[Federal Register Volume 85, Number 5 (Wednesday, January 8, 2020)]
[Rules and Regulations]
[Pages 831-834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28233]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 390

[Docket No. 19-CRB-0009 AA]


Determination and Allocation of Initial Administrative Assessment 
To Fund Mechanical Licensing Collective (Initial AA)

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Final rule.

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SUMMARY: The Copyright Royalty Judges publish final regulations that 
set the amount and allocation of the Initial Administrative Assessment 
to fund the Mechanical Licensing Collective.

DATES: Effective Date: January 8, 2020.

ADDRESSES: Docket: For access to the docket to read background 
documents go to eCRB, the Copyright Royalty Board's electronic filing 
and case management system, at https://app.crb.gov/, and search for 
docket number 19-CRB-0009 AA.

FOR FURTHER INFORMATION CONTACT: Anita Blaine, Program Specialist, by 
telephone at (202) 707-7658 or by email at [email protected].

SUPPLEMENTARY INFORMATION: On July 8, 2019, the Copyright Royalty Board 
initiated the proceeding titled Determination and Allocation of Initial 
Administrative Assessment to Fund Mechanical Licensing Collective, by 
causing to be published a notice in the Federal Register at 84 FR 
32475, pursuant to the Orrin G. Hatch-Bob Goodlatte Music Modernization 
Act (MMA), Public Law 115-264, 132 Stat. 3676 (Oct. 11, 2018), 17 
U.S.C. 115(d)(7)(D)(vii) and 801(b)(8) (2018). The purpose of this 
proceeding was to determine the initial administrative

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assessment that digital music providers and any significant nonblanket 
licensees must pay to fund the collective total costs of the Mechanical 
Licensing Collective.
    On November 14, 2019, the Mechanical Licensing Collective and the 
Digital Licensee Coordinator filed with the Copyright Royalty Judges 
(``Judges'') a Joint Notice of Settlement and Motion to Suspend Case 
Schedule informing the Judges that they had reached a full settlement 
of all terms in the proceeding and describing in detail those terms. 
The Judges granted that motion and directed the participants to file 
proposed regulations.
    Section 115(d)(7)(D)(v) of the Copyright Act authorizes the Judges 
to approve and adopt a negotiated agreement that has been agreed to by 
the Mechanical Licensing Collective and the Digital Licensee 
Coordinator in lieu of a determination of the administrative 
assessment. An administrative assessment adopted under sec. 
115(d)(7)(D)(v) ``shall apply to all digital music providers and 
significant nonblanket licensees engaged in covered activities during 
the period the administrative assessment is in effect.'' Id.
    However, the Judges, in their discretion, may reject a proposed 
settlement for good cause shown. Section 355.4(c)(4) of 37 CFR 
establishes a process for non-settling participants to comment on a 
proposed settlement and for the settling participants to respond. 
Because there were no non-settling participants in the instant 
proceeding, the proposed settlement was unopposed.\1\ Moreover, the 
participants, at the Judges' direction, explained to the Judges' 
satisfaction how the Proposed Regulations comply with the provisions of 
the Copyright Act. See generally Motion. The Judges, finding no good 
cause to reject the proposed settlement agreement, hereby adopt it and 
publish these final regulations implementing the settlement.
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    \1\ The Judges have been advised by their staff that some 
members of the public sent emails to the Copyright Royalty Board 
seeking to comment on the proposed settlement agreement. Neither the 
Copyright Act, nor the regulations adopted thereunder, provide for 
submission or consideration of comments on a proposed settlement by 
non-participants in an administrative assessment proceeding. 
Consequently, as a matter of law, the Judges could not, and did not, 
consider these ex parte communications in deciding whether to 
approve the proposed settlement. Additionally, the Judges' non-
consideration of these ex parte communications does not: (i) Imply 
any opinion by the Judges as to the substantive merits of any 
statements contained in such communications; or (ii) reflect any 
inability of the Judges to question, sua sponte, whether good cause 
exists to adopt a settlement and to then utilize all express or 
reasonably implied statutory authority granted to them to make a 
determination as to the existence, vel non, of good cause.
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List of Subjects in 37 CFR Part 390

    Copyright, Licensing and registration, Music, Phonorecords, 
Recordings, Royalties.

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges add part 390 to chapter III of title 37 of the Code of Federal 
Regulations as follows:

PART 390--AMOUNTS AND TERMS FOR ADMINISTRATIVE ASSESSMENTS TO FUND 
MECHANICAL LICENSING COLLECTIVE

Sec.
390.1 Definitions.
390.2 Amount of assessments.
390.3 Annual minimum fees.
390.4 Annual Assessment allocation and payment.

    Authority: 17 U.S.C. 115, 801(b).

PART 390--AMOUNTS OF AND TERMS FOR ADMINISTRATIVE ASSESSMENTS TO 
FUND MECHANICAL LICENSING COLLECTIVE


Sec.  390.1  Definitions.

    Administrative assessment has the meaning set forth in 17 U.S.C. 
115(e)(3).
    Aggregate Sound Recordings Count means the sum of the Unique Sound 
Recordings Counts of each and every Licensee, calculated over the 
respective Quarterly Allocation calculation period.
    All Licensee Assessment Pool means an amount equaling 50% of each 
Annual Assessment and Quarterly Allocation.
    Annual Assessment means the administrative assessment for each 
calendar year beginning with the calendar year 2021.
    Annual Calculation Period means the calculation period for annual 
minimum fees, as set forth in Sec.  390.3(b).
    Annual minimum fee means the minimum amount each Licensee shall pay 
for each Annual Assessment period, as set forth in Sec.  390.3.
    Certified Minimum Fee Disclosure means a Licensee's certified 
statement setting forth its Unique Sound Recordings Count for the 
respective calculation period.
    Digital licensee coordinator or DLC has the meaning set forth in 17 
U.S.C. 115(e)(9).
    ECI means the Employment Cost Index for Total Compensation (not 
seasonally adjusted), all civilian workers, as published on the website 
of the United States Department of Labor, Bureau of Labor Statistics, 
for the most recent 12-month period for which data are available on the 
date that is 60 days prior to the start of the calendar year.
    License availability date has the meaning set forth in 17 U.S.C. 
115(e)(15).
    Licensee means either:
    (1) A digital music provider that is engaged, in all or in part, in 
covered activities pursuant to a blanket license; or
    (2) A significant nonblanket licensee, as those terms are defined 
under 17 U.S.C. 115(e).
    Mechanical licensing collective or MLC has the meaning set forth in 
17 U.S.C. 115(e)(18).
    Notice of license has the meaning set forth in 17 U.S.C. 
115(e)(22).
    Notice of nonblanket activity has the meaning set forth in 17 
U.S.C. 115(e)(23).
    Quarterly Allocation means each of four equal parts of each Annual 
Assessment, to be paid on a calendar quarterly basis.
    Startup Assessment means the one-time administrative assessment for 
the startup phase of the Mechanical licensing collective.
    Threshold Licensee means a Licensee that reports at least 7.5% of 
the Aggregate Sound Recordings Count of all Licensees.
    Threshold Licensee Assessment Pool means an amount equaling 50% of 
each Annual Assessment and Quarterly Allocation.
    Unique Sound Recordings Count means, for each Licensee, the number 
of unique and royalty-bearing sound recordings used per month by such 
Licensee in Section 115 covered activities, such as would be reflected 
in the information required to be reported under Section 115(d), 
calculated as a monthly average over the respective calculation period. 
For example, a Licensee's Unique Sound Recordings Count for a Quarterly 
Allocation calculation period will be calculated by adding together the 
counts of unique and royalty-bearing sound recordings reported by such 
Licensee to the MLC during each month of that quarter, and dividing 
that sum by three. A Licensee's Unique Sound Recordings Count for an 
Annual Calculation Period will be calculated by adding together the 
counts of unique and royalty-bearing sound recordings reported by such 
Licensee to the MLC during each month of that twelve-month period, and 
dividing that sum by twelve. Within each month's usage reports from a 
particular Licensee, a sound recording reported multiple times with the 
same metadata would be counted as a single sound recording, and a sound 
recording reported multiple

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times each with different metadata would be counted multiple times, 
once for each reporting with new or different metadata.


Sec.  390.2  Amount of assessments.

    (a) Startup Assessment. The Startup Assessment shall be in the 
amount of $33,500,000.
    (b) 2021 Annual Assessment. The Annual Assessment for the calendar 
year 2021 shall be in the amount of $28,500,000.
    (c) Other Annual Assessments. (1) For the calendar year 2022 and 
all subsequent years, the amount of the Annual Assessment will be 
automatically adjusted by increasing the amount of the Annual 
Assessment of the preceding calendar year by the lesser of:
    (i) 3 percent; and
    (ii) The percentage change in the ECI.
    (2) The MLC shall publish notice on its website of each year's 
automatic adjustment to the Annual Assessment. The Annual Assessment 
shall continue from year to year unless and until the Copyright Royalty 
Judges cause to be published an adjusted administrative assessment 
pursuant to 17 U.S.C. 115(d)(7)(D)(iv) or (v).


Sec.  390.3  Annual minimum fees.

    (a) Amount. All Licensees shall pay the following annual minimum 
fee for each Annual Assessment period:
    (1) For Licensees that have a Unique Sound Recordings Count of less 
than 5,000 during the relevant Annual Calculation Period, the annual 
minimum fee shall be $5,000.
    (2) For Licensees that have a Unique Sound Recordings Count of 
5,000 or more during the relevant Annual Calculation Period, the annual 
minimum fee shall be $60,000.
    (b) Annual Calculation Period. The calculation period for annual 
minimum fees shall be the 12-month period that ends on the September 
30th immediately preceding the start of the assessment period (e.g., 
the annual minimum fee calculation period for the 2021 Annual 
Assessment shall be October 1, 2019 to September 30, 2020).
    (c) Calculation by Licensee certification (2021 and 2022)--(1) 
2021. Each Licensee in operation on or before the license availability 
date shall submit to the MLC, accompanying its notice of license under 
Section 115(d)(2)(A) or its notice of nonblanket activity under Section 
115(d)(6)(A) and no later than February 15, 2021, its Certified Minimum 
Fee Disclosure for the 2021 annual minimum fee (i.e., for the period 
from October 1, 2019 to September 30, 2020). Each Licensee shall submit 
the appropriate minimum fee (i.e., $5,000 or $60,000) for the 2021 
Assessment simultaneously with its Certified Minimum Fee Disclosure.
    (2) 2022. Each Licensee shall submit to the MLC by November 1, 
2021, a Certified Minimum Fee Disclosure for the 2022 Assessment, and 
shall pay the appropriate annual minimum fee by January 15, 2022.
    (d) Calculation by the MLC (2023 and subsequent years). (1) 
Beginning with the 2023 Assessment and continuing in subsequent years, 
the MLC will calculate each Licensee's annual minimum fee based on 
usage reporting received from Licensees pursuant to Section 115(d)(4). 
The MLC shall send invoices for the appropriate annual minimum fee to 
each Licensee. Licensees shall pay the annual minimum fee invoices from 
the MLC by the later of:
    (i) 30 days from receipt of the invoice from the MLC; or
    (ii) January 15th of the respective Annual Assessment year.
    (2) Each Licensee in operation during any portion of an annual 
minimum fee calculation period shall pay the full amount of the 
respective annual minimum fee.


Sec.  390.4  Annual Assessment allocation and payment.

    (a) Allocation formula. Each Annual Assessment shall be divided 
into four equal Quarterly Allocations, each of which shall be allocated 
and paid on a calendar quarterly basis. Each Quarterly Allocation shall 
be divided into two equal parts, allocated among Licensees according to 
the following formula:
    (1) All Licensee Assessment Pool. The All Licensee Assessment Pool 
shall be allocated on a pro rata basis across all Licensees based on 
each Licensee's share of the Aggregate Sound Recordings Count.
    (2) Threshold Licensee Assessment Pool. The Threshold Licensee 
Assessment Pool shall be allocated on a pro rata basis across Threshold 
Licensees based on each Threshold Licensee's share of the aggregate 
Unique Sound Recordings Counts of all Threshold Licensees.
    (b) Calculation periods and timing. The calculation period for each 
Quarterly Allocation shall be the three-month period that ends three 
months prior to the start of the respective quarter, except that the 
calculation period for the Quarterly Allocation for the first and 
second quarters of 2021 shall be the same as for the annual minimum fee 
for the 2021 Annual Assessment, and shall be calculated based upon the 
information provided in the Certified Minimum Fee Disclosures, as 
required by this part. The MLC shall make all calculations for each 
respective period based upon the reporting for such period received 
from Licensees as of the time of calculation by the MLC, which 
calculation time shall not be earlier than the legal deadline for 
submission of reporting by Licensees for the respective period. In the 
event that a Licensee has not provided timely reporting for the 
respective calculation period at the time the MLC calculates a 
Quarterly Allocation, the MLC may instead, in its discretion, use the 
most recent reporting from that Licensee to determine that Licensee's 
Unique Sound Recordings Count, for the purposes of calculating the 
Quarterly Allocation.
    (c) Invoicing and payment of allocation--(1) Deadline for payment. 
(i) Invoices from the MLC for Quarterly Allocation shares shall be 
payable pursuant to the MLC invoice, but no earlier than the later of:
    (A) 30 days from receipt of the invoice from the MLC; or
    (B) The first day of the next calendar quarter.
    (ii) Invoices from the MLC to Licensees shall be deemed received on 
the business day after electronic transmission.
    (2) Format of invoices. (i) The quarterly invoices issued by the 
MLC shall include at least the following information, where applicable:
    (A) Invoice issuance date;
    (B) Invoice payment due date;
    (C) Amount owed, by share of All Licensee Assessment Pool and 
Threshold Licensee Assessment Pool;
    (D) Allocation of Startup Assessment;
    (E) Offset of minimum fee payment against quarterly assessment; and
    (F) Amount of credit for un-recouped minimum fee.
    (ii) Invoices issued as a result of an allocation adjustment shall 
include all of the information set forth in paragraphs (c)(2)(i)(A) 
through (F) of this section that may be relevant, as well as an 
explanation of the change from the prior invoices that are affected, 
and the reason(s) for the adjustment.
    (d) Late reporting. The MLC shall promptly notify the DLC of any 
known Licensees who have not timely submitted reports of usage as 
required each month pursuant to Section 115(d) and 37 CFR part 210.
    (e) Recalculation of Allocated Assessment invoices. The MLC may, in 
its discretion, recalculate allocations and adjust prior invoices, with 
the written consent of the DLC, within twelve months after the initial 
issuance of such invoices, in circumstances including, but not limited 
to, where new usage reporting is received or where a

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correction would alter one or more of any Licensee's Quarterly 
Allocation shares by at least 10%.
    (f) Recoupment of minimum fee. Each Licensee's annual minimum fee 
will be offset against its Quarterly Allocation shares, and additional 
payment will not be due from a Licensee unless and until its total 
Quarterly Allocation shares exceed its annual minimum fee payment. To 
the extent that a Licensee's annual minimum fee exceeds that Licensee's 
Quarterly Allocation shares for a given Assessment period, the excess 
amounts will be pooled and credited pro rata to all Licensees based on 
the Quarterly Allocation shares for the first quarter of the following 
year.
    (g) Reports to DLC. The MLC shall report to the DLC no later than 
75 days after the end of every quarter the Aggregate Sound Recordings 
Count for that quarter.
    (h) Startup Assessment allocation and payment. The Startup 
Assessment shall be allocated and paid in the same manner and on the 
same dates as the 2021 Annual Assessment, including as to each of the 
applicable provisions above, and shall be separately itemized in 
invoices from the MLC to Licensees.

    Dated: December 18, 2019.
Jesse M. Feder,
Chief Copyright Royalty Judge.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2019-28233 Filed 1-7-20; 8:45 am]
 BILLING CODE 1410-72-P