[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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 [email protected], 
Steve Ruwe Assistant General Counsel, by email at [email protected], 
or Jason E. Sloan, Assistant General Counsel, by email at 
[email protected]. Each can be contacted by telephone by calling (202) 
707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 11, 2018, the 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \7\ 17 U.S.C. 115(d)(7)(D).
    \8\ Id. at 115(d)(3)(D)(i)(IV), (d)(5).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \9\ Id. at 115(d)(3)(B)(i).
    \10\ Id. at 115(d)(3)(B), (d)(3)(D)(iv)-(vi).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \14\ 17 U.S.C. 115(d)(5)(B).
    \15\ Id. at 115(d)(5)(B)(iii).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \18\ See 17 U.S.C. 115(d)(3)(D)(i).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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)(3)(F).
    \22\ Id. at 115(d)(2)(A)(iii)(I).
    \23\ Id. at 115(d)(2)(A)(iii)(II), and (d)(3)(F).
    \24\ Id. at 115(d)(3)(F), (e)(23).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \25\ See generally id. at 115(d)(3)(C)(i).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \26\ Id.
    \27\ Id.
    \28\ Id.; see also id. at 115(d)(3)(L).
    \29\ Id. at 115(d)(4)(D).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \30\ Id. at 115(d)(3)(C)(iii).
    \31\ Id. at 115(d)(3)(C)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \32\ Id. at 115(d)(3)(C)(i).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \33\ For the statutory requirements regarding the board 
described in this paragraph, see 17 U.S.C. 115(d)(3)(D)(i).
    \34\ Id.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \35\ S. Rep. No. 115-339, at 5.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \39\ 17 U.S.C. 115(d)(3)(D)(viii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \40\ Id. at 115(d)(3)(D)(ii).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \41\ Id. at 115(d)(3)(D)(iv).
    \42\ Id.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \43\ Id. at 115(d)(3)(D)(v).
    \44\ Id. at 115(d)(3)(J)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \45\ Id. at 115(d)(3)(D)(vi).
    \46\ Id. at 115(d)(3)(K).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \47\ See generally id. at 115(d)(5)(C).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \54\ Id. at 115(d)(3)(J).
---------------------------------------------------------------------------

     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:
---------------------------------------------------------------------------

    \55\ See Conf. Rep. at 6-7.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \56\ See 17 U.S.C. 115(d)(3)(E)(v).
---------------------------------------------------------------------------

     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:
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \59\ See Conf. Rep. at 11.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \60\ 17 U.S.C. 115(d)(3)(H).
---------------------------------------------------------------------------

     Any policies that the proposed MLC intends to implement 
with respect to undertaking a fair distribution of unclaimed royalties; 
\61\ and
---------------------------------------------------------------------------

    \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).

---------------------------------------------------------------------------

[[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:
---------------------------------------------------------------------------

    \62\ 17 U.S.C. 115(d)(3)(A)(iii).
---------------------------------------------------------------------------

     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:
---------------------------------------------------------------------------

    \63\ Id. at 115(d)(3)(D)(ix)(II)(bb)(BB).
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \64\ See id. at 115(d)(7)(B).
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \65\ See id. at 115(d)(7)(C):
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \66\ S. Rep. No. 115-339, at 14.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \67\ Id. at 5.
---------------------------------------------------------------------------

     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);
---------------------------------------------------------------------------

    \68\ 17 U.S.C. 115(d)(3)(D)(i)(I).
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \69\ MMA Signing Statement.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \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.'').
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \73\ See 17 U.S.C. 115(d)(5)(B)-(C).
---------------------------------------------------------------------------

     To the extent available, information regarding proposed 
governance structure, criteria for membership, and any anticipated 
dues; \74\
---------------------------------------------------------------------------

    \74\ See id. at 115(d)(5)(C)(i)(I).
---------------------------------------------------------------------------

     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
---------------------------------------------------------------------------

    \75\ See id. at 115(d)(5)(C)(iii).
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \76\ Id. at 115(d)(5)(A)(ii).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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