[Federal Register Volume 86, Number 42 (Friday, March 5, 2021)]
[Rules and Regulations]
[Pages 12822-12827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04573]


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

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.

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

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 adjusts 
provisions concerning the reporting of information about permanent 
download pass-through licenses in light of recent requests for 
accommodations to avoid potential market disruption.

DATES: Effective April 5, 2021.

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 
at (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 became 
available on January 1, 2021 (the ``license availability date''), 
administered by a mechanical licensing

[[Page 12823]]

collective (``MLC'') designated by the Copyright Office (the 
``Office''). Digital music providers (``DMPs'') are 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.
---------------------------------------------------------------------------

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

    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 (the ``September 2020 rule'').\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).
---------------------------------------------------------------------------

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

    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 
mechanical licenses from musical work copyright owners and then 
authorizes downstream distributors to make and distribute permanent 
downloads.'' \9\ The Office notes that this focus on permanent 
downloads reflects that the scope of ``pass-through'' licensing under 
section 115 was diminished under the MMA, which eliminated the ability 
of record labels to ``pass-through'' section 115 licenses for streaming 
or limited downloads.\10\
---------------------------------------------------------------------------

    \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 at 4-7 (Nov. 10, 2020).
    \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/mma/_conference_report.pdf (``Conf.Rep.''); 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).
---------------------------------------------------------------------------

    The underlying mechanical license pursuant to which the DMP has 
been given authority for permanent downloads by a record label can be 
either compulsory or voluntary. 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 blanket 
license availability date.\12\
---------------------------------------------------------------------------

    \11\ 17 U.S.C. 115(e)(12).
    \12\ See id. at 115(d)(9)(C).
---------------------------------------------------------------------------

    The DLC raised the concern that the relevant reporting requirements 
set forth in the September 2020 rule 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:
---------------------------------------------------------------------------

    \13\ DLC Ex Parte Letter at 4-6 (Nov. 10, 2020).

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

    \14\ Id. at 5-6.

The DLC submitted proposed regulatory amendments to address their 
concerns, to which the MLC did not object.\15\ The MLC and DLC agreed 
that ``allowing the existing rules to go into effect without alteration 
would cause market disruption for permanent download offerings.'' \16\
---------------------------------------------------------------------------

    \15\ DLC & MLC Ex Parte Letter at 4, add. B (Dec. 9, 2020).
    \16\ Id. at 4.
---------------------------------------------------------------------------

    In response, on December 28, 2020, the Office issued a supplemental 
interim rule with request for comments (the ``December 2020 
rule'').\17\ In the December 2020 rule, the Office tentatively agreed 
that the issue needed to be addressed and noticed the matter for public 
comment. It adjusted the September 2020 rule, effective immediately, to 
prevent the potential market disruption that the MLC and DLC were 
concerned about while the Office solicited comments and continued to 
consider how best to proceed with respect to the issue. Specifically, 
the December 2020 rule created 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 information about these licenses 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 December 2020 rule 
further provided 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 
their effective date (or an alternate date subsequently adopted by

[[Page 12824]]

the Office, whichever is later). The MLC and DLC indicated that neither 
of them opposed the Office employing this approach.\18\
---------------------------------------------------------------------------

    \17\ 85 FR 84243 (Dec. 28, 2020).
    \18\ DLC & MLC Ex Parte Letter at 4 (Dec. 9, 2020).
---------------------------------------------------------------------------

    With respect to the DLC's concerns, the Office solicited comments 
on the DLC's proposal, which would exempt individual download licenses 
and voluntary pass-through licenses from the relevant reporting 
requirements under the September 2020 rule, and would instead impose 
alternative requirements that the DLC views as more appropriate and 
feasible for DMPs to comply with in light of the information they 
typically receive from record labels, but that still ensure that the 
MLC has sufficient information to fulfill its statutory duties. The 
Office specifically sought comments regarding its authority to adopt 
the DLC's proposal, and invited comments more generally on how to 
address, or whether the Office should address, the pass-through license 
issue, including whether a different approach should be taken.
    The Office received responsive comments from the DLC, MLC, and the 
Alliance for Recorded Music (``ARM''), all agreeing that the issue 
should be addressed, that the DLC's proposed solution should be 
adopted, and that the Office has the authority to do so.\19\ Having 
reviewed and considered all relevant comments in the record, the Office 
concludes that it is necessary and appropriate under its authority 
pursuant to 17 U.S.C. 115 and 702 to further adjust the current interim 
rule to address the concerns that have been raised.\20\ The Office 
further finds the DLC's unopposed proposal to be a reasonable approach 
that is within the Office's authority to adopt; thus, it is being 
implemented with only minor modifications, discussed below.
---------------------------------------------------------------------------

    \19\ See DLC Supplemental Interim Rule Comment at 1-4; MLC 
Supplemental Interim Rule Comment at 2-4; ARM Supplemental Interim 
Rule Comment at 1-3.
    \20\ See 17 U.S.C. 702, 115(d)(4)(A)(ii)(III), 115(d)(12)(A); 
see also H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, at 
5, 15; Conf. Rep. at 4, 12; Nat'l Cable & Telecomms. Ass'n v. Brand 
X internet Servs., 545 U.S. 967, 980 (2005).
---------------------------------------------------------------------------

II. Supplemental Interim Rule

    The DLC's comments reiterate the concerns it previously raised:

    The existing reporting regulations require permanent download 
services operating under the authority of `voluntary pass-through 
licenses' to report information that they do not know--in 
particular, the identity and contact information for copyright 
owners of the musical works embodied in sound recordings. That is 
because musical work copyright owners issue voluntary pass-through 
licenses not to digital services, but to record labels, on the 
understanding that they will pass through the authority to make and 
distribute permanent downloads to downstream services. Record labels 
do pass on this authority but do not today report such identity and 
contact information to services through existing data feeds. Given 
that permanent downloads represent a diminishing (even if still 
significant) share of the market, labels and services will probably 
not invest in those reporting systems.\21\
---------------------------------------------------------------------------

    \21\ DLC Supplemental Interim Rule Comment at 1; see ARM 
Supplemental Interim Rule Comment at 2 n.1 (``Under this 
arrangement, it is the record labels--not the download stores--that 
are responsible for providing reports of use to the musical work 
copyright owners.'').

    ARM confirms that ``[d]ownload stores . . . are still a significant 
contributor to the recorded music industry's revenues,'' contributing 
``nearly $1 billion (i.e., $856 million) in annual revenues'' as of 
2019.\22\ ARM seconds the DLC's assertions that ``[a]bsent a change in 
the interim rule to address this problem, `download stores would simply 
cease operations' rather than investing the resources to build entirely 
new systems to collect and report the necessary information,'' adding 
that ``[g]iven the revenue figures cited above, any such decision by 
the operators of download stores would be extremely damaging to artists 
and labels alike.'' \23\ The MLC also ``understands that the market for 
permanent downloads faces significant disruption if DMPs operating 
download stores under pass-through mechanical licenses are required to 
identify and provide contact information for each respective musical 
work copyright owner in order to have those pass-through licenses 
recognized by the MLC and carved out from the blanket license.'' \24\ 
The Office agrees that the relevant reporting requirements adopted by 
the September 2020 rule should be adjusted in light of this additional 
information to avoid any such potential harm or disruption to the 
permanent download market, especially given that the MLC does not 
object that doing so may impede its ability to properly administer the 
blanket license.
---------------------------------------------------------------------------

    \22\ ARM Supplemental Interim Rule Comment at 1.
    \23\ Id. at 2 (quoting DLC & MLC Ex Parte Letter at 4 (Dec. 9, 
2020)).
    \24\ MLC Supplemental Interim Rule Comment at 2.
---------------------------------------------------------------------------

    The September 2020 rule required DMPs and SNBLs to report certain 
information about applicable voluntary licenses and individual download 
licenses, including the identity and contact information for the 
musical work copyright owners for works subject to such licenses.\25\ 
The DLC's proposed solution is to exempt pass-through licenses--both 
individual download licenses and voluntary pass-through licenses--from 
these reporting requirements, and instead impose alternative reporting 
requirements pursuant to which DMPs and SNBLs must either indicate 
reliance on pass-through licenses for all of their permanent downloads 
or provide a list of all sound recordings covered by pass-through 
licenses, or provide a list of any applicable catalog exclusions where 
it is indicated that authority otherwise exists for all permanent 
downloads.\26\ The MLC does not oppose this proposal and states that 
``[w]ith respect to the practical viability of the DLC Proposal, the 
MLC believes that it can effectively and efficiently administer the 
blanket license with the reporting adjustments in the proposal.'' \27\
---------------------------------------------------------------------------

    \25\ 37 CFR 210.24(b)(8), 210.25(b)(6), 210.27(c)(5), 
210.28(c)(5).
    \26\ DLC & MLC Ex Parte Letter at 4, add. B at 2-4, 7, 10, 28-29 
(Dec. 9, 2020); see DLC Supplemental Interim Rule Comment at 1; MLC 
Supplemental Interim Rule Comment at 2 (stating that this would 
``continue the industry practice of identifying pass-through 
licenses by reference to the sound recordings'').
    \27\ MLC Supplemental Interim Rule Comment at 3.
---------------------------------------------------------------------------

    This proposal strikes the Office as reasonable in light of the 
concerns raised following the adoption of the September 2020 rule and 
the MLC's statements that the proposed alternative information to be 
reported will be sufficient for it to effectively and efficiently 
administer the blanket license. The remaining question is whether the 
Office has the authority under the MMA to adopt the proposal. In the 
notice soliciting comments that accompanied the December 2020 rule, the 
Office said that 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.'' \28\ The Office said that 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,'' 
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.\29\ The Office said that relatedly, it seeks comments as to 
whether there are any concerns, as a matter of statutory 
interpretation, with

[[Page 12825]]

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).\30\ In response, 
the DLC and ARM put forward several legal arguments supporting the 
Office's authority.\31\ While the Office does not necessarily agree on 
every point asserted, the Office ultimately concurs that the DLC's 
proposal is not contrary to the statute and that the Office has the 
authority to adopt it (and that as a matter of policy, it is 
appropriate to do so in light of the unanimous public comments in 
support of the proposal).
---------------------------------------------------------------------------

    \28\ 85 FR at 84244.
    \29\ Id.
    \30\ Id.
    \31\ DLC Supplemental Interim Rule Comment at 2-4; ARM 
Supplemental Interim Rule Comment at 2-3.
---------------------------------------------------------------------------

    Specifically, the Office has analyzed the interrelationships among 
sections 115(d)(3)(G)(i)(I)(bb), 115(d)(4)(A)(ii), 
115(d)(4)(A)(ii)(I)(bb), and 115(d)(4)(A)(ii)(II), which address the 
MLC's obligations and DMP reporting requirements with respect to 
voluntary licenses and individual download licenses.\32\ Under section 
115(d)(3)(G)(i)(I)(bb), the MLC has a duty to ``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.'' \33\ And 
pursuant to the introductory paragraph of section 115(d)(4)(A)(ii), 
DMPs, in reporting to the MLC, must ``provide usage data for musical 
works used under the blanket license and usage data for musical works 
used in covered activities under voluntary licenses and individual 
download licenses.'' \34\ But under section 115(d)(4)(A)(ii)(II) (one 
of multiple subparts providing further specificity under this 
introductory paragraph), DMPs are required to report musical work 
copyright owner identity and contact information only 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.'' \35\ Individual download licenses are conspicuously absent 
from this subpart, although the introductory paragraph of section 
115(d)(4)(A)(ii) requires reporting of usage data under these licenses 
and the MLC must receive at least some sort of information about these 
licenses in order to be able to carry out its obligations under section 
115(d)(3)(G)(i)(I)(bb). This suggests the Office should specify the 
information required to be reported with respect to individual download 
licenses pursuant to section 115(d)(4)(A)(ii)(III), which requires DMPs 
to ``provide such other information as the Register of Copyrights shall 
require by regulation,'' \36\ in addition to the Office's general 
authority under section 115(d)(12)(A).
---------------------------------------------------------------------------

    \32\ While the first two provisions expressly refer to both 
voluntary licenses and individual download licenses, the third does 
not explicitly refer to either, and the fourth only mentions 
voluntary licenses.
    \33\ 17 U.S.C. 115(d)(3)(G)(i)(I)(bb) (emphasis added).
    \34\ Id. at 115(d)(4)(A)(ii) (emphasis added).
    \35\ Id. at 115(d)(4)(A)(ii)(II).
    \36\ See id. at 115(d)(4)(A)(ii)(III).
---------------------------------------------------------------------------

    With respect to section 115(d)(4)(A)(ii)(II)'s usage of the phrase 
``voluntary license,'' when read against these other provisions and the 
overall licensing framework, the Office believes this phrase is best 
read as referring only to voluntary licenses that DMPs have entered 
into directly with musical work copyright owners (or their agents), 
leaving a reporting gap for voluntary pass-through licenses for which 
the Office should detail requirements by regulation. By requiring 
identity and contact information for the relevant musical work 
copyright owners and omitting reference to individual download 
licenses, the provision implies a direct relationship between DMPs and 
the musical work copyright owners that does not exist with pass-through 
licenses. As the DLC notes, not only do DMPs not have this information, 
they often do not even know if the relevant pass-through licenses are 
voluntary or compulsory because that license belongs to the record 
label.\37\ If Congress had meant for this provision to cover voluntary 
pass-through licenses, it would have likely included a reference to 
individual download licenses as well; there does not seem to be any 
reason to distinguish between them for reporting purposes.\38\
---------------------------------------------------------------------------

    \37\ DLC Ex Parte Letter at 5 (Nov. 10, 2020) (``[D]ownload 
stores are not even aware when a label is relying on a compulsory 
license and when it is relying on a voluntary variant thereof. Nor 
have they ever received contact information for musical work 
copyright owners from record labels.''); DLC Supplemental Interim 
Rule Comment at 3 (``[I]t would be unusual for a service to have 
contact information for a musical work copyright owner with whom it 
has no direct contractual relationship.'').
    \38\ In adopting the September 2020 rule, and in the absence of 
any contrary comments at that time, the Office had read the 
provision as inadvertently omitting individual download licenses, 
and so adopted regulations requiring reporting of copyright owner 
identity and contact information for both voluntary licenses and 
individual download licenses. See 37 CFR 210.24(b)(8), 210.25(b)(6), 
210.27(c)(5), 210.28(c)(5). While that interpretation is also 
reasonable, in light of the DLC's post-issuance comments about that 
approach, the Office now finds it more persuasive that the omission 
of individual download licenses was intentional, and that, instead, 
this provision simply did not specify that it was not intended to 
apply to voluntary pass-through licenses.
---------------------------------------------------------------------------

    If the provision were read to include voluntary pass-through 
licenses, DMPs would have to obtain the relevant information from the 
sound recording copyright owners or licensors that have the direct 
relationship with the musical work copyright owners, but nothing in the 
statute compels them to provide such information to DMPs. Such a 
requirement would also be in tension with section 
115(d)(4)(A)(ii)(I)(bb), which requires DMPs to report musical work 
copyright owner information for the musical works embodied in reported 
sound recordings only ``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.'' 
\39\
---------------------------------------------------------------------------

    \39\ See 17 U.S.C. 115(d)(4)(A)(ii)(I)(bb).
---------------------------------------------------------------------------

    Additionally, the MMA's definition of ``voluntary license'' is very 
broad: ``A license for use of a musical work (or share thereof) other 
than a compulsory license obtained under this section.'' \40\ 
Especially given that this definition is not even limited to covered 
activities, examining the context of the provision in which the term 
appears is critical. Here, as the foregoing shows, it is clear from 
reading the whole of section 115(d)(4)(A)(ii) together in context that 
section 115(d)(4)(A)(ii)(II) is meant to be referring to voluntary 
licenses for covered activities that are not pass-through licenses. 
This is in contrast, for example, to the introductory paragraph of 
section 115(d)(4)(A)(ii) where it is obviously meant to more broadly 
refer to both direct voluntary licenses and voluntary pass-through 
licenses.
---------------------------------------------------------------------------

    \40\ Id. at 115(e)(36).
---------------------------------------------------------------------------

    This result is consistent with Congress's expressed intent to 
``maintain[ ] the `pass-through' license for record labels to obtain 
and pass through mechanical license rights for individual permanent 
downloads.'' \41\ Reading the statute in a way that frustrates the 
continuation of download stores or pass-through licensing for permanent 
downloads would be contrary to Congress's wishes.
---------------------------------------------------------------------------

    \41\ See H.R. Rep. No. 115-651, at 4; S. Rep. No. 115-339, at 4; 
Conf. Rep. at 3.
---------------------------------------------------------------------------

    Accordingly, the Office has adopted the proposal with a minor 
modification. The Office is omitting the qualifying phrase ``where such 
authority applies to the exclusion of the blanket license authority 
pursuant to 17 U.S.C.

[[Page 12826]]

115(d)(1)(C)(i)'' from each place where it appears in the proposal.\42\ 
The DLC characterized the language as ``simply reiterat[ing] the 
principle expressed in section 115(d)(1)(C)(i),'' and the MLC said it 
``sees this language to be in the nature of `for the avoidance of 
doubt' language.'' \43\ The MLC explained that the reason for the 
language is ``so that DMPs understand clearly that where they identify 
pass-through licenses at the sound recording level, then their blanket 
license coverage is also excluded at the sound recording level.'' \44\ 
The MLC noted that ``if the Office was to clarify that operation of 
voluntary license identification elsewhere, then the queried language 
would be less important.'' \45\
---------------------------------------------------------------------------

    \42\ See DLC & MLC Ex Parte Letter add. B at 2, 3, 10 (Dec. 9, 
2020).
    \43\ DLC Supplemental Interim Rule Comment at 5; MLC 
Supplemental Interim Rule Comment at 2.
    \44\ MLC Supplemental Interim Rule Comment at 2.
    \45\ Id. at 3.
---------------------------------------------------------------------------

    In light of these points, the proposed language appears to be 
unnecessary. It also seems somewhat ambiguous, and could potentially be 
construed as suggesting that there may be types of voluntary licenses 
authorizing DMPs to make and distribute permanent downloads that do not 
apply to the exclusion of the blanket license, which the MLC and DLC 
state is not the intention of the language.\46\ To clarify, as the MLC 
requests, the Office accepts the common sense reading of section 
115(d)(1)(C)(i) that musical works (or shares thereof) are only 
excluded from the blanket license to the extent ``a voluntary license 
or individual download license applies.'' \47\ In other words, the 
scope of the exclusion from the blanket license corresponds to the 
scope of the alternative license authority. For example, a pass-through 
license for making permanent downloads of a particular sound recording 
of a musical work would only exclude the musical work as embodied in 
that specific sound recording and used in that specific DPD 
configuration; it would not exclude the musical work as embodied in 
other sound recordings or as used in other DPD configurations (like 
interactive streams) that are not part of that pass-through license 
authority (which could be separately excluded by other licenses).
---------------------------------------------------------------------------

    \46\ See DLC Supplemental Interim Rule Comment at 5; MLC 
Supplemental Interim Rule Comment at 2.
    \47\ See 17 U.S.C. 115(d)(1)(C)(i).
---------------------------------------------------------------------------

    The DLC's proposal also included a provision that ``explicitly 
acknowledges that the MLC may report to copyright owners regarding 
usage of their musical works that a DMP identified as covered by pass-
through licenses.'' \48\ The MLC explains that it ``believes that it 
can substantially advance transparency'' by doing this, as it would 
``for the first time in the industry, give copyright owners an 
independent record of download store usage that copyright owners can 
use to verify their royalty accountings from record labels for 
mechanical licenses that were passed through to DMPs.'' \49\ The rule 
includes this unopposed provision, as it further serves the 
transparency aims of the MMA.
---------------------------------------------------------------------------

    \48\ MLC Supplemental Interim Rule Comment at 3; DLC & MLC Ex 
Parte Letter add. B at 17 (Dec. 9, 2020).
    \49\ MLC Supplemental Interim Rule Comment at 3.
---------------------------------------------------------------------------

    In addition to adopting the modified DLC proposal, this 
supplemental interim rule updates the December 2020 rule by providing 
that the temporary reporting exception the Office had adopted while it 
noticed this topic for public comment and considered the issue more 
thoroughly shall be retired as of the effective date of the new 
provisions now being adopted. Beneficiaries of the temporary exception 
are reminded that in order to retain the protection of the exception, 
they must comply with the new supplemental interim rule by reporting 
the required information to the MLC within 45 days after the rule's 
effective date.

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. Amend Sec.  210.24 as follows:
0
a. Remove ``or individual download license'' each place it appears;
0
b. In paragraph (b)(8) introductory text, add a sentence after the 
second sentence; and
0
c. Add paragraph (b)(9).
    The additions read as follows:


Sec.  210.24  Notices of blanket license.

* * * * *
    (b) * * *
    (8) * * * This paragraph (b)(8) does not apply to any authority 
obtained by a digital music provider from licensors of sound recordings 
to make and distribute permanent downloads of musical works embodied in 
such sound recordings pursuant to an individual download license or 
voluntary license. * * *
* * * * *
    (9) A description of the extent to which the digital music provider 
is operating under authority obtained from licensors of sound 
recordings to make and distribute permanent downloads of musical works 
embodied in such sound recordings pursuant to an individual download 
license or voluntary license. Such description may indicate that such 
authority exists for all permanent downloads. Otherwise, such 
description shall include a list of all sound recordings for which the 
digital music provider has obtained such authority from the respective 
sound recording licensors, or a list of any applicable catalog 
exclusions where the digital music provider indicates that such 
authority otherwise exists for all permanent downloads. Such 
description shall also include an identification of the digital music 
provider's covered activities operated under such authority.
* * * * *

0
3. Amend Sec.  210.25 by revising paragraph (b)(6) to read as follows:


Sec.  210.25  Notices of nonblanket activity.

* * * * *
    (b) * * *
    (6) Acknowledgement of whether the significant nonblanket licensee 
is operating under authority obtained from licensors of sound 
recordings to make and distribute permanent downloads of musical works 
embodied in such sound recordings pursuant to an individual download 
license or voluntary license. Where such authority does not cover all 
permanent downloads made available on the service, the significant 
nonblanket licensee shall maintain with the mechanical licensing 
collective a list of all sound recordings for which it has obtained 
such authority from the respective sound recording licensors, or a list 
of any applicable catalog exclusions where the significant nonblanket 
licensee indicates that such authority otherwise exists for all 
permanent downloads.
* * * * *

0
4. Amend Sec.  210.27 as follows:
0
a. Revise paragraph (c)(5); and
0
b. In paragraph (g)(2)(ii), add a sentence at the end of the paragraph.
    The revision and addition read as follows:

[[Page 12827]]

Sec.  210.27  Reports of usage and payment for blanket licensees.

* * * * *
    (c) * * *
    (5)(i) For any voluntary license in effect during the applicable 
monthly reporting period, the information required under Sec.  
210.24(b)(8). If this information has been separately provided to the 
mechanical licensing collective, it need not be contained in the 
monthly report of usage, provided the report states that the 
information has been provided separately and includes the date on which 
such information was last provided to the mechanical licensing 
collective. This paragraph (c)(5)(i) does not apply to any authority 
obtained by a digital music provider from licensors of sound recordings 
to make and distribute permanent downloads of musical works embodied in 
such sound recordings pursuant to an individual download license or 
voluntary license.
    (ii) For any authority obtained by a digital music provider from 
licensors of sound recordings to make and distribute permanent 
downloads of musical works embodied in such sound recordings pursuant 
to an individual download license or voluntary license, and where such 
authority does not cover all permanent downloads made available on the 
service, a list of all sound recordings for which the digital music 
provider has obtained such authority from the respective sound 
recording licensors, or a list of any applicable catalog exclusions 
where the digital music provider indicates that such authority 
otherwise exists for all permanent downloads, and an identification of 
the digital music provider's covered activities operated under such 
authority. If this information has been separately provided to the 
mechanical licensing collective, it need not be contained in the 
monthly report of usage, provided the report states that the 
information has been provided separately and includes the date on which 
such information was last provided to the mechanical licensing 
collective.
* * * * *
    (g) * * *
    (2) * * *
    (ii) * * * These efforts may include providing copyright owners 
with information on usage of their respective musical works that was 
identified by a digital music provider as subject to a voluntary 
license or individual download license.
* * * * *

0
5. Amend Sec.  210.28 by revising paragraph (c)(5) to read as follows:


Sec.  210.28  Reports of usage for significant nonblanket licensees.

* * * * *
    (c) * * *
    (5)(i) For each voluntary license in effect during the applicable 
monthly reporting period, the information required under Sec.  
210.24(b)(8). If this information has been separately provided to the 
mechanical licensing collective, it need not be contained in the 
monthly report of usage, provided the report states that the 
information has been provided separately and includes the date on which 
such information was last provided to the mechanical licensing 
collective. This paragraph (c)(5)(i) does not apply to any authority 
obtained by a significant nonblanket licensee from licensors of sound 
recordings to make and distribute permanent downloads of musical works 
embodied in such sound recordings pursuant to an individual download 
license or voluntary license.
    (ii) For any authority obtained by a significant nonblanket 
licensee from licensors of sound recordings to make and distribute 
permanent downloads of musical works embodied in such sound recordings 
pursuant to an individual download license or voluntary license, and 
where such authority does not cover all permanent downloads made 
available on the service, a list of all sound recordings for which the 
significant nonblanket licensee has obtained such authority from the 
respective sound recording licensors, or a list of any applicable 
catalog exclusions where the significant nonblanket licensee indicates 
that such authority otherwise exists for all permanent downloads, and 
identification of the significant nonblanket licensee's covered 
activities operated under such authority. If this information has been 
separately provided to the mechanical licensing collective, it need not 
be contained in the monthly report of usage, provided the report states 
that the information has been provided separately and includes the date 
on which such information was last provided to the mechanical licensing 
collective.
* * * * *

0
6. Amend Sec.  210.30 as follows:
0
a. Revise paragraph (a);
0
b. Remove paragraph (b); and
0
c. Redesignate paragraph (c) as paragraph (b).
    The revision reads as follows:


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

    (a) 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 before April 5, 2021, in connection with a submission to the 
mechanical licensing collective before such date, a submitter may take 
additional time to comply with such reporting obligations, as amended, 
by no later than May 19, 2021. Taking such additional time shall not 
render an otherwise compliant notice of license, notice of nonblanket 
activity, or report of usage invalid, or 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. Any deadline otherwise applicable to any such 
action by the mechanical licensing collective shall be tolled with 
respect to a submitter permitted to take additional time to comply with 
these reporting obligations until May 19, 2021.
* * * * *

    Dated: February 23, 2021.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.

    Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2021-04573 Filed 3-4-21; 8:45 am]
BILLING CODE 1410-30-P