Treatment of Confidential Information by the Mechanical Licensing Collective and Digital Licensee Coordinator, 22559-22568 [2020-08374]

Agencies

• Library of Congress
• U.S. Copyright Office

[Federal Register Volume 85, Number 78 (Wednesday, April 22, 2020)]
[Proposed Rules]
[Pages 22559-22568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08374]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2020-7]


Treatment of Confidential Information by the Mechanical Licensing 
Collective and Digital Licensee Coordinator

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Copyright Office is issuing a notice of proposed 
rulemaking regarding the protection of confidential information by the 
mechanical licensing collective and digital licensee coordinator under 
title I of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act. 
After soliciting public comments through a notification of inquiry, the 
Office is now proposing regulations identifying appropriate procedures 
to ensure that confidential, private, proprietary, or privileged 
information contained in the records of the mechanical licensing 
collective and digital licensee coordinator is not improperly disclosed 
or used. The Office solicits additional public comments on the proposed 
rule, including regarding the use of confidentiality designations and 
nondisclosure agreements.

DATES: Written comments must be received no later than 11:59 Eastern 
Time on June 8, 2020.

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

FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and 
Associate Register of Copyrights, by

[[Page 22560]]

email at [email protected] or Anna Chauvet, Associate 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 president signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551 (``MMA'').\1\ 
Title I of the MMA, the Musical Works Modernization Act, substantially 
modifies the compulsory ``mechanical'' license for making and 
distributing phonorecords of nondramatic musical works under 17 U.S.C. 
115.\2\ Prior to the MMA, licensees obtained a section 115 compulsory 
license on a per-work, song-by-song basis, by serving a notice of 
intention to obtain a compulsory license (``NOI'') on the relevant 
copyright owner (or filing it with the Copyright Office if the Office's 
public records did not identify the copyright owner) and then paying 
applicable royalties accompanied by accounting statements.\3\ The MMA 
amends this regime most significantly by establishing a new blanket 
compulsory license that digital music providers may obtain to make 
digital phonorecord deliveries (``DPDs'') of musical works, including 
in the form of permanent downloads, limited downloads, or interactive 
streams (referred to in the statute as ``covered activity,'' where such 
activity qualifies for a compulsory license).\4\ Instead of licensing 
one song at a time by serving NOIs on individual copyright owners, the 
blanket license will cover all musical works available for compulsory 
licensing and will be centrally administered by a mechanical licensing 
collective (``MLC''), which has been designated by the Register of 
Copyrights.\5\
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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\ See 17 U.S.C. 115(b)(1), (c)(5) (2017); U.S. Copyright 
Office, Copyright and the Music Marketplace 28-31 (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf (describing operation of prior section 115 
license).
    \4\ 17 U.S.C. 115(d)(1), (e)(7); see H.R. Rep. No. 115-651, at 
4-6 (describing operation of the blanket license and the mechanical 
licensing collective); S. Rep. No. 115-339, at 3-6 (same).
    \5\ 17 U.S.C. 115(d)(1), (3); 84 FR 32274 (July 8, 2019).
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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'').\6\ As permitted under the MMA, the Office designated 
a digital licensee coordinator (``DLC'') to represent licensees in 
proceedings before the CRJs and the Copyright Office, to serve as a 
non-voting member of the MLC, and to carry out other functions.\7\
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    \6\ 17 U.S.C. 115(d)(7)(D).
    \7\ Id. at 115(d)(5)(B); 84 FR at 32274; see also 17 
U.S.C.115(d)(3)(D)(i)(IV), (d)(5)(C).
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    The MMA directs the Copyright Office to ``adopt regulations to 
provide for the appropriate procedures to ensure that confidential, 
private, proprietary, or privileged information contained in the 
records of the [MLC] and [DLC] is not improperly disclosed or used, 
including through any disclosure or use by the board of directors or 
personnel of either entity, and specifically including the unclaimed 
royalties oversight committee and the dispute resolution committee of 
the [MLC].'' \8\
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    \8\ 17 U.S.C. 115(d)(12)(C).
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    The MMA additionally makes several explicit references to the 
Office's regulations governing the treatment of confidential and other 
sensitive information in various circumstances, including with respect 
to: (1) ``all material records of the operations of the [MLC]''; \9\ 
(2) steps the MLC must take to ``safeguard the confidentiality and 
security of usage, financial, and other sensitive data used to compute 
market shares'' when distributing unclaimed accrued royalties; \10\ (3) 
steps the MLC and DLC must take to ``safeguard the confidentiality and 
security of financial and other sensitive data shared'' by the MLC to 
the DLC about significant nonblanket licensees; \11\ (4) voluntary 
licenses administered by the MLC; \12\ (5) examination of the MLC's 
``books, records, and data'' pursuant to audits by copyright owners; 
\13\ and (6) examination of digital music providers' ``books, records, 
and data'' pursuant to audits by the MLC.\14\
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    \9\ Id. at 115(d)(3)(M)(i) (``The mechanical licensing 
collective shall ensure that all material records of the operations 
of the mechanical licensing collective, including those relating to 
notices of license, the administration of the claims process of the 
mechanical licensing collective, reports of usage, royalty payments, 
receipt and maintenance of accrued royalties, royalty distribution 
processes, and legal matters, are preserved and maintained in a 
secure and reliable manner, with appropriate commercially reasonable 
safeguards against unauthorized access, copying, and disclosure, and 
subject to the confidentiality requirements prescribed by the 
Register of Copyrights under paragraph (12)(C) for a period of not 
less than 7 years after the date of creation or receipt, whichever 
occurs later.'').
    \10\ Id. at 115(d)(3)(J)(i)(II)(bb); see H.R. Rep. No. 115-651, 
at 27 (``Unclaimed royalties are to be distributed based upon market 
share data that is confidentially provided to the collective by 
copyright owners.''); S. Rep. No. 115-339, at 24 (same); Conf. Rep. 
at 20 (same).
    \11\ 17 U.S.C. 115(d)(6)(B)(ii).
    \12\ Id. at 115(d)(11)(C)(iii).
    \13\ Id. at 115(d)(3)(L)(i)(II).
    \14\ Id. at 115(d)(4)(D)(i)(II).
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    On September 24, 2019, the Office issued a notification of inquiry 
seeking, among other things, public input on any issues that should be 
considered relating to the treatment of confidential and other 
sensitive information under the blanket license regime.\15\ In 
response, the Office received proposed regulatory language relating to 
confidentiality requirements from both the DLC and MLC, and a few 
comments about confidentiality more generally from other 
stakeholders.\16\
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    \15\ 84 FR 49966, 49973 (Sept. 24, 2019).
    \16\ All rulemaking activity, including public comments, as well 
as educational material regarding the Music Modernization Act, can 
currently be accessed via navigation from https://www.copyright.gov/music-modernization/. Comments received in response to the September 
2019 notification of inquiry are available at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2019-0002&refD=COLC-2019-0002-0001. References to these comments and 
letters are by party name (abbreviated where appropriate), followed 
by either ``Initial,'' ``Reply,'' or ``Ex Parte Letter,'' as 
appropriate. Guidelines for ex parte communications, along with 
records of such communications, are available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. The Office encourages parties to refrain from 
requesting ex parte meetings on this proposed rule until they have 
submitted written comments. As stated in the guidelines, ex parte 
meetings with the Office are intended to provide an opportunity for 
participants to clarify evidence and/or arguments made in prior 
written submissions, and to respond to questions from the Office on 
those matters.
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    The MLC's approach generally proposes requiring the MLC and DLC to 
implement confidentiality policies to prevent improper or unauthorized 
use of various categories of confidential information, but lacks 
specific requirements for those policies or a proposed definition of 
``confidential information.'' \17\ The DLC contends that the MLC's 
proposal, by providing broad discretion to the MLC and DLC to implement 
policies regarding confidentiality, ``would inappropriately redelegate 
that authority [granted to the Register] to itself and DLC.'' \18\ The 
DLC maintains that the Office's regulations should provide necessary 
guidance, not merely provide the MLC and DLC discretion to create their 
own policies.\19\ Taking into account the statutory text, legislative 
history, and comments received, the Office agrees with the DLC's 
concern. As noted previously by the Office, ``establishing 
confidentiality

[[Page 22561]]

rules sooner rather than later may help the MLC and DLC share 
information as effectively and efficiently as possible as they both get 
ready for the license availability date.'' \20\ In addition, having 
more specific confidentiality regulations in place may assure those 
providing confidential and commercially sensitive information to the 
MLC that it will be protected, as well as ``provide the ground rules 
for the relationship between DLC, the MLC, and its respective 
members.'' \21\
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    \17\ See MLC Initial at 29-30, App. H.
    \18\ DLC Reply at 27.
    \19\ See id. at 28.
    \20\ 84 FR at 49968.
    \21\ DLC Initial at 3.
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    In issuing this proposed confidentiality rule, the Office is 
mindful of Congress's countervailing goals for the MMA to enhance 
transparency, accountability, and public access to musical work 
ownership information.\22\ The Office thus intends for its proposed 
confidentiality rule to complement separate regulations regarding 
transparency, accountability, and public accessibility.\23\ Concurrent 
with this notice of proposed rulemaking, the Office issued a 
notification of inquiry seeking additional information on a variety of 
topics relating to the disclosure of non-confidential material to 
facilitate the MMA's goals of enhanced transparency, accountability, 
and public accessibility of certain data.\24\ Specifically, the 
notification seeks public input regarding which information in the 
MLC's database should be publicly available, which information the MLC 
should be required to disclose in its annual reports (including issues 
related to vendor selection and performance), which entities should 
have bulk access to the MLC's database (and through which manner), 
restrictions on the use of data from the MLC's database, and other ways 
in which transparency may be promoted. The Office encourages interested 
commenters in connection with this notice of proposed rulemaking to 
review that separate notice carefully and consider commenting on that 
notice as well.
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    \22\ See 17 U.S.C. 115(d)(3)(E), (e)(20); id. at 115(d)(3)(E)(v) 
(stating the database must ``be made available to members of the 
public in a searchable, online format, free of charge''); 164 Cong. 
Rec. S501, 504 (daily ed. Jan. 24, 2018) (statement of Sen. Chris 
Coons) (``This important piece of legislation will bring much-needed 
transparency and efficiency to the music marketplace.''); 164 Cong. 
Rec. H3522, 3541 (daily ed. April 25, 2018) (statement Rep. Steve 
Chabot) (``This legislation provides much-needed updates to bring 
music licensing into the digital age, particularly improving market 
efficiencies and transparency to reflect the modern music 
marketplace.''); id. at 3542 (statement of Rep. Norma Torres) 
(``Information regarding music owed royalties would be easily 
accessible through the database created by the Music Modernization 
Act. This transparency will surely improve the working relationship 
between creators and music platforms and aid the music industry's 
innovation process.'').
    \23\ See DLC Ex Parte Letter Feb. 24, 2020 (``DLC Ex Parte 
Letter #2'') at 5 (acknowledging that the ``MLC will be under 
certain legal transparency requirements,'' and that confidentiality 
regulations should ``not stand in the way of that transparency''); 
The International Confederation of Societies of Authors and 
Composers (``CISAC'') & The International Organisation representing 
Mechanical Rights Societies (``BIEM'') Reply at 2 (stating that 
``musical works information populated in the database can include 
confidential, personal and/or sensitive data, and as such, the 
Regulations should ensure the required balance between the public 
interest in having transparent access to such information and the 
protection of commercially sensitive information and personal 
data'').
    \24\ U.S. Copyright Office, Notification of Inquiry, 
Transparency of the Mechanical Licensing Collective and Its Database 
of Musical Works Information, Dkt. No. 2020-8, published elsewhere 
in this issue of the Federal Register.
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    Having reviewed and carefully considered all relevant comments, the 
Office now issues a proposed rule and invites further public comment. 
While all public comments are welcome, as applicable, should commenters 
disagree with language in the proposed rule, the Office encourages 
commenters to offer alternate language not yet considered by the 
Office. Depending on the feedback received, the Office will either 
issue a final rule, or an interim rule with further request for 
comment.

II. Proposed Rule

A. Defining ``Confidential Information''

    Although the MMA requires the Office to issue regulations governing 
the protection of confidential information contained in the records of 
the MLC and DLC, the statute does not define the term ``confidential.'' 
\25\ The MLC's proposed language would also not expressly define 
material as confidential, instead referencing categories of material 
which may contain confidential material and allowing the MLC and DLC to 
establish their own policies to ensure the safeguarding of such 
information. Although the Office has considered the merits of this 
approach, in part given the interplay between confidential material and 
material that should be disclosed, the proposed rule defines 
``confidential information'' to provide sufficient guidance.
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    \25\ See 17 U.S.C. 115(d)(12)(C), (e).
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    The DLC, which does proffer a definition, proposes that 
``confidential information'' include, ``at a minimum, all the usage and 
royalty information received by the MLC from a digital music 
provider,'' \26\ ``including the amount of royalty payments and 
calculations thereunder.'' \27\ While the Office recognizes that 
digital music providers understandably want to ensure that sensitive 
business provided information to the MLC is not unlawfully or 
inappropriately disclosed or used, defining confidential information as 
including ``all the usage and royalty information'' would be overly 
broad and unnecessarily place restrictions on information that must 
necessarily be shared with copyright owners receiving statements of 
accounts from the MLC.\28\ As a workaround, the DLC proposes that the 
regulations allow copyright owners (and their designated agents) to 
receive confidential information, ``so long as they sign an appropriate 
confidentiality agreement with the MLC.'' \29\ Prior to the MMA, 
however, the Copyright Office previously considered and expressly 
rejected the idea of placing a confidentiality requirement on copyright 
owners receiving statements of account under the section 115 statutory 
license due to the inclusion of ``competively sensitive'' information 
(e.g., licensees' overall revenues, royalty payments to record 
companies and performance rights organizations, and overall usage); 
rather, ``once the statements of account have been delivered to the 
copyright owners, there should be no restrictions on the copyright 
owners' ability to use the statements or disclose their contents.'' 
\30\ Particularly given that an animating goal of the MMA is to 
facilitate increased transparency and accuracy in reporting payments to 
copyright owners, the Office sees no reason to deviate from this 
policy.\31\
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    \26\ DLC Ex Parte Letter #2 at 5.
    \27\ DLC Reply Add. at A-20. See also CISAC & BIEM Initial at 4 
(asserting that ``ownership shares are particularly sensitive and 
confidential information which [should] not be visible by the 
public''); The American Association of Independent Music (``A2IM'') 
and the Recording Industry Association of America, Inc. (``RIAA'') 
Reply at 4 (asserting that the MLC should not receive ``all of the 
metadata associated with the sound recordings,'' as ``a portion of 
the metadata provided to a DMP with a sound recording can, and 
typically does, include confidential deal points and usage 
information''); id. at 6 (``The contractual terms between DMPs and 
record companies are highly confidential and represent extremely 
sensitive business information.'').
    \28\ See 37 CFR 210.16(c).
    \29\ DLC Ex Parte Letter #2 at 5; see DLC Reply at 28; 37 CFR 
380.5(c)(3).
    \30\ 79 FR 56190, 56206 (Sept. 18, 2014); id. (holding that 
placing a confidentiality restriction on copyright owners receiving 
statements of account ``would have burdened copyright owners' 
ability to disclose to the public the royalties they received under 
the statutory license. The Office is particularly reluctant to so 
drastically restrict copyright owners' ability to freely discuss the 
effects of government policy.'').
    \31\ See 164 Cong. Rec. H 3522, 3542 (statement of Rep. Norma 
Torres) (``In addition to an increase in efficiency, the [MMA] would 
foster a more transparent relationship between creators and music 
platforms. Information regarding music owed royalties would be 
easily accessible through the database created by the [MMA]. This 
transparency will surely improve the working relationship between 
creators and music platforms and aid the music industry's innovation 
process.''); Proposal of Digital Licensee Coordinator, Inc. at 2, 
U.S. Copyright Office Dkt. No. 2018-11, available at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2018-0011&refD=COLC-2018-0011-0001 (acknowledging that goals of the MMA 
include ``provid[ing] licensing efficiency and transparency, and . . 
. ensur[ing] that the new blanket licensing system is, and remains, 
workable for digital music providers as well as copyright owners'').

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    Accordingly, the proposed rule instead defines ``confidential 
information'' as including ``sensitive financial or business 
information, including information relating to financial or business 
terms that could be used for commercial advantage'' and ``trade 
secrets.'' This definition specifically includes categories of 
information and documents expressly referenced in the statute: ``the 
confidentiality and security of usage, financial, and other sensitive 
data used to compute market shares'' when distributing unclaimed 
accrued royalties,\32\ ``financial and other sensitive data shared'' by 
the MLC to the DLC about significant nonblanket licensees,\33\ and 
voluntary licenses.\34\
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    \32\ 17 U.S.C. 115(d)(3)(J)(i)(II)(bb); see H.R. Rep. No. 115-
651, at 27 (``Unclaimed royalties are to be distributed based upon 
market share data that is confidentially provided to the collective 
by copyright owners.''); S. Rep. No. 115-339, at 24 (same); Conf. 
Rep. at 20 (same).
    \33\ 17 U.S.C. 115(d)(6)(B)(ii).
    \34\ Id. at 115(d)(11)(C)(iii). Music Artists Coalition 
(``MAC'') contends that ``data relating to market share 
determinations and voluntary licenses'' should be publicly shared. 
MAC Reply at 2-3. The statute, however, specifically contemplates 
such information being treated as confidential information. 17 
U.S.C. 115(d)(3)(J)(i)(II)(bb); id. at 115(d)(11)(C)(iii).
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    The DLC suggests that third parties may submit other types of 
information to the MLC or DLC ``that should properly be treated as 
confidential,'' and so proposes that ``confidential information'' 
include ``any other information submitted by a third party,'' where it 
has been ``reasonably designated as confidential by the party 
submitting the information,'' \35\ and the proposed rule largely adopts 
this approach. The Office notes, however, that under the proposed rule, 
third-party submissions to the MLC and DLC remain subject to the other 
provisions of the proposed rule, including the exclusion of certain 
categories of material subject to disclosure from being considered 
confidential, to ensure that third-party submissions do not receive 
heightened protection over those submitted by digital music providers 
and significant nonblanket licensees or musical work copyright owners.
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    \35\ DLC Ex Parte Letter #2 at 5; DLC Reply Add. at A-20.
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    Other stakeholders expressed concern about the disclosure of 
confidential personal information, particularly relating to copyright 
owner information.\36\ The Office appreciates this concern, as among 
many other data points, the MLC must maintain, for example, banking 
information and mailing addresses for copyright owners to whom it 
remits royalty payments. Appreciating this concern, the MLC notes that 
it is ``committed to maintaining robust security to protect 
confidential user data, and that it contractually requires vendors to 
maintain robust security to protect confidential information handled 
for the MLC.'' \37\ Accordingly, the proposed rule also includes in the 
definition of ``confidential information'' ``sensitive personal 
information, including but not limited to, an individual's Social 
Security number, taxpayer identification number, financial account 
number(s), or date of birth (other than year).''
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    \36\ CISAC & BIEM Reply at 8 (encouraging ``the Office to adopt 
suitable regulations that aim to protect sensitive and/or private 
information from public disclosure''); MAC Reply at 2-3 (noting that 
``certain information such as . . . personal addresses should 
obviously be kept out of public documents'').
    \37\ MLC Ex Parte Letter Jan. 29, 2020 (``MLC Ex Parte Letter 
#1'') at 4.
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    As noted above, the proposed rule also defines ``confidential 
information'' by what it is not. Borrowing from current regulations 
governing SoundExchange in connection with the section 112/114 license, 
and as recommended by the DLC, the rule proposes that the definition of 
``confidential information'' exclude ``documents or information that 
may be made public by law'' or ``that at the time of delivery to the 
[MLC] or [DLC] is public knowledge,'' and that ``[t]he party seeking 
information from the [MLC] or [DLC] based on a claim that the 
information sought is a matter of public knowledge shall have the 
burden of proving that fact.'' \38\ In addition, because documents and 
information may be subsequently disclosed by the party to whom the 
information would otherwise be considered confidential, or by the MLC 
or DLC pursuant to participation in proceedings before the Copyright 
Office or Copyright Royalty Judges (including proceedings to 
redesignate the MLC or DLC), the proposed rule excludes such 
information and documents from the definition of ``confidential 
information.''
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    \38\ DLC Reply Add. at A-20.
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    Recognizing that important restrictions on the disclosure of 
information are cabined by equally significant countervailing 
considerations of transparency in reporting certain types of 
information, the proposed rule also excludes the following from the 
definition of ``confidential information'': Information made publicly 
available through notices of license,\39\ notices of nonblanket 
activity, the MLC's online database, and information disclosable 
through the MLC bylaws, annual report, audit report, or the MLC's 
adherence to transparency and accountability with respect to the 
collective's policies or practices, including its anti-commingling 
policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii),(vii), and (ix).
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    \39\ Consistent with the Office's proposed rule regarding 
notices of license, the definition of confidentiality in this 
proposed rule excludes any addendum to general notices of license 
that provides a description of any applicable voluntary license or 
individual download license the digital music provider is, or 
expects to be, operating under concurrently with the blanket license 
that is sufficient for the mechanical licensing collective to 
fulfill its obligations under 17 U.S.C. 115(d)(3)(G)(i)(I)(bb). See 
U.S. Copyright Office, Notice of Proposed Rulemaking, Music 
Modernization Act Notices of License, Notices of Nonblanket 
Activity, Data Collection and Delivery Efforts, and Reports of Usage 
and Payment, Dkt. No. 2020-5, published elsewhere in this issue of 
the Federal Register.
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    In addition, adopting a suggestion from the MLC, the proposed rule 
would exclude from the meaning of ``confidential information'' any top 
level, compilation data presented in anonymized format that does not 
allow identification of such data as belonging to any digital music 
provider, significant nonblanket licensee, or copyright owner.\40\ This 
exclusion recognizes the MLC's stated need for MLC board and committee 
members (including DLC representatives) to obtain access to anonymized 
information, as well as potentially members of the public in MLC 
reports.
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    \40\ MLC Initial at 30 (proposing that ``the MLC, when providing 
necessary data to its board or committee Members, will only share 
proprietary or confidential data as necessary, and in a format that 
is anonymized and cannot be identified as belonging to any 
particular copyright owner, in order to prevent any disclosure to 
potential competitors'').
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    Finally, the proposed rule clarifies that documents or information 
created by a party will not be considered confidential with respect to 
usage of that information by the same party (e.g., documents created by 
the DLC should not be considered confidential with respect to the DLC).

[[Page 22563]]

B. Disclosure and Use of Confidential Information

1. Proposed Approach to Disclosure and Use
    While the definition of confidential information is consistent for 
all uses, the rule proposes various categories of permitted disclosure 
and use by MLC employees, board and committee members of the MLC and 
DLC (and members' respective places of employment), and vendors and 
agents of the MLC and DLC. The segregation into categories of potential 
users of confidential material is common in analogous situations, such 
as protective orders in intellectual property litigation and the CRJ's 
applicable regulation for information under the section 112/114 
statutory licenses.\41\ The Office anticipates that this framework will 
allow for more flexible adjustment to the regulation, if it proves 
necessary to further adjust the permitted disclosure to, and use of 
confidential information by certain users.
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    \41\ 37 CFR 380.5(c).
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    As a general approach, the proposed rule would permit the 
disclosure of confidential information in the following tiers. First, 
all uses by the MLC must be limited to activities necessary to perform 
their duties during the ordinary course of work for the MLC. All 
recipients of confidential information, including MLC employees, must 
execute a written confidentiality agreement. Agents, consultants, 
vendors, and independent contractors of the MLC may receive 
confidential information, only when necessary to carry out their 
duties. This approach is somewhat similar to that of the DLC, which 
proposed that confidential information may be disclosed to ``employees, 
agents, consultants, and independent contractors of the MLC or DLC, 
subject to an appropriate written confidentiality agreement, who are 
engaged in the calculation, collection, matching and distribution of 
royalty payments hereunder and activities related directly thereto who 
require access to the Confidential Information, and only to the extent 
necessary for the purpose of performing their duties during the 
ordinary course of their work, provided that no employee or officer of 
any music publisher shall have access to Confidential Information.'' 
\42\ Similarly, and discussed further below, non-DLC members of the 
board or statutory committees \43\ as well as DLC representatives on 
the board or statutory committees may receive confidential information 
only on a need to know basis and to the extent necessary to carry out 
their duties.
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    \42\ DLC Reply Add. at A-21.
    \43\ The Copyright Office understands that the MLC may have 
established or wish to establish other standing committees, which 
may not derogate the duties of the statutory committees; under the 
proposed rule, those members would presumably be treated as 
consultants of the MLC.
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    Second, uses by the DLC are also related to the DLC's ordinary 
work, with similar limitations for any employees, agents, consultants, 
vendors, and independent contractors of the DLC.
    Third, the proposed rule would expressly permit access to certain 
categories of non-MLC or DLC persons or entities entitled to this 
information by law, including qualified auditors or outside counsel 
pursuant to the statutorily-permitted audits by the MLC of a digital 
music provider operating under the blanket license or audits by a 
copyright owner(s) of the MLC, in each case subject to an appropriate 
written confidentiality agreement. The MMA expressly permits audits by 
copyright owners of the MLC's ``books, records, and data,'' \44\ and by 
the MLC of digital music providers' ``books, records, and data,'' \45\ 
and this approach is similar, though not identical, to language 
proposed by the DLC.\46\
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    \44\ 17 U.S.C. 115(d)(3)(L)(i)(II).
    \45\ Id. at 115(d)(4)(D)(i)(II).
    \46\ DLC Reply Add. at A-21.
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    Finally, similar to current rules established for the 
administration of the section 112/114 licenses, information may also be 
disclosed by parties to proceedings before federal courts, the 
Copyright Office, or the Copyright Royalty Judges, or when such 
disclosure is required by court order or subpoena, subject to an 
appropriate protective order. Neither the DLC nor MLC appear to object 
to such a provision.\47\
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    \47\ See MLC Initial at 30 (``The policies should allow a 
limited exception to allow disclosure of such information in 
response to court orders, subpoenas or other legal processes.''); 
DLC Reply Add. at A-21 (proposing that confidential information 
could be disclosed to ``[a]ttorneys and other authorized agents of 
parties to proceedings before the Copyright Royalty Board, acting 
under an appropriate protective order'').
---------------------------------------------------------------------------

2. Restrictions on Use by Members of the Board of Directors and 
Committees of the MLC
    The MLC and DLC share somewhat similar concerns as to how 
confidential information may be disclosed to and used by board and 
committee members of the MLC and DLC. Both the MLC and DLC express 
concern about the disclosure of confidential information to 
competitors. For example, the MLC maintains that ``[g]iven that the MLC 
board and committee members may be exposed to highly sensitive and 
confidential information, permitting [DLC] representatives to share 
such information with their employers or other individuals who may use 
such information for competitive advantage or other improper purposes 
runs contrary to the confidential nature of the information.'' \48\ The 
DLC notes that ``licensees will be providing a significant amount of 
highly confidential information to the MLC, especially through the 
filing of reports of usage, from which highly confidential details of 
private licensing agreements can be gleaned,'' \49\ and that ``a music 
publisher representative on the MLC Board should not be able to see the 
financial terms that a digital music provider agreed to as part of a 
voluntary license with one of its competitors--or even that such a 
voluntary license exists.'' \50\
---------------------------------------------------------------------------

    \48\ MLC Reply at 41-42.
    \49\ DLC Initial at 22.
    \50\ DLC Ex Parte Letter #2 at 5.
---------------------------------------------------------------------------

    Both designated parties propose limits on the types of information 
that can be shared with board members, with the DLC focused on limiting 
access to information confidential to digital services and the MLC 
focused on limiting access to confidential information belonging to a 
particular musical work copyright owner.\51\ The DLC asserts that 
``confidential information provided to the MLC and DLC (including by 
licensees in reports of usage) are maintained in the strictest of 
confidence and cannot generally be shared with Board members of those 
respective organizations.'' \52\ The MLC proposes that it ``implement 
and enforce a reasonable policy that prevents any member of its board 
of directors or any member of its committees from accessing or 
reviewing any confidential or sensitive data belonging to a particular 
musical work copyright owner but shall allow members of its

[[Page 22564]]

board of directors or committee members, when necessary to carry out 
their duties, to review aggregated and/or anonymized data of musical 
work copyright owners that cannot be identified as belonging to any 
particular musical work copyright owner.'' \53\ It appears that the 
MLC's approach would potentially allow its board and committee members 
to view confidential information from a digital music provider (subject 
to a confidentiality policy), while the DLC's approach would 
potentially allow its board and committee members to view confidential 
information from musical work copyright owners. Both parties generally 
assert that access to confidential information may be necessary for the 
MLC and DLC to serve their statutory purposes.\54\
---------------------------------------------------------------------------

    \51\ See DLC Initial at 22 (``licensees will be providing a 
significant amount of highly confidential information to the MLC, 
especially through the filing of reports of usage, from which highly 
confidential details of private licensing agreements can be 
gleaned''); DLC Ex Parte Letter #2 at 5 (``For instance, a music 
publisher representative on the MLC Board should not be able to see 
the financial terms that a digital music provider agreed to as part 
of a voluntary license with one of its competitors--or even that 
such a voluntary license exists.''); MLC Initial at 30 (proposing 
that ``when providing necessary data to its board or committee 
Members, the MLC will only share proprietary or confidential data as 
necessary, and in a format that is anonymized and cannot be 
identified as belonging to any particular copyright owner, in order 
to prevent any disclosure to potential competitors''); MLC Initial 
at App. H (proposing regulatory language in support of same); MLC 
Reply at App. H (same).
    \52\ DLC Reply at 28.
    \53\ MLC Initial at App. H.
    \54\ See MLC Initial at 29 (``The MMA contemplates that certain 
confidential, private, proprietary, or privileged information will 
have to be provided in order for the MLC to carry out its statutory 
obligations . . .''); DLC Initial at 23 (maintaining that having DLC 
representatives on MLC boards and committees ``is so the broader 
[DLC] has insight into how the MLC is being run . . . and to advise 
on operational issues,'' and that DLC representatives should thus be 
able to share confidential information ``with people with a need to 
know within DLC membership and within their companies'').
---------------------------------------------------------------------------

    The proposed rule addresses these concerns by adopting a general 
approach that will allow a board or statutory committee member to 
access confidential information, but only upon a ``need to know'' and 
``necessary to carry out'' relevant duties basis, and then only subject 
to a written confidentiality agreement. Given the somewhat divergent 
views from the MLC and DLC, and the need for regulatory language to be 
somewhat flexible to accommodate unforeseen issues, the proposed rule 
would permit parity in access with disclosure of information, if any, 
connected to direct performance of statutory duties, rather than hard 
and fast categories prohibiting disclosure of information relevant to, 
or accessed by, digital music providers or music publishers. As noted 
above, the proposed rule also wholly excludes top level, compilation 
data presented in anonymized format from the definition of 
``confidential information.'' As noted below, the Office invites 
comment upon whether any further restrictions on access by board or 
committee members is advisable, such as whether to exclude from 
disclosure and use especially sensitive material, i.e., an additional 
category of ``highly confidential'' information.\55\
---------------------------------------------------------------------------

    \55\ While the DLC's approach would limit disclosure to board 
and committee members only to information labeled ``MLC Confidential 
Information,'' without more background, the Office is not sure this 
approach is advisable. It was not immediately clear to the Office 
whether the MLC would be able to recreate information that would 
otherwise not be accessible to board and committee members, and so 
the Office tentatively concludes that the proposed rule offers a 
reasonable alternative.
---------------------------------------------------------------------------

    The proposed rule also addresses conditions upon which a DLC 
representative may share information within the DLC. The DLC contends 
that its representatives should be able to share confidential 
information among DLC membership because ``[t]he purpose of that 
representation is so the broader [DLC] has insight into how the MLC is 
being run--after all, those licensees have agreed to fund it--and to 
advise on operational issues. DLC representatives are thus meant to 
represent the entire digital licensee community, and should be able to 
share information among DLC membership. Indeed, DLC might appoint 
someone who is not even employed by a licensee as its representative.'' 
\56\ The DLC's proposed regulatory language thus includes provisions to 
handle the specific issues that arise with respect to DLC 
representatives to MLC boards and committees.\57\ By contrast, the MLC 
maintains that ``[g]iven that the MLC board and committee members may 
be exposed to highly sensitive and confidential information, permitting 
[DLC] representatives to share such information with . . . individuals 
who may use such information for competitive advantage or other 
improper purposes runs contrary to the confidential nature of the 
information.'' \58\
---------------------------------------------------------------------------

    \56\ DLC Initial at 23; see also DLC Reply at 28.
    \57\ See DLC Reply at 28, Add. A-22.
    \58\ MLC Reply at 41-42.
---------------------------------------------------------------------------

    The Copyright Office acknowledges that in developing operations 
policies for the MLC, DLC representatives may need to rely on the 
expertise of individuals within the DLC. The Office also acknowledges, 
however, the importance of preventing confidential information from 
being misused by competitors for commercial advantage. The proposed 
rule thus allows DLC representatives who serve on the board of 
directors or committees of the MLC to share confidential information 
with individuals serving on the board of directors and committees of 
the DLC, but only to the extent necessary for such persons to know such 
information and only when necessary to carry out their duties for the 
DLC, subject to an appropriate written confidentiality agreement. Under 
the proposed rule, all DLC representatives are prohibited from using 
confidential information for any purpose other than for work performed 
during the ordinary course of business for the DLC or MLC.
    In addition, the proposed rule addresses conditions upon which DLC 
representatives may share information with additional persons at their 
respective companies. The DLC contends that its representatives should 
be able to share confidential information obtained with people with a 
need to know within DLC companies.\59\ By contrast, the MLC maintains 
that doing so risks disclosure to competitors or others who may misuse 
such information for competitive advantage or other improper 
purposes.\60\
---------------------------------------------------------------------------

    \59\ DLC Initial at 23; DLC Reply at 28.
    \60\ MLC Reply at 41-42.
---------------------------------------------------------------------------

    In contributing to the operations advisory committee's work on the 
MLC, some of which may involve fairly technical considerations, the 
Office tentatively concludes that some DLC representatives may 
reasonably need to solicit additional subject matter expertise of 
individuals within DLC member companies. To address the MLC's concerns, 
under the proposed rule DLC representatives who serve on the MLC's 
board of directors or committees may share confidential information 
with individuals employed by DLC members, subject to an appropriate 
written confidentiality agreement, and only to the extent necessary for 
such persons to know such information and for the DLC to perform its 
duties. Individuals employed by DLC members who receive confidential 
information from DLC representatives are prohibited from using 
confidential information for any purpose other than for work performed 
during the ordinary course of business for the DLC or MLC.
    Finally, the proposed rule provides some flexibility by 
incorporating the MLC's suggestion that confidential information may be 
shared with other individuals authorized by the MLC to receive such 
information, but only to the extent necessary for such persons to know 
such information and only when necessary for the MLC to perform its 
duties, subject to an appropriate written confidentiality agreement.
3. Restrictions on Use by MLC and DLC Vendors and Consultants
    Multiple commenters expressed concern about MLC vendors using 
confidential information they acquire while conducting work for the MLC 
for commercial advantage or for purposes outside of the MLC's statutory 
ambit.\61\

[[Page 22565]]

The MLC states that it ``intends to provide users who submit 
confidential data to the MLC an ability to voluntarily `opt in' to 
share that data for general use by its primary royalty processing 
vendor, the Harry Fox Agency,'' but that ``MLC users will not be 
required to opt in to any such sharing in order for the MLC to fully 
process and pay all royalties due to them under the blanket license.'' 
\62\ The MLC did not further detail what it means by ``general use,'' 
but presumably, such shared information may potentially include payment 
information by copyright owners, including self-published songwriters, 
who sign up through the MLC's online portal. Without more information 
as to the intended use and anticipated benefit to MLC stakeholders, the 
Office is disinclined at this time to adopt the MLC's proposal, and so 
the proposed rule would not permit MLC vendors to use confidential 
information for purposes other than for duties performed during the 
ordinary course of work for the MLC, e.g., including the administration 
of voluntary bundled licensing of performance and mechanical uses that 
the MLC itself is prohibited from administrating.\63\
---------------------------------------------------------------------------

    \61\ National Association of Independent Songwriters (``NOIS'') 
et al. Initial at 16 (``The vendors for the MLC should not be . . . 
able to use information and data that the MLC will gather and 
control to their competitive advantage. If they are in competition 
with other entities considered to be similar in nature or can use 
the data to their own unique proprietary advantage, they should not 
be eligible to be selected as a vendor.''); Lowery Reply at 12 (``If 
the Copyright Office does not prohibit HFA from selling for other 
commercial purposes the data it acquires through its engagement by 
MLC to facilitate the compulsory blanket license, the Congress will 
have just handed HFA a near insurmountable advantage over its 
competitors.'').
    \62\ MLC Ex Parte Letter #1 at 4.
    \63\ See 37 CFR 380.5(b) (prohibiting SoundExchange from using 
``any Confidential Information for any purpose other than royalty 
collection and distribution and activities related directly 
thereto'').
---------------------------------------------------------------------------

    Alternatively, where users of the MLC would have voluntarily opted-
into ``general use'' of their information by the MLC's vendors, the 
Office considered whether to propose language requiring the MLC to 
provide such information to other third parties, perhaps restricted to 
those offering or administering music licensing services, for a 
reasonable cost. This approach would have the potential benefit of 
leveraging the unique nature of the MLC database in other aspects of 
the music ecosystem, without potentially affecting the competitive 
landscape in ways unrelated to the section 115 license. This approach, 
however, could also begin to implicate broader questions of data 
privacy and sharing that are less central to the MMA's goals, and the 
Office tentatively concludes that the more prudent approach is to 
restrict the MLC's disclosure of confidential information to its 
vendors, even with ostensible permission, to activities related to a 
given vendor's work for the MLC. For parity, the proposed rule includes 
a similar provision for DLC vendors, as well as board and committee 
members, employees, agents, consultants, and independent contractors of 
either the MLC or DLC. The Office invites public comment on this aspect 
of the proposed rule.

C. Safeguarding Confidential Information

    Both the MLC and DLC propose having the MLC and DLC implement 
policies and procedures to prevent unauthorized access and/or use of 
confidential information, an approach that seems necessary to 
effectuate the intent of the proposed regulations.\64\ Accordingly, the 
proposed rule states that the MLC, DLC, and any person or entity 
authorized to receive confidential information from either of those 
entities, must implement procedures to safeguard against unauthorized 
access to or dissemination of confidential information using a 
reasonable standard of care, but no less than the same degree of 
security that the recipient uses to protect its own confidential 
information or similarly sensitive information.\65\ In addition, the 
proposed rule states that the MLC and DLC shall each implement and 
enforce reasonable policies governing the confidentiality of its 
records.
---------------------------------------------------------------------------

    \64\ MLC Initial at 29 (stating ``protection of such 
confidential, private, proprietary or privileged information may be 
accomplished through a regulation that requires the MLC and the DLC 
to implement confidentiality policies that prevent improper or 
unauthorized use of such material by their directors, committee 
members, and personnel''); DLC Reply Add. at A-21-22 (proposing that 
the MLC and DLC (and any person authorized to receive confidential 
information) ``must implement procedures to safeguard against 
unauthorized access to or dissemination of Confidential Information 
using a reasonable standard of care, but no less than the same 
degree of security that the recipient uses to protect its own 
Confidential Information or similarly sensitive information'').
    \65\ See 37 CFR 380.5(d) (``[SoundExchange] and any person 
authorized to receive Confidential Information from [SoundExchange] 
must implement procedures to safeguard against unauthorized access 
to or dissemination of Confidential Information using a reasonable 
standard of care, but no less than the same degree of security that 
the recipient uses to protect its own Confidential Information or 
similarly sensitive information.'').
---------------------------------------------------------------------------

D. Maintenance of Records

    The MMA requires the Copyright Office to issue regulations 
``setting forth requirements under which records of use shall be 
maintained and made available to the [MLC] by digital music providers 
engaged in covered activities under a blanket license.'' \66\ While the 
Copyright Office will address records maintenance in connection with a 
separate rulemaking addressing data collection and reporting 
obligations by digital music providers,\67\ the proposed rule provides 
that any written confidentiality agreements relating to the use or 
disclosure of confidential information must be maintained and stored by 
the relevant parties for at least the same amount of time that certain 
digital music providers are required to maintain records of use 
pursuant to 17 U.S.C. 115(d)(4)(A)(iv).
---------------------------------------------------------------------------

    \66\ 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I).
    \67\ See U.S. Copyright Office, Notice of Proposed Rulemaking, 
Music Modernization Act Notices of License, Notices of Nonblanket 
Activity, Data Collection and Delivery Efforts, and Reports of Usage 
and Payment, Dkt. No. 2020-5, published elsewhere in this issue of 
the Federal Register.
---------------------------------------------------------------------------

E. Confidentiality Designations

    The proposed rule does not impose a requirement that confidential 
information necessarily bear a designation of confidentiality, although 
the MLC or DLC could presumably impose such a requirement in their own 
policies.

F. Nondisclosure Agreements

    The MLC and DLC disagree as to whether DLC representatives should 
be required to sign nondisclosure agreements (``NDAs'') in their 
personal capacities. The DLC suggests that only the DLC as an 
organization should be bound, and not the DLC representatives in their 
personal capacities or as representatives of their employers.\68\ 
Instead, the DLC contends, confidentiality obligations for the MLC and 
DLC should operate at ``an organization-to-organization level,'' \69\ 
as ``some companies prohibit [DLC representatives from] taking on such 
personal liability for actions taken in the scope of employment.'' \70\ 
The MLC disagrees, stating that if only the DLC, which is relatively 
assetless, is bound by a confidentiality agreement, there would be no 
recourse against the DLC for breach of confidentiality, and that such a 
proposal ``disincentives individuals on the MLC Board and committees 
from protecting confidential information, as there will be no penalty 
for unlawful disclosure.'' \71\
---------------------------------------------------------------------------

    \68\ DLC Initial at 23.
    \69\ Id.
    \70\ DLC Ex Parte Letter #2 at 6.
    \71\ MLC Reply at 41.
---------------------------------------------------------------------------

    While the Office acknowledges the DLC's concerns, having 
confidentiality obligations operate at an MLC-to-DLC

[[Page 22566]]

level presents some potential shortcomings. For example, if DLC 
representatives are not bound in their personal capacities, what 
recourse would be available should a former DLC representative disclose 
or misuse confidential information, including after having left a DLC 
member company? Moreover, as the DLC would like its representatives to 
be able to share confidential information with employees of DLC member 
companies--who themselves do not serve on a DLC board or committee--
ensuring that such confidential information is not improperly disclosed 
or misused may seem to necessitate employees of DLC member companies 
signing nondisclosure agreements in their personal capacities. In 
examining the analogous context of preventing confidential information 
produced through litigation discovery from being improperly disclosed 
or misused, the Copyright Office observes that model protective orders 
appear to bind individuals in their personal capacities.\72\ 
Accordingly, at this time, the Office is disinclined to require that 
confidentiality obligations for the MLC and DLC operate at an 
organization-to-organization level. Instead, the proposed rule states 
that the various categories of individuals to receive confidential 
information do so subject to an appropriate written confidentiality 
agreement. The Copyright Office invites public comment on this aspect 
of the proposed rule.
---------------------------------------------------------------------------

    \72\ See, e.g., United States District Court for the Northern 
District of California, Model Protective Orders, https://www.cand.uscourts.gov/forms/model-protective-orders/ (last visited 
Mar. 25, 2020); United States District Court for the Southern 
District of New York, Model Protective Order, https://nysd.uscourts.gov/sites/default/files/practice_documents/Judge%20Parker%20Model%20Protective%20Order%205-21-19%20%281%29.pdf 
(last visited Mar. 25, 2020).
---------------------------------------------------------------------------

    In addition, a few commenters expressed concern about the MLC's 
ability to require NDAs for its board and committee members. The 
National Association of Independent Songwriters (``NOIS''), joined by 
individual stakeholders, contend that there ``must be a rejection of 
any incremental NDA put forth by the MLC to its board and/or committee 
members that requires anything not mandated by the MMA.'' \73\ 
Similarly, the DLC maintains that Office's regulations ``should be the 
ceiling on any confidentiality requirements'' by the MLC.\74\ For its 
part, the MLC states that it should have discretion to impose 
additional confidentiality requirements for board or committee 
participation, as it would ``allow[ ] the MLC to fill in inevitable 
gaps to ensure that confidential information is kept confidential . . 
.'' \75\
---------------------------------------------------------------------------

    \73\ NOIS et al. Initial at 16. The NOIS comment did not provide 
any information regarding membership of the National Association of 
Independent Songwriters; many of the individual signatories were 
previously affiliated with the American Music Licensing Collective 
(``AMLC''), and do not all appear to be songwriters based on 
information previously submitted by the AMLC. See AMLC Proposal at 
35, U.S. Copyright Office Dkt. No. 2018-11, available at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2018-0011&refD=COLC-2018-0011-0001.
    \74\ DLC Reply at 28.
    \75\ MLC Reply at 42.
---------------------------------------------------------------------------

    Under the proposed rule, the MLC may not impose additional 
restrictions relating to the use or disclosure of confidential 
information, beyond those imposed by the Office's regulations, as a 
condition for participation on a board or committee. The DLC is 
similarly restricted. In addition, the proposed rule states that the 
use of confidentiality agreements by the MLC and DLC is subject to the 
Office's confidentiality regulations, and that neither entity can 
permit broader use or disclosure of confidential information than what 
is permitted under the Office's regulations.

III. Subjects of Inquiry

    The Copyright Office seeks additional public comment on all aspects 
of the proposed rule, including the specific subjects below:
    1. Should the proposed rule further limit access to confidential 
material by MLC board and committee members? What about access to 
confidential material by employees at companies of MLC and DLC board 
members?
    2. In addition to a ``Confidential Information'' designation, 
should the regulations provide for a ``Highly Confidential 
Information'' designation to provide an additional layer of protection 
for certain documents and information that only the employees, or 
employees, agents, and vendors of the MLC, may access (i.e., not 
members of the board or committees of either the MLC or DLC)? If so, 
should the proposed rule specify which types of information and 
documents should be eligible for the ``Highly Confidential 
Information'' designation, or provide the MLC with flexibility to 
establish such policies, and how would that designation relate to 
permitted use of such material?
    3. Should the Office's regulations address instances of inadvertent 
disclosure? If so, how?
    4. If DLC representatives are not permitted to sign confidentiality 
agreements in their personal capacities, should the Office's 
regulations address the penalty for disclosure? If so, how? The Office 
welcomes suggestions of preferable alternative solutions that would 
balance the interests identified above to allow DLC representatives to 
participate on the MLC committees without creating disincentives to 
protect confidential information, or present issues should a DLC 
representative end employment with a DLC member company.

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Proposed Regulations

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

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

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

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

Subpart B--Blanket Compulsory License for Digital Uses, Mechanical 
Licensing Collective, and Digital Licensee Coordinator


Sec. Sec.  210.30 through 210.32  [Reserved]

0
2. Add reserved Sec. Sec.  210.30 through 210.32.
0
3. Add Sec.  210.33 to read as follows:


Sec.  210.33  Treatment of confidential and other sensitive 
information.

    (a) General. This section prescribes the rules under which the 
mechanical licensing collective (MLC) and digital licensee coordinator 
(DLC) shall ensure that confidential, private, proprietary, or 
privileged information received by the MLC or DLC or contained in their 
records is not improperly disclosed or used, in accordance with 17 
U.S.C. 115(d)(12)(C), including with respect to actions of the board of 
directors, committee members, and personnel of the MLC or DLC.
    (b) Definitions. For purposes of this section:
    (1) Unless otherwise specified, the terms used have the meanings 
set forth in 17 U.S.C. 115.
    (2) ``Confidential Information'' includes sensitive financial or 
business information, including information relating to financial or 
business terms that could be used for commercial advantage, trade 
secrets, or sensitive personal information, including but not limited 
to, an individual's Social Security number, taxpayer identification 
number, financial account number(s), or

[[Page 22567]]

date of birth (other than year). Confidential Information specifically 
includes usage data and other sensitive data used to compute market 
shares when distributing unclaimed accrued royalties, sensitive data 
shared between the MLC and DLC regarding any significant nonblanket 
licensee, and sensitive data concerning voluntary licenses or 
individual download licenses administered by and/or disclosed to the 
MLC. ``Confidential information'' also includes information submitted 
by a third party that is reasonably designated as confidential by the 
party submitting the information, subject to the other provisions of 
this section. ``Confidential Information'' does not include:
    (i) Documents or information that are public or may be made public 
by law or regulation, including but not limited to information made 
publicly available through:
    (A) Notices of license, excluding any addendum that provides a 
description of any applicable voluntary license or individual download 
license the digital music provider is, or expects to be, operating 
under concurrently with the blanket license.
    (B) Notices of nonblanket activity, the MLC's online database, and 
information disclosable through the MLC bylaws, annual report, audit 
report, or the MLC's adherence to transparency and accountability with 
respect to the collective's policies or practices, including its anti-
commingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii),(vii), and 
(ix). Confidential Information also excludes information made publicly 
available by the MLC or DLC pursuant to participation in proceedings 
before the Copyright Office or Copyright Royalty Judges, including 
proceedings to redesignate the MLC or DLC.
    (ii) Documents or information that may be made public by law or 
that at the time of delivery to the MLC or DLC is public knowledge, or 
is subsequently disclosed by the party to whom the information would 
otherwise be considered confidential. The party seeking information 
from the MLC or DLC based on a claim that the information sought is a 
matter of public knowledge shall have the burden of proving that fact.
    (iii) Top level, compilation data presented in anonymized format 
that does not allow identification of such data as belonging to any 
digital music provider, significant nonblanket licensee, or copyright 
owner.
    (iv) Documents or information created by a party with respect to 
usage of such documents or information by that originating party.
    (c) Disclosure and Use of Confidential Information by the MLC and 
DLC. (1) The MLC, including its employees, agents, consultants, 
vendors, independent contractors, and non-DLC members of the MLC board 
of directors or committees, shall not use any Confidential Information 
for any purpose other than determining compliance with statutory 
license requirements, royalty calculation, collection, matching, and 
distribution, and activities related directly thereto, in performing 
their duties during the ordinary course of their work for the MLC. 
Access and use of Confidential Information by the MLC shall be further 
limited as follows:
    (i) Employees of the MLC may receive Confidential Information, 
subject to an appropriate written confidentiality agreement.
    (ii) Agents, consultants, vendors, and independent contractors of 
the MLC may receive Confidential Information, only when necessary to 
carry out their duties during the ordinary course of their work for the 
MLC and subject to an appropriate written confidentiality agreement.
    (iii) Non-DLC members on the MLC board of directors or committees 
may receive Confidential Information from the MLC, only to the extent 
necessary for such persons to know such information, only when 
necessary to carry out their duties for the MLC, and subject to an 
appropriate written confidentiality agreement.
    (2) The DLC, including its employees, agents, consultants, vendors, 
independent contractors, members of the DLC board of directors or 
committees, and representatives serving on the board of directors or 
committees of the MLC, shall not use any Confidential Information for 
any purpose other than determining compliance with statutory license 
requirements, royalty calculation, collection, matching, and 
distribution, and activities related directly thereto, in performing 
their duties during the ordinary course of their work for the DLC. 
Access and use of Confidential Information by the DLC shall be further 
limited as follows:
    (i) Employees, agents, consultants, vendors, and independent 
contractors of the DLC may receive Confidential Information from the 
MLC, only when necessary to carry out their duties during the ordinary 
course of their work for the DLC and subject to an appropriate written 
confidentiality agreement.
    (ii) Representatives of the DLC who serve on the board of directors 
or committees of the MLC may receive Confidential Information from the 
MLC, only to the extent necessary for such persons to know such 
information, only when necessary to carry out their duties for the DLC, 
and subject to an appropriate written confidentiality agreement.
    (iii) Representatives of the DLC who serve on the board of 
directors or committees of the MLC, and receive Confidential 
Information, may share such information with the following persons:
    (A) Employees, agents, consultants, vendors, and independent 
contractors of the DLC, only to the extent necessary for the purpose of 
performing their duties during the ordinary course of their work for 
the DLC, and persons otherwise authorized by the MLC to receive 
Confidential Information, only to the extent necessary for such persons 
to know such information, subject to an appropriate written 
confidentiality agreement.
    (B) Individuals serving on the board of directors and committees of 
the DLC, only to the extent necessary for such persons to know such 
information and only when necessary to carry out their duties for the 
DLC, subject to an appropriate written confidentiality agreement.
    (C) Individuals otherwise employed by members of the DLC, only to 
the extent necessary for such persons to know such information and only 
when necessary for the DLC to perform its duties, subject to an 
appropriate written confidentiality agreement.
    (D) Persons otherwise authorized by the MLC to receive Confidential 
Information, only to the extent necessary for such persons to know such 
information and only when necessary for the MLC to perform its duties, 
subject to an appropriate written confidentiality agreement.
    (d) Disclosure of Confidential Information to Non-MLC and Non-DLC 
Persons and Entities. In addition to the permitted use and disclosure 
of Confidential Information in paragraph (c) of this section, the MLC 
and the DLC may disclose Confidential Information to:
    (1) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 
115(d)(4)(D), who is authorized to act on behalf of the mechanical 
licensing collective with respect to verification of royalty payments 
by a digital music provider operating under the blanket license, 
subject to an appropriate written confidentiality agreement;

[[Page 22568]]

    (2) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 
115(d)(3)(L), who is authorized to act on behalf of a copyright owner 
or group of copyright owners with respect to verification of royalty 
payments by the mechanical licensing collective, subject to an 
appropriate written confidentiality agreement; and
    (3) Attorneys and other authorized agents of parties to proceedings 
before federal courts, the Copyright Office, or the Copyright Royalty 
Judges, or when such disclosure is required by court order or subpoena, 
subject to an appropriate protective order or agreement.
    (e) Safeguarding Confidential Information. The MLC, DLC, and any 
person or entity authorized to receive Confidential Information from 
either of those entities, must implement procedures to safeguard 
against unauthorized access to or dissemination of Confidential 
Information using a reasonable standard of care, but no less than the 
same degree of security that the recipient uses to protect its own 
Confidential Information or similarly sensitive information. The MLC 
and DLC shall each implement and enforce reasonable policies governing 
the confidentiality of their records, subject to the other provisions 
of this section.
    (f) Maintenance of records. Any written confidentiality agreements 
relating to the use or disclosure of Confidential Information must be 
maintained and stored by the relevant parties for at least the same 
amount of time that certain digital music providers are required to 
maintain records of use pursuant to 17 U.S.C. 115(d)(4)(A)(iv).
    (g) Confidentiality agreements. The use of confidentiality 
agreements by the MLC and DLC shall be subject to the other provisions 
of this section, and shall not permit broader use or disclosure of 
Confidential Information than permitted under this section. The MLC and 
DLC may not impose additional restrictions relating to the use or 
disclosure of Confidential Information, beyond those imposed by this 
provision, as a condition for participation on a board or committee.

    Dated: April 15, 2020.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2020-08374 Filed 4-17-20; 4:15 pm]
 BILLING CODE 1410-30-P