[Federal Register Volume 85, Number 248 (Monday, December 28, 2020)]
[Rules and Regulations]
[Pages 84243-84245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28505]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2020-5]


Music Modernization Act Notices of License, Notices of Nonblanket 
Activity, Data Collection and Delivery Efforts, and Reports of Usage 
and Payment

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

ACTION: Supplemental interim rule with request for comments.

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SUMMARY: The U.S. Copyright Office is amending its regulations 
governing certain reporting requirements of digital music providers and 
significant nonblanket licensees pursuant to title I of the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act. This amendment will create 
a temporary exception to certain provisions concerning the reporting of 
information about permanent download pass-through licenses in light of 
recent requests that an accommodation to current reporting rules be 
made to avoid potential market disruption. Based on these requests 
received following the adoption of the current requirements, the 
Copyright Office has determined that there is a legitimate need to make 
this amendment effective immediately to govern these matters while it 
considers further potential adjustments. The Copyright Office solicits 
public comment on how, or whether, it should further adjust these 
particular reporting requirements.

DATES: The supplemental interim rule is effective December 28, 2020. 
Written comments must be received no later than 11:59 p.m. Eastern Time 
on January 27, 2021.

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-notices-reports/. If 
electronic submission of comments is not feasible due to lack of access 
to a computer and/or the internet, please contact the Copyright 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], 
Jason E. Sloan, Assistant General Counsel, by email at 
[email protected], or Cassandra G. Sciortino, Attorney-Advisor, by 
email at [email protected]. Each can be contacted by telephone 
by calling (202) 707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 11, 2018, the President signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') 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.\1\ 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 
will be administered by a mechanical licensing collective (``MLC'') 
designated by the Copyright Office (the ``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, including reporting 
obligations.\2\ DMPs may also continue to engage in those activities 
solely through voluntary, or direct, licensing with copyright owners, 
in which case the DMP may be considered a significant nonblanket 
licensee (``SNBL'') under the statute, subject to separate reporting 
obligations.
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    \1\ Public Law 115-264, 132 Stat. 3676 (2018).
    \2\ 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 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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    On September 17, 2020, the Office issued an interim rule adopting 
regulations concerning certain types of reporting required under the 
statute after the license availability date: Notices of license and 
reports of usage by DMPs, and notices of nonblanket activity and 
reports of usage by SNBLs.\3\ Those interim regulations include 
requirements to report certain information about certain permanent 
download licenses.\4\ They were adopted to help ensure that the MLC 
receives sufficient information to be able to fulfill its statutory 
obligations, including under section 115(d)(3)(G)(i)(I)(bb), and to 
effectuate the reporting requirements of section 115(d)(4)(A)(ii)(II). 
The Office assumes familiarity with the interim rule and all related 
Federal Register documents.
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    \3\ 85 FR 58114 (Sept. 17, 2020).
    \4\ 37 CFR 210.24(b)(8), 210.25(b)(6), 210.27(c)(5), 
210.28(c)(5).
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    After the adoption of these rules, which involved multiple rounds 
of public comments through a notification of inquiry,\5\ notice of 
proposed rulemaking,\6\ and an ex parte communications process,\7\ the 
DLC raised a new concern with respect to the applicability of these 
particular reporting provisions to ``pass-through'' licenses for 
permanent downloads.\8\ The DLC explained that ``all [DMPs operating] 
download stores operate exclusively under so-called `pass-through' 
licenses received from record labels, where the label obtains the

[[Page 84244]]

mechanical licenses from musical work copyright owners and then 
authorizes downstream distributors to make and distribute permanent 
downloads.'' \9\ The Office notes that this reflects that the scope of 
``pass-through'' licensing under section 115 shrank under the MMA, 
which eliminated the ability of record labels to ``pass-through'' 
section 115 licenses for streaming or limited downloads.\10\
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    \5\ 84 FR 49966 (Sept. 24, 2019).
    \6\ 85 FR 22518 (Apr. 22, 2020).
    \7\ Guidelines for ex parte communications, along with records 
of such communications, including those referenced herein, are 
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. All rulemaking 
activity, including public comments, as well as educational material 
regarding the Music Modernization Act, can currently be accessed via 
navigation from https://www.copyright.gov/music-modernization/.
    \8\ See DLC Ex Parte Letter Nov. 10, 2020 at 4-7.
    \9\ Id. at 4.
    \10\ See H.R. Rep. No. 115-651, at 4 (2018) (``Subsection (b)(3) 
maintains the `pass-through' license for record labels to obtain and 
pass through mechanical license rights for individual permanent 
downloads. Under the Music Modernization Act, a record label will no 
longer be eligible to obtain and pass through a Section 115 license 
to a digital music provider to engage in activities related to 
interactive streams or limited downloads.''); S. Rep. No. 115-339, 
at 4 (2018); Report and Section-by-Section Analysis of H.R. 1551 by 
the Chairmen and Ranking Members of Senate and House Judiciary 
Committees, at 3 (2018), https://www.copyright.gov/legislation/_conference_report.pdf; U.S. Copyright Office, Copyright and the 
Music Marketplace at 27-28 (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf 
(describing previous pass-through licensing practices).
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    The underlying mechanical license pursuant to which the DMP has 
been given authority for permanent downloads by a record label can be a 
compulsory license or a voluntary license. Under the MMA, the 
compulsory version is defined as an ``individual download license,'' 
which is ``a compulsory license obtained by a record company to make 
and distribute, or authorize the making and distribution of, permanent 
downloads embodying a specific individual musical work.'' \11\ The non-
compulsory version (a ``voluntary pass-through license'') does not 
appear to be directly addressed by the MMA, but in general the MMA 
provides for preexisting voluntary licenses to remain in effect after 
the license availability date.\12\
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    \11\ 17 U.S.C. 115(e)(12).
    \12\ See id. at 115(d)(9)(C).
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    The DLC raised the concern that the relevant reporting requirements 
set forth in the interim regulations require DMPs and SNBLs operating 
under the authority of pass-through licenses to report certain 
information about such licenses, including identification and contact 
information for relevant musical work copyright owners that they do not 
have.\13\ The DLC stated that:
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    \13\ DLC Ex Parte Letter Nov. 10, 2020 at 4-6.

    This information is not provided by record labels to download 
stores through existing reporting mechanisms . . . and for this to 
occur would require record labels and digital music providers to 
invest resources to build entirely new systems. The reality is that 
services are not likely to make those investments, especially 
because purchases of permanent downloads, while still significant, 
are declining. It is far more likely that download stores would 
simply cease operations.\14\
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    \14\ Id. at 5-6.

    The DLC submitted proposed regulatory amendments to address their 
concerns, which the MLC does not object to.\15\ The MLC and DLC are in 
agreement that ``allowing the existing rules to go into effect without 
alteration would cause market disruption for permanent download 
offerings.'' \16\ The DLC's proposal is available in Addendum B of the 
ex parte letter available at: https://www.copyright.gov/rulemaking/mma-implementation/ex-parte/mlc-and-dlc.pdf.
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    \15\ DLC & MLC Ex Parte Letter Dec. 9, 2020 at 4, add. B.
    \16\ Id. at 4.
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II. Supplemental Interim Rule and Request for Comments

    The Office tentatively agrees that this issue needs to be addressed 
and is therefore noticing the matter for public comment. In the 
meantime, the Office finds it necessary and appropriate under its 
authority pursuant to 17 U.S.C. 115 and 702 to adjust the interim rule, 
effective immediately, to prevent potential market disruption that the 
MLC and DLC are concerned about occurring while the Office solicits 
comments and continues to consider how best to proceed with respect to 
this issue.\17\ The supplemental interim rule creates a temporary 
exception to the previously adopted reporting requirements with respect 
to individual download licenses and voluntary pass-through licenses, 
such that the failure to report that particular information will not 
otherwise impact a DMP's or SNBL's compliance with their various 
requirements under the MMA and the Office's related regulations (e.g., 
the MLC cannot use the failure to provide that particular information 
as a basis to reject an otherwise compliant notice of license or serve 
a notice of default on an otherwise compliant blanket licensee). The 
supplemental interim rule further provides that after the temporary 
exception is no longer in effect, the MLC can take action against a DMP 
or SNBL who benefitted from the exception if any amended reporting 
requirements adopted by the Office are not complied with by the DMP or 
SNBL within 45 days after the effective date of such an amendment (or 
an alternate date subsequently adopted by the Office, whichever is 
later). The MLC and DLC indicated that they respectively do not oppose 
the Office employing this approach while considering this matter.\18\
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    \17\ Because of the short amount of time remaining before the 
January 1, 2021 license availability date, the Office finds there is 
good cause to adopt the temporary supplemental interim rule without 
public notice and comment, and to make it effective immediately upon 
publication. See 5 U.S.C. 553(b)(3)(B), (d)(3); see also DLC & MLC 
Ex Parte Letter Dec. 9, 2020 at 4 (supporting adoption of a 
temporary rule while the Office further considers this issue and 
agreeing that ``allowing the existing rules to go into effect 
without alteration would cause market disruption for permanent 
download offerings'').
    \18\ DLC & MLC Ex Parte Letter Dec. 9, 2020 at 4.
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    With respect to the DLC's concerns, the Office solicits comments on 
the DLC's proposal. As the Office understands it, the proposal would 
basically exempt individual download licenses and voluntary pass-
through licenses from the relevant reporting requirements under the 
interim regulations, and would instead impose alternative requirements 
that the DLC views as more appropriate but that still ensure that the 
MLC has sufficient information to fulfill its statutory duties. In 
particular, the Office seeks comments regarding its authority to adopt 
the DLC's proposal in light of 17 U.S.C. 115(d)(4)(A)(ii)(II), which 
requires DMPs to ``identify and provide contact information for all 
musical work copyright owners for works embodied in sound recordings as 
to which a voluntary license, rather than the blanket license, is in 
effect with respect to the uses being reported.'' While the DLC argues 
that the statute is ``at least . . . ambiguous'' and that the Office 
can ``exercise its general regulatory authority to clarify this 
issue,'' \19\ the Office is cautious about potentially concluding that 
the term ``voluntary license'' in that provision excludes voluntary 
pass-through licenses, and thus seeks further comments to aid its 
statutory analysis.\20\ Relatedly, the Office seeks comments as to 
whether there are any concerns, as a matter of statutory 
interpretation, with interpreting the term ``voluntary license'' in 
section 115(d)(4)(A)(ii)(II) in the manner the DLC requests while 
reading the same term more broadly elsewhere in section 115, such as in 
the introductory paragraph of section 115(d)(4)(A)(ii).
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    \19\ DLC Ex Parte Letter Nov. 10, 2020 at 6-7.
    \20\ A ``voluntary license'' is a defined term under 17 U.S.C. 
115(e)(36).
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    The Office seeks clarification from the MLC and DLC, and comments 
from other interested stakeholders, regarding their proposed inclusion 
of language seeming to qualify the proposed exceptions to ``where [the 
DMP's] authority applies to the exclusion of the blanket license 
authority pursuant to 17

[[Page 84245]]

U.S.C. 115(d)(1)(C)(i).'' \21\ This proposed language seems to suggest 
that the DLC and MLC believe there are types of voluntary licenses, 
authorizing DMPs to make and distribute permanent downloads, that would 
not apply to the exclusion of the blanket license. It is not entirely 
clear to the Office what is meant by this aspect of the proposal, but 
the Office observes that section 115(d)(1)(C) says ``[a] voluntary 
license for covered activities entered into by or under the authority 
of 1 or more copyright owners and 1 or more digital music providers, or 
authority to make and distribute permanent downloads of a musical work 
obtained by a digital music provider from a sound recording copyright 
owner pursuant to an individual download license, shall be given effect 
in lieu of a blanket license under this subsection with respect to the 
musical works (or shares thereof) covered by such voluntary license or 
individual download authority.'' \22\
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    \21\ See DLC & MLC Ex Parte Letter Dec. 9, 2020 add. B at 2, 3, 
10.
    \22\ 17 U.S.C. 115(d)(1)(C).
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    Beyond the DLC's proposal, the Office invites comments more 
generally on how to address, or whether the Office should address, the 
pass-through license issue that has been raised, including whether a 
different approach should be taken. One potential alternative approach 
the Office seeks comment on could be for the Office to adopt a rule 
providing that any failure to comply with the previously adopted 
reporting requirements in 37 CFR 210.24(b)(8), 210.25(b)(6), 
210.27(c)(5), or 210.28(c)(5) with respect to individual download 
licenses or voluntary pass-through licenses may not be construed as 
material noncompliance with the statute or regulations, but rather 
would be considered to be harmless errors, if appropriate alternative 
information--perhaps the information the DLC proposed--is timely 
reported instead. This would mean that in such cases, the harmless 
error provisions in place for notices of license (Sec.  210.24(e)), 
notices of nonblanket activity (Sec.  210.25(e)), and SNBL-submitted 
reports of usage (Sec.  210.28(k)) would apply to protect the DMP or 
SNBL; the statutory default provision in 17 U.S.C. 115(d)(4)(E)(i)(III) 
would similarly protect a DMP from being in default under the blanket 
license with respect to its reports of usage.

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Interim Regulations

    For the reasons set forth in the preamble, the Copyright Office 
amends 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. Add Sec.  210.30 to read as follows:


Sec.  210.30  Temporary exception to certain reporting requirements 
about certain permanent download licenses.

    (a) Subject to paragraph (b) of this section, where a requirement 
of Sec.  210.24(b)(8), Sec.  210.25(b)(6), Sec.  210.27(c)(5), or Sec.  
210.28(c)(5) has not been satisfied with respect to an individual 
download license or voluntary pass-through license, such failure shall 
not:
    (1) Render an otherwise compliant notice of license, notice of 
nonblanket activity, or report of usage invalid; or
    (2) Provide a basis for the mechanical licensing collective to 
reject an otherwise compliant notice of license, serve a notice of 
default on an otherwise compliant blanket licensee, terminate an 
otherwise compliant blanket license, or engage in legal enforcement 
efforts against an otherwise compliant significant nonblanket licensee.
    Note 1 to paragraph (a): Paragraph (a) of this section is a 
transitional exception that shall cease to apply in accordance with 
such further regulations as the Copyright Office may adopt.
    (b) After paragraph (a) of this section is no longer applicable, 
the mechanical licensing collective may take such action(s) against a 
beneficiary of paragraph (a) of this section as had been prohibited by 
paragraph (a) when it was applicable, if an amendment adopted by the 
Copyright Office to a requirement of Sec.  210.24(b)(8), Sec.  
210.25(b)(6), Sec.  210.27(c)(5), or Sec.  210.28(c)(5) with respect to 
individual download licenses or voluntary pass-through licenses is not 
complied with by such a beneficiary within 45 calendar days after the 
effective date of such an amendment, or an alternate date subsequently 
adopted by the Office, whichever is later. Any deadline otherwise 
applicable to any such action by the mechanical licensing collective 
shall be tolled with respect to a beneficiary of paragraph (a) of this 
section until the conclusion of such 45-day or alternate period.
    (c) For purposes of this section, a voluntary pass-through license 
is a voluntary license obtained by a licensor of sound recordings to 
make and distribute, or authorize the making and distribution of, 
permanent downloads embodying musical works through which a digital 
music provider or significant nonblanket licensee has obtained 
authority from such licensor of sound recordings to make and distribute 
permanent downloads of musical works embodied in such sound recordings.

    Dated: December 16, 2020.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.

    Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2020-28505 Filed 12-23-20; 8:45 am]
BILLING CODE 1410-30-P