishing policies necessary to undertake a fair
distribution of unclaimed royalties.\44\
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\43\ Id. at 115(d)(3)(D)(v).
\44\ Id. at 115(d)(3)(J)(ii).
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Dispute Resolution Committee. The MLC board of directors is
required to establish and appoint a dispute resolution committee
consisting of not fewer than 6 members, which shall include an equal
number of representatives of musical work copyright owners and
professional songwriters.\45\ This committee is responsible for
establishing policies and procedures for copyright owners to address
disputes relating to ownership interests in musical works, which shall
include a mechanism to hold disputed funds pending the resolution of
the dispute.\46\
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\45\ Id. at 115(d)(3)(D)(vi).
\46\ Id. at 115(d)(3)(K).
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E. The DLC
The MMA also calls for the establishment of a digital licensee
coordinator (``DLC'') to carry out key functions under the new blanket
license.\47\ The DLC is tasked with coordinating the activities of the
licensees. The DLC shall make reasonable, good faith efforts to assist
the MLC in its efforts to locate and identify copyright owners of
unmatched musical works (and shares of such works) by encouraging
digital music providers to publicize the existence of the collective
and the ability of copyright owners to claim unclaimed accrued
royalties, including by posting contact information for the collective
at reasonably prominent locations on digital music provider websites
and applications and conducting in-person outreach activities with
songwriters. The DLC is authorized to gather and provide documentation
for, and participate in proceedings before, the Copyright Royalty
Judges to determine the administrative assessment to be paid by digital
music providers. Further, the DLC may initiate and participate in
proceedings before the Copyright Office with respect to the blanket
mechanical license.
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\47\ See generally id. at 115(d)(5)(C).
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II. Request for Proposals and Related Information
At this time, the Copyright Office solicits information to assist
in identifying the appropriate entities to serve as the MLC and DLC.
The MMA also directs the Register to promulgate multiple other
regulations with respect to the operation of the revamped blanket
mechanical license and operation of the MLC, regarding, inter alia, the
form of the notices of license and notice of nonblanket activity,\48\
usage reports and adjustments,\49\ information to be included in the
musical works database,\50\ requirements for the usability,
interoperability, and usage restrictions of that database,\51\ and the
disclosure and use of confidential information.\52\ The Office will
solicit public comment regarding those subjects through future
notice(s) and therefore present commenters should focus their
statements on information relevant to the designation processes.\53\
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\48\ Id. at 115(d)(2)(A)(i), (d)(6)(A)(i).
\49\ Id. at 115(d)(4)(A)(iv).
\50\ Id. at 115(d)(3)(E)(ii)-(iii).
\51\ Id. at 115(d)(3)(E)(vi).
\52\ Id. at 115(d)(12)(C).
\53\ The Office is contemplating whether it may aid the process
to solicit initial public comments on some of these issues in
advance of the final designation. The Office notes, however, that
the MMA explicitly contemplates that the MLC and DLC may participate
in such proceedings, and would not expect to conclude any
proceeding(s) without affording that opportunity. See id. at
115(d)(3)(C)(i)(X), (d)(5)(C)(i)(IV). The Office welcomes comment on
this question of timing.
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A. Mechanical Licensing Collective
The Office hereby requests proposals for designation as the MLC
that include the identities of all members of a proposed board of
directors and the various committees, along with contact information
for the collective. Such proposals should identify the proposed board
members' relevant background and affiliations so that interested
parties can submit comments to the Register addressing whether the
parties meet the statutory requirements set forth in 17 U.S.C.
115(d)(3)(D).
[[Page 65751]]
The Office requests that proposals for the MLC designations include
the following information, organized by the categories below.
1. Administrative and Technological Capabilities
The following questions are directed at identifying an entity that
can best perform the duties outlined in section 115(d)(3)(C) of the
MMA.
a. General. The Office requests a business plan, including a
statement of purpose or principles, proposed schedule, and available
budgetary projections, for the establishment and operation of the
proposed MLC for the first five years of its existence. In response to
the more granular information requested below, this plan should include
a description of the intended technological and/or business methods
for: Establishing and maintaining the required musical works database;
administering the blanket license and collecting relevant notices,
usage reports, and administrative assessments from digital music
providers; administering a process by which copyright owners can claim
ownership of musical works (and shares of such works); distributing
royalties generated from unidentified works equitably; collecting and
processing royalty payments to musical work copyright owners; and
otherwise fulfilling the MLC's statutory obligations.
b. Ownership Identification, Matching, and Claiming Process. The
Office solicits information tailored to the proposed MLC's ability to
identify musical works (and shares of such works) embodied in
particular sound recordings, and to locate the copyright owners of such
musical works, including but not limited to:
The proposed MLC's plan for matching sound recordings and
musical works, including plans for developing or acquiring initial sets
of data;
An explanation of how ownership information may be
populated, corrected or updated by various stakeholders and how the
proposed MLC will accommodate submission of information that may vary
by scale and scope depending upon the technical or business
sophistication of the submitter;
Best practices, methodologies or expertise (including
manual processes), that the proposed MLC may employ for identification
of copyright owners and matching of copyrighted works;
Intended approaches to prioritization of matching efforts
(including whether and how factors such as usage, royalty amounts,
genre, and vintage of usage of works may guide prioritization choices);
The proposed MLC's target goals or estimates for matching
works in each of the first five years, and in the aggregate, expressed
both in terms of a percentage of the market share of musical works in
covered activities, and in terms of a percentage of the works licensed
for use in covered activity;
With consideration of the statutory timeframes regarding
distribution of unclaimed royalties that accrued before the license
availability date, an explanation how the proposed MLC will provide
adequate opportunity to engage in requisite identification and matching
efforts and for copyright owners to search and claim ownership of
musical works (or shares thereof); \54\
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\54\ Id. at 115(d)(3)(J).
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Intended approaches to address fraudulent claims,
including any planned policies or procedures of the dispute resolution
committee noted below, relevant institutional knowledge of its board
members or prospective vendors, and intended documentation regarding
claims of ownership of works or intended technological processes; and
Any views regarding how the proposed MLC intends to
interact with and address ownership information with collective
management organizations that represent owners of comparable and/or
associated rights.
c. Maintenance of Musical Works Database. While a well-functioning
musical works database is presumed to be integral to administering the
matching and claiming process described above,\55\ the Office solicits
additional information related to the creation and operation of this
historic unified music database, specifically:
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\55\ See Conf. Rep. at 6-7.
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How the proposed MLC will approach interoperability of
existing or future external databases, systems and applications,
including the extent to which it may adopt or engage with existing and
future frameworks, standards or formats (including open standards);
The proposed MLC's plans to utilize and interact with
existing and emerging methods or standards for identification of
parties and works (including hashes and fingerprint technologies);
An explanation of how the proposed MLC will have the
capability to accept, maintain, and otherwise handle large data sets,
including consideration of the scale of data that the MLC will be
responsible for managing;
An explanation of how the proposed MLC intends to approach
access and usage restrictions regarding the musical works database,
including with respect to digital music providers, significant
nonblanket licensees, authorized vendors, and other parties' timely
access to data; \56\
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\56\ See 17 U.S.C. 115(d)(3)(E)(v).
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An explanation of how the proposed MLC will approach other
information technology issues, including security, redundancy, privacy,
and transparency.
d. Collection and Distribution of Royalties, Including Unclaimed
Accrued Royalties. The Office seeks information related to the proposed
MLC's royalty distribution methods and capabilities. As the legislative
history notes, the MLC is required to collect and distribute royalties
using the information provided in usage reports on a specific schedule
mandated by statute.\57\ As the history further notes, there is an
expectation that ``[a]ll copyright owners shall have their royalties
distributed fairly and no copyright owner may receive special treatment
as a result of their position on the Board, its committees, or for any
other reason without a reasonable basis.'' \58\ Specifically, the
Office requests:
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\57\ H.R. Rep. No. 115-651, at 12; S. Rep. No. 115-339, at 13.
\58\ H.R. Rep. No. 115-651, at 12; S. Rep. No. 115-339, at 13.
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The proposed MLC's expected competence with efficient and
effective payment methods, including addressing tax and other
regulatory documentation for various payees and entities;
Any planned approaches with respect to the collection and
distribution of royalties collected through bankruptcy proceedings;
\59\
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\59\ See Conf. Rep. at 11.
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Information about the proposed MLC's approach to
scheduling royalty payments to identified copyright owners, including
whether the entirety of unclaimed royalties is intended to be
distributed simultaneously;
Views regarding whether the proposed MLC may consider
holding reserve funds to address claims that may only reasonably be
identified after the statutory holding period, and what if any criteria
might be used to implement any such reserve practices; \60\
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\60\ 17 U.S.C. 115(d)(3)(H).
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Any policies that the proposed MLC intends to implement
with respect to undertaking a fair distribution of unclaimed royalties;
\61\ and
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\61\ H.R. Rep. No. 115-651, at 13 (describing required policies,
and noting ``[i]t is the intent of Congress to ensure that
songwriters receive their fair share of monies distributed to
copyright owners under subsection (d)(3)(J), while at the same time
respecting contractual relationships. To that end, payments and
credits to songwriters shall be allocated in proportion to the
reported usage of individual musical works by digital music
providers during the relevant reporting periods. The 50% payment or
credit to a songwriter referenced in subsection (d)(3)(J)(iv)(II) is
intended to be treated as a floor, not a ceiling''); S. Rep. No.
115-339, at 14 (same).
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[[Page 65752]]
Any other considerations that may be relevant with respect
to the distribution of claimed and unclaimed accrued royalties.
e. Investment in Resources and Vendor Engagement. The Office
understands that proposals for designation as the MLC may rely on one
or more vendors to ``demonstrate to the Register of Copyrights that the
entity has, or will have prior to the license availability date, the
administrative and technological capabilities to perform the required
functions of the mechanical licensing collective.'' \62\ To the extent
not already provided, the Office therefore seeks information about
actual or potential vendors, including the specific functions to be
addressed by a given vendor, the vendors' relevant experience with
clients and projects involving similar scale and type, or industry-
specific knowledge. The Office requests, to the extent practicable:
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\62\ 17 U.S.C. 115(d)(3)(A)(iii).
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The estimated number of employees the proposed MLC intends
to hire and/or engage through vendors in each of the first five years;
The names and resumes of any key employees that the
proposed MLC may have engaged to design and operate the statutorily
required functions of the MLC;
The contracts the proposed MLC has engaged in, or any
funds or other items of value the proposed MLC has exchanged in
anticipation of being designated as the MLC;
Information regarding any conflicts of interests,
including but not limited to disclosure of common ownership or other
direct or indirect economic relationships, or prospective
relationships, between board members of the MLC, their associated
publishers and/or catalogs, and actual or potential vendors;
To the extent unaddressed elsewhere, information regarding
any relevant ``request for information'' or ``request for proposals''
issued by the proposed MLC and responsive submissions to the extent
this information is relevant to the entity's ability to perform the
statutory functions of the MLC.
f. Funding. While the Register's process of designating an MLC is
separate from the establishment of an administrative assessment by the
Copyright Royalty Judges, understanding the proposed funding for the
MLC (in advance of the establishment of the administrative assessment)
is important to confirming that the MLC will be ready to adequately
perform its required functions by the license availability date and
beyond. Further, the statute separately directs the MLC to establish
procedures to guard against ``abuse, waste, and the unreasonable use of
funds.'' \63\ Accordingly the Office requests, for the purposes of this
designation process only, and without prejudice to the future
administrative assessment proceeding, to the extent available:
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\63\ Id. at 115(d)(3)(D)(ix)(II)(bb)(BB).
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The anticipated annual costs of the proposed MLC in each
of the first five years (or the anticipated range of costs), itemized
to the extent possible;
Information related to the planned funding of the MLC
operations prior to receipt of administrative assessment funds,
including information that may relate to voluntary contributions; \64\
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\64\ See id. at 115(d)(7)(B).
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Information related to whether and to what extent the
proposed MLC may take on debt obligations to fund its operations, and
what collateral may be used to secure such debt; and
Information regarding whether and how the proposed MLC may
apply unclaimed accrued royalties on an interim basis to defray
operating costs, as well as any accompanying plans for future
reimbursement of such royalties from future collections of the
administrative assessment, including relevant legal considerations and
guidelines in the event the proposed MLC does intend to apply unclaimed
accrued royalties.\65\
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\65\ See id. at 115(d)(7)(C):
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g. Education and Outreach. The Office welcomes information
regarding how a proposed MLC intends to pursue its education and
outreach efforts, including how it intends to reach diverse audiences
to ``engage in diligent, good-faith efforts to publicize the collective
and ability to claim unclaimed accrued royalties for unmatched musical
works (and shares of such works).'' \66\ Please reference any relevant
experience of proposed board members, personnel, and potential vendors.
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\66\ S. Rep. No. 115-339, at 14.
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2. Governance
The following questions are directed at identifying an entity that
can best adhere to the required governance criteria outlined in section
115(d)(3)(D) of the MMA.
a. Composition. As directed by statute, the Office requests:
The name and affiliation of each member of the board of
directors described above and in 17 U.S.C. 115(d)(3)(D)(i);
The name and affiliation of each member of the operations
advisory committee described above and in 17 U.S.C. 115(d)(3)(D)(iv);
The name and affiliation of each member of the unclaimed
royalties oversight committee described above and in 17 U.S.C.
115(d)(3)(D)(v);
The name and affiliation of each member of the dispute
resolution committee described above and in 17 U.S.C. 115(d)(3)(D)(vi);
and
Proof that the proposed MLC is a nonprofit entity, not
owned by any other entity that is created by copyright owners to carry
out responsibilities set forth in the statute.
In responding, please also address the following topics to explain
how these individuals, and the respective board or committees, meet the
statutory criteria:
The process and criteria used for selection of board and
committee members;
How the proposed songwriter board members individually and
together faithfully reflect the entire songwriting community; \67\
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\67\ Id. at 5.
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How the proposed music publisher board members
individually and together faithfully reflect the entire music publisher
community;
Whether the proposed MLC believes that the board members
who are ``representatives of music publishers . . . to which
songwriters have assigned exclusive rights of reproduction and
distribution of musical works with respect to covered activities'' \68\
could include representatives of music publishing administrators, where
copyright ownership interests are not transferred to the publisher, but
remain with the songwriter(s);
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\68\ 17 U.S.C. 115(d)(3)(D)(i)(I).
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Whether board members, who are either representatives of
music publishers or professional songwriters, intend to license covered
activity through the proposed MLC, or whether, and to what extent, they
intend to license covered activity directly with licensees; and
With respect to the unclaimed royalties oversight
committee, how the proposed members possess specific insight and
knowledge about the types of owners and songwriters whose works
[[Page 65753]]
may be susceptible to being unmatched and unclaimed.
The Office notes the Presidential Signing Statement accompanying
enactment of the law indicates an expectation that the Register work
with the MLC, once it has been designated, to ensure that the Librarian
retains the ultimate authority to appoint and remove all directors.\69\
The Office invites comment regarding how the proposed MLC intends to
address issues relating to succession of board and committee members,
and any other obligations that may be impacted by this statement.
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\69\ MMA Signing Statement.
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b. Governance Issues. The Office further requests that prospective
MLCs provide:
Draft bylaws or other documentation regarding how the MLC
will ensure that the operations of the MLC and its board are
transparent and accountable; \70\
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\70\ See H.R. Rep. No. 115-651, at 5 (stressing importance of
transparency ``to avoid unnecessary litigation as well as to gain
the trust of the entire music community''); S. Rep. No. 115-339, at
5 (same).
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Information regarding how the proposed MLC board may
identify and approach perceived or actual conflicts of interest,
including with respect to applicable law and/or rules of professional
responsibility, and the selection of board and committee members and
individual vendors; and
Information regarding how the MLC may approach
confidential information, including board and committee member's access
to sensitive information regarding marketplace rivals.
3. Indicia of Endorsement and Support
As noted, the MLC must be ``endorsed by, and enjoy[] substantial
support from, musical work copyright owners that together represent the
greatest percentage of the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years. '' \71\ The Office understands that there may be conflicting
views regarding how the ``greatest percentage of the licensor market''
should be measured--i.e., in market value, or in number of licenses.
That said, the Office has made a few preliminary interpretations
regarding this clause. For example, because the section 115 license
applies to uses of phonorecords in the United States, the relevant
market is the United States market for making and distributing
phonorecords of musical works. Endorsement may be shown by including
musical work copyright owners located outside the United States so long
as they control the relevant rights to works played or otherwise
distributed in the United States. Similarly, because the statute seeks
support from ``musical work copyright owners,'' the relevant support
should come from the parties who have a relevant ownership interest in
the copyright to musical works (or shares of such works), in contrast
to parties who do not possess any ownership interest in the musical
work but rather the ability to administer the works.\72\ Further, the
Office does not read this clause as prohibiting a musical work
copyright owner from endorsing multiple prospective MLCs.
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\71\ 17 U.S.C. 115(d)(3)(A).
\72\ Al Kohn & Bob Kohn, Kohn on Music Licensing 170 (4th ed.
2010) (``An administration agreement is an agreement between two or
more people that provides one of the parties, called the
administrator, the right to administer the music publishing
activities . . . relating to the musical compositions covered by the
agreement, in exchange for the payment of an administration fee.
Unlike an exclusive administrator under a co-publishing agreement,
the administrator under an administration agreement generally does
not acquire any ownership interest in the compositions covered by
the agreement.'').
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The Office requests that a proposed MLC address how it interprets
and satisfies this endorsement criteria, including an explanation of
how the proposed MLC has calculated and documented the endorsement and
substantial support of the requisite number of copyright owners.
B. DLC and Its Board Members
The Office hereby requests proposals for designation as the DLC
that includes articles of incorporation, along with contact information
for the collective. The Office requests that proposals include a list
of proposed board members and their relevant background and
affiliations. The Office further requests that proposals for the DLC
designation include the following information:
A business plan, including any statement of purpose or
principles and proposed schedule for establishment and operation of the
proposed DLC in the first five years of its existence;
A detailed description outlining how the proposed DLC has
or will have the administrative capabilities to perform the required
functions; \73\
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\73\ See 17 U.S.C. 115(d)(5)(B)-(C).
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To the extent available, information regarding proposed
governance structure, criteria for membership, and any anticipated
dues; \74\
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\74\ See id. at 115(d)(5)(C)(i)(I).
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Information regarding how the proposed DLC intends to
address issues of confidentiality as it relates to the DLC
representative on the MLC board;
Views whether a single vendor may simultaneously provide
services fulfilling the statutory obligations of the DLC and the MLC;
Information regarding how the proposed DLC intends to
pursue its outreach efforts, including ``reasonable, good-faith efforts
to assist the mechanical licensing collective . . . by encouraging
digital music providers to publicize the existence of the collective
and the ability of copyright owners to claim unclaimed accrued
royalties. '' \75\ Please reference any relevant experience of proposed
board members, personnel and potential vendors; and
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\75\ See id. at 115(d)(5)(C)(iii).
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Any other information that proposed DLC believes is
relevant to demonstrate it best meets the selection criteria.
Finally, the Office requests that the proposed DLC address how it
interprets and satisfies the criteria that it must be ``endorsed by and
enjoy[] substantial support from digital music providers and
significant nonblanket licensees that together represent the greatest
percentage of the licensee market for uses of musical works in covered
activities, as measured over the preceding 3 calendar years. '' \76\
Please include an explanation of how the proposed DLC has verified,
calculated, and documented such endorsement and substantial support,
including how the licensee market was calculated.
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\76\ Id. at 115(d)(5)(A)(ii).
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III. Additional Opportunity for Public Participation
Depending on the feedback received, the Office may request
additional information in the form of a public notice, directed letters
inviting prospective MLCs to supplement or respond to certain
information, or a public meeting or hearing.
The Office will also consider whether to utilize informal meetings
to address discrete issues prior to issuing a designation by
establishing guidelines for ex parte communications. The Office's
proceedings typically do not include discussions about the substance of
a proceeding apart from the noticed phases of written comments and
public hearings (although the Office does provide procedural guidance
to participants). But for certain proceedings, the Office has
determined that informal communications with participants can be
beneficial in limited circumstances where the Office seeks specific
information or follow-up
[[Page 65754]]
regarding the public record.\77\ Following that precedent, in this
proceeding, any such communication will be so limited. The primary
means to communicate views in the course of the designation process
will be through the submission of written comments. In other words,
informal communication will supplement, not substitute for, the written
record. While exact guidelines governing ex parte communications with
the Office regarding the designation process may be issued at a later
date on https://www.copyright.gov/rulemaking/mma-designations/, they
would be similar to those imposed by the Office for the recently
concluded section 1201 proceeding.\78\ For example, the participating
party or parties will be responsible for submitting a list of attendees
and written summary of any oral communication to the Office, which will
be made publicly available on the Office's website. In sum, the Office
will require that all such communications be on the record to ensure
the greatest possible transparency.
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\77\ See, e.g., 82 FR 49550, 49563 (Oct. 26, 2017) (identifying
guidelines for ex parte communications in section 1201 rulemaking);
82 FR 58153, 58154 (Dec. 11, 2017) (identifying guidelines for ex
parte communications in rulemaking regarding cable, satellite, and
DART license reporting practices).
\78\ See U.S. Copyright Office, Ex Parte Communications, https://www.copyright.gov/1201/2018/ex-parte-communications.html.
Dated: December 18, 2018.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2018-27743 Filed 12-20-18; 8:45 am]
BILLING CODE 1410-30-P
