[Federal Register Volume 85, Number 138 (Friday, July 17, 2020)]
[Proposed Rules]
[Pages 43517-43526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15591]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2020-12]


Music Modernization Act Transition Period Transfer and Reporting 
of Royalties to the Mechanical Licensing Collective

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Copyright Office is issuing a notice of proposed 
rulemaking regarding digital music providers' obligations to transfer 
and report accrued royalties for unmatched musical works (or shares) to 
the mechanical licensing collective for purposes of being eligible for 
the limitation on liability for prior unlicensed uses under title I of 
the Orrin G. Hatch-Bob Goodlatte Music Modernization Act. Having 
solicited public comments through multiple prior notices, the Office is 
now proposing an update to regulations concerning the transfer and 
reporting of such royalties, namely the content, format, and delivery 
of cumulative statements of account to be submitted by digital music 
providers to the mechanical licensing collective at the conclusion of 
the statutory transition period.

DATES: Written comments must be received no later than 11:59 p.m. 
Eastern Time on August 17, 2020.

ADDRESSES: For reasons of government efficiency, the Copyright Office 
is using the regulations.gov system for the submission and posting of 
public comments in this proceeding. All comments are therefore to be 
submitted electronically through regulations.gov. Specific instructions 
for submitting comments are available on the Copyright Office's website 
at https://www.copyright.gov/rulemaking/mma-transition-reporting. If 
electronic submission of comments is not feasible due to lack of access 
to a computer and/or the internet, please contact the Office using the 
contact information below for special instructions.

FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and 
Associate Register of Copyrights, by email at [email protected], 
John R. Riley, Assistant General Counsel, by email at 
[email protected], or Jason E. Sloan, Assistant General Counsel, by 
email at [email protected]. Each can be contacted by telephone by 
calling (202) 707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

    This notice of proposed rulemaking (``NPRM'') is being issued 
subsequent to a notification of inquiry, published in the Federal 
Register on September 24, 2019, that describes in detail the 
legislative background and regulatory scope of the present rulemaking 
proceeding.\1\ The Copyright Office assumes familiarity with that 
document, and encourages anyone reading this NPRM who has not reviewed 
that notice to do so before continuing here.
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    \1\ 84 FR 49966 (Sept. 24, 2019). All rulemaking activity, 
including public comments, as well as legislative history and 
educational material regarding the Music Modernization Act, can 
currently be accessed via navigation from https://www.copyright.gov/music-modernization/. Comments received in response to the September 
2019 notification of inquiry are available at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2019-0002&refD=COLC-2019-0002-0001. Related ex parte letters are 
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. References to these 
comments and letters are by party name (abbreviated where 
appropriate), followed by ``Initial,'' ``Reply,'' or ``Ex Parte 
Letter'' as appropriate.
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    On October 11, 2018, the president signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') which, among 
other things, substantially modifies the compulsory ``mechanical'' 
license for making and distributing phonorecords of nondramatic musical 
works under 17 U.S.C. 115.\2\ It does so by switching from a song-by-
song licensing system to a blanket licensing regime that will become 
available on January 1, 2021 (the ``license availability date''), and 
be administered by a mechanical licensing collective (``MLC'') 
designated by the Copyright Office. Digital music providers (``DMPs'') 
will be able to obtain the new compulsory blanket license to make 
digital phonorecord deliveries (``DPDs'') of musical works, including 
in the form of permanent downloads, limited downloads, or interactive 
streams (referred to in the statute as ``covered activity,'' where such 
activity qualifies for a compulsory license), subject to compliance 
with various requirements.\3\
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    \2\ Public Law 115-264, 132 Stat. 3676 (2018).
    \3\ As permitted under the MMA, the Office designated a digital 
licensee coordinator (``DLC'') to represent licensees in proceedings 
before the Copyright Royalty Judges (``CRJs'') and the Copyright 
Office, to serve as a non-voting member of the MLC, and to carry out 
other functions. 17 U.S.C. 115(d)(5)(B); 84 FR 32274 (July 8, 2019); 
see also 17 U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C).
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    Prior to the MMA, DMPs obtained a section 115 compulsory license on 
a per-work, song-by-song basis, by serving a notice of intention to 
obtain a compulsory license (``NOI'') on the copyright owner (or filing 
it with the Copyright Office if the Office's public records did not 
identify the copyright owner) and then paying applicable royalties 
accompanied by accounting statements.\4\ The MMA includes a 
``transition period'' for the period following the new law's enactment, 
before the blanket license becomes available.\5\ During this transition 
period, anyone seeking to obtain a compulsory license to make DPDs must 
continue to do so on a song-by-song basis by serving NOIs on copyright 
owners ``if the identity and location of the musical work copyright 
owner is known,'' and paying them applicable royalties accompanied by 
statements of account.\6\ If the musical work copyright owner is 
unknown, a DMP may no longer file an NOI with the Copyright Office, but 
instead may rely on a limitation on liability that requires the DMP to 
``continue[ ] to search for the musical work copyright owner'' using 
good-faith, commercially reasonable efforts and bulk electronic 
matching processes.\7\ The DMP must eventually either account for and 
pay accrued royalties to the relevant musical work copyright owner(s) 
when found or, if they are not found before the end of the transition 
period, account for and transfer the royalties to the MLC at that 
time.\8\ Congress believed that the liability limitation, which limits 
recovery in lawsuits commenced on or after January 1, 2018 to the 
statutory royalty due, would ``ensure that more artist royalties will 
be paid than otherwise would be the case through continual litigation'' 
\9\ and viewed this provision as a ``key component that was

[[Page 43518]]

necessary'' to ensure support for legislative change.\10\
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    \4\ See 17 U.S.C. 115(b)(1), (c)(5) (2017).
    \5\ H.R. Rep. No. 115-651, at 10 (2018); S. Rep. No. 115-339, at 
10 (2018).
    \6\ 17 U.S.C. 115(b)(2)(A), (c)(2)(I); see H.R. Rep. No. 115-
651, at 4; S. Rep. No. 115-339, at 3.
    \7\ 17 U.S.C. 115(b)(2)(A), (d)(9)(D)(i), (d)(10)(A)-(B); see 
H.R. Rep. No. 115-651, at 4, 10; S. Rep. No. 115-339, at 3, 10, 22.
    \8\ 17 U.S.C. 115(d)(10)(B); see H.R. Rep. No. 115-651, at 4, 
10; S. Rep. No. 115-339, at 3, 10.
    \9\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 14-15; 
Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen 
and Ranking Members of Senate and House Judiciary Committees, at 12 
(2018), https://www.copyright.gov/legislation/mma_conference_report.pdf (``Conf. Rep.'').
    \10\ H.R. Rep. No. 115-651, at 13; S. Rep. No. 115-339, at 14; 
Conf. Rep. at 12.
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    With respect to the specific reporting and payment requirements to 
be eligible for the limitation on liability, the statute details three 
scenarios. First, if the matching efforts are successful in identifying 
and locating a copyright owner of a musical work (or share) by the end 
of the calendar month in which the DMP first makes use of the work, the 
DMP must provide statements of account and pay royalties to that 
copyright owner in accordance with section 115 and applicable 
regulations.\11\ The second and third scenarios apply if the copyright 
owner is not identified or located by the end of the calendar month in 
which the DMP first makes use of the work.\12\ In such cases, the DMP 
must accrue and hold applicable statutory royalties in accordance with 
usage of the work, from the initial use of the work until these 
royalties can be paid to the copyright owner or are required to be 
transferred to the MLC.\13\ If a copyright owner of an unmatched 
musical work (or share) is identified and located by or to the DMP 
before the license availability date, the DMP must, among other things, 
pay the copyright owner all accrued royalties accompanied by a 
cumulative statement of account that includes the information that 
would have been provided to the copyright owner had the DMP been 
providing monthly statements of account to the copyright owner from 
initial use of the work in accordance with section 115 and applicable 
regulations.\14\ If a copyright owner of an unmatched musical work (or 
share) is not identified and located by the license availability date, 
the DMP must, among other things, transfer, no later than 45 calendar 
days after the license availability date, all accrued royalties to the 
MLC accompanied by a cumulative statement of account that includes the 
information that would have been provided to the copyright owner had 
the DMP been serving monthly statements of account on the copyright 
owner ``from initial use of the work in accordance with [section 115] 
and applicable regulations,'' including the certification that would 
have been provided to an identified copyright owner as well as an 
additional certification attesting to the DMP's matching efforts during 
the transition period.\15\
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    \11\ 17 U.S.C. 115(d)(10)(B)(iii).
    \12\ Id. at 115(d)(10)(B)(iv).
    \13\ Id.
    \14\ Id. at 115(d)(10)(B)(iv)(II).
    \15\ Id. at 115(d)(10)(B)(iv)(III).
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    In December 2018, the Office published an interim rule and 
requested comments to address the current transition period.\16\ With 
respect to the payment and reporting obligations to be eligible for the 
limitation on liability, the Office adopted regulations specifying that 
DMPs must pay royalties and provide cumulative statements of account to 
copyright owners and the MLC in compliance with the Office's 
preexisting monthly statement of account regulations in 37 CFR 
210.16.\17\ The Office required that cumulative statements of account 
include ``a clear identification of the total period covered by the 
cumulative statement and the total royalty payable for the period.'' 
\18\ The Office did not receive any comments in response to this public 
rulemaking and finalized the rule in March 2019.\19\ In promulgating 
the rule, the Office observed that ``[t]he intent of the legislation 
does not signal to the Office that it should be overhauling its 
existing regulations during the transition period before the blanket 
license becomes available.'' \20\ But the rule did separate provisions 
regarding the reporting of cumulative statements of account and payment 
of royalties for matched works provided to copyright owners on the one 
hand from the reporting of cumulative unmatched usages and transfer of 
associated royalties to the MLC on the other. This approach includes 
the extra step of statutorily required certifications for reports 
provided to the MLC.\21\
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    \16\ 83 FR 63061 (Dec. 7, 2018).
    \17\ 37 CFR 210.20.
    \18\ Id. at 210.20(b)(2)(i), (3)(i).
    \19\ See 84 FR 10685 (Mar. 22, 2019).
    \20\ 83 FR at 63062.
    \21\ See 83 FR at 63065-66; 37 CFR 210.16, 210.20.
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    Following the adoption of this rule, in September 2019, the Office 
issued a notification of inquiry regarding multiple topics related to 
MMA implementation.\22\ Noting the ``persistent concern about the 
`black box' of unclaimed royalties, including its amount and treatment 
by digital music providers and the MLC,'' the Office provided another 
opportunity for the public to comment on the regulations governing the 
reporting of cumulative statements of account and generally on ``any 
issues that should be considered relating to the transfer and reporting 
of unclaimed royalties by digital music providers to the MLC.'' \23\
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    \22\ 84 FR 49966 (Sept. 24, 2019).
    \23\ Id. at 49971.
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    In response to this later inquiry, both the MLC and the DLC 
provided comments. The MLC proposed that the cumulative statements of 
account to be delivered to the MLC at the end of the transition period, 
instead of complying with the Office's preexisting monthly statement of 
account regulations in 37 CFR 210.16, should include the same 
information and be in the same format as required for monthly reports 
of usage under the blanket license.\24\ The MLC also proposed requiring 
these cumulative statements to include: (1) Per-play allocations or 
other applicable rates and amounts allocated to identified usage, and 
perpetually unique DMP transaction identifiers for usage; (2) 
information about matched shares of a musical work where unmatched 
shares for the work are reported; (3) information about any applicable 
earned interest; and (4) information about any claimed or applied 
deductions or adjustments to the aggregate accrued royalties 
payable.\25\ The DLC proposed that DMPs not be ``required to accrue any 
royalties that are required to be paid to copyright owners of musical 
works pursuant to any agreements entered into prior to the effective 
date of the [MMA]'' and that those royalties not be treated as 
``accrued royalties'' under the statute.\26\
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    \24\ MLC Reply App. D at 19; see also MLC Initial at 23; MLC 
Reply at 27-28; MLC Ex Parte Letter at 2 (June 17, 2020).
    \25\ MLC Reply App. D at 19; see also MLC Initial at 22-23; MLC 
Reply at 27-28; MLC Ex Parte Letter at 3-4 (June 17, 2020).
    \26\ DLC Reply App. at A-24; see also DLC Initial at 18-19.
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    Having reviewed and carefully considered all relevant comments, the 
Office now issues a proposed rule and invites further public comment. 
While all public comments are welcome, as applicable, should commenters 
disagree with language in the proposed rule, the Office encourages 
commenters to offer alternate potential regulatory language.

II. Proposed Rule

A. Cumulative Statement of Account Content and Format

    General. The MLC proposed requiring cumulative statements of 
account to ``include[ ] all of the information, and [be] in the same 
format, as required to be provided in the monthly usage reports 
pursuant to [section] 115(d)(4)(A)(i)-(iii), as supplemented by [the 
reports of usage regulations].'' \27\ The MLC explained that it needs 
the additional information to properly administer the transferred 
royalties.\28\
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    \27\ MLC Reply App. D at 19.
    \28\ MLC Initial at 22; see also MLC Ex Parte Letter at 2 & n.1 
(June 17, 2020).
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    In response, the DLC suggested that the Copyright Office is 
restricted in its ability to require DMPs to provide

[[Page 43519]]

additional information in a different format than what was required by 
the Office's preexisting monthly statement of account regulations, 
because doing so ``is contrary to the MMA, which requires the digital 
music provider to only provide `the information that would have been 
provided to the copyright owner had the digital music provider been 
serving monthly statements of account on the copyright owner.' '' \29\ 
The DLC further claimed that the MLC's proposal was ``impractical,'' 
explaining that ``digital music providers have maintained usage 
information . . . with the existing statement of account regulations in 
mind.'' \30\
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    \29\ DLC Reply at 24 (quoting 17 U.S.C. 
115(d)(10)(B)(iv)(III)(aa)).
    \30\ Id. at 24.
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    The MLC noted that the cited clause ``does not imply that DMPs 
should not report anything additional or otherwise limit the Copyright 
Office's general authority under [s]ection 115(d)(12)(A) to adopt 
regulations necessary or appropriate to effectuate the provisions of 
[s]ection 115(d)'' and that regulations to ``effectuate the proper 
disposition of accrued unclaimed royalties'' are ``necessary or 
appropriate'' for the MLC to execute its functions under section 
115(d).\31\
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    \31\ MLC Ex Parte Letter at 2 n.1 (June 17, 2020).
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    After considering the issue, the Office tentatively concludes that 
it would be within its regulatory authority and in clear furtherance of 
the statute's goals and the legislative intent to update the rule 
concerning cumulative statements of account as proposed below. In the 
course of analyzing these public comments and promulgating a related 
rule concerning post-blanket license monthly reporting of usage 
information, the Office's review indicates that updating certain 
requirements related to the content and delivery of cumulative 
statements may help the MLC more effectively identify and locate the 
copyright owners of unmatched works to ensure they are paid the 
royalties due to them. Congress has signaled this is a core task of the 
MLC.\32\ Where statements of account provided to copyright owners have 
historically been intended to ``increase the protection of copyright 
proprietors against economic harm from companies which might refuse or 
fail to pay their just obligations,'' \33\ cumulative statement 
reporting to the MLC is meant to facilitate the additional critical 
function of matching DMP usage to musical works and their owners--a 
task already accomplished where a statement is being served by the DMP 
directly on the copyright owner.\34\ The legislative history of the MMA 
is in accord, providing that reporting accompanying unmatched royalties 
transferred to the MLC at the end of the transition period should 
contain ``as much information about usage and ownership information as 
possible.'' \35\ The present rule for cumulative statements of account 
differentiates between reports provided to copyright owners and reports 
provided to the MLC by requiring DMPs to certify to the MLC that they 
have engaged in good faith efforts to obtain a variety of statutorily 
mandated categories of sound recording and musical work 
information.\36\ The current rule also separately addresses transfer of 
royalties and reporting to the MLC. To some extent, then, the MLC's 
request for additional information related to partially matched works 
(not least, when partial payments have occurred) and the identity of 
these unmatched works may be viewed as an extension of these provisions 
regarding transfer and certification of efforts to obtain additional 
information about these works.\37\
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    \32\ See H.R. Rep. No. 115-651, at 9 (The MLC's duty to 
``identify the musical works embodied in particular sound 
recordings, as well as to identify and locate the copyright owners 
of such works'' is its ``highest responsibility'' next to the 
``efficient and accurate collection and distribution of 
royalties.''); S. Rep. No. 115-339, at 9 (same); Conf. Rep. at 7 
(same); see also Letter from Lindsey Graham, Chairman, Senate 
Judiciary Committee, to Karyn Temple, Register of Copyrights 1 (Nov. 
1, 2019) (on file with Copyright Office) (``Reducing unmatched funds 
is the measure by which the success of this important legislation 
should be measured.'').
    \33\ H.R. Rep. No. 94-1476, at 111 (1976).
    \34\ 17 U.S.C. 115(d)(3)(C)(i)(II)-(III).
    \35\ H.R. Rep. No. 115-651, at 29 (emphasis added); S. Rep. No. 
115-339, at 26 (same); Conf. Rep. at 22 (same).
    \36\ 17 U.S.C. 115(d)(B)(i)(I)(aa)-(bb).
    \37\ See id.
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    Accordingly, to effectuate the provisions of section 115(d)(10), 
and against that provision's specific reference to ``regulations'' as 
well as the MMA's broad grant of regulatory authority to the Copyright 
Office, the Office tentatively concludes that it is necessary and 
appropriate to require DMPs to provide additional information to aid 
the MLC in fulfilling its statutory duty to identify and locate the 
copyright owners of unmatched works and pay the royalties due to 
them.\38\ The proposed rule employs the MLC's preferred approach of 
generally importing the requirements that are eventually adopted for 
monthly reports of usage under the blanket license. While those 
regulations are still under consideration in a separate proceeding,\39\ 
it seems reasonable to harmonize these rules in places, since the MLC 
is tasked with the same mission of matching works and distributing 
royalties, and DMPs, too, may benefit from consistency in reporting 
usage information in a similar manner (to the extent they have acquired 
such information).\40\ Accordingly, the Office is proposing adjustments 
to requirements, such as those addressing format, royalty payment and 
accounting information, and sound recording and musical work 
information, that largely mirror the requirements proposed for reports 
of usage.\41\ Notably, several categories of sound recording and 
musical work information proposed to be imported from the reports of 
usage regulations are already required under the current rule,\42\ 
including artist,\43\ playing time,\44\ ISRC,\45\ ISWC,\46\ 
songwriter,\47\ ISNI,\48\ and ownership share.\49\ In other respects, 
the proposed rule reorganizes and clarifies preexisting requirements, 
generally by replacing cross references to section 210.16 with the 
relevant regulatory language.\50\ For example, while the current 
provision incorporates by reference section 210.16's provision with 
respect to performance royalty estimates, the proposed rule 
specifically addresses use of such estimates in the context of 
cumulative statements, which unlike monthly statements delivered to 
copyright owners, are not reconciled via annual statements of 
account.\51\ Additionally, recognizing the function served by the 
cumulative statements, the proposed rule requires reporting of data 
related to partially paid shares of musical works and information 
needed to reconcile any deviation between royalty statements and the 
amounts transferred to the MLC.
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    \38\ See id. at 115(d)(10)(B)(iv)(III); id. at 115(d)(12)(A).
    \39\ See generally 85 FR 22518 (Apr. 22, 2020).
    \40\ In fact, cumulative statements of account will be due 
around the same time as the first monthly reports of usage begin to 
come in, and so it may create some efficiencies for DMPs, as well as 
the MLC, if these reports follow similar requirements.
    \41\ See 85 FR at 22540-46.
    \42\ See 37 CFR 210.20(b)(3)(i) (referring to ``the information 
and certification required by Sec.  210.16'').
    \43\ See id. at 210.16(c)(3)(iv).
    \44\ See id. at 210.16(c)(3)(v).
    \45\ See id. at 210.16(c)(3)(iii).
    \46\ See id. at 210.16(c)(3)(viii).
    \47\ See id. at 210.16(c)(3)(vii).
    \48\ See id.
    \49\ See id. at 210.16(c)(3)(vi).
    \50\ See, e.g., id. at 210.16(e) (``clear statements'' 
requirement); id. at 210.16(d)(3)(i) (performance royalty 
estimates); id. at 210.16(d)(3)(ii) (NOI reference number); id. at 
210.16(f) (certification requirement).
    \51\ See id. at 210.16(d)(3)(i).
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    Regarding the DLC's assertion that DMPs have been maintaining 
certain

[[Page 43520]]

information with only the preexisting statement of account regulations 
in mind, under the proposed rule, required information is generally 
limited to items that are either equivalent to the information required 
by section 210.16 or otherwise ``to the extent acquired'' by a DMP.\52\ 
The Office believes that this qualification reasonably addresses the 
DLC's concern.
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    \52\ Compare id. at 210.16(c) with 85 FR at 22541-42.
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    Where the NPRM imports the proposed reports of usage requirements, 
the Office's intent is for both rules to remain largely harmonized when 
finalized. After considering the MLC's suggestion, the Office declines 
to simply cross reference the reports of usage regulations because they 
may change over time after becoming effective (especially if adopted on 
an interim basis as has been proposed); \53\ whereas the cumulative 
statement of account requirements, tied to the license availability 
date, will not change. To minimize duplication, commenters may cross 
reference or incorporate by reference comments submitted in the 
separate reports of usage proceeding as appropriate, and focus their 
comments here on items uniquely relevant to cumulative statements of 
account. To the extent commenters believe a separate approach is 
appropriate for cumulative statements of account compared to the 
proposed rule regarding reports of usage, they are encouraged to 
identify those areas of differentiation and explain their position.
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    \53\ See 85 FR at 22519 (noting that an interim rule would offer 
``more flexibly to make necessary modifications in response to new 
evidence, unforeseen issues, or where something is otherwise not 
functioning as intended'').
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    Format. While the rule adopted in December 2018 was silent as to 
method of delivery, now that the MLC has been designated and is further 
along in its operational activities, the Office proposes to carry over 
the proposed reports of usage format provision, which would require 
delivery to the MLC in a machine-readable format that is compatible 
with its information technology systems, as reasonably determined by 
the MLC and taking into consideration relevant industry standards. If a 
large amount of musical works remain unmatched after the transition 
period, the MLC may be required to ingest a significant amount of 
cumulative statements of account from DMPs. As the MLC explains, using 
the same format will ensure efficient processing and ultimately support 
``efficient and accurate reporting.'' \54\ Further, as the MLC points 
out, ``a workflow will already have to be developed by the DMPs and the 
MLC for reporting in this format'' to process reports of usage,\55\ and 
the MLC is ``mindful of the varying data formats used by DMPs with 
varying resources and intends to coordinate with the DMP community to 
ensure the most appropriate version of data standards is selected.'' 
\56\ The Office notes that current monthly statement of account 
regulations already allow a copyright owner to ``demand that Monthly 
Statements of Account be submitted in a readily accessible electronic 
format consistent with prevailing industry practices applicable to 
comparable electronic delivery of comparable financial information.'' 
\57\
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    \54\ MLC Initial at 20.
    \55\ MLC Ex Parte Letter at 2 (June 17, 2020).
    \56\ MLC Initial at 20.
    \57\ 37 CFR 210.16(g)(2).
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    Certifications and clear statements. The Office does not propose 
any substantive changes to the certifications required under the 
previously adopted rule for cumulative statements of account.\58\ The 
rule proposes a technical change to include the actual language for 
clarity (with appropriate conforming edits), rather than merely 
referring to the ``certification required by Sec.  210.16.'' The Office 
has moved the other required certification--``that the digital music 
provider has fulfilled the requirements of 17 U.S.C. 115(d)(10)(B)(i) 
and (ii) but has not been successful in locating or identifying the 
copyright owner''--to be in the same paragraph as the language from 
section 210.16. The proposed rule also imports the ``clear statements'' 
requirement from the preexisting regulations.\59\
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    \58\ See id. at 210.20(b)(3)(i). As noted, to the extent the 
proposed rule would obligate DMPs to engage in reporting additional 
sound recording and musical works information, the statute requires 
DMPs to certify that they have attempted to acquire much of this 
information, and so an alternate method of providing this 
information to the MLC may be to require reporting the fruits of 
these inquiries in the certification.
    \59\ Id. at 210.16(e).
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    Estimates and adjustments. Under the previously adopted cumulative 
statement of account regulation, DMPs could make estimates to the 
extent currently permitted by 37 CFR 210.16(d)(3)(i) (covering where 
the final public performance royalty has not yet been determined), and 
there would be no adjustments mechanism. The Office proposes to retain 
this status quo rather than conform to the estimates and adjustments 
provisions proposed for reports of usage, given the one-time nature of 
the cumulative statements, compared to the proposed regulatory 
structure designed for ongoing reporting. The Office does propose, 
however, that any overpayment (whether resulting from an estimate or 
otherwise) should be credited to the DMP's account, or refunded upon 
request.
    Response files and invoices. In light of the DLC's comments 
concerning the value of receiving invoices and response files,\60\ the 
proposed rule allows a DMP to request and obtain a response file and/or 
invoice from the MLC. Because the MLC will be ingesting a large amount 
of data all around the same time, the rule proposes that any requested 
invoices and/or response files be delivered to DMPs within a 
``reasonable'' period of time in lieu of imposing a strict deadline.
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    \60\ See DLC Comments at 12-13, Music Modernization Act Notices 
of License, Notices of Nonblanket Activity, Data Collection and 
Delivery Efforts, and Reports of Usage and Payment, Docket No. 2020-
5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0012&attachmentNumber=1&contentType=pdf (``Invoices and 
response files are critically important to licensees and their 
accounting processes.''); see also 85 FR at 22528.
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    NOI reference numbers. The proposed rule restates a provision 
currently incorporated by reference to section 210.16(c)(3)(ii), which 
requires a DMP to provide a reference number or code identifying the 
relevant NOI if it, or its agent, provided such a number or code on its 
relevant NOI. The Office proposes to retain this provision because 
records of past NOIs issued may be helpful inputs for the MLC in 
identifying unmatched works (or shares).
    Sound recording and musical work information. As noted, the 
proposed rule generally harmonizes with the reporting requirements 
proposed for DMPs' monthly reports of usage to be delivered to the MLC 
following the transition to the blanket license. In many cases, this 
information is already required to be reported under the current rule, 
and in others, DMPs must certify that they have tried to obtain this 
information to receive the limitation on liability.\61\ In some cases, 
additional fields are proposed to be required, including certain 
categories pertaining to identifying information for the sound 
recording that embodies a particular musical work.\62\ As noted below, 
the obligation to report these additional fields is generally cabined 
by the extent the DMP has acquired this information,

[[Page 43521]]

and, in some instances, is further limited by whether the DMP is 
already reporting this information.
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    \61\ 17 U.S.C. 115(d)(10)(B)(i)(I)(aa)-(bb), (iv)(III)(aa); see 
37 CFR 210.20(b)(3)(i) (referring to ``the information and 
certification required by Sec.  210.16''); id. at 210.16(c)(3) 
(addressing e.g., artist, playing time, ISRC, ISWC, songwriter, 
ISNI, and ownership share).
    \62\ For example, sound recording name(s), producer(s), 
version(s), release date(s), album title(s), and distributor(s).
---------------------------------------------------------------------------

    Altered data and practicability of reporting. For sound recording 
and musical work information, the rule proposes to require identifying 
whether the reported data has been modified by the DMP, compared to 
being passed through in its original, as-received form. This concept 
was suggested by the MLC and others.\63\ As noted above, the Office is 
still considering comments in the reports of usage rulemaking and 
incorporation of the MLC's suggestion here should not indicate that the 
Office has made any conclusions in either this rulemaking or the 
reports of usage rulemaking on this subject. The Office also proposes 
to import the practicability limitation concerning the reporting of 
sound recording and musical work information that was proposed in the 
reports of usage proceeding.\64\ Under that proposal, much of the 
enumerated sound recording and musical work information would only need 
to be reported by a DMP ``to the extent practicable,'' which is defined 
in reference to categories of information that are statutorily 
required, required by a data standard used by the DMP, or were 
otherwise already being reported by the relevant DMP.\65\ As with 
altered data, the inclusion of this limitation in the proposed rule 
should not indicate that the Office has finalized its approach with 
respect to this aspect of the reports of usage rulemaking. The Office 
recognizes that these are potential areas where it may make sense to 
consider whether the monthly and cumulative reporting rules should 
diverge, and invites comment on these issues.\66\
---------------------------------------------------------------------------

    \63\ MLC Comments at 26, Music Modernization Act Notices of 
License, Notices of Nonblanket Activity, Data Collection and 
Delivery Efforts, and Reports of Usage and Payment, Docket No. 2020-
5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0014&attachmentNumber=1&contentType=pdf; A2IM & RIAA Initial at 
2-3 (noting provenance issues with using DMP-sourced sound recording 
data); Paul Jessop Initial at 2-3 (same); SoundExchange Comments at 
4-5, Music Modernization Act Notices of License, Notices of 
Nonblanket Activity, Data Collection and Delivery Efforts, and 
Reports of Usage and Payment, Docket No. 2020-5, https://www.regulations.gov/contentStreamer?documentId=COLC-2020-0005-0006&attachmentNumber=1&contentType=pdf (same).
    \64\ See 85 FR at 22541-42.
    \65\ See id.; see also id. at 22531-32. As proposed, it would be 
``practicable'' to provide the enumerated information if: (1) it 
belongs to a category of information expressly required by the 
enumerated list of information contained in 17 U.S.C. 
115(d)(4)(A)(ii)(I)(aa) or (bb); (2) where the MLC has adopted a 
particular nationally or internationally recognized reporting or 
data standard or format (e.g., DDEX) that is being used by the 
particular DMP, it belongs to a category of information required to 
be reported under such standard or format; (3) it belongs to a 
category of information that is reported by the particular DMP 
pursuant to any voluntary license or individual download license; or 
(4) it belongs to a category of information that was periodically 
reported by the particular DMP prior to the license availability 
date.
    \66\ For example, the Office has inquired whether a reasonable 
transition period may be appropriate with respect to certain monthly 
usage reporting requirements. See Letter from Copyright Office to 
Alliance for Recorded Music, DLC, MLC, and SoundExchange, Inc., at 
3-4 (June 30, 2020), https://www.copyright.gov/rulemaking/mma-implementation/copyright-office-letters/2020-5-june-30-2020.pdf. 
Since cumulative statements of account are reported only once, 
shortly after the license availability date, such a period would 
make less sense for this proposed rule, and reporting obligations 
for cumulative statements may need to be cognizant of the time 
period within which DMPs will ready such statements.
---------------------------------------------------------------------------

    Partially matched works. The MLC requested that cumulative 
statements of account include information about matched shares of a 
musical work where unmatched shares for the work are reported, by 
proposing the following regulatory language:

for each track for which a share of a musical work has been matched 
and for which accrued royalties have been paid in accordance with 
section [210.20(b)(2)], but for which one or more shares of a 
musical work remains unmatched, identification of [the total period 
covered by the cumulative statement and the per-play allocation and 
unique DMP transaction identifier], and a clear identification of 
the share(s) that have been matched, the owner(s) of such matched 
shares, and the amount of such accrued royalties paid in accordance 
with section [210.20(b)(2)].\67\
---------------------------------------------------------------------------

    \67\ MLC Reply App. D at 19.

    The MLC explained that, in practice, a DMP may have paid one 
copyright owner their royalty share, and held accrued royalties for any 
remaining unmatched share(s).\68\ The MLC is concerned that upon 
transfer of such unmatched royalties, if the paid share is not properly 
identified, there is a risk that a paid co-owner would be able to 
collect a portion of an unpaid co-owner's share.\69\
---------------------------------------------------------------------------

    \68\ MLC Ex Parte Letter at 3 (June 17, 2020) (giving the 
example of an identified 50% co-owner being paid their 50% share by 
a DMP, and then subsequently being paid half of the remaining share 
by the MLC due to lack of record of the first payment; stating that 
``reporting on partially-matched works and the respective shares 
that the DMP already paid is essential to allow the MLC to properly 
credit share owners who have been paid and avoid double payments'').
    \69\ MLC Ex Parte Letter at 3 (June 17, 2020).
---------------------------------------------------------------------------

    The DLC does not appear to disagree with the MLC's description of 
the issue, but stated that ``[t]his sort of operational detail should 
be worked out between the MLC and individual digital music providers.'' 
\70\ The DLC suggested that DMPs' third-party vendors, who are subject 
to ``strict contractual confidentiality restrictions,'' may have this 
information and not the DMPs themselves.\71\ Although it did not 
propose suggested language, it asked the Office to ``account for these 
[confidentiality] restrictions and protect digital music providers from 
any liability related to their breach,'' were it to promulgate a 
regulation.\72\ The MLC presumed that the DLC's confidentiality concern 
``relates to the amounts of royalties paid under voluntary licenses'' 
and offered to amend their proposal to limit share reporting ``to the 
share percentage and the owner of the share that was paid, [and] 
omitting the precise amount of royalties paid under the voluntary 
license terms.'' \73\
---------------------------------------------------------------------------

    \70\ DLC Reply at 25.
    \71\ Id.
    \72\ Id.
    \73\ MLC Ex Parte Letter at 4 (June 17, 2020).
---------------------------------------------------------------------------

    The Copyright Office finds the MLC's proposal to be reasonable in 
light of the statutory function of cumulative statements of account. 
Current regulations already allow a compulsory licensee to elect to 
allocate monthly royalty payments between co-owners and serve 
statements on each co-owner reflecting the percentage share paid to 
that co-owner.\74\ Further, the MMA contemplates that if a DMP's 
matching efforts are successful during the transition period as to a 
share of a work, it will pay royalties to the owner of that share, 
while holding the unmatched remainder for further matching efforts and, 
if ultimately unsuccessful, eventual transfer to the MLC.\75\ Thus, the 
situation the MLC anticipates seems likely to occur, and having the 
matched share information will be important. The proposed rule largely 
follows the MLC's language, although it does not include the MLC's 
proposed limitation to instances where royalty shares are paid in 
accordance with Sec.  210.20(b)(2), which concerns payments related to 
musical works matched during the transition period. It seems that all 
instances of partial payment of royalty interests may be relevant to 
the MLC's identification and royalty distribution functions for the 
remaining unmatched share(s). The Office welcomes comments on all 
aspects of this proposed rule, and is interested in whether the MLC's 
suggestion to omit a requirement to report the amount of royalties paid 
to matched shares under voluntary licenses adequately addresses the 
DLC's concerns. To that end, the Office solicits comments regarding 
whether the rule should also permit the MLC and individual DMPs to 
enter into

[[Page 43522]]

agreements to alter this process, provided that any such change does 
not materially prejudice the MLC's efforts with respect to locating and 
identifying copyright owners owed a portion of these accrued royalties. 
The Office has proposed a similar provision with respect to monthly 
reports of usage.\76\
---------------------------------------------------------------------------

    \74\ 37 CFR 210.16(g)(1).
    \75\ See 17 U.S.C. 115(d)(10)(B).
    \76\ See 85 FR 22546 (proposed 37 CFR 210.27(n)).
---------------------------------------------------------------------------

    Reconciliation. The MLC requested reporting of information 
concerning any applicable interest earned by DMPs on accrued royalties, 
and also ``any claimed or applied deductions or adjustments'' to 
applicable royalties ``with a description of the nature of, and basis 
for, such claimed deduction or adjustment.'' \77\ The DLC responded 
that interest ``was purposefully not included in the statute'' and 
``was specifically negotiated out of the draft legislation.'' \78\ In 
particular, the DLC objected to the inclusion of deductions or 
adjustments because it ``is not aware of any deductions or adjustments 
that would be made to accrued royalties.'' \79\
---------------------------------------------------------------------------

    \77\ MLC Reply App. D at 19.
    \78\ DLC Reply at 24.
    \79\ Id. at 25.
---------------------------------------------------------------------------

    The MLC subsequently clarified that it ``does not purport to 
dictate where interest must be applied or what would be applicable 
interest,'' but wished to ``ensure[] that any such interest paid over 
is also reported, so that the MLC can know to which copyright owners 
those moneys should ultimately be paid.'' \80\ Similarly, for 
deductions or adjustments, the MLC explained that it does not ``intend 
to approve or condone of applying deductions, but merely wants to 
ensure that any such changes are properly reported, again so that the 
MLC can understand and exactly match the reporting to the payments.'' 
\81\ The MLC contended that these provisions are needed because ``it is 
essential that the reporting on unclaimed accrued royalties match the 
accompanying royalty payments to the penny.'' \82\
---------------------------------------------------------------------------

    \80\ MLC Ex Parte Letter at 4 (June 17, 2020).
    \81\ Id.
    \82\ Id.
---------------------------------------------------------------------------

    Recognizing the DLC's comments regarding specific references to 
interest, adjustments, and deductions, the Copyright Office also 
appreciates the broader principle advanced by the MLC that it has an 
operational need for royalty statements to match the royalties 
transferred to the MLC, or at least minimize unexplained deviations. 
While not adopting the MLC's proposed language, the rule proposes that 
if the total royalties turned over to the MLC do not reconcile with the 
corresponding cumulative statement of account (for whatever reason), 
the DMP should include a clear and detailed explanation of the 
deviation. The Office has previously adopted a similar rule in the 
context of annual statements of account.\83\
---------------------------------------------------------------------------

    \83\ See 37 CFR 210.17(d)(2)(ii).
---------------------------------------------------------------------------

    Per-play allocation and unique transaction identifiers. The MLC 
proposed that cumulative statements of account be required to include 
``[t]he per-play allocation or any other applicable rates and amounts 
allocated to the identified usage, and a perpetually unique DMP 
transaction identifier for the usage.'' \84\ During a subsequent ex 
parte meeting, the MLC explained that while the proposed reports of 
usage requirements do not explicitly include references to these items, 
this information would nonetheless be adequately captured if the Office 
applied those proposed requirements.\85\ As a result, the Office has 
not included the MLC's proposed language.\86\
---------------------------------------------------------------------------

    \84\ MLC Reply App. D at 19.
    \85\ See MLC Ex Parte Letter at 3 (June 17, 2020).
    \86\ The proposed rule adopts the same approach with respect to 
reporting of partially matched works. See MLC Reply App. D at 19.
---------------------------------------------------------------------------

B. Treatment of Negotiated Agreements

    As described above, in addition to the MLC's request for additional 
reporting, the DLC asked for a ``regulatory clarification'' related to 
negotiated agreements that predate the MMA's enactment.\87\ In its 
words, certain music publishers ``negotiated agreements with several of 
the major digital music providers to liquidate accrued royalties for 
unmatched works through payments based on market share, or other 
mechanisms not based on matching to specific compositions that 
generated the royalties,'' and some of these agreements have continued 
in force through the MMA's enactment date such that ``some digital 
music providers will continue to be obligated to pay some amount of 
accrued unmatched royalties to publishers with whom they have direct 
deals.'' \88\ According to the DLC, ``[t]his creates a conflict between 
the terms of those preexisting agreements and the MMA's directions in 
section 115(d)(10) regarding the accrual of unmatched royalties.'' \89\ 
To address this, and the DLC's overarching concern that ``[i]n no event 
should digital music providers be made to pay double,'' \90\ the DLC 
proposed adding the following regulatory language:
---------------------------------------------------------------------------

    \87\ DLC Initial at 18.
    \88\ Id. at 18-19.
    \89\ Id. at 18.
    \90\ Id. at 19.

Notwithstanding anything in this section to the contrary, digital 
music providers are not required to accrue any royalties that are 
required to be paid to copyright owners of musical works pursuant to 
any agreements entered into prior to the effective date of the Music 
Modernization Act, and such royalties shall not be treated as 
``accrued royalties'' for purposes of this section or 17 U.S.C. 
115(d)(10).\91\
---------------------------------------------------------------------------

    \91\ Id.

    The MLC objected, stating that this proposed regulation would both 
``conflict[] with the statute's requirement that all royalties accrued 
from initial use of the unmatched work be transferred'' to the MLC and 
``exceed the Copyright Office's authority.'' \92\ The MLC stated that 
``[w]hile prior to the enactment of the MMA, certain DMPs entered into 
settlement agreements with certain music publishers in connection with 
disputes arising from their failure to license, match and/or pay 
royalties due, such settlement payments were definitively not the 
proper payment of royalties to copyright owners of unmatched uses,'' 
and were ``more likely consideration for releases from liability for 
copyright infringement or covenants not to sue.'' \93\ The MLC further 
argued that royalties lose their ``unclaimed'' status only when they 
are matched.\94\
---------------------------------------------------------------------------

    \92\ MLC Reply at 27-30.
    \93\ Id. at 29.
    \94\ Id.
---------------------------------------------------------------------------

    The proposed rule does not include regulatory language specifically 
addressing the relationship between private settlement agreements and 
whether works are required to be reported on cumulative statements of 
account (with accompanying payment of accrued royalties). The statute 
is somewhat instructive to this issue. Provisions regarding the 
treatment of voluntary licenses and accrued, unclaimed royalties were 
carefully negotiated during the legislative process.\95\ To maintain 
eligibility for the limitation on liability, when making available a 
sound recording of a musical work via a covered activity, a digital 
music provider must accrue and hold royalties for each musical work for 
which a copyright owner has not been identified or located.\96\ At the 
end of this current holding period, all accrued royalties for which ``a 
copyright owner of an unmatched musical work (or share thereof) is not 
identified and located'' must be transferred to the MLC along with 
associated reporting.\97\ Works are

[[Page 43523]]

considered ``matched'' when ``the copyright owner of such work (or 
share thereof) has been identified and located.'' \98\ The law further 
states that ``[v]oluntary license[s]'' will ``remain in effect'' by 
their respective terms notwithstanding the license availability date, 
and by implication, DMPs would not retain accrued royalties (as defined 
in the MMA) for works licensed under private agreements.\99\
---------------------------------------------------------------------------

    \95\ See H.R. Rep. No. 115-651, at 9-10, 24; S. Rep. No. 115-
339, at 10-11, 33-34.
    \96\ 17 U.S.C. 115(d)(10).
    \97\ Id. at 115(d)(10)(B)(iv)(III); see id. at 115(e)(2) (``The 
term `accrued royalties' means royalties accrued for the 
reproduction or distribution of a musical work (or share thereof) in 
a covered activity, calculated in accordance with the applicable 
royalty rate under this section.'').
    \98\ Id. at 115(e)(17); see also id. at 115(e)(35) (defining 
``unmatched'').
    \99\ Id. at 115(e)(36) (``The term `voluntary license' means a 
license for use of a musical work (or share thereof) other than a 
compulsory license obtained under this section.''); id. at 
115(d)(9)(C) (describing transition to blanket license). The MLC 
will ``confirm uses of musical works subject to voluntary licenses 
and individual download licenses, and the corresponding pro rata 
amounts to be deducted from royalties that would otherwise be due 
under the blanket license.'' Id. at 115(d)(3)(G)(i)(I)(bb). The 
Office has proposed a rule that would require DMPs to provide a 
description (including the start and end dates, the musical work 
copyright owner, and either a list of all covered musical works or 
an identification of any applicable catalog exclusions) of any 
applicable voluntary licenses to the MLC so that the MLC can confirm 
such uses for DMPs. See 85 FR 22537, 22541.
---------------------------------------------------------------------------

    The Office understands the DLC's concerns to center around whether 
payments made pursuant to various private settlement agreements can 
extinguish the obligation to deliver accrued royalties to the MLC. In 
light of the statutory language, these questions may be best resolved 
by determining whether a given agreement constitutes a valid license to 
the work(s) at issue (and if so, the scope of the license).\100\ In 
such cases, the work(s) licensed under such agreements could be 
considered ``matched'' and may not need to be reported at the close of 
the transition period. In the case of jointly authored works, a further 
potential wrinkle may be determining whether any license extended 
pursuant to a settlement agreement was conveyed to the entirety of the 
work, or only to a partial interest in a co-owned work.\101\
---------------------------------------------------------------------------

    \100\ While in some cases, the terms of a settlement agreement 
may provide continuing license authority, the Second Circuit has 
opined that, ``absent clear language to the contrary, they are not 
licenses for future use.'' Compare Davis v. Blige 505 F.3d 90, 102-
04 (2d Cir. 2007) (holding that ``a license or assignment in 
copyright can only act prospectively,'' and that a co-owner cannot 
convey ``his co-owners' right to prosecute past infringements'') 
with Jacobs v. Nintendo of Am., Inc., 370 F.3d 1097, 1101 (Fed. Cir. 
2004) (holding that a settlement with an unrestricted grant to 
engage in patented activities carried with it an implied 
sublicense); see also United States v. Youngstown Sheet & Tube Co., 
171 F.2d 103, 111 (6th Cir. 1948) (``A release for wrongs done in 
the past is not the equivalent of a license to do rightfully the 
same thing in the future.'').
    \101\ For a background discussion on considerations related to 
licensing co-owned works in the performance royalty context, see 
U.S. Copyright Office, Views of the United States Copyright Office 
Concerning PRO Licensing of Jointly Owned Works (Jan. 2016), https://www.copyright.gov/policy/pro-licensing.pdf. As a starting point, 
``[j]oint authors co-owning copyright in a work . . . `each hav[e] 
an independent right to use or [non-exclusively] license the 
copyright, subject only to a duty to account to the other co-owner 
for any profits earned thereby.' '' Cmty. for Creative Non-Violence 
v. Reid, 846 F.2d 1485, 1498 (DC Cir. 1988). Collaborators can and 
sometimes do ``alter this statutory allocation of rights and 
liabilities by contract,'' including with respect to licensing. Paul 
Goldstein, 1 Goldstein on Copyright sec. 4.2 (3d. ed. 2020); see, 
e.g., Corbello v. DeVito, 832 F. Supp. 2d 1231, 1244 (D. Nev. 2011).
---------------------------------------------------------------------------

    The Office appreciates the DMP's motivation for further guidance on 
this important issue, but must be careful to avoid speaking over either 
the statue or private transactions. It would seem that the specific 
terms of each agreement would be highly relevant to addressing this 
issue, and that questions regarding the interpretation of various 
private contracts may be better resolved by the relevant parties rather 
than a blanket rule by the Copyright Office.\102\ To the extent that 
preexisting settlement agreements may be, as the DLC asserts, in 
``conflict'' with ``the MMA's directions in section 115(d)(10) 
regarding the accrual of unmatched royalties,'' \103\ the statutory 
directive could not yield to such agreements, but the Office offers no 
opinion as to whether this is indeed the case. Additionally, if a DMP 
is unsure about its obligations under the statute vis-a-vis a given 
agreement (or with respect to a particular musical work or share of a 
work) and inadvertently transfers royalties later determined to have 
indeed been properly matched and paid by the DMP, the Office has 
proposed a provision that, as noted, would require the MLC to credit or 
refund any overpayment back to the DMP. For these reasons, based on the 
current record, the Office tentatively declines the DLC's suggestion to 
offer regulatory language regarding the interaction of preexisting 
settlement agreements and cumulative reporting obligations.\104\ The 
Office recognizes that the DLC's comments arise out of a complicated 
and nuanced treatment of private transactions and remains available to 
dialogue further, in accordance with the public process for written 
comments and/or ex parte meetings.
---------------------------------------------------------------------------

    \102\ The Office has not been provided copies of these 
settlement agreements.
    \103\ DLC Initial at 18.
    \104\ Further, while the Office appreciates the DLC's view that 
enactment of the MMA was not intended to result in services 
``pay[ing] double'' to the same parties for the same activities, id. 
at 19, its specific proposed regulatory language may conflict with 
the statutory definition of ``accrued royalties'' and lack precision 
with respect to scenarios where a payment does not extinguish 
royalty entitlements for all copyright owners for the relevant 
works; that is, where usage remains fully or partially ``unmatched'' 
within the meaning of the statute.
---------------------------------------------------------------------------

III. Subjects of Inquiry

    The proposed rule is designed to reasonably implement regulatory 
duties assigned to the Copyright Office under the MMA and facilitate 
the administration of the compulsory licensing system. The Office 
solicits additional public comment on all aspects of the proposed rule.

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Office 
proposes amending 37 CFR part 210 as follows:

PART 210--COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL 
AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS

0
1. The authority citation for part 210 continues to read as follows:

    Authority: 17 U.S.C. 115, 702.

0
2. Amend Sec.  210.12 by revising paragraph (k) and removing paragraphs 
(i) through (o).
    The revision reads as follows:


Sec.  210.12  Definitions.

* * * * *
    (k) Any terms not otherwise defined in this section shall have the 
meanings set forth in 17 U.S.C. 115(e).
0
3. Amend Sec.  210.20 by revising paragraph (b)(3)(i) and adding 
paragraphs (c) through (j) to read as follows:


Sec.  210.20  Statements required for limitation on liability for 
digital music providers for the transition period prior to the license 
availability date.

* * * * *
    (b) * * *
    (3) * * *
    (i) Not later than 45 calendar days after the license availability 
date, transfer all accrued royalties to the mechanical licensing 
collective (as required by paragraph (i)(2) of this section), such 
payment to be accompanied by a cumulative statement of account that:
    (A) Includes all of the information required by paragraphs (c) 
through (e) of this section covering the period starting from initial 
use of the work;
    (B) Is delivered to the mechanical licensing collective as required 
by paragraph (i)(1) of this section; and

[[Page 43524]]

    (C) Is certified as required by paragraph (j) of this section; and
* * * * *
    (c) Each cumulative statement of account delivered to the 
mechanical licensing collective under paragraph (b)(3)(i) of this 
section shall be clearly and prominently identified as a ``Cumulative 
Statement of Account for Making and Distributing Phonorecords,'' and 
shall include a clear statement of the following information:
    (1) The period (months and years) covered by the cumulative 
statement of account.
    (2) The full legal name of the digital music provider and, if 
different, the trade or consumer-facing brand name(s) of the 
service(s), including any specific offering(s), through which the 
digital music provider engages, or has engaged at any time during the 
period identified in paragraph (c)(1) of this section, in covered 
activities. If the digital music provider has a unique DDEX identifier 
number, it must also be provided.
    (3) The full address, including a specific number and street name 
or rural route, of the place of business of the digital music provider. 
A post office box or similar designation will not be sufficient except 
where it is the only address that can be used in that geographic 
location.
    (4) For each sound recording embodying a musical work for which 
accrued royalties must be transferred to the mechanical licensing 
collective under paragraph (b)(3)(i) of this section, a detailed 
cumulative statement, from which the mechanical licensing collective 
may separate reported information for each month and year for each 
applicable activity or offering including as may be defined in part 385 
of this title, of all of:
    (i) The royalty payment and accounting information required by 
paragraph (d) of this section; and
    (ii) The sound recording and musical work information required by 
paragraph (e) of this section.
    (5) The total royalty payable by the digital music provider for the 
period identified in paragraph (c)(1) of this section for the sound 
recordings embodying musical works identified in paragraph (c)(4) of 
this section, computed in accordance with the requirements of this 
section and part 385 of this title, and including detailed information 
regarding how the royalty was computed, with such total royalty payable 
broken down by month and year and by each applicable activity or 
offering including as may be defined in part 385 of this title.
    (6) If the total royalty payable under paragraph (c)(5) of this 
section does not reconcile with the royalties actually transferred to 
the mechanical licensing collective, a clear and detailed explanation 
of the difference and the basis for it.
    (d) The royalty payment and accounting information called for by 
paragraph (c)(4)(i) of this section shall consist of the following:
    (1) A detailed and step-by-step accounting of the calculation of 
royalties payable by the digital music provider under applicable 
provisions of this section and part 385 of this title, sufficient to 
allow the mechanical licensing collective to assess the manner in which 
the digital music provider determined the royalty owed and the accuracy 
of the royalty calculations, including but not limited to the number of 
payable units, including, as applicable, permanent downloads, plays, 
and constructive plays, for each reported sound recording.
    (2) A digital music provider may, in cases where the final public 
performance royalty has not yet been determined, compute the public 
performance royalty component based on the interim public performance 
royalty rate, if established; or alternatively, on a reasonable 
estimation of the expected royalties to be paid in accordance with 
GAAP.
    (3) All information and calculations provided pursuant to paragraph 
(d) of this section shall be made in good faith and on the basis of the 
best knowledge, information, and belief of the digital music provider 
at the time the cumulative statement of account is delivered to the 
mechanical licensing collective, and subject to any additional 
accounting and certification requirements under 17 U.S.C. 115 and this 
section.
    (e)(1) The following information must be provided for each sound 
recording embodying a musical work required to be reported under 
paragraph (c)(4)(ii) of this section:
    (i) Identifying information for the sound recording, including but 
not limited to:
    (A) Sound recording name(s), including, to the extent practicable, 
all known alternative and parenthetical titles for the sound recording;
    (B) Featured artist(s);
    (C) Unique identifier(s) assigned by the digital music provider, if 
any, including any code(s) that can be used to locate and listen to the 
sound recording through the digital music provider's public-facing 
service;
    (D) Playing time; and
    (E) To the extent acquired by the digital music provider in 
connection with its use of sound recordings of musical works to engage 
in covered activities, and to the extent practicable:
    (1) Sound recording copyright owner(s);
    (2) Producer(s);
    (3) International standard recording code(s) (ISRC);
    (4) Any other unique identifier(s) for or associated with the sound 
recording, including any unique identifier(s) for any associated album, 
including but not limited to:
    (i) Catalog number(s);
    (ii) Universal product code(s) (UPC); and
    (iii) Unique identifier(s) assigned by any distributor;
    (5) Version(s);
    (6) Release date(s);
    (7) Album title(s);
    (8) Label name(s);
    (9) Distributor(s); and
    (10) Other information commonly used in the industry to identify 
sound recordings and match them to the musical works the sound 
recordings embody.
    (ii) Identifying information for the musical work embodied in the 
reported sound recording, to the extent acquired by the digital music 
provider in the metadata provided by sound recording copyright owners 
or other licensors of sound recordings in connection with the use of 
sound recordings of musical works to engage in covered activities, and 
to the extent practicable:
    (A) Information concerning authorship and ownership of the 
applicable rights in the musical work embodied in the sound recording, 
including but not limited to:
    (1) Songwriter(s);
    (2) Publisher(s) with applicable U.S. rights;
    (3) Musical work copyright owner(s);
    (4) International standard name identifier(s) (ISNI) and interested 
parties information code(s) (IPI) for each such songwriter, publisher, 
and musical work copyright owner; and
    (5) Respective ownership shares of each such musical work copyright 
owner;
    (B) International standard musical work code(s) (ISWC) for the 
musical work embodied in the sound recording; and
    (C) Musical work name(s) for the musical work embodied in the sound 
recording, including any alternative or parenthetical titles for the 
musical work.
    (iii) Whether the digital music provider, or any corporate parent 
or subsidiary of the digital music provider, is a copyright owner of 
the musical work embodied in the sound recording.
    (iv) A reference number or code identifying the relevant Notice of

[[Page 43525]]

Intention, if the digital music provider, or its agent, chose to 
include such a number or code on its relevant Notice of Intention for 
the compulsory license.
    (2) Subject to paragraph (e)(3) of this section, where any of the 
information called for by paragraph (e)(1) of this section is acquired 
by the digital music provider from sound recording copyright owners or 
other licensors of sound recordings (or their representatives), and the 
digital music provider revises, re-titles, or otherwise edits or 
modifies the information, it shall be sufficient for the digital music 
provider to report either the originally acquired version or the 
modified version of such information (but any modified information must 
be identified as such) to satisfy its obligations under paragraph 
(e)(1) of this section, unless one or more of the following scenarios 
apply, in which case either the unaltered version or both versions must 
be reported:
    (i) If the mechanical licensing collective has adopted a particular 
nationally or internationally recognized reporting or data standard or 
format (e.g., DDEX) that is being used by the particular digital music 
provider, and either the unaltered version or both versions are 
required to be reported under such standard or format.
    (ii) Either the unaltered version or both versions are reported by 
the particular digital music provider pursuant to any voluntary license 
or individual download license.
    (iii) Either the unaltered version or both versions were 
periodically reported by the particular digital music provider prior to 
the license availability date.
    (3) Notwithstanding paragraph (e)(2) of this section, a digital 
music provider shall not be able to satisfy its obligations under 
paragraph (e)(1) of this section by reporting a modified version of any 
information belonging to a category of information that was not 
periodically revised, re-titled, or otherwise edited or modified by the 
particular digital music provider prior to the license availability 
date, and in no case shall a modified version of any unique identifier 
(including but not limited to ISRC and ISWC), playing time, or release 
date be sufficient to satisfy the digital music provider's obligations 
under paragraph (e)(1) of this section.
    (4) Any obligation under paragraph (e)(1) of this section 
concerning information about sound recording copyright owners may be 
satisfied by reporting the information for applicable sound recordings 
provided to the digital music provider by sound recording copyright 
owners or other licensors of sound recordings (or their 
representatives) contained in each of the following DDEX fields: DDEX 
Party Identifier (DPID), LabelName, and PLine. Where a digital music 
provider acquires this information in addition to other information 
identifying a relevant sound recording copyright owner, all such 
information must be reported to the extent practicable.
    (5) As used in this paragraph (e), it is practicable to provide the 
enumerated information if:
    (i) It belongs to a category of information expressly required by 
the enumerated list of information contained in 17 U.S.C. 
115(d)(4)(A)(ii)(I)(aa) or (bb);
    (ii) Where the mechanical licensing collective has adopted a 
particular nationally or internationally recognized reporting or data 
standard or format (e.g., DDEX) that is being used by the particular 
digital music provider, it belongs to a category of information 
required to be reported under such standard or format;
    (iii) It belongs to a category of information that is reported by 
the particular digital music provider pursuant to any voluntary license 
or individual download license; or
    (iv) It belongs to a category of information that was periodically 
reported by the particular digital music provider prior to the license 
availability date.
    (6) Notwithstanding any information reported under paragraph 
(e)(1)(ii)(A)(5) of this section, for each track for which a share of a 
musical work has been matched and for which accrued royalties for such 
share have been paid, but for which one or more shares of the musical 
work remains unmatched and unpaid, the digital music provider must 
provide a clear identification of the share(s) that have been matched, 
the owner(s) of such matched shares, and, for shares other than those 
paid pursuant to a voluntary license, the amount of such accrued 
royalties paid.
    (f) The information required by paragraphs (c) through (e) of this 
section requires intelligible, legible, and unambiguous statements in 
the cumulative statements of account, without incorporation by 
reference of facts or information contained in other documents or 
records.
    (g) References to part 385 of this title, as used in paragraphs (c) 
and (d) of this section, refer to the rates and terms of royalty 
payments as in effect as to each particular reported use based on when 
the use occurred.
    (h) If requested by a digital music provider, the mechanical 
licensing collective shall deliver an invoice and/or a response file to 
the digital music provider within a reasonable period of time after the 
cumulative statement of account and related royalties are received. The 
response file shall contain such information as is common in the 
industry to be reported in response files, backup files, and any other 
similar such files provided to digital music providers by applicable 
third-party administrators.
    (i)(1) Each cumulative statement of account delivered to the 
mechanical licensing collective under paragraph (b)(3)(i) of this 
section shall be delivered in a machine-readable format that is 
compatible with the information technology systems of the mechanical 
licensing collective as reasonably determined by the mechanical 
licensing collective and set forth on its website, taking into 
consideration relevant industry standards and the potential for 
different degrees of sophistication among digital music providers. The 
mechanical licensing collective must offer at least two options, where 
one is dedicated to smaller digital music providers that may not be 
reasonably capable of complying with the requirements of a reporting or 
data standard or format that the mechanical licensing collective may 
see fit to adopt for larger digital music providers with more 
sophisticated operations. Nothing in this section shall be construed as 
prohibiting the mechanical licensing collective from adopting more than 
two reporting or data standards or formats.
    (2) Royalty payments shall be delivered to the mechanical licensing 
collective in such manner and form as the mechanical licensing 
collective may reasonably determine and set forth on its website. A 
cumulative statement of account and its related royalty payment may be 
delivered together or separately, but if delivered separately, the 
payment must include information reasonably sufficient to allow the 
mechanical licensing collective to match the cumulative statement of 
account to the payment.
    (3) In the case of an overpayment of royalties, the mechanical 
licensing collective shall appropriately credit or offset the excess 
payment amount and apply it to the digital music provider's account. As 
an alternative to a credit, a digital music provider may request a 
refund for an overpayment of royalties, which the mechanical licensing 
collective shall pay within a reasonable period of time.
    (j) Each cumulative statement of account delivered to the 
mechanical licensing collective under paragraph (b)(3)(i) of this 
section shall be accompanied by:

[[Page 43526]]

    (1) The name of the person who is signing and certifying the 
cumulative statement of account.
    (2) A signature, which in the case of a digital music provider that 
is a corporation or partnership, shall be the signature of a duly 
authorized officer of the corporation or of a partner.
    (3) The date of signature and certification.
    (4) If the digital music provider is a corporation or partnership, 
the title or official position held in the partnership or corporation 
by the person who is signing and certifying the cumulative statement of 
account.
    (5) One of the following statements:
    (i) Statement one:

I certify that (1) I am duly authorized to sign this cumulative 
statement of account on behalf of the digital music provider; (2) I 
have examined this cumulative statement of account; and (3) all 
statements of fact contained herein are true, complete, and correct 
to the best of my knowledge, information, and belief, and are made 
in good faith.

    (ii) Statement two:

I certify that (1) I am duly authorized to sign this cumulative 
statement of account on behalf of the digital music provider, (2) I 
have prepared or supervised the preparation of the data used by the 
digital music provider and/or its agent to generate this cumulative 
statement of account, and (3) such data is true, complete, and 
correct to the best of my knowledge, information, and belief, and 
was prepared in good faith, and (4) this cumulative statement of 
account was prepared by the digital music provider and/or its agent 
using processes and internal controls that were subject to an 
examination, during the past year, by a licensed certified public 
accountant in accordance with the attestation standards established 
by the American Institute of Certified Public Accountants, the 
opinion of whom was that the processes and internal controls were 
suitably designed to generate monthly reports of usage that 
accurately reflect, in all material respects, the digital music 
provider's usage of musical works, the statutory royalties 
applicable thereto, and any other data that is necessary for the 
proper calculation of the statutory royalties in accordance with 17 
U.S.C. 115 and applicable regulations.

    (6) A certification by a duly authorized officer of the digital 
music provider that the digital music provider has fulfilled the 
requirements of 17 U.S.C. 115(d)(10)(B)(i) and (ii) but has not been 
successful in locating or identifying the copyright owner.

Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2020-15591 Filed 7-16-20; 8:45 am]
BILLING CODE 1410-30-P