Designation of Music Licensing Collective and Digital Licensee Coordinator, 32274-32296 [2019-14376]

Download as PDF 32274 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations (b) Definitions. As used in this section, designated representative means a Coast Guard Patrol Commander, including a Coast Guard petty officer, warrant or commissioned officer on board a Coast Guard vessel or on board a federal, state, or local law enforcement vessel assisting the Captain of the Port (COTP), Delaware Bay in the enforcement of the safety zone. (c) Regulations. (1) Under the general safety zone regulations in subpart C of this part, you may not enter the safety zone described in paragraph (a) of this section unless authorized by the COTP or the COTP’s designated representative. (2) To seek permission to enter or remain in the zone, contact the COTP or the COTP’s representative via VHF–FM channel 16 or 215–271–4807. Those in the safety zone must comply with all lawful orders or directions given to them by the COTP or the COTP’s designated representative. (3) This section applies to all vessels except those engaged in law enforcement, aids to navigation servicing, and emergency response operations. (d) Enforcement. The U.S. Coast Guard may be assisted in the patrol and enforcement of the safety zone by Federal, State, and local agencies. (e) Enforcement period. This zone will be enforced from approximately (but no earlier than) 5 p.m. to approximately (but not later than) 9 p.m. on July 14, 2019. Dated: June 28, 2019. Scott E. Anderson, Captain, U.S. Coast Guard, Captain of the Port Delaware Bay. [FR Doc. 2019–14420 Filed 7–5–19; 8:45 am] BILLING CODE 9110–04–P LIBRARY OF CONGRESS U.S. Copyright Office 37 CFR Part 210 [Docket No. 2018–11] Designation of Music Licensing Collective and Digital Licensee Coordinator U.S. Copyright Office, Library of Congress. ACTION: Final rule. AGENCY: Pursuant to title I of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, and following a solicitation of proposals and public comment on those proposals, the Register is designating the entities who will perform certain functions relating jbell on DSK3GLQ082PROD with RULES SUMMARY: VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 to the compulsory license for digital music providers to make and distribute digital phonorecord deliveries. For the reasons published in this document, the Register designates Mechanical Licensing Collective, Inc. as the mechanical licensing collective and Digital Licensee Coordinator, Inc. as the digital licensee coordinator, including their individual proposed board members. DATES: Effective July 8, 2019. FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and Associate Register of Copyrights, by email at regans@copyright.gov, Steve Ruwe Assistant General Counsel, by email at sruwe@copyright.gov, or Jason E. Sloan, Assistant General Counsel, by email at jslo@copyright.gov. Each can be contacted by telephone by calling (202) 707–8350. SUPPLEMENTARY INFORMATION: I. Background On October 11, 2018, the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (the ‘‘MMA’’) was signed into law.1 Title I of the MMA addresses the efficiency and fairness of the section 115 ‘‘mechanical’’ license for the reproduction and distribution of musical works embodied in digital phonorecord deliveries, including permanent downloads, limited downloads, and interactive streams.2 In relevant part, it eliminates the song-bysong notice of intention process for such uses and creates a new blanket compulsory licensing system for digital music providers engaged in digital phonorecord deliveries.3 The blanket licensing structure is designed to reduce the transaction costs associated with song-by-song licensing by commercial services that strive to offer ‘‘as much music as possible,’’ while ‘‘ensuring fair and timely payment to all creators’’ of the musical works used on these digital services.4 The MMA directs the Register of Copyrights to designate a nonprofit entity operated by copyright owners, referred to by statute as the mechanical licensing collective (‘‘MLC’’), to Law 115–264, 132 Stat. 3676 (2018). S. Rep. No. 115–339, at 1–2 (2018); Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen and Ranking Members of Senate and House Judiciary Committees, at 1 (2018), https:// www.copyright.gov/legislation/mma_conference_ report.pdf (‘‘Conf. Rep.’’); see also H.R. Rep. No. 115–651, at 2 (2018) (detailing the House Judiciary Committee’s efforts to review music copyright laws). 3 The MMA retains the ability of record companies to obtain an individual download license on a song-by-song basis. 17 U.S.C. 115(b)(3). 4 S. Rep. No. 115–339, at 4, 8. PO 00000 1 Public 2 See Frm 00020 Fmt 4700 Sfmt 4700 administer this new blanket-licensing system beginning on the ‘‘license availability date,’’ that is, January 1, 2021.5 As detailed further below, the MLC, through its board of directors and task-specific committees, will be responsible for a variety of duties, including receiving usage reports from digital music providers, collecting and distributing royalties associated with those uses, identifying musical works embodied in particular sound recordings, administering a process by which copyright owners can claim ownership of musical works (and shares of such works), and establishing a musical works database relevant to these activities.6 By statute, digital music providers will bear the reasonable costs of establishing and operating the MLC through an administrative assessment, to be determined if necessary by the Copyright Royalty Judges (‘‘CRJs’’) in a separate proceeding.7 The MMA also allows, but does not require, the Register to designate a digital licensee coordinator (‘‘DLC’’) to represent licensees in this proceeding, to serve as a non-voting member of the MLC, and to carry out other functions.8 A. MLC Designation Requirements, Duties, and Functions The entity designated as the MLC must be: • A single nonprofit entity that is created by copyright owners to carry out its statutory responsibilities; • ‘‘endorsed by, and enjoy[ ] substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years;’’ 9 • able to demonstrate to the Copyright Office that, by the license availability date, it will have the administrative and technological capabilities to perform the required functions; and • governed by a board of directors and include committees that are composed of a mix of voting and nonvoting members as directed by the statute.10 If no single entity meets each of these statutory criteria, the Register must designate as the MLC the entity that 5 17 U.S.C. 115(d)(2)(B), (d)(3)(B); see also id. at 115(e)(15). 6 Id. at 115(d)(3)(C). 7 Id. at 115(d)(7)(D). 8 Id. at 115(d)(5)(B); see also id. at 115(d)(3)(D)(i)(IV), (d)(5)(C). 9 Id. at 115(d)(3)(A)(ii). 10 Id. at 115(d)(3)(A), (d)(3)(D)(i). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations most nearly fits these qualifications.11 After five years, the Register will commence a periodic review of this designation.12 The MMA enumerates a number of required functions for the MLC.13 A core aspect of the MLC’s responsibilities includes identifying musical works and copyright owners, matching them to sound recordings (and addressing disputes), and ensuring that a copyright owner gets paid as he or she should. To that end, the MLC will create and maintain a free, public database of musical work and sound recording ownership information. The MLC will administer processes by which copyright owners can claim ownership of musical works (and shares of such works), and by which royalties for works for which the owner is not identified or located are equitably distributed to known copyright owners on a market share basis after a required holding period.14 The MLC will participate in proceedings before the CRJs to establish the administrative assessment that will fund the MLC’s activities, as well as proceedings before the Copyright Office with respect to the foregoing activities.15 The board of the MLC shall consist of fourteen voting members and three nonvoting members.16 Ten voting members shall be representatives of music publishers that have been assigned exclusive rights of reproduction and distribution of musical works with respect to covered activities, and four other voting members shall be professional songwriters who have retained and exercise exclusive rights of reproduction and distribution for musical works they have authored. There are also three nonvoting members that will represent the interests of songwriters, music publishers, and digital licensees via representatives of relevant trade associations or, in the case of licensees, the DLC, if one has been designated.17 Within one year of designation, the MLC must establish publicly available bylaws 11 Id. at 115(d)(3)(B)(iii). at 115(d)(3)(B)(ii); see also H.R. Rep. No. 115–651, at 6 (noting that continuity is expected to be beneficial so long as the designated entity has ‘‘regularly demonstrated its efficient and fair administration,’’ whereas evidence of ‘‘fraud, waste, or abuse,’’ or failure to adhere to relevant regulations should ‘‘raise serious concerns’’ regarding whether re-designation is appropriate); S. Rep. No. 115–339, at 5–6 (same). 13 17 U.S.C. 115(d)(3)(C)(i), (iii) (enumerating thirteen functions, in addition to permission to administer voluntary licenses). 14 Id. at 115(d)(3)(E). 15 Id. at 115(d)(3)(C)(i)(IX)–(X). 16 Id. at 115(d)(3)(D)(i). 17 Id. jbell on DSK3GLQ082PROD with RULES 12 Id. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 relating to the governance of the collective, following statutory criteria.18 By statute, the MLC board must establish three committees. First, an operations advisory committee will make recommendations concerning the operations of the collective, ‘‘including the efficient investment in and deployment of information technology and data resources.’’ 19 Second, an unclaimed royalties oversight committee will establish policies and procedures necessary to undertake a fair distribution of unclaimed royalties.20 Third, a dispute resolution committee will establish policies and procedures for copyright owners to address disputes relating to ownership interests in musical works, including a mechanism to hold disputed funds pending the resolution of the dispute.21 B. DLC Designation Criteria and Functions Similar to the MLC, the DLC must: • Be a single nonprofit entity created to carry out certain statutory responsibilities; • be endorsed by digital music service providers and significant nonblanket licensees that together represent the greatest percentage of the licensee market for uses of musical works in covered activities, as measured over the preceding 3 calendar years; and • possess the administrative and technological capabilities necessary to carry out a wide array of authorities and functions.22 The Register is directed to designate the DLC following substantially the same procedure described for designation of the MLC.23 Unlike the MLC, in the event the Register is unable to identify an entity that fulfills the criteria for the DLC, the Register may decline to designate a DLC; in that event, the statutory references to the DLC go without effect unless or until a DLC is designated.24 The DLC is tasked with coordinating the activities of the licensees.25 The DLC shall make reasonable, good faith efforts at 115(d)(3)(D)(ii). at 115(d)(3)(D)(iv). This committee will have an equal number of musical work copyright owners and digital music provider representatives, respectively appointed by the MLC and DLC. 20 Id. at 115(d)(3)(D)(v), (d)(3)(J)(ii). This committee of ten will have an equal number of musical work copyright owners and professional songwriters. 21 Id. at 115(d)(3)(D)(vi), (d)(3)(H)(ii), (d)(3)(K). This committee will consist of at least six members, again equally divided among musical work copyright owners and professional songwriters. 22 Id. at 115(d)(5)(A)(i)–(iii). 23 Id. at 115(d)(5)(B). 24 Id. at 115(d)(5)(B)(iii). 25 See generally id. at 115(d)(5)(C). PO 00000 18 Id. 19 Id. Frm 00021 Fmt 4700 Sfmt 4700 32275 to assist the MLC in its efforts to locate and identify copyright owners of unmatched musical works (and shares of such works) by encouraging digital music providers to publicize the existence of the collective and the ability of copyright owners to claim unclaimed accrued royalties, including by posting contact information for the collective at reasonably prominent locations on digital music provider websites and applications, and conducting in-person outreach activities with songwriters. The DLC is authorized to participate in proceedings before the CRJs to determine the administrative assessment to be paid by digital music providers, and before the Copyright Office with respect to the blanket mechanical license. C. Designation Process and the Role of the Copyright Office. The Register is to designate the MLC, along with the DLC (as applicable), by publishing a notice in the Federal Register that sets forth ‘‘the identity of and contact information for the . . . collective,’’ and ‘‘the reasons for the designation.’’ 26 These designations are subject to the approval of the Librarian of Congress pursuant to section 702 of title 17.27 The legislative history states that ‘‘the Register is expected to allow the public to submit comments on whether the individuals and their affiliations meet the criteria specified in the legislation; make some effort of its own as it deems appropriate to verify that the individuals and their affiliations actually meet the criteria specified in the legislation; and allow the public to submit comments on whether they support such individuals being appointed for these positions.’’ 28 On December 21, 2018, the Office issued a Notice of Inquiry (‘‘NOI’’) setting forth the functions of the MLC and DLC and the statutory criteria for designation, and solicited proposals from entities meeting such criteria and seeking to be designated as the MLC or DLC, as well as relevant public comments.29 The name and affiliation of each proposed board and committee member established by the MLC were 26 Id. at 115(d)(3)(B)(II), (d)(5)(B)(i)–(ii). at 115(d)(3)(A)(iv) (‘‘with the approval of the Librarian of Congress pursuant to section 702, in accordance with subparagraph (B)’’); id. at (d)(5)(A)(iv) (same); see id. at 702. 28 H.R. Rep. No. 115–651, at 5; S. Rep. No. 115– 339, at 5; Conf. Rep. at 4; see H.R. Rep. No. 115– 651, at 26 (‘‘This requirement is not waivable by the Register and is not subject to the alternate designation language.’’); S. Rep. No. 115–339, at 23 (same). 29 83 FR 65747 (Dec. 21, 2018) (‘‘NOI’’); see 17 U.S.C. 115(d)(3)(B), (d)(3)(D)(iv)–(vi), (d)(5)(B). 27 Id. E:\FR\FM\08JYR1.SGM 08JYR1 32276 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations solicited as part of the designation process.30 The Office received one proposal for designation as the DLC and two proposals for designation as the MLC, which, in accordance with the NOI, the public was invited to comment upon. The response was considerable; the Office received over 600 comments addressing these proposals, including, but not limited to, musical work copyright owners endorsing one or more of the entities seeking designation. As noticed in the NOI, the Office also considered whether to utilize information meetings subject to established guidelines for such ex parte communications.31 Determining that follow-up with each of the three candidates would be valuable, the Office issued such guidelines, and on May 28 and 29, the Office met with the three proponents seeking designation as the DLC or MLC, allowing the proponents to supplement their written submissions, but not to address matters wholly outside the record; summaries of those meetings were posted on the Office’s website.32 Beyond the Office’s role in designating the MLC and DLC, Congress intended to invest the Register with ‘‘broad regulatory authority’’ to create policies and conduct proceedings as necessary to effectuate the MMA.33 The statute enumerates several regulations that the Register is specifically directed to promulgate, including regulations regarding the form of the notices of license and notices of nonblanket activity,34 usage reports and adjustments,35 information to be included in the musical works database,36 requirements for the usability, interoperability, and usage restrictions of that database,37 and the disclosure and use of confidential information.38 The legislative history contemplates that the Register will both ‘‘thoroughly review[ ]’’ policies and procedures established by the MLC, and promulgate regulations that balance 30 17 U.S.C. 115(d)(3)(B)(i)(I). at 65753–54. 32 See U.S. Copyright Office, Ex Parte Communications, https://www.copyright.gov/ rulemaking/mma-designations/ex-partecommunications.html (last visited June 24, 2019); NOI at 65753–54. Given the relatively robust record, with over 600 written comments received regarding the proposals, and in light of the statutory deadline, the Office elected to limit meetings to the three candidates. 33 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. 115– 339, at 5; see also 17 U.S.C. 115(d)(12). 34 17 U.S.C. 115(d)(2)(A)(i), (d)(6)(A)(i). 35 Id. at 115(d)(4)(A)(iv). 36 Id. at 115(d)(3)(E)(ii)(V), (d)(3)(E)(iii)(II). 37 Id. at 115(d)(3)(E)(vi). 38 Id. at 115(d)(12)(C). jbell on DSK3GLQ082PROD with RULES 31 NOI VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 ‘‘the need to protect the public’s interest with the need to let the new collective operate without over-regulation.’’ 39 II. Register’s Designation and Analysis A. Mechanical Licensing Collective The Office received proposals from two entities seeking to be designated as the MLC: (1) The ‘‘Mechanical Licensing Collective, Inc.’’ referred to here as ‘‘MLCI’’; and (2) the ‘‘American Music Licensing Collective,’’ referred to here as ‘‘AMLC.’’ 40 The candidates’ respective submissions take differing approaches to demonstrating compliance with the statutory criteria. MLCI provides a detailed outline of its proposed organizational structure, business plan, and overall activities. It provided flowcharts and other illustrative materials setting forth indepth plans for executing the MLC’s administrative and technological responsibilities, including managing compulsory and voluntary licenses, matching songwriters to musical works, and collecting and distributing royalties. It describes its submission as the ‘‘music industry consensus proposal’’ and contends that its selection would facilitate valuable cooperative efforts across the industry.41 AMLC focuses more specifically on matching unidentified songwriters to their compositions for payment purposes. It argues that the expertise of its proposed board and vendors makes it best positioned to advance that goal,42 which the Conference Report describes as ‘‘the highest responsibility of the collective’’ beyond efficient and accurate collection and distribution of royalties.43 The Copyright Office assessed the extent to which each candidate satisfies the statutory requirements for designation, which can be grouped into three categories: (1) Organization, board and committee composition, and governance; (2) endorsement and substantial support from musical work copyright owners; and (3) administrative and technological capabilities. As detailed below, the Office concludes that while both candidates meet the statutory criteria to be a nonprofit created to carry out its 39 H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. No. 115–339, at 5, 15; see also 17 U.S.C. 115(d)(12). 40 The incorporator’s contact information for these entities are: Benjamin K. Semel, Pryor Cashman LLP, 7 Times Square, New York, NY 10036 (MCLI); Derek C. Crownover, Dickinson Wright, PLLC, 54 Music Square East, Suite 303, Nashville, TN 37203 (AMLC); and Allison Stillman, Mayer Brown LLP, 1221 Avenue of the Americas, New York, NY 10020 (DLCI). 41 MLCI Proposal at 5, 8. 42 Id. at 2–5. 43 Conf. Rep. at 7; H.R. Rep. No. 115–651, at 9 (same); S. Rep. No. 115–339, at 9 (same). PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 statutory responsibilities, only MLCI satisfies the endorsement criteria, and MLCI also has made a better showing as to its prospective administrative and technological capabilities. The Register is thus designating MLCI, including its individual board members, with the Librarian’s approval. As both proposals demonstrate, the new collective must undertake formidable responsibilities expeditiously and conscientiously to establish a number of operational functions critical to implementation of the new blanket licensing system. While the comprehensive MLCI proposal signals its understanding of the full scope of this project and its importance to songwriters and others in the music community, a successful collective will undoubtedly benefit from input from that broader community much in the way the MMA itself was enacted in a spirit of consensus and compromise.44 The Register welcomes the prospect of MLCI working with the broader community of musical work copyright owners and other songwriters, as well as the DLC and individual digital music providers, to realize the promise of the MLC as envisioned by Congress. 1. Organization, Board and Committee Composition, and Governance As the statute requires, both MLCI and AMLC are constructed as nonprofit entities created by copyright owners to carry out the MLC’s statutory responsibilities.45 The analysis below will focus on relevant board and committee composition and governance issues. i. Board and Committee Composition a. MLCI In accordance with the statute, MLCI’s proposed board includes four professional songwriters: Kara DioGuardi, Oak Fielder, Kevin Kadish, and Tim Nichols.46 MLCI notes that these members were selected by a songwriter advisory panel consisting of two professional songwriters from each of the Nashville Songwriters Association International (‘‘NSAI’’), Songwriters of North America (‘‘SONA’’), Songwriters Guild of America (‘‘SGA’’), American Society of 44 See, e.g., Conf. Rep. at 2 (‘‘Songwriters, artists, publishers, producers, distributors, and other stakeholders involved in the creation and distribution of music collaborated with legislators in both the Senate and the House to find a path forward on music reform.’’). 45 MLCI Proposal at Ex. 1 (Certificate of Incorporation under Delaware law); AMLC Proposal at Schedule B (Certificate of Incorporation under New York law). 46 Id. at 67–68 (a biography is included for each songwriter board member). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations Composers, Authors and Publishers (‘‘ASCAP’’), and Broadcast Music, Inc. (‘‘BMI’’).47 No members of the advisory panel were themselves candidates for the board or any committee.48 NSAI reports that the panel considered nearly 300 songwriter applicants as part of this selection process.49 To satisfy the requirement of ten music publisher representatives, MLCI’s proposed board includes the following members: Jeff Brabec (BMG); Peter Brodsky (Sony/ATV Music Publishing); Bob Bruderman (Kobalt); Tim Cohan (peermusic); Alisa Coleman (ABKCO); Scott Cutler (Pulse Music Group); Paul Kahn (Warner/Chappell Music Publishing); David Kokakis (Universal Music Publishing Group); Mike Molinar (Big Machine Music); and Evelyn Paglinawan (Concord Music). MLCI notes that these members were selected by an advisory panel comprised of professionals associated with independent music publishers.50 The panel ‘‘carefully vetted candidates to ensure that the representatives selected to serve on the Board (a) have the requisite expertise and experience to govern MLC; (b) individually and together faithfully reflect the entire music publisher community; and (c) are motivated to serve on the Board and understand and do not underestimate the serious responsibilities entrusted to them.’’ 51 As described by MLCI, the publisher board members represent a broad range of publishing interests— from a ‘‘thirty-employee company established and run by creatives with a catalog of approximately 10,000 songs’’ to the largest global publishers.52 MLCI’s required nonvoting board members are Danielle Aguirre (NMPA), as a representative of the nonprofit trade association of music publishers that represents the greatest percentage of the licensor market for uses of musical works in covered activities; 53 and Bart Herbison (NSAI), as a representative of a nationally recognized nonprofit trade association whose mission is advocacy on behalf of songwriters.54 The third 47 Id. at 67–69. at 68; NSAI Reply at 4–5 (discussing conflicts of interest approach). 49 NSAI Reply at 5. 50 MLCI Proposal at 69; see also NSAI Reply at 4–5 (advisory selection panel contained ‘‘only independent music publishers whose interests are best served by selecting the most efficient back office systems, and who have vast experience with potential vendors’’). 51 MLCI Proposal at 69–70 (A biography is included for each music publisher board member). 52 Id. at 70. 53 Id. at 74. 54 Id. at 74–75. jbell on DSK3GLQ082PROD with RULES 48 Id. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 non-voting board member will be a representative of the DLC.55 MLCI also submits proposed members for each of the three statutorily required committees. For the operations advisory committee, MLCI has selected copyright owners who have substantial experience with license administration, rights management operations, and the relevant technology.56 For the unclaimed royalties oversight committee, the proposed members likewise have extensive experience relevant to that committee’s task of ‘‘establish[ing] policies and procedures for the distribution of unclaimed accrued royalties and accrued interest.’’ 57 Each publisher representative on the unclaimed royalties committee is affiliated with an independent music publisher, as opposed to a major music publisher, which will help to ensure that smaller rightsholders have a voice in MLC functions.58 Finally, consistent with the statute, MLCI proposes a dispute resolution committee made of five professional songwriters and five musical work copyright owners.59 Based on the biographies and other information submitted regarding these proposed board and committee members, the Copyright Office determines that the proposed composition of MLCI’s board and committees satisfies the statutory requirements, and moreover, that each of its proposed directors possesses the qualifications necessary for at 75. at 76–78 (committee members are Joe Conyers III (Songtrust and Downtown Music Publishing), Scott Farrant (Kobalt), Rell Lafargue (Reservoir Media Management), Michael Lau (Round Hill Music), John Reston (Universal Music Publishing Group), and Bill Starke (Sony/ATV Music Publishing)). 57 17 U.S.C. 115(d)(3)(J)(ii); see MLCI Proposal at 78 (‘‘This Committee includes individuals who have experience in royalty and payment accounting and administration, have served on the boards of independent music publishing trade groups, and have litigated (on behalf of songwriters) the failure of digital music providers to pay royalties due to a claimed inability to identify or ‘match’ recordings to musical works.’’). 58 MLCI Proposal at 79–80 (committee members are songwriters busbee, Kay Hanley, David Lowery, Dan Navarro, and Tom Shapiro and copyright owner representatives Phil Cialdella (Atlas Music Publishing), Patrick Curley (Third Side Music), Michael Eames (PEN Music Group), Frank Liwall (The Royalty Network, Inc.), and Kathryn Ostien (The Richmond Organization/Essex Music Group)). 59 MLCI Proposal at 84–86 (committee members are songwriters Aime´e Allen, Odie Blackmon, Gary Burr, David Hodges, and Jennifer Schott and copyright owner representatives Alison Koerper (Disney Music Group), Ed Leonard (Daywind Music Group), Sean McGraw (Downtown Music Publishing), Debbie Rose (Shapiro, Bernstein & Co.), and Jason Rys (Wixen Music Publishing)). PO 00000 55 Id. 56 Id. Frm 00023 Fmt 4700 Sfmt 4700 32277 appointment to the board.60 In addition, MLCI’s submission indicates that its selection procedures were carefully designed to ensure transparency and input from a broad range of industry sectors, as well as to avoid any likelihood of self-selection. MLCI also designed its committee selection process such that committee members do not also serve on the board, helping guard against potential conflicts of interest or undue influence. b. AMLC AMLC’s submission provides less information on the mechanics of its board and committee selection processes. For its professional songwriter members, AMLC’s board includes Rick Carnes, Imogen Heap, Zoe Keating, and Maria Schneider.61 For its music publisher members, AMLC’s board includes Maximo Aguirre (Maximo Aguirre Music Publishing, Inc.), Wally Badarou (ISHE sarl Music), John Barker (ClearBox Rights, LLC), Marti Cuevas (Mayimba Music), Joerg Evers (Eversongs), Brownlee Ferguson (Bluewater Music Corp.), Henry Gradstein (listed as an attorney and independent publisher), Lisa Klein Moberly (Optic Noise), Ricardo Ordonez (Union Music Group), and Jeff Price (Audiam, Inc.).62 AMLC reports that these members were selected following an ‘‘active recruitment campaign’’ and that each selected member was required to have ‘‘proven skill sets and practical hands-on work experience’’ in various industry sectors, as well as ‘‘first-hand work experience and knowledge of music rights organizations and how they operate.’’ 63 60 AMLC does not dispute that these proposed members possess the required qualifications. The Office received one comment from a songwriter who allegedly observed ‘‘collusion’’ while ‘‘serving on the selection committee for the NMPA’s MLC,’’ without providing substantiation. See Michelle Shocked Reply at 1. While the Office takes such matters seriously, MLCI’s submission did not list this commenter as a member of its songwriter advisory panel and other songwriters praised the selection process. See, e.g., SONA Reply at 2 (signed by Michelle Lewis, a MLCI songwriter advisory panel member, and over twenty other songwriters); MLCI Proposal at Ex. 8 (statement of NSAI). In the absence of more specific information, these allegations do not factor into the Office’s analysis. 61 AMLC Proposal at 35. 62 Id. at 35, 49–75 (A biography is included for each board member). 63 Id. at 38. Following its meeting with AMLC, the Office understands that an initial core of board members, namely Mr. Barker, Mr. Price, Mr. Ferguson, and Ms. Moberly, served to vet additional members. See AMLC Ex Parte Meeting Summary at 22 (June 5, 2019) (‘‘Board member searches were conducted via personal relationships, recommendations, and invitations to submit inquiries of interest via public posting on the AMLC E:\FR\FM\08JYR1.SGM Continued 08JYR1 32278 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES AMLC includes only one of the three required nonvoting board members, David Wolfert of MusicAnswers, as a representative of a nationally recognized nonprofit trade organization whose primary mission is advocacy on behalf of songwriters in the United States.64 AMLC notes that one additional nonvoting board member will be a representative of the DLC, and another will be filled by NMPA as a representative of the nonprofit trade association of music publishers.65 In response, MLCI contends that AMLC’s proposed board does not adequately represent the entire music publisher community, as it lacks representatives from large or mid-size publishers.66 The Office notes, however, that AMLC has offered to replace one of its current publisher board members with a representative of a major publisher if such an organization were to request a voting seat.67 AMLC also submits proposed members for each of the designated committees. Unlike MLCI, some of the members on each committee include proposed board members—a structure that potentially could diminish the committees’ ability to provide independent recommendations to the board.68 As required, AMLC provides four members for the operations advisory committee, and five professional songwriters and five musical work copyright owners for the unclaimed royalties oversight committee.69 AMLC notes that the proposed members of the latter committee ‘‘have years of experience dealing with double claims, counter claims and registration of song data both in the US and internationally.’’ 70 For the dispute resolution committee, AMLC provides three representatives of website.’’). MLCI, however, raised questions as to a lack of transparency and potential conflicts of interest in AMLC’s selection process. See MLCI Reply at 16–18. 64 AMLC Proposal at 35. 65 Id. 66 MLCI Reply at 18. 67 AMLC Proposal at 35. 68 Id. (AMLC’s proposed Operations Advisory Committee members are Frank Liddell (Carnival Music), Caleb Shreve (Killphonic Music), and board members Brownlee Ferguson (Bluewater Music Corp.) and Jeff Price (Audiam, Inc.)). 69 Id. at 35–36 (AMLC’s proposed Unclaimed Royalties Oversight Committee members are songwriters Joerg Evers, Rick Carnes, Zoe Keating, Stewart Copeland, He´le`ne Muddiman, and Anna Rose Menken and copyright owners Ricardo Ordonez (Union Music Group), Gian Caterine (American Music Partners West), Carlos Martin Carle (Mayimba Music), Juan Hidalgo (Juan y Nelson Entertainment), Al Staehely (listed as an entertainment lawyer and copyright owner), and David Bander (Ultra Music & Ultra International Music Publishing)). 70 Id. at 41. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 musical work copyright owners and three professional songwriters.71 MLCI argues that certain AMLC board members do not in fact satisfy the relevant statutory criteria.72 MLCI specifically questions AMLC proposed board members John Barker, Joerg Evers, and Wally Badarou’s status as ‘‘publisher representatives,’’ contending that the entities with which they claim affiliation do not appear to be music publishers.73 MLCI also challenges the characterization of Henry Gradstein as an ‘‘independent publisher’’ on the ground that he is a litigation attorney for whom no publisher affiliation is provided either in AMLC’s submission or on his law firm’s website.74 The Office raised these issues in its meeting with AMLC representatives. In response, AMLC provided specific information regarding the entities with which these individuals are affiliated. AMLC stated that Mr. Barker is the owner and CEO of ClearBox Rights, LLC, an ‘‘independent copyright administration company,’’ which is the ‘‘‘exclusive’ agent for licensing and collection of royalties for all types of uses.’’ 75 Under AMLC’s interpretation, Mr. Barker would be qualified to serve on the board because he represents music publishers through his administration company.76 AMLC further provided company names and ASCAP or BMI IPI numbers for publishing companies owned by Mr. Evers, Mr. Badarou, and Mr. Gradstein.77 Based on this information, the Register will assume for purposes of this designation that Mr. Evers, Mr. Badarou, and Mr. Gradstein qualify as ‘‘representatives of music publishers.’’ 78 While Mr. Gradstein in particular appears to be primarily a litigator, he is also the owner of a music publishing company. For the music publishing representatives, the statute does not appear to require that music publishing is a full-time occupation, and Mr. Gradstein has focused his career on issues relevant to his proposed board service.79 While Mr. Barker’s 71 Id. at 36 (committee members are songwriters Wally Badarou, Imogen Heap, and Jon Siebels and copyright owners Peter Roselli (Bluewater Music Corp.), Hakim Draper (Boogie Shack Music Group), and Jonathan Segel (Copyright Owner)). 72 MLCI Reply at 19–20. 73 Id. at 20. 74 Id. at 19. 75 AMLC Ex Parte Meeting Summary at 6. 76 Id. 77 Id. 78 17 U.S.C. 115(d)(3)(D)(i)(I). 79 In contrast, the songwriter board members must be ‘‘professional[s],’’ which the Office regards as a requirement that such board members must be primarily songwriters. Id. at 115(d)(3)(D)(i)(II) PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 background similarly demonstrates relevant experience, it is not clear that he meets the statutory criteria, as MCLI raises a colorable argument that representatives of ‘‘[e]ntities that do not have a relevant ownership interest in the copyright to musical works (either by virtue of assignment or exclusive license) do not meet the statutory criteria.’’ 80 Under that reading, if Mr. Barker’s company merely administers licenses on behalf of copyright owners, but has not itself been assigned copyrights, he would not constitute a publisher representative within the meaning of the statute. Ultimately, the Copyright Office need not resolve this issue because the specific proposal of Mr. Barker does not factor heavily into the Office’s assessment. Any conflict with the statute could be cured by replacing him with a publisher representative; indeed, the Office appreciates AMLC’s offer to accommodate a major publisher that wishes to join its board. A greater concern, however, is the lack of specific information provided by AMLC on its membership selection processes. Even assuming that its ultimate selections would satisfy the statutory requirements, AMLC’s submissions describe a somewhat ad hoc decision making process in this area. While many of the proposed AMLC board members demonstrate commendable experience to perform the relevant duties, the Office appreciates MLCI’s more comprehensive approach to identifying and selecting potential members, who themselves each appear highly experienced and able to perform the required duties. ii. Representation and Diversity The Institute of Intellectual Property and Social Justice (‘‘IIPSJ’’), in comments co-signed by several dozen artists and other music industry stakeholders, urged the Register to ensure that the MLC includes ‘‘meaningful and significant representatives from the AfricanAmerican, Latino-American and AsianAmerican songwriting and music publishing communities, selected by such communities, and encompassing (regarding ‘‘professional songwriters who have retained and exercise exclusive rights of reproduction and distribution with respect to covered activities with respect to musical works they have authored’’) (emphasis added); see also MLCI Proposal at 67 (‘‘In MLC’s view, the requirement that four voting board members of MLC be ‘‘professional songwriters’’ means that the songwriter board members must be songwriters who earn a living primarily through their songwriting activities.’’). 80 MLCI Reply at 20; see also 17 U.S.C. 115(d)(3)(D)(i)(I). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations representation from the Hip-Hop, R&B, Latin, Reggae, Jazz and Gospel/Christian music genres.’’ 81 Pointing to the growing influence of Hip-Hop and Latino music, IIPSJ suggests that the statute requires ‘‘diverse cultural representation’’ for the board.82 IIPSJ believes that the proposed boards of both MLCI and AMLC lack sufficient representation from these communities.83 The Office takes representation concerns seriously and agrees that they should be considered as part of the MLC board and committee selection processes. In meetings with the Office, both MLCI and AMLC expressed a commitment to ensuring diversity in their memberships, though, both questioned the premises of IIPSJ’s letter with regards to the sufficiency of representation in their proposed board slates. In addition, MLCI noted that its draft bylaws ‘‘contain a diversity provision that calls for a biannual report on the diversity of the board, including diversity as to gender/race/ethnicity, income, musical genre, geography and expertise/experience.’’ 84 The report’s conclusions ‘‘are to be used by the nominating committees in choosing future candidates’’ to be proposed for the board.85 MLCI further emphasized its capacity to reach a variety of communities, noting ‘‘the extensive participation that it has developed through its Board and Committee members and many endorsers,’’ and that ‘‘many groups supporting MLC[I] have international offices that can assist in global outreach.’’ 86 AMLC responded by reiterating the diverse nature of its board members and their experience with broad array of genres and creator communities.87 AMLC believes that its board members’ experiences would prove beneficial in the development of educational and outreach efforts targeting diverse creators, including those overseas.88 Both candidates agreed that securing engagement and trust among varied communities, musical genres, and geographical locations would prove critical to the MLC’s core project of encouraging musical work copyright owners with unclaimed accrued royalties to come forward and claim such monies. 81 IIPSJ Initial at 3. at 3–4. 83 IIPSJ Reply at 4–6. 84 MLCI Ex Parte Meeting Summary at 3 (June 4, 2019). 85 Id. 86 Id. 87 AMLC Ex Parte Meeting Summary at 3–4, 15– 17. 88 Id. at 15–17. jbell on DSK3GLQ082PROD with RULES 82 Id. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 The Copyright Office recognizes the entertainment industry as a whole has been grappling with the question of how best to diversify its leadership and provide opportunities to a broader range of creators. The Office believes that the MLC can play a role in helping to advance these goals within the music industry.89 The Office accordingly expects the designated MLC to ensure engagement with a broad spectrum of musical work copyright owners, including from those communities that IIPSJ asserts are underrepresented. The Office intends to work with the MLC to help it achieve these goals.90 iii. Bylaws, Conflicts of Interest, and Other Governance Issues Both submissions address the statutory requirement to establish bylaws within one year of designation, including with respect to succession of board members.91 MLCI has not yet adopted bylaws, but it does have draft bylaws that it will make public ‘‘well in advance of the statutory deadline.’’ 92 In addition, although it has ‘‘not finalized a management structure for daily operations,’’ MLCI has already established a number of ‘‘foundational’’ policies and procedures designed to ensure accountability, transparency, fairness and confidentiality, including that: (1) All committee recommendations will be subject to board approval; (2) annual reports will be released to the public; (3) the committees will maintain their statutory composition; (4) MLCI will maintain a public list of all unmatched works and engage in public outreach to enhance legitimate ownership claims; and (5) the board will adopt a comprehensive set of written codes, policies, and procedures to govern the board and committees.93 MLCI also commits to ‘‘safeguard[ing] private, sensitive, or confidential information.’’ 94 With regard to 89 Cf. Cal. Corp. Code sec. 301.3 (under California law, publicly held corporations whose principal executive offices are located in California must include female board members). 90 See H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. No. 115–339, at 5, 15. 91 17 U.S.C. 115(d)(3)(D)(ii)(I). 92 MLCI Proposal at 86; MLCI Ex Parte Meeting Summary at 3 (referencing draft bylaws). MLCI correctly notes that it is not required to have adopted bylaws at this stage. See MLCI Proposal at 115. 93 MLCI Proposal at 86–91 (noting the board’s forthcoming sets of written codes, policies, and procedures, including: Code of Conduct and Ethics; Conflict of Interest Policy; Investment Policy (including an Anti-Comingling Policy); Confidentiality Policy; Whistleblower Policy; Document Retention Policy; Technology and Security Policy; Non-Discrimination Policy; AntiSexual Harassment Policy; Social Media Policy; and Gift Acceptance Policy). 94 Id. at 92–93. PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 32279 successive board members, MLCI proposes that songwriter members would be appointed from a slate of candidates chosen by songwriters, and prospective music publisher members would be appointed from candidates chosen by music publishers.95 A similar process would be followed for committees.96 MLCI proposes that the board conduct regular elections as well as address interim vacancies though an election process based on those nominations.97 AMLC has adopted bylaws that detail board members’ obligations with regard to related party transactions and conflicts of interest, including disclosure requirements and procedures for review by fellow board members, although ALMC recognizes that it may have ‘‘to ameliorate or conform the bylaws’’ if they are not consistent with the MMA, the Register’s yet-to-be promulgated regulations, or the New York State Not-for-Profit Corporation Law.98 AMLC proposes that replacement board members can be nominated by either the departing member or any other voting members, and that AMLC’s board would select committee members by a majority vote, but its bylaws do not otherwise detail how committee candidates will be nominated.99 Beyond these statutorily prescribed committees, AMLC proposes four ‘‘additional support committees’’—Audit and Finance, Education and Outreach, Technology and Security, and International.100 It appears there is some potential for overlap, as, for example, strategic technology issues appear to fall under both the Technology and Security Committee and the Operations Oversight Committee, and matters relating to budgeting, vendor contracts, and general operations appear to be germane to the Operations Oversight Committee as well as the Executive and Audit and Finance Committees.101 The Office notes that any additional standing committees should not conflict with the functions of the statutorily mandated committees, which are subject to strict board composition requirements to ensure adequate representation of interests (e.g., songwriters, digital music providers) in 95 Id. at 87. 96 Id. 97 Id. 98 AMLC Proposal at 78, 88–91 (AMLC bylaws). at 79–80 (AMLC bylaw art. 4.3). 100 Id. at 36, 85 (AMLC bylaw art. 6.5.5–6.5.8). 101 Id. at 84–85 (AMLC bylaw art. 6.5.1, 6.5.4, 6.5.5, 6.5.7). 99 Id. E:\FR\FM\08JYR1.SGM 08JYR1 32280 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES the matters handled by those committees.102 With respect to conflicts of interest, MLCI will require all board members and employees to comply with a conflicts policy to be adopted at a later date.103 The policy ‘‘will require disclosure of all actual or potential conflicts,’’ including ‘‘having a financial interest (direct or indirect) in any contemplated MLC transaction, or relationship with any counterparty to such transaction.’’ 104 MLCI also states that it ‘‘expects all associated persons to fully comply with all applicable law,’’ including fiduciary and ethical obligations, and that it ‘‘will enforce such obligations, which may include removal for cause, in the event of a demonstrated violation.’’ 105 AMLC disputes that these measures are sufficient to prevent conflicts in the event MLCI were designated. AMLC argues that there is a serious conflict of interest when a MLC board member is eligible to receive a significant portion of the accrued but unpaid royalties—a concern that AMLC believes is salient given the number of major publishers represented on MLCI’s board.106 Other commenters, some of whom appear affiliated with AMLC, raise similar concerns.107 In response, NSAI argues that the unclaimed royalties oversight committee will protect against such concerns, noting that MLCI does not include a major publisher on that committee.108 MLCI further suggests this concern would attach to any board member regardless of which entity is designated, noting that every copyright owner and songwriter on any designated MLC will be eligible to receive a distribution of unclaimed accrued royalties.109 For its part, AMLC sets forth procedures for disclosing, addressing, and documenting conflicts of interest in its bylaws.110 It asserts that its board will consider such issues carefully in establishing governance procedures and that the unclaimed royalties committee 102 See, e.g., 17 U.S.C. 115(d)(3)(D)(iv)–(vi); see also Conf. Rep. at 19 (‘‘Since the Board of Directors and committee member requirements . . . are statutory in nature, these requirements are not waivable by the Register or subject to modification by the Board of Directors.’’). 103 MLCI Proposal at 91–92. 104 Id. 105 Id. at 92. 106 AMLC Proposal at 19, 45–46. 107 Robert Allen Reply at 3–4; Cameron Ford Reply at 1–2; MusicAnswers Reply at 1–3; Maria Schneider Reply at 1; Rhonda Seegal Reply at 2– 3; SGA Reply at 5–8. 108 NSAI Reply at 4. 109 MLCI Reply at 33. 110 AMLC Proposal at 89–90 (AMLC bylaw art. 14). VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 will establish guidelines and polices to reduce conflicts.111 MLCI suggests that AMLC has serious conflicts of interest of its own, alleging that AMLC board members have undisclosed ties to its proposed vendors, in violation of AMLC’s own bylaws.112 These claims, echoed by NSAI,113 involve allegations that certain AMLC board members have financial interests in the Society of Composers, Authors and Music Publishers of Canada (‘‘SOCAN’’), which owns AMLC’s intended vendor partner DataClef.114 AMLC responded that while Mr. Barker previously was in a consulting position with SOCAN, that relationship ended prior to AMLC’s formation.115 AMLC acknowledges that Mr. Price is the founder and CEO of Audiam, a company acquired by a SOCAN holding company, but asserts that the companies are managed separately and that ‘‘Audiam is not a vendor and is not going to be one.’’ 116 AMLC also generally asserted that AMLC’s board members currently have ‘‘no ties or fiduciary responsibilities to any shareholders.’’ 117 Taking all of this information into account, both MLCI and AMLC have adopted policies and procedures that appear broadly consistent with the statutory requirements on matters of governance. Both submissions show a serious commitment to transparency, accountability, and the protection of confidential information.118 With respect to the purported conflicts of interest of individual board members, although these claims raise serious issues, they ultimately have little impact on the Office’s evaluation of the candidates’ proposals. Regarding MLCI’s board composition, the Office agrees that the unclaimed royalties oversight committee will help mitigate potential conflicts. As discussed below, the Office expects ongoing regulatory and other implementation efforts to further extenuate the risk of self-interest with respect to the distribution of unclaimed accrued royalties. As to the allegations regarding individual AMLC at 19. Reply at 30–32. 113 NSAI Reply at 5. 114 MLCI Reply at 30–31. 115 AMLC Ex Parte Meeting Summary at 23 (AMLC further offered that ‘‘Mr. Barker continues to have an arm’s-length business relationship with SOCAN for certain collection activity’’). 116 Id. Despite the assertion that Audiam has its own management, AMLC does not state that the Audiam board contains no SOCAN executives. See id. (noting that Audiam’s board of directors ‘‘includes non-SOCAN executives’’). 117 Id. 118 See, e.g., MLCI Proposal at 88–93; AMLC Proposal at 17, 42, 78. PO 00000 111 Id. 112 MLCI Frm 00026 Fmt 4700 Sfmt 4700 board members, a more substantial explanation of the relevant business relationships may be required if AMLC were the candidate that otherwise most nearly satisfied the statutory criteria. The Office thus need not resolve whether any specific affiliations of AMLC board members would, in fact, present material conflicts of interest with respect to its intended primary vendor. More generally, the Copyright Office appreciates that both proponents have pledged to operate under bylaws that will address conflicts of interest and appropriate disclosures in accordance with applicable state laws and professional duties of care.119 Following this designation process, and including through the various statutorily required rulemakings, the Register intends to exercise her oversight role as it pertains to matters of governance, including through promulgation of regulations so that the MLC’s bylaws include an avenue to ensure that subsequent board member selections are made in compliance with all relevant legal requirements.120 2. Endorsement and Support As noted, the MLC must be ‘‘endorsed by, and enjoy[ ] substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years.’’ 121 The Copyright Office made two preliminary interpretations regarding this clause in the NOI.122 First, the Office explained that because the section 115 license applies to uses of phonorecords in the United States, the relevant market is the United States market for making and distributing phonorecords of musical works. Thus, endorsement may be shown by including musical work copyright owners located outside the United States so long as they control the relevant rights to works played or otherwise distributed in the United States. Second, the Office stated that because the statute refers to support from ‘‘musical work copyright owners,’’ the relevant support should come from parties who have a relevant ownership 119 See, e.g., Del. Code Ann. tit. 8, sec. 144(a); N.Y. Not-for-Profit Corp. L. sec. 715. 120 See 17 U.S.C. 115(d)(12); see id. at 115(d)(3)(D)(i)(I)–(IV); see also H.R. Rep. No. 115– 651, at 5–6; S. Rep. No. 115–339, at 5; Conf. Rep. at 4. The Office notes that many commenters supported the Office performing a meaningful oversight role to the extent permissible under the statute. See, e.g., Maria Schneider Reply at 2–3; SGA Reply at 7. 121 17 U.S.C. 115(d)(3)(A)(ii). 122 NOI at 65753. E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations to [m]arket [s]hare.’’ 129 Section 115(d)(3)(J) states that after unclaimed accrued royalties have been held for the requisite period of time, the MLC is to distribute the royalties to identified copyright owners ‘‘in a transparent and equitable manner based on data indicating the relative market shares of such copyright owners as reflected in reports of usage provided by digital music providers for covered activities for the periods in question.’’ 130 AMLC notes that, unlike the endorsement provision, section 115(d)(3)(J) expressly refers to ‘‘relative market share.’’ In its view, ‘‘[i]f Congress, in articulating the endorsement criteria, intended for the words ‘licensor market’ to mean ‘relative market share’ (or some equivalent), Congress would have included the words ‘relative market share,’ the methodology to calculate same and the corresponding confidentiality language it included later on when specifically referring to ‘relative market share.’ ’’ 131 AMLC also makes the policy argument that ‘‘[a]n inherent conflict of i. Statutory Interpretation interest would be created if the MLC were primarily endorsed and/or a. Candidates’ Views constituted by the largest and/or ‘major’ AMLC argues that the endorsement publishers’’ because, ‘‘[s]ince unclaimed provision ‘‘should be interpreted so that or ‘black box’ royalties are to be the relevant ‘licensor market’ from distributed based on market share, those which the ‘greatest percentage’ is taken publishers would be dis-incentivized to is the endorsing group of copyright account to independent songwriters and owners who, via the greatest number of independent publishers accurately, i.e., licenses, have made musical works the major publishers would be available for covered activities as incentivized to create a larger ‘black measured over the preceding 3 full box’ from which they could then calendar years.’’ 126 AMLC contends that participate.’’ 132 AMLC argues that the statutory language is ambiguous but ‘‘[w]ere [these copyright owners] to be that its reading is confirmed by the in control of such process, the resulting legislative history. It notes that ‘‘[t]he situation would repeat the incentive [Senate Judiciary] Committee explained problem involving digital music that the MLC should be ‘endorsed by services that the statute intended to fix,’’ and enjoy[ ] support from the majority of and that ‘‘the purposes of the MMA musical works copyright owners as would not be best fulfilled if proper measured over the preceding three incentives are not aligned.’’ 133 In AMLC’s view, because years.’ ’’ 127 From this, AMLC asserts that Congress intended that ‘‘the parties ‘‘songwriters . . . are the greatest number of copyright owners relevant to eligible to endorse the proposed MLC are the musical works copyright 129 Id. at 44. owners.’’ 128 130 17 U.S.C. 115(d)(3)(J)(II). AMLC also points to a separate 131 AMLC Proposal at 44–45 (emphasis omitted) provision of the statute, section (‘‘Generally, statutory language should be internally 115(d)(3)(J), to argue that the consistent and considered in light of full statutory endorsement provision ‘‘[c]annot [r]efer context. As such, courts will generally read as jbell on DSK3GLQ082PROD with RULES interest in the copyright to musical works (or shares of such works), in contrast to parties who do not possess any ownership interest in musical works but only the ability to administer the works. Neither MLC candidate disagrees with these conclusions.123 Under section 115(d)(3)(A)(ii), only those copyright owners comprising a portion of ‘‘the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years,’’ count for purposes of endorsement.124 The Office also noted in the NOI that it understood there might be conflicting views regarding how the indicia of endorsement and support should be measured.125 This understanding proved correct, as MLCI and AMLC offer competing interpretations. While MLCI argues that the measurement is to be based on market share and licensing revenue, AMLC disagrees. The Office will address these disputed issues of statutory construction before making its evidentiary findings. 123 See AMLC Proposal at 46; MLCI Proposal at 96–97, 113–14. 124 MLCI agrees that a ‘‘relevant copyright owner’’ is ‘‘an owner of musical works copyrights licensed for covered activities over the preceding three full calendar years.’’ MLCI Reply at 9. 125 NOI at 65753. 126 AMLC Proposal at 43 (emphasis omitted). 127 Id. at 46 (quoting S. Rep. No. 115–339, at 22) (emphasis AMLC’s). 128 Id. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 meaningful ‘the exclusion of language from one statutory provision that is included in other provisions of the same statute.’ ’’) (quoting Hamdan v. Rumsfeld, 548 U.S. 557, 578 (2006), superseded by statute on other grounds, Military Commissions Act of 2006, Public Law 109–366, 120 Stat. 2600 (2006)). 132 Id. at 45. 133 Id. at 46 (contending that ‘‘copyright owners controlling the greatest percentage of ‘relative market share’ were not intended to be in control of the process of locating and paying copyright owners who are owed unclaimed royalties’’). PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 32281 and able to endorse an MLC,’’ 134 endorsement should be measured by counting each musical work copyright owner as one vote.135 As evidence of such support, it relies on a list of (in some cases, appending supporting letters from) purported endorsers.136 In contrast, MLCI argues that the endorsement provision is unambiguous, and that the ‘‘only reasonable interpretation . . . is that the collective shall be the entity that has the endorsement and support of copyright owners that together received during the statutory three-year period the largest aggregate percentage of total mechanical royalties of any entity seeking designation as the collective.’’ 137 MLCI primarily relies on the statutory text to assert that ‘‘percentage of the . . . market’’ means ‘‘market share,’’ that the phrase ‘‘for uses of [musical] works in covered activities’’ denotes a measurement based on usage, and that such usage should be measured by looking at licensor revenue from applicable royalty payments.138 MLCI contends that other potential metrics—i.e., number of licenses, number of copyright owners, and number of musical works—are not supported by the legislative history and are unworkable as a practical matter.139 It disagrees with AMLC’s analysis of section 115(d)(3)(J)’s use of the phrase ‘‘relative market share,’’ arguing that that section ‘‘supports, rather than refutes, the fact that the endorsement criterion looks to royalty market share, as both are examples of the MMA’s use of such market share to guide processes under the statute.’’ 140 As a policy matter, MLCI suggests ‘‘that the group of copyright owners with the most royalties at stake—the largest aggregate share of the royalty pool that the collective will have [the] authority to license—should voice who is entrusted with that authority.’’ 141 It would ‘‘make[ ] a mockery of the language of the statute,’’ MLCI contends, to construe the provision to mean that ‘‘owners of musical works that are not being streamed or earning royalties could be deemed to have the same market share as owners of works that are 134 Id. at 46–47. AMLC Ex Parte Meeting Summary at 24 (‘‘AMLC response is based on the number of copyright owners, not the total number of copyrights.’’). 136 AMLC Proposal at 46–48, 94–107. 137 MLCI Proposal at 96; see also id. at 108; MLCI Reply at 5 (‘‘[T]he only reasonable reading of this language is the plain English reading.’’). 138 See MLCI Proposal at 107–113. 139 Id. at 108–113; see MLCI Reply at 5–6. 140 MLCI Reply at 6–7. 141 MLCI Proposal at 107. 135 See E:\FR\FM\08JYR1.SGM 08JYR1 32282 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations streamed billions of times and earn substantial royalties.’’ 142 b. Copyright Office’s Analysis Legal Interpretation. Taking all comments into consideration, the Copyright Office concludes that the endorsement provision in section 115(d)(3)(A)(ii) mandates that the entity designated as the MLC be endorsed and supported by musical work copyright owners that together earned the largest aggregate percentage (among MLC candidates) of total royalties from the use of their musical works in covered activities in the U.S. during the statutory three-year period. In other words, the Office agrees with MLCI that the endorsement criterion is a plurality requirement based on market share, measured by applicable licensing revenue. The Office draws this conclusion from the plain meaning of the statutory text, which, after careful review of the statute as a whole, the Office concludes is unambiguous.143 First, the phrase ‘‘percentage of the . . . market’’ clearly refers to market share; indeed, it is the actual definition of ‘‘market share.’’ 144 And market share is ordinarily calculated using earned sales revenue.145 Here, the statute makes clear that endorsement is a metric of ‘‘licensor’’ revenue earned specifically ‘‘for uses of [musical] works in covered 142 Id. at 110, n.31. Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S. Ct. 1002, 1010 (2017) (‘‘We thus begin and end our inquiry with the text, giving each word its ordinary, contemporary, common meaning.’’) (internal quotation marks omitted). AMLC incorrectly suggests that the Office ‘‘has acknowledged an ambiguity in the statute.’’ AMLC Proposal at 46. The Office only acknowledged that ‘‘there may be conflicting views’’ on the matter. NOI at 65753. 144 See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/ market%20share (last visited June 24, 2019) (Market share is ‘‘the percentage of the market for a product or service that a company supplies.’’); Market Share, Investopedia, https:// www.investopedia.com/terms/m/marketshare.asp (last visited June 24, 2019) (‘‘Market share represents the percentage of an industry, or a market’s total sales, that is earned by a particular company over a specified time period.’’). 145 See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/ market%20share (last visited June 24, 2019) (noting the formula for market share as ‘‘Market Share = (Particular Company’s Sales Revenue in Time Period X)/(Relevant Market’s Total Sales Revenue in Time Period X)’’); Market Share, Investopedia, https://www.investopedia.com/terms/m/ marketshare.asp (last visited June 24, 2019) (noting that in calculating a company’s market share, you must ‘‘divide the company’s total revenues by its industry’s total sales’’); Market Share, The American Heritage Dictionary of the English Language, https://ahdictionary.com/word/ search.html?q=market+share (last visited June 24, 2019) (Market share is ‘‘[t]he proportion of industry sales of a good or service that is controlled by a company.’’). jbell on DSK3GLQ082PROD with RULES 143 See VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 activities.’’ 146 Moreover, Congress’s inclusion of the phrase ‘‘uses of [musical] works’’ suggests that the proper metric is one of licensing revenue (i.e., royalties), rather than numbers of licenses, copyright owners, or works. Under the compulsory license, royalties are calculated based on use, suggesting that Congress intended to define the market for ‘‘uses’’ according to the royalty revenues generated.147 In contrast, counting up just the number of endorsing copyright owners—from an amateur part-time songwriter whose works have been streamed a handful of times to a major music publisher that has earned millions of dollars from millions of streams of millions of works—says nothing about the actual ‘‘uses of [the owners’ musical] works.’’ Such an interpretation impermissibly reads that language out of the statute.148 Similarly, looking only to the number of works owned by endorsing copyright owners would not accurately reflect use because it does not differentiate between works streamed once or twice and works streamed millions of times. In the Office’s view, the same kinds of problems exist with counting the number of licenses. The Office is unpersuaded by AMLC’s argument concerning section 115(d)(3)(J). There is no substantive distinction between the use of ‘‘market share[ ]’’ in that provision and the use of ‘‘percentage of the . . . market’’ in the endorsement provision. One is the very definition of the other. AMLC relies upon the canon of statutory interpretation under which Congress is presumed to have acted intentionally when it excludes ‘‘language from one statutory provision that is included in other provisions of the same statute.’’ 149 But that canon is inapplicable here, as the cases AMLC cites involve only the wholesale omission of an item from a statutory provision; 150 they do not speak to situations where, as here, there U.S.C. 115(d)(3)(A)(ii). 37 CFR 385.11, 385.21. MLCI notes that ‘‘[p]ractically speaking, a metric based on user usage is going to align with a metric based on licensor revenues, as the statutory royalty rates for both streaming and downloading are tied to usage,’’ and that ‘‘a musical work with more usage will wind up with more royalty revenues.’’ See MLCI Proposal at 111–12 & n.34. While not all uses are subject to the same royalty rate, the royalties are nonetheless connected to use. 148 See, e.g., Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652, 1659 (2017) (‘‘Our practice . . . is to give effect, if possible, to every clause and word of a statute.’’) (internal quotation marks omitted). 149 AMLC Proposal at 44 (citing Hamdan, 548 U.S. at 578). 150 See Hamdan, 548 U.S. at 578–79; City of Chi. v. Envtl. Def. Fund, 511 U.S. 328, 334–37 (1994). PO 00000 146 17 147 See Frm 00028 Fmt 4700 Sfmt 4700 is no omission and Congress merely used synonyms.151 The Office is likewise unpersuaded that these synonyms should be read differently simply because the unclaimed royalties provision contains different details regarding calculation and confidentiality than the endorsement provision. While both provisions use a similar market share metric, the contexts are different, such that it makes sense that Congress would provide different instructions. Section 115(d)(3)(J) explains how the MLC is to distribute unclaimed royalties after the blanket license becomes available. It is unsurprising that Congress would provide detailed requirements to govern how those payments are to be allocated. In contrast, the designation of an entity to be the MLC involves a higher-level inquiry into the aggregate market share of each candidate’s endorsing copyright owners. Congress could have given the Office detailed instructions as to how to perform this analysis, but it instead left the matter to the Office’s expertise and reasonable discretion. There is nothing inconsistent with Congress establishing differing approaches to accomplishing these different tasks. The legislative history does not counsel differently. The relevant language, which appears in House and Senate Judiciary Committee Reports, states that the MLC must be ‘‘endorsed by and enjoy[ ] support from the majority of musical works copyright owners as measured over the preceding three years.’’ 152 This language can best be understood as an imprecise summary of the statutory text, for if it is taken literally, it directly conflicts with the statute, which refers to ‘‘endorse[ment] by[ ] and . . . substantial support from[ ] musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities.’’ 153 For the statute to mean what the legislative history seems to say, ‘‘substantial’’ could be deleted, ‘‘greatest percentage’’ would need to be replaced with ‘‘majority,’’ and ‘‘of the licensor market for uses of such works in covered activities’’ could also be deleted. It does not seem reasonable for the Office to interpret the statute in this way.154 151 See, e.g., United States v. Sioux, 362 F.3d 1241, 1246 (9th Cir. 2004) (‘‘It is an elementary principle of statutory construction that similar language in similar statutes should be interpreted similarly.’’). 152 H.R. Rep. No. 115–651, at 26; S. Rep. No. 115– 339, at 22; see also Conf. Rep. at 18 (similar). 153 17 U.S.C. 115(d)(3)(A)(ii). 154 See, e.g., Nat’l Ass’n of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 634 n.9 (2018) (‘‘[A]mbiguous E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES Policy Considerations. With respect to AMLC’s policy arguments, they mirror the same conflict-of-interest concerns raised by AMLC and discussed in connection with board composition. The Office takes these concerns seriously, but they do not compel a different interpretation of the plain text of the statute.155 Rather, there are other ways that the statute addresses these issues and protects smaller independent songwriters, as the following examples illustrate.156 First, the statute provides for equal representation of musical work copyright owners and professional songwriters on the unclaimed royalties oversight committee, which is charged with ‘‘establish[ing] policies and procedures for the distribution of unclaimed accrued royalties and accrued interest.’’ 157 By law, any copyright owner receiving such a distribution must pay or credit to an individual songwriter no ‘‘less than 50 percent of the payment received by the copyright owner attributable to usage of musical works (or shares of works) of that songwriter.’’ 158 Second, the statute requires the MLC to undertake a number of duties with respect to unclaimed royalties, including maintaining a public online list of unmatched musical works through which ownership can be legislative history cannot trump clear statutory language.’’) (internal quotation marks omitted); R.R. Comm’n of Wis. v. Chi., Burlington & Quincy R.R. Co., 257 U.S. 563, 589 (1922) (‘‘Committee reports and explanatory statements of members in charge made in presenting a bill for passage have been held to be a legitimate aid to the interpretation of a statute where its language is doubtful or obscure. But when taking the act as a whole, the effect of the language used is clear to the court, extraneous aid like this can not control the interpretation. Such aids are only admissible to solve doubt and not to create it.’’ (internal citations omitted)); see also Pattern Makers’ League of N. Am., AFL–CIO v. N.L.R.B., 473 U.S. 95, 112 (1985) (finding ‘‘ambiguous legislative history’’ to ‘‘fall[ ] far short of showing that the [agency’s] interpretation of the [statute] is unreasonable’’). 155 Cf. Fourth Estate Pub. Benefit Corp. v. WallStreet.com, LLC, 139 S. Ct. 881, 892 (2019) (noting that ‘‘the statutory scheme has not worked as Congress likely envisioned,’’ but that ‘‘[u]nfortunate as [that] may be, that factor does not allow us to revise [the statute’s] congressionally composed text’’). 156 See SGA Reply at 3 (‘‘SGA is far more concerned with ensuring that music creator rights are fully protected against conflicts of interest and impingements upon the rights and interests of songwriters and composers under all circumstances, than in supporting one or the other candidate vying to be selected as the Mechanical Collective.’’). 157 17 U.S.C. 115(d)(3)(D)(v), (d)(3)(J)(ii). 158 Id. at 115(d)(3)(J)(iv)(II); see also S. Rep. No. 115–339, at 14 (‘‘The 50% payment or credit . . . is intended to be treated as a floor, not a ceiling, and is not meant to override any applicable contractual arrangement providing for a higher payment or credit of such monies to a songwriter.’’). VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 claimed.159 The MLC must ‘‘engage in diligent, good-faith efforts to publicize, throughout the music industry,’’ the existence of the MLC, procedures to claim unclaimed royalties, any transfer of royalties under section 115(d)(10)(B), and any pending distribution of unclaimed accrued royalties and accrued interest not less than 90 days before distribution.160 More generally, the statute expressly requires the MLC to ‘‘ensure that the policies and practices of the [MLC] are transparent and accountable.’’ 161 The MLC must issue a detailed annual report, including describing ‘‘how royalties are collected and distributed,’’ and ‘‘the efforts of the [MLC] to locate and identify copyright owners of unmatched musical works (and shares of works).’’ 162 And every five years, the MLC must retain an independent auditor to ‘‘examine the books, records, and operations of the [MLC]’’ and prepare a report addressing, among other things, ‘‘the implementation and efficacy of procedures’’ ‘‘for the receipt, handling, and distribution of royalty funds, including any amounts held as unclaimed royalties,’’ and ‘‘to guard against fraud, abuse, waste, and the unreasonable use of funds.’’ 163 Third, the Copyright Office has been provided with ‘‘broad regulatory authority’’ to conduct proceedings as necessary to effectuate the statute with the Librarian’s approval.164 In addition to the regulations that the Office is specifically directed to promulgate, the legislative history contemplates that the Office will ‘‘thoroughly review[]’’ policies and procedures established by the MLC.165 The legislative history suggests that the Office promulgate the necessary regulations in a way that ‘‘balances the need to protect the public’s interest with the need to let the new collective operate without overregulation.’’ 166 The Office intends to conduct its oversight role in a fair and impartial manner; songwriters are encouraged to participate in these future rulemakings. Fourth, the MLC must be redesignated every five years.167 In the legislative history, Congress explained that U.S.C. 115(d)(3)(J)(iii)(I). at 115(d)(3)(J)(iii)(II). 161 Id. at 115(d)(3)(D)(ix)(I)(aa). 162 Id. at 115(d)(3)(D)(vii)(bb), (hh). 163 Id. at 115(d)(3)(D)(ix)(II). 164 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. 115–339, at 5; Conf. Rep. at 4; see 17 U.S.C. 115(d)(12). 165 H.R. Rep. No. 115–651, at 5–6; S. Rep. No. 115–339, at 5; Conf. Rep. at 4; see 17 U.S.C. 115(d)(12). 166 H.R. Rep. No. 115–651, at 14; S. Rep. No. 115– 339, at 15; Conf. Rep. at 12. 167 17 U.S.C. 115(d)(3)(B)(ii). PO 00000 159 17 160 Id. Frm 00029 Fmt 4700 Sfmt 4700 32283 ‘‘evidence of fraud, waste, or abuse, including the failure to follow the relevant regulations adopted by the Copyright Office, over the prior five years should raise serious concerns within the Copyright Office as to whether that same entity has the administrative capabilities necessary to perform the required functions of the collective,’’ and that in such cases, the Office should consider selecting a new entity ‘‘even if not all criteria are met pursuant to section 115(d)(3)(B)(iii).’’ 168 The Office thus agrees that ‘‘it seems highly implausible . . . that Congress intended that the ‘licensor market support’ criterion be the primary, deciding factor as to whether a full investigation and analysis by the Register and the Copyright Office of each serious [MLC] candidate is necessary.’’ 169 The Office believes that, among other scenarios, if the designated entity were to make unreasonable distributions of unclaimed royalties, that could be grounds for concern and may call into question whether the entity has the ‘‘administrative and technological capabilities to perform the required functions of the [MLC].’’ 170 Fifth, Congress has asked the Office to study the issue of unclaimed royalties and to provide a report by July 2021 that recommends best practices for the MLC to identify and locate copyright owners with unclaimed royalties, encourage copyright owners to claim their royalties, and reduce the incidence of unclaimed royalties.171 The MLC must give ‘‘substantial weight’’ to these recommendations when establishing its procedures to identify and locate copyright owners and to distribute unclaimed royalties.172 Sixth, in addition to the various ways the MLC is required to publicize unclaimed royalties,173 the DLC must assist with publicity for unclaimed royalties by encouraging digital music providers to publicize information on the existence of the MLC and on claiming royalties on websites and applications, and conducting in-person outreach activities with songwriters.174 The Copyright Office, too, is tasked with engaging in public outreach and 168 H.R. Rep. No. 115–651, at 6; S. Rep. No. 115– 339, at 5–6; Conf. Rep. at 4. 169 SGA Reply at 9. 170 17 U.S.C. 115(d)(3)(A)(iii). 171 Public Law 115–264, sec. 102(f), 132 Stat. at 3722–23. 172 Id. at sec. 102(f)(2), 132 Stat. at 3723. 173 17 U.S.C. 115(d)(3)(J)(iii) (including maintenance of an online list of unmatched works through which ownership can be claimed, notification prior to any distribution, and participation in music industry conferences and events). 174 Id. at 115(d)(5)(C)(i)(VII), (d)(5)(C)(iii). E:\FR\FM\08JYR1.SGM 08JYR1 32284 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations educational activities that must specifically include ‘‘educating songwriters and other interested parties’’ about how ‘‘a copyright owner may claim ownership of musical works (and shares of such works)’’ and how ‘‘royalties for works for which the owner is not identified or located shall be equitably distributed to known copyright owners.’’ 175 Finally, the Office suggests there may be other reasons for the statutory requirement that the MLC enjoy ‘‘substantial support’’ from the largest market share of musical work copyright owners. Without minimizing the importance of ensuring that unidentified copyright owners have the opportunity to come forward and effectively claim their works to receive accrued royalties, there are other duties of the MLC that also serve the paramount goal of ‘‘ensuring that a songwriter actually gets paid.’’ 176 As MLCI notes, already identified copyright owners have an interest in ensuring the efficient and accurate collection and distribution of royalties.177 Further, the MLC will participate in proceedings before the CRJs, and having the support of publishers with prior experience before the CRJs may be beneficial. Establishment of the statutorily-required database will likely also benefit from initial support of music publishers and other relevant copyright owners with large quantities of authoritative versions of data for works that together will comprise the bulk of royalty distributions.178 As these examples illustrate, having strong support from key copyright owners may assist in ensuring that the MLC is in the best possible position to succeed in effectively carrying out the whole of its assigned responsibilities. ii. Evidentiary Findings jbell on DSK3GLQ082PROD with RULES 175 Public Law 115–264, sec. 102(e)(2), 132 Stat. at 3722. 176 164 Cong. Rec. S6292, 6292 (daily ed. Sept. 25, 2018) (statement of Sen. Hatch). 177 MLCI Proposal at 107. 178 For example, a number of MLCI’s largest endorsers state that each intends to work with MLCI to incorporate its musical work data into the musical works database. See, e.g., MLCI Proposal at Exs. 11–B–2 (Sony/ATV Music Publishing), 11–C– 2 (Kobalt Music Publishing America, Inc.), 11–N– 2 (Warner/Chappell Music, Inc.), 11–P–2 (Universal Music Publishing Group). 15:55 Jul 05, 2019 The Supporting Copyright Owners include copyright owners of all sizes who own the relevant rights in musical works covering the spectrum of musical genres—including pop, rap, hip hop, R&B, country, rock, metal, reggae, folk, electronic, jazz, classical—and from every era—including popular current hits and ‘‘evergreen standards.’’ Their sizes range from major music publishers who own the relevant rights to millions of songs, to small, family-owned companies that focus on a particular genre or sub-genre. The Supporting Copyright Owners own the mechanical rights to, at a minimum, well over seven million musical works.180 A sworn declaration from David M. Israelite of the NMPA states that the Supporting Copyright Owners ‘‘own[ ] the U.S. mechanical rights to millions of works’’ and ‘‘have confirmed that they exclusively endorse MLC[I] to be the collective, and have pledged to provide substantial support to MLC[I].’’ 181 A group endorsement letter from the Supporting Copyright Owners further states that they ‘‘all own, and have during the preceding three years owned, exclusive rights to license musical works for use in covered activities in the United States and have licensed those rights to digital music providers.’’ 182 The Supporting Copyright Owners thus appear to be relevant copyright owners who may be counted for endorsement purposes. While MLCI states that it is also endorsed by ‘‘over 2,400 songwriters’’—of whom ‘‘[o]ver 1,400’’ ‘‘have reported that they are self179 Id. a. Market Share With respect to the information submitted in the proceeding, AMLC does not provide market share data for its endorsing copyright owners. Nor do its endorsers provide sufficient information from which the Office can reasonably determine their aggregate applicable market share. In contrast, VerDate Sep<11>2014 MLCI provides multiple data points regarding the market share of its endorsers. For purposes of calculating market share, MLCI counts 132 musical work copyright owners it calls the ‘‘Supporting Copyright Owners.’’ 179 According to MLCI: Jkt 247001 at 98. (citations omitted); see id. at Ex. 11–8–9 (stating that ‘‘a partial count of information obtained from less than half of the Supporting Copyright Owners shows that together they own (now and over the preceding 3 full calendar years) the right to reproduce and distribute over 7.3 million musical works in Section 115 covered activities in the U.S.’’) (declaration of David M. Israelite). 181 Id. at Ex. 11–5. 182 Id. at Ex. 11–A–1; see, e.g., id. at Ex. 11–B– 1 (‘‘Sony owns the exclusive rights to license millions of musical works written by tens of thousands of songwriters, including for use in Section 115 covered activities. Sony has for well over the last three years licensed these rights to digital services through the Section 115 compulsory licensing process and, in some cases, through voluntary licenses.’’); id. at Ex. 11–D–1 (‘‘Reel Muzik Werks is the owner or the exclusive licensee of the rights to engage and to license others to engage in Section 115 covered activities . . . . Reel Muzik Werks has during the last three full calendar years licensed its rights in and to musical works to digital music providers for use in covered activities.’’). PO 00000 180 Id. Frm 00030 Fmt 4700 Sfmt 4700 published songwriters, meaning they are not signed to or affiliated with a music publisher and manage their own musical work copyrights’’—they are not included in MLCI’s market share calculations.183 According to MLCI, ‘‘[i]ndustry data, including revenue information that NMPA collects from its members on an annual basis and publicly available data, demonstrates that the Supporting Copyright Owners represent between 85% and 90% of the licensor market for all uses of musical works during the [statutory three-year period from 2016 through 2018].’’ 184 Additionally, Mr. Israelite’s declaration provides data from Billboard Magazine showing the average combined market share of Supporting Copyright Owners appearing in Billboard’s quarterly top ten rankings of music publishers over the last three years to be 87.83%.185 Mr. Israelite states that these data figures are ‘‘a fair proxy for estimating the Supporting Copyright Owners’ market share for uses of musical works in covered activities, as there is no reason to believe that the Supporting Copyright Owners’ market share for uses of their musical works in covered activities should deviate significantly from their market share for their uses of musical works generally.’’ 186 In support, MLCI states that ‘‘NMPA was able to confirm from information regarding the U.S. mechanical royalties paid by Apple Music and Spotify—the largest and most popular services in the market—that the Supporting Copyright Owners have together received the substantial majority of total mechanical royalties for uses of musical works in covered activities in the U.S. during the [statutory three-year period from 2016 through 2018].’’ 187 As discussed below, Digital Licensee Coordinator, Inc. (‘‘DLCI’’) follows a similar market sharebased approach to establish its endorsement by digital music providers and significant non-blanket licensees.188 AMLC does not contest these market share figures; indeed, a comment supporting AMLC submitted on behalf 183 Id. at 98–99 & n.22. at 99 (citation omitted); see also id. at Ex. 11–5–7 (declaration of David M. Israelite). 185 Id. at Ex. 11–6–7. The Office notes that Billboard appears to only ‘‘measure the market share . . . of the top 100 radio airplay songs.’’ See, e.g., Ed Christman, Music Publishers’ 4th Quarter Report: Top 3 Companies Have the Same No. 1 Song, Billboard (Feb. 3, 2017), https:// www.billboard.com/articles/business/7677913/ music-publishers-4th-quarter-report. 186 MLCI Proposal at Ex. 11–7. 187 Id. at 99–100; see also id. at Ex. 11–7–8 (describing methodology) (declaration of David M. Israelite). 188 See DLCI Proposal at 4–7. 184 Id. E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations of a group of songwriters that includes two AMLC board members concedes that ‘‘Sony/EMI, Warner, and Universal’’—each of which exclusively endorse MLCI—‘‘control about 65% of the market for music publishing.’’ 189 The Office notes that other sources confirm that MLCI is supported by a majority of the music publishing market; according to Music & Copyright’s annual survey ‘‘based on revenue,’’ Sony,190 Universal, and Warner/Chappell together had an average combined global market share of 58.65% for 2017 and 2018.191 Based on the foregoing, the Office finds that there is substantial evidence to demonstrate that MLCI is endorsed and supported by the required plurality of relevant endorsing copyright owners, based on applicable market share. Given the overwhelming majority market share of MLCI’s Supporting Copyright Owners and the data from Apple Music and Spotify, and in the absence of any evidence to the contrary, the abovediscussed market share figures appear more likely than not to be a sufficient proxy for estimating market share based on royalties earned from covered activities in the U.S. Even if that were not the case, the Office finds, based on the foregoing, that MLCI would still be ‘‘the entity that most nearly fulfills’’ the section 115(d)(3)(A)(ii) qualification.192 b. Number of Copyright Owners In any event, even under the metric for which AMLC provides evidence— number of copyright owners—AMLC would not be the candidate that satisfies the endorsement provision. The Office received comments from a significant portion of the music industry, voicing support for either MLCI or AMLC. Endorsements came from a diverse array of large and small publishers 193 as well as from thousands of songwriters from across the country and beyond representing virtually every major genre, including pop, hip hop, rap, rock, country, R&B, alternative, electronic, dance, folk, jazz, classical, Broadway/musical theatre, blues, Christian, gospel, Latin, bluegrass, and 189 Robert Allen Reply at 6. Global Recorded-music and Music Publishing Market Share Results for 2018, Music & Copyright (May 8, 2019), https://musicand copyright.wordpress.com/2019/05/08/globalrecorded-music-and-music-publishing-marketshare-results-for-2018/. 191 Id. (this calculation includes figures from Sony/ATV, Sony Music Publishing Japan, and EMI Music Publishing and includes all revenue, not just for covered activities). 192 17 U.S.C. 115(d)(3)(B)(iii). 193 See, e.g., MLCI Proposal at 98, Ex. 11–A–X; KDE LLC Reply at 1 (supporting AMLC); Secretly Publishing Reply at 1 (supporting MLCI). jbell on DSK3GLQ082PROD with RULES 190 See VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 soul.194 These songwriters include writers of #1 hit songs, Grammy Award winners and nominees, a Rock and Roll Hall of Fame inductee, members of the Nashville Songwriters Hall of Fame, film and television composers, and numerous less established or part-time writers. The Office also heard from a broad assortment of trade groups and other organizations (some of which the Office understands to be members or subgroups of each other) representing publisher and songwriter interests. Groups listed as supporting AMLC include international alliances and collectives like the Music Creators of North America (‘‘MCNA’’), European Composer and Songwriter Alliance, Pan-African Composers’ and Songwriters’ Alliance, Asia-Pacific Music Creators Alliance, and Alianza Latinoamericana de Compositores y Autores de Mu´sica, and other groups like the Songwriters Guild of America, Screen Composers Guild of Canada, American Composers Forum, and Music Answers.195 Groups listed as supporting MLCI include the National Music Publishers’ Association, Association of Independent Music Publishers, International Confederation of Music Publishers, Nashville Songwriters Association International, Songwriters of North America, Music Publishers Association, American Composers Alliance, Gospel Music Association, Church Music Publishers Association, Americana Music Association, Copyright Alliance, and Creative Future.196 In addition, performing rights organizations ASCAP, BMI, SESAC, and Global Music Rights all endorse MLCI, as do many representatives from the recorded music industry, including the Recording Industry Association of America, the American Association of 194 See, e.g., AMLC Proposal at 47–75; MLCI Proposal at Exs. 5–A, 6–10; Robert Allen Reply; Board of Directors of NSAI Reply; Maria Schneider Reply; Spence Burton Reply; Michael Busbee Reply; Britt Daley Reply; Barry DeVorzon Reply; Jerry Emanuel Reply; Beckie Foster Reply; Jan Garrett Reply; Ben Glover Reply; Dan Gutenkauf Reply; John Harding Reply; Aaron Johns Reply; Brett Jones Reply; Amy Kinast Reply; Wayne Kirkpatrick Reply; Sonia Kiva Reply; Bill LaBounty Reply; David Lauver Reply; Daniel Leathersich Reply; Alejandro Martinez Reply; Dennis Matkosky Reply; Steve Miller Reply; Clay Mills Reply; Vincent Mullin Reply; Kerry Muzzey Reply; Rick Nowels Reply; Melissa Peirce Reply, Jim Photoglo Reply; Deric Ruttan Reply; Jerry Schneyer Reply; Joie Scott Reply; Pamela Schuler Reply; Karen Sotomayor Reply; Miki Speer Reply; Even Stevens Reply; Paris Strachan Reply; Eleisa Trampler Reply; Kelly Triplett Reply; Danny Wells Reply; Anna Wilson Reply. 195 AMLC Proposal at 47–48; see generally id. at 94–107. 196 MLCI Proposal at 100, Ex. 11–X; International Confederation of Music Publishers Reply at 1. PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 32285 Independent Music, the major record labels, and SoundExchange.197 Lastly, in one of the few comments from an organization that waited to review the proposals before endorsing a candidate, the Recording Academy, whose membership includes ‘‘thousands of working songwriters and composers, many of whom are independent, selfpublished, or unaffiliated songwriters,’’ states that it ‘‘believes that the MLC[I] submission is best equipped to satisfy the statutory requirements of the MMA.’’ 198 As noted above, and as both candidates agree, not every commenter can be counted for purposes of the endorsement provision—even under AMLC’s interpretation. If the statue were to require only a headcount, it would still be a headcount of relevant copyright owners. In this proceeding, some endorsers, for example, are attorneys that give no indication that they are also relevant copyright owners.199 Some endorsers do not give any indication of their connection to the industry.200 And some endorsers who state that they are songwriters are not clear about whether they are also relevant copyright owners for their songs.201 Many of the endorsements contain ambiguities such as these. A separate issue concerns the treatment of the international alliances, performing rights organizations, trade groups, and other endorsing organizations. MLCI does not contend that these types of organizations are relevant copyright owners.202 AMLC, on the other hand, appears to count not only each of its supporting organizations, but the individual members of each of those organizations.203 MLCI strongly disapproves of this approach.204 The Office finds it difficult to credit these purported endorsements, as there is insufficient evidence to demonstrate that every member of each of these 197 MLCI Proposal at 100, Ex. 11–X Academy Reply at 1, 3. 199 See, e.g., Jay A. Rosenthal et al. Reply. 200 See, e.g., Jared Burton Reply; Brandon Dudley Reply; Earl Vickers Reply. 201 See, e.g., Ashley Gorley Reply; Chris Myers Reply; Jeff Rodman Reply; Chris Xefos Reply. 202 See MLCI Proposal at 100, Ex. 11–9 (referring to them as ‘‘non-musical work copyright owner[ ] groups’’). 203 See AMLC Proposal at 47–48 (claiming its endorsers ‘‘represent hundreds of thousands of separate and unique music publishers whose music is distributed on digital streaming services in the United States’’). 204 See MLCI Reply at 11 (‘‘MLC[I] would never claim that, simply by virtue of a trade group endorsement, each songwriter and publisher member of the trade group can be deemed to endorse and support MLC[I], as that would be misleading.’’). 198 Recording E:\FR\FM\08JYR1.SGM 08JYR1 32286 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES organizations actually endorses AMLC. While surely each referenced association on a general level represents the interests of their members, none of AMLC’s group endorsements indicate that they have the authority to endorse an MLC candidate on their members’ behalf. For example, the submissions do not indicate that any kind of resolution to endorse was passed by their members, and if one was, whether their members voted unanimously (as would be necessary to claim that every member should be counted). In many cases, moreover, it is difficult to tell whether the endorsements are submitted on behalf of the organization, or from individuals associated with the organizations acting in their personal capacities or in their capacity as an individual board member.205 In fact, two organizations listed by AMLC as endorsers in its proposal subsequently disavowed the purported endorsements and clarified that they do not in fact support AMLC.206 If the Office were to credit these kinds of endorsements, it would raise unresolvable practical problems. For many of these organizations, no membership numbers are provided,207 and for others, only an indefinite range or rounded figure is given, making a precise headcount impossible.208 205 See, e.g., AMLC Proposal at 95 (letter from the Chairman of the Asia-Pacific Music Creators Alliance, providing no information about the organization or its membership, and stating that ‘‘I hereby voice my support to’’ AMLC) (emphasis added); id. at 98 (same with respect to Alianza Latinoamericana de Compositores y Autores de Mu´sica); id. at 103 (same with respect to PanAfrican Composers’ and Songwriters’ Alliance); see also AMLC Ex Parte Meeting Summary at 24 (‘‘Some [organizational] endorsements were interpreted to be an endorsement by the individual, and others on behalf of the entire membership.’’). 206 See APRA AMCOS Reply at 1 (clarifying that APRA AMCOS does not endorse AMLC and was ‘‘misrepresented in the AMLC’s submission,’’ and that the letter appended to AMLC’s proposal was ‘‘signed by a single writer director of the APRA board and does not represent the commitment or support of our organization, nor does the letter state anywhere that APRA itself has offered any such institutional endorsement’’); Statement from CISAC and CIAM on the U.S. Music Licensing Collective, International Confederation of Societies of Authors and Composers (Apr. 5, 2019), https:// www.cisac.org/Newsroom/Articles/Statement-fromCISAC-and-CIAM-on-the-U.S.-Music-LicensingCollective (‘‘For the avoidance of doubt and in view of the different rumours circulating, CIAM and CISAC wish to clarify that the organisations have not endorsed either of the competing companies for the U.S. MLC.’’). 207 See, e.g., AMLC Proposal at 95 (Asia-Pacific Music Creators Alliance); id. at 98 (Alianza Latinoamericana de Compositores y Autores de Mu´sica); id. at 102 (Society of Authors and Composers of Colombia); id. at 104 (Screen Composers Guild of Canada); id. at 106 (ABRAMUS/ALCAM). 208 See, e.g., id. at 99 (stating that European Composer and Songwriter Alliance ‘‘represents over VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 Additionally, without a list of member names, the Office cannot determine whether individual members are being counted more than once due to membership in multiple endorsing organizations or because the individual filed his or her own comment with the Copyright Office directly.209 By not identifying purported endorsing members, the possibility also exists for conflicting endorsements.210 For example, AMLC board members Zoe Keating, Maria Schneider, and Rick Carnes appear to be affiliated with ASCAP,211 which endorses MLCI. These individuals presumably would object to MLCI counting them among its endorsers merely because ASCAP has endorsed MLCI. Lastly, AMLC’s proposal refers to ‘‘100+ various individual composers/ writers/publishers/organizations who have signed an AMLC endorsement document’’ and ‘‘600+ endorsements via [the] AMLC website,’’ which suffer from the same kinds of practical problems.212 Because these individuals are not specifically identified, the Office cannot determine their precise number or if any of them additionally submitted comments directly to the Office such that they may be counted more than once. Nonetheless, even if these ambiguities are resolved in favor of counting each endorsement (except for the individual members of the endorsing organizations discussed above and the two organizations that repudiated their purported endorsements), AMLC still would have substantially fewer endorsements than MLCI.213 Applying 50,000 professional composers and songwriters’’); id. at 100 (stating that MCNA has an ‘‘approximate collective membership of between 7,500 to 8,500 songwriters and composers’’); id. at 105 (stating that Music Answers has ‘‘more than 3,500 supporters’’); SGA Reply at 1 (‘‘membership ranges between 3,500 and 5,000 members’’). 209 For example, it seems that the memberships of SGA and Screen Composers Guild of Canada may be subsumed within the membership of MCNA. See AMLC Proposal at 100 (listing SGA and SCGC as ‘‘member organizations’’ of MCNA). 210 While the Office made clear in the NOI that endorsements need not be exclusive, this is a different issue that speaks to whether the candidate is in fact supported by an individual. 211 See Sue (or In a Season of Crime), ACE Repertory, https://www.ascap.com/repertory#ace/ search/workID/888244289 (last visited June 24, 2019) (listing Maria Schneider’s PRO affiliation as ASCAP); Across the Street (Live), ACE Repertory, https://www.ascap.com/repertory#ace/search/ workID/886237406 (last visited June 24, 2019) (listing Zoe Keating’s PRO affiliation as ASCAP); Hangin Around, ACE Repertory, https:// www.ascap.com/repertory#ace/search/workID/ 380230553 (last visited June 24, 2019) (listing Rick Carnes’s PRO affiliation as ASCAP). 212 AMLC Proposal at 48. 213 The Office’s methodology was as follows. First, the Office counted all endorsements provided PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 these assumptions, AMLC would have around 1,000 endorsements, while MLCI would have about three times that number. Even if based only on MLCI’s Supporting Copyright Owners and the songwriters listed in MLCI’s proposal who identified as self-published, MLCI would still have hundreds more endorsers than all of the comments submitted in support of AMLC. Thus, under both the proper metric of market share, and the alternative metric of number of copyright owners, MLCI is the candidate that satisfies the endorsement requirement. As noted in conclusion below, the MMA was enacted only after an extensive effort to build consensus amongst musical work copyright owners and songwriters with various, sometimes competing, interests. The Register expects that the designated MLC will endeavor to equally represent the interests of those who did not endorse it, and that interested sides will continue to come together to make the implementation of this historic new licensing scheme a success, building upon the cooperative spirit that facilitated the MMA’s passage.214 3. Administrative and Technological Capabilities The statute requires that the designated entity ‘‘has, or will have prior to the license availability date, the administrative and technological capabilities to perform the required functions of the mechanical licensing collective.’’ 215 The NOI requested that each proposal include specific information to demonstrate the candidate’s ability to meet this by AMLC and MLCI in their respective proposals, including counting all proposed board and committee members. Then, the Office counted every endorsement contained in other comments. The Office did not, however, count the individual members of any endorsing groups or organizations for the reasons stated above. To be as equitable as possible, the Office treated every endorsement as coming from a relevant copyright owner, except where the record affirmatively stated otherwise. Because AMLC did not provide the identities of the bulk of their endorsers, the Office could not compare most of the endorsers from AMLC’s proposal to the individual endorsements received in the comments, meaning the Office could not ascertain whether there might be duplicate endorsements. Because the Office could not deduplicate AMLC’s endorsements, the Office did not deduplicate MLCI’s endorsements either, so as to apply a consistent methodology to both candidates. 214 See, e.g. Music Policy Issues: A Perspective from Those Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836 Before the H. Comm. on the Judiciary, 115th Cong. 4 (2018) (statement of Ranking Member Nadler); 164 Cong. Rec. S501, 502 (daily ed. Jan. 24, 2018) (statement of Sen. Hatch); 164 Cong. Rec. H3522, 3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte). 215 17 U.S.C. 115(d)(3)(A)(iii). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations requirement, organized into enumerated categories. i. Overview of Proposals, Including Business Planning and Budgeting The Office requested that each entity provide ‘‘a business plan, including a statement of purpose or principles, proposed schedule, and available budgetary projections, for the establishment and operation of the proposed MLC for the first five years of its existence.’’ 216 The NOI noted that although the MLC designation process is separate from the establishment of an administrative assessment by the CRJs, ‘‘understanding the proposed funding for the MLC (in advance of the establishment of the administrative assessment)’’ and budgetary planning generally can be ‘‘important to confirming that the MLC will be ready to adequately perform its required functions by the license availability date and beyond.’’ 217 Accordingly, the Office’s interest in the candidates’ budgetary materials is ‘‘for the purposes of this designation process only, and without prejudice to the future administrative assessment proceeding.’’ 218 Considering both proposals at a very high level, there are a number of similarities, including a shared intention to set up offices in or near Nashville, Tennessee.219 Both candidates envision using a primary vendor to build out the required musical works database, and to varying degrees signaled intentions or openness to working with additional vendors.220 In recognition that the creation of a comprehensive musical works database has long been an aim of various segments of the music community, both candidates plan to ‘‘utilize systems that are tested’’ 221 or ‘‘leverage[ ] existing technology and data providers’’ 222 Both propose to rely on automated processes for the bulk of identifying songs recorded and matching them to copyright holders, augmented with manual processing as needed.223 To that end, both note the importance of compatibility with existing music industry standards, including jbell on DSK3GLQ082PROD with RULES 216 NOI at 65751 (requesting each plan also include ‘‘a description of the intended technological and/or business methods’’ for accomplishing the MLC’s statutory obligations). 217 Id. at 65752. 218 Id. 219 MLCI Proposal at 66; AMLC Proposal at 48, 76. 220 MLCI Ex Parte Meeting Summary at 2; AMLC Ex Parte Meeting Summary at 7–9. 221 MLCI Proposal at 39. 222 AMLC Proposal at 5. 223 MLCI Proposal at 18–19, 41; AMLC Proposal at 10–11. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 communicating information in accordance with the Common Works Registration (‘‘CWR’’) format and DDEX standards, and a willingness to explore other relevant existing or emerging standards or open protocols.224 Similarly, AMLC and MLCI each express an understanding of the need to address policies and actions related to distributions of unclaimed accrued royalties with care, including providing adequate notice before such distributions occur.225 They commit to engage in education and outreach efforts to publicize the collective, including procedures by which copyright owners may identify themselves to claim accrued royalties.226 They both appropriately focus on the need to operate a user-friendly claiming portal, for, as the legislative history notes, ‘‘the simple way to avoid any distribution to other copyright owners and artists is to step forward and identify oneself and one’s works to the collective, an exceedingly low bar to claiming one’s royalties.’’ 227 Although the proposals share certain commonalities, they diverge on details, sometimes significantly, including at times on the level or evidence of planning disclosed in response to the NOI. These differences were reflected in the proposed budgetary estimates, including the specific line items, put forth by each candidate. a. MLCI Out of the two candidates, MLCI provides a more detailed organizational model for its operations and reports that it ‘‘has already begun the process of assuring the timely acquisition of these capabilities’’ 228 necessary to fulfill the statutory functions. This framework is organized into three categories of activities: Strategic Processes, defined as ‘‘the management processes that empower the operational capabilities of the collective’’; Core Processes, defined as ‘‘capabilities and processes in the core tasks’’ including ‘‘how the MLC performs the central ownership and license administration responsibilities’’; and Foundational Processes, defined as 224 MLCI Proposal at 35, 38, 57–58; AMLC Proposal at 15; see also Berklee College of Music & MIT Connection Science Comments at 2–5. 225 See, e.g., MLCI Proposal at 43–44; AMLC Proposal at 18–19; AMLC Ex Parte Meeting Summary at 14. 226 MLCI Proposal at 62–63; AMLC Proposal at 30–33. 227 S. Rep. No. 115–339, at 14 (2018) (stating that ‘‘[t]his process ensures that copyright owners and artists benefit’’ in contrast to views of ‘‘some copyright owners and/or artists who would prefer that such money be escrowed indefinitely until claimed’’). 228 MLCI Proposal at 7. PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 32287 ‘‘necessary support capabilities and processes, usually typical of most businesses (payroll, legal, etc.).’’ 229 These categories in turn comprise ten functions that the MLC will carry out on behalf of songwriters, musical works owners, and the public, explained by a series of detailed flow charts.230 While MLCI has not yet determined the precise management structure for daily operations or full staffing, it includes a series of organizational charts, which propose fifty-five employees.231 It also has retained consultant support in overseeing technology strategy, the RFI/RFP process, and operations design, and reports that its board members have dedicated a considerable amount of time to this planning process.232 MLCI intends to ‘‘utilize a single primary vendor for core usage processing functions, with consideration of secondary vendors to augment in specific areas.’’ 233 Sixteen vendors participated in its RFI process, and MLCI selected seven of those to participate in the RFP process.234 MLCI notes that, in aggregate, these RFI participants ‘‘have processed nearly 20 trillion lines of sound recording usage and more than $4.2 billion in royalties for the U.S. territory over the past 3 calendar years, and have more than 20 million unique works in rights databases and existing connectivity with approximately 50,000 publishers.’’ 235 MLCI estimates its total startup costs through the license availability date to be between $26 and $48 million, with annual operating costs between $25 and $40 million.236 To obtain funding, it has engaged in ‘‘good faith negotiations with the major licensee services in an attempt to reach agreement on voluntary contributions.’’ 237 If such an agreement is not realized, MLCI will participate in the assessment proceeding.238 In that 229 Id. at 12. at 13. 231 Id. at 25; see id. at 25–29 (detailed description of employee roles). 232 Id. at 3–4; see also MLCI Ex Parte Meeting Summary at 2. 233 MLCI Ex Parte Meeting Summary at 2. 234 MLCI Proposal at 55 (listing RFI participants ASCAP, AxisPoint, BackOffice, BMI, BMAT, Crunch Digital, DDEX, Gracenote, ICE, Music Reports, Inc. (‘‘MRI’’), Open Music Initiative (OMI), Sacem/IBM, SESAC/HFA, SOCAN/DataClef, SourceAudio, and SXWorks); id. at 59 (listing RFP participants ASCAP, BackOffice, ICE, MRI, SESAC/ HFA, SXWorks, and Sacem/IBM); id.at Exs. 3, 4 (providing RFI and RFP). MLCI did not include copies of RFI or RFP responses, stating they are subject to nondisclosure agreements and include confidential information. Id. at 59. 235 Id. at 56–57. 236 Id. at 31–32. 237 Id. at 59. 238 Id. at 61. 230 Id. E:\FR\FM\08JYR1.SGM 08JYR1 32288 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations event, it ‘‘will seek bridge funding to cover any gaps,’’ and expresses confidence that ‘‘its extensive network of support and trust throughout the industry, and the reputations of its leadership, will assist it in obtaining support for its continued operations.’’ 239 MLCI expects to have no need to apply unclaimed royalties to defray costs, though it notes that the statute permits it to do so on an interim basis.240 b. AMLC AMLC aspires to adopt a leaner approach to these issues. Upon its launch, it will rely on incumbent services and vendors that have been ‘‘vetted and approved’’ by the Digital Media Association (‘‘DiMA’’).241 It intends to add technology applications, features, and solution providers incrementally over time ‘‘as a series of steps on top of [this] pre-existing solid foundation.’’ 242 AMLC reports that it ‘‘has taken significant input from key stakeholders, potential vendors, performing rights organizations, labels, and most importantly, publishers and songwriters in formulating [its] technology plan,’’ and states that it will have further discussions in designing and implementing solutions if it is designated.243 It intends to hire eleven employees, and ha engaged a technology consultant.244 However, AMLC cautions that ‘‘although there ha[ve] been significant discussions and planning . . . much of the details need to be formalized once the mandate decision is made.’’ 245 AMLC established several requirements that potential vendors must meet, including that the entity is ‘‘in good standing’’; has no pending litigation; has worked with or for the major music publishers, independent music publishers, and self-published 239 Id. 246 AMLC jbell on DSK3GLQ082PROD with RULES 240 Id. at 61–62 (citing 17 U.S.C. 115(d)(7)(C)). 241 AMLC Proposal at 4. 242 Id. 243 Id. at 6. 244 Id. at 26. 245 Id. at 6. AMLC subsequently reported that although several vendors have agreed to work with it in the event it is selected as the MLC, many ‘‘were concerned [that] they would suffer negative consequences if they were listed in the AMLC application.’’ AMLC Ex Parte Meeting Summary at 8. To the extent such vendors believe they are prohibited from contracting with both candidates, that understanding is not supported by the statute. As noted in the NOI, ‘‘while the statutory language authorizes the MLC to arrange for services of outside vendors, nothing suggests that such a vendor must offer exclusive services to that MLC candidate.’’ NOI at 65749. At the same time, the statute does not regulate parties’ ability to enter into exclusive relationships or other arrangements that may affect the information that can be disclosed in the candidates’ submissions. VerDate Sep<11>2014 songwriters; has worked with at least one of the major digital service providers (‘‘DSPs’’); and has distributed at least $100 million to rightsholders each year for the last two years.246 Having held discussions with four primary vendors, AMLC ‘‘expects to engage foundational vendors’’ DataClef and MRI to enable it to provide a comprehensive interoperable database.247 It notes that DataClef has access to the CIS–NET Works Information Database (‘‘WID’’), which includes over 81.1 million musical works.248 Beyond these vendors, AMLC states that additional incumbent entities employed by DSPs have confirmed that if AMLC is designated, they would play a role if requested or needed.249 In response, MLCI expresses concern regarding the perceived lack of explanation of AMLC’s RFI process, and doubts the ability of the potential AMLC vendors to provide key capabilities such as access to relevant databases, specifically challenging whether AMLC will be legally entitled to access the WID for its purposes.250 AMLC submitted substantially lower cost estimates for its activities, estimating total costs of approximately $43.9 million for its first five years, broken out across fewer categories than MLCI.251 Like MLCI, AMLC intends to negotiate with DiMA on a final budget to be submitted to the CRJs for approval.252 AMLC does not intend to utilize debt, except perhaps during the initial MLC startup phase.253 AMLC believes it is inappropriate to apply songwriters’ and publishers’ royalties to cover the MLC’s operating costs, but states that interest income earned from the unclaimed accrued royalties may be used to defer initial operating costs during the startup phase.254 MLCI characterizes AMLC’s budget and development timeframe as vague 15:55 Jul 05, 2019 Jkt 247001 Ex Parte Meeting Summary at 7–8. Proposal at 4; see also AMLC Ex Parte Meeting Summary at 8–9 (indicating AMLC selected DataClef as their vendor, as well as a continued willingness to consider other vendors). 248 AMLC Proposal at 7–8. It is unclear how DataClef qualifies as a vendor under AMLC’s criteria, as it was launched in late 2018 and would not have distributed at least $100 million over the last two years. See SOCAN Launches Dataclef Music Services (Oct. 22, 2018), https:// www.socan.com/socan-launches-dataclef-musicservices/. 249 AMLC Proposal at 4. 250 MLCI Reply at 22–24 (‘‘Access to the CIS–NET WID is a benefit for CISAC member societies, but a CISAC member like SOCAN would not have authority to sublicense the WID to anyone else it wants, be it DataClef or the collective.’’). 251 AMLC Proposal at 28. 252 Id. 253 Id. at 28–29 (outlining potential sources of debt financing). 254 Id. at 29. PO 00000 247 AMLC Frm 00034 Fmt 4700 Sfmt 4700 and unrealistic.255 Noting that AMLC’s cost projections are far below the $30 million annual cost estimate provided by the Congressional Budget Office (‘‘CBO’’),256 MLCI argues that AMLC’s budget ‘‘would result in a grossly underfunded collective that could not diligently protect the rights and royalties of songwriters and copyright owners.’’ 257 Other commenters, some but not all affiliated with AMLC, praised AMLC’s approach as reflecting the advantages of a startup or small company, or otherwise favored its proposed budget.258 Indeed, in some instances it is unclear whether AMLC’s budget estimates anticipate each of its statutorily required activities in the manner it envisions executing them, which makes it difficult to assess AMLC’s degree of advance planning. For instance, AMLC does not indicate which expenditures are encompassed by its ‘‘OpEx’’ budget item, which averages approximately $600,000 per year during its first two full years.259 By comparison, MLCI’s estimated operational costs include specific line items for premises, office expenses, accounting services, finance and insurance, and travel expenses, among other expenditures.260 The comparative lack of specificity calls into question the extent to which AMLC considered the full range of the MLC’s necessary operational costs. Similarly, AMLC projects annual expenditures of approximately $600,000 to $730,000 for licensing and legal activities for the first five years of its operation.261 It is unclear whether these allocated amounts fully anticipate the MLC’s statutory obligations in this area, which include participating in Copyright Office rulemakings and the CRJs’ administrative assessment proceedings, and ‘‘[e]ngag[ing] in legal and other efforts to enforce rights and obligations’’ under section 115(d), ‘‘including by filing bankruptcy proofs of claims for amounts owed under licenses’’ or commencing actions for damages and injunctive relief in federal court.262 255 MLCI Reply at 25–29. Congressional Budget Office Cost Estimate, S. 2823 Music Modernization Act (Sept. 12, 2018, revised Sept. 17, 2018), https:// www.cbo.gov/system/files/2018-09/s2823.pdf. 257 MLCI Reply at 25. 258 See Peter Jessel Reply at 1; Peter Resnikoff Reply at 1; H. Hendricks Reply at 1; Alfons Karabuda Reply at 1; Betsy Tinney Reply at 1. 259 See AMLC Proposal at 28. 260 See MLCI Proposal at 32. 261 AMLC Proposal at 28. 262 17 U.S.C. 115(d)(3)(C)(i)(VIII)–(XI); id. at 115(d)(6)(C)(i); see also AIPLA, 2017 Report of the Economic Survey 44 (2017). 256 CBO, E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES ii. Ownership Information, Matching, and Claiming Process As noted, a key aspect of the MLC’s collection and distribution responsibilities includes ingesting data regarding musical works and uses under the license, and identifying musical works and copyright owners, matching them to sound recordings, and ensuring that a copyright owner gets paid as he or she should.263 Both proposals appropriately focus on this core task.264 As noted, both AMLC and MLCI intend to employ established and standard data formats and architectural practices to support data exchange functions, including development of Application Programming Interfaces (‘‘APIs’’) to allow bulk processing of data for larger users 265 and supporting a variety of formats for new submissions ‘‘to accommodate copyright owners who are unable to convert data to standard formats themselves.’’ 266 Each expresses a willingness to utilize current and emerging technologies to match sound recordings to musical works, including hashes and watermarking or fingerprinting technologies.267 Finally, both wisely point to usage reporting as the primary determinant with respect to prioritization of matching resources.268 In terms of populating ownership information, MLCI envisions updates to the database being built into industry deals involving assignment of copyright interests, and by establishing a simple, user-friendly, and ADA-compliant web portal.269 According to MLCI, ‘‘[o]nce the rights database, claiming portal, and license administration are fully operational, the industry will have a single, transparent, publicly-accessible resource for establishing and identifying ownership of mechanical rights.’’ 270 263 Indeed, many interested commenters focused on these ‘‘core’’ or ‘‘principal’’ duties. See, e.g., Recording Academy Reply at 3; DiMA Reply at 2. 264 See Recording Academy Reply at 3 (‘‘Both have also demonstrated a clear commitment to the rights of songwriters.’’). 265 MLCI Proposal at 34–35, 37; AMLC Proposal at 5, 11, 15. Berklee College of Music and MIT Connection Science also noted the importance of the MLC using standardized APIs open protocols and accessibility. Berklee College of Music & MIT Connection Science at 2–5. 266 MLCI Proposal at 37; see AMLC Proposal at 10 (similar, referencing need to ingest comma separated values (‘‘CSV’’) files, Excel files, DDEX files, or data via an online user interface with fields that the end user will populate). 267 AMLC Proposal at 16; MLCI Proposal at 48. 268 MLCI Proposal at 41 (stating ‘‘[t]otal royalties accrued has been a common metric for prioritization, simply because it aims to minimize the total amount of unmatched royalties’’ and that ‘‘[u]sage and vintage of usage are metrics that are related to total royalties’’); AMLC Proposal at 12. 269 MLCI Proposal at 37 & n.6. 270 Id. at 34. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 MLCI ‘‘would undertake targeted activities to clean and improve the initial ownership and matching data using independent data assets . . . drawing on MLC[I]’s unparalleled access to data resources from its industry supporters.’’ 271 While noting that all usage data would be run through matching software, MLCI notes that it plans to develop policies to address issues related to calibration of confidence levels to ensure reliable matching, and prioritization of manual processing through the operations advisory committee in the context of specific unmatched pools.272 MLCI asserts that for at least two years beyond the license availability date, and perhaps longer, any previously accrued unmatched uses will be analyzed by the MLC matching systems and will be publicly available on the rights portal for members of the public to claim.273 MLCI adds that it intends to make repeated attempts to match ‘‘until such time as the Unclaimed Royalties Committee and the Board of Directors . . . determine that a distribution of those unmatched royalties is fair and appropriate under the statute.’’ 274 MLCI contends that ‘‘[t]here is no standard format for modeling musical works ownership agreement information in databases,’’ as there is disagreement over which terms are important to capture, a problem paralleled in capturing chain of title data.275 MLCI therefore presumes a necessity to merge ‘‘information between databases,’’ which ‘‘can require complex reformatting of data.’’ 276 In response, DiMA suggested that ‘‘it may be more effective and efficient to focus efforts on increasing the accuracy of automated methods.’’ 277 DiMA also suggests that improving the standardization of metadata might be achievable at lower cost by making such issues a focus of education and outreach efforts, as distinguished from the more labor- and cost-intensive approach of allowing data submission in a variety of different 271 Id. 272 Id. at 41; see also MLCI Ex Parte Meeting Summary at 3 (stressing ‘‘the importance of robust manual efforts to match uses and locate owners of works’’). 273 MLCI Proposal at 43–44. 274 Id. at 44. The Recording Academy urged the Register to seek further information on MLCI’s commitments to match works and on when such commitments may reasonably be exhausted. See Recording Academy Reply at 4–5. In its ex parte meeting with the Office, MLCI reiterated its intention to ‘‘exceed the statutory minimums related to notice and distribution in order to maximize matching success.’’ MLCI Ex Parte Meeting Summary at 3. 275 MLCI Proposal at 36. 276 Id. 277 DiMA Reply at 10. PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 32289 formats.278 In its meeting with the Office, MLCI reiterated its intention to accept submission of data in multiple formats as a way to accommodate the needs and technical sophistication of a wide array of copyright owners. It also affirmed its commitment to education and outreach, noting that such efforts will inform the design of its rights portal and options for data submission.279 AMLC commits to continually engaging with stakeholders to monitor and review new frameworks, and has established an advisory technology committee comprised of members with significant technology backgrounds.280 AMLC plans to ‘‘build a robust interface to allow for bulk transitions of catalog or individual ownership changes . . . to be properly updated through the chosen authoritative data partners and vendors.’’ 281 AMLC professes that its system will be designed in part for selfpublished songwriters, who represent the largest percentage of music owners but in many cases have the lowest level of understanding of copyright requirements.282 AMLC anticipates that incomplete DSP data will be analyzed and segmented based on the distributor of the underlying recording, and repeatedly expresses optimism that the MLC and DSPs could work collaboratively to address such issues.283 Regarding the claiming process specifically, MLCI is confident that its ownership claiming portal will be usable by stakeholders of any sophistication level, and it will dedicate staff to assist copyright owners with troubleshooting and claims submission.284 Likewise, AMLC intends to utilize DataClef’s pre-built ‘‘claiming portal,’’ allowing copyright owners to search a database of unmatched and/or partial ownership recordings, and identify recordings of their compositions.285 AMLC envisions implementing a change management module and reliance upon ‘‘chosen authoritative data partners and vendors.’’ 286 It proposes that its portal will stream 30-second preview clips to 278 Id. at 10–11. Ex Parte Meeting Summary at 2–3. 280 AMLC Proposal at 15–16, 36. 281 Id. at 10. 282 Id. 283 See, e.g., id. at 4 (‘‘our first priority is to meet with DiMA members and other DSPs to collaborate, white-board, diagram/discuss and further work through technology topics’’). 284 MLCI Proposal at 37 & n.6. 285 AMLC Proposal at 9. 286 Id. at 9–10. 279 MLCI E:\FR\FM\08JYR1.SGM 08JYR1 32290 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations allow rightsholders to confirm matches.287 In response to the Office’s request for ‘‘target goals or estimates for matching works in each of the first five years,’’ 288 MLCI states that its target ‘‘is, and will always be, 100% success.’’ 289 But it argues that because match rates are easily manipulated, ‘‘the critical question is not match rate, but the quality of matches.’’ 290 Therefore, MLCI will ‘‘fine-tune[ ]’’ its algorithms based on system complaints, feedback, and disputes, and will investigate inaccurate matches.291 MLCI also notes that it will explore developments in algorithms, machine learning, and artificial intelligence.292 For its part, AMLC believes that it can establish a dataset of 80 million works and recordings, ‘‘with corresponding works that are matched with high confidence to recordings of approximately 70%, or 56 million works.’’ 293 It estimates that the percentage of works matched will exceed 90% by 2024.294 AMLC’s estimates are based on several key assumptions, including 15% growth per year in works and recordings used in covered activities.295 Based on these submissions, the Copyright Office finds that both candidates have demonstrated a reasonable ability to acquire and build the necessary data processing capabilities for ownership identification, matching, and claiming processes. In particular, the Office appreciates the level of detail provided by both entities on their approach to matching works, description of plans to implement public claiming portals, and commitment to prioritizing usage, or total royalties accrued, when focusing on minimizing the incidence of unmatched sound recordings. The Office also appreciates that both candidates intend to adhere to established formats for data transfers, as well as use standard identifiers currently used by the global music industry. The Office expects the selected designee to follow through on these commitments, to continue to explore technological developments in matching works, and to publicly disclose and update the methods used in its matching efforts. jbell on DSK3GLQ082PROD with RULES 287 Id. at 9. 288 NOI at 65751. 289 MLCI Proposal at 42. 290 Id. at 43. 291 MLCI Proposal at 43; see also MLCI Ex Parte Meeting Summary at 2–3. 292 MLCI Proposal at 39. 293 AMLC Proposal at 12. 294 Id. at 12. 295 Id. at 12–13. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 iii. Dispute Resolution As noted, the MLC dispute resolution committee will establish policies and procedures for copyright owners to address disputes relating to ownership interests in musical works. Neither candidate has developed detailed procedures governing this committee’s activities, but both provided sufficient information regarding their understanding of the scope of its responsibilities. MLCI will address disputed claims of ownership using existing tools commonly used in the industry, including algorithms used to detect fraud, establishing a process by which users can be authenticated, and tracking changes made by MLCI employees.296 It notes that its dispute resolution committee and board have extensive experience in ownership matters, including the role of abandoned property laws, processes for validating copyrighted arrangements of public domain works, public domain fraud, and implementation of legal holds.297 Similarly, AMLC states that its conflict resolution committee will recommend and implement policies to address discrepancies, disputes, and fraudulent claims.298 It reiterates that it will work with DSPs to identify the origin of false claims and create incentives for distributors to reduce fraud.299 As noted above, it also envisions employing a robust data change management module.300 In ex parte meetings, both MLCI and AMLC confirmed their understanding that the dispute resolution committee’s role does not include adjudicating ownership disputes on the merits. Rather, both expressed their understanding that the committee’s function is limited to the establishment of policies and procedures to govern the resolution of such disputes. iv. Maintenance of Musical Works Database The Office requested input regarding the operation and maintenance of a well-functioning database, including specific information on how each entity would address issues of security, redundancy, privacy, and transparency.301 Both depict a technological approach that is fully scalable and reliable, with the ability to PO 00000 296 MLCI Proposal at 44–45. at 45–46. 298 AMLC Proposal at 14. 299 Id. 300 Id. at 10. 301 NOI at 65751. 297 Id. Frm 00036 Fmt 4700 Sfmt 4700 handle large data sets.302 They also each commit to establishing an information security management system that is certified with ISO/IEC 27001 and meets the EU General Data Protection Regulation requirements, and other applicable laws, and to employing redundancy practices to minimize data loss.303 While its policies and procedures for accessing information in the databases are not yet finalized, MLCI commits to following the regulations promulgated by the Register concerning ‘‘the usability, interoperability, and usage restrictions of the musical works database.’’ 304 AMLC proposes two types of access to the musical works database. First, the general public would have access to ‘‘a minimal amount of data that is generally available to the public already.’’ 305 Second, AMLC will offer ‘‘DSPs and other key constituents’’ access to feeds with ‘‘more comprehensive data that is generally not public, but necessary for proper royalty and ownership processing (such as splits, territorial rights etc.).’’ 306 It proposes to develop data access rules ‘‘in collaboration between publishers’’ to ensure confidentiality and compliance with domestic and international privacy and data security policies.307 AMLC’s submission does not explicitly acknowledge the statutory requirements for provision of access, although elsewhere AMLC has pledged to conform any policies to subsequent regulatory activities.308 Based on this information, the Office finds that both MLCI and AMLC have the capability to maintain and provide access to the required public database of musical works. The Office appreciates each entity’s commitment to ensure compliance with all relevant legal obligations with respect to privacy and security. v. Notices of License, Collection and Distribution of Royalties, Including Unclaimed Accrued Royalties The MLC’s administrative role includes accepting notices of license (and terminating them when the licensee is in default), and collecting and distributing royalties for covered 302 AMLC Proposal at 16; MLCI Proposal at 49; see also DiMA Reply at 9–10 (addressing potential volume of transactions to be processed by the MLC). 303 MLCI Proposal at 50; AMLC Proposal at 17. 304 MLCI Proposal at 50 (quoting 17 U.S.C. 115(d)(3)(E)(vi)). 305 AMLC Proposal at 17 (detailing fields with respect to musical works and sound recordings). 306 Id. 307 Id. 308 Id. at 78 (AMLC bylaw art. 3). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations activities, including unclaimed funds after the prescribed holding period.309 With respect to notices of license, MLCI reports that it ‘‘will strictly enforce the monthly reporting requirements under Section 115(d)(4)(A), and will promptly issue notices of default and terminations of licenses where applicable.’’ 310 It adds that it will distribute royalty pools obtained through legal proceedings to copyright holders based on usage reports and that where funds do not match the full amount of royalties due, they would be distributed on a pro rata basis.311 AMLC notes that its board members have ‘‘extensive experience in all matters of resolution of royalty collections and payments, including bankruptcy proceedings,’’ and therefore it will be well positioned to adopt policies ‘‘to manage all known situations’’ related to licensee and licensor payments.312 With respect to distributions, MLCI intends to provide ‘‘prompt, complete, and accurate payments to all copyright owners.’’ 313 It interprets section 115(d)(3)(J)(i)(I)—which provides that the first distribution of unclaimed accrued royalties ‘‘shall occur on or after January 1 of the second full calendar year to commence after the license availability date’’—to provide that no such distribution shall occur prior to 2023.314 Additionally, MLCI interprets the statute as providing discretion to retain unclaimed accrued royalties beyond the statutory holding period to allow for additional efforts at matching and claiming, and promises to do so where there is ‘‘reasonable evidence’’ that such efforts may bear fruit.315 It is committed to diligent efforts to match uses and works, including ‘‘robustly and relentlessly’’ deploying its matching system with respect to unmatched works, and holding unclaimed accrued royalties beyond the statutory eligibility for distribution, to obtain more matches, and distribute more royalties to rightful owners.316 MLCI further states that its royalty payment systems will comply with relevant tax law obligations, ‘‘including 309 17 U.S.C. 115(d)(3)(C)(i)(I)–(II). Proposal at 51. 311 Id. at 52. 312 AMLC Proposal at 18. 313 MLCI Proposal at 52. 314 17 U.S.C. 115(d)(3)(J)(i)(I); MLCI Proposal at 52. 315 Id. at 52–53. 316 Id. at 43–44, 53–54 (discussing ‘‘mak[ing] information on its unmatched works available to the public on its rights portal’’ and undertaking ‘‘significant outreach to educate the public on accessing this information and making claims’’). jbell on DSK3GLQ082PROD with RULES 310 MLCI VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 collection of valid documentation (e.g., IRS Forms W–8 and W–9), administration of information statements and other reporting requirements (e.g., IRS Forms 1099 and 1042), and, where applicable, the accurate withholding and depositing of U.S. tax payments.’’ 317 It also notes that its board members have experience overseeing all aspects of royalty payment processing.318 AMLC does not specifically address timing of initial and annual distribution of unclaimed royalties, instead emphasizing that it intends to keep distribution of unclaimed royalties to the lowest possible limit, and to only make such distributions ‘‘as a last resort after every possible effort is put into identifying the rights holder(s).’’ 319 It further notes that its unclaimed royalties committee will seek to develop a policy ‘‘to ensure the reserve fund is sized and managed appropriately.’’ 320 In addition, AMLC plans to use actuarial data to make more accurate projections regarding accrued and unclaimed liquidations, interest earned, and potential claims.321 AMLC will outsource royalty payment to established payment vendors, ‘‘or an entity that . . . has built the needed workflow/infrastructure into the existing work process that can be repurposed for AMLC distributions, such as . . . MRI and/or DataClef.’’ 322 This entity ‘‘will also be responsible for the storage of personal information (including tax ID, name, address, bank info etc.) under security compliant systems.’’ 323 In general, the Office is persuaded that both candidates, through vendors or a combination of vendors and in-house capabilities, are capable of carrying out functions relating to collection and distribution of royalties. As with some other requirements, however, MLCI’s submission provides a more thorough explanation of how it would approach these matters. It articulates several policies it intends to implement to maximize matching, including holding accrued royalties beyond the statutory holding period, making information on unmatched works available on a public portal, and undertaking outreach and education efforts. Moreover, AMLC does not specifically address MLC functions regarding notices, recordkeeping, and collection under the license. For these PO 00000 317 Id. at 51. 318 Id. 319 AMLC 320 Id. Proposal at 18–19. at 19. 321 Id. 322 Id. at 18. 323 Id. Frm 00037 Fmt 4700 Sfmt 4700 32291 reasons, MLCI has made a more persuasive showing with respect to these requirements. With respect to the distribution of unclaimed, accrued royalties, the Copyright Office agrees with MLCI that the statute does not permit the first such distribution to occur before January 1, 2023.324 The Office also agrees that unclaimed accrued royalties may be retained beyond the statutory holding period.325 vi. Education and Outreach Both candidates appear to have developed multifaceted education and outreach plans to fulfill this statutory duty.326 MLCI notes that it is already engaged in significant education and outreach efforts to inform the relevant industries and the general public.327 It plans to continue these efforts through the MLC’s launch, and thereafter will ‘‘provide regular information and updates to the public,’’ including through ‘‘press releases, social media, articles and advertisements in trade publications, and speaking engagements at music industry events, conferences, and festivals.’’ 328 MLCI notes that its board includes prominent music industry professionals who will use their expertise and connections to ensure that information is disseminated throughout the industry.329 AMLC has developed a strategy focused on three tasks: Engagement, education, and follow-up efforts.330 It seeks to reach as many potential users as possible through a variety of channels, including advertising, social media, industry conferences, and sponsorships, and relying on its own board members’ connections.331 It specifically commits to making information available in ‘‘English, Spanish, and additional languages on an 324 See 17 U.S.C. 115(d)(3)(J)(i)(I) (‘‘The first such distribution shall occur on or after January 1 of the second full calendar year to commence after the license availability date, with not less than 1 such distribution to take place during each calendar year thereafter.’’). 325 See id. at 115(d)(3)(H)(i) (‘‘The mechanical licensing collective shall hold accrued royalties associated with particular musical works (and shares of works) that remain unmatched for a period of not less than 3 years after the date on which the funds were received by the mechanical licensing collective, or not less than 3 years after the date on which the funds were accrued by a digital music provider that subsequently transferred such funds to the mechanical licensing collective pursuant to paragraph (10)(B), whichever period expires sooner.’’) (emphasis added). 326 See generally, MLCI Proposal at 62–63; AMLC Proposal at 30–33. 327 MLCI Proposal at 62. 328 Id. at 63. 329 Id. 330 AMLC Proposal at 30–33. 331 Id. at 30. E:\FR\FM\08JYR1.SGM 08JYR1 32292 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations as needed basis for targeted songwriting communities where the MLC determines special outreach is needed.’’ 332 AMLC also plans to produce a series of tutorial videos on specific aspects of the royalty collection and distribution process.333 The Recording Academy asserts that ‘‘[w]ithout an effective outreach program, the Collective will not succeed.’’ 334 While noting that both proposals contain information regarding public outreach, the Recording Academy suggests that both are insufficiently detailed with respect to clear and executable plans, and how each will measure the effectiveness of outreach.335 The Office questioned each candidate about specific plans and metrics in subsequent meetings. AMLC expressed a variety of ambitious outreach ideas, although it was not necessarily clear whether it had yet established a specific plan and timeline (or whether all intended activities were reflected in its budget planning).336 MLCI represented that ‘‘numerous educational and outreach documents have been drafted and release is pending the determination on designation.’’ 337 It plans to utilize focus groups with respect to design of the rights portal, and leverage its board and committee members, as well as endorsers, in national and international outreach.338 Ultimately, the Office finds that both candidates have the capability to undertake the education and outreach efforts required of the MLC. Following this designation, the selected entity should work with the Office, the DLC, and other stakeholders to ensure that rightsholders are adequately informed about the new licensing framework and the MLC’s functions. These efforts should include ‘‘clear benchmarks that measure [the MLC’s] outreach effectiveness so that it can modify and adapt its strategies and tactics to best serve the entire songwriter community.’’ 339 In addition, as per Congress’s directive, the Office will consider best practices in education and outreach efforts as part of its study on unclaimed royalties.340 332 Id. 333 Id. at 32–33. Academy Reply at 5. 335 Id. at 5–6. 336 See AMLC Ex Parte Meeting Summary at 17– 20. 337 MLCI Ex Parte Meeting Summary at 3. 338 Id. 339 Recording Academy Reply at 5. 340 Public Law 115–264, sec. 102(f), 132 Stat. at 3722–23. vii. Copyright Office’s Analysis Overall, the submissions suggest that both MLCI and AMLC have or will have the basic administrative and technological capabilities to perform the required functions under the statute. For the reasons discussed above, however, MLCI has demonstrated a greater capacity to carry out several of these responsibilities. In particular, it is apparent that MLCI has established a more detailed operational framework and has garnered input from a broader set of interested parties. MLCI’s submission reflects substantially more detailed planning with respect to organizational structure, vendor selection, and collection and distribution procedures. Indeed, the Recording Academy, a rare organization to withhold endorsement until it was able to study each candidates’ proposals, weighed in on the perceived capabilities of the two proposals, ultimately endorsing MLCI ‘‘upon careful consideration of both submissions.’’ 341 While praising the AMLC’s commitment and role in ‘‘opening up dialogue’’ on issues with respect to transparency and board representation, the Academy noted that MLCI’s ‘‘submission embodies a thoughtful, meticulous, and comprehensive approach,’’ concluding that it was ‘‘best equipped to satisfy’’ the duties of the MMA.342 For somewhat similar reasons, the Copyright Office concludes that MLCI is better equipped to operationalize the many statutory functions required by the MMA. To be sure, AMLC’s goals and principles are laudable, and its submission includes a number of ideas that should be given further consideration. But while AMLC’s leaner approach potentially could provide certain benefits, MLCI’s planning and organizational detail provide a more reliable basis for concluding that it will be able to meet the MLC’s administrative obligations by the license availability date.343 The MLC is not a start-up venture or small business that can adjust its rollout timing or pivot its focus; rather, it is tasked with establishing, for the first time, a complex and highly regulated administrative framework designed to serve all who are subject to (or make use jbell on DSK3GLQ082PROD with RULES 334 Recording VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 341 Recording Academy Reply at 2–3. The Recording Academy noted that it represents ‘‘thousands of working songwriters and composers, many of whom are independent, self-published, or unaffiliated songwriters.’’ Id. at 1. 342 Id. at 3. 343 AMLC’s failure to file a reply comment in this proceeding underscores this conclusion. PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 of) the statutory license, under legallymandated timeframes. MLCI’s proposal as a whole reflects a more realistic understanding of the MLC’s responsibilities under this new system and indicates that it is better positioned to undertake and execute the full range of administrative functions required of the MLC within these critical first five years.344 The Office expects that MLCI will build upon its considerable planning in a flexible and conscientious manner that also considers input from the to-bedesignated DLC non-voting or committee members, as well as the broader musical work copyright owner and songwriting communities. B. Digital Licensee Coordinator The Office received one proposal, by DLCI, for designation as the DLC.345 DLCI’s founding members are five of the largest digital music providers—Spotify USA Inc., Apple Inc., Amazon Digital Services LLC, Google LLC, and Pandora Media, LLC. DLCI’s submission includes a proposal directly responding to the NOI, and a variety of supporting documents such as a certificate of incorporation, bylaws, and a five-year business plan.346 For the reasons described below, the Register has concluded that DLCI meets each of the statutory criteria required of the digital licensee coordinator, and that each of its individual board members are wellqualified to perform the statutory functions. Accordingly, the Register designates DLCI and its members, with the Librarian’s approval. As noted above, in designating a DLC, the Register must apply similar statutory criteria regarding nonprofit status, endorsement (from digital music providers in this instance), and ability to perform the DLC’s administrative capabilities. Unlike the MLC, the Register may decline to designate a DLC if she is unable to identify an entity that fulfills each of the statutory qualifications; in that event, the statutory references to the DLC go without effect unless or until a DLC is designated.347 But designation of a DLC would allow that entity to start doing important work. The DLC’s authorities and functions include enforcing notice and payment obligations with respect to the administrative assessment, publicizing the ability of copyright owners to claim unmatched musical 344 Indeed, MLCI has pointed out that its budget is far more in line with the CBO estimate than is AMLC’s. MLCI Reply at 25. 345 DLCI Proposal at Ex. A–1–2 (certificate of incorporation). 346 See DLCI Proposal. 347 17 U.S.C. 115(d)(5)(B)(iii). E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations work royalties through the MLC, appointing representatives of digital music providers to the MLC’s operations advisory committee and generally representing digital music providers’ interests as a non-voting member on the MLC board, and participating in proceedings before the CRJs and the Copyright Office.348 As a result, it is important that the DLC is a wellqualified representative of both digital music providers who take advantage of the section 115 blanket license and significant nonblanket licensees who will benefit from the new MLC database. 1. Organization, Board Composition, and Governance Beginning with the first required statutory qualification, DLCI’s proposal sufficiently demonstrates that it is a nonprofit created to carry out responsibilities under the MMA. DLCI is a Delaware nonprofit ‘‘organized to represent digital music providers in connection with the administration of the mechanical license provided under Section 115 of the United States Copyright Act.’’ 349 DLCI thus satisfies the first statutory criterion that it be a single nonprofit entity created to carry out certain statutory responsibilities.350 DLCI’s board is composed of the following initial members: Nick Williamson (Apple, Inc.), Lisa Selden (Spotify), Sarah Rosenbaum (Google), James Duffett-Smith (Amazon Music), and Cynthia Greer (Sirius XM Radio Inc., the parent of Pandora Media, LLC). Collectively and individually, these individuals have a significant and diverse background in the music licensing marketplace, including representing digital music providers and in music database administration, and thus qualify for appointment to the board.351 DLCI has selected three officers: James Duffett-Smith as board chair, Sarah Rosenbaum as treasurer, and Lisa Selden as secretary, and anticipates hiring an executive jbell on DSK3GLQ082PROD with RULES 348 See generally, id. at 115(d)(5)(C). 349 DLCI Proposal at Ex. C–1; id. at Ex. A–1 (certificate of incorporation) (stating that ‘‘[n]o part of the net earnings of [DLCI] shall inure to the benefit of, or be distributable to, its members, trustees, directors, officers or other private persons.’’). 350 17 U.S.C. 115(d)(5)(A)(i). 351 DLCI Proposal at Ex. C–14–17 (for example, Williamson previously headed the ‘‘music industry technical standards body, DDEX’’; Selden works to improve copyright matching at Spotify and, while at ASCAP, processed royalties ‘‘for Amazon, Apple, Pandora and YouTube’’; Rosenbaum has experience at both Google and Music Reports, where she launched a section 115 rights-claiming portal; and Duffett-Smith and Greer each have over fifteen years of experience licensing music for digital services). VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 director.352 ‘‘Subject to input from and discussion with the MLC,’’ DLCI anticipates designating a non-director, officer, or employee to serve as the nonvoting member of the MLC board; this potentially may be DiMA’s CEO.353 In response to a request from the Office, DLCI named its representatives to the MLC’s operations advisory committee.354 Because MLCI and AMLC proposed different numbers of their own representatives to the operations advisory committee (six and four, respectively), DLCI stated that it will ‘‘work with the [designated] MLC to finalize the appointees to the Committee following designation.’’ 355 DLCI also anticipates creating several committees not required by the MMA. The Executive Committee will exercise the powers of the board, if and when the board exceeds nine members.356 The Compliance Committee will be responsible for ‘‘receiving and following up on reports from the MLC of noncompliant nonblanket licensees.’’ 357 The Regulatory Committee will engage in both CRJ and Copyright Office proceedings.358 And the Re-Designation Committee will prepare for a possible redesignation of DLCI as the DLC.359 DLCI’s bylaws outline rules governing membership eligibility, voting, and dues; meetings and schedules; its board, committees, and officers; and other rules and operational provisions. DLCI creates three classes of membership (principal, charter, and general); until 2024, the principal members are DLCI’s founding members.360 Beginning in 2024, the principal members will be determined on a share basis by those charter members with the five highest stream counts, determined every two years.361 Charter members are those who have adhered to the mission and standards of DLCI for at least two years and have paid relevant dues.362 The bylaws also set out the voting structure, 352 DLCI Ex Parte Meeting Summary at 1 (June 4, 2019); DLCI Proposal at Ex. B–18. 353 DLCI Proposal at 8; see id. at Ex. B–16–18. 354 Letter from DLCI to U.S. Copyright Office at 1 (June 13, 2019) (proposed committee members are Lisa Selden (Spotify), Nick Williamson (Apple Music), Alan Jennings (Amazon), Alex Winck (Pandora Media LLC), and Jennifer Rosen (Google Play Music and YouTube Music)); see also DLCI Proposal at Ex. C–12. 355 Letter from DLCI to U.S. Copyright Office at 1. 356 DLCI Proposal at Ex. B–13–14. 357 Id. at Ex. C–7. 358 Id. at Ex. C–11. 359 Id. at Ex. C–12–13. 360 Id. at Ex. B–2–3. 361 Id. at Ex. B–3. 362 Id. at Ex. B–2–3. PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 32293 a meeting schedule, and a structure for collecting dues and funding the DLC.363 2. Endorsement Under the second designation criterion, the DLC must be ‘‘endorsed by and enjoy[ ] substantial support from digital music providers and significant nonblanket licensees that together represent the greatest percentage of the licensee market for uses of musical works in covered activities, as measured over the preceding 3 calendar years.’’ 364 The Office asked for ‘‘an explanation of how the proposed DLC has verified, calculated, and documented such endorsement and substantial support, including how the licensee market was calculated.’’ 365 In response, DLCI indicated that it interprets the statutory term ‘‘uses’’ as referring to ‘‘actual use of music pursuant to covered activities,’’ and that such use could be measured in ‘‘number of subscribers, number of streams, or amount of royalties paid.’’ 366 DLCI stated that Congress could have chosen a different term if it wanted to measure endorsement by reference to, for example, a percentage of music providers engaged in covered activities or the number of musical works available.367 DLCI did not disclose usage metrics for its member companies, stating that for ‘‘any individual music service’’ usage metrics are ‘‘extremely confidential and proprietary.’’ 368 Instead, DLCI offered aggregated metrics provided by the Harry Fox Agency (‘‘HFA’’) and MRI. This information indicated that DLCI members ‘‘represented by [HFA and MRI] combined had over 84% of the aggregate streams, over 94% of the aggregate subscribers, and over 88% of the aggregate royalties paid’’ over the last three years.369 The Copyright Office is tasked with evaluating the support of both digital music providers who will use the blanket license as well as significant nonblanket licensees.370 But since it is currently before the license availability date, it is unclear which digital music providers will be taking advantage of 363 Meetings will be as-needed and at least annual, with specified advance notice. Id. at Ex. B– 7. All members have one vote, with some exceptions. Id. at Ex. B–4. DLCI’s annual budget is dues-funded; at least 60% of is paid for by Charter Members and not more than 40% will be paid for by General Members. Id. at Ex. B–5. The board may also approve special assessments under certain circumstances. Id. at Ex. B–5–6. 364 17 U.S.C. 115(d)(5)(A)(ii). 365 NOI at 65753. 366 DLCI Proposal at 4–5. 367 Id. at 4. 368 Id. at 5. 369 Id. at 5–6 (emphasis omitted). 370 17 U.S.C. 115(d)(5)(A)(ii). E:\FR\FM\08JYR1.SGM 08JYR1 32294 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations the blanket license. DLCI does not describe whether its founding members would qualify as significant nonblanket licensees or blanket licensees but states that it is ‘‘committed to soliciting other interested licensee services to participate in all aspects of the DLC’’ and plans to ‘‘bolster its support and endorsement’’ going forward.371 In submitting the aggregated HFA and MCI metrics, DLCI offers three different criteria for evaluation (i.e., subscribers, streams, or royalties paid). As the statutory language here is similar to the MLC endorsement/support criteria,372 the Office believes that the DLC endorsement/support standard is intended to parallel the MLC standard. Thus, the entity designated as the DLC should be endorsed and supported by digital music providers and significant nonblanket licensees that together paid the largest aggregate percentage (among DLC candidates) of total royalties from the use of their musical works in covered activities in the United States during the statutory three-year period. In any event, DLCI is the sole candidate, and each criterion signals support over 80% of the relevant pool. DLCI thus satisfies the second statutory criterion for designation. jbell on DSK3GLQ082PROD with RULES 3. Administrative and Technical Capabilities General. In response to questions regarding its administrative capabilities, DLCI submitted a five-year business plan, which includes plans for establishing and enforcing administrative assessment payment obligations, identifying unmatched musical work owners, including outreach, participating in MLC governance and CRJ proceedings, maintaining records of its activities, and an anticipated budget.373 DLCI’s ‘‘primary purpose will be to coordinate the activities of the digital 371 DLCI Proposal at 6–7; see also Oversight of the U.S. Copyright Office, Hearing Before the H. Comm. on the Judiciary, 116th Cong. (2019) (statement of Rep. Escobar) (indicating that the DLC should not overlook smaller digital platforms and new market entrants). 372 Compare 17 U.S.C. 115(d)(5)(A)(ii) (The DLC shall be ‘‘a single entity that . . . is endorsed by and enjoys substantial support from digital music providers and significant nonblanket licensees that together represent the greatest percentage of the licensee market for uses of musical works in covered activities, as measured over the preceding 3 calendar years.’’), with id. at 115(d)(3)(A)(ii) (The MLC shall be ‘‘a single entity that . . . is endorsed by, and enjoys substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years.’’). 373 See NOI at 65753; DLCI Proposal at Ex. C; see also 17 U.S.C. 115(d)(5)(C) (outlining authorities and functions of DLC regarding these topics). VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 music services relating to the mechanical license provided under Section 115, including through the specific authorities and functions identified in the statute.’’ 374 It will ‘‘fairly represent digital licensee services, and effectively coordinate with the MLC, to help realize the goals of the MMA to provide licensing efficiency and transparency, and to ensure that the new blanket licensing system is, and remains, workable for digital music providers as well as copyright owners.’’ 375 DLCI describes its administrative capabilities as being ‘‘managed by subject-matter experts with relevant industry experience and relationships’’ to ‘‘carry out its statutory functions and help ensure that the blanket licensing system is implemented successfully, to the benefit of all stakeholders in the industry.’’ 376 Membership. Although DLCI represents a large swath of the relevant licensee market, it does not represent all licensees, and presumably the market will see new entrants over the next five years.377 Indeed, DLCI’s membership is identical to DiMA’s membership. DLCI has explained that it is committed to growing its membership to other DSPs and it is confident it will do so, noting that any digital music provider or significant nonblanket licensee can become a member of DLCI and smaller licensees will enjoy some protections, as the bylaws require certain actions to be passed by a supermajority of members.378 DLCI’s bylaws further outline how different membership tiers will be charged dues, and its business plan explains that operating expenses will be ‘‘modest, and intend[ed] to minimize overhead costs to the extent possible.’’ 379 Administrative Assessment. DLCI asserts that it wishes to ‘‘minimize the need for contested proceedings or enforcement actions, by prioritizing negotiations and cooperation among licensees and the MLC.’’ 380 DLCI is developing an agreement regarding the apportionment of the administrative assessment among the digital music licensees and significant non-blanket licensees ‘‘and expects to be able to establish a plan for that allocation before—or shortly after—the DLC is designated.’’ 381 Should the administrative assessment be decided by the CRJs, DLCI suggests it is ‘‘uniquely positioned to support the [Copyright Royalty Board] in its assessments of ‘reasonable costs,’ based on its members’ experience with largescale data management practices.’’ 382 While it does not endorse either candidate for the MLC, DLCI has been communicating with the two MLC candidates ‘‘to support the development of efficient MLC operations and foster a collaborative working relationship’’ regarding payment enforcement responsibilities.383 MLC Participation. DLCI hopes that its representatives ‘‘will be able to help facilitate discussions between the MLC and DLC regarding the ongoing evaluation of the administrative assessment, and help streamline any potential [Copyright Royalty Board assessment] proceedings’’ and apportionment.384 While the administrative assessment proceeding will be conducted by the CRJs and its cost is beyond the ambit of the designation process, the Office notes that in some areas, DiMA—whose membership is coextensive with DLCI’s founding and current members— appeared to envision a narrower range of activities, such as those related to manual claims processing and enforcement, than either of the MLC candidates.385 Given the nascent status of operations, the Office would expect DLCI’s participation on the MLC board to be flexible, as the Office expects from the MLC. In any event, DLCI suggested that coordination and communication may improve following conclusion of the designation process. Confidentiality. To fulfill its statutory function of records maintenance, DLCI selected a secretary who will be responsible for ‘‘ensuring that books, reports, statements, certificates, and all other documents and records are properly kept and filed’’ 386 and for ‘‘managing the confidentiality and security of sensitive information’’ shared between it and the MLC.387 With respect to confidentiality and the DLC representative on the MLC board, DLCI states that in addition to designating a 381 Id. at Ex. C–4, C–5. at Ex. C–6. 383 Id. at Ex. C–3. 384 Id. at Ex. C–9–10. 385 Compare DiMA Reply Comments at 10, and DLCI Ex Parte Meeting Summary at 2, with MLCI Proposal at 36 (‘‘Merging data from multiple sources on conflicts will require significant manual processing and will be very resource-intensive.’’). 386 DLCI Proposal at Ex. C–11; DLCI Ex Parte Meeting Summary at 1. 387 DLCI Proposal at Ex. C–12. 382 Id. Proposal at Ex. C–1. at Ex. C–2. 376 Id. at Ex. C–13. 377 For example, DLCI membership does not include TIDAL, Deezer, Soundcloud, iHeartRadio, or Napster. 378 DLCI Proposal at Ex. C–13–14; DLCI Ex Parte Meeting Summary at 2. 379 DLCI Proposal at Ex. C–18. 380 Id. at Ex. C–3. PO 00000 374 DLCI 375 Id. Frm 00040 Fmt 4700 Sfmt 4700 E:\FR\FM\08JYR1.SGM 08JYR1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations jbell on DSK3GLQ082PROD with RULES non-DLCI director, officer, or employee, it plans on ‘‘establishing, through agreement, appropriate limitations on the information that may be shared between [the MLC and DLC], as well as procedures for shielding information concerning individual licensee service members of the DLC from other licensee service members.’’ 388 If necessary, DLCI states that it could address any confidentiality or administration issues with the MLC’s vendors in specific agreements.389 The Copyright Office is hopeful that relevant parties will agree on appropriate procedures to protect confidential, proprietary, or otherwise sensitive information, and notes that the Register has ultimate responsibility to proscribe regulations related to the protection of confidential information by the MLC, DLC, and their employees, committees, or board members.390 Education and Outreach. DLCI expects to ‘‘develop standardized text identifying and providing contact information for the MLC, and instructions for how a songwriter or other copyright owner of musical compositions can claim accrued royalties by providing the necessary information to the MLC’’ for digital licensees to post on their services.391 DLCI generally expressed intentions to engage in educational efforts and plans to coordinate outreach efforts with the MLC to inform songwriters and publishers of the MLC and how to claim royalties, including by ‘‘develop[ing] a protocol to guide its members’ individual outreach’’ and ‘‘participat[ing] in songwriter and publisher industry events, including those organized by the MLC.’’ 392 DLCI has also committed to participating in outreach events with the Copyright Office.393 The Office finds that DLCI has addressed the main issues regarding its administrative capabilities. DLCI proposed a thorough and thoughtful governance structure, criteria for membership, and dues structure, and appears well-positioned to participate in an administrative assessment proceeding if necessary. Other DLCI functions, such as educational and outreach efforts, plans to enforce notice and payment obligations, and ensuring that DLCI has the broadest possible support of the licensee market, appear more inchoate and may benefit from 388 NOI at 65753; DLCI Proposal at 8; see also id. at Ex. C–9. 389 DLCI Proposal at 10. 390 17 U.S.C. 115(d)(12)(C). 391 DLCI Proposal at Ex. C–8. 392 Id. 393 DLCI Ex Parte Meeting Summary at 2. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 continued refinement. Overall, the Office concludes that DLCI satisfies the third statutory criterion for designation as the DLC and has demonstrated a commitment to building out its operations and execution of its statutory functions. C. Conclusion For the reasons set forth above, the Register is selecting and designating MLCI and DLCI, and their individual board members, which Librarian approves. MLCI has demonstrated it meets each of the statutory criteria; indeed, it is the only candidate that satisfies the requirement of being endorsed by, and enjoying substantial support from, musical work copyright owners that represent the greatest percentage of the licensor market for covered activities in the past three years. Further, by articulating a more thoughtful, methodical, and comprehensive approach towards executing the many important administrative and technological duties of the collective, MLCI has also demonstrated that it is better positioned to perform the required functions. The Register has reviewed and determined that each of MLCI’s individual board members are well-qualified to serve on the board in accordance with the statutory criteria. Similarly, DLCI has demonstrated that it fulfills each of the statutory criteria for designation, and that its individual board members are well-qualified to serve on its board pursuant to the statute. Importantly, both the MLCI and the DLCI submissions acknowledge that their intended roles carry the responsibility to broadly represent the interests of musical work copyright owners and songwriters, or digital music providers, respectively, with respect to the section 115 mechanical license. In particular, the Office appreciates AMLC’s proposal. The Office hopes that MLCI will consider whether any aspects of the AMLC’s proposal should be incorporated into its future planning. As the legislative history amply documents, this historic music copyright legislation was enacted only in the wake of significant consensusbuilding and cooperation across a wide berth of industry stakeholders.394 Now 394 See, e.g., Music Policy Issues: A Perspective from Those Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836 Before H. Comm. On the Judiciary, 115th Cong. 4 (2018) (statement of Rep. Nadler) (‘‘For the last few years, I have been imploring the music community to come together in support of a common policy agenda, so it was music to my ears to see—to hear, I suppose—the unified statement of support for a package of PO 00000 Frm 00041 Fmt 4700 Sfmt 4700 32295 that it is time to roll up sleeves, sustained dedication to these worthy goals will be critical as the MLC and DLC turn to the many tasks involved in preparation for the license availability date. The Copyright Office looks forward to working with the MLC, DLC, and other interested parties on next steps in MMA implementation. As noted, the MLC and DLC, along with the Copyright Office, are asked to facilitate education and outreach regarding the new blanket licensing system to the broader songwriting community. In the coming months, the Office will initiate additional regulatory activities required under the statute and begin planning its public policy study regarding best practices, which the MLC may implement to identify musical work copyright owners with unclaimed accrued royalties and reduce the incidence of unclaimed royalties. Future information regarding those activities will be made available at: https:// www.copyright.gov/musicmodernization/. Finally, the Copyright Office finds that there is good cause to make the codification of this designation effective on publication. Timely designation of the MLC and DLC are vital to the success of Congress’s reform of the section 115 statutory license. Indeed, by the statutory language, the designation would be timely based solely upon the date of publication in the Federal Register, but reflecting the designation in Copyright Office regulations will be helpful to the public.395 The statutory designation deadline is the same deadline for the CRJs to commence a reforms issued by key music industry leaders earlier this month. Many of these measures, such as the CLASSICS Act and the Music Modernization Act, are supported by stakeholders on both sides, by digital service providers as well as by music creators. This emerging consensus gives us hope that this committee can start to move beyond the review stage toward legislative action.’’); 164 Cong. Rec. H3522, 3537 (daily ed. Apr. 25, 2018) (statement of Rep. Collins) (‘‘[This bill] comes to the floor with an industry that many times couldn’t even decide that they wanted to talk to each other about things in their industry, but who came together with overwhelming support and said this is where we need to be.’’); 164 Cong. Rec. S501, 502 (daily ed. Jan. 24, 2018) (statement of Sen. Hatch) (‘‘I don’t think I have ever seen a music bill that has had such broad support across the industry. All sides have a stake in this, and they have come together in support of a commonsense, consensus bill that addresses challenges throughout the music industry.’’); 164 Cong. Rec. H3522, 3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte) (‘‘I tasked the industry to come together with a unified reform bill and, to their credit, they delivered, albeit with an occasional bump along the way.’’); 164 Cong. Rec. S6259, 6260 (daily ed. Sept. 18, 2018) (statement of Sen. Alexander on behalf of Sen. Grassley) (‘‘This bill is the product of long and hard negotiations and compromise.’’). 395 17 U.S.C. 115(d)(3)(B)(i), (d)(5)(B)(i). E:\FR\FM\08JYR1.SGM 08JYR1 32296 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Rules and Regulations proceeding to establish the initial administrative assessment, which anticipates MLC and DLC participation.396 Further, given the license availability date of January 1, 2021, the MLC has a tight deadline to become fully operational, and both the MLC and DLC have important roles in educating the public on the royalty claiming process, which may be unnecessarily encumbered if designation were delayed.397 The public had ample opportunity to comment on the proposals for parties to be named the MLC and DLC and did, in fact, file over six hundred comments in response to the different proposals. PART 210—COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS 1. The authority citation for part 210 continues to read as follows: ■ Authority: 17 U.S.C. 115, 702. 2. Add subpart A, consisting of §§ 210.1 through 210.10, to read as follows: ■ Subpart A—Blanket Compulsory License, Mechanical Licensing Collective, and Digital Licensee Coordinator Sec. 210.1 Designation of the Mechanical Licensing Collective and Digital Licensee Coordinator. 210.2–210.10 [Reserved] jbell on DSK3GLQ082PROD with RULES § 210.1 Designation of the Mechanical Licensing Collective and Digital Licensee Coordinator. The following entities are designated pursuant to 17 U.S.C. 115(d)(3)(B) and (d)(5)(B). Additional information regarding these entities will be made available on the Copyright Office’s website. (a) Mechanical Licensing Collective, Inc., incorporated in Delaware on March 5, 2019, is designated as the Mechanical Licensing Collective; and (b) Digital Licensee Coordinator, Inc., incorporated in Delaware on March 20, 2019, is designated as the Digital Licensee Coordinator. VerDate Sep<11>2014 15:55 Jul 05, 2019 Jkt 247001 Dated: July 1, 2019. Karyn A. Temple, Register of Copyrights and Director of the U.S. Copyright Office. Approved by: Carla D. Hayden, Librarian of Congress. [FR Doc. 2019–14376 Filed 7–5–19; 8:45 am] BILLING CODE 1410–30–P LIBRARY OF CONGRESS Copyright Royalty Board [Docket No. 18–CRB–0012 RM] Final Regulations For the reasons set forth in the preamble, the Copyright Office amends 37 CFR part 210 as follows: at 115(d)(3)(B)(i), (d)(5)(B)(i), (d)(7)(D)(iii)(I). 397 See id. at 115(d)(3)(J)(iii), (d)(5)(C)(iii). [Reserved] 37 CFR Parts 303, 350, 355, 370, 380, 382, 383, 384, and 385 List of Subjects in 37 CFR Part 210 Copyright, Phonorecords. 396 Id. § § 210.2–210.10 Copyright Royalty Board Regulations Regarding Procedures for Determination and Allocation of Assessment To Fund Mechanical Licensing Collective and Other Amendments Required by the HatchGoodlatte Music Modernization Act Copyright Royalty Board, Library of Congress. ACTION: Final rule. AGENCY: The Copyright Royalty Judges (Judges) adopt regulations governing proceedings to determine the reasonableness of, and allocate responsibility to fund, the operating budget of the Mechanical Licensing Collective authorized by the Music Modernization Act (MMA). The Judges also adopt proposed amendments to extant rules as required by the MMA. DATES: Effective July 8, 2019. FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist, by telephone at (202) 707–7658 or email at crb@loc.gov. SUPPLEMENTARY INFORMATION: On March 13, 2019, the Copyright Royalty Judges (Judges) published proposed regulations governing proceedings to determine the reasonableness of, and allocate responsibility to fund, the operating budget of the Mechanical Licensing Collective authorized by the Music Modernization Act (MMA). The Judges also proposed amendments to extant rules as required by the MMA. 84 FR 9053. The Judges received comments from the Digital Music Association (DiMA), The National Music Publishers Association (NMPA), and SoundExchange, Inc.1 The commenters generally support the Judges’ proposal SUMMARY: 1 The proposal was further to a Notice of Inquiry that the Judges published on November 5, 2018. 83 FR 55334. PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 while recommending certain adjustments, many of which the Judges accept as improvements to the rules as originally proposed. The Judges hereby adopt the proposed rules as amended. Background The MMA amended title 17 of the United States Code (Copyright Act) to authorize, among other things, designation by the Register of Copyrights (with the approval of the Librarian of Congress) of a Mechanical Licensing Collective (MLC). 17 U.S.C. 115(d)(3)(A)(iv) and 17 U.S.C. 115(d)(3)(B)(i). The MLC is to be a nonprofit entity created by copyright owners to carry out responsibilities set forth in sec. 115 of the Copyright Act. 17 U.S.C. 115(d)(3)(A)(i). The Copyright Act sets forth the governance of the MLC, which shall include representatives of songwriters and music publishers (with nonvoting members representing licensees of musical works and trade associations). 17 U.S.C. 115(d)(3)(D). The MLC is authorized expressly to carry out several functions under the Copyright Act, including offering and administering blanket licenses and collecting and distributing royalties. 17 U.S.C. 115(d)(3)(C)(i) and (iii). Section 115(d)(5)(A) of the MMA defines a second entity, the Digital Licensee Coordinator (‘‘DLC’’), a single nonprofit entity not owned by any other entity, created to carry out responsibilities under the MMA. The DLC must be endorsed by and enjoy substantial support from digital music providers and significant nonblanket licensees that together represent the greatest percentage of the licensee market for uses of musical works in covered activities, as measured over the preceding three calendar years. 17 U.S.C. 115(d)(5)(A). The DLC will be designated by the Register, with the approval of the Librarian, and is authorized to perform certain functions under the Copyright Act, including establishing a governance structure, criteria for membership, and dues to be paid by its members.2 The DLC is also authorized to engage in efforts to enforce notice and payment obligations with respect to the administrative assessment, including by receiving information from and coordinating with the MLC. The DLC is also authorized to initiate and participate in proceedings before the Judges to establish the 2 The Register may decline to designate a DLC if she is unable to identify an entity that fulfills the qualifications for the DLC set forth in the MMA. 17 U.S.C. 115(d)(5)(B)(iii). E:\FR\FM\08JYR1.SGM 08JYR1

Agencies

Library of Congress
U.S. Copyright Office

[Federal Register Volume 84, Number 130 (Monday, July 8, 2019)]
[Rules and Regulations]
[Pages 32274-32296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14376]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2018-11]


Designation of Music Licensing Collective and Digital Licensee 
Coordinator

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

ACTION: Final rule.

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SUMMARY: Pursuant to title I of the Orrin G. Hatch-Bob Goodlatte Music 
Modernization Act, and following a solicitation of proposals and public 
comment on those proposals, the Register is designating the entities 
who will perform certain functions relating to the compulsory license 
for digital music providers to make and distribute digital phonorecord 
deliveries. For the reasons published in this document, the Register 
designates Mechanical Licensing Collective, Inc. as the mechanical 
licensing collective and Digital Licensee Coordinator, Inc. as the 
digital licensee coordinator, including their individual proposed board 
members.

DATES: Effective July 8, 2019.

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

SUPPLEMENTARY INFORMATION:

I. Background

    On October 11, 2018, the Orrin G. Hatch-Bob Goodlatte Music 
Modernization Act (the ``MMA'') was signed into law.\1\ Title I of the 
MMA addresses the efficiency and fairness of the section 115 
``mechanical'' license for the reproduction and distribution of musical 
works embodied in digital phonorecord deliveries, including permanent 
downloads, limited downloads, and interactive streams.\2\ In relevant 
part, it eliminates the song-by-song notice of intention process for 
such uses and creates a new blanket compulsory licensing system for 
digital music providers engaged in digital phonorecord deliveries.\3\ 
The blanket licensing structure is designed to reduce the transaction 
costs associated with song-by-song licensing by commercial services 
that strive to offer ``as much music as possible,'' while ``ensuring 
fair and timely payment to all creators'' of the musical works used on 
these digital services.\4\
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    \1\ Public Law 115-264, 132 Stat. 3676 (2018).
    \2\ See S. Rep. No. 115-339, at 1-2 (2018); Report and Section-
by-Section Analysis of H.R. 1551 by the Chairmen and Ranking Members 
of Senate and House Judiciary Committees, at 1 (2018), https://www.copyright.gov/legislation/mma_conference_report.pdf (``Conf. 
Rep.''); see also H.R. Rep. No. 115-651, at 2 (2018) (detailing the 
House Judiciary Committee's efforts to review music copyright laws).
    \3\ The MMA retains the ability of record companies to obtain an 
individual download license on a song-by-song basis. 17 U.S.C. 
115(b)(3).
    \4\ S. Rep. No. 115-339, at 4, 8.
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    The MMA directs the Register of Copyrights to designate a nonprofit 
entity operated by copyright owners, referred to by statute as the 
mechanical licensing collective (``MLC''), to administer this new 
blanket-licensing system beginning on the ``license availability 
date,'' that is, January 1, 2021.\5\ As detailed further below, the 
MLC, through its board of directors and task-specific committees, will 
be responsible for a variety of duties, including receiving usage 
reports from digital music providers, collecting and distributing 
royalties associated with those uses, identifying musical works 
embodied in particular sound recordings, administering a process by 
which copyright owners can claim ownership of musical works (and shares 
of such works), and establishing a musical works database relevant to 
these activities.\6\
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    \5\ 17 U.S.C. 115(d)(2)(B), (d)(3)(B); see also id. at 
115(e)(15).
    \6\ Id. at 115(d)(3)(C).
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    By statute, digital music providers will bear the reasonable costs 
of establishing and operating the MLC through an administrative 
assessment, to be determined if necessary by the Copyright Royalty 
Judges (``CRJs'') in a separate proceeding.\7\ The MMA also allows, but 
does not require, the Register to designate a digital licensee 
coordinator (``DLC'') to represent licensees in this proceeding, to 
serve as a non-voting member of the MLC, and to carry out other 
functions.\8\
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    \7\ Id. at 115(d)(7)(D).
    \8\ Id. at 115(d)(5)(B); see also id. at 115(d)(3)(D)(i)(IV), 
(d)(5)(C).
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A. MLC Designation Requirements, Duties, and Functions

    The entity designated as the MLC must be:
     A single nonprofit entity that is created by copyright 
owners to carry out its statutory responsibilities;
     ``endorsed by, and enjoy[ ] substantial support from, 
musical work copyright owners that together represent the greatest 
percentage of the licensor market for uses of such works in covered 
activities, as measured over the preceding 3 full calendar years;'' \9\
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    \9\ Id. at 115(d)(3)(A)(ii).
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     able to demonstrate to the Copyright Office that, by the 
license availability date, it will have the administrative and 
technological capabilities to perform the required functions; and
     governed by a board of directors and include committees 
that are composed of a mix of voting and non-voting members as directed 
by the statute.\10\
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    \10\ Id. at 115(d)(3)(A), (d)(3)(D)(i).
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    If no single entity meets each of these statutory criteria, the 
Register must designate as the MLC the entity that

[[Page 32275]]

most nearly fits these qualifications.\11\ After five years, the 
Register will commence a periodic review of this designation.\12\
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    \11\ Id. at 115(d)(3)(B)(iii).
    \12\ Id. at 115(d)(3)(B)(ii); see also H.R. Rep. No. 115-651, at 
6 (noting that continuity is expected to be beneficial so long as 
the designated entity has ``regularly demonstrated its efficient and 
fair administration,'' whereas evidence of ``fraud, waste, or 
abuse,'' or failure to adhere to relevant regulations should ``raise 
serious concerns'' regarding whether re-designation is appropriate); 
S. Rep. No. 115-339, at 5-6 (same).
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    The MMA enumerates a number of required functions for the MLC.\13\ 
A core aspect of the MLC's responsibilities includes identifying 
musical works and copyright owners, matching them to sound recordings 
(and addressing disputes), and ensuring that a copyright owner gets 
paid as he or she should. To that end, the MLC will create and maintain 
a free, public database of musical work and sound recording ownership 
information. The MLC will administer processes by which copyright 
owners can claim ownership of musical works (and shares of such works), 
and by which royalties for works for which the owner is not identified 
or located are equitably distributed to known copyright owners on a 
market share basis after a required holding period.\14\ The MLC will 
participate in proceedings before the CRJs to establish the 
administrative assessment that will fund the MLC's activities, as well 
as proceedings before the Copyright Office with respect to the 
foregoing activities.\15\
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    \13\ 17 U.S.C. 115(d)(3)(C)(i), (iii) (enumerating thirteen 
functions, in addition to permission to administer voluntary 
licenses).
    \14\ Id. at 115(d)(3)(E).
    \15\ Id. at 115(d)(3)(C)(i)(IX)-(X).
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    The board of the MLC shall consist of fourteen voting members and 
three nonvoting members.\16\ Ten voting members shall be 
representatives of music publishers that have been assigned exclusive 
rights of reproduction and distribution of musical works with respect 
to covered activities, and four other voting members shall be 
professional songwriters who have retained and exercise exclusive 
rights of reproduction and distribution for musical works they have 
authored. There are also three nonvoting members that will represent 
the interests of songwriters, music publishers, and digital licensees 
via representatives of relevant trade associations or, in the case of 
licensees, the DLC, if one has been designated.\17\ Within one year of 
designation, the MLC must establish publicly available bylaws relating 
to the governance of the collective, following statutory criteria.\18\
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    \16\ Id. at 115(d)(3)(D)(i).
    \17\ Id.
    \18\ Id. at 115(d)(3)(D)(ii).
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    By statute, the MLC board must establish three committees. First, 
an operations advisory committee will make recommendations concerning 
the operations of the collective, ``including the efficient investment 
in and deployment of information technology and data resources.'' \19\ 
Second, an unclaimed royalties oversight committee will establish 
policies and procedures necessary to undertake a fair distribution of 
unclaimed royalties.\20\ Third, a dispute resolution committee will 
establish policies and procedures for copyright owners to address 
disputes relating to ownership interests in musical works, including a 
mechanism to hold disputed funds pending the resolution of the 
dispute.\21\
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    \19\ Id. at 115(d)(3)(D)(iv). This committee will have an equal 
number of musical work copyright owners and digital music provider 
representatives, respectively appointed by the MLC and DLC.
    \20\ Id. at 115(d)(3)(D)(v), (d)(3)(J)(ii). This committee of 
ten will have an equal number of musical work copyright owners and 
professional songwriters.
    \21\ Id. at 115(d)(3)(D)(vi), (d)(3)(H)(ii), (d)(3)(K). This 
committee will consist of at least six members, again equally 
divided among musical work copyright owners and professional 
songwriters.
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B. DLC Designation Criteria and Functions

    Similar to the MLC, the DLC must:
     Be a single nonprofit entity created to carry out certain 
statutory responsibilities;
     be endorsed by digital music service providers and 
significant nonblanket licensees that together represent the greatest 
percentage of the licensee market for uses of musical works in covered 
activities, as measured over the preceding 3 calendar years; and
     possess the administrative and technological capabilities 
necessary to carry out a wide array of authorities and functions.\22\
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    \22\ Id. at 115(d)(5)(A)(i)-(iii).
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    The Register is directed to designate the DLC following 
substantially the same procedure described for designation of the 
MLC.\23\ Unlike the MLC, in the event the Register is unable to 
identify an entity that fulfills the criteria for the DLC, the Register 
may decline to designate a DLC; in that event, the statutory references 
to the DLC go without effect unless or until a DLC is designated.\24\
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    \23\ Id. at 115(d)(5)(B).
    \24\ Id. at 115(d)(5)(B)(iii).
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    The DLC is tasked with coordinating the activities of the 
licensees.\25\ The DLC shall make reasonable, good faith efforts to 
assist the MLC in its efforts to locate and identify copyright owners 
of unmatched musical works (and shares of such works) by encouraging 
digital music providers to publicize the existence of the collective 
and the ability of copyright owners to claim unclaimed accrued 
royalties, including by posting contact information for the collective 
at reasonably prominent locations on digital music provider websites 
and applications, and conducting in-person outreach activities with 
songwriters. The DLC is authorized to participate in proceedings before 
the CRJs to determine the administrative assessment to be paid by 
digital music providers, and before the Copyright Office with respect 
to the blanket mechanical license.
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    \25\ See generally id. at 115(d)(5)(C).
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C. Designation Process and the Role of the Copyright Office.

    The Register is to designate the MLC, along with the DLC (as 
applicable), by publishing a notice in the Federal Register that sets 
forth ``the identity of and contact information for the . . . 
collective,'' and ``the reasons for the designation.'' \26\ These 
designations are subject to the approval of the Librarian of Congress 
pursuant to section 702 of title 17.\27\ The legislative history states 
that ``the Register is expected to allow the public to submit comments 
on whether the individuals and their affiliations meet the criteria 
specified in the legislation; make some effort of its own as it deems 
appropriate to verify that the individuals and their affiliations 
actually meet the criteria specified in the legislation; and allow the 
public to submit comments on whether they support such individuals 
being appointed for these positions.'' \28\
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    \26\ Id. at 115(d)(3)(B)(II), (d)(5)(B)(i)-(ii).
    \27\ Id. at 115(d)(3)(A)(iv) (``with the approval of the 
Librarian of Congress pursuant to section 702, in accordance with 
subparagraph (B)''); id. at (d)(5)(A)(iv) (same); see id. at 702.
    \28\ H.R. Rep. No. 115-651, at 5; S. Rep. No. 115-339, at 5; 
Conf. Rep. at 4; see H.R. Rep. No. 115-651, at 26 (``This 
requirement is not waivable by the Register and is not subject to 
the alternate designation language.''); S. Rep. No. 115-339, at 23 
(same).
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    On December 21, 2018, the Office issued a Notice of Inquiry 
(``NOI'') setting forth the functions of the MLC and DLC and the 
statutory criteria for designation, and solicited proposals from 
entities meeting such criteria and seeking to be designated as the MLC 
or DLC, as well as relevant public comments.\29\ The name and 
affiliation of each proposed board and committee member established by 
the MLC were

[[Page 32276]]

solicited as part of the designation process.\30\
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    \29\ 83 FR 65747 (Dec. 21, 2018) (``NOI''); see 17 U.S.C. 
115(d)(3)(B), (d)(3)(D)(iv)-(vi), (d)(5)(B).
    \30\ 17 U.S.C. 115(d)(3)(B)(i)(I).
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    The Office received one proposal for designation as the DLC and two 
proposals for designation as the MLC, which, in accordance with the 
NOI, the public was invited to comment upon. The response was 
considerable; the Office received over 600 comments addressing these 
proposals, including, but not limited to, musical work copyright owners 
endorsing one or more of the entities seeking designation. As noticed 
in the NOI, the Office also considered whether to utilize information 
meetings subject to established guidelines for such ex parte 
communications.\31\ Determining that follow-up with each of the three 
candidates would be valuable, the Office issued such guidelines, and on 
May 28 and 29, the Office met with the three proponents seeking 
designation as the DLC or MLC, allowing the proponents to supplement 
their written submissions, but not to address matters wholly outside 
the record; summaries of those meetings were posted on the Office's 
website.\32\
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    \31\ NOI at 65753-54.
    \32\ See U.S. Copyright Office, Ex Parte Communications, https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html (last visited June 24, 2019); NOI at 65753-54. 
Given the relatively robust record, with over 600 written comments 
received regarding the proposals, and in light of the statutory 
deadline, the Office elected to limit meetings to the three 
candidates.
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    Beyond the Office's role in designating the MLC and DLC, Congress 
intended to invest the Register with ``broad regulatory authority'' to 
create policies and conduct proceedings as necessary to effectuate the 
MMA.\33\ The statute enumerates several regulations that the Register 
is specifically directed to promulgate, including regulations regarding 
the form of the notices of license and notices of nonblanket 
activity,\34\ usage reports and adjustments,\35\ information to be 
included in the musical works database,\36\ requirements for the 
usability, interoperability, and usage restrictions of that 
database,\37\ and the disclosure and use of confidential 
information.\38\ The legislative history contemplates that the Register 
will both ``thoroughly review[ ]'' policies and procedures established 
by the MLC, and promulgate regulations that balance ``the need to 
protect the public's interest with the need to let the new collective 
operate without over-regulation.'' \39\
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    \33\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5; 
see also 17 U.S.C. 115(d)(12).
    \34\ 17 U.S.C. 115(d)(2)(A)(i), (d)(6)(A)(i).
    \35\ Id. at 115(d)(4)(A)(iv).
    \36\ Id. at 115(d)(3)(E)(ii)(V), (d)(3)(E)(iii)(II).
    \37\ Id. at 115(d)(3)(E)(vi).
    \38\ Id. at 115(d)(12)(C).
    \39\ H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, at 
5, 15; see also 17 U.S.C. 115(d)(12).
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II. Register's Designation and Analysis

A. Mechanical Licensing Collective

    The Office received proposals from two entities seeking to be 
designated as the MLC: (1) The ``Mechanical Licensing Collective, 
Inc.'' referred to here as ``MLCI''; and (2) the ``American Music 
Licensing Collective,'' referred to here as ``AMLC.'' \40\ The 
candidates' respective submissions take differing approaches to 
demonstrating compliance with the statutory criteria. MLCI provides a 
detailed outline of its proposed organizational structure, business 
plan, and overall activities. It provided flowcharts and other 
illustrative materials setting forth in-depth plans for executing the 
MLC's administrative and technological responsibilities, including 
managing compulsory and voluntary licenses, matching songwriters to 
musical works, and collecting and distributing royalties. It describes 
its submission as the ``music industry consensus proposal'' and 
contends that its selection would facilitate valuable cooperative 
efforts across the industry.\41\ AMLC focuses more specifically on 
matching unidentified songwriters to their compositions for payment 
purposes. It argues that the expertise of its proposed board and 
vendors makes it best positioned to advance that goal,\42\ which the 
Conference Report describes as ``the highest responsibility of the 
collective'' beyond efficient and accurate collection and distribution 
of royalties.\43\
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    \40\ The incorporator's contact information for these entities 
are: Benjamin K. Semel, Pryor Cashman LLP, 7 Times Square, New York, 
NY 10036 (MCLI); Derek C. Crownover, Dickinson Wright, PLLC, 54 
Music Square East, Suite 303, Nashville, TN 37203 (AMLC); and 
Allison Stillman, Mayer Brown LLP, 1221 Avenue of the Americas, New 
York, NY 10020 (DLCI).
    \41\ MLCI Proposal at 5, 8.
    \42\ Id. at 2-5.
    \43\ Conf. Rep. at 7; H.R. Rep. No. 115-651, at 9 (same); S. 
Rep. No. 115-339, at 9 (same).
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    The Copyright Office assessed the extent to which each candidate 
satisfies the statutory requirements for designation, which can be 
grouped into three categories: (1) Organization, board and committee 
composition, and governance; (2) endorsement and substantial support 
from musical work copyright owners; and (3) administrative and 
technological capabilities. As detailed below, the Office concludes 
that while both candidates meet the statutory criteria to be a 
nonprofit created to carry out its statutory responsibilities, only 
MLCI satisfies the endorsement criteria, and MLCI also has made a 
better showing as to its prospective administrative and technological 
capabilities. The Register is thus designating MLCI, including its 
individual board members, with the Librarian's approval.
    As both proposals demonstrate, the new collective must undertake 
formidable responsibilities expeditiously and conscientiously to 
establish a number of operational functions critical to implementation 
of the new blanket licensing system. While the comprehensive MLCI 
proposal signals its understanding of the full scope of this project 
and its importance to songwriters and others in the music community, a 
successful collective will undoubtedly benefit from input from that 
broader community much in the way the MMA itself was enacted in a 
spirit of consensus and compromise.\44\ The Register welcomes the 
prospect of MLCI working with the broader community of musical work 
copyright owners and other songwriters, as well as the DLC and 
individual digital music providers, to realize the promise of the MLC 
as envisioned by Congress.
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    \44\ See, e.g., Conf. Rep. at 2 (``Songwriters, artists, 
publishers, producers, distributors, and other stakeholders involved 
in the creation and distribution of music collaborated with 
legislators in both the Senate and the House to find a path forward 
on music reform.'').
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1. Organization, Board and Committee Composition, and Governance
    As the statute requires, both MLCI and AMLC are constructed as 
nonprofit entities created by copyright owners to carry out the MLC's 
statutory responsibilities.\45\ The analysis below will focus on 
relevant board and committee composition and governance issues.
---------------------------------------------------------------------------

    \45\ MLCI Proposal at Ex. 1 (Certificate of Incorporation under 
Delaware law); AMLC Proposal at Schedule B (Certificate of 
Incorporation under New York law).
---------------------------------------------------------------------------

i. Board and Committee Composition
a. MLCI
    In accordance with the statute, MLCI's proposed board includes four 
professional songwriters: Kara DioGuardi, Oak Fielder, Kevin Kadish, 
and Tim Nichols.\46\ MLCI notes that these members were selected by a 
songwriter advisory panel consisting of two professional songwriters 
from each of the Nashville Songwriters Association International 
(``NSAI''), Songwriters of North America (``SONA''), Songwriters Guild 
of America (``SGA''), American Society of

[[Page 32277]]

Composers, Authors and Publishers (``ASCAP''), and Broadcast Music, 
Inc. (``BMI'').\47\ No members of the advisory panel were themselves 
candidates for the board or any committee.\48\ NSAI reports that the 
panel considered nearly 300 songwriter applicants as part of this 
selection process.\49\
---------------------------------------------------------------------------

    \46\ Id. at 67-68 (a biography is included for each songwriter 
board member).
    \47\ Id. at 67-69.
    \48\ Id. at 68; NSAI Reply at 4-5 (discussing conflicts of 
interest approach).
    \49\ NSAI Reply at 5.
---------------------------------------------------------------------------

    To satisfy the requirement of ten music publisher representatives, 
MLCI's proposed board includes the following members: Jeff Brabec 
(BMG); Peter Brodsky (Sony/ATV Music Publishing); Bob Bruderman 
(Kobalt); Tim Cohan (peermusic); Alisa Coleman (ABKCO); Scott Cutler 
(Pulse Music Group); Paul Kahn (Warner/Chappell Music Publishing); 
David Kokakis (Universal Music Publishing Group); Mike Molinar (Big 
Machine Music); and Evelyn Paglinawan (Concord Music). MLCI notes that 
these members were selected by an advisory panel comprised of 
professionals associated with independent music publishers.\50\ The 
panel ``carefully vetted candidates to ensure that the representatives 
selected to serve on the Board (a) have the requisite expertise and 
experience to govern MLC; (b) individually and together faithfully 
reflect the entire music publisher community; and (c) are motivated to 
serve on the Board and understand and do not underestimate the serious 
responsibilities entrusted to them.'' \51\ As described by MLCI, the 
publisher board members represent a broad range of publishing 
interests--from a ``thirty-employee company established and run by 
creatives with a catalog of approximately 10,000 songs'' to the largest 
global publishers.\52\
---------------------------------------------------------------------------

    \50\ MLCI Proposal at 69; see also NSAI Reply at 4-5 (advisory 
selection panel contained ``only independent music publishers whose 
interests are best served by selecting the most efficient back 
office systems, and who have vast experience with potential 
vendors'').
    \51\ MLCI Proposal at 69-70 (A biography is included for each 
music publisher board member).
    \52\ Id. at 70.
---------------------------------------------------------------------------

    MLCI's required nonvoting board members are Danielle Aguirre 
(NMPA), as a representative of the nonprofit trade association of music 
publishers that represents the greatest percentage of the licensor 
market for uses of musical works in covered activities; \53\ and Bart 
Herbison (NSAI), as a representative of a nationally recognized 
nonprofit trade association whose mission is advocacy on behalf of 
songwriters.\54\ The third non-voting board member will be a 
representative of the DLC.\55\
---------------------------------------------------------------------------

    \53\ Id. at 74.
    \54\ Id. at 74-75.
    \55\ Id. at 75.
---------------------------------------------------------------------------

    MLCI also submits proposed members for each of the three 
statutorily required committees. For the operations advisory committee, 
MLCI has selected copyright owners who have substantial experience with 
license administration, rights management operations, and the relevant 
technology.\56\ For the unclaimed royalties oversight committee, the 
proposed members likewise have extensive experience relevant to that 
committee's task of ``establish[ing] policies and procedures for the 
distribution of unclaimed accrued royalties and accrued interest.'' 
\57\ Each publisher representative on the unclaimed royalties committee 
is affiliated with an independent music publisher, as opposed to a 
major music publisher, which will help to ensure that smaller 
rightsholders have a voice in MLC functions.\58\ Finally, consistent 
with the statute, MLCI proposes a dispute resolution committee made of 
five professional songwriters and five musical work copyright 
owners.\59\
---------------------------------------------------------------------------

    \56\ Id. at 76-78 (committee members are Joe Conyers III 
(Songtrust and Downtown Music Publishing), Scott Farrant (Kobalt), 
Rell Lafargue (Reservoir Media Management), Michael Lau (Round Hill 
Music), John Reston (Universal Music Publishing Group), and Bill 
Starke (Sony/ATV Music Publishing)).
    \57\ 17 U.S.C. 115(d)(3)(J)(ii); see MLCI Proposal at 78 (``This 
Committee includes individuals who have experience in royalty and 
payment accounting and administration, have served on the boards of 
independent music publishing trade groups, and have litigated (on 
behalf of songwriters) the failure of digital music providers to pay 
royalties due to a claimed inability to identify or `match' 
recordings to musical works.'').
    \58\ MLCI Proposal at 79-80 (committee members are songwriters 
busbee, Kay Hanley, David Lowery, Dan Navarro, and Tom Shapiro and 
copyright owner representatives Phil Cialdella (Atlas Music 
Publishing), Patrick Curley (Third Side Music), Michael Eames (PEN 
Music Group), Frank Liwall (The Royalty Network, Inc.), and Kathryn 
Ostien (The Richmond Organization/Essex Music Group)).
    \59\ MLCI Proposal at 84-86 (committee members are songwriters 
Aim[eacute]e Allen, Odie Blackmon, Gary Burr, David Hodges, and 
Jennifer Schott and copyright owner representatives Alison Koerper 
(Disney Music Group), Ed Leonard (Daywind Music Group), Sean McGraw 
(Downtown Music Publishing), Debbie Rose (Shapiro, Bernstein & Co.), 
and Jason Rys (Wixen Music Publishing)).
---------------------------------------------------------------------------

    Based on the biographies and other information submitted regarding 
these proposed board and committee members, the Copyright Office 
determines that the proposed composition of MLCI's board and committees 
satisfies the statutory requirements, and moreover, that each of its 
proposed directors possesses the qualifications necessary for 
appointment to the board.\60\ In addition, MLCI's submission indicates 
that its selection procedures were carefully designed to ensure 
transparency and input from a broad range of industry sectors, as well 
as to avoid any likelihood of self-selection. MLCI also designed its 
committee selection process such that committee members do not also 
serve on the board, helping guard against potential conflicts of 
interest or undue influence.
---------------------------------------------------------------------------

    \60\ AMLC does not dispute that these proposed members possess 
the required qualifications. The Office received one comment from a 
songwriter who allegedly observed ``collusion'' while ``serving on 
the selection committee for the NMPA's MLC,'' without providing 
substantiation. See Michelle Shocked Reply at 1. While the Office 
takes such matters seriously, MLCI's submission did not list this 
commenter as a member of its songwriter advisory panel and other 
songwriters praised the selection process. See, e.g., SONA Reply at 
2 (signed by Michelle Lewis, a MLCI songwriter advisory panel 
member, and over twenty other songwriters); MLCI Proposal at Ex. 8 
(statement of NSAI). In the absence of more specific information, 
these allegations do not factor into the Office's analysis.
---------------------------------------------------------------------------

b. AMLC
    AMLC's submission provides less information on the mechanics of its 
board and committee selection processes. For its professional 
songwriter members, AMLC's board includes Rick Carnes, Imogen Heap, Zoe 
Keating, and Maria Schneider.\61\ For its music publisher members, 
AMLC's board includes Maximo Aguirre (Maximo Aguirre Music Publishing, 
Inc.), Wally Badarou (ISHE sarl Music), John Barker (ClearBox Rights, 
LLC), Marti Cuevas (Mayimba Music), Joerg Evers (Eversongs), Brownlee 
Ferguson (Bluewater Music Corp.), Henry Gradstein (listed as an 
attorney and independent publisher), Lisa Klein Moberly (Optic Noise), 
Ricardo Ordonez (Union Music Group), and Jeff Price (Audiam, Inc.).\62\ 
AMLC reports that these members were selected following an ``active 
recruitment campaign'' and that each selected member was required to 
have ``proven skill sets and practical hands-on work experience'' in 
various industry sectors, as well as ``first-hand work experience and 
knowledge of music rights organizations and how they operate.'' \63\
---------------------------------------------------------------------------

    \61\ AMLC Proposal at 35.
    \62\ Id. at 35, 49-75 (A biography is included for each board 
member).
    \63\ Id. at 38. Following its meeting with AMLC, the Office 
understands that an initial core of board members, namely Mr. 
Barker, Mr. Price, Mr. Ferguson, and Ms. Moberly, served to vet 
additional members. See AMLC Ex Parte Meeting Summary at 22 (June 5, 
2019) (``Board member searches were conducted via personal 
relationships, recommendations, and invitations to submit inquiries 
of interest via public posting on the AMLC website.''). MLCI, 
however, raised questions as to a lack of transparency and potential 
conflicts of interest in AMLC's selection process. See MLCI Reply at 
16-18.

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

[[Page 32278]]

    AMLC includes only one of the three required nonvoting board 
members, David Wolfert of MusicAnswers, as a representative of a 
nationally recognized nonprofit trade organization whose primary 
mission is advocacy on behalf of songwriters in the United States.\64\ 
AMLC notes that one additional nonvoting board member will be a 
representative of the DLC, and another will be filled by NMPA as a 
representative of the nonprofit trade association of music 
publishers.\65\
---------------------------------------------------------------------------

    \64\ AMLC Proposal at 35.
    \65\ Id.
---------------------------------------------------------------------------

    In response, MLCI contends that AMLC's proposed board does not 
adequately represent the entire music publisher community, as it lacks 
representatives from large or mid-size publishers.\66\ The Office 
notes, however, that AMLC has offered to replace one of its current 
publisher board members with a representative of a major publisher if 
such an organization were to request a voting seat.\67\
---------------------------------------------------------------------------

    \66\ MLCI Reply at 18.
    \67\ AMLC Proposal at 35.
---------------------------------------------------------------------------

    AMLC also submits proposed members for each of the designated 
committees. Unlike MLCI, some of the members on each committee include 
proposed board members--a structure that potentially could diminish the 
committees' ability to provide independent recommendations to the 
board.\68\ As required, AMLC provides four members for the operations 
advisory committee, and five professional songwriters and five musical 
work copyright owners for the unclaimed royalties oversight 
committee.\69\ AMLC notes that the proposed members of the latter 
committee ``have years of experience dealing with double claims, 
counter claims and registration of song data both in the US and 
internationally.'' \70\ For the dispute resolution committee, AMLC 
provides three representatives of musical work copyright owners and 
three professional songwriters.\71\
---------------------------------------------------------------------------

    \68\ Id. (AMLC's proposed Operations Advisory Committee members 
are Frank Liddell (Carnival Music), Caleb Shreve (Killphonic Music), 
and board members Brownlee Ferguson (Bluewater Music Corp.) and Jeff 
Price (Audiam, Inc.)).
    \69\ Id. at 35-36 (AMLC's proposed Unclaimed Royalties Oversight 
Committee members are songwriters Joerg Evers, Rick Carnes, Zoe 
Keating, Stewart Copeland, H[eacute]l[egrave]ne Muddiman, and Anna 
Rose Menken and copyright owners Ricardo Ordonez (Union Music 
Group), Gian Caterine (American Music Partners West), Carlos Martin 
Carle (Mayimba Music), Juan Hidalgo (Juan y Nelson Entertainment), 
Al Staehely (listed as an entertainment lawyer and copyright owner), 
and David Bander (Ultra Music & Ultra International Music 
Publishing)).
    \70\ Id. at 41.
    \71\ Id. at 36 (committee members are songwriters Wally Badarou, 
Imogen Heap, and Jon Siebels and copyright owners Peter Roselli 
(Bluewater Music Corp.), Hakim Draper (Boogie Shack Music Group), 
and Jonathan Segel (Copyright Owner)).
---------------------------------------------------------------------------

    MLCI argues that certain AMLC board members do not in fact satisfy 
the relevant statutory criteria.\72\ MLCI specifically questions AMLC 
proposed board members John Barker, Joerg Evers, and Wally Badarou's 
status as ``publisher representatives,'' contending that the entities 
with which they claim affiliation do not appear to be music 
publishers.\73\ MLCI also challenges the characterization of Henry 
Gradstein as an ``independent publisher'' on the ground that he is a 
litigation attorney for whom no publisher affiliation is provided 
either in AMLC's submission or on his law firm's website.\74\
---------------------------------------------------------------------------

    \72\ MLCI Reply at 19-20.
    \73\ Id. at 20.
    \74\ Id. at 19.
---------------------------------------------------------------------------

    The Office raised these issues in its meeting with AMLC 
representatives. In response, AMLC provided specific information 
regarding the entities with which these individuals are affiliated. 
AMLC stated that Mr. Barker is the owner and CEO of ClearBox Rights, 
LLC, an ``independent copyright administration company,'' which is the 
```exclusive' agent for licensing and collection of royalties for all 
types of uses.'' \75\ Under AMLC's interpretation, Mr. Barker would be 
qualified to serve on the board because he represents music publishers 
through his administration company.\76\ AMLC further provided company 
names and ASCAP or BMI IPI numbers for publishing companies owned by 
Mr. Evers, Mr. Badarou, and Mr. Gradstein.\77\
---------------------------------------------------------------------------

    \75\ AMLC Ex Parte Meeting Summary at 6.
    \76\ Id.
    \77\ Id.
---------------------------------------------------------------------------

    Based on this information, the Register will assume for purposes of 
this designation that Mr. Evers, Mr. Badarou, and Mr. Gradstein qualify 
as ``representatives of music publishers.'' \78\ While Mr. Gradstein in 
particular appears to be primarily a litigator, he is also the owner of 
a music publishing company. For the music publishing representatives, 
the statute does not appear to require that music publishing is a full-
time occupation, and Mr. Gradstein has focused his career on issues 
relevant to his proposed board service.\79\ While Mr. Barker's 
background similarly demonstrates relevant experience, it is not clear 
that he meets the statutory criteria, as MCLI raises a colorable 
argument that representatives of ``[e]ntities that do not have a 
relevant ownership interest in the copyright to musical works (either 
by virtue of assignment or exclusive license) do not meet the statutory 
criteria.'' \80\ Under that reading, if Mr. Barker's company merely 
administers licenses on behalf of copyright owners, but has not itself 
been assigned copyrights, he would not constitute a publisher 
representative within the meaning of the statute.
---------------------------------------------------------------------------

    \78\ 17 U.S.C. 115(d)(3)(D)(i)(I).
    \79\ In contrast, the songwriter board members must be 
``professional[s],'' which the Office regards as a requirement that 
such board members must be primarily songwriters. Id. at 
115(d)(3)(D)(i)(II) (regarding ``professional songwriters who have 
retained and exercise exclusive rights of reproduction and 
distribution with respect to covered activities with respect to 
musical works they have authored'') (emphasis added); see also MLCI 
Proposal at 67 (``In MLC's view, the requirement that four voting 
board members of MLC be ``professional songwriters'' means that the 
songwriter board members must be songwriters who earn a living 
primarily through their songwriting activities.'').
    \80\ MLCI Reply at 20; see also 17 U.S.C. 115(d)(3)(D)(i)(I).
---------------------------------------------------------------------------

    Ultimately, the Copyright Office need not resolve this issue 
because the specific proposal of Mr. Barker does not factor heavily 
into the Office's assessment. Any conflict with the statute could be 
cured by replacing him with a publisher representative; indeed, the 
Office appreciates AMLC's offer to accommodate a major publisher that 
wishes to join its board. A greater concern, however, is the lack of 
specific information provided by AMLC on its membership selection 
processes. Even assuming that its ultimate selections would satisfy the 
statutory requirements, AMLC's submissions describe a somewhat ad hoc 
decision making process in this area. While many of the proposed AMLC 
board members demonstrate commendable experience to perform the 
relevant duties, the Office appreciates MLCI's more comprehensive 
approach to identifying and selecting potential members, who themselves 
each appear highly experienced and able to perform the required duties.
ii. Representation and Diversity
    The Institute of Intellectual Property and Social Justice 
(``IIPSJ''), in comments co-signed by several dozen artists and other 
music industry stakeholders, urged the Register to ensure that the MLC 
includes ``meaningful and significant representatives from the African-
American, Latino-American and Asian-American songwriting and music 
publishing communities, selected by such communities, and encompassing

[[Page 32279]]

representation from the Hip-Hop, R&B, Latin, Reggae, Jazz and Gospel/
Christian music genres.'' \81\ Pointing to the growing influence of 
Hip-Hop and Latino music, IIPSJ suggests that the statute requires 
``diverse cultural representation'' for the board.\82\ IIPSJ believes 
that the proposed boards of both MLCI and AMLC lack sufficient 
representation from these communities.\83\
---------------------------------------------------------------------------

    \81\ IIPSJ Initial at 3.
    \82\ Id. at 3-4.
    \83\ IIPSJ Reply at 4-6.
---------------------------------------------------------------------------

    The Office takes representation concerns seriously and agrees that 
they should be considered as part of the MLC board and committee 
selection processes. In meetings with the Office, both MLCI and AMLC 
expressed a commitment to ensuring diversity in their memberships, 
though, both questioned the premises of IIPSJ's letter with regards to 
the sufficiency of representation in their proposed board slates. In 
addition, MLCI noted that its draft bylaws ``contain a diversity 
provision that calls for a biannual report on the diversity of the 
board, including diversity as to gender/race/ethnicity, income, musical 
genre, geography and expertise/experience.'' \84\ The report's 
conclusions ``are to be used by the nominating committees in choosing 
future candidates'' to be proposed for the board.\85\ MLCI further 
emphasized its capacity to reach a variety of communities, noting ``the 
extensive participation that it has developed through its Board and 
Committee members and many endorsers,'' and that ``many groups 
supporting MLC[I] have international offices that can assist in global 
outreach.'' \86\ AMLC responded by reiterating the diverse nature of 
its board members and their experience with broad array of genres and 
creator communities.\87\ AMLC believes that its board members' 
experiences would prove beneficial in the development of educational 
and outreach efforts targeting diverse creators, including those 
overseas.\88\ Both candidates agreed that securing engagement and trust 
among varied communities, musical genres, and geographical locations 
would prove critical to the MLC's core project of encouraging musical 
work copyright owners with unclaimed accrued royalties to come forward 
and claim such monies.
---------------------------------------------------------------------------

    \84\ MLCI Ex Parte Meeting Summary at 3 (June 4, 2019).
    \85\ Id.
    \86\ Id.
    \87\ AMLC Ex Parte Meeting Summary at 3-4, 15-17.
    \88\ Id. at 15-17.
---------------------------------------------------------------------------

    The Copyright Office recognizes the entertainment industry as a 
whole has been grappling with the question of how best to diversify its 
leadership and provide opportunities to a broader range of creators. 
The Office believes that the MLC can play a role in helping to advance 
these goals within the music industry.\89\ The Office accordingly 
expects the designated MLC to ensure engagement with a broad spectrum 
of musical work copyright owners, including from those communities that 
IIPSJ asserts are underrepresented. The Office intends to work with the 
MLC to help it achieve these goals.\90\
---------------------------------------------------------------------------

    \89\ Cf. Cal. Corp. Code sec. 301.3 (under California law, 
publicly held corporations whose principal executive offices are 
located in California must include female board members).
    \90\ See H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, 
at 5, 15.
---------------------------------------------------------------------------

iii. Bylaws, Conflicts of Interest, and Other Governance Issues
    Both submissions address the statutory requirement to establish 
bylaws within one year of designation, including with respect to 
succession of board members.\91\ MLCI has not yet adopted bylaws, but 
it does have draft bylaws that it will make public ``well in advance of 
the statutory deadline.'' \92\ In addition, although it has ``not 
finalized a management structure for daily operations,'' MLCI has 
already established a number of ``foundational'' policies and 
procedures designed to ensure accountability, transparency, fairness 
and confidentiality, including that: (1) All committee recommendations 
will be subject to board approval; (2) annual reports will be released 
to the public; (3) the committees will maintain their statutory 
composition; (4) MLCI will maintain a public list of all unmatched 
works and engage in public outreach to enhance legitimate ownership 
claims; and (5) the board will adopt a comprehensive set of written 
codes, policies, and procedures to govern the board and committees.\93\ 
MLCI also commits to ``safeguard[ing] private, sensitive, or 
confidential information.'' \94\ With regard to successive board 
members, MLCI proposes that songwriter members would be appointed from 
a slate of candidates chosen by songwriters, and prospective music 
publisher members would be appointed from candidates chosen by music 
publishers.\95\ A similar process would be followed for committees.\96\ 
MLCI proposes that the board conduct regular elections as well as 
address interim vacancies though an election process based on those 
nominations.\97\
---------------------------------------------------------------------------

    \91\ 17 U.S.C. 115(d)(3)(D)(ii)(I).
    \92\ MLCI Proposal at 86; MLCI Ex Parte Meeting Summary at 3 
(referencing draft bylaws). MLCI correctly notes that it is not 
required to have adopted bylaws at this stage. See MLCI Proposal at 
115.
    \93\ MLCI Proposal at 86-91 (noting the board's forthcoming sets 
of written codes, policies, and procedures, including: Code of 
Conduct and Ethics; Conflict of Interest Policy; Investment Policy 
(including an Anti-Comingling Policy); Confidentiality Policy; 
Whistleblower Policy; Document Retention Policy; Technology and 
Security Policy; Non-Discrimination Policy; Anti-Sexual Harassment 
Policy; Social Media Policy; and Gift Acceptance Policy).
    \94\ Id. at 92-93.
    \95\ Id. at 87.
    \96\ Id.
    \97\ Id.
---------------------------------------------------------------------------

    AMLC has adopted bylaws that detail board members' obligations with 
regard to related party transactions and conflicts of interest, 
including disclosure requirements and procedures for review by fellow 
board members, although ALMC recognizes that it may have ``to 
ameliorate or conform the bylaws'' if they are not consistent with the 
MMA, the Register's yet-to-be promulgated regulations, or the New York 
State Not-for-Profit Corporation Law.\98\
---------------------------------------------------------------------------

    \98\ AMLC Proposal at 78, 88-91 (AMLC bylaws).
---------------------------------------------------------------------------

    AMLC proposes that replacement board members can be nominated by 
either the departing member or any other voting members, and that 
AMLC's board would select committee members by a majority vote, but its 
bylaws do not otherwise detail how committee candidates will be 
nominated.\99\ Beyond these statutorily prescribed committees, AMLC 
proposes four ``additional support committees''--Audit and Finance, 
Education and Outreach, Technology and Security, and 
International.\100\ It appears there is some potential for overlap, as, 
for example, strategic technology issues appear to fall under both the 
Technology and Security Committee and the Operations Oversight 
Committee, and matters relating to budgeting, vendor contracts, and 
general operations appear to be germane to the Operations Oversight 
Committee as well as the Executive and Audit and Finance 
Committees.\101\ The Office notes that any additional standing 
committees should not conflict with the functions of the statutorily 
mandated committees, which are subject to strict board composition 
requirements to ensure adequate representation of interests (e.g., 
songwriters, digital music providers) in

[[Page 32280]]

the matters handled by those committees.\102\
---------------------------------------------------------------------------

    \99\ Id. at 79-80 (AMLC bylaw art. 4.3).
    \100\ Id. at 36, 85 (AMLC bylaw art. 6.5.5-6.5.8).
    \101\ Id. at 84-85 (AMLC bylaw art. 6.5.1, 6.5.4, 6.5.5, 6.5.7).
    \102\ See, e.g., 17 U.S.C. 115(d)(3)(D)(iv)-(vi); see also Conf. 
Rep. at 19 (``Since the Board of Directors and committee member 
requirements . . . are statutory in nature, these requirements are 
not waivable by the Register or subject to modification by the Board 
of Directors.'').
---------------------------------------------------------------------------

    With respect to conflicts of interest, MLCI will require all board 
members and employees to comply with a conflicts policy to be adopted 
at a later date.\103\ The policy ``will require disclosure of all 
actual or potential conflicts,'' including ``having a financial 
interest (direct or indirect) in any contemplated MLC transaction, or 
relationship with any counterparty to such transaction.'' \104\ MLCI 
also states that it ``expects all associated persons to fully comply 
with all applicable law,'' including fiduciary and ethical obligations, 
and that it ``will enforce such obligations, which may include removal 
for cause, in the event of a demonstrated violation.'' \105\
---------------------------------------------------------------------------

    \103\ MLCI Proposal at 91-92.
    \104\ Id.
    \105\ Id. at 92.
---------------------------------------------------------------------------

    AMLC disputes that these measures are sufficient to prevent 
conflicts in the event MLCI were designated. AMLC argues that there is 
a serious conflict of interest when a MLC board member is eligible to 
receive a significant portion of the accrued but unpaid royalties--a 
concern that AMLC believes is salient given the number of major 
publishers represented on MLCI's board.\106\ Other commenters, some of 
whom appear affiliated with AMLC, raise similar concerns.\107\ In 
response, NSAI argues that the unclaimed royalties oversight committee 
will protect against such concerns, noting that MLCI does not include a 
major publisher on that committee.\108\ MLCI further suggests this 
concern would attach to any board member regardless of which entity is 
designated, noting that every copyright owner and songwriter on any 
designated MLC will be eligible to receive a distribution of unclaimed 
accrued royalties.\109\
---------------------------------------------------------------------------

    \106\ AMLC Proposal at 19, 45-46.
    \107\ Robert Allen Reply at 3-4; Cameron Ford Reply at 1-2; 
MusicAnswers Reply at 1-3; Maria Schneider Reply at 1; Rhonda Seegal 
Reply at 2-3; SGA Reply at 5-8.
    \108\ NSAI Reply at 4.
    \109\ MLCI Reply at 33.
---------------------------------------------------------------------------

    For its part, AMLC sets forth procedures for disclosing, 
addressing, and documenting conflicts of interest in its bylaws.\110\ 
It asserts that its board will consider such issues carefully in 
establishing governance procedures and that the unclaimed royalties 
committee will establish guidelines and polices to reduce 
conflicts.\111\
---------------------------------------------------------------------------

    \110\ AMLC Proposal at 89-90 (AMLC bylaw art. 14).
    \111\ Id. at 19.
---------------------------------------------------------------------------

    MLCI suggests that AMLC has serious conflicts of interest of its 
own, alleging that AMLC board members have undisclosed ties to its 
proposed vendors, in violation of AMLC's own bylaws.\112\ These claims, 
echoed by NSAI,\113\ involve allegations that certain AMLC board 
members have financial interests in the Society of Composers, Authors 
and Music Publishers of Canada (``SOCAN''), which owns AMLC's intended 
vendor partner DataClef.\114\ AMLC responded that while Mr. Barker 
previously was in a consulting position with SOCAN, that relationship 
ended prior to AMLC's formation.\115\ AMLC acknowledges that Mr. Price 
is the founder and CEO of Audiam, a company acquired by a SOCAN holding 
company, but asserts that the companies are managed separately and that 
``Audiam is not a vendor and is not going to be one.'' \116\ AMLC also 
generally asserted that AMLC's board members currently have ``no ties 
or fiduciary responsibilities to any shareholders.'' \117\
---------------------------------------------------------------------------

    \112\ MLCI Reply at 30-32.
    \113\ NSAI Reply at 5.
    \114\ MLCI Reply at 30-31.
    \115\ AMLC Ex Parte Meeting Summary at 23 (AMLC further offered 
that ``Mr. Barker continues to have an arm's-length business 
relationship with SOCAN for certain collection activity'').
    \116\ Id. Despite the assertion that Audiam has its own 
management, AMLC does not state that the Audiam board contains no 
SOCAN executives. See id. (noting that Audiam's board of directors 
``includes non-SOCAN executives'').
    \117\ Id.
---------------------------------------------------------------------------

    Taking all of this information into account, both MLCI and AMLC 
have adopted policies and procedures that appear broadly consistent 
with the statutory requirements on matters of governance. Both 
submissions show a serious commitment to transparency, accountability, 
and the protection of confidential information.\118\
---------------------------------------------------------------------------

    \118\ See, e.g., MLCI Proposal at 88-93; AMLC Proposal at 17, 
42, 78.
---------------------------------------------------------------------------

    With respect to the purported conflicts of interest of individual 
board members, although these claims raise serious issues, they 
ultimately have little impact on the Office's evaluation of the 
candidates' proposals. Regarding MLCI's board composition, the Office 
agrees that the unclaimed royalties oversight committee will help 
mitigate potential conflicts. As discussed below, the Office expects 
ongoing regulatory and other implementation efforts to further 
extenuate the risk of self-interest with respect to the distribution of 
unclaimed accrued royalties. As to the allegations regarding individual 
AMLC board members, a more substantial explanation of the relevant 
business relationships may be required if AMLC were the candidate that 
otherwise most nearly satisfied the statutory criteria. The Office thus 
need not resolve whether any specific affiliations of AMLC board 
members would, in fact, present material conflicts of interest with 
respect to its intended primary vendor.
    More generally, the Copyright Office appreciates that both 
proponents have pledged to operate under bylaws that will address 
conflicts of interest and appropriate disclosures in accordance with 
applicable state laws and professional duties of care.\119\ Following 
this designation process, and including through the various statutorily 
required rulemakings, the Register intends to exercise her oversight 
role as it pertains to matters of governance, including through 
promulgation of regulations so that the MLC's bylaws include an avenue 
to ensure that subsequent board member selections are made in 
compliance with all relevant legal requirements.\120\
---------------------------------------------------------------------------

    \119\ See, e.g., Del. Code Ann. tit. 8, sec. 144(a); N.Y. Not-
for-Profit Corp. L. sec. 715.
    \120\ See 17 U.S.C. 115(d)(12); see id. at 115(d)(3)(D)(i)(I)-
(IV); see also H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, 
at 5; Conf. Rep. at 4. The Office notes that many commenters 
supported the Office performing a meaningful oversight role to the 
extent permissible under the statute. See, e.g., Maria Schneider 
Reply at 2-3; SGA Reply at 7.
---------------------------------------------------------------------------

2. Endorsement and Support
    As noted, the MLC must be ``endorsed by, and enjoy[ ] substantial 
support from, musical work copyright owners that together represent the 
greatest percentage of the licensor market for uses of such works in 
covered activities, as measured over the preceding 3 full calendar 
years.'' \121\ The Copyright Office made two preliminary 
interpretations regarding this clause in the NOI.\122\ First, the 
Office explained that because the section 115 license applies to uses 
of phonorecords in the United States, the relevant market is the United 
States market for making and distributing phonorecords of musical 
works. Thus, endorsement may be shown by including musical work 
copyright owners located outside the United States so long as they 
control the relevant rights to works played or otherwise distributed in 
the United States. Second, the Office stated that because the statute 
refers to support from ``musical work copyright owners,'' the relevant 
support should come from parties who have a relevant ownership

[[Page 32281]]

interest in the copyright to musical works (or shares of such works), 
in contrast to parties who do not possess any ownership interest in 
musical works but only the ability to administer the works. Neither MLC 
candidate disagrees with these conclusions.\123\
---------------------------------------------------------------------------

    \121\ 17 U.S.C. 115(d)(3)(A)(ii).
    \122\ NOI at 65753.
    \123\ See AMLC Proposal at 46; MLCI Proposal at 96-97, 113-14.
---------------------------------------------------------------------------

    Under section 115(d)(3)(A)(ii), only those copyright owners 
comprising a portion of ``the licensor market for uses of such works in 
covered activities, as measured over the preceding 3 full calendar 
years,'' count for purposes of endorsement.\124\ The Office also noted 
in the NOI that it understood there might be conflicting views 
regarding how the indicia of endorsement and support should be 
measured.\125\ This understanding proved correct, as MLCI and AMLC 
offer competing interpretations. While MLCI argues that the measurement 
is to be based on market share and licensing revenue, AMLC disagrees. 
The Office will address these disputed issues of statutory construction 
before making its evidentiary findings.
---------------------------------------------------------------------------

    \124\ MLCI agrees that a ``relevant copyright owner'' is ``an 
owner of musical works copyrights licensed for covered activities 
over the preceding three full calendar years.'' MLCI Reply at 9.
    \125\ NOI at 65753.
---------------------------------------------------------------------------

i. Statutory Interpretation
a. Candidates' Views
    AMLC argues that the endorsement provision ``should be interpreted 
so that the relevant `licensor market' from which the `greatest 
percentage' is taken is the endorsing group of copyright owners who, 
via the greatest number of licenses, have made musical works available 
for covered activities as measured over the preceding 3 full calendar 
years.'' \126\ AMLC contends that the statutory language is ambiguous 
but that its reading is confirmed by the legislative history. It notes 
that ``[t]he [Senate Judiciary] Committee explained that the MLC should 
be `endorsed by and enjoy[ ] support from the majority of musical works 
copyright owners as measured over the preceding three years.' '' \127\ 
From this, AMLC asserts that Congress intended that ``the parties 
eligible to endorse the proposed MLC are the musical works copyright 
owners.'' \128\
---------------------------------------------------------------------------

    \126\ AMLC Proposal at 43 (emphasis omitted).
    \127\ Id. at 46 (quoting S. Rep. No. 115-339, at 22) (emphasis 
AMLC's).
    \128\ Id.
---------------------------------------------------------------------------

    AMLC also points to a separate provision of the statute, section 
115(d)(3)(J), to argue that the endorsement provision ``[c]annot 
[r]efer to [m]arket [s]hare.'' \129\ Section 115(d)(3)(J) states that 
after unclaimed accrued royalties have been held for the requisite 
period of time, the MLC is to distribute the royalties to identified 
copyright owners ``in a transparent and equitable manner based on data 
indicating the relative market shares of such copyright owners as 
reflected in reports of usage provided by digital music providers for 
covered activities for the periods in question.'' \130\ AMLC notes 
that, unlike the endorsement provision, section 115(d)(3)(J) expressly 
refers to ``relative market share.'' In its view, ``[i]f Congress, in 
articulating the endorsement criteria, intended for the words `licensor 
market' to mean `relative market share' (or some equivalent), Congress 
would have included the words `relative market share,' the methodology 
to calculate same and the corresponding confidentiality language it 
included later on when specifically referring to `relative market 
share.' '' \131\
---------------------------------------------------------------------------

    \129\ Id. at 44.
    \130\ 17 U.S.C. 115(d)(3)(J)(II).
    \131\ AMLC Proposal at 44-45 (emphasis omitted) (``Generally, 
statutory language should be internally consistent and considered in 
light of full statutory context. As such, courts will generally read 
as meaningful `the exclusion of language from one statutory 
provision that is included in other provisions of the same statute.' 
'') (quoting Hamdan v. Rumsfeld, 548 U.S. 557, 578 (2006), 
superseded by statute on other grounds, Military Commissions Act of 
2006, Public Law 109-366, 120 Stat. 2600 (2006)).
---------------------------------------------------------------------------

    AMLC also makes the policy argument that ``[a]n inherent conflict 
of interest would be created if the MLC were primarily endorsed and/or 
constituted by the largest and/or `major' publishers'' because, 
``[s]ince unclaimed or `black box' royalties are to be distributed 
based on market share, those publishers would be dis-incentivized to 
account to independent songwriters and independent publishers 
accurately, i.e., the major publishers would be incentivized to create 
a larger `black box' from which they could then participate.'' \132\ 
AMLC argues that ``[w]ere [these copyright owners] to be in control of 
such process, the resulting situation would repeat the incentive 
problem involving digital music services that the statute intended to 
fix,'' and that ``the purposes of the MMA would not be best fulfilled 
if proper incentives are not aligned.'' \133\
---------------------------------------------------------------------------

    \132\ Id. at 45.
    \133\ Id. at 46 (contending that ``copyright owners controlling 
the greatest percentage of `relative market share' were not intended 
to be in control of the process of locating and paying copyright 
owners who are owed unclaimed royalties'').
---------------------------------------------------------------------------

    In AMLC's view, because ``songwriters . . . are the greatest number 
of copyright owners relevant to and able to endorse an MLC,'' \134\ 
endorsement should be measured by counting each musical work copyright 
owner as one vote.\135\ As evidence of such support, it relies on a 
list of (in some cases, appending supporting letters from) purported 
endorsers.\136\
---------------------------------------------------------------------------

    \134\ Id. at 46-47.
    \135\ See AMLC Ex Parte Meeting Summary at 24 (``AMLC response 
is based on the number of copyright owners, not the total number of 
copyrights.'').
    \136\ AMLC Proposal at 46-48, 94-107.
---------------------------------------------------------------------------

    In contrast, MLCI argues that the endorsement provision is 
unambiguous, and that the ``only reasonable interpretation . . . is 
that the collective shall be the entity that has the endorsement and 
support of copyright owners that together received during the statutory 
three-year period the largest aggregate percentage of total mechanical 
royalties of any entity seeking designation as the collective.'' \137\ 
MLCI primarily relies on the statutory text to assert that ``percentage 
of the . . . market'' means ``market share,'' that the phrase ``for 
uses of [musical] works in covered activities'' denotes a measurement 
based on usage, and that such usage should be measured by looking at 
licensor revenue from applicable royalty payments.\138\
---------------------------------------------------------------------------

    \137\ MLCI Proposal at 96; see also id. at 108; MLCI Reply at 5 
(``[T]he only reasonable reading of this language is the plain 
English reading.'').
    \138\ See MLCI Proposal at 107-113.
---------------------------------------------------------------------------

    MLCI contends that other potential metrics--i.e., number of 
licenses, number of copyright owners, and number of musical works--are 
not supported by the legislative history and are unworkable as a 
practical matter.\139\ It disagrees with AMLC's analysis of section 
115(d)(3)(J)'s use of the phrase ``relative market share,'' arguing 
that that section ``supports, rather than refutes, the fact that the 
endorsement criterion looks to royalty market share, as both are 
examples of the MMA's use of such market share to guide processes under 
the statute.'' \140\
---------------------------------------------------------------------------

    \139\ Id. at 108-113; see MLCI Reply at 5-6.
    \140\ MLCI Reply at 6-7.
---------------------------------------------------------------------------

    As a policy matter, MLCI suggests ``that the group of copyright 
owners with the most royalties at stake--the largest aggregate share of 
the royalty pool that the collective will have [the] authority to 
license--should voice who is entrusted with that authority.'' \141\ It 
would ``make[ ] a mockery of the language of the statute,'' MLCI 
contends, to construe the provision to mean that ``owners of musical 
works that are not being streamed or earning royalties could be deemed 
to have the same market share as owners of works that are

[[Page 32282]]

streamed billions of times and earn substantial royalties.'' \142\
---------------------------------------------------------------------------

    \141\ MLCI Proposal at 107.
    \142\ Id. at 110, n.31.
---------------------------------------------------------------------------

b. Copyright Office's Analysis
    Legal Interpretation. Taking all comments into consideration, the 
Copyright Office concludes that the endorsement provision in section 
115(d)(3)(A)(ii) mandates that the entity designated as the MLC be 
endorsed and supported by musical work copyright owners that together 
earned the largest aggregate percentage (among MLC candidates) of total 
royalties from the use of their musical works in covered activities in 
the U.S. during the statutory three-year period. In other words, the 
Office agrees with MLCI that the endorsement criterion is a plurality 
requirement based on market share, measured by applicable licensing 
revenue. The Office draws this conclusion from the plain meaning of the 
statutory text, which, after careful review of the statute as a whole, 
the Office concludes is unambiguous.\143\
---------------------------------------------------------------------------

    \143\ See Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S. 
Ct. 1002, 1010 (2017) (``We thus begin and end our inquiry with the 
text, giving each word its ordinary, contemporary, common 
meaning.'') (internal quotation marks omitted). AMLC incorrectly 
suggests that the Office ``has acknowledged an ambiguity in the 
statute.'' AMLC Proposal at 46. The Office only acknowledged that 
``there may be conflicting views'' on the matter. NOI at 65753.
---------------------------------------------------------------------------

    First, the phrase ``percentage of the . . . market'' clearly refers 
to market share; indeed, it is the actual definition of ``market 
share.'' \144\ And market share is ordinarily calculated using earned 
sales revenue.\145\ Here, the statute makes clear that endorsement is a 
metric of ``licensor'' revenue earned specifically ``for uses of 
[musical] works in covered activities.'' \146\ Moreover, Congress's 
inclusion of the phrase ``uses of [musical] works'' suggests that the 
proper metric is one of licensing revenue (i.e., royalties), rather 
than numbers of licenses, copyright owners, or works. Under the 
compulsory license, royalties are calculated based on use, suggesting 
that Congress intended to define the market for ``uses'' according to 
the royalty revenues generated.\147\
---------------------------------------------------------------------------

    \144\ See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/market%20share (last visited June 
24, 2019) (Market share is ``the percentage of the market for a 
product or service that a company supplies.''); Market Share, 
Investopedia, https://www.investopedia.com/terms/m/marketshare.asp 
(last visited June 24, 2019) (``Market share represents the 
percentage of an industry, or a market's total sales, that is earned 
by a particular company over a specified time period.'').
    \145\ See, e.g., Market Share, Merriam-Webster, https://www.merriam-webster.com/dictionary/market%20share (last visited June 
24, 2019) (noting the formula for market share as ``Market Share = 
(Particular Company's Sales Revenue in Time Period X)/(Relevant 
Market's Total Sales Revenue in Time Period X)''); Market Share, 
Investopedia, https://www.investopedia.com/terms/m/marketshare.asp 
(last visited June 24, 2019) (noting that in calculating a company's 
market share, you must ``divide the company's total revenues by its 
industry's total sales''); Market Share, The American Heritage 
Dictionary of the English Language, https://ahdictionary.com/word/search.html?q=market+share (last visited June 24, 2019) (Market 
share is ``[t]he proportion of industry sales of a good or service 
that is controlled by a company.'').
    \146\ 17 U.S.C. 115(d)(3)(A)(ii).
    \147\ See 37 CFR 385.11, 385.21. MLCI notes that ``[p]ractically 
speaking, a metric based on user usage is going to align with a 
metric based on licensor revenues, as the statutory royalty rates 
for both streaming and downloading are tied to usage,'' and that ``a 
musical work with more usage will wind up with more royalty 
revenues.'' See MLCI Proposal at 111-12 & n.34. While not all uses 
are subject to the same royalty rate, the royalties are nonetheless 
connected to use.
---------------------------------------------------------------------------

    In contrast, counting up just the number of endorsing copyright 
owners--from an amateur part-time songwriter whose works have been 
streamed a handful of times to a major music publisher that has earned 
millions of dollars from millions of streams of millions of works--says 
nothing about the actual ``uses of [the owners' musical] works.'' Such 
an interpretation impermissibly reads that language out of the 
statute.\148\ Similarly, looking only to the number of works owned by 
endorsing copyright owners would not accurately reflect use because it 
does not differentiate between works streamed once or twice and works 
streamed millions of times. In the Office's view, the same kinds of 
problems exist with counting the number of licenses.
---------------------------------------------------------------------------

    \148\ See, e.g., Advocate Health Care Network v. Stapleton, 137 
S. Ct. 1652, 1659 (2017) (``Our practice . . . is to give effect, if 
possible, to every clause and word of a statute.'') (internal 
quotation marks omitted).
---------------------------------------------------------------------------

    The Office is unpersuaded by AMLC's argument concerning section 
115(d)(3)(J). There is no substantive distinction between the use of 
``market share[ ]'' in that provision and the use of ``percentage of 
the . . . market'' in the endorsement provision. One is the very 
definition of the other. AMLC relies upon the canon of statutory 
interpretation under which Congress is presumed to have acted 
intentionally when it excludes ``language from one statutory provision 
that is included in other provisions of the same statute.'' \149\ But 
that canon is inapplicable here, as the cases AMLC cites involve only 
the wholesale omission of an item from a statutory provision; \150\ 
they do not speak to situations where, as here, there is no omission 
and Congress merely used synonyms.\151\
---------------------------------------------------------------------------

    \149\ AMLC Proposal at 44 (citing Hamdan, 548 U.S. at 578).
    \150\ See Hamdan, 548 U.S. at 578-79; City of Chi. v. Envtl. 
Def. Fund, 511 U.S. 328, 334-37 (1994).
    \151\ See, e.g., United States v. Sioux, 362 F.3d 1241, 1246 
(9th Cir. 2004) (``It is an elementary principle of statutory 
construction that similar language in similar statutes should be 
interpreted similarly.'').
---------------------------------------------------------------------------

    The Office is likewise unpersuaded that these synonyms should be 
read differently simply because the unclaimed royalties provision 
contains different details regarding calculation and confidentiality 
than the endorsement provision. While both provisions use a similar 
market share metric, the contexts are different, such that it makes 
sense that Congress would provide different instructions. Section 
115(d)(3)(J) explains how the MLC is to distribute unclaimed royalties 
after the blanket license becomes available. It is unsurprising that 
Congress would provide detailed requirements to govern how those 
payments are to be allocated. In contrast, the designation of an entity 
to be the MLC involves a higher-level inquiry into the aggregate market 
share of each candidate's endorsing copyright owners. Congress could 
have given the Office detailed instructions as to how to perform this 
analysis, but it instead left the matter to the Office's expertise and 
reasonable discretion. There is nothing inconsistent with Congress 
establishing differing approaches to accomplishing these different 
tasks.
    The legislative history does not counsel differently. The relevant 
language, which appears in House and Senate Judiciary Committee 
Reports, states that the MLC must be ``endorsed by and enjoy[ ] support 
from the majority of musical works copyright owners as measured over 
the preceding three years.'' \152\ This language can best be understood 
as an imprecise summary of the statutory text, for if it is taken 
literally, it directly conflicts with the statute, which refers to 
``endorse[ment] by[ ] and . . . substantial support from[ ] musical 
work copyright owners that together represent the greatest percentage 
of the licensor market for uses of such works in covered activities.'' 
\153\ For the statute to mean what the legislative history seems to 
say, ``substantial'' could be deleted, ``greatest percentage'' would 
need to be replaced with ``majority,'' and ``of the licensor market for 
uses of such works in covered activities'' could also be deleted. It 
does not seem reasonable for the Office to interpret the statute in 
this way.\154\
---------------------------------------------------------------------------

    \152\ H.R. Rep. No. 115-651, at 26; S. Rep. No. 115-339, at 22; 
see also Conf. Rep. at 18 (similar).
    \153\ 17 U.S.C. 115(d)(3)(A)(ii).
    \154\ See, e.g., Nat'l Ass'n of Mfrs. v. Dep't of Def., 138 S. 
Ct. 617, 634 n.9 (2018) (``[A]mbiguous legislative history cannot 
trump clear statutory language.'') (internal quotation marks 
omitted); R.R. Comm'n of Wis. v. Chi., Burlington & Quincy R.R. Co., 
257 U.S. 563, 589 (1922) (``Committee reports and explanatory 
statements of members in charge made in presenting a bill for 
passage have been held to be a legitimate aid to the interpretation 
of a statute where its language is doubtful or obscure. But when 
taking the act as a whole, the effect of the language used is clear 
to the court, extraneous aid like this can not control the 
interpretation. Such aids are only admissible to solve doubt and not 
to create it.'' (internal citations omitted)); see also Pattern 
Makers' League of N. Am., AFL-CIO v. N.L.R.B., 473 U.S. 95, 112 
(1985) (finding ``ambiguous legislative history'' to ``fall[ ] far 
short of showing that the [agency's] interpretation of the [statute] 
is unreasonable'').

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

[[Page 32283]]

    Policy Considerations. With respect to AMLC's policy arguments, 
they mirror the same conflict-of-interest concerns raised by AMLC and 
discussed in connection with board composition. The Office takes these 
concerns seriously, but they do not compel a different interpretation 
of the plain text of the statute.\155\ Rather, there are other ways 
that the statute addresses these issues and protects smaller 
independent songwriters, as the following examples illustrate.\156\
---------------------------------------------------------------------------

    \155\ Cf. Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, 
LLC, 139 S. Ct. 881, 892 (2019) (noting that ``the statutory scheme 
has not worked as Congress likely envisioned,'' but that 
``[u]nfortunate as [that] may be, that factor does not allow us to 
revise [the statute's] congressionally composed text'').
    \156\ See SGA Reply at 3 (``SGA is far more concerned with 
ensuring that music creator rights are fully protected against 
conflicts of interest and impingements upon the rights and interests 
of songwriters and composers under all circumstances, than in 
supporting one or the other candidate vying to be selected as the 
Mechanical Collective.'').
---------------------------------------------------------------------------

    First, the statute provides for equal representation of musical 
work copyright owners and professional songwriters on the unclaimed 
royalties oversight committee, which is charged with ``establish[ing] 
policies and procedures for the distribution of unclaimed accrued 
royalties and accrued interest.'' \157\ By law, any copyright owner 
receiving such a distribution must pay or credit to an individual 
songwriter no ``less than 50 percent of the payment received by the 
copyright owner attributable to usage of musical works (or shares of 
works) of that songwriter.'' \158\
---------------------------------------------------------------------------

    \157\ 17 U.S.C. 115(d)(3)(D)(v), (d)(3)(J)(ii).
    \158\ Id. at 115(d)(3)(J)(iv)(II); see also S. Rep. No. 115-339, 
at 14 (``The 50% payment or credit . . . is intended to be treated 
as a floor, not a ceiling, and is not meant to override any 
applicable contractual arrangement providing for a higher payment or 
credit of such monies to a songwriter.'').
---------------------------------------------------------------------------

    Second, the statute requires the MLC to undertake a number of 
duties with respect to unclaimed royalties, including maintaining a 
public online list of unmatched musical works through which ownership 
can be claimed.\159\ The MLC must ``engage in diligent, good-faith 
efforts to publicize, throughout the music industry,'' the existence of 
the MLC, procedures to claim unclaimed royalties, any transfer of 
royalties under section 115(d)(10)(B), and any pending distribution of 
unclaimed accrued royalties and accrued interest not less than 90 days 
before distribution.\160\ More generally, the statute expressly 
requires the MLC to ``ensure that the policies and practices of the 
[MLC] are transparent and accountable.'' \161\ The MLC must issue a 
detailed annual report, including describing ``how royalties are 
collected and distributed,'' and ``the efforts of the [MLC] to locate 
and identify copyright owners of unmatched musical works (and shares of 
works).'' \162\ And every five years, the MLC must retain an 
independent auditor to ``examine the books, records, and operations of 
the [MLC]'' and prepare a report addressing, among other things, ``the 
implementation and efficacy of procedures'' ``for the receipt, 
handling, and distribution of royalty funds, including any amounts held 
as unclaimed royalties,'' and ``to guard against fraud, abuse, waste, 
and the unreasonable use of funds.'' \163\
---------------------------------------------------------------------------

    \159\ 17 U.S.C. 115(d)(3)(J)(iii)(I).
    \160\ Id. at 115(d)(3)(J)(iii)(II).
    \161\ Id. at 115(d)(3)(D)(ix)(I)(aa).
    \162\ Id. at 115(d)(3)(D)(vii)(bb), (hh).
    \163\ Id. at 115(d)(3)(D)(ix)(II).
---------------------------------------------------------------------------

    Third, the Copyright Office has been provided with ``broad 
regulatory authority'' to conduct proceedings as necessary to 
effectuate the statute with the Librarian's approval.\164\ In addition 
to the regulations that the Office is specifically directed to 
promulgate, the legislative history contemplates that the Office will 
``thoroughly review[]'' policies and procedures established by the 
MLC.\165\ The legislative history suggests that the Office promulgate 
the necessary regulations in a way that ``balances the need to protect 
the public's interest with the need to let the new collective operate 
without over-regulation.'' \166\ The Office intends to conduct its 
oversight role in a fair and impartial manner; songwriters are 
encouraged to participate in these future rulemakings.
---------------------------------------------------------------------------

    \164\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5; 
Conf. Rep. at 4; see 17 U.S.C. 115(d)(12).
    \165\ H.R. Rep. No. 115-651, at 5-6; S. Rep. No. 115-339, at 5; 
Conf. Rep. at 4; see 17 U.S.C. 115(d)(12).
    \166\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15; 
Conf. Rep. at 12.
---------------------------------------------------------------------------

    Fourth, the MLC must be redesignated every five years.\167\ In the 
legislative history, Congress explained that ``evidence of fraud, 
waste, or abuse, including the failure to follow the relevant 
regulations adopted by the Copyright Office, over the prior five years 
should raise serious concerns within the Copyright Office as to whether 
that same entity has the administrative capabilities necessary to 
perform the required functions of the collective,'' and that in such 
cases, the Office should consider selecting a new entity ``even if not 
all criteria are met pursuant to section 115(d)(3)(B)(iii).'' \168\ The 
Office thus agrees that ``it seems highly implausible . . . that 
Congress intended that the `licensor market support' criterion be the 
primary, deciding factor as to whether a full investigation and 
analysis by the Register and the Copyright Office of each serious [MLC] 
candidate is necessary.'' \169\ The Office believes that, among other 
scenarios, if the designated entity were to make unreasonable 
distributions of unclaimed royalties, that could be grounds for concern 
and may call into question whether the entity has the ``administrative 
and technological capabilities to perform the required functions of the 
[MLC].'' \170\
---------------------------------------------------------------------------

    \167\ 17 U.S.C. 115(d)(3)(B)(ii).
    \168\ H.R. Rep. No. 115-651, at 6; S. Rep. No. 115-339, at 5-6; 
Conf. Rep. at 4.
    \169\ SGA Reply at 9.
    \170\ 17 U.S.C. 115(d)(3)(A)(iii).
---------------------------------------------------------------------------

    Fifth, Congress has asked the Office to study the issue of 
unclaimed royalties and to provide a report by July 2021 that 
recommends best practices for the MLC to identify and locate copyright 
owners with unclaimed royalties, encourage copyright owners to claim 
their royalties, and reduce the incidence of unclaimed royalties.\171\ 
The MLC must give ``substantial weight'' to these recommendations when 
establishing its procedures to identify and locate copyright owners and 
to distribute unclaimed royalties.\172\
---------------------------------------------------------------------------

    \171\ Public Law 115-264, sec. 102(f), 132 Stat. at 3722-23.
    \172\ Id. at sec. 102(f)(2), 132 Stat. at 3723.
---------------------------------------------------------------------------

    Sixth, in addition to the various ways the MLC is required to 
publicize unclaimed royalties,\173\ the DLC must assist with publicity 
for unclaimed royalties by encouraging digital music providers to 
publicize information on the existence of the MLC and on claiming 
royalties on websites and applications, and conducting in-person 
outreach activities with songwriters.\174\ The Copyright Office, too, 
is tasked with engaging in public outreach and

[[Page 32284]]

educational activities that must specifically include ``educating 
songwriters and other interested parties'' about how ``a copyright 
owner may claim ownership of musical works (and shares of such works)'' 
and how ``royalties for works for which the owner is not identified or 
located shall be equitably distributed to known copyright owners.'' 
\175\
---------------------------------------------------------------------------

    \173\ 17 U.S.C. 115(d)(3)(J)(iii) (including maintenance of an 
online list of unmatched works through which ownership can be 
claimed, notification prior to any distribution, and participation 
in music industry conferences and events).
    \174\ Id. at 115(d)(5)(C)(i)(VII), (d)(5)(C)(iii).
    \175\ Public Law 115-264, sec. 102(e)(2), 132 Stat. at 3722.
---------------------------------------------------------------------------

    Finally, the Office suggests there may be other reasons for the 
statutory requirement that the MLC enjoy ``substantial support'' from 
the largest market share of musical work copyright owners. Without 
minimizing the importance of ensuring that unidentified copyright 
owners have the opportunity to come forward and effectively claim their 
works to receive accrued royalties, there are other duties of the MLC 
that also serve the paramount goal of ``ensuring that a songwriter 
actually gets paid.'' \176\ As MLCI notes, already identified copyright 
owners have an interest in ensuring the efficient and accurate 
collection and distribution of royalties.\177\ Further, the MLC will 
participate in proceedings before the CRJs, and having the support of 
publishers with prior experience before the CRJs may be beneficial. 
Establishment of the statutorily-required database will likely also 
benefit from initial support of music publishers and other relevant 
copyright owners with large quantities of authoritative versions of 
data for works that together will comprise the bulk of royalty 
distributions.\178\ As these examples illustrate, having strong support 
from key copyright owners may assist in ensuring that the MLC is in the 
best possible position to succeed in effectively carrying out the whole 
of its assigned responsibilities.
---------------------------------------------------------------------------

    \176\ 164 Cong. Rec. S6292, 6292 (daily ed. Sept. 25, 2018) 
(statement of Sen. Hatch).
    \177\ MLCI Proposal at 107.
    \178\ For example, a number of MLCI's largest endorsers state 
that each intends to work with MLCI to incorporate its musical work 
data into the musical works database. See, e.g., MLCI Proposal at 
Exs. 11-B-2 (Sony/ATV Music Publishing), 11-C-2 (Kobalt Music 
Publishing America, Inc.), 11-N-2 (Warner/Chappell Music, Inc.), 11-
P-2 (Universal Music Publishing Group).
---------------------------------------------------------------------------

ii. Evidentiary Findings
a. Market Share
    With respect to the information submitted in the proceeding, AMLC 
does not provide market share data for its endorsing copyright owners. 
Nor do its endorsers provide sufficient information from which the 
Office can reasonably determine their aggregate applicable market 
share. In contrast, MLCI provides multiple data points regarding the 
market share of its endorsers.
    For purposes of calculating market share, MLCI counts 132 musical 
work copyright owners it calls the ``Supporting Copyright Owners.'' 
\179\ According to MLCI:
---------------------------------------------------------------------------

    \179\ Id. at 98.

    The Supporting Copyright Owners include copyright owners of all 
sizes who own the relevant rights in musical works covering the 
spectrum of musical genres--including pop, rap, hip hop, R&B, 
country, rock, metal, reggae, folk, electronic, jazz, classical--and 
from every era--including popular current hits and ``evergreen 
standards.'' Their sizes range from major music publishers who own 
the relevant rights to millions of songs, to small, family-owned 
companies that focus on a particular genre or sub-genre. The 
Supporting Copyright Owners own the mechanical rights to, at a 
minimum, well over seven million musical works.\180\
---------------------------------------------------------------------------

    \180\ Id. (citations omitted); see id. at Ex. 11-8-9 (stating 
that ``a partial count of information obtained from less than half 
of the Supporting Copyright Owners shows that together they own (now 
and over the preceding 3 full calendar years) the right to reproduce 
and distribute over 7.3 million musical works in Section 115 covered 
activities in the U.S.'') (declaration of David M. Israelite).

    A sworn declaration from David M. Israelite of the NMPA states that 
the Supporting Copyright Owners ``own[ ] the U.S. mechanical rights to 
millions of works'' and ``have confirmed that they exclusively endorse 
MLC[I] to be the collective, and have pledged to provide substantial 
support to MLC[I].'' \181\ A group endorsement letter from the 
Supporting Copyright Owners further states that they ``all own, and 
have during the preceding three years owned, exclusive rights to 
license musical works for use in covered activities in the United 
States and have licensed those rights to digital music providers.'' 
\182\ The Supporting Copyright Owners thus appear to be relevant 
copyright owners who may be counted for endorsement purposes. While 
MLCI states that it is also endorsed by ``over 2,400 songwriters''--of 
whom ``[o]ver 1,400'' ``have reported that they are self-published 
songwriters, meaning they are not signed to or affiliated with a music 
publisher and manage their own musical work copyrights''--they are not 
included in MLCI's market share calculations.\183\
---------------------------------------------------------------------------

    \181\ Id. at Ex. 11-5.
    \182\ Id. at Ex. 11-A-1; see, e.g., id. at Ex. 11-B-1 (``Sony 
owns the exclusive rights to license millions of musical works 
written by tens of thousands of songwriters, including for use in 
Section 115 covered activities. Sony has for well over the last 
three years licensed these rights to digital services through the 
Section 115 compulsory licensing process and, in some cases, through 
voluntary licenses.''); id. at Ex. 11-D-1 (``Reel Muzik Werks is the 
owner or the exclusive licensee of the rights to engage and to 
license others to engage in Section 115 covered activities . . . . 
Reel Muzik Werks has during the last three full calendar years 
licensed its rights in and to musical works to digital music 
providers for use in covered activities.'').
    \183\ Id. at 98-99 & n.22.
---------------------------------------------------------------------------

    According to MLCI, ``[i]ndustry data, including revenue information 
that NMPA collects from its members on an annual basis and publicly 
available data, demonstrates that the Supporting Copyright Owners 
represent between 85% and 90% of the licensor market for all uses of 
musical works during the [statutory three-year period from 2016 through 
2018].'' \184\ Additionally, Mr. Israelite's declaration provides data 
from Billboard Magazine showing the average combined market share of 
Supporting Copyright Owners appearing in Billboard's quarterly top ten 
rankings of music publishers over the last three years to be 
87.83%.\185\
---------------------------------------------------------------------------

    \184\ Id. at 99 (citation omitted); see also id. at Ex. 11-5-7 
(declaration of David M. Israelite).
    \185\ Id. at Ex. 11-6-7. The Office notes that Billboard appears 
to only ``measure the market share . . . of the top 100 radio 
airplay songs.'' See, e.g., Ed Christman, Music Publishers' 4th 
Quarter Report: Top 3 Companies Have the Same No. 1 Song, Billboard 
(Feb. 3, 2017), https://www.billboard.com/articles/business/7677913/music-publishers-4th-quarter-report.
---------------------------------------------------------------------------

    Mr. Israelite states that these data figures are ``a fair proxy for 
estimating the Supporting Copyright Owners' market share for uses of 
musical works in covered activities, as there is no reason to believe 
that the Supporting Copyright Owners' market share for uses of their 
musical works in covered activities should deviate significantly from 
their market share for their uses of musical works generally.'' \186\ 
In support, MLCI states that ``NMPA was able to confirm from 
information regarding the U.S. mechanical royalties paid by Apple Music 
and Spotify--the largest and most popular services in the market--that 
the Supporting Copyright Owners have together received the substantial 
majority of total mechanical royalties for uses of musical works in 
covered activities in the U.S. during the [statutory three-year period 
from 2016 through 2018].'' \187\ As discussed below, Digital Licensee 
Coordinator, Inc. (``DLCI'') follows a similar market share-based 
approach to establish its endorsement by digital music providers and 
significant non-blanket licensees.\188\
---------------------------------------------------------------------------

    \186\ MLCI Proposal at Ex. 11-7.
    \187\ Id. at 99-100; see also id. at Ex. 11-7-8 (describing 
methodology) (declaration of David M. Israelite).
    \188\ See DLCI Proposal at 4-7.
---------------------------------------------------------------------------

    AMLC does not contest these market share figures; indeed, a comment 
supporting AMLC submitted on behalf

[[Page 32285]]

of a group of songwriters that includes two AMLC board members concedes 
that ``Sony/EMI, Warner, and Universal''--each of which exclusively 
endorse MLCI--``control about 65% of the market for music publishing.'' 
\189\ The Office notes that other sources confirm that MLCI is 
supported by a majority of the music publishing market; according to 
Music & Copyright's annual survey ``based on revenue,'' Sony,\190\ 
Universal, and Warner/Chappell together had an average combined global 
market share of 58.65% for 2017 and 2018.\191\
---------------------------------------------------------------------------

    \189\ Robert Allen Reply at 6.
    \190\ See Global Recorded-music and Music Publishing Market 
Share Results for 2018, Music & Copyright (May 8, 2019), https://musicandcopyright.wordpress.com/2019/05/08/global-recorded-music-and-music-publishing-market-share-results-for-2018/.
    \191\ Id. (this calculation includes figures from Sony/ATV, Sony 
Music Publishing Japan, and EMI Music Publishing and includes all 
revenue, not just for covered activities).
---------------------------------------------------------------------------

    Based on the foregoing, the Office finds that there is substantial 
evidence to demonstrate that MLCI is endorsed and supported by the 
required plurality of relevant endorsing copyright owners, based on 
applicable market share. Given the overwhelming majority market share 
of MLCI's Supporting Copyright Owners and the data from Apple Music and 
Spotify, and in the absence of any evidence to the contrary, the above-
discussed market share figures appear more likely than not to be a 
sufficient proxy for estimating market share based on royalties earned 
from covered activities in the U.S. Even if that were not the case, the 
Office finds, based on the foregoing, that MLCI would still be ``the 
entity that most nearly fulfills'' the section 115(d)(3)(A)(ii) 
qualification.\192\
---------------------------------------------------------------------------

    \192\ 17 U.S.C. 115(d)(3)(B)(iii).
---------------------------------------------------------------------------

b. Number of Copyright Owners
    In any event, even under the metric for which AMLC provides 
evidence--number of copyright owners--AMLC would not be the candidate 
that satisfies the endorsement provision.
    The Office received comments from a significant portion of the 
music industry, voicing support for either MLCI or AMLC. Endorsements 
came from a diverse array of large and small publishers \193\ as well 
as from thousands of songwriters from across the country and beyond 
representing virtually every major genre, including pop, hip hop, rap, 
rock, country, R&B, alternative, electronic, dance, folk, jazz, 
classical, Broadway/musical theatre, blues, Christian, gospel, Latin, 
bluegrass, and soul.\194\ These songwriters include writers of #1 hit 
songs, Grammy Award winners and nominees, a Rock and Roll Hall of Fame 
inductee, members of the Nashville Songwriters Hall of Fame, film and 
television composers, and numerous less established or part-time 
writers.
---------------------------------------------------------------------------

    \193\ See, e.g., MLCI Proposal at 98, Ex. 11-A-X; KDE LLC Reply 
at 1 (supporting AMLC); Secretly Publishing Reply at 1 (supporting 
MLCI).
    \194\ See, e.g., AMLC Proposal at 47-75; MLCI Proposal at Exs. 
5-A, 6-10; Robert Allen Reply; Board of Directors of NSAI Reply; 
Maria Schneider Reply; Spence Burton Reply; Michael Busbee Reply; 
Britt Daley Reply; Barry DeVorzon Reply; Jerry Emanuel Reply; Beckie 
Foster Reply; Jan Garrett Reply; Ben Glover Reply; Dan Gutenkauf 
Reply; John Harding Reply; Aaron Johns Reply; Brett Jones Reply; Amy 
Kinast Reply; Wayne Kirkpatrick Reply; Sonia Kiva Reply; Bill 
LaBounty Reply; David Lauver Reply; Daniel Leathersich Reply; 
Alejandro Martinez Reply; Dennis Matkosky Reply; Steve Miller Reply; 
Clay Mills Reply; Vincent Mullin Reply; Kerry Muzzey Reply; Rick 
Nowels Reply; Melissa Peirce Reply, Jim Photoglo Reply; Deric Ruttan 
Reply; Jerry Schneyer Reply; Joie Scott Reply; Pamela Schuler Reply; 
Karen Sotomayor Reply; Miki Speer Reply; Even Stevens Reply; Paris 
Strachan Reply; Eleisa Trampler Reply; Kelly Triplett Reply; Danny 
Wells Reply; Anna Wilson Reply.
---------------------------------------------------------------------------

    The Office also heard from a broad assortment of trade groups and 
other organizations (some of which the Office understands to be members 
or subgroups of each other) representing publisher and songwriter 
interests. Groups listed as supporting AMLC include international 
alliances and collectives like the Music Creators of North America 
(``MCNA''), European Composer and Songwriter Alliance, Pan-African 
Composers' and Songwriters' Alliance, Asia-Pacific Music Creators 
Alliance, and Alianza Latinoamericana de Compositores y Autores de 
M[uacute]sica, and other groups like the Songwriters Guild of America, 
Screen Composers Guild of Canada, American Composers Forum, and Music 
Answers.\195\ Groups listed as supporting MLCI include the National 
Music Publishers' Association, Association of Independent Music 
Publishers, International Confederation of Music Publishers, Nashville 
Songwriters Association International, Songwriters of North America, 
Music Publishers Association, American Composers Alliance, Gospel Music 
Association, Church Music Publishers Association, Americana Music 
Association, Copyright Alliance, and Creative Future.\196\ In addition, 
performing rights organizations ASCAP, BMI, SESAC, and Global Music 
Rights all endorse MLCI, as do many representatives from the recorded 
music industry, including the Recording Industry Association of 
America, the American Association of Independent Music, the major 
record labels, and SoundExchange.\197\ Lastly, in one of the few 
comments from an organization that waited to review the proposals 
before endorsing a candidate, the Recording Academy, whose membership 
includes ``thousands of working songwriters and composers, many of whom 
are independent, self-published, or unaffiliated songwriters,'' states 
that it ``believes that the MLC[I] submission is best equipped to 
satisfy the statutory requirements of the MMA.'' \198\
---------------------------------------------------------------------------

    \195\ AMLC Proposal at 47-48; see generally id. at 94-107.
    \196\ MLCI Proposal at 100, Ex. 11-X; International 
Confederation of Music Publishers Reply at 1.
    \197\ MLCI Proposal at 100, Ex. 11-X
    \198\ Recording Academy Reply at 1, 3.
---------------------------------------------------------------------------

    As noted above, and as both candidates agree, not every commenter 
can be counted for purposes of the endorsement provision--even under 
AMLC's interpretation. If the statue were to require only a headcount, 
it would still be a headcount of relevant copyright owners. In this 
proceeding, some endorsers, for example, are attorneys that give no 
indication that they are also relevant copyright owners.\199\ Some 
endorsers do not give any indication of their connection to the 
industry.\200\ And some endorsers who state that they are songwriters 
are not clear about whether they are also relevant copyright owners for 
their songs.\201\ Many of the endorsements contain ambiguities such as 
these.
---------------------------------------------------------------------------

    \199\ See, e.g., Jay A. Rosenthal et al. Reply.
    \200\ See, e.g., Jared Burton Reply; Brandon Dudley Reply; Earl 
Vickers Reply.
    \201\ See, e.g., Ashley Gorley Reply; Chris Myers Reply; Jeff 
Rodman Reply; Chris Xefos Reply.
---------------------------------------------------------------------------

    A separate issue concerns the treatment of the international 
alliances, performing rights organizations, trade groups, and other 
endorsing organizations. MLCI does not contend that these types of 
organizations are relevant copyright owners.\202\ AMLC, on the other 
hand, appears to count not only each of its supporting organizations, 
but the individual members of each of those organizations.\203\ MLCI 
strongly disapproves of this approach.\204\ The Office finds it 
difficult to credit these purported endorsements, as there is 
insufficient evidence to demonstrate that every member of each of these

[[Page 32286]]

organizations actually endorses AMLC. While surely each referenced 
association on a general level represents the interests of their 
members, none of AMLC's group endorsements indicate that they have the 
authority to endorse an MLC candidate on their members' behalf. For 
example, the submissions do not indicate that any kind of resolution to 
endorse was passed by their members, and if one was, whether their 
members voted unanimously (as would be necessary to claim that every 
member should be counted). In many cases, moreover, it is difficult to 
tell whether the endorsements are submitted on behalf of the 
organization, or from individuals associated with the organizations 
acting in their personal capacities or in their capacity as an 
individual board member.\205\ In fact, two organizations listed by AMLC 
as endorsers in its proposal subsequently disavowed the purported 
endorsements and clarified that they do not in fact support AMLC.\206\
---------------------------------------------------------------------------

    \202\ See MLCI Proposal at 100, Ex. 11-9 (referring to them as 
``non-musical work copyright owner[ ] groups'').
    \203\ See AMLC Proposal at 47-48 (claiming its endorsers 
``represent hundreds of thousands of separate and unique music 
publishers whose music is distributed on digital streaming services 
in the United States'').
    \204\ See MLCI Reply at 11 (``MLC[I] would never claim that, 
simply by virtue of a trade group endorsement, each songwriter and 
publisher member of the trade group can be deemed to endorse and 
support MLC[I], as that would be misleading.'').
    \205\ See, e.g., AMLC Proposal at 95 (letter from the Chairman 
of the Asia-Pacific Music Creators Alliance, providing no 
information about the organization or its membership, and stating 
that ``I hereby voice my support to'' AMLC) (emphasis added); id. at 
98 (same with respect to Alianza Latinoamericana de Compositores y 
Autores de M[uacute]sica); id. at 103 (same with respect to Pan-
African Composers' and Songwriters' Alliance); see also AMLC Ex 
Parte Meeting Summary at 24 (``Some [organizational] endorsements 
were interpreted to be an endorsement by the individual, and others 
on behalf of the entire membership.'').
    \206\ See APRA AMCOS Reply at 1 (clarifying that APRA AMCOS does 
not endorse AMLC and was ``misrepresented in the AMLC's 
submission,'' and that the letter appended to AMLC's proposal was 
``signed by a single writer director of the APRA board and does not 
represent the commitment or support of our organization, nor does 
the letter state anywhere that APRA itself has offered any such 
institutional endorsement''); Statement from CISAC and CIAM on the 
U.S. Music Licensing Collective, International Confederation of 
Societies of Authors and Composers (Apr. 5, 2019), https://www.cisac.org/Newsroom/Articles/Statement-from-CISAC-and-CIAM-on-the-U.S.-Music-Licensing-Collective (``For the avoidance of doubt 
and in view of the different rumours circulating, CIAM and CISAC 
wish to clarify that the organisations have not endorsed either of 
the competing companies for the U.S. MLC.'').
---------------------------------------------------------------------------

    If the Office were to credit these kinds of endorsements, it would 
raise unresolvable practical problems. For many of these organizations, 
no membership numbers are provided,\207\ and for others, only an 
indefinite range or rounded figure is given, making a precise headcount 
impossible.\208\ Additionally, without a list of member names, the 
Office cannot determine whether individual members are being counted 
more than once due to membership in multiple endorsing organizations or 
because the individual filed his or her own comment with the Copyright 
Office directly.\209\ By not identifying purported endorsing members, 
the possibility also exists for conflicting endorsements.\210\ For 
example, AMLC board members Zoe Keating, Maria Schneider, and Rick 
Carnes appear to be affiliated with ASCAP,\211\ which endorses MLCI. 
These individuals presumably would object to MLCI counting them among 
its endorsers merely because ASCAP has endorsed MLCI.
---------------------------------------------------------------------------

    \207\ See, e.g., AMLC Proposal at 95 (Asia-Pacific Music 
Creators Alliance); id. at 98 (Alianza Latinoamericana de 
Compositores y Autores de M[uacute]sica); id. at 102 (Society of 
Authors and Composers of Colombia); id. at 104 (Screen Composers 
Guild of Canada); id. at 106 (ABRAMUS/ALCAM).
    \208\ See, e.g., id. at 99 (stating that European Composer and 
Songwriter Alliance ``represents over 50,000 professional composers 
and songwriters''); id. at 100 (stating that MCNA has an 
``approximate collective membership of between 7,500 to 8,500 
songwriters and composers''); id. at 105 (stating that Music Answers 
has ``more than 3,500 supporters''); SGA Reply at 1 (``membership 
ranges between 3,500 and 5,000 members'').
    \209\ For example, it seems that the memberships of SGA and 
Screen Composers Guild of Canada may be subsumed within the 
membership of MCNA. See AMLC Proposal at 100 (listing SGA and SCGC 
as ``member organizations'' of MCNA).
    \210\ While the Office made clear in the NOI that endorsements 
need not be exclusive, this is a different issue that speaks to 
whether the candidate is in fact supported by an individual.
    \211\ See Sue (or In a Season of Crime), ACE Repertory, https://www.ascap.com/repertory#ace/search/workID/888244289 (last visited 
June 24, 2019) (listing Maria Schneider's PRO affiliation as ASCAP); 
Across the Street (Live), ACE Repertory, https://www.ascap.com/repertory#ace/search/workID/886237406 (last visited June 24, 2019) 
(listing Zoe Keating's PRO affiliation as ASCAP); Hangin Around, ACE 
Repertory, https://www.ascap.com/repertory#ace/search/workID/380230553 (last visited June 24, 2019) (listing Rick Carnes's PRO 
affiliation as ASCAP).
---------------------------------------------------------------------------

    Lastly, AMLC's proposal refers to ``100+ various individual 
composers/writers/publishers/organizations who have signed an AMLC 
endorsement document'' and ``600+ endorsements via [the] AMLC 
website,'' which suffer from the same kinds of practical problems.\212\ 
Because these individuals are not specifically identified, the Office 
cannot determine their precise number or if any of them additionally 
submitted comments directly to the Office such that they may be counted 
more than once.
---------------------------------------------------------------------------

    \212\ AMLC Proposal at 48.
---------------------------------------------------------------------------

    Nonetheless, even if these ambiguities are resolved in favor of 
counting each endorsement (except for the individual members of the 
endorsing organizations discussed above and the two organizations that 
repudiated their purported endorsements), AMLC still would have 
substantially fewer endorsements than MLCI.\213\ Applying these 
assumptions, AMLC would have around 1,000 endorsements, while MLCI 
would have about three times that number. Even if based only on MLCI's 
Supporting Copyright Owners and the songwriters listed in MLCI's 
proposal who identified as self-published, MLCI would still have 
hundreds more endorsers than all of the comments submitted in support 
of AMLC. Thus, under both the proper metric of market share, and the 
alternative metric of number of copyright owners, MLCI is the candidate 
that satisfies the endorsement requirement.
---------------------------------------------------------------------------

    \213\ The Office's methodology was as follows. First, the Office 
counted all endorsements provided by AMLC and MLCI in their 
respective proposals, including counting all proposed board and 
committee members. Then, the Office counted every endorsement 
contained in other comments. The Office did not, however, count the 
individual members of any endorsing groups or organizations for the 
reasons stated above. To be as equitable as possible, the Office 
treated every endorsement as coming from a relevant copyright owner, 
except where the record affirmatively stated otherwise. Because AMLC 
did not provide the identities of the bulk of their endorsers, the 
Office could not compare most of the endorsers from AMLC's proposal 
to the individual endorsements received in the comments, meaning the 
Office could not ascertain whether there might be duplicate 
endorsements. Because the Office could not deduplicate AMLC's 
endorsements, the Office did not deduplicate MLCI's endorsements 
either, so as to apply a consistent methodology to both candidates.
---------------------------------------------------------------------------

    As noted in conclusion below, the MMA was enacted only after an 
extensive effort to build consensus amongst musical work copyright 
owners and songwriters with various, sometimes competing, interests. 
The Register expects that the designated MLC will endeavor to equally 
represent the interests of those who did not endorse it, and that 
interested sides will continue to come together to make the 
implementation of this historic new licensing scheme a success, 
building upon the cooperative spirit that facilitated the MMA's 
passage.\214\
---------------------------------------------------------------------------

    \214\ See, e.g. Music Policy Issues: A Perspective from Those 
Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836 
Before the H. Comm. on the Judiciary, 115th Cong. 4 (2018) 
(statement of Ranking Member Nadler); 164 Cong. Rec. S501, 502 
(daily ed. Jan. 24, 2018) (statement of Sen. Hatch); 164 Cong. Rec. 
H3522, 3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte).
---------------------------------------------------------------------------

3. Administrative and Technological Capabilities
    The statute requires that the designated entity ``has, or will have 
prior to the license availability date, the administrative and 
technological capabilities to perform the required functions of the 
mechanical licensing collective.'' \215\ The NOI requested that each 
proposal include specific information to demonstrate the candidate's 
ability to meet this

[[Page 32287]]

requirement, organized into enumerated categories.
---------------------------------------------------------------------------

    \215\ 17 U.S.C. 115(d)(3)(A)(iii).
---------------------------------------------------------------------------

i. Overview of Proposals, Including Business Planning and Budgeting
    The Office requested that each entity provide ``a business plan, 
including a statement of purpose or principles, proposed schedule, and 
available budgetary projections, for the establishment and operation of 
the proposed MLC for the first five years of its existence.'' \216\ The 
NOI noted that although the MLC designation process is separate from 
the establishment of an administrative assessment by the CRJs, 
``understanding the proposed funding for the MLC (in advance of the 
establishment of the administrative assessment)'' and budgetary 
planning generally can be ``important to confirming that the MLC will 
be ready to adequately perform its required functions by the license 
availability date and beyond.'' \217\ Accordingly, the Office's 
interest in the candidates' budgetary materials is ``for the purposes 
of this designation process only, and without prejudice to the future 
administrative assessment proceeding.'' \218\
---------------------------------------------------------------------------

    \216\ NOI at 65751 (requesting each plan also include ``a 
description of the intended technological and/or business methods'' 
for accomplishing the MLC's statutory obligations).
    \217\ Id. at 65752.
    \218\ Id.
---------------------------------------------------------------------------

    Considering both proposals at a very high level, there are a number 
of similarities, including a shared intention to set up offices in or 
near Nashville, Tennessee.\219\ Both candidates envision using a 
primary vendor to build out the required musical works database, and to 
varying degrees signaled intentions or openness to working with 
additional vendors.\220\ In recognition that the creation of a 
comprehensive musical works database has long been an aim of various 
segments of the music community, both candidates plan to ``utilize 
systems that are tested'' \221\ or ``leverage[ ] existing technology 
and data providers'' \222\ Both propose to rely on automated processes 
for the bulk of identifying songs recorded and matching them to 
copyright holders, augmented with manual processing as needed.\223\ To 
that end, both note the importance of compatibility with existing music 
industry standards, including communicating information in accordance 
with the Common Works Registration (``CWR'') format and DDEX standards, 
and a willingness to explore other relevant existing or emerging 
standards or open protocols.\224\
---------------------------------------------------------------------------

    \219\ MLCI Proposal at 66; AMLC Proposal at 48, 76.
    \220\ MLCI Ex Parte Meeting Summary at 2; AMLC Ex Parte Meeting 
Summary at 7-9.
    \221\ MLCI Proposal at 39.
    \222\ AMLC Proposal at 5.
    \223\ MLCI Proposal at 18-19, 41; AMLC Proposal at 10-11.
    \224\ MLCI Proposal at 35, 38, 57-58; AMLC Proposal at 15; see 
also Berklee College of Music & MIT Connection Science Comments at 
2-5.
---------------------------------------------------------------------------

    Similarly, AMLC and MLCI each express an understanding of the need 
to address policies and actions related to distributions of unclaimed 
accrued royalties with care, including providing adequate notice before 
such distributions occur.\225\ They commit to engage in education and 
outreach efforts to publicize the collective, including procedures by 
which copyright owners may identify themselves to claim accrued 
royalties.\226\ They both appropriately focus on the need to operate a 
user-friendly claiming portal, for, as the legislative history notes, 
``the simple way to avoid any distribution to other copyright owners 
and artists is to step forward and identify oneself and one's works to 
the collective, an exceedingly low bar to claiming one's royalties.'' 
\227\
---------------------------------------------------------------------------

    \225\ See, e.g., MLCI Proposal at 43-44; AMLC Proposal at 18-19; 
AMLC Ex Parte Meeting Summary at 14.
    \226\ MLCI Proposal at 62-63; AMLC Proposal at 30-33.
    \227\ S. Rep. No. 115-339, at 14 (2018) (stating that ``[t]his 
process ensures that copyright owners and artists benefit'' in 
contrast to views of ``some copyright owners and/or artists who 
would prefer that such money be escrowed indefinitely until 
claimed'').
---------------------------------------------------------------------------

    Although the proposals share certain commonalities, they diverge on 
details, sometimes significantly, including at times on the level or 
evidence of planning disclosed in response to the NOI. These 
differences were reflected in the proposed budgetary estimates, 
including the specific line items, put forth by each candidate.
a. MLCI
    Out of the two candidates, MLCI provides a more detailed 
organizational model for its operations and reports that it ``has 
already begun the process of assuring the timely acquisition of these 
capabilities'' \228\ necessary to fulfill the statutory functions. This 
framework is organized into three categories of activities: Strategic 
Processes, defined as ``the management processes that empower the 
operational capabilities of the collective''; Core Processes, defined 
as ``capabilities and processes in the core tasks'' including ``how the 
MLC performs the central ownership and license administration 
responsibilities''; and Foundational Processes, defined as ``necessary 
support capabilities and processes, usually typical of most businesses 
(payroll, legal, etc.).'' \229\ These categories in turn comprise ten 
functions that the MLC will carry out on behalf of songwriters, musical 
works owners, and the public, explained by a series of detailed flow 
charts.\230\
---------------------------------------------------------------------------

    \228\ MLCI Proposal at 7.
    \229\ Id. at 12.
    \230\ Id. at 13.
---------------------------------------------------------------------------

    While MLCI has not yet determined the precise management structure 
for daily operations or full staffing, it includes a series of 
organizational charts, which propose fifty-five employees.\231\ It also 
has retained consultant support in overseeing technology strategy, the 
RFI/RFP process, and operations design, and reports that its board 
members have dedicated a considerable amount of time to this planning 
process.\232\
---------------------------------------------------------------------------

    \231\ Id. at 25; see id. at 25-29 (detailed description of 
employee roles).
    \232\ Id. at 3-4; see also MLCI Ex Parte Meeting Summary at 2.
---------------------------------------------------------------------------

    MLCI intends to ``utilize a single primary vendor for core usage 
processing functions, with consideration of secondary vendors to 
augment in specific areas.'' \233\ Sixteen vendors participated in its 
RFI process, and MLCI selected seven of those to participate in the RFP 
process.\234\ MLCI notes that, in aggregate, these RFI participants 
``have processed nearly 20 trillion lines of sound recording usage and 
more than $4.2 billion in royalties for the U.S. territory over the 
past 3 calendar years, and have more than 20 million unique works in 
rights databases and existing connectivity with approximately 50,000 
publishers.'' \235\
---------------------------------------------------------------------------

    \233\ MLCI Ex Parte Meeting Summary at 2.
    \234\ MLCI Proposal at 55 (listing RFI participants ASCAP, 
AxisPoint, BackOffice, BMI, BMAT, Crunch Digital, DDEX, Gracenote, 
ICE, Music Reports, Inc. (``MRI''), Open Music Initiative (OMI), 
Sacem/IBM, SESAC/HFA, SOCAN/DataClef, SourceAudio, and SXWorks); id. 
at 59 (listing RFP participants ASCAP, BackOffice, ICE, MRI, SESAC/
HFA, SXWorks, and Sacem/IBM); id.at Exs. 3, 4 (providing RFI and 
RFP). MLCI did not include copies of RFI or RFP responses, stating 
they are subject to nondisclosure agreements and include 
confidential information. Id. at 59.
    \235\ Id. at 56-57.
---------------------------------------------------------------------------

    MLCI estimates its total startup costs through the license 
availability date to be between $26 and $48 million, with annual 
operating costs between $25 and $40 million.\236\ To obtain funding, it 
has engaged in ``good faith negotiations with the major licensee 
services in an attempt to reach agreement on voluntary contributions.'' 
\237\ If such an agreement is not realized, MLCI will participate in 
the assessment proceeding.\238\ In that

[[Page 32288]]

event, it ``will seek bridge funding to cover any gaps,'' and expresses 
confidence that ``its extensive network of support and trust throughout 
the industry, and the reputations of its leadership, will assist it in 
obtaining support for its continued operations.'' \239\ MLCI expects to 
have no need to apply unclaimed royalties to defray costs, though it 
notes that the statute permits it to do so on an interim basis.\240\
---------------------------------------------------------------------------

    \236\ Id. at 31-32.
    \237\ Id. at 59.
    \238\ Id. at 61.
    \239\ Id.
    \240\ Id. at 61-62 (citing 17 U.S.C. 115(d)(7)(C)).
---------------------------------------------------------------------------

b. AMLC
    AMLC aspires to adopt a leaner approach to these issues. Upon its 
launch, it will rely on incumbent services and vendors that have been 
``vetted and approved'' by the Digital Media Association 
(``DiMA'').\241\ It intends to add technology applications, features, 
and solution providers incrementally over time ``as a series of steps 
on top of [this] pre-existing solid foundation.'' \242\ AMLC reports 
that it ``has taken significant input from key stakeholders, potential 
vendors, performing rights organizations, labels, and most importantly, 
publishers and songwriters in formulating [its] technology plan,'' and 
states that it will have further discussions in designing and 
implementing solutions if it is designated.\243\ It intends to hire 
eleven employees, and ha engaged a technology consultant.\244\ However, 
AMLC cautions that ``although there ha[ve] been significant discussions 
and planning . . . much of the details need to be formalized once the 
mandate decision is made.'' \245\
---------------------------------------------------------------------------

    \241\ AMLC Proposal at 4.
    \242\ Id.
    \243\ Id. at 6.
    \244\ Id. at 26.
    \245\ Id. at 6. AMLC subsequently reported that although several 
vendors have agreed to work with it in the event it is selected as 
the MLC, many ``were concerned [that] they would suffer negative 
consequences if they were listed in the AMLC application.'' AMLC Ex 
Parte Meeting Summary at 8. To the extent such vendors believe they 
are prohibited from contracting with both candidates, that 
understanding is not supported by the statute. As noted in the NOI, 
``while the statutory language authorizes the MLC to arrange for 
services of outside vendors, nothing suggests that such a vendor 
must offer exclusive services to that MLC candidate.'' NOI at 65749. 
At the same time, the statute does not regulate parties' ability to 
enter into exclusive relationships or other arrangements that may 
affect the information that can be disclosed in the candidates' 
submissions.
---------------------------------------------------------------------------

    AMLC established several requirements that potential vendors must 
meet, including that the entity is ``in good standing''; has no pending 
litigation; has worked with or for the major music publishers, 
independent music publishers, and self-published songwriters; has 
worked with at least one of the major digital service providers 
(``DSPs''); and has distributed at least $100 million to rightsholders 
each year for the last two years.\246\ Having held discussions with 
four primary vendors, AMLC ``expects to engage foundational vendors'' 
DataClef and MRI to enable it to provide a comprehensive interoperable 
database.\247\ It notes that DataClef has access to the CIS-NET Works 
Information Database (``WID''), which includes over 81.1 million 
musical works.\248\ Beyond these vendors, AMLC states that additional 
incumbent entities employed by DSPs have confirmed that if AMLC is 
designated, they would play a role if requested or needed.\249\
---------------------------------------------------------------------------

    \246\ AMLC Ex Parte Meeting Summary at 7-8.
    \247\ AMLC Proposal at 4; see also AMLC Ex Parte Meeting Summary 
at 8-9 (indicating AMLC selected DataClef as their vendor, as well 
as a continued willingness to consider other vendors).
    \248\ AMLC Proposal at 7-8. It is unclear how DataClef qualifies 
as a vendor under AMLC's criteria, as it was launched in late 2018 
and would not have distributed at least $100 million over the last 
two years. See SOCAN Launches Dataclef Music Services (Oct. 22, 
2018), https://www.socan.com/socan-launches-dataclef-music-services/
.
    \249\ AMLC Proposal at 4.
---------------------------------------------------------------------------

    In response, MLCI expresses concern regarding the perceived lack of 
explanation of AMLC's RFI process, and doubts the ability of the 
potential AMLC vendors to provide key capabilities such as access to 
relevant databases, specifically challenging whether AMLC will be 
legally entitled to access the WID for its purposes.\250\
---------------------------------------------------------------------------

    \250\ MLCI Reply at 22-24 (``Access to the CIS-NET WID is a 
benefit for CISAC member societies, but a CISAC member like SOCAN 
would not have authority to sublicense the WID to anyone else it 
wants, be it DataClef or the collective.'').
---------------------------------------------------------------------------

    AMLC submitted substantially lower cost estimates for its 
activities, estimating total costs of approximately $43.9 million for 
its first five years, broken out across fewer categories than 
MLCI.\251\ Like MLCI, AMLC intends to negotiate with DiMA on a final 
budget to be submitted to the CRJs for approval.\252\ AMLC does not 
intend to utilize debt, except perhaps during the initial MLC startup 
phase.\253\ AMLC believes it is inappropriate to apply songwriters' and 
publishers' royalties to cover the MLC's operating costs, but states 
that interest income earned from the unclaimed accrued royalties may be 
used to defer initial operating costs during the startup phase.\254\
---------------------------------------------------------------------------

    \251\ AMLC Proposal at 28.
    \252\ Id.
    \253\ Id. at 28-29 (outlining potential sources of debt 
financing).
    \254\ Id. at 29.
---------------------------------------------------------------------------

    MLCI characterizes AMLC's budget and development timeframe as vague 
and unrealistic.\255\ Noting that AMLC's cost projections are far below 
the $30 million annual cost estimate provided by the Congressional 
Budget Office (``CBO''),\256\ MLCI argues that AMLC's budget ``would 
result in a grossly underfunded collective that could not diligently 
protect the rights and royalties of songwriters and copyright owners.'' 
\257\ Other commenters, some but not all affiliated with AMLC, praised 
AMLC's approach as reflecting the advantages of a startup or small 
company, or otherwise favored its proposed budget.\258\
---------------------------------------------------------------------------

    \255\ MLCI Reply at 25-29.
    \256\ CBO, Congressional Budget Office Cost Estimate, S. 2823 
Music Modernization Act (Sept. 12, 2018, revised Sept. 17, 2018), 
https://www.cbo.gov/system/files/2018-09/s2823.pdf.
    \257\ MLCI Reply at 25.
    \258\ See Peter Jessel Reply at 1; Peter Resnikoff Reply at 1; 
H. Hendricks Reply at 1; Alfons Karabuda Reply at 1; Betsy Tinney 
Reply at 1.
---------------------------------------------------------------------------

    Indeed, in some instances it is unclear whether AMLC's budget 
estimates anticipate each of its statutorily required activities in the 
manner it envisions executing them, which makes it difficult to assess 
AMLC's degree of advance planning. For instance, AMLC does not indicate 
which expenditures are encompassed by its ``OpEx'' budget item, which 
averages approximately $600,000 per year during its first two full 
years.\259\ By comparison, MLCI's estimated operational costs include 
specific line items for premises, office expenses, accounting services, 
finance and insurance, and travel expenses, among other 
expenditures.\260\ The comparative lack of specificity calls into 
question the extent to which AMLC considered the full range of the 
MLC's necessary operational costs. Similarly, AMLC projects annual 
expenditures of approximately $600,000 to $730,000 for licensing and 
legal activities for the first five years of its operation.\261\ It is 
unclear whether these allocated amounts fully anticipate the MLC's 
statutory obligations in this area, which include participating in 
Copyright Office rulemakings and the CRJs' administrative assessment 
proceedings, and ``[e]ngag[ing] in legal and other efforts to enforce 
rights and obligations'' under section 115(d), ``including by filing 
bankruptcy proofs of claims for amounts owed under licenses'' or 
commencing actions for damages and injunctive relief in federal 
court.\262\
---------------------------------------------------------------------------

    \259\ See AMLC Proposal at 28.
    \260\ See MLCI Proposal at 32.
    \261\ AMLC Proposal at 28.
    \262\ 17 U.S.C. 115(d)(3)(C)(i)(VIII)-(XI); id. at 
115(d)(6)(C)(i); see also AIPLA, 2017 Report of the Economic Survey 
44 (2017).

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

[[Page 32289]]

ii. Ownership Information, Matching, and Claiming Process
    As noted, a key aspect of the MLC's collection and distribution 
responsibilities includes ingesting data regarding musical works and 
uses under the license, and identifying musical works and copyright 
owners, matching them to sound recordings, and ensuring that a 
copyright owner gets paid as he or she should.\263\
---------------------------------------------------------------------------

    \263\ Indeed, many interested commenters focused on these 
``core'' or ``principal'' duties. See, e.g., Recording Academy Reply 
at 3; DiMA Reply at 2.
---------------------------------------------------------------------------

    Both proposals appropriately focus on this core task.\264\ As 
noted, both AMLC and MLCI intend to employ established and standard 
data formats and architectural practices to support data exchange 
functions, including development of Application Programming Interfaces 
(``APIs'') to allow bulk processing of data for larger users \265\ and 
supporting a variety of formats for new submissions ``to accommodate 
copyright owners who are unable to convert data to standard formats 
themselves.'' \266\ Each expresses a willingness to utilize current and 
emerging technologies to match sound recordings to musical works, 
including hashes and watermarking or fingerprinting technologies.\267\ 
Finally, both wisely point to usage reporting as the primary 
determinant with respect to prioritization of matching resources.\268\
---------------------------------------------------------------------------

    \264\ See Recording Academy Reply at 3 (``Both have also 
demonstrated a clear commitment to the rights of songwriters.'').
    \265\ MLCI Proposal at 34-35, 37; AMLC Proposal at 5, 11, 15. 
Berklee College of Music and MIT Connection Science also noted the 
importance of the MLC using standardized APIs open protocols and 
accessibility. Berklee College of Music & MIT Connection Science at 
2-5.
    \266\ MLCI Proposal at 37; see AMLC Proposal at 10 (similar, 
referencing need to ingest comma separated values (``CSV'') files, 
Excel files, DDEX files, or data via an online user interface with 
fields that the end user will populate).
    \267\ AMLC Proposal at 16; MLCI Proposal at 48.
    \268\ MLCI Proposal at 41 (stating ``[t]otal royalties accrued 
has been a common metric for prioritization, simply because it aims 
to minimize the total amount of unmatched royalties'' and that 
``[u]sage and vintage of usage are metrics that are related to total 
royalties''); AMLC Proposal at 12.
---------------------------------------------------------------------------

    In terms of populating ownership information, MLCI envisions 
updates to the database being built into industry deals involving 
assignment of copyright interests, and by establishing a simple, user-
friendly, and ADA-compliant web portal.\269\ According to MLCI, 
``[o]nce the rights database, claiming portal, and license 
administration are fully operational, the industry will have a single, 
transparent, publicly-accessible resource for establishing and 
identifying ownership of mechanical rights.'' \270\ MLCI ``would 
undertake targeted activities to clean and improve the initial 
ownership and matching data using independent data assets . . . drawing 
on MLC[I]'s unparalleled access to data resources from its industry 
supporters.'' \271\ While noting that all usage data would be run 
through matching software, MLCI notes that it plans to develop policies 
to address issues related to calibration of confidence levels to ensure 
reliable matching, and prioritization of manual processing through the 
operations advisory committee in the context of specific unmatched 
pools.\272\ MLCI asserts that for at least two years beyond the license 
availability date, and perhaps longer, any previously accrued unmatched 
uses will be analyzed by the MLC matching systems and will be publicly 
available on the rights portal for members of the public to claim.\273\ 
MLCI adds that it intends to make repeated attempts to match ``until 
such time as the Unclaimed Royalties Committee and the Board of 
Directors . . . determine that a distribution of those unmatched 
royalties is fair and appropriate under the statute.'' \274\
---------------------------------------------------------------------------

    \269\ MLCI Proposal at 37 & n.6.
    \270\ Id. at 34.
    \271\ Id.
    \272\ Id. at 41; see also MLCI Ex Parte Meeting Summary at 3 
(stressing ``the importance of robust manual efforts to match uses 
and locate owners of works'').
    \273\ MLCI Proposal at 43-44.
    \274\ Id. at 44. The Recording Academy urged the Register to 
seek further information on MLCI's commitments to match works and on 
when such commitments may reasonably be exhausted. See Recording 
Academy Reply at 4-5. In its ex parte meeting with the Office, MLCI 
reiterated its intention to ``exceed the statutory minimums related 
to notice and distribution in order to maximize matching success.'' 
MLCI Ex Parte Meeting Summary at 3.
---------------------------------------------------------------------------

    MLCI contends that ``[t]here is no standard format for modeling 
musical works ownership agreement information in databases,'' as there 
is disagreement over which terms are important to capture, a problem 
paralleled in capturing chain of title data.\275\ MLCI therefore 
presumes a necessity to merge ``information between databases,'' which 
``can require complex reformatting of data.'' \276\ In response, DiMA 
suggested that ``it may be more effective and efficient to focus 
efforts on increasing the accuracy of automated methods.'' \277\ DiMA 
also suggests that improving the standardization of metadata might be 
achievable at lower cost by making such issues a focus of education and 
outreach efforts, as distinguished from the more labor- and cost-
intensive approach of allowing data submission in a variety of 
different formats.\278\ In its meeting with the Office, MLCI reiterated 
its intention to accept submission of data in multiple formats as a way 
to accommodate the needs and technical sophistication of a wide array 
of copyright owners. It also affirmed its commitment to education and 
outreach, noting that such efforts will inform the design of its rights 
portal and options for data submission.\279\
---------------------------------------------------------------------------

    \275\ MLCI Proposal at 36.
    \276\ Id.
    \277\ DiMA Reply at 10.
    \278\ Id. at 10-11.
    \279\ MLCI Ex Parte Meeting Summary at 2-3.
---------------------------------------------------------------------------

    AMLC commits to continually engaging with stakeholders to monitor 
and review new frameworks, and has established an advisory technology 
committee comprised of members with significant technology 
backgrounds.\280\ AMLC plans to ``build a robust interface to allow for 
bulk transitions of catalog or individual ownership changes . . . to be 
properly updated through the chosen authoritative data partners and 
vendors.'' \281\ AMLC professes that its system will be designed in 
part for self-published songwriters, who represent the largest 
percentage of music owners but in many cases have the lowest level of 
understanding of copyright requirements.\282\ AMLC anticipates that 
incomplete DSP data will be analyzed and segmented based on the 
distributor of the underlying recording, and repeatedly expresses 
optimism that the MLC and DSPs could work collaboratively to address 
such issues.\283\
---------------------------------------------------------------------------

    \280\ AMLC Proposal at 15-16, 36.
    \281\ Id. at 10.
    \282\ Id.
    \283\ See, e.g., id. at 4 (``our first priority is to meet with 
DiMA members and other DSPs to collaborate, white-board, diagram/
discuss and further work through technology topics'').
---------------------------------------------------------------------------

    Regarding the claiming process specifically, MLCI is confident that 
its ownership claiming portal will be usable by stakeholders of any 
sophistication level, and it will dedicate staff to assist copyright 
owners with troubleshooting and claims submission.\284\ Likewise, AMLC 
intends to utilize DataClef's pre-built ``claiming portal,'' allowing 
copyright owners to search a database of unmatched and/or partial 
ownership recordings, and identify recordings of their 
compositions.\285\ AMLC envisions implementing a change management 
module and reliance upon ``chosen authoritative data partners and 
vendors.'' \286\ It proposes that its portal will stream 30-second 
preview clips to

[[Page 32290]]

allow rightsholders to confirm matches.\287\
---------------------------------------------------------------------------

    \284\ MLCI Proposal at 37 & n.6.
    \285\ AMLC Proposal at 9.
    \286\ Id. at 9-10.
    \287\ Id. at 9.
---------------------------------------------------------------------------

    In response to the Office's request for ``target goals or estimates 
for matching works in each of the first five years,'' \288\ MLCI states 
that its target ``is, and will always be, 100% success.'' \289\ But it 
argues that because match rates are easily manipulated, ``the critical 
question is not match rate, but the quality of matches.'' \290\ 
Therefore, MLCI will ``fine-tune[ ]'' its algorithms based on system 
complaints, feedback, and disputes, and will investigate inaccurate 
matches.\291\ MLCI also notes that it will explore developments in 
algorithms, machine learning, and artificial intelligence.\292\
---------------------------------------------------------------------------

    \288\ NOI at 65751.
    \289\ MLCI Proposal at 42.
    \290\ Id. at 43.
    \291\ MLCI Proposal at 43; see also MLCI Ex Parte Meeting 
Summary at 2-3.
    \292\ MLCI Proposal at 39.
---------------------------------------------------------------------------

    For its part, AMLC believes that it can establish a dataset of 80 
million works and recordings, ``with corresponding works that are 
matched with high confidence to recordings of approximately 70%, or 56 
million works.'' \293\ It estimates that the percentage of works 
matched will exceed 90% by 2024.\294\ AMLC's estimates are based on 
several key assumptions, including 15% growth per year in works and 
recordings used in covered activities.\295\
---------------------------------------------------------------------------

    \293\ AMLC Proposal at 12.
    \294\ Id. at 12.
    \295\ Id. at 12-13.
---------------------------------------------------------------------------

    Based on these submissions, the Copyright Office finds that both 
candidates have demonstrated a reasonable ability to acquire and build 
the necessary data processing capabilities for ownership 
identification, matching, and claiming processes. In particular, the 
Office appreciates the level of detail provided by both entities on 
their approach to matching works, description of plans to implement 
public claiming portals, and commitment to prioritizing usage, or total 
royalties accrued, when focusing on minimizing the incidence of 
unmatched sound recordings. The Office also appreciates that both 
candidates intend to adhere to established formats for data transfers, 
as well as use standard identifiers currently used by the global music 
industry. The Office expects the selected designee to follow through on 
these commitments, to continue to explore technological developments in 
matching works, and to publicly disclose and update the methods used in 
its matching efforts.
iii. Dispute Resolution
    As noted, the MLC dispute resolution committee will establish 
policies and procedures for copyright owners to address disputes 
relating to ownership interests in musical works. Neither candidate has 
developed detailed procedures governing this committee's activities, 
but both provided sufficient information regarding their understanding 
of the scope of its responsibilities.
    MLCI will address disputed claims of ownership using existing tools 
commonly used in the industry, including algorithms used to detect 
fraud, establishing a process by which users can be authenticated, and 
tracking changes made by MLCI employees.\296\ It notes that its dispute 
resolution committee and board have extensive experience in ownership 
matters, including the role of abandoned property laws, processes for 
validating copyrighted arrangements of public domain works, public 
domain fraud, and implementation of legal holds.\297\
---------------------------------------------------------------------------

    \296\ MLCI Proposal at 44-45.
    \297\ Id. at 45-46.
---------------------------------------------------------------------------

    Similarly, AMLC states that its conflict resolution committee will 
recommend and implement policies to address discrepancies, disputes, 
and fraudulent claims.\298\ It reiterates that it will work with DSPs 
to identify the origin of false claims and create incentives for 
distributors to reduce fraud.\299\ As noted above, it also envisions 
employing a robust data change management module.\300\
---------------------------------------------------------------------------

    \298\ AMLC Proposal at 14.
    \299\ Id.
    \300\ Id. at 10.
---------------------------------------------------------------------------

    In ex parte meetings, both MLCI and AMLC confirmed their 
understanding that the dispute resolution committee's role does not 
include adjudicating ownership disputes on the merits. Rather, both 
expressed their understanding that the committee's function is limited 
to the establishment of policies and procedures to govern the 
resolution of such disputes.
iv. Maintenance of Musical Works Database
    The Office requested input regarding the operation and maintenance 
of a well-functioning database, including specific information on how 
each entity would address issues of security, redundancy, privacy, and 
transparency.\301\ Both depict a technological approach that is fully 
scalable and reliable, with the ability to handle large data sets.\302\ 
They also each commit to establishing an information security 
management system that is certified with ISO/IEC 27001 and meets the EU 
General Data Protection Regulation requirements, and other applicable 
laws, and to employing redundancy practices to minimize data loss.\303\
---------------------------------------------------------------------------

    \301\ NOI at 65751.
    \302\ AMLC Proposal at 16; MLCI Proposal at 49; see also DiMA 
Reply at 9-10 (addressing potential volume of transactions to be 
processed by the MLC).
    \303\ MLCI Proposal at 50; AMLC Proposal at 17.
---------------------------------------------------------------------------

    While its policies and procedures for accessing information in the 
databases are not yet finalized, MLCI commits to following the 
regulations promulgated by the Register concerning ``the usability, 
interoperability, and usage restrictions of the musical works 
database.'' \304\
---------------------------------------------------------------------------

    \304\ MLCI Proposal at 50 (quoting 17 U.S.C. 115(d)(3)(E)(vi)).
---------------------------------------------------------------------------

    AMLC proposes two types of access to the musical works database. 
First, the general public would have access to ``a minimal amount of 
data that is generally available to the public already.'' \305\ Second, 
AMLC will offer ``DSPs and other key constituents'' access to feeds 
with ``more comprehensive data that is generally not public, but 
necessary for proper royalty and ownership processing (such as splits, 
territorial rights etc.).'' \306\ It proposes to develop data access 
rules ``in collaboration between publishers'' to ensure confidentiality 
and compliance with domestic and international privacy and data 
security policies.\307\ AMLC's submission does not explicitly 
acknowledge the statutory requirements for provision of access, 
although elsewhere AMLC has pledged to conform any policies to 
subsequent regulatory activities.\308\
---------------------------------------------------------------------------

    \305\ AMLC Proposal at 17 (detailing fields with respect to 
musical works and sound recordings).
    \306\ Id.
    \307\ Id.
    \308\ Id. at 78 (AMLC bylaw art. 3).
---------------------------------------------------------------------------

    Based on this information, the Office finds that both MLCI and AMLC 
have the capability to maintain and provide access to the required 
public database of musical works. The Office appreciates each entity's 
commitment to ensure compliance with all relevant legal obligations 
with respect to privacy and security.
v. Notices of License, Collection and Distribution of Royalties, 
Including Unclaimed Accrued Royalties
    The MLC's administrative role includes accepting notices of license 
(and terminating them when the licensee is in default), and collecting 
and distributing royalties for covered

[[Page 32291]]

activities, including unclaimed funds after the prescribed holding 
period.\309\
---------------------------------------------------------------------------

    \309\ 17 U.S.C. 115(d)(3)(C)(i)(I)-(II).
---------------------------------------------------------------------------

    With respect to notices of license, MLCI reports that it ``will 
strictly enforce the monthly reporting requirements under Section 
115(d)(4)(A), and will promptly issue notices of default and 
terminations of licenses where applicable.'' \310\ It adds that it will 
distribute royalty pools obtained through legal proceedings to 
copyright holders based on usage reports and that where funds do not 
match the full amount of royalties due, they would be distributed on a 
pro rata basis.\311\ AMLC notes that its board members have ``extensive 
experience in all matters of resolution of royalty collections and 
payments, including bankruptcy proceedings,'' and therefore it will be 
well positioned to adopt policies ``to manage all known situations'' 
related to licensee and licensor payments.\312\
---------------------------------------------------------------------------

    \310\ MLCI Proposal at 51.
    \311\ Id. at 52.
    \312\ AMLC Proposal at 18.
---------------------------------------------------------------------------

    With respect to distributions, MLCI intends to provide ``prompt, 
complete, and accurate payments to all copyright owners.'' \313\ It 
interprets section 115(d)(3)(J)(i)(I)--which provides that the first 
distribution of unclaimed accrued royalties ``shall occur on or after 
January 1 of the second full calendar year to commence after the 
license availability date''--to provide that no such distribution shall 
occur prior to 2023.\314\ Additionally, MLCI interprets the statute as 
providing discretion to retain unclaimed accrued royalties beyond the 
statutory holding period to allow for additional efforts at matching 
and claiming, and promises to do so where there is ``reasonable 
evidence'' that such efforts may bear fruit.\315\ It is committed to 
diligent efforts to match uses and works, including ``robustly and 
relentlessly'' deploying its matching system with respect to unmatched 
works, and holding unclaimed accrued royalties beyond the statutory 
eligibility for distribution, to obtain more matches, and distribute 
more royalties to rightful owners.\316\
---------------------------------------------------------------------------

    \313\ MLCI Proposal at 52.
    \314\ 17 U.S.C. 115(d)(3)(J)(i)(I); MLCI Proposal at 52.
    \315\ Id. at 52-53.
    \316\ Id. at 43-44, 53-54 (discussing ``mak[ing] information on 
its unmatched works available to the public on its rights portal'' 
and undertaking ``significant outreach to educate the public on 
accessing this information and making claims'').
---------------------------------------------------------------------------

    MLCI further states that its royalty payment systems will comply 
with relevant tax law obligations, ``including collection of valid 
documentation (e.g., IRS Forms W-8 and W-9), administration of 
information statements and other reporting requirements (e.g., IRS 
Forms 1099 and 1042), and, where applicable, the accurate withholding 
and depositing of U.S. tax payments.'' \317\ It also notes that its 
board members have experience overseeing all aspects of royalty payment 
processing.\318\
---------------------------------------------------------------------------

    \317\ Id. at 51.
    \318\ Id.
---------------------------------------------------------------------------

    AMLC does not specifically address timing of initial and annual 
distribution of unclaimed royalties, instead emphasizing that it 
intends to keep distribution of unclaimed royalties to the lowest 
possible limit, and to only make such distributions ``as a last resort 
after every possible effort is put into identifying the rights 
holder(s).'' \319\ It further notes that its unclaimed royalties 
committee will seek to develop a policy ``to ensure the reserve fund is 
sized and managed appropriately.'' \320\ In addition, AMLC plans to use 
actuarial data to make more accurate projections regarding accrued and 
unclaimed liquidations, interest earned, and potential claims.\321\
---------------------------------------------------------------------------

    \319\ AMLC Proposal at 18-19.
    \320\ Id. at 19.
    \321\ Id.
---------------------------------------------------------------------------

    AMLC will outsource royalty payment to established payment vendors, 
``or an entity that . . . has built the needed workflow/infrastructure 
into the existing work process that can be repurposed for AMLC 
distributions, such as . . . MRI and/or DataClef.'' \322\ This entity 
``will also be responsible for the storage of personal information 
(including tax ID, name, address, bank info etc.) under security 
compliant systems.'' \323\
---------------------------------------------------------------------------

    \322\ Id. at 18.
    \323\ Id.
---------------------------------------------------------------------------

    In general, the Office is persuaded that both candidates, through 
vendors or a combination of vendors and in-house capabilities, are 
capable of carrying out functions relating to collection and 
distribution of royalties. As with some other requirements, however, 
MLCI's submission provides a more thorough explanation of how it would 
approach these matters. It articulates several policies it intends to 
implement to maximize matching, including holding accrued royalties 
beyond the statutory holding period, making information on unmatched 
works available on a public portal, and undertaking outreach and 
education efforts. Moreover, AMLC does not specifically address MLC 
functions regarding notices, recordkeeping, and collection under the 
license. For these reasons, MLCI has made a more persuasive showing 
with respect to these requirements.
    With respect to the distribution of unclaimed, accrued royalties, 
the Copyright Office agrees with MLCI that the statute does not permit 
the first such distribution to occur before January 1, 2023.\324\ The 
Office also agrees that unclaimed accrued royalties may be retained 
beyond the statutory holding period.\325\
---------------------------------------------------------------------------

    \324\ See 17 U.S.C. 115(d)(3)(J)(i)(I) (``The first such 
distribution shall occur on or after January 1 of the second full 
calendar year to commence after the license availability date, with 
not less than 1 such distribution to take place during each calendar 
year thereafter.'').
    \325\ See id. at 115(d)(3)(H)(i) (``The mechanical licensing 
collective shall hold accrued royalties associated with particular 
musical works (and shares of works) that remain unmatched for a 
period of not less than 3 years after the date on which the funds 
were received by the mechanical licensing collective, or not less 
than 3 years after the date on which the funds were accrued by a 
digital music provider that subsequently transferred such funds to 
the mechanical licensing collective pursuant to paragraph (10)(B), 
whichever period expires sooner.'') (emphasis added).
---------------------------------------------------------------------------

vi. Education and Outreach
    Both candidates appear to have developed multifaceted education and 
outreach plans to fulfill this statutory duty.\326\ MLCI notes that it 
is already engaged in significant education and outreach efforts to 
inform the relevant industries and the general public.\327\ It plans to 
continue these efforts through the MLC's launch, and thereafter will 
``provide regular information and updates to the public,'' including 
through ``press releases, social media, articles and advertisements in 
trade publications, and speaking engagements at music industry events, 
conferences, and festivals.'' \328\ MLCI notes that its board includes 
prominent music industry professionals who will use their expertise and 
connections to ensure that information is disseminated throughout the 
industry.\329\
---------------------------------------------------------------------------

    \326\ See generally, MLCI Proposal at 62-63; AMLC Proposal at 
30-33.
    \327\ MLCI Proposal at 62.
    \328\ Id. at 63.
    \329\ Id.
---------------------------------------------------------------------------

    AMLC has developed a strategy focused on three tasks: Engagement, 
education, and follow-up efforts.\330\ It seeks to reach as many 
potential users as possible through a variety of channels, including 
advertising, social media, industry conferences, and sponsorships, and 
relying on its own board members' connections.\331\ It specifically 
commits to making information available in ``English, Spanish, and 
additional languages on an

[[Page 32292]]

as needed basis for targeted songwriting communities where the MLC 
determines special outreach is needed.'' \332\ AMLC also plans to 
produce a series of tutorial videos on specific aspects of the royalty 
collection and distribution process.\333\
---------------------------------------------------------------------------

    \330\ AMLC Proposal at 30-33.
    \331\ Id. at 30.
    \332\ Id.
    \333\ Id. at 32-33.
---------------------------------------------------------------------------

    The Recording Academy asserts that ``[w]ithout an effective 
outreach program, the Collective will not succeed.'' \334\ While noting 
that both proposals contain information regarding public outreach, the 
Recording Academy suggests that both are insufficiently detailed with 
respect to clear and executable plans, and how each will measure the 
effectiveness of outreach.\335\ The Office questioned each candidate 
about specific plans and metrics in subsequent meetings. AMLC expressed 
a variety of ambitious outreach ideas, although it was not necessarily 
clear whether it had yet established a specific plan and timeline (or 
whether all intended activities were reflected in its budget 
planning).\336\ MLCI represented that ``numerous educational and 
outreach documents have been drafted and release is pending the 
determination on designation.'' \337\ It plans to utilize focus groups 
with respect to design of the rights portal, and leverage its board and 
committee members, as well as endorsers, in national and international 
outreach.\338\
---------------------------------------------------------------------------

    \334\ Recording Academy Reply at 5.
    \335\ Id. at 5-6.
    \336\ See AMLC Ex Parte Meeting Summary at 17-20.
    \337\ MLCI Ex Parte Meeting Summary at 3.
    \338\ Id.
---------------------------------------------------------------------------

    Ultimately, the Office finds that both candidates have the 
capability to undertake the education and outreach efforts required of 
the MLC. Following this designation, the selected entity should work 
with the Office, the DLC, and other stakeholders to ensure that 
rightsholders are adequately informed about the new licensing framework 
and the MLC's functions. These efforts should include ``clear 
benchmarks that measure [the MLC's] outreach effectiveness so that it 
can modify and adapt its strategies and tactics to best serve the 
entire songwriter community.'' \339\ In addition, as per Congress's 
directive, the Office will consider best practices in education and 
outreach efforts as part of its study on unclaimed royalties.\340\
---------------------------------------------------------------------------

    \339\ Recording Academy Reply at 5.
    \340\ Public Law 115-264, sec. 102(f), 132 Stat. at 3722-23.
---------------------------------------------------------------------------

vii. Copyright Office's Analysis
    Overall, the submissions suggest that both MLCI and AMLC have or 
will have the basic administrative and technological capabilities to 
perform the required functions under the statute. For the reasons 
discussed above, however, MLCI has demonstrated a greater capacity to 
carry out several of these responsibilities. In particular, it is 
apparent that MLCI has established a more detailed operational 
framework and has garnered input from a broader set of interested 
parties. MLCI's submission reflects substantially more detailed 
planning with respect to organizational structure, vendor selection, 
and collection and distribution procedures.
    Indeed, the Recording Academy, a rare organization to withhold 
endorsement until it was able to study each candidates' proposals, 
weighed in on the perceived capabilities of the two proposals, 
ultimately endorsing MLCI ``upon careful consideration of both 
submissions.'' \341\ While praising the AMLC's commitment and role in 
``opening up dialogue'' on issues with respect to transparency and 
board representation, the Academy noted that MLCI's ``submission 
embodies a thoughtful, meticulous, and comprehensive approach,'' 
concluding that it was ``best equipped to satisfy'' the duties of the 
MMA.\342\
---------------------------------------------------------------------------

    \341\ Recording Academy Reply at 2-3. The Recording Academy 
noted that it represents ``thousands of working songwriters and 
composers, many of whom are independent, self-published, or 
unaffiliated songwriters.'' Id. at 1.
    \342\ Id. at 3.
---------------------------------------------------------------------------

    For somewhat similar reasons, the Copyright Office concludes that 
MLCI is better equipped to operationalize the many statutory functions 
required by the MMA. To be sure, AMLC's goals and principles are 
laudable, and its submission includes a number of ideas that should be 
given further consideration. But while AMLC's leaner approach 
potentially could provide certain benefits, MLCI's planning and 
organizational detail provide a more reliable basis for concluding that 
it will be able to meet the MLC's administrative obligations by the 
license availability date.\343\ The MLC is not a start-up venture or 
small business that can adjust its rollout timing or pivot its focus; 
rather, it is tasked with establishing, for the first time, a complex 
and highly regulated administrative framework designed to serve all who 
are subject to (or make use of) the statutory license, under legally-
mandated timeframes.
---------------------------------------------------------------------------

    \343\ AMLC's failure to file a reply comment in this proceeding 
underscores this conclusion.
---------------------------------------------------------------------------

    MLCI's proposal as a whole reflects a more realistic understanding 
of the MLC's responsibilities under this new system and indicates that 
it is better positioned to undertake and execute the full range of 
administrative functions required of the MLC within these critical 
first five years.\344\ The Office expects that MLCI will build upon its 
considerable planning in a flexible and conscientious manner that also 
considers input from the to-be-designated DLC non-voting or committee 
members, as well as the broader musical work copyright owner and 
songwriting communities.
---------------------------------------------------------------------------

    \344\ Indeed, MLCI has pointed out that its budget is far more 
in line with the CBO estimate than is AMLC's. MLCI Reply at 25.
---------------------------------------------------------------------------

B. Digital Licensee Coordinator

    The Office received one proposal, by DLCI, for designation as the 
DLC.\345\ DLCI's founding members are five of the largest digital music 
providers--Spotify USA Inc., Apple Inc., Amazon Digital Services LLC, 
Google LLC, and Pandora Media, LLC. DLCI's submission includes a 
proposal directly responding to the NOI, and a variety of supporting 
documents such as a certificate of incorporation, bylaws, and a five-
year business plan.\346\ For the reasons described below, the Register 
has concluded that DLCI meets each of the statutory criteria required 
of the digital licensee coordinator, and that each of its individual 
board members are well-qualified to perform the statutory functions. 
Accordingly, the Register designates DLCI and its members, with the 
Librarian's approval.
---------------------------------------------------------------------------

    \345\ DLCI Proposal at Ex. A-1-2 (certificate of incorporation).
    \346\ See DLCI Proposal.
---------------------------------------------------------------------------

    As noted above, in designating a DLC, the Register must apply 
similar statutory criteria regarding nonprofit status, endorsement 
(from digital music providers in this instance), and ability to perform 
the DLC's administrative capabilities. Unlike the MLC, the Register may 
decline to designate a DLC if she is unable to identify an entity that 
fulfills each of the statutory qualifications; in that event, the 
statutory references to the DLC go without effect unless or until a DLC 
is designated.\347\ But designation of a DLC would allow that entity to 
start doing important work. The DLC's authorities and functions include 
enforcing notice and payment obligations with respect to the 
administrative assessment, publicizing the ability of copyright owners 
to claim unmatched musical

[[Page 32293]]

work royalties through the MLC, appointing representatives of digital 
music providers to the MLC's operations advisory committee and 
generally representing digital music providers' interests as a non-
voting member on the MLC board, and participating in proceedings before 
the CRJs and the Copyright Office.\348\ As a result, it is important 
that the DLC is a well-qualified representative of both digital music 
providers who take advantage of the section 115 blanket license and 
significant nonblanket licensees who will benefit from the new MLC 
database.
---------------------------------------------------------------------------

    \347\ 17 U.S.C. 115(d)(5)(B)(iii).
    \348\ See generally, id. at 115(d)(5)(C).
---------------------------------------------------------------------------

1. Organization, Board Composition, and Governance
    Beginning with the first required statutory qualification, DLCI's 
proposal sufficiently demonstrates that it is a nonprofit created to 
carry out responsibilities under the MMA. DLCI is a Delaware nonprofit 
``organized to represent digital music providers in connection with the 
administration of the mechanical license provided under Section 115 of 
the United States Copyright Act.'' \349\ DLCI thus satisfies the first 
statutory criterion that it be a single nonprofit entity created to 
carry out certain statutory responsibilities.\350\
---------------------------------------------------------------------------

    \349\ DLCI Proposal at Ex. C-1; id. at Ex. A-1 (certificate of 
incorporation) (stating that ``[n]o part of the net earnings of 
[DLCI] shall inure to the benefit of, or be distributable to, its 
members, trustees, directors, officers or other private persons.'').
    \350\ 17 U.S.C. 115(d)(5)(A)(i).
---------------------------------------------------------------------------

    DLCI's board is composed of the following initial members: Nick 
Williamson (Apple, Inc.), Lisa Selden (Spotify), Sarah Rosenbaum 
(Google), James Duffett-Smith (Amazon Music), and Cynthia Greer (Sirius 
XM Radio Inc., the parent of Pandora Media, LLC). Collectively and 
individually, these individuals have a significant and diverse 
background in the music licensing marketplace, including representing 
digital music providers and in music database administration, and thus 
qualify for appointment to the board.\351\ DLCI has selected three 
officers: James Duffett-Smith as board chair, Sarah Rosenbaum as 
treasurer, and Lisa Selden as secretary, and anticipates hiring an 
executive director.\352\ ``Subject to input from and discussion with 
the MLC,'' DLCI anticipates designating a non-director, officer, or 
employee to serve as the non-voting member of the MLC board; this 
potentially may be DiMA's CEO.\353\
---------------------------------------------------------------------------

    \351\ DLCI Proposal at Ex. C-14-17 (for example, Williamson 
previously headed the ``music industry technical standards body, 
DDEX''; Selden works to improve copyright matching at Spotify and, 
while at ASCAP, processed royalties ``for Amazon, Apple, Pandora and 
YouTube''; Rosenbaum has experience at both Google and Music 
Reports, where she launched a section 115 rights-claiming portal; 
and Duffett-Smith and Greer each have over fifteen years of 
experience licensing music for digital services).
    \352\ DLCI Ex Parte Meeting Summary at 1 (June 4, 2019); DLCI 
Proposal at Ex. B-18.
    \353\ DLCI Proposal at 8; see id. at Ex. B-16-18.
---------------------------------------------------------------------------

    In response to a request from the Office, DLCI named its 
representatives to the MLC's operations advisory committee.\354\ 
Because MLCI and AMLC proposed different numbers of their own 
representatives to the operations advisory committee (six and four, 
respectively), DLCI stated that it will ``work with the [designated] 
MLC to finalize the appointees to the Committee following 
designation.'' \355\ DLCI also anticipates creating several committees 
not required by the MMA. The Executive Committee will exercise the 
powers of the board, if and when the board exceeds nine members.\356\ 
The Compliance Committee will be responsible for ``receiving and 
following up on reports from the MLC of non-compliant nonblanket 
licensees.'' \357\ The Regulatory Committee will engage in both CRJ and 
Copyright Office proceedings.\358\ And the Re-Designation Committee 
will prepare for a possible redesignation of DLCI as the DLC.\359\
---------------------------------------------------------------------------

    \354\ Letter from DLCI to U.S. Copyright Office at 1 (June 13, 
2019) (proposed committee members are Lisa Selden (Spotify), Nick 
Williamson (Apple Music), Alan Jennings (Amazon), Alex Winck 
(Pandora Media LLC), and Jennifer Rosen (Google Play Music and 
YouTube Music)); see also DLCI Proposal at Ex. C-12.
    \355\ Letter from DLCI to U.S. Copyright Office at 1.
    \356\ DLCI Proposal at Ex. B-13-14.
    \357\ Id. at Ex. C-7.
    \358\ Id. at Ex. C-11.
    \359\ Id. at Ex. C-12-13.
---------------------------------------------------------------------------

    DLCI's bylaws outline rules governing membership eligibility, 
voting, and dues; meetings and schedules; its board, committees, and 
officers; and other rules and operational provisions. DLCI creates 
three classes of membership (principal, charter, and general); until 
2024, the principal members are DLCI's founding members.\360\ Beginning 
in 2024, the principal members will be determined on a share basis by 
those charter members with the five highest stream counts, determined 
every two years.\361\ Charter members are those who have adhered to the 
mission and standards of DLCI for at least two years and have paid 
relevant dues.\362\ The bylaws also set out the voting structure, a 
meeting schedule, and a structure for collecting dues and funding the 
DLC.\363\
---------------------------------------------------------------------------

    \360\ Id. at Ex. B-2-3.
    \361\ Id. at Ex. B-3.
    \362\ Id. at Ex. B-2-3.
    \363\ Meetings will be as-needed and at least annual, with 
specified advance notice. Id. at Ex. B-7. All members have one vote, 
with some exceptions. Id. at Ex. B-4. DLCI's annual budget is dues-
funded; at least 60% of is paid for by Charter Members and not more 
than 40% will be paid for by General Members. Id. at Ex. B-5. The 
board may also approve special assessments under certain 
circumstances. Id. at Ex. B-5-6.
---------------------------------------------------------------------------

2. Endorsement
    Under the second designation criterion, the DLC must be ``endorsed 
by and enjoy[ ] substantial support from digital music providers and 
significant nonblanket licensees that together represent the greatest 
percentage of the licensee market for uses of musical works in covered 
activities, as measured over the preceding 3 calendar years.'' \364\ 
The Office asked for ``an explanation of how the proposed DLC has 
verified, calculated, and documented such endorsement and substantial 
support, including how the licensee market was calculated.'' \365\ In 
response, DLCI indicated that it interprets the statutory term ``uses'' 
as referring to ``actual use of music pursuant to covered activities,'' 
and that such use could be measured in ``number of subscribers, number 
of streams, or amount of royalties paid.'' \366\ DLCI stated that 
Congress could have chosen a different term if it wanted to measure 
endorsement by reference to, for example, a percentage of music 
providers engaged in covered activities or the number of musical works 
available.\367\ DLCI did not disclose usage metrics for its member 
companies, stating that for ``any individual music service'' usage 
metrics are ``extremely confidential and proprietary.'' \368\ Instead, 
DLCI offered aggregated metrics provided by the Harry Fox Agency 
(``HFA'') and MRI. This information indicated that DLCI members 
``represented by [HFA and MRI] combined had over 84% of the aggregate 
streams, over 94% of the aggregate subscribers, and over 88% of the 
aggregate royalties paid'' over the last three years.\369\
---------------------------------------------------------------------------

    \364\ 17 U.S.C. 115(d)(5)(A)(ii).
    \365\ NOI at 65753.
    \366\ DLCI Proposal at 4-5.
    \367\ Id. at 4.
    \368\ Id. at 5.
    \369\ Id. at 5-6 (emphasis omitted).
---------------------------------------------------------------------------

    The Copyright Office is tasked with evaluating the support of both 
digital music providers who will use the blanket license as well as 
significant nonblanket licensees.\370\ But since it is currently before 
the license availability date, it is unclear which digital music 
providers will be taking advantage of

[[Page 32294]]

the blanket license. DLCI does not describe whether its founding 
members would qualify as significant nonblanket licensees or blanket 
licensees but states that it is ``committed to soliciting other 
interested licensee services to participate in all aspects of the DLC'' 
and plans to ``bolster its support and endorsement'' going 
forward.\371\
---------------------------------------------------------------------------

    \370\ 17 U.S.C. 115(d)(5)(A)(ii).
    \371\ DLCI Proposal at 6-7; see also Oversight of the U.S. 
Copyright Office, Hearing Before the H. Comm. on the Judiciary, 
116th Cong. (2019) (statement of Rep. Escobar) (indicating that the 
DLC should not overlook smaller digital platforms and new market 
entrants).
---------------------------------------------------------------------------

    In submitting the aggregated HFA and MCI metrics, DLCI offers three 
different criteria for evaluation (i.e., subscribers, streams, or 
royalties paid). As the statutory language here is similar to the MLC 
endorsement/support criteria,\372\ the Office believes that the DLC 
endorsement/support standard is intended to parallel the MLC standard. 
Thus, the entity designated as the DLC should be endorsed and supported 
by digital music providers and significant nonblanket licensees that 
together paid the largest aggregate percentage (among DLC candidates) 
of total royalties from the use of their musical works in covered 
activities in the United States during the statutory three-year period. 
In any event, DLCI is the sole candidate, and each criterion signals 
support over 80% of the relevant pool. DLCI thus satisfies the second 
statutory criterion for designation.
---------------------------------------------------------------------------

    \372\ Compare 17 U.S.C. 115(d)(5)(A)(ii) (The DLC shall be ``a 
single entity that . . . is endorsed by and enjoys substantial 
support from digital music providers and significant nonblanket 
licensees that together represent the greatest percentage of the 
licensee market for uses of musical works in covered activities, as 
measured over the preceding 3 calendar years.''), with id. at 
115(d)(3)(A)(ii) (The MLC shall be ``a single entity that . . . is 
endorsed by, and enjoys substantial support from, musical work 
copyright owners that together represent the greatest percentage of 
the licensor market for uses of such works in covered activities, as 
measured over the preceding 3 full calendar years.'').
---------------------------------------------------------------------------

3. Administrative and Technical Capabilities
    General. In response to questions regarding its administrative 
capabilities, DLCI submitted a five-year business plan, which includes 
plans for establishing and enforcing administrative assessment payment 
obligations, identifying unmatched musical work owners, including 
outreach, participating in MLC governance and CRJ proceedings, 
maintaining records of its activities, and an anticipated budget.\373\
---------------------------------------------------------------------------

    \373\ See NOI at 65753; DLCI Proposal at Ex. C; see also 17 
U.S.C. 115(d)(5)(C) (outlining authorities and functions of DLC 
regarding these topics).
---------------------------------------------------------------------------

    DLCI's ``primary purpose will be to coordinate the activities of 
the digital music services relating to the mechanical license provided 
under Section 115, including through the specific authorities and 
functions identified in the statute.'' \374\ It will ``fairly represent 
digital licensee services, and effectively coordinate with the MLC, to 
help realize the goals of the MMA to provide licensing efficiency and 
transparency, and to ensure that the new blanket licensing system is, 
and remains, workable for digital music providers as well as copyright 
owners.'' \375\ DLCI describes its administrative capabilities as being 
``managed by subject-matter experts with relevant industry experience 
and relationships'' to ``carry out its statutory functions and help 
ensure that the blanket licensing system is implemented successfully, 
to the benefit of all stakeholders in the industry.'' \376\
---------------------------------------------------------------------------

    \374\ DLCI Proposal at Ex. C-1.
    \375\ Id. at Ex. C-2.
    \376\ Id. at Ex. C-13.
---------------------------------------------------------------------------

    Membership. Although DLCI represents a large swath of the relevant 
licensee market, it does not represent all licensees, and presumably 
the market will see new entrants over the next five years.\377\ Indeed, 
DLCI's membership is identical to DiMA's membership. DLCI has explained 
that it is committed to growing its membership to other DSPs and it is 
confident it will do so, noting that any digital music provider or 
significant nonblanket licensee can become a member of DLCI and smaller 
licensees will enjoy some protections, as the bylaws require certain 
actions to be passed by a supermajority of members.\378\ DLCI's bylaws 
further outline how different membership tiers will be charged dues, 
and its business plan explains that operating expenses will be 
``modest, and intend[ed] to minimize overhead costs to the extent 
possible.'' \379\
---------------------------------------------------------------------------

    \377\ For example, DLCI membership does not include TIDAL, 
Deezer, Soundcloud, iHeartRadio, or Napster.
    \378\ DLCI Proposal at Ex. C-13-14; DLCI Ex Parte Meeting 
Summary at 2.
    \379\ DLCI Proposal at Ex. C-18.
---------------------------------------------------------------------------

    Administrative Assessment. DLCI asserts that it wishes to 
``minimize the need for contested proceedings or enforcement actions, 
by prioritizing negotiations and cooperation among licensees and the 
MLC.'' \380\ DLCI is developing an agreement regarding the 
apportionment of the administrative assessment among the digital music 
licensees and significant non-blanket licensees ``and expects to be 
able to establish a plan for that allocation before--or shortly after--
the DLC is designated.'' \381\ Should the administrative assessment be 
decided by the CRJs, DLCI suggests it is ``uniquely positioned to 
support the [Copyright Royalty Board] in its assessments of `reasonable 
costs,' based on its members' experience with large-scale data 
management practices.'' \382\
---------------------------------------------------------------------------

    \380\ Id. at Ex. C-3.
    \381\ Id. at Ex. C-4, C-5.
    \382\ Id. at Ex. C-6.
---------------------------------------------------------------------------

    While it does not endorse either candidate for the MLC, DLCI has 
been communicating with the two MLC candidates ``to support the 
development of efficient MLC operations and foster a collaborative 
working relationship'' regarding payment enforcement 
responsibilities.\383\
---------------------------------------------------------------------------

    \383\ Id. at Ex. C-3.
---------------------------------------------------------------------------

    MLC Participation. DLCI hopes that its representatives ``will be 
able to help facilitate discussions between the MLC and DLC regarding 
the ongoing evaluation of the administrative assessment, and help 
streamline any potential [Copyright Royalty Board assessment] 
proceedings'' and apportionment.\384\ While the administrative 
assessment proceeding will be conducted by the CRJs and its cost is 
beyond the ambit of the designation process, the Office notes that in 
some areas, DiMA--whose membership is coextensive with DLCI's founding 
and current members--appeared to envision a narrower range of 
activities, such as those related to manual claims processing and 
enforcement, than either of the MLC candidates.\385\ Given the nascent 
status of operations, the Office would expect DLCI's participation on 
the MLC board to be flexible, as the Office expects from the MLC. In 
any event, DLCI suggested that coordination and communication may 
improve following conclusion of the designation process.
---------------------------------------------------------------------------

    \384\ Id. at Ex. C-9-10.
    \385\ Compare DiMA Reply Comments at 10, and DLCI Ex Parte 
Meeting Summary at 2, with MLCI Proposal at 36 (``Merging data from 
multiple sources on conflicts will require significant manual 
processing and will be very resource-intensive.'').
---------------------------------------------------------------------------

    Confidentiality. To fulfill its statutory function of records 
maintenance, DLCI selected a secretary who will be responsible for 
``ensuring that books, reports, statements, certificates, and all other 
documents and records are properly kept and filed'' \386\ and for 
``managing the confidentiality and security of sensitive information'' 
shared between it and the MLC.\387\ With respect to confidentiality and 
the DLC representative on the MLC board, DLCI states that in addition 
to designating a

[[Page 32295]]

non-DLCI director, officer, or employee, it plans on ``establishing, 
through agreement, appropriate limitations on the information that may 
be shared between [the MLC and DLC], as well as procedures for 
shielding information concerning individual licensee service members of 
the DLC from other licensee service members.'' \388\ If necessary, DLCI 
states that it could address any confidentiality or administration 
issues with the MLC's vendors in specific agreements.\389\ The 
Copyright Office is hopeful that relevant parties will agree on 
appropriate procedures to protect confidential, proprietary, or 
otherwise sensitive information, and notes that the Register has 
ultimate responsibility to proscribe regulations related to the 
protection of confidential information by the MLC, DLC, and their 
employees, committees, or board members.\390\
---------------------------------------------------------------------------

    \386\ DLCI Proposal at Ex. C-11; DLCI Ex Parte Meeting Summary 
at 1.
    \387\ DLCI Proposal at Ex. C-12.
    \388\ NOI at 65753; DLCI Proposal at 8; see also id. at Ex. C-9.
    \389\ DLCI Proposal at 10.
    \390\ 17 U.S.C. 115(d)(12)(C).
---------------------------------------------------------------------------

    Education and Outreach. DLCI expects to ``develop standardized text 
identifying and providing contact information for the MLC, and 
instructions for how a songwriter or other copyright owner of musical 
compositions can claim accrued royalties by providing the necessary 
information to the MLC'' for digital licensees to post on their 
services.\391\ DLCI generally expressed intentions to engage in 
educational efforts and plans to coordinate outreach efforts with the 
MLC to inform songwriters and publishers of the MLC and how to claim 
royalties, including by ``develop[ing] a protocol to guide its members' 
individual outreach'' and ``participat[ing] in songwriter and publisher 
industry events, including those organized by the MLC.'' \392\ DLCI has 
also committed to participating in outreach events with the Copyright 
Office.\393\
---------------------------------------------------------------------------

    \391\ DLCI Proposal at Ex. C-8.
    \392\ Id.
    \393\ DLCI Ex Parte Meeting Summary at 2.
---------------------------------------------------------------------------

    The Office finds that DLCI has addressed the main issues regarding 
its administrative capabilities. DLCI proposed a thorough and 
thoughtful governance structure, criteria for membership, and dues 
structure, and appears well-positioned to participate in an 
administrative assessment proceeding if necessary. Other DLCI 
functions, such as educational and outreach efforts, plans to enforce 
notice and payment obligations, and ensuring that DLCI has the broadest 
possible support of the licensee market, appear more inchoate and may 
benefit from continued refinement. Overall, the Office concludes that 
DLCI satisfies the third statutory criterion for designation as the DLC 
and has demonstrated a commitment to building out its operations and 
execution of its statutory functions.

C. Conclusion

    For the reasons set forth above, the Register is selecting and 
designating MLCI and DLCI, and their individual board members, which 
Librarian approves. MLCI has demonstrated it meets each of the 
statutory criteria; indeed, it is the only candidate that satisfies the 
requirement of being endorsed by, and enjoying substantial support 
from, musical work copyright owners that represent the greatest 
percentage of the licensor market for covered activities in the past 
three years. Further, by articulating a more thoughtful, methodical, 
and comprehensive approach towards executing the many important 
administrative and technological duties of the collective, MLCI has 
also demonstrated that it is better positioned to perform the required 
functions. The Register has reviewed and determined that each of MLCI's 
individual board members are well-qualified to serve on the board in 
accordance with the statutory criteria. Similarly, DLCI has 
demonstrated that it fulfills each of the statutory criteria for 
designation, and that its individual board members are well-qualified 
to serve on its board pursuant to the statute.
    Importantly, both the MLCI and the DLCI submissions acknowledge 
that their intended roles carry the responsibility to broadly represent 
the interests of musical work copyright owners and songwriters, or 
digital music providers, respectively, with respect to the section 115 
mechanical license. In particular, the Office appreciates AMLC's 
proposal. The Office hopes that MLCI will consider whether any aspects 
of the AMLC's proposal should be incorporated into its future planning.
    As the legislative history amply documents, this historic music 
copyright legislation was enacted only in the wake of significant 
consensus-building and cooperation across a wide berth of industry 
stakeholders.\394\ Now that it is time to roll up sleeves, sustained 
dedication to these worthy goals will be critical as the MLC and DLC 
turn to the many tasks involved in preparation for the license 
availability date.
---------------------------------------------------------------------------

    \394\ See, e.g., Music Policy Issues: A Perspective from Those 
Who Make It: Hearing on H.R. 4706, H.R. 3301, H.R. 831 and H.R. 1836 
Before H. Comm. On the Judiciary, 115th Cong. 4 (2018) (statement of 
Rep. Nadler) (``For the last few years, I have been imploring the 
music community to come together in support of a common policy 
agenda, so it was music to my ears to see--to hear, I suppose--the 
unified statement of support for a package of reforms issued by key 
music industry leaders earlier this month. Many of these measures, 
such as the CLASSICS Act and the Music Modernization Act, are 
supported by stakeholders on both sides, by digital service 
providers as well as by music creators. This emerging consensus 
gives us hope that this committee can start to move beyond the 
review stage toward legislative action.''); 164 Cong. Rec. H3522, 
3537 (daily ed. Apr. 25, 2018) (statement of Rep. Collins) (``[This 
bill] comes to the floor with an industry that many times couldn't 
even decide that they wanted to talk to each other about things in 
their industry, but who came together with overwhelming support and 
said this is where we need to be.''); 164 Cong. Rec. S501, 502 
(daily ed. Jan. 24, 2018) (statement of Sen. Hatch) (``I don't think 
I have ever seen a music bill that has had such broad support across 
the industry. All sides have a stake in this, and they have come 
together in support of a commonsense, consensus bill that addresses 
challenges throughout the music industry.''); 164 Cong. Rec. H3522, 
3536 (daily ed. Apr. 25, 2018) (statement of Rep. Goodlatte) (``I 
tasked the industry to come together with a unified reform bill and, 
to their credit, they delivered, albeit with an occasional bump 
along the way.''); 164 Cong. Rec. S6259, 6260 (daily ed. Sept. 18, 
2018) (statement of Sen. Alexander on behalf of Sen. Grassley) 
(``This bill is the product of long and hard negotiations and 
compromise.'').
---------------------------------------------------------------------------

    The Copyright Office looks forward to working with the MLC, DLC, 
and other interested parties on next steps in MMA implementation. As 
noted, the MLC and DLC, along with the Copyright Office, are asked to 
facilitate education and outreach regarding the new blanket licensing 
system to the broader songwriting community. In the coming months, the 
Office will initiate additional regulatory activities required under 
the statute and begin planning its public policy study regarding best 
practices, which the MLC may implement to identify musical work 
copyright owners with unclaimed accrued royalties and reduce the 
incidence of unclaimed royalties. Future information regarding those 
activities will be made available at: https://www.copyright.gov/music-modernization/.
    Finally, the Copyright Office finds that there is good cause to 
make the codification of this designation effective on publication. 
Timely designation of the MLC and DLC are vital to the success of 
Congress's reform of the section 115 statutory license. Indeed, by the 
statutory language, the designation would be timely based solely upon 
the date of publication in the Federal Register, but reflecting the 
designation in Copyright Office regulations will be helpful to the 
public.\395\ The statutory designation deadline is the same deadline 
for the CRJs to commence a

[[Page 32296]]

proceeding to establish the initial administrative assessment, which 
anticipates MLC and DLC participation.\396\ Further, given the license 
availability date of January 1, 2021, the MLC has a tight deadline to 
become fully operational, and both the MLC and DLC have important roles 
in educating the public on the royalty claiming process, which may be 
unnecessarily encumbered if designation were delayed.\397\ The public 
had ample opportunity to comment on the proposals for parties to be 
named the MLC and DLC and did, in fact, file over six hundred comments 
in response to the different proposals.
---------------------------------------------------------------------------

    \395\ 17 U.S.C. 115(d)(3)(B)(i), (d)(5)(B)(i).
    \396\ Id. at 115(d)(3)(B)(i), (d)(5)(B)(i), (d)(7)(D)(iii)(I).
    \397\ See id. at 115(d)(3)(J)(iii), (d)(5)(C)(iii).
---------------------------------------------------------------------------

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords.

Final 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 subpart A, consisting of Sec. Sec.  210.1 through 210.10, to 
read as follows:

Subpart A--Blanket Compulsory License, Mechanical Licensing 
Collective, and Digital Licensee Coordinator

Sec.
210.1 Designation of the Mechanical Licensing Collective and Digital 
Licensee Coordinator.
210.2-210.10 [Reserved]


Sec.  210.1  Designation of the Mechanical Licensing Collective and 
Digital Licensee Coordinator.

    The following entities are designated pursuant to 17 U.S.C. 
115(d)(3)(B) and (d)(5)(B). Additional information regarding these 
entities will be made available on the Copyright Office's website.
    (a) Mechanical Licensing Collective, Inc., incorporated in Delaware 
on March 5, 2019, is designated as the Mechanical Licensing Collective; 
and
    (b) Digital Licensee Coordinator, Inc., incorporated in Delaware on 
March 20, 2019, is designated as the Digital Licensee Coordinator.


Sec.  Sec.  210.2-210.10  [Reserved]

    Dated: July 1, 2019.
Karyn A. Temple,
Register of Copyrights and Director of the U.S. Copyright Office.
    Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2019-14376 Filed 7-5-19; 8:45 am]
 BILLING CODE 1410-30-P

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