[Federal Register Volume 88, Number 170 (Tuesday, September 5, 2023)]
[Rules and Regulations]
[Pages 60587-60591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18609]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 210

[Docket No. 2023-2]


Fees for Late Royalty Payments Under the Music Modernization Act

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

ACTION: Interpretive rule; termination of notification of inquiry

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SUMMARY: The U.S. Copyright Office adopts the following interpretive 
rule regarding fees for late royalty payments under the Music 
Modernization Act's statutory mechanical blanket license and terminates 
its notification of inquiry on this subject that was published on 
February 23, 2023.

DATES: Effective September 5, 2023.

FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the 
General Counsel, by email at [email protected] or telephone at 202-
707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

    On February 23, 2023, the Copyright Office (``Office'') published a 
notification of inquiry (``NOI'') in the Federal Register seeking 
public comments regarding when fees for late royalty payments should be 
assessed in connection with reporting by digital music providers 
(``DMPs'') under the Orrin G. Hatch-Bob Goodlatte Music Modernization 
Act's (``MMA's'') statutory mechanical blanket license (the ``blanket 
license'').\1\ The Office opened the February NOI based on interested 
parties' requests for guidance on this matter.
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    \1\ 88 FR 11398 (Feb. 23, 2023).
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    Having carefully considered the comments and thoroughly examined 
the statute and legislative history, the Office is terminating the 
inquiry without issuing any regulations on this subject. Rather, the 
Office is issuing an interpretive rule to provide the mechanical 
licensing collective (``MLC''), DMPs, and other parties with its 
conclusion that the statute's due date provisions are unambiguous. 
Interpretive rules ``advise the public of the agency's construction of 
the statutes and rules which it administers.'' \2\ Under the 
Administrative Procedure Act, interpretive rules are not subject to 
notice and comment procedures and can be published with an immediate 
effective date.\3\ Consequently, the publication of this document 
concludes this proceeding.\4\
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    \2\ Perez v. Mortgage Bankers Ass'n, 575 U.S. 92, 97 (2015) 
(quoting Shalala v. Guernsey Mem. Hosp., 514 U.S. 87, 99 (1995)).
    \3\ See 5 U.S.C. 553(b)(A), (d)(2).
    \4\ The Office may issue a notice of proposed rulemaking 
regarding outstanding issues relating to adjustments (e.g., 
regarding the timing of royalty payments, invoices, and response 
files) at a later date. See 88 FR 6630 (Feb. 1, 2023).
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A. Statutory Background

    The MMA substantially modified the statutory ``mechanical'' license 
for reproducing and distributing phonorecords of nondramatic musical 
works under 17 U.S.C. 115, including 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 
the MLC designated by the Office.\5\ The Office also designated a 
digital licensee coordinator (the ``DLC'') to represent DMPs in 
proceedings before the Copyright Royalty Judges (``CRJs,'' also 
sometimes referred to as the ``Copyright Royalty Board'' or ``CRB''). 
The DLC also serves as a non-voting member of the MLC and carries out 
other functions.\6\ Under the MMA, DMPs are able to obtain the blanket 
license to make digital phonorecord deliveries of nondramatic musical 
works, including in the form of permanent downloads, limited downloads, 
or interactive streams, subject to various requirements, including 
payment and reporting obligations.\7\
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    \5\ Public Law 115-264, 132 Stat. 3676 (2018).
    \6\ 84 FR 32274 (July 8, 2019).
    \7\ 17 U.S.C. 115(d). Alternatively, DMPs have the option to 
engage in these activities, in whole or in part, through voluntary 
licenses with copyright owners.
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    As relevant to this proceeding, the MMA states that with respect to 
DMPs' payment and reporting obligations under the blanket license, 
``monthly reporting shall be due on the date that is 45 calendar days . 
. . after the end of the monthly reporting period.'' \8\ The MMA also 
states that ``[l]ate fees for past due royalty payments shall accrue 
from the due date for payment until payment is received by the [MLC].'' 
\9\ Other reporting and payment deadlines, including regulations 
governing estimates and adjustments, are regulatory in nature. These 
provisions are further discussed below.
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    \8\ Id. at 115(d)(4)(A)(i).
    \9\ Id. at 115(d)(8)(B)(i).
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1. Statutory Division of Responsibility
    The Copyright Act, as amended by the MMA, assigns different 
responsibilities to the CRJs and Office with respect to the blanket 
license. Congress granted the CRJs the responsibility to set the 
blanket license's royalty rates and terms.\10\ As part of this 
ratesetting authority, the CRJs' determinations ``may include terms 
with respect to late payment[s].'' \11\ These ``late fees'' are a 
consequence of late royalty payments. While the CRJs' authority to set 
such late fees predated the MMA, the MMA added a provision stating 
that, with respect to the blanket license, ``[l]ate fees for past due 
royalty payments shall accrue from the due date for payment until 
payment is received by the [MLC].'' \12\
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    \10\ Id. at 115(c)(E)-(F), (d)(8)(B)-(D); id. at 801(b)(1).
    \11\ Id. at 803(c)(7); see also id. at 115(d)(8)(B).
    \12\ Id. at 115(d)(8)(B)(i).
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    The Office's responsibilities under the MMA include overseeing the 
administration of the blanket license, including by promulgating 
various regulations specifically required by Congress, such as those 
governing reporting and payment requirements for DMPs.\13\ Relevant to 
this proceeding, Congress directed the Office to adopt regulations 
``regarding adjustments to reports of usage by digital music providers, 
including mechanisms to account for overpayment and underpayment of 
royalties in prior periods.'' \14\ Additionally, Congress granted the 
Office ``broad regulatory authority'' \15\ to ``conduct such

[[Page 60588]]

proceedings and adopt such regulations as may be necessary or 
appropriate to effectuate the provisions of [the MMA pertaining to the 
blanket license].'' \16\
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    \13\ Id. at 115(d)(4)(A)(ii)(III), (iii), (iv).
    \14\ Id. at 115(d)(4)(A)(iv)(II).
    \15\ H.R. Rep. No. 115-651, at 5-6 (2018); S. Rep. No. 115-339, 
at 5 (2018); Staff of S. and H. Comms. On the Judiciary, 115th 
Cong., Report and Section-by-Section Analysis of H.R. 1551 by the 
Chairmen and Ranking Members of Senate and House Judiciary 
Committees, at 4 (Comm. Print 2018), https://www.copyright.gov/legislation/mma_conference_report.pdf.
    \16\ 17 U.S.C. 115(d)(12)(A).
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B. Regulatory Background

    On September 17, 2020, the Office issued an interim rule adopting 
regulations concerning reporting and payment requirements under the 
blanket license (the ``September 2020 Rule'').\17\ The September 2020 
Rule addressed the ability of DMPs to make adjustments to monthly and 
annual reports and related royalty payments, including to correct 
errors and replace estimated royalty calculation inputs (e.g., the 
amount of applicable public performance royalties) with finally 
determined figures.\18\ The interim regulations permit DMPs to make 
adjustments in other situations as well, such as in exceptional 
circumstances, following an audit, or in response to a change in the 
applicable statutory rates or terms adopted by the CRJs.\19\
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    \17\ 85 FR 58114 (Sept. 17, 2020). That proceeding involved 
multiple rounds of public comments through a notification of 
inquiry, 84 FR 49966 (Sept. 24, 2019), a notice of proposed 
rulemaking (``NPRM''), 85 FR 22518 (Apr. 22, 2020), and an ex parte 
communications process. 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 
Office rulemaking activity, including public comments, as well as 
educational material regarding the MMA, can currently be accessed 
via navigation from https://www.copyright.gov/music-modernization. 
References to public comments in the Office's proceedings are either 
cited in full or are by party name (abbreviated where appropriate), 
followed by ``NPRM Comments,'' ``Initial Comments,'' ``Reply 
Comments,'' or ``Ex Parte Letter,'' as appropriate.
    \18\ 37 CFR 210.27(d)(2)(i), (f), (g)(3)-(4).
    \19\ Id. at 210.27(k).
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    During the rulemaking proceeding that culminated in the September 
2020 Rule, the MLC and DLC raised differing views about when a payment 
should be considered ``late,'' thus triggering the obligation to pay a 
late fee, in the context of the MMA, the Office's adjustments to 
reports of usage regulations, and the CRJs' late fee regulations. The 
MLC's view was that the MMA requires a DMP's payment to be considered 
``late'' if not received by the 45th calendar day after the end of the 
monthly reporting period.\20\ The DLC took an opposing view and 
contended that late fees should not be due for any timely adjustments 
to good faith estimates made pursuant to the Office's regulations or in 
response to a change in rates and terms made by the CRJs.\21\ At the 
time of the September 2020 Rule, the Office declined to address the 
interplay between the statute, the CRJs' late fee regulation, and the 
Office's provisions for adjustments, in part, because it believed that 
``the CRJs may wish themselves to . . . update their operative 
regulation in light of the [September 2020 Rule].'' \22\
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    \20\ MLC NPRM Comments at 36-37, App. C at xiv; MLC Ex Parte 
Letter at 7-8 (Feb. 26, 2020); see also AIMP NPRM Comments at 4-5 
(``[L]ate royalty payments have been a significant problem for 
copyright owners, and the implementation of a late fee for any 
royalty amounts paid late was a significant step forward. The 
regulations as proposed, should remove any doubt that might 
interfere with those late fee payments.''); Peermusic NPRM Comments 
at 5 (``[W]e appreciate the Copyright Office's rejection of the DLC 
request that underpayments, when tied to `estimates,' should not be 
subject to the late fee provision of the CRJ regulations governing 
royalties payable under Section 115, and we would request that the 
regulations be clear on this point.'' (citation omitted)).
    \21\ DLC NPRM Comments at 14.
    \22\ 85 FR 58114, 58137; see also 85 FR 22518, 22530 (``Any 
applicable late fees are governed by the CRJs, and any clarification 
should come from them.'').
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    Since the Office issued the September 2020 Rule, the CRJs published 
two ratesetting determinations applicable to the blanket license: the 
Phonorecords III Remand determination (covering the 2018-2022 rate 
period) \23\ and the Phonorecords IV determination (covering the 2023-
2027 rate period).\24\ Neither determination addressed the competing 
views within the industry on when the CRJ's late fee provisions are 
triggered.
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    \23\ 88 FR 54406 (Aug. 10, 2023).
    \24\ 87 FR 80448 (Dec. 30, 2022).
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    The Phonorecords IV determination, which adopted the terms of the 
participants' settlement,\25\ contains the current late fee regulation, 
which states that, ``[a] Licensee shall pay a late fee of 1.5% per 
month, or the highest lawful rate, whichever is lower, for any payment 
owed to a Copyright Owner and remaining unpaid after the due date 
established in 17 U.S.C. 115(c)(2)(I) \26\ or 17 U.S.C. 
115(d)(4)(A)(i),\27\ as applicable and detailed in part 210 of [the 
Office's regulations governing reporting and payments under the 
statutory mechanical license].'' \28\ It further provides that ``[l]ate 
fees shall accrue from the due date until the Copyright Owner receives 
payment.'' \29\ In approving the parties' settlement, the CRJs found 
that the late fee provision was ``not unreasonable.'' \30\
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    \25\ Before participants settled the Phonorecords IV proceeding, 
DMPs Spotify and Amazon each proposed a version of what the DLC 
proposes here--that late fees would not be owed for most types of 
permitted adjustments to monthly or annual reports of usage. 
Corrected Written Direct Statement of Spotify USA Inc. at Tab B, 10-
11, Determination of Royalty Rates and Terms for Making and 
Distributing Phonorecords (Phonorecords IV), No. 21-CRB-0001-PR 
(2023-2027) (CRB Oct. 29, 2021), https://app.crb.gov/document/download/25899; Amazon's Am. Written Direct Statement, Ex. A.1 at 
10, Determination of Royalty Rates and Terms for Making and 
Distributing Phonorecords (Phonorecords IV), No. 21-CRB-0001-PR 
(2023-2027) (CRB Mar. 8, 2022), https://app.crb.gov/document/download/26286. These proposals were not included in the final 
settlement, as approved by the CRJs.
    \26\ This provision states that, except as provided in section 
115(d)(4)(A)(i), ``royalty payments shall be made on or before the 
twentieth day of each month and shall include all royalties for the 
month next preceding.'' 17 U.S.C. 115(c)(2)(I).
    \27\ This provision states that ``[a] digital music provider 
shall report and pay royalties to the [MLC] under the blanket 
license on a monthly basis in accordance with . . . subsection 
(c)(2)(I), except that the monthly reporting shall be due on the 
date that is 45 calendar days, rather than 20 calendar days, after 
the end of the monthly reporting period.'' Id. at 115(d)(4)(A)(i).
    \28\ 37 CFR 385.3.
    \29\ Id. Parties in the most recent section 115 ratesetting 
proceeding recognized that this language ``does not acknowledge that 
the [MLC] has responsibility for collecting payment under the 
blanket license for digital uses'' and moved to add the following 
language to the end of the quoted language: ``except that where 
payment is due to the mechanical licensing collective under 17 
U.S.C. 115(d)(4)(A)(i), late fees shall accrue from the due date 
until the mechanical licensing collective receives payment.'' Mot. 
to Req. Issuance of Amendment to Determination of Royalty Rates and 
Terms for Making and Distributing Phonorecords (Phonorecords IV) 
Pursuant to 17 U.S.C. [sec.] 803(C)(4) at 1-2, Determination of 
Royalty Rates and Terms for Making and Distributing Phonorecords 
(Phonorecords IV), No. 21-CRB-0001-PR (2023-2027) (CRB Jan. 10, 
2023), https://app.crb.gov/document/download/27417.
    \30\ 87 FR 80448, 80452 n.20.
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    Both the Phonorecords III Remand and Phonorecords IV determinations 
resulted in rate calculations that use multiple steps to ultimately 
determine royalties due under the blanket license.\31\ These 
calculations require inputs that may not be known at the time a DMP's 
reporting is due under the MMA, including the amounts expensed by DMPs 
for sound recording licenses and for musical works' public performance 
licenses as a factor in the calculation to determine mechanical 
royalties due under the blanket license.
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    \31\ 37 CFR 385.21 (covering the Phonorecords IV period); id. at 
pt. 385, App. A, 385.21 (covering the Phonorecords III period).
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    In late 2022, before the CRJs' Phonorecords III Remand and 
Phonorecords IV determinations were finalized, the MLC and DLC 
submitted comments to the Office following a May 2022 amendment \32\ to 
the September 2020 Rule and again raised the issue of late fees, 
confirming their continued disagreement on the subject.\33\ Both the

[[Page 60589]]

MLC and DLC requested the Office provide guidance and regulatory 
amendments.\34\ The DLC requested that the Office ``specify that when 
both the initial estimated payments and the later adjustment of such 
payments to account for the updated and finalized information are made 
according to the timelines established in the regulations, such 
payments are proper and have been made by the `due date for payment' as 
set forth in 17 U.S.C. [sec.] 115(d)(8)(B)(i).'' \35\ The MLC opposed 
the DLC's position \36\ and instead proposed regulatory language 
providing that nothing in the adjustment provisions ``shall change a 
blanket licensee's liability for late fees, where applicable.'' \37\
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    \32\ 87 FR 31422 (May 24, 2022).
    \33\ MLC Ex Parte Letter at 8 (Oct. 17, 2022); MLC Ex Parte 
Letter at 2-5 (Dec. 21, 2022); Comments of DLC to Suppl. Interim 
Rule Concerning Reports of Adjustment and Annual Reports of Usage at 
3, MMA Notice of License, Notices of Nonblanket Activity, Data 
Collection and Delivery Efforts, Reports of Usage and Payment, No. 
2020-5 (U.S. Copyright Office July 8, 2022) (``DLC July 2022 
Comments''), https://www.regulations.gov/comment/COLC-2020-0005-0029.
    \34\ See 85 FR at 58136-37; MLC Ex Parte Letter at 8 (Oct. 17, 
2022); MLC Ex Parte Letter at 2-5 (Dec. 21, 2022); DLC July 2022 
Comments at 3.
    \35\ DLC July 2022 Comments at 3.
    \36\ MLC Ex Parte Letter at 2-5 (Dec. 21, 2022).
    \37\ MLC Ex Parte Letter at 8 (Oct. 17, 2022).
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II. Discussion

    The Office's February NOI sought public comments on this 
disagreement and explained that, while it ``typically does not offer 
interpretations of the CRJs' regulations,'' the Office is squarely 
within its authority to advise the public on the construction of the 
Copyright Act.\38\ Interested parties, including the MLC, National 
Music Publishers' Association (``NMPA''), DLC, publishers, groups 
representing songwriters, and others submitted comments responding to 
the Office's NOI.\39\
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    \38\ See 17 U.S.C. 115(d)(8)(B)(i) (``Late fees for past due 
royalty payments shall accrue from the due date for payment until 
payment is received by the mechanical licensing collective.'').
    \39\ The Office also received letters from members of Congress 
reflecting their views that any late fees for underpayments begin to 
accrue starting 45 days after the end of a monthly reporting period. 
Letter from Ted W. Lieu, Ben Cline, Jerrold Nadler, Henry C. 
``Hank'' Johnson, Laurel M. Lee, Adam B. Schiff & Harriet M. 
Hageman, Members of Congress to Shira Perlmutter, Register of 
Copyrights (May 9, 2023), https://www.copyright.gov/rulemaking/mma-late-fees/mma-late-fee-letter-house.pdf; Letter from Thom Tillis, 
Chris Coons, Marsha Blackburn, Bill Hagerty & Mazie Hirono, Members 
of Congress to Shira Perlmutter, Register of Copyrights (May 9, 
2023), https://www.copyright.gov/rulemaking/mma-late-fees/mma-late-fee-letter-senate.pdf.
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A. Responsive Comments

1. Commenters Supporting the MLC's Interpretation
    The Copyright Alliance, Dina LaPolt, NMPA, Nashville Songwriters 
Association International (``NSAI''), Songwriters of North America 
(``SONA''), Songwriters Guild of America, Society of Composers & 
Lyricists, and Music Creators North America supported the MLC's 
position that the MMA's plain language indicates that the due date for 
payment is 45 calendar days after the end of a monthly reporting period 
and that late fees begin accruing after that point in time or that 
equitable policy considerations dictate the same result.\40\
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    \40\ See Copyright Alliance Reply Comments at 2; Dina LaPolt 
Initial Comments at 3-4; MLC Initial Comments at 2-3; NMPA Initial 
Comments at 2; NSAI Reply Comments at 2; SONA Initial Comments at 2; 
Songwriters Guild of Am., Inc., Soc'y of Composers & Lyricists, and 
Music Creators N. Am. Initial Comments at 3.
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    These parties generally argued that the MMA's plain language is 
conclusive with respect to the blanket license's ``due date for 
payment.'' The NMPA reasoned that ``Congress was clear and unambiguous 
in establishing precisely when late fees shall begin to accrue,'' as 
``the date that is 45 calendar days . . . after the end of the monthly 
reporting period.'' \41\ The Copyright Alliance echoed this reasoning, 
adding that there is language in the MMA's legislative history stating 
that a DMP must provide the MLC certain data ``along with its royalty 
payments due 45 calendar days after the end of a monthly reporting 
period.'' \42\
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    \41\ NMPA Initial Comments at 2; see also MLC Initial Comments 
at 10-11 (calling the provisions at issue ``unambiguous'' and 
``detailed'' and identifying that ``[f]or the blanket license, the 
MMA specifically changes the due date from 20 days to 45 days after 
the end of the month''), 11-12 (``Neither the ability to use 
estimates, nor the requirement to follow up to correct those 
estimates, changes the fact that DSPs are responsible for the 
payment of `all royalties' by the statutory due date, and that late 
fees `shall accrue' from that mandated due date.''); NSAI Reply 
Comments at 1-2 (noting that Congress's intention was ``clear'' when 
it passed the late fee provisions).
    \42\ Copyright Alliance Reply Comments at 2, n.2 (citing H.R. 
Rep. No. 115-651, at 27 (2018)).
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    The NMPA added that the statute does not contain any exceptions for 
underpayments, including for those ``caused by an error, a misestimate, 
or any other reason,'' including ``where the DMP later corrects its 
underpayment through an adjustment.'' \43\ It noted that Congress could 
have created an exemption to when late fees accrue, as it did for 
royalty payments under the optional statutory limitation on liability 
for certain unlicensed uses prior to the license availability date, but 
it did not do so.\44\
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    \43\ NMPA Initial Comments at 4.
    \44\ Id. (citing 17 U.S.C. 115(d)(10)(B)(v)).
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    These parties also made policy arguments supporting their view that 
late fees should begin to accrue starting after 45 calendar days after 
the end of a monthly reporting period. For example, they argued that 
their approach would incentivize DMPs to pay the MLC--and, in turn, 
songwriters and publishers--accurately and on time and that the DLC's 
opposing interpretation, discussed below, would disincentivize accurate 
and timely royalty payments.\45\ Some argued that the harm to 
songwriters under the DLC's position would be significant, while the 
MLC's position would not cause significant harm to DMPs.\46\ As NSAI 
explained, ``[a]n underpayment of even a few hundred dollars for a few 
months can mean meaningful life decisions for a songwriter. The gravity 
of that must be considered against the inconsequential burden a minimal 
late fee imposes on a DMP.'' \47\
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    \45\ See, e.g., Copyright Alliance Reply Comments at 2; NSAI 
Reply Comments at 2 (``Because DMPs are permitted to make good-faith 
estimates when reporting and paying royalties, there must be a 
safeguard in place to hold them accountable.''); SONA Initial 
Comments at 2 (``If late fees were to apply only after the 
adjustment due date, DMPs will have latitude to underestimate 
amounts due and make more gains at the expense of songwriters and 
copyright holders by continuing to have those additional funds in 
their possession for as long as possible without incentive to change 
their royalty reporting practices.''); Songwriters Guild of Am., the 
Soc'y of Composers & Lyricists, and Music Creators N. Am. Initial 
Comments at 3 (adding that the ``Congressional resort to late fees 
as a motivator was necessary in light of the fact that the MMA 
limits the ability of music creators and copyright owners to utilize 
copyright infringement litigation as an alternative means to compel 
accurate and timely royalty compliance'').
    \46\ See, e.g., Copyright Alliance Reply Comments at 3; Dina 
LaPolt Initial Comments at 7 (``[B]y the valuation and market 
capitalization of the DMPs noted, they could conceivably make an 
overestimation on their monthly royalty payments to avoid paying a 
late fee and would not be burdened, whereas making an 
underestimation severely impacts the daily lives of songwriters 
forcing them to wait for their adjusted income.''); SONA Initial 
Comments at 5 (``[P]aying late fees or otherwise making an 
overestimation on the DMPs' monthly royalty payments is not a severe 
burden to these companies, whereas making an underestimation 
significantly and negatively impacts the daily lives of 
songwriters.'').
    \47\ NSAI Reply Comments at 2.
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2. The DLC's Interpretation
    The DLC contends that ``the clear text of the statute and relevant 
regulations, unbroken historical precedent, and interests of efficiency 
and equity'' support its position that late fees are not due for 
payments that are compliant with the Office's estimate and adjustment 
reporting regulations.\48\ The DLC explained that because the MMA 
states that monthly payments must ``comply with requirements that the 
Register of Copyrights shall prescribe by regulation'' and because the 
CRJs referenced the Office's section 115

[[Page 60590]]

regulations in their late fee provision,\49\ ``[t]aken together, these 
provisions compel the conclusion that when a payment is made on or 
before the due date, and is made in compliance with the regulatory 
requirements, it is not `late' or otherwise legally deficient, even if 
it is based on estimated inputs, or is an adjustment to a payment made 
earlier.'' \50\ It asserts that ``estimates and adjustments are a 
necessary consequence of the CRB's . . . rate structure'' because the 
required inputs under the rate structure (e.g., royalties for sound 
recordings or the public performance of musical works) may not be final 
or known when reporting is due to the MLC, therefore DMPs must be 
allowed to rely on estimates and adjustments and not incur late fees 
when doing so.\51\
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    \48\ DLC Initial Comments at 1.
    \49\ I.e., the Office's ``reporting regulations in part 210 of 
title 37 of the CFR.'' DLC Reply Comments at 7.
    \50\ DLC Initial Comments at 4-5.
    \51\ Id. at 2-3.
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    The DLC also offered policy-based reasons in support of its 
position. For example, it claimed that ``[i]f DMPs are threatened with 
late fees for every routine royalty payment, one can reasonably expect 
that at least some [DMPs] will systematically over pay royalties'' and 
subsequent ``clawback[s]'' would cause operational challenges for the 
MLC and harm to songwriters and publishers.\52\ Finally, the DLC 
claimed that ``[i]t defies common sense that failing to guess at and 
pay royalties at not-yet-determined rates would trigger late fees,'' 
\53\ and suggested that Congress would not have intended such a 
``facially illogical result.'' \54\
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    \52\ DLC Reply Comments at 8-9.
    \53\ DLC Initial Comments at 5.
    \54\ DLC Reply Comments at 6.
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B. Statutory Analysis

1. Monthly Royalty Payments Made to the MLC More Than 45 Days After the 
End of the Applicable Monthly Reporting Period Are Late Under the 
Statute
    The Office has reviewed the MMA's text, context, and statutory 
scheme along with cannons of statutory construction in its 
consideration of whether the statute is ambiguous.\55\ It concludes 
that the statute's (i) due date provisions, (ii) direction to the 
Office to adopt regulations governing adjustments, and (iii) delegation 
of authority to the CRJs to promulgate late fee provisions are 
compatible and unambiguous. The Office, therefore, declines to issue 
any associated regulations.
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    \55\ Courts commonly review a statute's text, context, statutory 
scheme, and cannons of statutory construction when considering 
whether a statute is ambiguous. See, e.g., Household Credit Servs., 
Inc. v. Pfennig, 541 U.S. 232, 239-42 (2004); Zuni Pub. School Dist. 
No. 89 v. Dept. of Ed., 550 U.S. 81, 98-99 (2007); FDA v. Brown & 
Williamson Tobacco Corp., 529 U.S. 120, 133 (2000); Dole v. United 
Steelworkers of Am., 494 U.S. 26, 36 (1990).
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    Starting with the statute's text, section 115(d)(8)(B)(i) states 
that CRJ-adopted ``[l]ate fees for past due royalty payments [under 
blanket licenses] shall accrue from the due date for payment until 
payment is received by the mechanical licensing collective.'' \56\ The 
phrase ``due date for payment'' is undefined and, therefore, these 
words must ``be interpreted as taking their ordinary, contemporary, 
common meaning.'' \57\ Black's Law Dictionary defines ``due date'' as 
``[t]he date on which something is supposed to happen, esp. as a matter 
of requirement.'' \58\
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    \56\ 17 U.S.C. 115(d)(8)(B)(i).
    \57\ Perrin v. United States, 444 U.S. 37, 42 (1979).
    \58\ Date, Black's L. Dictionary (11th ed. 2019) (defining ``due 
date'' in the definition of ``date'').
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    In the Office's view, ``due date for payment'' unambiguously refers 
to the ``date on which'' monthly royalty payments are required to be 
delivered to the MLC. Section 115(d)(4)(A)(i) provides that ``[a] 
digital music provider shall report and pay royalties to the mechanical 
licensing collective under the blanket license on a monthly basis in 
accordance with . . . subsection (c)(2)(I), except that the monthly 
reporting shall be due on the date that is 45 calendar days, rather 
than 20 calendar days, after the end of the monthly reporting period.'' 
\59\ Section (c)(2)(I), in turn, states that monthly ``royalty payments 
. . . shall include all royalties for the month next preceding.'' \60\ 
Taken together, the plain and natural meaning of the statute is that 
``all royalties'' for a given monthly reporting period are ``due'' no 
later than 45 days after the end of the monthly reporting period. Thus, 
any royalties received by the MLC for such reporting period after this 
``due date for payment'' are late. They are ``past due royalty 
payments'' that are subject to such ``late fees'' as the CRJs may 
adopt.
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    \59\ 17 U.S.C. 115(d)(4)(A)(i) (emphasis added).
    \60\ Id. at 115(c)(2)(I) (emphasis added). The Office previously 
addressed the interaction between sections 115(c)(2)(I) and 
115(d)(4)(A)(i), concluding that ``both provisions must be read as 
referring to both reporting and payment.'' 85 FR 22518, 22527.
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    The DLC argues that this construction of the statute yields an 
absurd result.\61\ While a statutory ambiguity can be found if clear 
statutory text would produce an absurd result,\62\ that is not the case 
here. Rather, the Office understands that the DLC's concerns are really 
aimed at the potential effect of the CRJs' regulations, not the statute 
itself.
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    \61\ DLC Reply Comments at 6.
    \62\ Pub. Citizen v. U.S. Dep't of Just., 491 U.S. 440, 454 
(1989) (quoting Green v. Bock Laundry Machine Co., 490 U.S. 504, 509 
(1989)) (``Where the literal reading of a statutory term would 
`compel an odd result,' we must search for other evidence of 
congressional intent to lend the term its proper scope.'').
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    The fact that the final amount due on the statutory due date may 
not be known to a DMP on that date is a product of the rate structure 
adopted by the CRJs, which involves calculating royalties using inputs 
that may not be finally determined at the time the royalty is due, 
necessitating the use of estimates and adjustments.\63\
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    \63\ For example, one such input is the amount paid for the 
public performance of musical works. It is common for those public 
performance rates to be set on an interim basis, with final rates 
set later and applying retroactively. U.S. Copyright Office, 
Copyright and the Music Marketplace 41-42 (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf.
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    To the extent Congress disapproved of this result, and instead 
intended the result advocated for by the DLC, Congress either would not 
have adopted the version of section 115(d)(8)(B)(i) that it did or it 
would have made other changes to the statute. A version of the CRJs' 
current rate structure has been in place since the Phonorecords I 
settlement,\64\ which predated the MMA's enactment by nine years. 
Congress would have been aware of the CRJs' longstanding rate structure 
in passing the MMA, including with respect to the operation of 
estimates and adjustments, therefore the decision to enact section 
115(d)(8)(B)(i) and the rest of the MMA against that backdrop must be 
understood as intentional.
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    \64\ See 37 CFR 385.12(b)(1), (b)(2) (2009) (using both 
percentage of service revenue and royalties for the public 
performance of musical works as inputs to determine a DMPs' 
mechanical royalty rate); 74 FR 4510, 4531 (Jan. 26, 2009).
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    This understanding is not incompatible with the MMA's direction, in 
section 115(d)(4)(A)(iv)(II), for the Office to adopt regulations 
regarding adjustments. First, while the MMA requires the Office to 
establish regulations regarding adjustments, it does not require the 
CRJs to set royalty rates and terms using inputs that are not final at 
the time the royalties are due. For example, the CRJs could have set a 
per-stream rate that did not use any such inputs.\65\ Second, while 
DMPs who take advantage of the Office's estimate

[[Page 60591]]

and adjustment regulations \66\ may have to pay late fees under the 
CRJs' regulations for any underpayments, that has no bearing on whether 
the statutory text is ambiguous. As the MLC points out, the estimate 
and adjustment regulations adopted by the Office pursuant to that 
provision allow DMPs ``to use estimates where appropriate without 
violating the law[,] . . . but not the ability to pay royalties later 
than the statutory due date.'' \67\
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    \65\ A group representing copyright owners proposed ``a unitary 
rate structure for all interactive streaming and limited downloads'' 
in the Phonorecords III proceeding. Johnson v. Copyright Royalty 
Bd., 969 F.3d 363, 371 (D.C. Cir. 2020) (citing 84 FR 1918, 1924, 
1930-1931 (Feb. 5, 2019)).
    \66\ It appears that not all DMPs use the adjustment provisions. 
MLC Ex Parte Letter at 4 (Dec. 21, 2022) (noting that ``over half of 
the blanket licensees submitted annual reports of usage for 2021 
without any concurrent adjustment'').
    \67\ MLC Initial Comments at 8.
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    Further, as the NMPA noted, Congress knows how to exempt certain 
types of royalty payments from incurring late fees, as it did with the 
optional statutory limitation on liability for certain unlicensed uses 
prior to the license availability date.\68\ Under the negative-
implication cannon of statutory construction, ``[w]hen Congress 
includes particular language in one section of a statute but omits it 
from a neighbor, we normally understand that difference in language to 
convey a difference in meaning,'' \69\ i.e., that textual difference is 
presumed to be intentional.
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    \68\ NMPA Initial Comments at 4 (citing 17 U.S.C. 
115(d)(10)(B)(v)).
    \69\ Bittner v. United States, 598 U.S. 85, 94 (2023).
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2. Distinguishing the Phonorecords III Remand Determination
    Commenters appear to be in agreement that late fees do not apply to 
adjustments resulting from the change in rates and terms following the 
CRJs' Phonorecords III Remand determination. For example, the MLC 
reasoned that where applicable royalty rates are changed, as with the 
Phonorecords III Remand proceeding, there would be no underpayment to 
trigger late fees, as the ``rates were not in effect at those times.'' 
\70\ Similarly, the NMPA states that ``where rates have not yet been 
determined, payment under the not-yet determined rates are not `due' '' 
and ``[payment] only become[s] `due' when [the rates] are determined.'' 
\71\ The DLC believes that it would be illogical and inconsistent for 
DMPs' ``true-up'' payments made after the Phonorecords III Remand 
determination to be considered ``late.'' \72\
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    \70\ MLC Initial Comments at 6 n.1.
    \71\ NMPA Initial Comments at 8.
    \72\ DLC Initial Comments at 6; DLC Reply Comments at 6 (``It is 
entirely unclear why that is true for interim section 115 rates but 
not true for interim rates or payments to PROs or labels.'').
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    The Office concurs that no late fees are owed in connection with 
any Phonorecords III Remand adjustments. Under section 115(c)(1)(C), 
for digital phonorecord deliveries (including uses under the blanket 
license), ``the royalty payable shall be the royalty prescribed under 
subparagraphs (D) through (F), paragraph (2)(A), and chapter 8.'' \73\ 
Therefore, what constitutes ``all royalties'' \74\ that are ``due'' for 
any given monthly reporting period \75\ are the royalties 
``prescribed'' under the rates and terms that are in effect at that 
time.\76\ By definition, the newer rates and terms, despite having 
retroactive effect, were not ``the royalty prescribed'' at the time the 
previous payment was due, and therefore did not constitute ``the 
royalty payable'' at that time.\77\ Previously timely payments cannot 
subsequently be rendered late because of a retroactive change in the 
rates and terms adopted by the CRJs.
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    \73\ 17 U.S.C. 115(c)(1)(C).
    \74\ See id. at 115(c)(2)(I).
    \75\ See id. at 115(d)(4)(A)(i).
    \76\ See id. at 115(c)(1)(C).
    \77\ See id.
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C. The CRJs' Authority To Set Late Fees

    As noted above, the Copyright Office concludes that the MMA's 
provisions are not ambiguous or silent on the issue of when royalty 
payments are due; therefore our inquiry ends here. To the extent that 
interested parties have competing policy concerns about when or how 
late fees should be incurred, such concerns must be addressed either to 
Congress or the CRJs, as Congress delegated authority over the 
substance of late fees to the CRJs and not the Office.
    While we offer no views regarding what late fee regulations should 
be adopted by the CRJs, if any, the Office does take the position that 
the CRJs have broad and flexible authority under section 803(c)(7) to 
adopt late fee terms, including by adopting differentiated or variable 
late fees (e.g., where the amounts can change over time), if the CRJs 
see fit to do so and such regulations are otherwise consistent with 
title 17 and based on an appropriate record. Nothing in title 17 
suggests that the CRJs cannot adopt different late fees (whether with 
respect to their amount(s) or how they operate) based on competing 
policy concerns.

    Dated: August 23, 2023.
Suzanne V. Wilson,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2023-18609 Filed 9-1-23; 8:45 am]
BILLING CODE 1410-30-P