Music Modernization Act Notices of License, Notices of Nonblanket Activity, Data Collection and Delivery Efforts, and Reports of Usage and Payment, 22518-22549 [2020-08379]

Download as PDF 22518 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules E. Sloan, Assistant General Counsel, by email at jslo@copyright.gov. Each can be contacted by telephone by calling (202) 707–8350. SUPPLEMENTARY INFORMATION: LIBRARY OF CONGRESS U.S. Copyright Office 37 CFR Part 210 [Docket No. 2020–5] Music Modernization Act Notices of License, Notices of Nonblanket Activity, Data Collection and Delivery Efforts, and Reports of Usage and Payment U.S. Copyright Office, Library of Congress. ACTION: Notice of proposed rulemaking. AGENCY: The U.S. Copyright Office is issuing a notice of proposed rulemaking regarding information to be provided by digital music providers pursuant to the new compulsory blanket license to make and deliver digital phonorecords of musical works established by title I of the Orrin G. Hatch–Bob Goodlatte Music Modernization Act. The law establishes a new blanket license, to be administered by a mechanical licensing collective, and to become available on January 1, 2021. Having solicited public comments through a previous notification of inquiry, through this notice, the Office is proposing regulations concerning notices of license, data collection and delivery efforts, and reports of usage and payment by digital music providers. The Office is also proposing regulations concerning notices of nonblanket activity and reports of usage by significant nonblanket licensees, as well as language addressing data collection efforts by musical work copyright owners. SUMMARY: Written comments must be received no later than 11:59 p.m. Eastern Time on May 22, 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’s website at https:// www.copyright.gov/rulemaking/mmanotices-reports/. 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 email at regans@copyright.gov, or Jason khammond on DSKJM1Z7X2PROD with PROPOSALS2 DATES: VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 I. Background This notice of proposed rulemaking (‘‘NPRM’’) is being issued subsequent to a notification of inquiry, published in the Federal Register on September 24, 2019, that describes in detail the legislative background and regulatory scope of the present rulemaking proceeding.1 The Copyright Office assumes familiarity with that document, and encourages anyone reading this NPRM who has not reviewed it to do so before continuing. On October 11, 2018, the president signed into law the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (‘‘MMA’’) which, among other things, substantially modifies the compulsory ‘‘mechanical’’ license for making and distributing phonorecords of nondramatic musical works under 17 U.S.C. 115.2 It does so by switching from a song-by-song licensing system to a blanket licensing regime that will become available on January 1, 2021 (the ‘‘license availability date’’), and be administered by a mechanical licensing collective (‘‘MLC’’) designated by the Copyright Office. Digital music providers (‘‘DMPs’’) will be able to obtain the new compulsory blanket license to make digital phonorecord deliveries (‘‘DPDs’’) of musical works, including in the form of permanent downloads, limited downloads, or interactive streams (referred to in the statute as ‘‘covered activity,’’ where such activity qualifies for a compulsory license), subject to compliance with various requirements, including reporting obligations.3 DMPs may also 1 84 FR 49966 (Sept. 24, 2019). All rulemaking activity, including public comments, as well as legislative history and 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=COLC2019-0002-0001. Related ex parte letters are available at https://www.copyright.gov/rulemaking/ mma-implementation/ex-partecommunications.html. References to these comments and letters are by party name (abbreviated where appropriate), followed by ‘‘Initial,’’ ‘‘Reply,’’ or ‘‘Ex Parte Letter’’ as appropriate. 2 Public Law 115–264, 132 Stat. 3676 (2018). 3 As permitted under the MMA, the Office designated a digital licensee coordinator (‘‘DLC’’) to represent licensees in proceedings before the Copyright Royalty Judges (‘‘CRJs’’) and the Copyright Office, to serve as a non-voting member of the MLC, and to carry out other functions. 17 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 continue to engage in those activities through voluntary, or direct licensing with copyright owners, in which case the DMP may be considered a significant nonblanket licensee (‘‘SNBL’’) under the statute, subject to separate reporting obligations. As detailed in the previous notification of inquiry, the statute specifically directs the Copyright Office to adopt a number of regulations to govern the new blanket licensing regime and vests the Office with broad general authority to adopt such regulations as may be necessary or appropriate to effectuate the new blanket licensing structure. Having solicited public comments through the notification of inquiry, the Office is preparing multiple notices of proposed rulemaking to address various subjects presented in the notification. This NPRM specifically addresses notices of license, notices of nonblanket activity, data collection and delivery efforts, and reports of usage and payment, which were among those topics requested by various commenters to be prioritized because they relate to core information needed by both DMPs and the MLC to prepare and ready their operations in advance of the blanket license becoming available.4 Notices addressing confidentiality, the musical works database, and accounting statements to copyright owners are being published simultaneously with this NPRM, and the Office will continue to consider whether further rulemakings are appropriate. For example, the Office is separately engaged in a policy study regarding best practices that the MLC may consider to reduce the incidence of unclaimed accrued royalties. A notification of inquiry seeking comment regarding that study will be forthcoming in connection with considerations of potential regulatory activity related to the distribution of such royalties by the MLC to musical work copyright owners identified in the musical works database in years following the license availability date.5 The MMA significantly altered the complex music licensing landscape after careful congressional deliberation following extensive input from, and negotiations between, a variety of stakeholders.6 In this NPRM, as well as U.S.C. 115(d)(5)(B); 84 FR 32274 (July 8, 2019); see also 17 U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C). 4 DLC Reply at 1; MLC Initial at 2; Future of Music Coalition (‘‘FMC’’) Reply at 3. 5 More information about the unclaimed royalties study can be found at https://www.copyright.gov/ policy/unclaimed-royalties/. 6 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. E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 the other notices published concurrently, the Copyright Office has endeavored to build upon that foundation and propose a reasonable regulatory framework for the MLC, DMPs, copyright owners and songwriters, and other interested parties to operationalize the various duties and entitlements set out by statute.7 The subjects of this proposed rule, as much as any the MMA charges the Office with implementing, have made it necessary to propose regulatory language that navigates convoluted nuances of the music data supply chain and differing expectations of the MLC, DMPs, and other stakeholders, while remaining cognizant of the potential effect upon varied business practices across the digital music marketplace.8 While the 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. . . . 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.’’). See also U.S. Copyright Office, Copyright and the Music Marketplace at Preface (2015), https:// www.copyright.gov/policy/musiclicensingstudy/ copyright-and-the-music-marketplace.pdf (noting ‘‘the problems in the music marketplace need to be evaluated as a whole, rather than as isolated or individual concerns of particular stakeholders’’). 7 See Alliance of Artists & Recording Cos. v. DENSO Int’l Am., Inc., 947 F.3d 849, 863 (D.C. Cir. 2020) (‘‘[T]he best evidence of a law’s purpose is the statutory text, and most certainly when that text is the result of carefully negotiated compromise among the stakeholders who will be directly affected by the legislation.’’) (internal quotation marks, brackets, and citations omitted). 8 See, e.g., Nat’l Cable & Telecomms. Ass’n v. Brand X internet Servs., 545 U.S. 967, 980 (2005) (‘‘[A]mbiguities in statutes within an agency’s jurisdiction to administer are delegations of authority to the agency to fill the statutory gap in reasonable fashion.’’) (citing Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984)); see also Report and Section-by-Section Analysis of H.R. 1551 by the Chairmen and Ranking Members of Senate and House Judiciary Committees, at 12 (2018), https://www.copyright.gov/legislation/mma_ conference_report.pdf (‘‘Conf. Rep.’’) (acknowledging that ‘‘it is to be expected that situations will arise that were not contemplated by the legislation,’’ and that ‘‘[t]he Office is expected to use its best judgement in determining the appropriate steps in those situations’’). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 Office’s task was aided by receipt of numerous helpful and substantive comments representing interests from across the music ecosystem, in many cases, the comments also uncovered divergent assumptions and expectations as to the shouldering and execution of relevant duties assigned by the MMA. In proposing the following rule, where comments diverged sharply, the Office has proposed regulatory language that it believes best reflects the statutory language and its animating goals in light of the record before it.9 As the Office previously noted, the ‘‘MLC has a tight deadline to become fully operational,’’ and it encourages continued dialogue to expeditiously resolve or refine areas of disagreement among interested stakeholders.10 Accordingly, the Office also welcomes parties to file joint comments on issues of common agreement and consensus.11 If parties disagree with aspects of the Office’s proposal, they are encouraged to provide specific alternative regulatory language for the Office to consider.12 The Office seeks public comments on all aspects of this NPRM, but asks that any comments directed at other subjects discussed in the notification of inquiry be reserved for the appropriate notice of proposed rulemaking. In recognition of the significant changes brought by the MMA, and challenges both in setting up a fully functional MLC and for DMPs to adjust their internal practices, the Office also invites comment on whether it would be beneficial to adopt the proposed rule on an interim basis. If necessary, based on feedback received, the Office would make appropriate adjustments to the regulatory language before the rule is finalized, and following the license availability date. This approach would allow the Office 9 See H.R. Rep. No. 115–651, at 14 (2018); S. Rep. No. 115–339, at 15 (2018); Conf. Rep. at 12 (‘‘The Copyright Office has the knowledge and expertise regarding music licensing through its past rulemakings and recent assistance to the Committee[s] during the drafting of this legislation.’’); see also 84 FR at 49967–68. 10 84 FR at 32296. 11 See, e.g., Joint Comments of Dig. Media Ass’n, Nat’l Music Publishers’ Ass’n, Recording Indus. Ass’n of Am., Harry Fox Agency, Inc., & Music Reports, Inc. Submitted in Response to U.S. Copyright Office’s July 27, 2012, Notice of Proposed Rulemaking (Oct. 25, 2012) (regarding section 115 statement of account regulations). 12 Guidelines for ex parte communications, along with records of such communications, are available at https://www.copyright.gov/rulemaking/mmaimplementation/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. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 22519 more flexibly to make necessary modifications in response to new evidence, unforeseen issues, or where something is otherwise not functioning as intended. II. Proposed Rule Having reviewed and considered all relevant comments received in response to the notification of inquiry, and having engaged in a number of ex parte communications with commenters, the Office has weighed all appropriate legal, business, and practical implications and equities that have been raised, and proposes the following with respect to notices of license, notices of nonblanket activity, data collection and delivery efforts, and reports of usage and payment under the MMA.13 A. Notices of License and Nonblanket Activity The MMA requires entities engaging in covered activities to file notice with the MLC regarding such activities. A DMP seeking a blanket license must file a notice of license (‘‘NOL’’), while an entity qualifying as an SNBL must file a notice of nonblanket activity (‘‘NNBA’’). The Copyright Office must prescribe regulations regarding the form and content for these notices.14 1. Notices of License In response to the Office’s notification of inquiry, the MLC and DLC offer disparate views as to what NOLs should look like and how they should operate. The DLC argues that NOLs should be relatively brief and high-level in describing the DMP’s covered activities, and should only need to be filed once.15 The MLC seeks considerably more detail about the DMP’s activities, as well as an ongoing duty to file an amended NOL whenever any information changes.16 The DLC also seeks a harmless error rule (whereby immaterial errors in an NOL would not render it invalid), while the MLC argues against one.17 Both the MLC and DLC provide specific regulatory language for their competing views.18 Among other commenters weighing in on the issue of NOLs, the International 13 In addition to these substantive topics, the rule also proposes a technical reorganization of part 210 of the Office’s regulations, whereby the current subpart A and subpart B are flipped so that when final, subpart A will contain the Office’s current regulations for the non-blanket section 115 license and subpart B will contain the Office’s new regulations for the blanket license. 14 See 84 FR at 49969. 15 DLC Initial at 5; DLC Reply at 2–5. 16 MLC Initial at 2–9; MLC Reply at 2–7; see also Nat’l Music Publishers’ Ass’n (‘‘NMPA’’) Reply at 2–3 (agreeing with the MLC’s position). 17 DLC Initial at 5; MLC Reply at 8–9. 18 DLC Reply Add. at A–2–3; MLC Reply App. A at 1–3. E:\FR\FM\22APP2.SGM 22APP2 22520 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 Confederation of Societies of Authors and Composers (‘‘CISAC’’) & the International Organisation representing Mechanical Rights Societies (‘‘BIEM’’) and Monica Corton Consulting advocate for having a clear and sufficiently detailed description of the DMP’s activities.19 Music Reports proposes that DMPs be required to submit a concise description of their activities, and also information about the individual sound recordings made available.20 Based on the record before it, the Office proposes the following rules for NOLs. Name and contact information. The Office proposes requiring essentially the same name and contact information for DMPs as proposed by the MLC and DLC, which is also in general accord with the current requirements both for completing a notice of intention to obtain a compulsory license under section 115 (‘‘NOI’’) 21 and a notice of use of sound recordings under the sections 112 and 114 statutory licenses (‘‘NOU’’).22 Submission. The Office proposes rules governing the submission criteria for NOLs that are generally in line with the commenters’ proposals and the requirements of existing Copyright Office filings, namely that NOLs be submitted in a manner reasonably determined by the MLC, that NOLs be signed by an appropriate representative of the DMP who certifies to his or her authority to make the submission and the truth of the submitted information, and the MLC confirms receipt of NOLs.23 Description of DMP and its covered activities. The proposed rule diverges from both the DLC and MLC proposals as to the requisite level of detail NOLs must contain to describe the DMP and its covered activities. At one end, the DLC’s proposal to only provide ‘‘[a] general description of the covered activities,’’ seems inconsistent with the statute.24 NOLs must ‘‘specif[y] the particular covered activities in which the digital music provider seeks to engage.’’ 25 Moreover, the statute tasks the MLC not merely with ‘‘receiv[ing]’’ NOLs, but also ‘‘review[ing], and confirm[ing] or reject[ing]’’ them.26 And one of the grounds for rejecting an NOL is if ‘‘the digital music provider or notice of license does not meet the 19 CISAC & BIEM Reply at 4; Monica Corton Consulting Reply at 1. 20 Music Reports Initial at 2–3. 21 See 37 CFR 201.18(d)(1)(i) and (ii). 22 See id. at § 370.2(b)(1) through (4). 23 See, e.g., id. at §§ 201.18(c), (d)(3), and (e), 201.35(f)(3), and 370.2(c). 24 See DLC Reply Add. at A–2. 25 17 U.S.C. 115(d)(2)(A) (emphasis added). 26 Id. at 115(d)(3)(F)(i). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 requirements of this section or applicable regulations.’’ 27 Taken together, the Office believes that the statute requires an NOL to contain a description that is sufficient to reasonably establish the DMP’s eligibility for a blanket license and to provide reasonable notice of the manner in which the DMP seeks to engage in covered activities under the blanket license. To that end, the rule proposes that NOLs contain a statement from the DMP that it has a good-faith belief in its eligibility for the blanket license and its ability to comply with all payments, terms, and other responsibilities under the blanket license. In specifying its particular covered activities, the Office proposes that the DMP specify or check off each applicable DPD configuration and service type from a list.28 By DPD configuration, the Office refers to the different types of DPDs a DMP might make, such as permanent downloads, limited downloads, interactive streams, and noninteractive streams. By service type, the Office refers to the general types of offerings through which a user may receive DPDs, such as whether the service is subscription-based, part of a bundle, a locker, free to the user, and/ or part of a discount plan. The proposed rule does not require that the description of the DMP’s service type(s) be tied to the specific categories of activities or offerings adopted by the Copyright Royalty Judges (‘‘CRJs’’) in 37 CFR part 385 (although such information would be permitted), because such details may go beyond the more general notice function the Office understands NOLs to serve; in any event, that information will be reported in reports of usage, as discussed below. In proposing this middle-ground approach, the Office tentatively concludes that the MLC’s position bends the statute too far the other way. To the extent the MLC may need any of the more detailed information it proposes to require through NOLs to fulfill its obligations under the statute, the Office generally agrees with the DLC that it would be more appropriate for such information to be provided as part of each DMP’s monthly reports of usage, addressed separately below.29 While the MLC contends that there is value in obtaining this sort of information ahead of the DMPs’ reports,30 at least based on 27 Id. at 115(d)(2)(A)(iii)(I) (emphasis added). MLC Initial at 9 (proposing that information be provided ‘‘through a simple ‘check the box’ method’’). This is also somewhat similar to how the current NOU form works. 29 See DLC Reply at 4. 30 See MLC Ex Parte Letter Jan. 29, 2020 (‘‘MLC Ex Parte Letter #1’’) at 3–4. 28 See PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 the current record, this potential value does not seem to outweigh the potential burden on DMPs to provide such duplicative information, especially if DMPs are required to amend NOLs with changes of practice, as the MLC proposes. The Office is inclined, however, to make an exception for information concerning any applicable voluntary license or individual download license the DMP may be operating under concurrently with the blanket license. The Office tentatively agrees with the MLC that obtaining such information from DMPs in advance of any pertinent report of usage is beneficial, because the MLC may need to identify specific musical works subject to such licenses so that they can be carved out from the blanket license royalty calculations, which the MLC asserts will be ‘‘very complicated and time-consuming.’’ 31 While the DLC requests that this not be imposed as a legal requirement in the NOL regulations themselves, the DLC does concede that, ‘‘[i]f there is some operational need,’’ this is reasonable information for the MLC to seek ‘‘during the on-boarding process, prior to the filing of the first report of usage.’’ 32 Harmless errors. In accord with the DLC’s proposal, the Office proposes a harmless error rule similar to others it has previously adopted, including for section 115 notices of intention to obtain a compulsory license sent under the song-by-song licensing process.33 Given the material consequences of being denied a blanket license that could otherwise result from a trivial deficiency in an NOL, the Office believes that such a provision is reasonable.34 The Office is inclined to disagree with the MLC’s arguments that such a provision would be ambiguous and unnecessary. While the statutory cure period 35 may lessen the need for a harmless error provision, it does not seem to obviate the need completely. As to any ambiguity, the Office is not aware of any difficulties with applying the Office’s current harmless error rules. Moreover, such a rule would be in accord with the MMA’s default and termination provision, which refers to ‘‘material[ ] deficien[cies]’’ and noncompliance with ‘‘material term[s] 31 See MLC Ex Parte Letter Feb. 26, 2020 (‘‘MLC Ex Parte Letter #2’’) at 2; see also MLC Reply at 3– 4. 32 See DLC Reply at 5. 33 See 37 CFR 201.18(h); see also id at § 201.10(e) (notices of termination). 34 See 66 FR 45241, 45243 (Aug. 28, 2001) (‘‘[P]otential licensees should not be denied the use of the license if such errors do not affect the legal sufficiency of the notice.’’). 35 17 U.S.C. 115(d)(2)(A)(iv). E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules or condition[s] of the blanket license.’’ 36 Amendments. In accord with the MLC’s proposal, the rule proposes requiring DMPs to amend their NOLs within 45 days of any information changing. Given the notice function NOLs are supposed to serve, it does not strike the Office as unreasonable to require DMPs to amend NOLs when DMPs make significant changes to how they are engaging, or seeking to engage, in covered activities or when their contact information changes. Having considered the DLC’s arguments on this matter, the Office concludes that the following reasons support an amendment requirement. First, the statute expressly provides for ‘‘an amended notice of license’’ in the context of curing deficiencies in a rejected NOL.37 Second, there would seem to be little meaning behind the requirement that NOLs ‘‘specif[y] the particular covered activities in which the digital music provider seeks to engage,’’ if DMPs never need to provide notice of changes to those particulars.38 Third, the statute requires the MLC to ‘‘maintain a current, publicly accessible list of blanket licenses that includes contact information for the licensees and the effective dates of such licenses.’’ 39 The Office has previously adopted an amendment requirement pursuant to a similarly worded statutory provision, and believes one is reasonable in this context as well so as to ensure that the contact information the MLC is required to make publicly available is always kept up to date.40 Fourth, although section 115 NOIs have no such amendment requirement, NOUs do,41 meaning that services operating under sections 112 and 114 are already complying with a similar requirement. Finally, between the reasonable amount of information the Office proposes be required, the statutory notice and cure mechanism, and the proposed inclusion of a harmless error rule, the amendment requirement would not be unduly burdensome or amount to a ‘‘trap for the unwary’’ as the DLC contends.42 The 36 See id. at 115(d)(4)(E)(i) (emphasis added). id. at 115(d)(2)(A)(iv). 38 See id. at 115(d)(2)(A); see also MLC Reply at 5–6. 39 Id. at 115(d)(3)(F)(i) (emphasis added). 40 See 37 CFR 201.38(c)(3) (a requirement to ‘‘timely updat[e] information when it has changed,’’ adopted under 17 U.S.C. 512(c)(2), which states that the Copyright Office ‘‘shall maintain a current directory of agents available to the public for inspection’’). 41 Id. at § 370.2(e). 42 Cf. 81 FR 75695, 75704 (Nov. 1, 2016) (with respect to adopting a renewal requirement for online service providers to keep current their designations with the Copyright Office for purposes khammond on DSKJM1Z7X2PROD with PROPOSALS2 37 See VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 Office proposes that information about voluntary licenses and individual download licenses be subject to their own amendment requirement, separate from NOL amendments. Delegation of authority to the MLC. The Office generally agrees with the DLC that the MLC need not have authority, delegated by regulation, to require additional substantive information from DMPs with respect to NOLs.43 If, in the course of establishment, the MLC identifies a legitimate need for additional information, the Office will make adjustment to the regulatory language. Of course, the MLC may ask DMPs for additional information, which DMPs may voluntarily elect to provide. The Office believes that certain matters, such as the precise format and method of submission of NOLs, are best left flexible and subject to the MLC’s commercially reasonable discretion and business judgment.44 Reporting sound recordings. The Office disagrees with Music Reports’ proposal that NOLs contain a list of all sound recordings made available to the public for substantially the same reasons as set forth by the DLC.45 Transition to blanket licenses. The rule proposes that DMPs obtaining the blanket license automatically pursuant to 17 U.S.C. 115(d)(9)(A) must still submit valid NOLs. Public access. To govern the MLC’s obligations under 17 U.S.C. 115(d)(3)(F)(i), and for transparency in how the MLC confirms or rejects NOLs, and terminates blanket licenses, the rule proposes that the MLC be required to maintain a current, free, and publicly accessible and searchable online list of all blanket licenses, including various details, such as information from NOLs, whether an NOL has been rejected and why, and whether a blanket license has been terminated and why. 2. Notices of Nonblanket Activity Based on the record before it, the Office generally agrees with commenters that NOLs and NNBAs should not differ substantially, as they serve similar purposes.46 Thus, the Office proposes that the regulations for NNBAs generally mirror the requirements for NOLs, with conforming adjustments reflecting appropriate distinctions between the two types of notices. B. Data Collection and Delivery Efforts While the MLC is ultimately tasked with the core project of matching musical works to sound recordings embodying those works, and identifying and locating the copyright owners of those works (and shares thereof), the MMA outlines roles for certain DMPs and copyright owners to facilitate this task by collecting and providing related data to the MLC. DMPs using the blanket license must ‘‘engage in goodfaith, commercially reasonable efforts to obtain’’ various sound recording and musical work information from sound recording copyright owners and other licensors of sound recordings made available through the DMP’s service.47 As the Office observed in the notification of inquiry, this obligation is directly connected to the reports of usage discussed below. The MMA also obligates musical work copyright owners with works that are listed in the MLC’s database to ‘‘engage in commercially reasonable efforts to deliver’’ to the MLC for the database, if not already listed, ‘‘information regarding the names of the sound recordings in which that copyright owner’s musical works (or shares thereof) are embodied, to the extent practicable.’’ 48 In the notification of inquiry, the Office asked whether it is appropriate to promulgate regulations concerning these provisions.49 1. Efforts by Digital Music Providers Most comments received by the Office concerning data collection and delivery efforts pertain to requirements for DMPs under the blanket license; the MLC and DLC each propose specific regulatory language. The MLC’s proposal is expansive.50 First, it would require DMPs to collect and provide ‘‘all identifying information’’ about relevant sound recordings and musical works from ‘‘the record label or other entity furnishing rights to the sound recording’’ that is ‘‘in the entity’s 47 17 of the section 512 safe harbor, the Office concluded that ‘‘[n]or does the rule create ‘a trap for the unwary’ as some opponents allege,’’ because ‘‘[i]f, after [receiving] multiple reminders, a service provider fails to renew its designation, it can hardly be said to have let its designation lapse unwittingly’’). 43 See DLC Reply at 6. 44 See SoundExchange Initial at 15–16. 45 See DLC Reply at 6. 46 See DLC Initial at 3; MLC Initial at 10–11; MLC Reply at 8; Music Reports Initial at 2–3; CISAC & BIEM Reply at 4. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 22521 U.S.C. 115(d)(4)(B). at 115(d)(3)(E)(iv). 49 See 84 FR at 49969–70. 50 See MLC Reply App. B at 7–8; see also MLC Reply at 10 (‘‘[T]he DMPs’ existing mechanisms for obtaining sound recording information have been insufficient, resulting in numerous recordings that cannot be matched to musical compositions, which led to the MMA specifically requiring greater efforts from the DMPs.’’); NMPA Reply at 3–4 (same); FMC Reply at 3 (‘‘Clear and robust guidelines are necessary to ensure that licensees are making aggressive efforts to get the data as complete and accurate as possible.’’). 48 Id. E:\FR\FM\22APP2.SGM 22APP2 22522 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules possession.’’ 51 Second, DMPs would have to undertake ‘‘all reasonable steps’’ to ensure collection of this information, ‘‘including affirmatively requiring’’ the entity to provide it ‘‘whether through contract or otherwise.’’ 52 Third, it would require a DMP to also provide ‘‘all information that is in its possession concerning sound recording[s] and musical work[s] used on its service,’’ regardless of when, how, or from where it was obtained.53 Fourth, it would require all collected information to be provided to the MLC promptly after being received and contemporaneously with monthly reports of usage.54 Fifth, the information would have to be delivered to the MLC in the same format with the same content as it was delivered to the DMP, without any revisions, re-titling, or other modifications to the information.55 Sixth, DMPs would have to provide timely updates to all such information.56 Lastly, DMPs would have to certify as to their compliance with these requirements.57 The DLC strongly opposes the MLC’s proposal, arguing that DMPs’ obligations should be limited to providing whatever information can be obtained from record labels and distributors, and passing that information on to the MLC.58 The DLC contends that DMPs have no ability to compel record labels and distributors to provide them with information, and further asserts that DMPs are only obligated to provide information to the MLC via their reports of usage.59 The DLC’s competing proposal essentially restates the statute as to what is required of DMPs, but further proposes that DMPs can satisfy their obligations under section 115(d)(4)(B) ‘‘by collectively arranging for the [MLC] to obtain’’ the required information from SoundExchange,60 ‘‘which shall provide this information at reasonable or no cost.’’ 61 Two particular issues surrounding these proposals were discussed at length 51 MLC Reply App. B at 7. at 7; see also Barker Initial at 10 (proposing that DMPs not release sound recordings unless and until they receive appropriate data from the record label); CISAC & BIEM Reply at 6 (agreeing with the MLC that DMPs should take ‘‘all reasonable steps’’). 53 MLC Reply App. B at 7. 54 Id. at 7. 55 Id. at 8. 56 Id. 57 Id. 58 DLC Initial at 7; DLC Reply at 6–11. 59 DLC Reply at 8–9. 60 SoundExchange is the collective designated by the CRJs to collect and distribute royalties under the section 112 and section 114 statutory licenses concerning noninteractive digital audio transmissions of sound recordings. 61 DLC Reply Add. at A–4; see also DLC Reply at 10–11. khammond on DSKJM1Z7X2PROD with PROPOSALS2 52 Id. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 in the comments and during several ex parte communications. The first is the DLC’s proposal for DMPs to be able to satisfy their section 115(d)(4)(B) obligations by arranging for the MLC to receive data from SoundExchange. Several commenters assert that the record labels themselves are the best source of authoritative sound recording data, and that it is important that the MLC’s sound recording information come from an authoritative source.62 The DLC and others (including A2IM, RIAA, and industry standards consultant Paul Jessop 63) further argue that a single, aggregated, unaltered, regularly updated, and verified feed of this information from SoundExchange (which is sourced directly from sound recording copyright owners) would be ideal, and avoid the possibility that different DMPs would submit disparate and potentially contradictory data that the MLC would need to expend time and resources to reconcile.64 The DLC also argues that under this proposal, the MLC could rely on only a single or limited number of data fields from DMPs’ reports of usage (e.g., international standard recording code (‘‘ISRC’’)) to find the sound recording to engage in matching efforts.65 The MLC, while acknowledging that it ‘‘intends to use SoundExchange as a valuable source of information for sound recording identifying information,’’ opposes this proposal.66 A main argument of the MLC is that even if the DMPs were to provide the MLC with access to SoundExchange’s data to satisfy their data collection obligations, it would not be a substitute for their reporting obligations because the DMPs are the only ones with the authoritative data as to what they actually streamed.67 The MLC also says that receiving only ISRCs from DMPs, as the DLC suggests, would be insufficient for proper sound recording 62 See Recording Industry Association of America, Inc. (‘‘RIAA’’) Initial at 4; American Association of Independent Music (‘‘A2IM’’) & RIAA Reply at 2–3; Jessop Initial at 2–3; Recording Academy Initial at 2. 63 Mr. Jessop, a former U.S. and U.K. recording association executive, has participated in the development or revision of various relevant standards bodies or individual codes, including ISRC, ISWC, and ISNI. Jessop Initial at 1–2. 64 DLC Reply at 10; RIAA Initial at 4–5; A2IM & RIAA Reply at 2–3 (also noting that record labels vary their own data sent to different DMPs to meet different DMP requirements); Jessop Reply at 2; see also Universal Music Group (‘‘UMG’’) & RIAA Ex Parte Letter at 2 (‘‘SoundExchange gets the same data feeds as the DMPs . . . but then it dedupes and deconflicts the data.’’); Sony Music (‘‘Sony’’) & RIAA Ex Parte Letter at 2. 65 DLC Reply at 10. 66 MLC Reply at 11 n.7. 67 MLC Ex Parte Letter #2 at 5, 7; see MLC Ex Parte Letter #1 at 2. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 identification, contending that ‘‘[t]here is no comprehensive, authoritative, central database for matching ISRC codes with other metadata fields, there are incorrect ISRC codes in use, and attempting to match streaming uses based on ISRC reporting alone would be unreliable, unprecedented and highly inappropriate.’’ 68 The second issue concerns the MLC’s proposal to require DMPs to provide the MLC with the information provided by sound recording copyright owners and licensors in the original, unmodified form in which it is received by the DMP, without any revisions, re-titling, or other edits or changes. The MLC and others explain that DMPs alter some amount of sound recording data, generally titles, artist names, and versions for display purposes in their public-facing service (e.g., changing ‘‘Hello’’ to ‘‘Hello (Radio Edit),’’ or changing ‘‘Puff Daddy,’’ ‘‘P. Diddy,’’ and ‘‘Puffy’’ all to ‘‘Diddy’’), and suggest that merely passing on the modified data to the MLC would frustrate matching efforts.69 The MLC also argues that, in connection with the proposal to permit DMPs to provide access to SoundExchange’s data to avoid having to report unaltered data, having to match the DMPs’ reports against SoundExchange’s data in an attempt to recapture what was originally delivered to the DMPs by record labels and distributors is ‘‘unworkable and wildly inefficient.’’ 70 On the other hand, to support their position that the MLC should obtain authoritative sound recording data from a single source for its database, A2IM & RIAA point out that their ‘‘member labels vary the metadata they send the different DMPs in order to meet the services’ idiosyncratic display requirements. Even if the DMPs were to pass on those feeds to the MLC unaltered, the MLC would still receive conflicting data that it will have to spend time and resources reconciling.’’ 71 Music Reports similarly points out that ‘‘a row of sound recording metadata provided by one DMP in relation to a discrete sound recording may differ from the row of metadata a second DMP provides in relation to the same sound recording, with additional or different data fields 68 MLC Reply at 16 n.9; MLC Ex Parte Letter #2 at 5; MLC Ex Parte Letter Apr. 3, 2020 (‘‘MLC Ex Parte Letter #4’’) at 9. 69 MLC Reply at 11; RIAA Initial at 3, 5–6; Sony & RIAA Ex Parte Letter at 2 (Dec. 9, 2019); MLC Ex Parte Letter #1 at 2; MLC Ex Parte Letter #2 at 5– 6; MLC Ex Parte Letter #4 at 8–9; Jessop Initial at 2–3; A2IM & RIAA Reply at 2–3, 3 n.1. 70 MLC Ex Parte Letter #2 at 5–6. 71 A2IM & RIAA Reply at 2. E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules or identifiers unique to that DMP.’’ 72 The MLC does not address this issue in its comments. The DLC readily acknowledges that individual DMPs may alter certain data fields, characterizing it as necessarily cleaning and fixing the data so that information related to a recording’s artist name, title, or other listener-facing fields are normalized.73 The DLC asserts that it would be highly burdensome for DMPs to retain and report unaltered data, because for many services, usage reporting pipelines have been designed to pull data from product databases that feature the ‘‘corrected’’ fields; it suggests that the MLC’s proposal would require an unnecessary maintaining of a parallel archive of data that may entail material engineering efforts.74 The DLC also argues that providing each of these fields unaltered is unlikely to palpably improve the MLC’s matching efforts, because other data fields that remain unaltered, in particular the ISRC (which both the DLC and MLC seem to agree exists for over 99% of reported tracks), are far better for identifying sound recordings.75 The DLC also states that alteration happens relatively infrequently, citing that for at least two DMPs, fewer than 1% of track titles are modified, and that alterations are minor, such that any reasonably sophisticated matching algorithm should not be stymied.76 The MMA was designed in part to address challenges related to data delivery in the digital supply chain, and after analyzing the comments and conducting repeated meetings with the MLC, DLC, and recording company and publishing interests, it is apparent to the Copyright Office that abstruse business complexities and misunderstandings persist. As discussed further below, it is not clear that the relevant parties agree on exactly which fields reported from sound recording owners or distributors to DMPs are most useful to pass through to the MLC, which fields the MLC should be expected or does expect to materially rely upon in conducting its matching efforts, or which fields are 72 Music Reports Initial at 3. Reply at 9–10; DLC Ex Parte Letter Feb. 14, 2020 (‘‘DLC Ex Parte Letter #1) Presentation at 15 (discussing ‘‘Hello (Radio Edit)’’ example; explaining that a DMP may receive information from different sources listing a band name in various fashions such as ‘‘Cure,’’ ‘‘The Cure,’’ and ‘‘Cure, The’’ which would be reconciled into ‘‘The Cure’’ for display on the service’s platform). 74 See DLC Ex Parte Letter #1 Presentation at 15. 75 DLC Ex Parte Letter Mar. 4, 2020 (‘‘DLC Ex Parte Letter #3’’) at 2. 76 DLC Ex Parte Letter #3 at 2 (discussing MediaNet and YouTube, and noting that all of MediaNet’s alterations are made at the request of the record labels). khammond on DSKJM1Z7X2PROD with PROPOSALS2 73 DLC VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 typical or commercially reasonable for DMPs to alter, such as in the course of arranging for all songs by the same artist (e.g., ‘‘Diddy’’) to be retrieved in an organized fashion in response to an end user’s search. And while the Office reached out to the MLC and DLC shortly after these entities were designated to encourage cooperation on these business-specific questions in anticipation of the significant prospective regulatory work, and understands they have engaged in dialogue, particularly after the submission of initial comments, it does not appear that discussions have yet bridged these areas of difference.77 To a certain extent, the MLC and DLC also appear to advance positions that go somewhat further than necessary even under their preferred approaches. For example, although the MLC does not intend to use every required or requested field in its matching processes,78 its proposed language would require every reportable sound recording field to be provided in unaltered form.79 Similarly, the Office understands that DMPs may typically alter only a few fields (e.g., titles, artist names, and versions) relevant to its consumer-facing platform fronts, yet the DLC has proposed language that would not restrict services from editing even universal identifiers. Relatedly, both parties may somewhat underestimate certain business realities that drive the 77 See MLC Initial at 1 n.2 (‘‘While the MLC and the [DLC] have not collaborated on the submission of initial comments in this proceeding, collaboration has been discussed and is anticipated in connection with reply comments, with the intent to provide supplemental information in reply comments as to any areas of common agreement.’’); DLC Initial at 2 n.3 (‘‘While the MLC and DLC have not collaborated on the submission of initial comments in this proceeding, collaboration has been discussed and is anticipated in connection with reply comments, with the intent to provide supplemental information in reply comments as to any areas of common agreement.’’); MLC Reply at 1 n.2 (‘‘Following the filing of the initial comments, the DLC and the MLC have engaged in a concerted effort to reach compromise on regulatory language. While the complexity of the issues has made it difficult to reach compromise, the DLC and the MLC plan to continue discussions and will revert back to the Office with any areas of compromise.’’); DLC Reply at 1 n.3 (‘‘Following the filing of the initial comments, DLC and MLC have engaged in a concerted effort to reach compromise on regulatory language. While the complexity of the issues has made it difficult to reach compromise, the DLC and MLC plan to continue discussions and will revert back to the Office with any areas of compromise.’’). To the Office’s knowledge, the MLC and DLC were not able to reach agreement on any areas. 78 MLC Ex Parte Letter #4 at 10–11 (noting that the MLC ‘‘does not anticipate’’ the ‘‘sound recording copyright owner’’ or ‘‘producer’’ fields ‘‘being utilized in matching,’’ and contemplates using ‘‘some, but not all’’ of other specific fields for matching). 79 See MLC Reply App. C at 11. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 22523 other’s positions: It seems reasonable to the Office both that different streaming services may choose to display the same artist or recording title in a different way as a competitive or data architecture matter (e.g., ‘‘I Feel Good’’ vs. ‘‘I Got You (I Feel Good)’’) and have designed reporting systems around the fields as used on their products, and also that such discrepancies in artist or title names may add complexity to the MLC’s efforts to match sound recordings to underlying musical works. Based on the record, it thus appears that the MLC’s matching efforts will need to involve analysis of multiple fields (i.e., not just ISRCs), and also that the MLC will need to reconcile certain sound recording information against its database. In light of these disagreements and areas of uncertainty, and the considerable, yet non-exhaustive,80 information submitted in this rulemaking, the Office sought to craft a reasonable approach that satisfies the main concerns of the most interested parties. Based on the record before it, the Office proposes the following rules with respect to DMP data collection and delivery efforts. Relationship to reports of usage. The MMA’s data collection efforts and reports of usage provisions are best read together, with section 115(d)(4)(B) describing the appropriate efforts DMPs must engage in to acquire the information to be reported to the MLC in reports of usage under section 115(d)(4)(A). Section 115(d)(4)(B) only refers to ‘‘[c]ollecti[ng]’’ and ‘‘obtain[ing]’’ information, while section 115(d)(4)(A) refers to ‘‘reporting’’ and expressly requires that certain information ‘‘acquired’’ by the DMP, ‘‘including pursuant to [section 115(d)(4)(B)],’’ be reported.81 Consequently, the rule proposes that the data collected pursuant to section 115(d)(4)(B) be delivered to the MLC in DMPs’ reports of usage in accordance with the rules governing such reports (discussed below). This would not foreclose the MLC from seeking information from DMPs outside of their 80 For example, while all were discussed at length in concept, the Office did not receive a full listing of which fields in the ERN specification any of the parties wish to be passed through, a comparison to licensable fields in the SoundExchange database, or certain ‘‘information concerning the use in the DDEX DSRF format of different metadata fields related to identification of sound recordings and musical works identification.’’ See MLC Ex Parte Letter #3 at 3. At this stage, commenters remain encouraged to submit additional data, but along with a clear explanation of why such data might support a change in the proposed regulatory language. 81 See 17 U.S.C. 115(d)(4)(A)–(B). E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22524 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules reports of usage on a voluntary basis, or even potentially that, upon a different showing, a different rule requiring delivery of certain information outside of reports of usage could be appropriate. Appropriate efforts. At least on the record before it, the Office declines to propose a one-size-fits-all approach as to what constitutes ‘‘good-faith, commercially reasonable efforts to obtain,’’ and so is disinclined to adopt a rule as strict as the MLC proposes. First, what may be commercially reasonable for one DMP may not be commercially reasonable for another, and even for the same DMP, a commercially reasonable action with respect to one sound recording copyright owner may not be commercially reasonable with respect to another. Second, the MMA did not impose a data delivery burden on sound recording copyright owners and licensors, so any rule compelling their compliance would seem to be at odds with Congress’s intent. DMPs must make genuine efforts to attempt to collect information from record labels and other distributors, but if those parties ultimately refuse, it does not necessarily mean that the DMP has not satisfied its collection effort obligations. Thus, the Office is wary of proposals mandating DMPs to require delivery of information from sound recording copyright owners and licensors through contractual or other means. Third, while it is important for DMPs to genuinely and fruitfully engage in appropriate collection and reporting efforts, the primary tasks of matching and data curation are assigned to the MLC, and the DMPs must fully fund the MLC’s undertaking of these critical tasks. Fourth, it does not appear that DMPs are necessarily required by the statute to deliver all pertinent information known to them or in their possession. For example, section 115(d)(4)(B) only refers to information obtained specifically ‘‘from sound recording copyright owners and other licensors of sound recordings,’’ and the musical work information required to be reported under section 115(d)(4)(A)(ii)(I)(bb) is limited to information ‘‘acquired by the digital music provider in the metadata provided by sound recording copyright owners or other licensors of sound recordings in connection with the use of sound recordings of musical works to engage in covered activities.’’ 82 With these observations in mind, the Office proposes to codify a minimal floor requirement that should not unduly burden DMPs, but which will still constitute a continuous and 82 See 83 See A2IM & RIAA Reply at 2; DLC Ex Parte Letter #3 at 2. id. at 115(d)(4)(A)–(B). VerDate Sep<11>2014 18:10 Apr 21, 2020 ongoing obligation to attempt to collect relevant data. The Office also proposes, in accord with the DLC’s proposal, to adopt a rule providing that a DMP may satisfy its obligations under section 115(d)(4)(B) by arranging for the MLC to receive appropriate data from an authoritative source, such as SoundExchange. Though, as explained further below, this would not obviate the need to report data to the MLC in reports of usage. Under the proposed floor requirement, where a DMP has not obtained all applicable sound recording and musical work information from sound recording copyright owners and licensors, the DMP will have a continuous and ongoing obligation to formally request such information in writing on a quarterly basis. The rule further proposes that DMPs request updates for obtained data periodically and at the MLC’s request. This proposal is to ensure that DMPs make ongoing active efforts to get missing and outdated information from record labels and distributors without burdening DMPs or sound recording copyright owners and licensors in ways the statute does not seem to intend. The Office is generally inclined to agree with commenters regarding provision of access to the SoundExchange database, and proposes that it be an option for interested DMPs. Based on all of the comments, it seems efficient for the MLC to have access to an aggregated, regularly updated, and verified feed of the applicable data sourced directly from copyright owners, rather than consistently need to sort through potentially contradictory DMPprovided label data—especially where the Office has been told that labels sometimes provide different data for the same works to different DMPs, and that labels themselves sometimes send updates that alter previously-reported fields.83 To be clear, DMPs would not be required to arrange for the MLC to have access to SoundExchange’s data; it would just be one option for complying with their data collection obligations. And the MLC would not be required to rely on these data; it would also receive data from monthly reports of usage and from musical work copyright owners, and would remain free to gather data from other sources to build and supplement its database as well. In sum, the record suggests that access to such a sound recording database can be expected to provide the MLC with more authoritative sound recording ownership data than it may otherwise Jkt 250001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 get from individual DMPs engaging in separate efforts to coax additional information from entities that are under no obligation to provide it for purposes of the section 115 license. In particular, SoundExchange’s repertoire database appears to be a reasonable analog for the data DMPs might otherwise obtain from sound recording copyright owners and licensors through the collection efforts mandated by section 115(d)(4)(B). In its role as administrator under the section 112 and section 114 licenses, SoundExchange appears to receive largely the same record label and distributor data feeds that the DMPs receive.84 And its database appears to be robust: SoundExchange has worked for years and spent many millions of dollars to develop its repertoire database, an authoritative repository of information identifying approximately 30 million sound recordings, all of which was sourced directly from the copyright owners of the recordings. . . . This database collects about 50 fields of information on each recording in the database, and includes [ISRCs] for all of those recordings. . . . To keep this database up to date with information about new releases, SoundExchange receives electronic data feeds directly from record companies and distributors that together cover more than 100 rights owners. This real-time data covers almost all commercially-significant U.S. recordings, and a large number of foreignorigin recordings as well. We have also received repertoire information in other forms from more than 20,000 other rights owners.85 The Office is, however, inclined to agree with the MLC that DMPs are the only authoritative source for what they actually used, and no amount of data from other sources can tell the MLC what was truly played on the DMP’s service. Therefore, the proposed rule makes clear that while DMPs may satisfy their section 115(d)(4)(B) collection obligations in this manner, it does not excuse DMPs from their reporting obligations under section 115(d)(4)(A) (discussed below). DMPs would still have to report all required information, subject to the applicable qualifications (e.g., having been acquired in the metadata provided to the DMP by sound recording copyright owners). There would just not be any further obligation to take affirmative steps to obtain additional information beyond what the DMP otherwise 84 See, e.g., UMG & RIAA Ex Parte Letter at 2 (Dec. 6, 2019) (‘‘SoundExchange gets the same data feeds as the DMPs. . . . SoundExchange receives data from approximately 3400 labels, including certain independent distributors (e.g., CdBaby).’’). 85 SoundExchange Initial at 2–3. E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules acquires in the ordinary course of engaging in covered activities. The Office’s proposed rule makes other additional adjustments to the DLC’s proposal. First, the source of the data could be another similarly authoritative source with a database size similar to SoundExchange; it would not specifically have to be SoundExchange. Second, the proposed rule would not require the authoritative source to provide its data at ‘‘reasonable or no cost.’’ As discussed above, the statute does not impose reporting burdens on sound recording copyright owners and, by extension, SoundExchange. Third, the Office proposes that if the DMP knows that a specific sound recording or set of recordings is not in the database, then provision of access to that database is insufficient and the DMP must, for such recording(s), formally request information in writing on a quarterly basis from the label or other distributor who supplied the recording, as described above. Appropriate information. The Office is inclined to disagree with the breadth of the MLC’s proposal to require the collection of ‘‘all identifying information.’’ The statute specifically enumerates information that is required to be collected, which is connected with the list of information required to be reported.86 Thus, the rule instead proposes that collection efforts extend to the statutorily enumerated information and any additional information required by the Copyright Office to be included in reports of usage (discussed below). With respect to the question of whether DMPs must provide the applicable information in unaltered form, the Office proposes a compromise approach. The Office notes that the proposed regulatory language addresses this in the section on reports of usage, rather than data collection, but since this issue was mostly raised by commenters in the context of data collection efforts, it is discussed here instead of below. The Office has essentially been told by the DLC that retaining and reporting unaltered data is generally burdensome and unhelpful for matching, while the MLC and others argue that it is generally needed and helpful for matching. Both positions seem to have at least some degree of merit with respect to certain aspects. The Office therefore offers what it believes to be a reasonable middle ground to balance these competing concerns. Instead of requiring DMPs to always report unaltered data or permitting 86 See 17 U.S.C. 115(d)(4)(A)–(B). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 DMPs to never report it, the rule proposes that a DMP can satisfy its reporting obligations by reporting either the originally acquired version of data within a specific field or the modified version, but subject to important limitations. First, the DMP would have to report the unaltered data in any of the following three cases: (1) Where the MLC has adopted a nationally or internationally recognized standard, such as DDEX, that is being used by the particular DMP, and either the unaltered version or both versions are required to be reported under that standard; (2) where either the unaltered version or both versions are reported by the particular DMP pursuant to any voluntary license or individual download license; or (3) where either the unaltered version or both versions were periodically reported by the particular DMP to its licensing administrator or to copyright owners directly prior to the license availability date. The first scenario tethers the requirement to provide unaltered data to whether a recognized standard setting body, for a standard the DMP uses, concludes that the information is important enough to be required. In such cases, it seems reasonable to require DMPs to undertake such burdens as may be necessary to comply with that decision.87 The second and third scenarios connect the requirement to provide unaltered data to the capabilities of the DMP’s systems. If a DMP was reporting the unaltered version, or both versions, prior to the license availability date or reports the unaltered version, or both versions, under other licenses, the DMP must similarly report such data to the MLC. The Office is also contemplating a fourth scenario for commenters to consider: Where the unaltered version or both versions are/were commonly reported in the industry by a majority of DMPs of comparable size and sophistication to the particular DMP either currently or prior to the license availability date. The second limitation would be that DMPs would not be permitted to only report modified versions of any unique identifier, playing time, or release date. The record does not suggest that DMPs typically adjust these particular items, but to the extent they do or might consider it in the future, it would seem to be particularly harmful to the MLC’s matching efforts. The DLC itself 87 See DLC Ex Parte Letter #3 at 4 (‘‘DDEX has an extensive and rigorous process of evaluating the fields that are required to be reported to assist with matching.’’). PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 22525 acknowledges the primacy of unique identifiers like ISRCs. And playing time and release date seem to be particularly helpful for matching, especially when distinguishing between different recorded versions of a song by the same artist. The Office invites comment on this aspect of the proposed rule, including whether ‘‘release date’’ should be further qualified as ‘‘release year.’’ Third, a DMP would not be permitted to only report modified versions of information belonging to categories that the DMP was not periodically altering prior to the license availability date. That would ensure that to the extent a DMP makes changes to its systems to alter new types of data, the DMP would need to retain the ability to report the unaltered versions. Certification. The Office is inclined to agree with the MLC’s proposal to require DMPs to certify as to their compliance with their section 115(d)(4)(B) obligations, and proposes that such a certification be included in DMPs’ reports of usage. Such a requirement would be analogous to other related certification requirements.88 2. Efforts by Copyright Owners Only a few commenters spoke to the collection efforts of copyright owners; the MLC and DLC each propose specific regulatory language. The MLC’s proposed language essentially restates the statute.89 The MLC argues that what constitutes commercially reasonable efforts for all musical work copyright owners cannot be defined because of the broad spectrum of musical work copyright owners, ranging from multinational publishing companies to individual do-it-yourself singersongwriters.90 The MLC’s comments characterize its proposal as imposing an obligation on musical work copyright owners ‘‘to provide information in their possession, custody or control,’’ ensuring ‘‘that large music publishers with detailed records of sound recordings embodying their musical compositions will be obligated to provide such information to the MLC, while still allowing for individual songwriters to comply with the regulation without undue hardship.’’ 91 The MLC also asserts that DMPs are better positioned to collect sound recording data because they deal directly with sound recording copyright 88 See 17 U.S.C. 115(d)(10)(B)(iv)(III)(aa); 37 CFR 201.18(d)(1)(vi). 89 MLC Reply App. B at 8. 90 MLC Initial at 15. 91 MLC Reply at 12. E:\FR\FM\22APP2.SGM 22APP2 22526 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules owners and licensors, whereas the existence of the compulsory license makes it so that many musical work copyright owners have no relationship with sound recording copyright owners or licensors, and so it would be inappropriate to require them to seek out and deliver information they do not already have.92 The DLC’s proposal would require musical work copyright owners to engage in commercially reasonable efforts to collect all available information about the applicable sound recordings, including at least the title, featured artist, and, if available, ISRC.93 The DLC’s proposal would also require copyright owners to provide the MLC with all available information related to performing rights societies through which performance rights in each musical work are licensed.94 The DLC asserts that copyright owners are best positioned to provide the relevant information and disagrees with the MLC’s characterization, stating that musical work copyright owners can obtain sound recording information in a variety of ways.95 A2IM & RIAA also commented on this issue, related to their overall viewpoint that the MLC should get sound recording data from a single authoritative source, rather than from DMPs and musical work copyright owners.96 They further suggest that publishers should have to provide sufficient information to unambiguously identify sound recordings, which they say would generally entail a title, featured artist, and ISRC.97 Based on the record before it, the Office proposes the following rules with respect to musical work copyright owner data collection and delivery efforts. Appropriate efforts. The Office agrees with the MLC that the wide variety of musical work copyright owners makes it challenging to adopt a one-size-fits-all approach as to what constitutes ‘‘commercially reasonable efforts to deliver.’’ Consequently, the Office proposes to codify a minimal floor requirement that should not unduly burden less-sophisticated musical work copyright owners—similar in approach khammond on DSKJM1Z7X2PROD with PROPOSALS2 92 MLC Initial at 16; MLC Reply at 13. Reply Add. at A–4. 94 Id. at A–5. 95 DLC Initial at 8; DLC Reply at 12, Add. A–5. 96 A2IM & RIAA Reply at 2; see also RIAA Initial at 9 (proposing that ‘‘commercially reasonable efforts’’ be defined as requiring the MLC to leverage existing industry infrastructure, including DDEX, SoundExchange’s ISRC lookup service, and SoundExchange’s Music Data Exchange). 97 A2IM & RIAA Reply at 12–13; see also RIAA Initial at 7–9. 93 DLC VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 to the minimal floor requirement discussed above for DMPs. The rule proposes that musical work copyright owners periodically monitor the MLC’s database for missing and inaccurate sound recording information relating to their musical works, and if an issue is discovered, then the copyright owner must provide the pertinent sound recording information to the MLC if the information is known to the copyright owner or, as the MLC proposes, is otherwise within the copyright owner’s possession, custody, or control. By limiting the obligation in this manner, musical work copyright owners would not have to affirmatively seek out information from sound recording copyright owners or licensors they may have no relationship with, but would have to provide information that may be contained in some of the sources the DLC discusses (e.g., royalty statements under the compulsory license and reporting from performing rights organizations). As to the proposal from A2IM & RIAA, the statute imposes a requirement on musical work copyright owners—not the MLC—so the Office does not interpret this provision to encompass requiring the MLC to obtain sound recording data from certain sources. Appropriate information. The Office is inclined to agree with the DLC and A2IM & RIAA that more than just the sound recording title should be provided. Section 115(d)(3)(E)(iv) refers to ‘‘information regarding the names of the sound recordings,’’ while in other places, the MMA only refers to ‘‘the name of the sound recording’’ or ‘‘sound recording name.’’ 98 Moreover, as the RIAA points out, in most cases, sound recordings are likely to share the same name as the underlying musical work, making a requirement limited to the sound recording’s title largely meaningless.99 Thus, the rule proposes, in accord with the comments of the DLC and A2IM & RIAA, that sound recording titles, including alternative and parenthetical titles, featured artists, and ISRCs should all be provided (subject to the appropriate efforts discussed above). The Office does not agree with the DLC’s proposal regarding performing rights organization information for musical works, as that information does not seem to fit within the meaning of ‘‘information regarding the names of the sound recordings.’’ 100 98 Compare 17 U.S.C. 115(d)(3)(E)(iv) (emphasis added) with id. at 115(d)(3)(E)(ii)(IV)(bb), (d)(3)(E)(iii)(I)(dd), (d)(4)(A)(ii)(I)(aa). 99 See RIAA Initial at 8–9; see also DLC Initial at 8. 100 See 17 U.S.C. 115(d)(3)(E)(iv) (emphasis added). PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 C. Reports of Usage and Payment— Digital Music Providers As discussed in the notification of inquiry, DMPs operating under the blanket license must report their usage of musical works and pay applicable royalties to the MLC. The statute contains two relevant reporting and payment provisions, sections 115(c)(2)(I) and 115(d)(4)(A), and the Copyright Office is to prescribe regulations pursuant to both.101 These regulations are to cover matters such as the form, content, delivery, certification, and adjustment of reports of usage and payment, as well as requirements under which records of use must be maintained and made available to the MLC by DMPs.102 Various commenters spoke to issues concerning reports of usage in responding to the notification of inquiry, and the MLC, DLC, and Music Reports provided proposed regulatory language. In promulgating reporting and payment rules for the section 115 license, the Copyright Office has long followed a ‘‘guiding principle’’ that ‘‘the regulations should preserve the compulsory license as a workable tool, while at the same time assuring that copyright owners will receive full and prompt payment for all phonorecords made and distributed.’’ 103 The Office has ‘‘accordingly evaluated proposed regulatory features using ‘three fundamental criteria’ ’’: (1) ‘‘ ‘the accounting procedures must not be so complicated as to make use of the compulsory license impractical;’ ’’ (2) ‘‘ ‘the accounting system must insure full payment, but not overpayment;’ ’’ and (3) ‘‘ ‘the accounting system must insure prompt payment.’ ’’ 104 The Office has also previously stressed that ‘‘transparency is critical where copyright owners are compelled by law to license their works.’’ 105 Today, the Office reaffirms these conclusions, which the Office has carefully considered in formulating this proposed rule. The Office also credits Congress’s intention that, under the MMA, reports of usage ‘‘should be consistent with then-current industry practices regarding how . . . limited downloads and interactive streams are tracked and reported.’’ 106 101 See 84 FR at 49970–71. id. 103 79 FR 56190, 56190 (Sept. 18, 2014) (internal quotation marks omitted) (quoting 45 FR 79038, 79039 (Nov. 28, 1980)). 104 Id. (internal brackets omitted) (quoting 45 FR 79038, 79039 (Nov. 28, 1980)). 105 79 FR at 56201. 106 See H.R. Rep. No. 115–651, at 12; S. Rep. No. 115–339, at 13; Conf. Rep. at 10; see also U.S. 102 See E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 Based on the record before it, and with these guiding principles in mind, the Office proposes the following rules with respect to reports of usage and payment to be delivered to the MLC by DMPs under the blanket license. General operation and timing. The rule proposes a general scheme whereby DMPs operating under the blanket license must report usage and pay royalties to the MLC on a monthly basis, with a cumulative annual report due each year, and an ability to make adjustments to monthly and annual reports and related royalty payments, including to correct errors and replace estimated inputs with finally determined figures. As required by section 115(d)(4)(A)(i), the rule proposes that monthly reports of usage and related royalty payments must be delivered to the MLC within 45 day of the end of the applicable monthly reporting period.107 The Office disagrees with the MLC, which would read the statute as requiring royalty payments to be due within 20 days rather than within the same 45-day period as their associated reports of usage.108 As the DLC points out, the statute and legislative history counsel that both are due within 45 days.109 Section 115(d)(4)(A)(i) states that DMPs shall ‘‘report and pay’’ ‘‘in accordance with’’ section 115(c)(2)(I), ‘‘except that the monthly reporting shall be due on the date that is 45 calendar days, rather than 20 calendar days, after the end of the monthly reporting period,’’ while section 115(c)(2)(I) states that ‘‘[e]xcept as provided in paragraph[] (4)(A)(i) . . . of subsection (d), royalty payments shall be made on or before the twentieth day of each month.’’ 110 Given that one provision refers to ‘‘monthly reporting’’ and the other refers to ‘‘royalty payments,’’ in order to give meaning to the ‘‘except’’ language, it would seem that both provisions must be read as referring to both reporting and payment. The legislative history confirms this intent.111 And it is in accord with the Copyright Office, Copyright and the Music Marketplace at 30–31 (noting that pre-MMA, mechanical licenses were overwhelmingly administered through direct licenses). 107 See 17 U.S.C. 115(d)(4)(A)(i). 108 See MLC Reply at 23. 109 See DLC Ex Parte Letter #1 Presentation at 2– 3. 110 17 U.S.C. 115(c)(2)(I), (d)(4)(A)(i) (emphasis added). 111 See H.R. Rep. No. 115–651, at 27 (‘‘Subparagraph A identifies the data that must be reported to the collective by a digital music provider along with its royalty payments due 45 calendar days after the end of a monthly reporting period.’’) (emphasis added); S. Rep. No. 115–339, at 24 (same); Conf. Rep. at 20 (same). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 Office’s longstanding interpretation of section 115.112 Under the proposed rule, an annual report of usage would be due on the 20th day of the sixth month after the end of the DMP’s fiscal year—the same timing as currently required for annual statements of account under the nonblanket section 115 license, and the same timing as proposed by Music Reports.113 The Office is inclined to disagree with the DLC that the statute does not require annual reporting certified by a certified public accountant (‘‘CPA’’).114 The Office has reasonably considered the DLC’s various arguments on this subject, but the plain language of section 115(c)(2)(I) seems to clearly state that ‘‘detailed cumulative annual statements of account, certified by a certified public accountant, shall be filed for every compulsory license under subsection (a).’’ 115 Even if that were not the case, the Office tentatively concludes that requiring CPA certification of annual reporting, pursuant to the Office’s broad regulatory authority, is reasonable and appropriate. While, as the DLC notes, the MMA creates a new triennial audit right, copyright owners remain unable to directly audit DMPs—they can only audit the MLC, which may, but is not required to, audit DMPs.116 And certified annual reporting may diminish the need to initiate the same level of audits of individual DMPs by the MLC; as the DLC is well-aware, DMPs effectively fund such audits through the administrative assessment. An annual CPA certification would also occur more frequently than these triennial audits, to the extent audits occur at all.117 Thus, requiring an annual CPA-certified report would ensure that copyright owners continue to be given at least as much comfort in the accuracy of DMP reporting as before the MMA.118 The MMA is intended to increase transparency, not diminish it.119 112 See 37 CFR 201.19(b)(5) (1978) (‘‘Each Monthly Statement of Account shall be served . . . together with the total royalty . . . on or before the twentieth day of the immediately succeeding month.’’) (emphasis added). 113 See id. at § 210.17(g)(1); Music Reports Initial at 18. 114 See DLC Initial at 9–12; DLC Reply at 22 n.97. 115 See 17 U.S.C. 115(c)(2)(I) (emphasis added). 116 See id. 115(d)(3)(L), (d)(4)(D). 117 See MLC Ex Parte Letter #2 at 4 (noting that the MLC is not funded at a level necessary to audit every DMP every three years). 118 See 79 FR at 56203 (‘‘[T]he purpose of the CPA certification requirement is to give the copyright owner firm assurance that it is receiving all the royalties to which it is entitled.’’). 119 As the DLC points out, the audit right was adopted in part upon the recommendation of the Copyright Office; this recommendation was not made with a corresponding suggestion to decrease PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 22527 Regarding adjustments, the rule proposes that a report adjusting a monthly report of usage can be delivered to the MLC any time between delivery of the monthly report being adjusted and delivery of the annual report covering that monthly report. The rule would also permit a DMP, at its option, to forego filing a separate report of adjustment and instead combine it with the applicable annual report. The latter option is similar to how adjustments to monthly statements currently operate under the non-blanket section 115 license,120 and the former option, allowing adjustments to be made at an earlier point in time, is something both the MLC and DLC propose and that the Office believes reasonably provides additional flexibility and may facilitate more prompt and accurate payments to copyright owners.121 In accord with the DLC’s proposal, and as is the case currently for monthly accounting statements under the non-blanket section 115 license, this effectively would require any adjustment to a monthly report of usage to be made within six months 122 of the end of the relevant annual period covering that monthly report (which, as discussed above, is the proposed deadline for delivering the annual report).123 The Office is inclined to agree with both the MLC and DLC that certain items may still need to be adjusted after the end of this six-month period,124 as is permitted currently in connection with performance royalty estimates under the non-blanket section 115 license.125 The Office thus proposes that an annual report of usage may be adjusted within six months (the same the potential reliability of indicia provided in licensee annual statements. See DLC Initial at 11 (citing U.S. Copyright Office, Copyright and the Music Marketplace at 173–74). See also, e.g., 164 Cong. Rec. S6292, 6293 (daily ed. Sept. 25, 2018) (statement of Sen. Hatch) (‘‘I need to thank Chairman Grassley, who shepherded this bill through the committee and made important contributions to the bill’s oversight and transparency provisions.’’); 164 Cong. Rec. S501, 504 (daily ed. Jan. 24, 2018) (statement of Sen. Coons) (‘‘This important piece of legislation will bring much-needed transparency and efficiency to the music marketplace.’’); Proposal of DLC Submitted in Response to U.S. Copyright Office’s Dec. 21, 2018, Notice of Inquiry, Ex. C at 2 (Mar. 21, 2019) (recognizing ‘‘the goals of the MMA to provide licensing efficiency and transparency’’). 120 See 37 CFR 210.16(d)(3)(i), 210.17(d)(2)(ii). 121 See DLC Reply at 21–22, Add. A–10–11; MLC Initial at 19–20; MLC Reply at 27, App. C at 14. 122 Technically the 20th day of the sixth month. 123 See DLC Reply at 21–22, Add. A–10–11. While the MLC proposes a different deadline, the MLC seems to concede that the DLC’s proposed timing would be reasonable. See MLC Reply at 27. 124 See DLC Reply at 22, Add. A–10–11; MLC Initial at 19–20; MLC Reply App. C at 14. 125 See 37 CFR 210.17(d)(2)(iii) (describing amended annual statements of account). E:\FR\FM\22APP2.SGM 22APP2 22528 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules timing as is currently permitted in connection with performance royalty estimates 126) of any one of the following occurrences, which are drawn from both the MLC and DLC proposals and strike the Office as being reasonable: (1) Exceptional circumstances; (2) when adjusting a previously estimated input after the input becomes finally established (see below); (3) following an audit; or (4) in response to a change in applicable rates or terms under 37 CFR part 385.127 Processing, invoices, and response files. A significant issue raised by the DLC throughout the rulemaking proceeding is that there must be a backand-forth process through which DMPs receive royalty invoices and response files 128 from the MLC after delivering monthly reports of usage, but before royalty payments are made or deducted from a DMP’s account with the MLC. The DLC states that this process is an industry-standard practice for many DMPs that use third-party vendors to calculate and process their royalty payments.129 The DLC is specifically concerned with the handling of voluntary licenses, explaining that because such licenses are often procured through blanket deals covering all musical works in a publisher’s catalog, the DMP usually does not know which specific musical works are covered, and will be reliant on the MLC to make that determination based on its statutorily directed matching efforts; this in turn affects the amount of royalties the DMP owes under the blanket license.130 The DLC seems especially worried that if invoices and response files are not required, DMPs will be effectively compelled to also use the MLC to administer their voluntary licenses (compared to a DMP processing in-house or through an alternate vendor) because the DMPs will not otherwise be able to properly account to copyright owners under these direct deals.131 At bottom, the DLC ostensibly seeks to 126 See id. DLC Reply at 22, Add. A–10–11; MLC Reply App. C at 14. 128 The DLC describes ‘‘response files’’ as detailing the results of the matching process and essentially serving as the ‘‘backup’’ to the invoice, confirming where royalties are being paid, DLC Reply at 16, and including such information as song title, vendor-assigned song code, composer(s), publisher name, publisher split, vendor-assigned publisher number, publisher/license status, and royalties per track, DLC Ex Parte Letter #1 Presentation at 11. 129 See DLC Initial at 13–14; DLC Reply at 13–16; DLC Ex Parte Letter Feb. 14, 2020 (‘‘DLC Ex Parte Letter #1’’) at 1–2; DLC Ex Parte Letter #1 Presentation at 3–13; DLC Ex Parte Letter #3 at 4. 130 DLC Initial at 13–14; DLC Reply at 13–16; DLC Ex Parte Letter #1 Presentation at 3–13. 131 DLC Ex Parte Letter #1 Presentation at 3–13. khammond on DSKJM1Z7X2PROD with PROPOSALS2 127 See VerDate Sep<11>2014 20:11 Apr 21, 2020 Jkt 250001 retain the status quo for these deliverables whereby the MLC, in fulfilling the matching and calculation role previously performed by DMPs and their vendors, would provide the royalty invoices and response files DMPs either generated or received from their vendors under the pre-MMA regime.132 To this end, the DLC proposes that DMPs first deliver their monthly reports of usage to the MLC, and that the MLC then use the reported data to match reported sound recordings to musical works and their copyright owners, confirm uses subject to voluntary licenses and the corresponding amounts to be deducted from royalties otherwise due under the blanket license, calculate royalties owed under the blanket license, and deliver an invoice to the DMP setting forth the royalties owed along with a response file.133 The DLC proposes not to prescribe when a DMP must deliver its report of usage, so long as it is before the statutory 45-day deadline, but would require the MLC to provide invoices and the response file within 15 days of receiving a monthly report of usage.134 The MLC does not seem to generally disagree with this choreography and ultimately states that it intends to provide DMPs with both invoices and response files, but argues that such matters, particularly with respect to timing, are not ripe for rulemaking.135 The MLC further states that to be logistically workable, there must be a fixed DMP reporting deadline, to provide the MLC with predictability in its staffing and resources.136 It proposes that, to the extent the Office adopts a rule, DMPs be required to deliver reports within 15 days after the end of the monthly reporting period and believes it can process them within 25 days, which would then allow 5 days to remit payment (or have the MLC charge a DMP’s account) before the statutory 45-day deadline expires.137 Having carefully considered this issue, the Office proposes a process that would require the MLC to provide invoices and response files generally along the outlines of the DLC’s 132 DLC Reply at 16. at Add. A–9; see also id. at 15–16. 134 Id. at Add. A–9; DLC Ex Parte Letter #3 at 4; see also DLC Ex Parte Letter #1 at 1–2 (‘‘[D]ifferent services have different internal accounting and payment practices, and imposing a rigid interim reporting deadline on all services will impede rather than accommodate those different practices.’’). 135 MLC Ex Parte Letter #2 at 2–3. 136 Id. at 2. 137 The MLC addressed planned timing with the Office during its February 21, 2020, ex parte communication. See generally MLC Ex Parte Letter #2 at 2. 133 Id. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 proposal.138 The Office, however, generally proposes to adopt the timing deadlines that the MLC indicates would be acceptable to its operations. Given that the current non-blanket section 115 license requires monthly reporting and payment within 20 days, and commenters state that DMPs generally report to their vendors within 10 days or less,139 the proposed 15-day deadline should not be burdensome. To the extent it is, it is optional; a DMP could take the full 45 days permitted under the statute, but it would not be entitled to an invoice if it does, absent special arrangement with the MLC (see ‘‘Voluntary agreements to alter process’’ below). The rule further proposes that response files must be requested by DMPs, in which case they must be delivered by the MLC within the same 25-day period the MLC will have to process reports.140 The Office believes the proposed rule is a reasonable approach to ensuring that DMPs that need invoices and response files can get them, while providing the MLC the time it needs to generate them. The proposed rule is intended to further the Office’s longstanding policy objective that the compulsory license should be a realistic and practical alternative to voluntary licensing. The Office appreciates the MLC’s position requesting the Office refrain from issuing a rule on this matter for the time being, but tentatively agrees with the DLC that a rule would ultimately be valuable to build reliance that DMPs can obtain these items. The Office is not opposed to revisiting the precise choreography at a later date. Content of monthly reports of usage. In addition to basic information like the covered period and the name of the DMP and its associated services, the rule proposes that monthly reports of usage contain a detailed statement covering the royalty payment and accounting information and sound recording and musical work information discussed below. Such information would be required for each sound recording embodying a musical work 138 The Office is inclined to disagree with the DLC’s proposal that the MLC provide the DMP with the amount of royalties owed under voluntary licenses. See DLC Reply Add. at A–9. That seems more like something the MLC would only be obligated to calculate and provide if it is privately engaged as the DMPs administrator for such voluntary licenses. See 17 U.S.C. 115(d)(3)(C)(iii); see also MLC Ex Parte Letter #2 at 3. 139 See Music Reports Initial at 7; MLC Ex Parte Letter #2 at 2. 140 The rule also proposes that a DMP may request a response file even when it is not entitled to an invoice because the information may still be of use to the DMP, such as for its voluntary licenses. In such cases, the MLC would have 25 days from the end of the 45-day reporting deadline to deliver the response file. E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 that is used by the DMP in covered activities during the applicable monthly reporting period.141 As required by the statute, this would cover ‘‘usage data for musical works used under the blanket license and usage data for musical works used in covered activities under voluntary licenses and individual download licenses.’’ 142 The rule proposes, in accord with the proposals of the MLC and DLC, that information be reported in such a manner as from which the MLC may separate the reported information for each different applicable activity or offering, including each different applicable activity and offering defined by the CRJs in 37 CFR part 385.143 This seems necessary for the MLC to be able to properly confirm DMP royalty payments considering that different activities and offerings are subject to different rate calculations under part 385, and part 385 specifically provides that ‘‘royalties must be calculated separately with respect to each Offering taking into consideration Service Provider Revenue and expenses associated with each Offering.’’ 144 Monthly reports would also have to contain appropriate information about applicable voluntary licenses and individual download licenses to the extent not otherwise provided separately as discussed above with respect to NOLs.145 The MLC asks the Office to clarify ‘‘that offerings with different consumer price points are different offerings to be reported separately.’’ 146 The DLC disagrees.147 This issue does not seem appropriate for the Office to opine on one way or the other. The CRJs in part 385 use the terms ‘‘Licensed Activity’’ and ‘‘Offering,’’ and provide definitions for both, which are relevant to the rate calculations.148 Any concerns should be addressed to the CRJs. The Office is inclined to disagree with the MLC with respect to requiring DMPs to report usage for non-music content (e.g., podcasts).149 Such information seems only relevant if somehow necessary for calculating statutory 141 See MLC Reply App. C at 9–10; DLC Reply Add. at A–6. 142 See 17 U.S.C. 115(d)(4)(A)(ii). 143 See MLC Initial at 18; MLC Reply App. C at 9; DLC Reply Add. at A–6. 144 See 37 CFR 385.21(b) (emphasis added). 145 See 17 U.S.C. 115(d)(4)(A)(ii)(II). 146 MLC Ex Parte Letter #2 at 4; see MLC Ex Parte Letter Mar. 24, 2020 (‘‘MLC Ex Parte Letter #3’’) at 2. 147 DLC Ex Parte Letter #3 at 3 (‘‘The rates established by the Copyright Royalty Board, however, are not based on customer price points, which is why reporting based on those distinctions should not be required.’’). 148 See 37 CFR 385.2, 385.21, 385.22, 385.31. 149 See MLC Reply App. C at 12. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 royalties, in which case, the proposed rule would cover it. The Office, at least on the record before it, is not persuaded by the MLC’s more general argument that nascent DMPs may not understand the difference between section 115 offerings and non-section 115 offerings.150 As with NOLs discussed above, the Office is also not inclined to provide the MLC with authority to require additional substantive information from DMPs in connection with their reports of usage, as the MLC proposes, although such information could be provided permissively.151 Particularly if issued on an interim basis, the Office will consider adjusting the relevant rule in the future if necessary. The Office is also not inclined to adopt a default rule entitling DMPs to provide various required information to the MLC separately from their reports, as the DLC proposes.152 The Office has concerns about potential logistical challenges it could create for the MLC, but has no objection to DMPs doing this if the MLC agrees (see ‘‘Voluntary agreements to alter process’’ below). Royalty payment and accounting information. With respect to specific accounting information and royalty calculation details required to be reported, the Office proposes to essentially retain the current rule governing non-blanket section 115 licenses, but with two paths to account for whether the DMP delivering the report is entitled to an invoice or not (which in turn, depends upon the date on which the DMP’s report is delivered to the MLC).153 Where the DMP will receive an invoice, it would be required to report all information necessary for the MLC to compute the royalties payable under the blanket license, in accordance with part 385, and all information necessary to enable the MLC to provide a detailed and step-bystep accounting of the calculation of such royalties, sufficient to allow each applicable copyright owner, in turn, to assess the manner in which the MLC, using the DMP’s information, determined the royalty owed and the accuracy of the royalty calculations. Where the DMP is not entitled to an invoice, it would be required to make its own calculations and provide the same detailed and step-by-step accounting of the calculation of such royalties, 150 See MLC Initial at 5, 18–19; see also DLC Reply at 20 (opposing the MLC’s proposal). 151 See MLC Reply App. C at 10, 12; see also DLC Reply at 20 (opposing the MLC’s proposal). 152 See DLC Reply at 17, Add. A–7. 153 See 37 CFR 210.16(c)(2); see also MLC Initial at 18 (supporting retention); Music Reports Initial at 11 (same). PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 22529 sufficient for the MLC to assess their accuracy. In both cases, the DMP would be required to report the number of payable units (e.g., permanent downloads, plays, constructive plays) for each reported sound recording, whether pursuant to a blanket license, voluntary license, or individual download license. In neither case would the DMP be expected to calculate or estimate per-work royalty allocations. In proposing to carry forward the current regulatory construct, the Office observes that the MMA does not appear to require any specific accounting or calculation details beyond the number of DPDs,154 and, as noted above, the MMA’s legislative history suggests that Congress did not intend for such reporting details to necessarily change.155 The Office, therefore, is not inclined to substantially deviate from its existing rule. The MLC and DLC sharply disagree on this matter. The MLC argues that the current level of accounting detail in reporting is insufficient and opaque, and proposes that the regulations remedy this by enumerating a considerable amount of detailed royalty accounting calculation and background information that DMPs must be required to report.156 The DLC objects to the MLC’s purported need for much of this information, and argues that compiling that level of information into monthly reports would be operationally burdensome and ‘‘will be a substantial engineering challenge.’’ 157 The DLC further argues that it would be more appropriate for the information sought by the MLC to be obtained via the 154 See 17 U.S.C. 115(d)(4)(A)(ii); see also Music Reports Initial at 4 (observing that the MMA has ‘‘a glaring gap’’ that ‘‘omits any requirement that DMPs deliver to the MLC . . . any of the underlying information that would be required to show how the DMPs have calculated their royalty payments’’). 155 See H.R. Rep. No. 115–651, at 12; S. Rep. No. 115–339, at 13; Conf. Rep. at 10. 156 See MLC Initial at 19; MLC Reply at 14, 19– 20, App. C at 9–12; MLC Ex Parte Letter #2 at 3. Some examples of what the MLC seeks include information regarding how the DMP calculates service revenue and total cost of content (including e.g., categories of revenue, subscription prices, deductions from revenue, and the types of consideration expensed for obtaining sound recording rights), information about bundles, discounts, free trials, and promotional offerings (including e.g., family and student plan data, which products/services constitute a bundle, and bundle component pricing), and information about DPDs for which the DMP does not pay royalties. 157 DLC Ex Parte Letter #1 at 2; DLC Ex Parte Letter #1 Presentation at 14 (‘‘The MLC has not explained why it needs this data to perform its core matching, collection, and distribution activities. Moreover, these changes will be a substantial engineering challenge. For instance, the inputs into determining the prices of the elements of a bundle are not data that is stored in a format amenable to reporting.’’); DLC Reply at 17–20. E:\FR\FM\22APP2.SGM 22APP2 22530 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 statutorily permitted audits.158 The MLC contends that these triennial audits are insufficient.159 Regardless of whatever the current reporting situation may be, the Office tentatively concludes that the MLC should have access to much of the information it seeks, but that it may be appropriate for some of this underlying backup information to be made available separate from monthly reports of use. As previously noted, ‘‘transparency is critical where copyright owners are compelled by law to license their works,’’ 160 and so it seems appropriate for the MLC to have access to as much information as is reasonably necessary for it to ‘‘engage in efforts to . . . confirm proper payment of royalties due.’’ 161 That the scope of that information may be cumbersome for DMPs is a product of the complexity of the rate structure adopted by the CRJs (which presumably could be changed in future ratemakings). The Office, however, is also mindful of other previously noted guiding principles, that the compulsory license must remain a ‘‘workable tool’’ and that ‘‘the accounting procedures must not be so complicated as to make use of the compulsory license impractical.’’ 162 To appropriately balance these competing concerns, the Office proposes a compromise approach whereby DMPs must make much of the information proposed by the MLC available to the MLC as part of their records of use.163 As discussed below in more detail, the Office proposes to clarify its recordkeeping rule with enumerated examples of the types of records DMPs must retain and make available. The MLC and DLC both acknowledge the practical reality that reporting will need to use estimates in certain circumstances,164 as is permitted for performance royalties under the current rules governing the non-blanket section 115 license.165 While the MLC proposes that estimates be limited to performance royalties,166 the DLC proposes a broader provision covering any royalty calculation ‘‘input that is unable to be finally determined.’’ 167 The DLC asserts that this expansion is appropriate because there are other royalty calculation inputs, such as the 158 DLC Reply at 17; DLC Ex Parte Letter #1 at 2. 159 MLC Ex Parte Letter #2 at 4. 160 79 FR at 56201. 161 See 17 U.S.C. 115(d)(3)(G)(i)(I)(cc). 162 79 FR at 56190. 163 See 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I). 164 See DLC Reply at 16, Add. A–8; MLC Reply App. C at 13. 165 See 37 CFR 210.16(d)(3)(i). 166 MLC Reply App. C at 13. 167 DLC Reply Add. at A–8. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 applicable consideration expensed for sound recording rights, that may not be established when an applicable report may be due.168 The rule proposes that a reasonable estimate be permitted for any royalty calculation input that is unable to be finally determined at the time the report is delivered to the MLC, if the reason the input cannot be finally determined is outside the DMP’s control. It seems reasonable to permit such estimations, but only where the DMP cannot unilaterally finalize the input. The proposed rule would allow use of an estimate where an input remains uncertain because of a bona fide dispute between the DMP and another party. But using an estimate because of a purely internal tracking or accounting issue, for example, would not be acceptable. The rule would require the DMP to deliver a report of adjustment after any estimated input becomes finally determined. The Office also proposes to specifically permit DMPs to calculate their total royalties owed under the blanket license by using a reasonable estimate of the amount to deduct for usage subject to voluntary licenses and individual download licenses, where the DMP is not entitled to an invoice but still dependent on the MLC to confirm such usage. The rule would require the DMP to deliver a report of adjustment after the MLC confirms such usage. The Office is not inclined to adopt the DLC’s proposal to clarify that making any adjustments to these estimates would not be a basis for charging late fees, terminating a blanket license, or requiring payment of audit fees.169 Any applicable late fees are governed by the CRJs, and any clarification should come from them. Whether or not payment of audit fees is incurred is governed by 17 U.S.C. 115(d)(4)(D). And whether or not the license can be terminated is governed by 17 U.S.C. 115(d)(4)(E). Sound recording and musical work information. With respect to the specific information required to be reported for purposes of identifying each sound recording embodying a musical work used by a DMP, the proposed rule is derived from the statute, current regulations, and the public comments (including the specific proposals of the MLC and DLC). In alignment with the statute, the proposed rule essentially has three tiers of information: (1) Sound recording information that must always 168 DLC Reply at 16; see also DLC Initial at 15– 16. 169 See DLC Reply at 16–17, Add. A–8; see also MLC Ex Parte Letter #2 at 7–8 (opposing the DLC’s proposal). PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 be reported (e.g., sound recording name and featured artist); (2) sound recording information that must be reported ‘‘to the extent acquired by the [DMP] in connection with its use of sound recordings of musical works to engage in covered activities, including pursuant to [section 115(d)(4)](B)’’ (e.g., sound recording copyright owner, producer, and ISRC); (3) and associated musical work information that must be reported ‘‘to the extent acquired by the [DMP] in the metadata provided by sound recording copyright owners or other licensors of sound recordings in connection with the use of sound recordings of musical works to engage in covered activities, including pursuant to [section 115(d)(4)](B)’’ (e.g., songwriter, publisher, and international standard musical work code (‘‘ISWC’’)).170 In addition to the statutorily enumerated information, the Office is proposing certain additional data fields that the record indicates are likely to be beneficial to the MLC’s key function of engaging in matching efforts to identify reported sound recordings, the musical works embodied in them, and the related copyright owners due royalties. For example, within the first tier described above—that must always be reported—the Office proposes including playing time 171 and any unique identifier assigned by the DMP (including any code that can be used to locate and listen to the sound recording on the DMP’s service).172 Besides being helpful for matching, particularly where there are multiple versions of a recording, playing time can be necessary for computing royalties.173 Regarding DMP identifiers, at this time, the Office is inclined to agree with the DLC’s proposal that DMPs provide these in lieu of the audio links the MLC requests.174 The MLC argues that these links may be critical to properly match and pay royalties because the audio is ‘‘the only truly authoritative evidence of the digital use,’’ and claims that it would not be burdensome for DMPs to provide them.175 Specifically, it points out that audio links have been provided by certain DMPs in connection with past settlements related to unclaimed 170 See 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa)–(bb). 37 CFR 210.16(c)(3)(v); Music Reports Initial at 12; DLC Reply Add. at A–7; MLC Reply App. C at 11; RIAA Initial at 6; Recording Academy Initial at 3; FMC Reply at 4. 172 See 37 CFR 210.16(c)(3)(iii)(C); Music Reports Initial at 12. 173 See id. at § 385.11(a) and 385.21(c). 174 See DLC Ex Parte Letter #1 Presentation at 15; DLC Ex Parte Letter #2 at 3; MLC Initial at 20; MLC Reply at 18–19, App. C at 10. 175 MLC Reply at 18–19; see also MLC Ex Parte Letter #1 at 2–3; MLC Ex Parte Letter #4 at 5. 171 See E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 royalties, and suggests that audio links would be particularly useful to reduce the incidence of unclaimed royalties and ownership disputes.176 The DLC contends that it would be burdensome to require ‘‘all digital music providers to engineer their systems’’ to provide active links in monthly reporting, and suggests that identifiers serve as a workable alternative, stating that, at least for Amazon, Apple, Google, Pandora, and Spotify, these identifiers would be sufficient for the MLC to locate and listen to a particular track using the search feature on each DMP’s consumer-facing service.177 The Office understands the MLC to believe that audio links will be most useful not in connection with automated matching efforts, but rather to feature on its online claiming portal, similar to claiming portals used in connection with class settlements over unclaimed royalties or collective management organizations that operate claims-based systems.178 It is not clear whether links might be featured for all sound recordings embodying musical works listed in the database, or only those with missing or incomplete ownership information. Either way, while the planned inclusion of audio links is commendable, the record to date does not establish that the method by which the MLC receives audio links should be a regulatory issue, rather than an operational matter potentially resolved by MLC and DLC members, including through the MLC’s operations advisory committee. For example, while the DLC suggests that inclusion of audio links for every recording reported on a monthly basis by each DMP would be burdensome, a few DLC members suggested in passing to the Office that they could just provide the MLC with a free monthly subscription in lieu of such reporting. It is not clear to what extent the parties have engaged on such logistical discussions to determine if this, or other operational solutions, may serve as a workable alternative. The Office declines at this time to propose a rule including audio links in monthly reporting, but encourages the parties, including individual DLC members, to further collaborate upon a solution for the MLC portal to include access to 176 MLC Ex Parte Letter #1 at 2–3. DLC Ex Parte Letter #2 at 3; see also DLC Reply at 17–18; DLC Ex Parte Letter #1 Presentation at 15. The MLC disputes the utility and widespread existence of such identifiers. MLC Ex Parte Letter #2 at 6; MLC Ex Parte Letter #4 at 5. 178 See MLC Ex Parte Letter #4 at 5 (‘‘[I]t would be unfair, and economically infeasible for many songwriters, to require the purchase of monthly subscriptions to each DMP service in order to fully utilize the statutorily-mandated claiming portal.’’). 177 See VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 specific tracks (or portions thereof) when necessary, without cost to songwriters or copyright owners. The Office hopes that this matter can be resolved after the parties confer further, but remains open to adjusting this aspect of the proposed rule if developments indicate it is necessary. In the second tier described above— sound recording information that must only be reported to the extent acquired—the rule proposes to include version,179 release date,180 album title,181 label name,182 distributor,183 and other unique identifiers beyond ISRC, including catalog number,184 universal product code,185 and any distributor-assigned identifier.186 In the third tier described above— related musical work information that must only be reported to the extent acquired in the metadata provided by sound recording copyright owners and licensors—the rule proposes to include musical work name,187 musical work copyright owner,188 and international standard name identifier (‘‘ISNI’’) and interested parties information code (‘‘IPI’’) for each songwriter, publisher, and musical work copyright owner.189 The Office disagrees with the MLC’s proposal that the musical work information enumerated in the statute be required ‘‘to the extent otherwise known by the [DMP].’’ 190 This seems directly at odds with the statute, which states that such information shall be provided ‘‘to the extent acquired by the [DMP] in the metadata provided by sound recording copyright owners or other licensors of sound recordings in connection with the use of sound 179 See DLC Reply Add. at A–7; MLC Reply App. C at 11; RIAA Initial at 6; Recording Academy Initial at 3; FMC Reply at 4. 180 See DLC Reply Add. at A–7; MLC Reply App. C at 11; RIAA Initial at 6; Recording Academy Initial at 3; FMC Reply at 4. 181 See DLC Ex Parte Letter #1 Presentation at 15; MLC Ex Parte Letter #4 at 11. 182 See 37 CFR 210.16(c)(3)(iii)(A); Music Reports Initial at 12; MLC Ex Parte Letter #4 at 11. 183 See DLC Reply Add. at A–7; MLC Reply App. C at 10. 184 See 37 CFR 210.16(c)(3)(iii)(A); Music Reports Initial at 12; MLC Ex Parte Letter #4 at 11. 185 See 37 CFR 210.16(c)(3)(iii)(B); Music Reports Initial at 12; DLC Ex Parte Letter #1 Presentation at 15; MLC Ex Parte Letter #4 at 11. 186 See 37 CFR 210.16(c)(3)(iii)(C); Music Reports Initial at 12. 187 See 37 CFR 210.16(c)(3)(i); Music Reports Initial at 12. 188 Though the statute already requires songwriter, publisher, and respective ownership share, the publisher may not always be the copyright owner, and in some cases, the owner may be neither the publisher nor the songwriter. 189 See 37 CFR 210.16(c)(3)(vii); Music Reports Initial at 12; MLC Ex Parte Letter #4 at 11. 190 See MLC Reply App. C at 11; see also MLC Initial at 17 n.7. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 22531 recordings of musical works to engage in covered activities, including pursuant to [section 115(d)(4)](B).’’ 191 As the Office previously cautioned, ‘‘while the Office’s regulatory authority is relatively broad, it is obviously constrained by the law Congress enacted; the Office can fill statutory gaps, but will not entertain proposals that conflict with the statute.’’ 192 In addition to establishing the three tiers described above, the Office further proposes that certain information, primarily that covered by the second and third tiers, must only be reported to the extent ‘‘practicable,’’ a term defined in the proposed rule. Similar to the arguments made with respect to the collection and reporting of unaltered data discussed above, the DLC asserts that it would be burdensome from an operational and engineering standpoint for DMPs to report additional categories of data not currently reported, and that DMPs should not be required to do so unless it would actually improve the MLC’s matching ability.193 The record suggests that all of the data categories described above possess some level of utility, although, as noted above, there is disagreement as to the particular degree of usefulness of each. It would seem that different data points may be of varying degrees of helpfulness depending on what other data points for a work may or may not be available. The proposed rule therefore defines ‘‘practicable’’ in a very specific way. First, the proposed definition would always require reporting of the expressly enumerated statutory categories (e.g., sound recording copyright owner, producer, ISRC, songwriter, publisher, ownership share, and ISWC must always be reported, to the extent appropriately acquired, regardless of any associated DMP burden). Second, it would require reporting of any other applicable categories of information (e.g., catalog number, version, release date, ISNI, etc.) under the same three scenarios discussed above with respect to unaltered data, and for the same reasons discussed above: (1) Where the MLC has adopted a nationally or internationally recognized standard, such as DDEX, that is being used by the particular DMP, and the information belongs to a category of information required to be reported under that standard; (2) where the information belongs to a category of information that is reported by the 191 See 17 U.S.C. 115(d)(4)(A)(ii)(I)(bb); see also DLC Reply at 18 (disagreeing with the MLC’s proposal for the same reason). 192 84 FR at 49968 (citations omitted). 193 See DLC Ex Parte Letter #1 at 2; DLC Ex Parte Letter #3 at 2. E:\FR\FM\22APP2.SGM 22APP2 22532 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 particular DMP pursuant to any voluntary license or individual download license; or (3) where the information belongs to a category of information that was periodically reported by the particular DMP to its licensing administrator or to copyright owners directly prior to the license availability date. The Office is also contemplating a fourth scenario for commenters to consider: Where the information belongs to a category of information that is/was commonly reported in the industry by a majority of DMPs of comparable size and sophistication to the particular DMP either currently or prior to the license availability date. As with the rules about whether a DMP needs to provide unaltered data, the Office’s proposed compromise seeks to appropriately balance the need for the MLC to receive detailed reporting with the burden that more detailed reporting may place on certain DMPs.194 With respect to the term ‘‘producer,’’ the Office agrees with commenters that it may be confusing and warrants definition.195 The Office proposes to adopt the proposal to use the Recording Academy’s Producers and Engineers Wing definition.196 With respect to the term ‘‘sound recording copyright owner,’’ A2IM & RIAA raise concerns over the reporting of this information and its use by the MLC, asserting that there is a disconnect between the use of the term in the statute and the actual information included in the digital supply chain about different parties associated with a given sound recording.197 In light of this discussion, the Office proposes that DMPs may satisfy their obligations to report sound recording copyright owner information by reporting the three DDEX fields identified by A2IM & RIAA as being most relevant (to the extent such data is provided to DMPs by sound recording copyright owners or 194 See also 17 U.S.C. 115(d)(4)(E)(i)(III) (one of the conditions of default is where a DMP provides a report ‘‘that, on the whole, is . . . materially deficient as a result of inaccurate, missing, or unreadable data, where the correct data was available to the [DMP] and required to be reported’’). 195 See RIAA Initial at 11; Recording Academy Initial at 3; see also MLC Reply at 34–35 (explaining the MLC’s own confusion over the term). 196 See RIAA Initial at 11; Recording Academy Initial at 3. 197 See A2IM & RIAA Reply at 8–9. Because the main of those concerns centers around the potential for confusion in the MLC’s public database, the Office has addressed this issue in more depth in connection with a separately-issued notification of inquiry. See 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. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 licensors): DDEX Party Identifier (DPID), LabelName, and PLine.198 Server fixation date and termination. With respect to the MLC’s proposal to require DMPs to report the date on which each sound recording is first reproduced by the DMP on its server, the rule proposes an alternative approach. As a result of the new blanket licensing system, the MLC contends that the server fixation date is ‘‘required to determine which rights owner is to be paid where one or more grants pursuant to which a musical work was reproduced in a sound recording has been terminated pursuant to Section 203 or 304 of the [Copyright] Act.’’ 199 The Copyright Act permits authors or their heirs, under certain circumstances and within certain windows of time, to terminate the exclusive or nonexclusive grant of a transfer or license of an author’s copyright in a work or of any right under a copyright.200 The statute, however, contains an exception with respect to derivative works, stating that ‘‘[a] derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination, but this privilege does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant.’’ 201 As the MLC explains it, ‘‘because the sound recording is a derivative work, it may continue to be exploited pursuant to the ‘panoply of contractual obligations that governed pretermination uses of derivative works by derivative work owners or their licensees.’ ’’ 202 The MLC contends that the section 115 compulsory license can be part of this ‘‘panoply,’’ and therefore, if the compulsory license ‘‘was issued before the termination date, the pretermination owner is paid. Otherwise, the post-termination owner is paid.’’ 203 The MLC further explains that ‘‘under the prior NOI regime, the license date for each particular musical work was considered to be the date of the NOI for 198 See A2IM & RIAA Reply at 8–9 (explaining the details of these different fields and asserting that ‘‘each may assist the MLC in different ways with its task of associating sound recordings with musical works’’); see also MLC Ex Parte Letter #4 at 10. 199 MLC Reply at 19; see also MLC Initial at 20; MLC Ex Parte Letter #2 at 6–7; MLC Ex Parte Letter #4 at 6–7. 200 See 17 U.S.C. 203, 304(c). 201 Id. at 203(b)(1), 304(c)(6)(A). 202 MLC Reply at 19 (quoting Woods v. Bourne Co., 60 F.3d 978, 987 (2d Cir. 1995)); see also MLC Ex Parte Letter #2 at 6–7; MLC Ex Parte Letter #4 at 6–7. 203 See MLC Ex Parte Letter #2 at 6–7; MLC Ex Parte Letter #4 at 6–7. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 that work,’’ but ‘‘[u]nder the new blanket license, there is no license date for each individual work.’’ 204 Thus, the MLC believes that ‘‘the date that the work was fixed on the DMP’s server— which is the initial reproduction of the work under the blanket license—is the most accurate date for the beginning of the license for that work.’’ 205 The MLC argues that including the server date in reports of usage should not be burdensome for DMPs because they currently possess and report this information.206 The DLC disagrees, stating that not all DMPs store this information, let alone report it.207 The DLC also attacks the merits of the MLC’s reason for wanting the server date, but at a relatively high-level.208 No other commenter directly spoke to this issue, though one commenter with experience in music publishing administration suggests concurrence with the MLC’s position.209 The MLC’s interpretation of the derivative works exception seems at least colorable, and no publisher or songwriter (or representative organization) submitted comments disagreeing with what the MLC characterizes as industry custom and understanding.210 Under the MMA, the MLC’s dispute resolution committee will establish policies and procedures to address ownership disputes (though not resolve legal claims), and, at least where there is no live controversy between parties, practices regarding the default payee pursuant to the derivative works exception is an area where the MLC may need to adopt a policy for handling in the ordinary course.211 Of course, any songwriter or publisher (or other relevant party) disagreeing with the 204 MLC Ex Parte Letter #4 at 6–7. Ex Parte Letter #2 at 6–7. 206 See MLC Reply at 19; MLC Ex Parte Letter #1 at 3; MLC Ex Parte Letter #2 at 6–7 (‘‘Server Fixation Date is currently a mandatory field that is reported on the License Request Form from HFA.’’); MLC Ex Parte Letter #4 at 6–7 (‘‘[A]ll file storage systems log such dates.’’). 207 DLC Ex Parte Letter #2 at 4; DLC Ex Parte Letter #3 at 5. 208 See DLC Ex Parte Letter #2 at 4. 209 See Barker Initial at 3–4 (‘‘When [termination] occurs, the law allows the original copyright owner of the . . . terminated work to continue to collect royalties for certain uses licensed prior to the effective date of . . . termination of transfer, while the new copyright owner of the work may exclusively license all future uses, and collect royalties for those and certain earlier uses.’’). 210 See Woods, 60 F.3d at 986–88. The Office does not foreclose the possibility of other interpretations, but also does not find it prudent to itself elaborate upon or offer an interpretation of the scope of the derivative works exception in this particular rulemaking proceeding, which is not primarily focused on termination issues and which has thus far engendered relatively little commentary on this discrete point. 211 See 17 U.S.C. 115(d)(3)(K). 205 MLC E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 MLC’s approach may also challenge such practice, but to the extent the MLC’s approach is not invalidated, or superseded by precedent, it seems reasonable for the MLC to want to know the applicable license date. It is not clear to the Office, however, whether the MLC has a need for the server fixation dates of musical works licensed by DMPs prior to the license availability date, even under its legal theory. With respect to most musical works first used before the license availability date, an NOI should have been served on the copyright owner or filed with the Copyright Office, or the work should have been otherwise licensed by a voluntary agreement. In cases where the license was obtained by service of an NOI upon the copyright owner, it would seem that the MLC could continue to use the relevant NOI date for termination purposes, as it asserts has been the customary practice.212 Since the MLC represents that this practice was working fairly well prior to the MMA, the rule does not now propose regulatory language on this issue. And for those works used via voluntary license, presumably the parties have relevant records of this agreement, but in any event, addressing issues related to the administration of such voluntary agreements may be outside the ambit of the proposed rule. The Office welcomes comment on this understanding. In other cases, the effective date of a DMP’s blanket license (which for any currently-operating DMP should ostensibly be the license availability date) would seem to be the relevant license date, including for some musical works already being used by DMPs prior to obtaining a blanket license. For those works being used by a DMP under the authority of NOIs that had been filed with the Copyright Office, the statute provides that such ‘‘notices of intention filed before the enactment date will no longer be effective or provide license authority with respect to covered activities,’’ and so the blanket license date may become a new, relevant license date.213 Musical works may also have been previously used without a license, whether because the use qualified for a copyright exception, limitation, or safe harbor (such as 212 See id. at 115(d)(9)(A)(‘‘On the license availability date, a blanket license shall, without any interruption in license authority enjoyed by such digital music provider, be automatically substituted for and supersede any existing compulsory license previously obtained under this section by the digital music provider from a copyright owner to engage in 1 or more covered activities with respect to a musical work.’’). 213 See id. at 115(d)(9)(D)(ii). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 section 512 or the current transition period for good faith efforts made under section 115(d)(10)), or because the use may have been infringing, including in cases where the NOI was not valid or appropriately served. For uses of those works, the effective date of the DMP’s blanket license may similarly be the relevant license date for termination purposes. A record of the DMP’s repertoire as of that date could be relevant to demonstrate which works were being used at the time the blanket license attached. To accommodate those instances, the rule proposes that each DMP take a snapshot of its sound recording database or otherwise make an archive as it exists immediately prior to the effective date of its blanket license.214 Going forward, to accommodate those musical works that subsequently become licensed pursuant to a blanket license after the effective date of a given DMP’s blanket license,215 the rule proposes that each DMP operating under a blanket license keep and retain at least one of three dates for each sound recording embodying such a musical work. First, the rule proposes including the server fixation date sought by the MLC. Because it is not clear, however, that this date is the best or only potential proxy for the relevant license date, the rule also proposes two other date options as reasonable proxies for the relevant license date: The date of the grant first authorizing the DMP’s use of the sound recording and the date on which the DMP first obtains the sound recording.216 Permitting multiple reasonable options may also help alleviate any particular operational burdens that may exist with respect to a DMP being required to track the server date specifically. The Office seeks comment specifically on this aspect of the proposed rule. The rule proposes that the required information described above need not be reported to the MLC in monthly 214 Cf. Music Reports Initial at 3 (proposing that DMPs be required in their NOLs ‘‘to include lists of sound recordings they make available to the public’’). 215 See 17 U.S.C. 115(d)(1)(B)(i) (‘‘A blanket license . . . covers all musical works (or shares of such works) available for compulsory licensing under this section for purposes of engaging in covered activities, except as provided in subparagraph (C) [discussing voluntary licenses and individual download licenses].’’). Cf. U.S. Copyright Office, Compendium of U.S. Copyright Office Practices sec. 2310.3(C)(3) (3d ed. 2017) (‘‘[A] transfer that predates the existence of the copyrighted work cannot be effective (and therefore cannot be ‘executed’) until the work of authorship (and the copyright) come into existence.’’). 216 Indeed, in many cases the Office assumes these three dates would likely be very close in time, and perhaps even be identical. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 22533 reports of usage. Rather, the Office proposes that such information be kept by the DMP in its records of use, which must be made available to the MLC. These particular records would be subject to the same five-year retention period proposed for other records, but since they may be pertinent to administering the blanket license decades later, the DMP would be required to provide the MLC with at least 90 days’ notice and an opportunity to claim and retrieve the records before they can be destroyed or discarded. It generally seems reasonable to expect that DMPs would track dates relevant to the licensing of sound recordings, and in the context of the blanket license, which was specifically adopted to increase transparency and better ensure that copyright owners receive their due royalties, it seems particularly reasonable to require DMPs to provide information that may bear on termination issues that are potentially clouded by the creation of the blanket license. The Office recognizes that this particular area is one of the more complicated ones in this proceeding, and additional comments are especially welcome on this topic. Content of annual reports of usage. In general accord with the MLC’s proposal, the Office proposes that annual reports contain cumulative information for the applicable fiscal year, broken down by month and by activity and offering, including the total royalty payable, the total sum paid, the total adjustments made, the total number of payable units, and to the extent applicable to calculating the royalties owed, total service provider revenue, total costs of content, total performance royalty deductions, and total subscribers.217 Receiving these totals and having them broken down this way seems beneficial to the MLC in confirming proper royalties, while not unreasonably burdening DMPs, who would not have to re-provide all of the information contained in the monthly reports covered by the annual reporting period. Format and delivery. The Office proposes, in accord with the MLC’s proposal, that separate monthly reports of usage must be delivered for each month during which there is any activity relevant to the payment of mechanical royalties for covered activities, and that an annual report must be delivered for each year during which at least one monthly report was required to be delivered.218 The Office proposes that reports of usage must be delivered to the MLC in 217 See 218 See E:\FR\FM\22APP2.SGM MLC Reply App. C at 13–14. id. at 16. 22APP2 22534 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 a machine-readable format that is compatible with the information technology systems of the MLC as reasonably determined by the MLC, which in turn must take into consideration relevant industry standards and the potential for different degrees of sophistication among DMPs. In accord with both the MLC and DLC proposals, the Office does not propose to provide more detailed requirements in the regulations, in order to leave flexibility as to the precise standards and formats.219 For this reason, the Office is not inclined to require that reporting must specifically utilize DDEX, as proposed by some 220—though the Office notes that the MLC plans to support DDEX for reports of usage.221 The Office further proposes to specifically require the MLC to offer at least two options, where one is dedicated to smaller DMPs that may not be reasonably capable of complying with the requirements that the MLC may see fit to adopt for larger DMPs. This would help ensure that all those qualifying for the blanket license can make use of it as a practical matter.222 The Office invites comment on this aspect of the proposed rule. To maintain appropriate flexibility, the Office also proposes that royalty payments similarly must be delivered in such manner and form as the MLC may reasonably determine. The Office further proposes a mechanism by which the MLC may modify its formatting and delivery requirements after providing appropriate notice to DMPs. The rule proposes an extended notice period for certain significant changes because of the level of effort that could potentially be involved for a DMP to comply.223 The Office also proposes a mechanism by which a DMP may be excused from default under the blanket license and any incurred late fees because of an untimely delivered report or payment where the reason for the untimeliness is either the MLC’s fault or results from an issue with the MLC’s applicable IT systems. This seems like a reasonable and equitable accommodation where 219 See MLC Initial at 20; MLC Reply at 21, App. C at 16; DLC Initial at 15; DLC Reply at 21, Add. A–8; see also SoundExchange Initial at 16. 220 See A2IM & RIAA Reply at 11; Jessop Reply at 2. 221 MLC Reply at 21–22, 35. 222 See id. at 21–22 (‘‘While the MLC supports the use of [the DDEX] format . . . it is mindful of the varying data formats used by DMPs with varying resources.’’); DLC Reply at 21 (stating that the regulations must ‘‘ensure that the full range of licensees will be able to report their usage to the MLC without substantial upfront burdens’’). 223 The Office’s proposed rule is somewhat similar to the MLC’s proposal for changing data formats or standards in the context of the musical works database. See MLC Reply App. F at 22. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 DMPs are statutorily required to rely on the MLC and its systems to satisfy certain obligations. Certifications. The Office proposes applying the current certification requirements in 37 CFR 210.16(f) and 210.17(f) for monthly and annual statements of account under the nonblanket section 115 license to monthly and annual reports of usage under the blanket license.224 The current certification requirements were adopted in 2014 after careful consideration by the Office,225 and the Office is disinclined to relitigate the details of these provisions unless presented with a strong showing that they are unworkable either because of something specifically to do with the changes made by the MMA or some other significant industry change that occurred after they were adopted. Content of reports of adjustment. In general accord with both the MLC and DLC proposals, the Office proposes that reports of adjustment contain the following information: (1) An identification of the previously delivered monthly or annual report(s) being adjusted; (2) the specific change(s) to such report(s), including the monetary amount of the adjustment and a detailed description of any changes to any of the inputs upon which computation of the payable royalties depends, along with appropriate stepby-step calculations; (3) the particular sound recordings and uses to which the adjustment applies; and (4) a description of the reason(s) for the adjustment.226 The proposed rule is also in general accord with the MLC and DLC proposals with respect to the mechanisms to account for overpayment and underpayment of royalties: an underpayment will need to accompany delivery of the report of adjustment, while an overpayment will be credited to the DMP’s account by the MLC.227 These requirements strike the Office as reasonable, and the proposed content should provide the MLC with sufficient information to confirm the adjustment and properly account for it to copyright owners. Voluntary agreements to alter process. The Office tentatively agrees with both the MLC and DLC that it would be beneficial to permit individual DMPs and the MLC to agree to vary or supplement the particular reporting procedures adopted by the Office—such as the specific mechanics relating to adjustments or invoices and response files.228 This would permit a degree of flexibility to help address the specific needs of a particular DMP. The Office proposes two caveats to this proposal to safeguard copyright owner interests because they would not be party to any such agreements. First, any voluntarily agreed-to changes could not materially prejudice copyright owners owed royalties under the blanket license. Second, the procedures surrounding the certification requirements would not be alterable because they serve as an important check on the DMPs that is ultimately to the benefit of copyright owners. Documentation and records of use. The rule proposes, in accord with the MLC’s proposal, to generally carry forward the current rule under the nonblanket section 115 license, whereby DMPs would be required to keep and retain all records and documents necessary and appropriate to support fully all of the information set forth in their reports of usage for a period of at least five years from the date of delivery of the particular report.229 The Office is not inclined to shorten the retention period to three years as the DLC proposes 230 given that the Office in 2014 found it appropriate to extend the period from three years to five years.231 If anything, the Office may consider extending the retention period to seven years to align with the statutory recordkeeping requirements the MMA places on the MLC.232 The Office is also not inclined to adopt the DLC’s proposal that recordkeeping requirements be subject to each DMP’s ‘‘generally applicable privacy and data retention policies,’’ and be limited merely to the ‘‘data included in’’ the report of usage.233 That proposal is a step in the wrong direction with respect to transparency.234 In accordance with the MMA’s requirement that records of use be ‘‘made available to the [MLC] by [DMPs],’’ the rule proposes that the 224 See MLC Reply App. C at 15 (proposing retention of current monthly certification); DLC Reply Add. at A–8 (proposing a monthly certification that is substantially similar to one of the current monthly certification options); Music Reports Initial at 13, 16–17 (proposing retention of one of the current monthly certification options and one of the current annual certification options). 225 See 79 FR 56190. 226 See DLC Reply Add. at A–10; MLC Reply App. C at 14. 227 See DLC Reply Add. at A–10; MLC Reply App. C at 14. 228 See DLC Reply Add. at A–11; MLC Reply App. C at 17. 229 See MLC Reply App. C at 16; 37 CFR 210.18. 230 See DLC Reply at 23, Add. A–11. 231 See 79 FR at 56205; see also MLC Ex Parte Letter #2 at 5 (‘‘[T]he three-year audit period look back does not mean that documents dated more than three years earlier are not relevant to audits.’’). 232 See 17 U.S.C. 115(d)(3)(M)(i). 233 See DLC Reply Add. at A–11. 234 See MLC Reply at 25–26 (‘‘Each DMP should not be permitted to self-determine its recordkeeping requirements.’’). PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules MLC be entitled to reasonable access to these records and documents upon reasonable request, subject to any applicable confidentiality rules the Office may adopt (and the Office has concurrently published a notice of proposed rulemaking regarding confidentiality issues).235 As noted above, the Office is proposing to clarify its recordkeeping rules by enumerating several nonexclusive examples of the types of records DMPs are obligated to retain and make available to the MLC. The Office continues to generally agree with the ‘‘minimalist approach’’ it took in 2014 with respect to importing details from the CRJs’ rates and terms regulations in 37 CFR part 385, and therefore the Office is not inclined to include the level of detail contained in the MLC’s comments.236 Rather, the Office proposes to more broadly articulate requirements encompassing what the MLC seeks. For example: Records accounting for non-play and other nonroyalty-bearing DPDs, records of promotional and free trial uses required to be maintained under part 385, records describing each of the DMP’s activities or offerings in sufficient detail to reasonably demonstrate which activities or offerings they are under part 385 and which rates and terms apply to them, records with sufficient information to reasonably demonstrate whether service revenue and total cost of content are properly calculated in accordance with part 385, records with sufficient information to reasonably demonstrate whether and how any royalty floor under part 385 does or does not apply, and records with such other information as is necessary to reasonably support and confirm all usage and calculations contained in each report of usage, including relevant information about subscriptions, bundles, devices, discount plans, and subscribers. Each DMP operating under the blanket license will need to know this information (to the extent applicable to its services), and so the Office expects it should not be burdensome to retain and make available corresponding records.237 While described in more generalized terms than proposed by the MLC, the Office recognizes that the above list is still fairly tailored to the 235 See 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I); U.S. Copyright Office, Notice of Proposed Rulemaking, Treatment of Confidential Information by the Mechanical Licensing Collective and Digital Licensee Coordinator, Dkt. No. 2020–7, published elsewhere in this issue of the Federal Register. 236 See 79 FR at 56193. 237 See DLC Ex Parte Letter #3 at 3 (noting the DLC’s openness to this proposal). VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 CRJs’ Phonorecords III determination; the Office will be prepared to revise these examples as necessary to align with such royalty rates and terms as the CRJs may subsequently adopt. D. Reports of Usage—Significant Nonblanket Licensees As discussed in the notification of inquiry, SNBLs are also required to deliver reports of usage to the MLC.238 Although the Office asked ‘‘how such reports may differ from the reports filed by digital music providers under the blanket license,’’ the comments received in response were fairly sparse.239 The MLC argues that reports of usage for SNBLs should be essentially the same as those of DMPs operating under the blanket license.240 While the MLC concedes various differences between blanket licensees and SNBLs, it asserts that it needs the same information because the MLC must (1) administer the process by which unclaimed royalties are to be distributed to copyright owners identified in the records of the MLC based on market share of usage under both statutory and voluntary licenses, and (2) administer collections of the administrative assessment paid by both blanket licensees and SNBLs to fund the MLC.241 The DLC argues that SNBL reports should be different and need not contain as much information because ‘‘they do not need to provide information related to calculation or payment of royalties.’’ 242 The DLC’s proposal for SNBLs omits items contained in its proposal for blanket licensees, such as royalty calculation data, estimates, adjustments, processing, and records of use.243 The DLC does not directly respond to the MLC’s assertions. Music Reports proposes that blanket licensee and SNBL reports be substantially the same, except that SNBL reports need not contain any royalty calculation information.244 The statutory requirements for blanket licensees and SNBLs differ in a number of material ways. Most notably, SNBLs do not operate under the blanket license and do not pay statutory royalties to the MLC. Moreover, royalties paid under voluntary licenses are generally calculated pursuant to those private agreements, rather than being tied to particular rates and terms established by 238 84 FR at 49971. id. 240 MLC Initial at 20–21; see MLC Reply App. C. 241 See MLC Initial at 10–11, 20–21; MLC Reply at 21. 242 DLC Initial at 16; see also DLC Reply at 23. 243 Compare DLC Reply Add. at A–6–11 with id. at A–12–14. 244 Music Reports Initial at 4. 239 See PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 22535 the CRJs in 37 CFR part 385. While blanket licensees must deliver reports of usage under section 115(d)(4)(A), SNBLs are ‘‘not obligated to provide reports of usage reflecting covered activities under subsection (d)(4)(A),’’ but rather report under section 115(d)(6)(A)(ii).245 While that provision states that SNBL reports of usage are to ‘‘contain[ ] the information described in paragraph (4)(A)(ii),’’ the other requirements of section 115(d)(4), such as with respect to reporting in accordance with section 115(c)(2)(I), formatting, adjustments, and records of use, do not expressly apply.246 By not being required to report in accordance with section 115(c)(2)(I), SNBLs are not required to deliver CPAcertified annual reports.247 SNBLs are also not subject to data collection efforts under section 115(d)(4)(B) or audits under section 115(d)(4)(D). With these observations in mind, it seems reasonable to fashion the proposed rule for SNBL reports of usage as an abbreviated version of the reporting provided by blanket licensees. The proposed rule for SNBLs generally tracks the proposed rule for blanket licensees, but makes several changes, somewhat along the lines of the DLC’s proposal. For example, provisions about estimates, processing, and records of use are omitted. The proposed rule also omits an annual reporting requirement. In contrast to the DLC’s proposal, the Office does, however, propose to require SNBLs to report their payable royalties for covered activities under relevant voluntary licenses and individual download licenses, but without reporting any underlying calculations. The proposed rule also contains an adjustments provision so that SNBLs have a mechanism to update anything if needed, such as if a play count error is discovered later on. In light of the particularly thin record on SNBLs, the Office encourages further comment on these issues to better inform the rulemaking process. For example, do other commenters agree with the MLC that the main purposes of SNBL reporting are to assist the MLC in distributing unclaimed royalties and collecting the administrative assessment? If commenters believe that SNBL reporting should serve other purposes (for example, assisting the MLC’s overall matching efforts), they should identify those additional aims, along with any adjustments to the information the rule proposes to be reported. Noting that the MLC must 245 See 17 U.S.C. 115(e)(31). id. at 115(d)(6)(A)(ii). 247 See id. at 115(c)(2)(I) (only requiring such reporting for ‘‘compulsory license[s]’’). 246 See E:\FR\FM\22APP2.SGM 22APP2 22536 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules distribute unclaimed accrued royalties ‘‘to copyright owners identified in the records of the collective,’’ the Office also seeks comment regarding whether and to what extent the MLC anticipates incorporating SNBL-supplied information into its public database.248 Further, the Office solicits comment regarding whether the proposed rule appropriately prescribes reporting of information relevant to the MLC’s tasks in distributing unclaimed royalties and collecting the administrative assessment. The Office specifically seeks comment as to what extent the information sought by the MLC is relevant to the administrative assessment, noting that the method for allocating the assessment among blanket licensees and SNBLs adopted by the CRJs is based solely on ‘‘the number of unique and royalty-bearing sound recordings used per month . . . in Section 115 covered activities.’’ 249 Similarly, the Office welcomes comment regarding whether the proposed rule provides adequate (or excessive) information to the MLC for purposes of the MLC calculating market share for distributing unclaimed royalties.250 As noted above, the Office will separately consider any regulatory activity related to the distribution of such royalties in connection with its ongoing related policy study. III. Subjects of Inquiry The proposed rule is designed to reasonably implement a number of regulatory duties assigned to the Copyright Office under the MMA and facilitate the MLC’s administration of the blanket licensing system. The Office solicits additional public comment on all aspects of the proposed rule. Copyright, Phonorecords, Recordings. Proposed Regulations khammond on DSKJM1Z7X2PROD with PROPOSALS2 For the reasons set forth in the preamble, the Copyright Office proposes amending 37 CFR part 210 as follows: at 115(d)(3)(J). 37 CFR 390.1 (defining ‘‘Unique Sound Recordings Count’’) (emphasis added). 250 For example, the MLC’s proposed language seeks information specific to the part 385 calculations. Does the MLC seek to take SNBL usage data and apply the part 385 royalty rate calculations used for blanket licensees as part of determining a transparent and equitable manner of distribution? 249 See VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 1. The authority citation for part 210 continues to read as follows: ■ Authority: 17 U.S.C. 115, 702. Subpart A [Removed] ■ 2. Remove subpart A. Subpart B [Redesignated as Subpart A] and §§ 210.11 Through 210.21 [Redesignated as §§ 210.1 Through 210.11] 3. Redesignate subpart B as subpart A and, in newly redesignated subpart A, §§ 210.11 through 210.21 are redesignated as §§ 210.1 through 210.11. ■ Subpart A [Amended] 4. In newly redesignated subpart A: a. Remove ‘‘§ 210.12’’ and add in its place ‘‘§ 210.2’’; ■ b. Remove ‘‘§ 210.15’’ and add in its place ‘‘§ 210.5’’; ■ c. Remove ‘‘§ 210.16’’ and add in its place ‘‘§ 210.6’’; ■ d. Remove ‘‘§ 210.17’’ and add in its place ‘‘§ 210.7’’; and ■ e. Remove ‘‘§ 210.21’’ and add in its place ‘‘§ 210.11’’. ■ 5. Amend newly redesignated § 210.1 by adding a sentence after the first sentence to read as follows: ■ ■ § 210.1 General. * * * Rules governing notices of intention to obtain a compulsory license for making and distributing phonorecords of nondramatic musical works are located in § 201.18. * * * § § 210.12 through 210.20 Reserved] [Added and 6. Add reserve §§ 210.12 through 210.20. ■ 7. Add a new subpart B to read as follows: ■ List of Subjects in 37 CFR Part 210 248 Id. PART 210—COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS Subpart B—Blanket Compulsory License for Digital Uses, Mechanical Licensing Collective, and Digital Licensee Coordinator Sec. 210.21 General. 210.22 Definitions. 210.23 Designation of the mechanical licensing collective and digital licensee coordinator. 210.24 Notices of blanket license. 210.25 Notices of nonblanket activity. 210.26 Data collection and delivery efforts by digital music providers and musical work copyright owners. 210.27 Reports of usage and payment for blanket licensees. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 210.28 Reports of usage for significant nonblanket licensees. § 210.21 General. This subpart prescribes rules for the compulsory blanket license to make and distribute digital phonorecord deliveries of nondramatic musical works pursuant to 17 U.S.C. 115(d), including rules for digital music providers, significant nonblanket licensees, the mechanical licensing collective, and the digital licensee coordinator. § 210.22 Definitions. For purposes of this subpart: (a) Unless otherwise specified, the terms used have the meanings set forth in 17 U.S.C. 115(e). (b) A blanket licensee is a digital music provider operating under a blanket license. (c) The term DDEX means Digital Data Exchange, LLC. (d) The term GAAP means U.S. Generally Accepted Accounting Principles, except that if the U.S. Securities and Exchange Commission permits or requires entities with securities that are publicly traded in the U.S. to employ International Financial Reporting Standards, as issued by the International Accounting Standards Board, or as accepted by the Securities and Exchange Commission if different from that issued by the International Accounting Standards Board, in lieu of Generally Accepted Accounting Principles, then an entity may employ International Financial Reporting Standards as ‘‘GAAP’’ for purposes of this section. (e) The term IPI means interested parties information code. (f) The term ISNI means international standard name identifier. (g) The term ISRC means international standard recording code. (h) The term ISWC means international standard musical work code. (i) The term producer means the primary person(s) contracted by and accountable to the content owner for the task of delivering the sound recording as a finished product. (j) The term UPC means universal product code. § 210.23 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 is available on the Copyright Office’s website. (a) Mechanical Licensing Collective, Inc., incorporated in Delaware on March E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules 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. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 210.24 Notices of blanket license. (a) General. This section prescribes rules under which a digital music provider completes and submits a notice of license to the mechanical licensing collective pursuant to 17 U.S.C. 115(d)(2)(A) for purposes of obtaining a statutory blanket license. (b) Form and content. A notice of license shall be prepared in accordance with any reasonable formatting instructions established by the mechanical licensing collective, and shall include all of the following information: (1) The full legal name of the digital music provider and, if different, the trade or consumer-facing brand name(s) of the service(s), including any specific offering(s), through which the digital music provider is engaging, or seeks to engage, in any covered activity. (2) The full address, including a specific number and street name or rural route, of the place of business of the digital music provider. A post office box or similar designation will not be sufficient except where it is the only address that can be used in that geographic location. (3) A telephone number and email address for the digital music provider where an individual responsible for managing the blanket license can be reached. (4) Any website(s), software application(s), or other online locations(s) where the digital music provider’s applicable service(s) is/are, or expected to be, made available. (5) A description sufficient to reasonably establish the digital music provider’s eligibility for a blanket license and to provide reasonable notice to the mechanical licensing collective, copyright owners, and songwriters of the manner in which the digital music provider is engaging, or seeks to engage, in any covered activity pursuant to the blanket license. Such description shall be sufficient if it includes at least the following information: (i) A statement that the digital music provider has a good-faith belief, informed by review of relevant law and regulations, that it: (A) Satisfies all requirements to be eligible for a blanket license, including that it satisfies the eligibility criteria to be considered a digital music provider pursuant to 17 U.S.C. 115(e)(8); and VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 (B) Is, or will be before the date of initial use of musical works pursuant to the blanket license, able to comply with all payments, terms, and responsibilities associated with the blanket license. (ii) A statement that where the digital music provider seeks or expects to engage in any activity identified in its notice of license, it has a good-faith intention to do so within a reasonable period of time. (iii) A general description of the digital music provider’s service(s), or expected service(s), and the manner in which it uses, or seeks to use, phonorecords of nondramatic musical works. (iv) Identification of each of the following digital phonorecord delivery configurations the digital music provider is, or seeks to be, making as part of its covered activities: (A) Permanent downloads. (B) Limited downloads. (C) Interactive streams. (D) Noninteractive streams. (E) Other configurations, accompanied by a brief description. (v) Identification of each of the following service types the digital music provider offers, or seeks to offer, as part of its covered activities (the digital music provider may, but is not required to, associate specific service types with specific digital phonorecord delivery configurations or with particular types of activities or offerings that may be defined in part 385 of this title): (A) Subscriptions. (B) Bundles. (C) Lockers. (D) Discounted, but not free-to-theuser, services. (E) Free-to-the-user services. (F) Other applicable services, accompanied by a brief description. (vi) Any other information the digital music provider wishes to provide. (6) The date, or expected date, of initial use of musical works pursuant to the blanket license. (7) Identification of any amendment made pursuant to paragraph (f) of this section, including the submission date of the notice being amended. (8) 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). This description should be provided as an addendum to the rest of the notice of license to help preserve any confidentiality it may be entitled to under regulations adopted by the Copyright Office. Such description PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 22537 shall be sufficient if it includes at least the following information: (i) An identification of each of the digital music provider’s services, including by reference to any applicable types of activities or offerings that may be defined in part 385 of this title, through which musical works are, or are expected to be, used pursuant to any such voluntary license or individual download license. If such a license pertains to all of the digital music provider’s applicable services, it may state so without identifying each service. (ii) The start and end dates. (iii) The musical work copyright owner, identified by name and any known and appropriate unique identifiers, and appropriate contact information for the musical work copyright owner or for an administrator or other representative who has entered into an applicable license on behalf of the relevant copyright owner. (iv) A satisfactory identification of any applicable catalog exclusions. (v) At the digital music provider’s option, and in lieu of providing the information listed in paragraph (b)(8)(iv) of this section, a list of all covered musical works, identified by appropriate unique identifiers. (c) Certification and signature. The notice of license shall be signed by an appropriate duly authorized officer or representative of the digital music provider. The signature shall be accompanied by the name and title of the person signing the notice and the date of the signature. The notice may be signed electronically. The person signing the notice shall certify that he or she has appropriate authority to submit the notice of license to the mechanical licensing collective on behalf of the digital music provider and that all information submitted as part of the notice is true, accurate, and complete to the best of the signer’s knowledge, information, and belief, and is provided in good faith. (d) Submission, fees, and acceptance. Except as provided by 17 U.S.C. 115(d)(9)(A), to obtain a blanket license, a digital music provider must submit a notice of license to the mechanical licensing collective. Notices of license shall be submitted to the mechanical licensing collective in a manner reasonably determined by the collective. No fee may be charged for submitting notices of license. Upon submitting a notice of license to the mechanical licensing collective, a digital music provider shall be provided with a prompt response from the collective confirming receipt of the notice and the date of receipt. The mechanical E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22538 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules licensing collective shall send any rejection of a notice of license to both the street address and email address provided in the notice. (e) Harmless errors. Errors in the submission or content of a notice of license that do not materially affect the adequacy of the information required to serve the purposes of 17 U.S.C. 115(d) shall be deemed harmless, and shall not render the notice invalid or provide a basis for the mechanical licensing collective to reject a notice or terminate a blanket license. This paragraph (e) shall apply only to errors made in good faith and without any intention to deceive, mislead, or conceal relevant information. (f) Amendments. A digital music provider may submit an amended notice of license to cure any deficiency in a rejected notice pursuant to 17 U.S.C. 115(d)(2)(A). A digital music provider operating under a blanket license must submit a new notice of license within 45 calendar days after any of the information required by paragraphs (b)(1) through (6) of this section contained in the notice on file with the mechanical licensing collective has changed. An amended notice shall indicate that it is an amendment and shall contain the submission date of the notice being amended. The mechanical licensing collective shall retain copies of all prior notices of license submitted by a digital music provider. Where the information required by paragraph (b)(8) of this section has changed, instead of submitting an amended notice of license, the digital music provider must promptly deliver updated information to the mechanical licensing collective in an alternative manner reasonably determined by the collective. To the extent commercially reasonable, the digital music provider must deliver such updated information at least 30 calendar days before delivering a report of usage covering a period where such license is in effect. (g) Transition to blanket licenses. Where a digital music provider obtains a blanket license automatically pursuant to 17 U.S.C. 115(d)(9)(A) and seeks to continue operating under the blanket license, a notice of license must be submitted to the mechanical licensing collective within 45 calendar days after the license availability date. In such cases, the blanket license shall continue to be effective as of the license availability date, rather than the date on which the notice is submitted to the collective. (h) Additional information. Nothing in this section shall be construed to prohibit the mechanical licensing collective from seeking additional VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 information from a digital music provider that is not required by this section, which the digital music provider may voluntarily elect to provide, provided that the collective may not represent that such information is required to comply with the terms of this section. (i) Public access. The mechanical licensing collective shall maintain a current, free, and publicly accessible and searchable online list of all blanket licenses that, subject to any applicable confidentiality rules established by the Copyright Office, includes: (1) All information contained in each notice of license, including amended and rejected notices; (2) Contact information for all blanket licensees; (3) The effective dates of all blanket licenses; (4) For any amended or rejected notice, a clear indication of its amended or rejected status and its relationship to other relevant notices; (5) For any rejected notice, the collective’s reason(s) for rejecting it; and (6) For any terminated blanket license, a clear indication of its terminated status, the date of termination, and the collective’s reason(s) for terminating it. § 210.25 Notices of nonblanket activity. (a) General. This section prescribes rules under which a significant nonblanket licensee completes and submits a notice of nonblanket activity to the mechanical licensing collective pursuant to 17 U.S.C. 115(d)(6)(A) for purposes of notifying the mechanical licensing collective that the licensee has been engaging in covered activities. (b) Form and content. A notice of nonblanket activity shall be prepared in accordance with any reasonable formatting instructions established by the mechanical licensing collective, and shall include all of the following information: (1) The full legal name of the significant nonblanket licensee and, if different, the trade or consumer-facing brand name(s) of the service(s), including any specific offering(s), through which the significant nonblanket licensee is engaging, or expects to engage, in any covered activity. (2) The full address, including a specific number and street name or rural route, of the place of business of the significant nonblanket licensee. A post office box or similar designation will not be sufficient except where it is the only address that can be used in that geographic location. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 (3) A telephone number and email address for the significant nonblanket licensee where an individual responsible for managing licenses associated with covered activities can be reached. (4) Any website(s), software application(s), or other online locations(s) where the significant nonblanket licensee’s applicable service(s) is/are, or expected to be, made available. (5) A description sufficient to reasonably establish the licensee’s qualifications as a significant nonblanket licensee and to provide reasonable notice to the mechanical licensing collective, digital licensee coordinator, copyright owners, and songwriters of the manner in which the significant nonblanket licensee is engaging, or expects to engage, in any covered activity. Such description shall be sufficient if it includes at least the following information: (i) A statement that the significant nonblanket licensee has a good-faith belief, informed by review of relevant law and regulations, that it satisfies all requirements to qualify as a significant nonblanket licensee under 17 U.S.C. 115(e)(31). (ii) A statement that where the significant nonblanket licensee expects to engage in any activity identified in its notice of nonblanket activity, it has a good-faith intention to do so within a reasonable period of time. (iii) A general description of the significant nonblanket licensee’s service(s), or expected service(s), and the manner in which it uses, or expects to use, phonorecords of nondramatic musical works. (iv) Identification of each of the following digital phonorecord delivery configurations the significant nonblanket licensee is, or expects to be, making as part of its covered activities: (A) Permanent downloads. (B) Limited downloads. (C) Interactive streams. (D) Noninteractive streams. (E) Other configurations, accompanied by a brief description. (v) Identification of each of the following service types the significant nonblanket licensee offers, or expects to offer, as part of its covered activities (the significant nonblanket licensee may, but is not required to, associate specific service types with specific digital phonorecord delivery configurations or with particular types of activities or offerings that may be defined in part 385 of this title): (A) Subscriptions. (B) Bundles. (C) Lockers. E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules (D) Discounted, but not free-to-theuser, services. (E) Free-to-the-user services. (F) Other applicable services, accompanied by a brief description. (vi) Any other information the significant nonblanket licensee wishes to provide. (6) Acknowledgement of whether the significant nonblanket licensee is operating under one or more individual download licenses. (7) The date of initial use of musical works pursuant to any covered activity. (8) Identification of any amendment made pursuant to paragraph (f) of this section, including the submission date of the notice being amended. (c) Certification and signature. The notice of nonblanket activity shall be signed by an appropriate duly authorized officer or representative of the significant nonblanket licensee. The signature shall be accompanied by the name and title of the person signing the notice and the date of the signature. The notice may be signed electronically. The person signing the notice shall certify that he or she has appropriate authority to submit the notice of nonblanket activity to the mechanical licensing collective on behalf of the significant nonblanket licensee and that all information submitted as part of the notice is true, accurate, and complete to the best of the signer’s knowledge, information, and belief, and is provided in good faith. (d) Submission, fees, and acceptance. Notices of nonblanket activity shall be submitted to the mechanical licensing collective in a manner reasonably determined by the collective. No fee may be charged for submitting notices of nonblanket activity. Upon submitting a notice of nonblanket activity to the mechanical licensing collective, a significant nonblanket licensee shall be provided with a prompt response from the collective confirming receipt of the notice and the date of receipt. (e) Harmless errors. Errors in the submission or content of a notice of nonblanket activity that do not materially affect the adequacy of the information required to serve the purposes of 17 U.S.C. 115(d) shall be deemed harmless, and shall not render the notice invalid or provide a basis for the mechanical licensing collective or digital licensee coordinator to engage in legal enforcement efforts under 17 U.S.C. 115(d)(6)(C). This paragraph (e) shall apply only to errors made in good faith and without any intention to deceive, mislead, or conceal relevant information. (f) Amendments. A significant nonblanket licensee must submit a new VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 notice of nonblanket activity with its report of usage that is next due after any of the information required by paragraphs (b)(1) through (7) of this section contained in the notice on file with the mechanical licensing collective has changed. An amended notice shall indicate that it is an amendment and shall contain the submission date of the notice being amended. The mechanical licensing collective shall retain copies of all prior notices of nonblanket activity submitted by a significant nonblanket licensee. (g) Transition to blanket licenses. Where a digital music provider that would otherwise qualify as a significant nonblanket licensee obtains a blanket license automatically pursuant to 17 U.S.C. 115(d)(9)(A) and does not seek to operate under the blanket license, if such licensee submits a valid notice of nonblanket activity within 45 calendar days after the license availability date in accordance with 17 U.S.C. 115(d)(6)(A)(i), such licensee shall not be considered to have ever operated under the statutory blanket license until such time as the licensee submits a valid notice of license pursuant to 17 U.S.C. 115(d)(2)(A). (h) Additional information. Nothing in this section shall be construed to prohibit the mechanical licensing collective from seeking additional information from a significant nonblanket licensee that is not required by this section, which the significant nonblanket licensee may voluntarily elect to provide, provided that the collective may not represent that such information is required to comply with the terms of this section. (i) Public access. The mechanical licensing collective shall maintain a current, free, and publicly accessible and searchable online list of all significant nonblanket licensees that, subject to any applicable confidentiality rules established by the Copyright Office, includes: (1) All information contained in each notice of nonblanket activity, including amended notices; (2) Contact information for all significant nonblanket licensees; (3) The date of receipt of each notice of nonblanket activity; and (4) For any amended notice, a clear indication of its amended status and its relationship to other relevant notices. § 210.26 Data collection and delivery efforts by digital music providers and musical work copyright owners. (a) General. This section prescribes rules under which digital music providers and musical work copyright owners shall engage in efforts to collect PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 22539 and provide information to the mechanical licensing collective that may assist the collective in matching musical works to sound recordings embodying those works and identifying and locating the copyright owners of those works. (b) Digital music providers. (1) Pursuant to 17 U.S.C. 115(d)(4)(B), in addition to obtaining sound recording names and featured artists and providing them in reports of usage, a digital music provider operating under a blanket license shall engage in goodfaith, commercially reasonable efforts to obtain from sound recording copyright owners and other licensors of sound recordings made available through the service(s) of such digital music provider the following information for each such sound recording embodying a musical work: (i) The sound recording copyright owner(s), producer(s), ISRC(s), and any other information commonly used in the industry to identify sound recordings and match them to the musical works the sound recordings embody as may be required by the Copyright Office to be included in reports of usage provided to the mechanical licensing collective by digital music providers. (ii) With respect to the musical work embodied in such sound recording, the songwriter(s), publisher name(s), ownership share(s), ISWC(s), and any other musical work authorship or ownership information as may be required by the Copyright Office to be included in reports of usage provided to the mechanical licensing collective by digital music providers. (2) As used in paragraph (b)(1) of this section, ‘‘good-faith, commercially reasonable efforts to obtain’’ shall include performing all of the following acts, subject to paragraph (b)(3) of this section: (i) Where the digital music provider has not obtained from applicable sound recording copyright owners or other licensors of sound recordings (or their representatives) all of the information listed in paragraph (b)(1) of this section, or where any such information was obtained before [effective date of final rule] and is no longer in such form that the digital music provider can use it to comply with paragraph (b)(2)(iii) of this section, the digital music provider shall have an ongoing and continuous obligation to, at least on a quarterly basis, request in writing such information from applicable sound recording copyright owners and other licensors of sound recordings. Such requests may be directed to a representative of any such owner or licensor. E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22540 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules (ii) With respect to any of the information listed in paragraph (b)(1) of this section that the digital music provider has obtained from applicable sound recording copyright owners or other licensors of sound recordings (or their representatives), the digital music provider shall have an ongoing and continuous obligation to, on a periodic basis or as otherwise requested by the mechanical licensing collective, request in writing from such owners or licensors any updates to any such information. Such requests may be directed to a representative of any such owner or licensor. (iii) Any information listed in paragraph (b)(1) of this section, including any updates to such information, provided to the digital music provider by sound recording copyright owners or other licensors of sound recordings (or their representatives) shall be delivered to the mechanical licensing collective in reports of usage in accordance with § 210.27(e). (3) Notwithstanding paragraph (b)(2) of this section, a digital music provider may satisfy its obligations under 17 U.S.C. 115(d)(4)(B) with respect to a particular sound recording by arranging, or collectively arranging with others, for the mechanical licensing collective to receive the information listed in paragraph (b)(1) of this section from an authoritative source, such as the collective designated by the Copyright Royalty Judges to collect and distribute royalties under the statutory licenses established in 17 U.S.C. 112 and 114, provided that such digital music provider does not know such source to lack such information for the relevant sound recording. Satisfying the requirements of 17 U.S.C. 115(d)(4)(B) in this manner does not excuse a digital music provider from having to report sound recording and musical work information in accordance with § 210.27(e). (4) The requirements of paragraph (b) of this section are without prejudice to what a court of competent jurisdiction may determine constitutes good-faith, commercially reasonable efforts for purposes of eligibility for the limitation on liability described in 17 U.S.C. 115(d)(10). (c) Musical work copyright owners. (1) Pursuant to 17 U.S.C. 115(d)(3)(E)(iv), each musical work copyright owner with any musical work listed in the musical works database shall engage in commercially reasonable efforts to deliver to the mechanical licensing collective, including for use in the musical works database, to the extent such information is not then available in VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 the database, information regarding the names of the sound recordings in which that copyright owner’s musical works (or shares thereof) are embodied, to the extent practicable. (2) As used in paragraph (c)(1) of this section, ‘‘information regarding the names of the sound recordings’’ shall include, for each applicable sound recording: (i) Sound recording name(s), including any alternative or parenthetical titles for the sound recording; (ii) Featured artist(s); and (iii) ISRC(s). (3) As used in paragraph (c)(1) of this section, ‘‘commercially reasonable efforts to deliver’’ shall include: (i) Periodically monitoring the musical works database for missing and inaccurate sound recording information relating to applicable musical works; and (ii) After finding any of the information listed in paragraph (c)(2) of this section to be missing or inaccurate as to any applicable musical work, promptly delivering complete and correct sound recording information to the mechanical licensing collective, by any means reasonably available to the copyright owner, if the information is known to or otherwise within the possession, custody, or control of the copyright owner. § 210.27 Reports of usage and payment for blanket licensees. (a) General. This section prescribes rules for the preparation and delivery of reports of usage and payment of royalties for the making and distribution of phonorecords of nondramatic musical works to the mechanical licensing collective by a digital music provider operating under a blanket license pursuant to 17 U.S.C. 115(d). A blanket licensee shall report and pay royalties to the mechanical licensing collective on a monthly basis in accordance with 17 U.S.C. 115(c)(2)(I), 17 U.S.C. 115(d)(4)(A), and this section. A blanket licensee shall also report to the mechanical licensing collective on an annual basis in accordance with 17 U.S.C. 115(c)(2)(I) and this section. A blanket licensee may make adjustments to its reports of usage and royalty payments in accordance with this section. (b) Definitions. For purposes of this section, in addition to those terms defined in § 210.22: (1) The term report of usage, unless otherwise specified, refers to all reports of usage required to be delivered by a blanket licensee to the mechanical licensing collective under the blanket PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 license, including reports of adjustment. As used in this section, it does not refer to reports required to be delivered by significant nonblanket licensees under 17 U.S.C. 115(d)(6)(A)(ii) and § 210.28. (2) A monthly report of usage is a report of usage accompanying monthly royalty payments identified in 17 U.S.C. 115(c)(2)(I) and 17 U.S.C. 115(d)(4)(A), and required to be delivered by a blanket licensee to the mechanical licensing collective under the blanket license. (3) An annual report of usage is a statement of account identified in 17 U.S.C. 115(c)(2)(I), and required to be delivered by a blanket licensee annually to the mechanical licensing collective under the blanket license. (4) A report of adjustment is a report delivered by a blanket licensee to the mechanical licensing collective under the blanket license adjusting one or more previously delivered monthly reports of usage or annual reports of usage, including related royalty payments. (c) Content of monthly reports of usage. A monthly report of usage shall be clearly and prominently identified as a ‘‘Monthly Report of Usage Under Compulsory Blanket License for Making and Distributing Phonorecords,’’ and shall include a clear statement of the following information: (1) The period (month and year) covered by the monthly report of usage. (2) The full legal name of the blanket licensee and, if different, the trade or consumer-facing brand name(s) of the service(s), including any specific offering(s), through which the blanket licensee engages in covered activities. If the blanket licensee has a unique DDEX identifier number, it must also be provided. (3) The full address, including a specific number and street name or rural route, of the place of business of the blanket licensee. A post office box or similar designation will not be sufficient except where it is the only address that can be used in that geographic location. (4) For each sound recording embodying a musical work that is used by the blanket licensee in covered activities during the applicable monthly reporting period, a detailed statement, from which the mechanical licensing collective may separate reported information for each applicable activity or offering including as may be defined in part 385 of this title, of all of: (i) The royalty payment and accounting information required by paragraph (d) of this section; and (ii) The sound recording and musical work information required by paragraph (e) of this section. E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules (5) For any voluntary license or individual download license in effect during the applicable monthly reporting period, the information required under § 210.24(b)(8). If this information has been separately provided to the mechanical licensing collective, it need not be contained in the monthly report of usage, provided the report states that the information has been provided separately and includes the date on which such information was last provided to the mechanical licensing collective. (6) Where the blanket licensee is not entitled to an invoice under paragraph (g)(1) of this section: (i) The total royalty payable by the blanket licensee under the blanket license for the applicable monthly reporting period, computed in accordance with the requirements of this section and part 385 of this title, and including detailed information regarding how the royalty was computed, with such total royalty payable broken down by each applicable activity or offering including as may be defined in part 385 of this title; and (ii) The amount of late fees, if applicable, included in the payment associated with the monthly report of usage. (d) Royalty payment and accounting information. The royalty payment and accounting information called for by paragraph (c)(4)(i) of this section shall consist of the following: (1) Calculations. (i) Where the blanket licensee is not entitled to an invoice under paragraph (g)(1) of this section, a detailed and step-by-step accounting of the calculation of royalties payable by the blanket licensee under the blanket license under applicable provisions of this section and part 385 of this title, sufficient to allow the mechanical licensing collective to assess the manner in which the blanket licensee determined the royalty owed and the accuracy of the royalty calculations, including but not limited to the number of payable units, including, as applicable, permanent downloads, plays, and constructive plays, for each reported sound recording, whether pursuant to a blanket license, voluntary license, or individual download license. (ii) Where the blanket licensee is entitled to an invoice under paragraph (g)(1) of this section, all information necessary for the mechanical licensing collective to compute, in accordance with the requirements of this section and part 385 of this title, the royalties payable by the blanket licensee under the blanket license, and all information necessary to enable the mechanical VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 licensing collective to provide a detailed and step-by-step accounting of the calculation of such royalties under applicable provisions of this section and part 385 of this title, sufficient to allow each applicable copyright owner to assess the manner in which the mechanical licensing collective, using the blanket licensee’s information, determined the royalty owed and the accuracy of the royalty calculations, including but not limited to the number of payable units, including, as applicable, permanent downloads, plays, and constructive plays, for each reported sound recording, whether pursuant to a blanket license, voluntary license, or individual download license. (2) Estimates. (i) Where computation of the royalties payable by the blanket licensee under the blanket license depends on an input that is unable to be finally determined at the time the report of usage is delivered to the mechanical licensing collective and where the reason the input cannot be finally determined is outside of the blanket licensee’s control (e.g., as applicable, the amount of applicable public performance royalties and the amount of applicable consideration for sound recording copyright rights), a reasonable estimation of such input, determined in accordance with GAAP, may be used or provided by the blanket licensee. Royalty payments based on such estimates shall be adjusted pursuant to paragraph (k) of this section after being finally determined. (ii) Where the blanket licensee is not entitled to an invoice under paragraph (g)(1) of this section, and the blanket licensee is dependent upon the mechanical licensing collective to confirm usage subject to applicable voluntary licenses and individual download licenses, the blanket licensee shall compute the royalties payable by the blanket licensee under the blanket license using a reasonable estimation of the amount of payment for such nonblanket usage to be deducted from royalties that would otherwise be due under the blanket license, determined in accordance with GAAP. Royalty payments based on such estimates shall be adjusted pursuant to paragraph (k) of this section after the mechanical licensing collective confirms such amount to be deducted and notifies the blanket licensee under paragraph (g)(2) of this section. Where the blanket licensee is entitled to an invoice under paragraph (g)(1) of this section, the blanket licensee shall not provide an estimate of or deduct such amount in the information delivered to the mechanical licensing collective under paragraph (d)(1)(ii) of this section. PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 22541 (3) Good faith. All information and calculations provided pursuant to paragraph (d) of this section shall be made in good faith and on the basis of the best knowledge, information, and belief of the blanket licensee at the time the report of usage is delivered to the mechanical licensing collective, and subject to any additional accounting and certification requirements under 17 U.S.C. 115 and this section. (e) Sound recording and musical work information. (1) The following information must be provided for each sound recording embodying a musical work required to be reported under paragraph (c)(4)(ii) of this section: (i) Identifying information for the sound recording, including but not limited to: (A) Sound recording name(s), including, to the extent practicable, all known alternative and parenthetical titles for the sound recording; (B) Featured artist(s); (C) Unique identifier(s) assigned by the blanket licensee, if any, including any code(s) that can be used to locate and listen to the sound recording through the blanket licensee’s publicfacing service; (D) Playing time; and (E) To the extent acquired by the blanket licensee in connection with its use of sound recordings of musical works to engage in covered activities, including pursuant to 17 U.S.C. 115(d)(4)(B), and to the extent practicable: (1) Sound recording copyright owner(s); (2) Producer(s); (3) ISRC(s); (4) Any other unique identifier(s) for or associated with the sound recording, including any unique identifier(s) for any associated album, including but not limited to: (i) Catalog number(s); (ii) UPC(s); and (iii) Unique identifier(s) assigned by any distributor; (5) Version(s); (6) Release date(s); (7) Album title(s); (8) Label name(s); (9) Distributor(s); and (10) Other information commonly used in the industry to identify sound recordings and match them to the musical works the sound recordings embody. (ii) Identifying information for the musical work embodied in the reported sound recording, to the extent acquired by the blanket licensee in the metadata provided by sound recording copyright owners or other licensors of sound recordings in connection with the use of E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22542 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules sound recordings of musical works to engage in covered activities, including pursuant to 17 U.S.C. 115(d)(4)(B), and to the extent practicable: (A) Information concerning authorship and ownership of the applicable rights in the musical work embodied in the sound recording, including but not limited to: (1) Songwriter(s); (2) Publisher(s) with applicable U.S. rights; (3) Musical work copyright owner(s); (4) ISNI(s) and IPI(s) for each such songwriter, publisher, and musical work copyright owner; and (5) Respective ownership shares of each such musical work copyright owner; (B) ISWC(s) for the musical work embodied in the sound recording; and (C) Musical work name(s) for the musical work embodied in the sound recording, including any alternative or parenthetical titles for the musical work. (iii) Whether the blanket licensee, or any corporate parent or subsidiary of the blanket licensee, is a copyright owner of the musical work embodied in the sound recording. (2) Subject to paragraph (e)(3) of this section, where any of the information called for by paragraph (e)(1) of this section is acquired by the blanket licensee from sound recording copyright owners or other licensors of sound recordings (or their representatives), and the blanket licensee revises, re-titles, or otherwise edits or modifies the information, it shall be sufficient for the blanket licensee to report either the originally acquired version or the modified version of such information to satisfy its obligations under paragraph (e)(1) of this section, unless one or more of the following scenarios apply, in which case either the unaltered version or both versions must be reported: (i) If the mechanical licensing collective has adopted a particular nationally or internationally recognized reporting or data standard or format (e.g., DDEX) that is being used by the particular blanket licensee, and either the unaltered version or both versions are required to be reported under such standard or format. (ii) Either the unaltered version or both versions are reported by the particular blanket licensee pursuant to any voluntary license or individual download license. (iii) Either the unaltered version or both versions were periodically reported by the particular blanket licensee prior to the license availability date. (3) Notwithstanding paragraph (e)(2) of this section, a blanket licensee shall not be able to satisfy its obligations VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 under paragraph (e)(1) of this section by reporting a modified version of any information belonging to a category of information that was not periodically revised, re-titled, or otherwise edited or modified by the particular blanket licensee prior to the license availability date, and in no case shall a modified version of any unique identifier (including but not limited to ISRC and ISWC), playing time, or release date be sufficient to satisfy a blanket licensee’s obligations under paragraph (e)(1) of this section. (4) Any obligation under paragraph (e)(1) of this section concerning information about sound recording copyright owners may be satisfied by reporting the information for applicable sound recordings provided to the blanket licensee by sound recording copyright owners or other licensors of sound recordings (or their representatives) contained in each of the following DDEX fields: DDEX Party Identifier (DPID), LabelName, and PLine. Where a blanket licensee acquires this information in addition to other information identifying a relevant sound recording copyright owner, all such information must be reported to the extent practicable. (5) As used in paragraph (e) of this section, it is practicable to provide the enumerated information if: (i) It belongs to a category of information expressly required by the enumerated list of information contained in 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa) or (bb); (ii) Where the mechanical licensing collective has adopted a particular nationally or internationally recognized reporting or data standard or format (e.g., DDEX) that is being used by the particular blanket licensee, it belongs to a category of information required to be reported under such standard or format; (iii) It belongs to a category of information that is reported by the particular blanket licensee pursuant to any voluntary license or individual download license; or (iv) It belongs to a category of information that was periodically reported by the particular blanket licensee prior to the license availability date. (f) Content of annual reports of usage. An annual report of usage, covering the full fiscal year of the blanket licensee, shall be clearly and prominently identified as an ‘‘Annual Report of Usage Under Compulsory Blanket License for Making and Distributing Phonorecords,’’ and shall include a clear statement of the following information: PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 (1) The fiscal year covered by the annual report of usage. (2) The full legal name of the blanket licensee and, if different, the trade or consumer-facing brand name(s) of the service(s), including any specific offering(s), through which the blanket licensee engages in covered activities. If the blanket licensee has a unique DDEX identifier number, it must also be provided. (3) The full address, including a specific number and street name or rural route, of the place of business of the blanket licensee. A post office box or similar designation will not be sufficient except where it is the only address that can be used in that geographic location. (4) The following information, cumulative for the applicable annual reporting period, for each month for each applicable activity or offering including as may be defined in part 385 of this title, and broken down by month and by each such applicable activity or offering: (i) The total royalty payable by the blanket licensee under the blanket license, computed in accordance with the requirements of this section and part 385 of this title. (ii) The total sum paid to the mechanical licensing collective under the blanket license, including the amount of any adjustment delivered contemporaneously with the annual report of usage. (iii) The total adjustment(s) made by any report of adjustment adjusting any monthly report of usage covered by the applicable annual reporting period, including any adjustment made in connection with the annual report of usage as described in paragraph (k)(1) of this section. (iv) The total number of payable units, including, as applicable, permanent downloads, plays, and constructive plays, for each sound recording used, whether pursuant to a blanket license, voluntary license, or individual download license. (v) To the extent applicable to the calculation of royalties owed by the blanket licensee under the blanket license: (A) Total service provider revenue, as may be defined in part 385 of this title. (B) Total costs of content, as may be defined in part 385 of this title. (C) Total deductions of performance royalties, as may be defined in and permitted by part 385 of this title. (D) Total subscribers, as may be defined in part 385 of this title. (5) The amount of late fees, if applicable, included in any payment associated with the annual report of usage. E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules (g) Processing and timing. (1) Each monthly report of usage and related royalty payment must be delivered to the mechanical licensing collective no later than 45 calendar days after the end of the applicable monthly reporting period. Where a monthly report of usage satisfying the requirements of 17 U.S.C. 115 and this section is delivered to the mechanical licensing collective no later than 15 calendar days after the end of the applicable monthly reporting period, the blanket licensee shall be entitled to receive an invoice from the mechanical licensing collective setting forth the royalties payable by the blanket licensee under the blanket license for the applicable monthly reporting period, which shall be broken down by each applicable activity or offering including as may be defined in part 385 of this title. (2) After receiving a monthly report of usage, the mechanical licensing collective shall engage in the following actions, among any other actions required of it: (i) The mechanical licensing collective shall engage in efforts to identify the musical works embodied in sound recordings reflected in such report, and the copyright owners of such musical works (and shares thereof). (ii) The mechanical licensing collective shall engage in efforts to confirm uses of musical works subject to voluntary licenses and individual download licenses, and, if applicable, the corresponding amounts to be deducted from royalties that would otherwise be due under the blanket license. (iii) Where the blanket licensee is not entitled to an invoice under paragraph (g)(1) of this section, the mechanical licensing collective shall engage in efforts to confirm proper payment of the royalties payable by the blanket licensee under the blanket license for the applicable monthly reporting period, computed in accordance with the requirements of this section and part 385 of this title, after accounting for, if applicable, amounts to be deducted under paragraph (g)(2)(ii) of this section. (iv) Where the blanket licensee is entitled to an invoice under paragraph (g)(1) of this section, the mechanical licensing collective shall engage in efforts to compute, in accordance with the requirements of this section and part 385 of this title, the royalties payable by the blanket licensee under the blanket license for the applicable monthly reporting period, after accounting for, if applicable, amounts to be deducted under paragraph (g)(2)(ii) of this section. (v) Where the blanket licensee is entitled to an invoice under paragraph VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 (g)(1) of this section, the mechanical licensing collective shall deliver such invoice to the blanket licensee no later than 40 calendar days after the end of the applicable monthly reporting period. (vi) The mechanical licensing collective shall deliver a response file to the blanket licensee if requested by the blanket licensee. Where the blanket licensee is entitled to an invoice under paragraph (g)(1) of this section, the mechanical licensing collective shall deliver the response file to the blanket licensee contemporaneously with such invoice. Where the blanket licensee is not entitled to an invoice under paragraph (g)(1) of this section, the mechanical licensing collective shall deliver the response file to the blanket licensee no later than 70 calendar days after the end of the applicable monthly reporting period. In all cases, the response file shall contain such information as is common in the industry to be reported in response files, backup files, and any other similar such files provided to digital music providers by applicable third-party administrators, and shall include the results of the process described in paragraphs (g)(2)(i) through (iv) of this section on a trackby-track and ownership-share basis, with updates to reflect any new results from the previous month. (3) Each annual report of usage and, if any, related royalty payment must be delivered to the mechanical licensing collective no later than the 20th day of the sixth month following the end of the fiscal year covered by the annual report of usage. (4) The required timing for any report of adjustment and, if any, related royalty payment shall be as follows: (i) Where a report of adjustment adjusting a monthly report of usage is not combined with an annual report of usage, as described in paragraph (k)(1) of this section, a report of adjustment adjusting a monthly report of usage must be delivered to the mechanical licensing collective after delivery of the monthly report of usage being adjusted and before delivery of the annual report of usage for the annual period covering such monthly report of usage. (ii) A report of adjustment adjusting an annual report of usage must be delivered to the mechanical licensing collective no later than 6 months after the occurrence of any of the scenarios specified by paragraph (k)(6) of this section, where such an event necessitates an adjustment. Where more than one scenario applies to the same annual report of usage at different points in time, a separate 6-month PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 22543 period runs for each such triggering event. (h) Format and delivery. (1) Reports of usage shall be delivered to the mechanical licensing collective in a machine-readable format that is compatible with the information technology systems of the mechanical licensing collective as reasonably determined by the mechanical licensing collective and set forth on its website, taking into consideration relevant industry standards and the potential for different degrees of sophistication among blanket licensees. The mechanical licensing collective must offer at least two options, where one is dedicated to smaller blanket licensees that may not be reasonably capable of complying with the requirements of a reporting or data standard or format that the mechanical licensing collective may see fit to adopt for larger blanket licensees with more sophisticated operations. Nothing in this section shall be construed as prohibiting the mechanical licensing collective from adopting more than two reporting or data standards or formats. (2) Royalty payments shall be delivered to the mechanical licensing collective in such manner and form as the mechanical licensing collective may reasonably determine and set forth on its website. A report of usage and its related royalty payment may be delivered together or separately, but if delivered separately, the payment must include information reasonably sufficient to allow the mechanical licensing collective to match the report of usage to the payment. (3) The mechanical licensing collective may modify the requirements it adopts under paragraphs (h)(1) and (2) of this section at any time, provided that advance notice of any such change is reflected on its website and delivered to blanket licensees using the contact information provided in each respective licensee’s notice of license. A blanket licensee shall not be required to comply with any such change before the first reporting period ending at least 30 calendar days after delivery of such notice, unless such change is a significant change, in which case, compliance shall not be required before the first reporting period ending at least 6 months after delivery of such notice. For purposes of this paragraph (h)(3), a significant change occurs as to a particular blanket licensee where the mechanical licensing collective changes any policy requiring information to be provided under particular reporting or data standards or formats being used by the blanket licensee, or where the mechanical licensing collective has E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22544 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules adopted a particular nationally or internationally recognized reporting or data standard or format (e.g., DDEX) that is being used by the blanket licensee and such standard or format is modified by the standard-setting organization. Where delivery of the notice required by this paragraph (h)(3) is attempted but unsuccessful because the contact information in the blanket licensee’s notice of license is not current, the grace periods established by this paragraph (h)(3) shall begin to run from the date of attempted delivery. (4) The mechanical licensing collective shall, by no later than the license availability date, establish an appropriate process by which any blanket licensee may voluntarily make advance deposits of funds with the mechanical licensing collective against which future royalty payments may be charged. (5) A separate monthly report of usage shall be delivered for each month during which there is any activity relevant to the payment of mechanical royalties for covered activities. An annual report of usage shall be delivered for each fiscal year during which at least one monthly report of usage was required to have been delivered. An annual report of usage does not replace any monthly report of usage. (6) Where a blanket licensee attempts to timely deliver a report of usage and/ or related royalty payment to the mechanical licensing collective but cannot because of the fault of the collective or an error, outage, disruption, or other issue with any of the collective’s applicable information technology systems (whether or not such issue is within the collective’s direct control), if the blanket licensee attempts to contact the collective about the problem within 2 business days, provides a sworn statement detailing the encountered problem to the Copyright Office within 5 business days (emailed to the Office of the General Counsel at USCOGeneralCounsel@copyright.gov), and delivers the report of usage and/or related royalty payment to the collective within 5 business days after receiving written notice from the collective that the problem is resolved, then the mechanical licensing collective shall act as follows: (i) The mechanical licensing collective shall fully credit the blanket licensee for any applicable late fee paid by the blanket licensee as a result of the untimely delivery of the report of usage and/or related royalty payment. (ii) The mechanical licensing collective shall not use the untimely delivery of the report of usage and/or related royalty payment as a basis to VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 terminate the blanket licensee’s blanket license. (i) Certification of monthly reports of usage. Each monthly report of usage shall be accompanied by: (1) The name of the person who is signing and certifying the monthly report of usage. (2) A signature, which in the case of a blanket licensee that is a corporation or partnership, shall be the signature of a duly authorized officer of the corporation or of a partner. (3) The date of signature and certification. (4) If the blanket licensee is a corporation or partnership, the title or official position held in the partnership or corporation by the person who is signing and certifying the monthly report of usage. (5) One of the following statements: (i) Statement one: I certify that (1) I am duly authorized to sign this monthly report of usage on behalf of the blanket licensee; (2) I have examined this monthly report of usage; and (3) all statements of fact contained herein are true, complete, and correct to the best of my knowledge, information, and belief, and are made in good faith. (ii) Statement two: I certify that (1) I am duly authorized to sign this monthly report of usage on behalf of the blanket licensee, (2) I have prepared or supervised the preparation of the data used by the blanket licensee and/or its agent to generate this monthly report of usage, (3) such data is true, complete, and correct to the best of my knowledge, information, and belief, and was prepared in good faith, and (4) this monthly report of usage was prepared by the blanket licensee and/or its agent using processes and internal controls that were subject to an examination, during the past year, by a licensed certified public accountant in accordance with the attestation standards established by the American Institute of Certified Public Accountants, the opinion of whom was that the processes and internal controls were suitably designed to generate monthly reports of usage that accurately reflect, in all material respects, the blanket licensee’s usage of musical works, the statutory royalties applicable thereto, and any other data that is necessary for the proper calculation of the statutory royalties in accordance with 17 U.S.C. 115 and applicable regulations. (6) A certification that the blanket licensee has, for the period covered by the monthly report of usage, engaged in good-faith, commercially reasonable efforts to obtain information about applicable sound recordings and musical works pursuant to 17 U.S.C. 115(d)(4)(B) and § 210.26. (j) Certification of annual reports of usage. (1) Each annual report of usage shall be accompanied by: PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 (i) The name of the person who is signing the annual report of usage on behalf of the blanket licensee. (ii) A signature, which in the case of a blanket licensee that is a corporation or partnership, shall be the signature of a duly authorized officer of the corporation or of a partner. (iii) The date of signature. (iv) If the blanket licensee is a corporation or partnership, the title or official position held in the partnership or corporation by the person signing the annual report of usage. (v) The following statement: I am duly authorized to sign this annual report of usage on behalf of the blanket licensee. (vi) A certification that the blanket licensee has, for the period covered by the annual report of usage, engaged in good-faith, commercially reasonable efforts to obtain information about applicable sound recordings and musical works pursuant to 17 U.S.C. 115(d)(4)(B) and § 210.26. (2) Each annual report of usage shall also be certified by a licensed certified public accountant. Such certification shall comply with the following requirements: (i) Except as provided in paragraph (j)(2)(ii) of this section, the accountant shall certify that it has conducted an examination of the annual report of usage prepared by the blanket licensee in accordance with the attestation standards established by the American Institute of Certified Public Accountants, and has rendered an opinion based on such examination that the annual report of usage conforms with the standards in paragraph (j)(2)(iv) of this section. (ii) If such accountant determines in its professional judgment that the volume of data attributable to a particular blanket licensee renders it impracticable to certify the annual report of usage as required by paragraph (j)(2)(i) of this section, the accountant may instead certify the following: (A) That the accountant has conducted an examination in accordance with the attestation standards established by the American Institute of Certified Public Accountants of the following assertions by the blanket licensee’s management: (1) That the processes used by or on behalf of the blanket licensee, including calculation of statutory royalties, generated annual reports of usage that conform with the standards in paragraph (j)(2)(iv) of this section; and (2) That the internal controls relevant to the processes used by or on behalf of the blanket licensee to generate annual reports of usage were suitably designed and operated effectively during the E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules period covered by the annual reports of usage. (B) That such examination included examining, either on a test basis or otherwise as the accountant considered necessary under the circumstances and in its professional judgment, evidence supporting the management assertions in paragraph (j)(2)(ii)(A) of this section, including data relevant to the calculation of statutory royalties, and performing such other procedures as the accountant considered necessary in the circumstances. (C) That the accountant has rendered an opinion based on such examination that the processes used to generate the annual report of usage were designed and operated effectively to generate annual reports of usage that conform with the standards in paragraph (j)(2)(iv) of this section, and that the internal controls relevant to the processes used to generate annual reports of usage were suitably designed and operated effectively during the period covered by the annual reports of usage. (iii) In the event a third party or third parties acting on behalf of the blanket licensee provided services related to the annual report of usage, the accountant making a certification under either paragraph (j)(2)(i) or (ii) of this section may, as the accountant considers necessary under the circumstances and in its professional judgment, rely on a report and opinion rendered by a licensed certified public accountant in accordance with the attestation standards established by the American Institute of Certified Public Accountants that the processes and/or internal controls of the third party or third parties relevant to the generation of the blanket licensee’s annual reports of usage were suitably designed and operated effectively during the period covered by the annual reports of usage, if such reliance is disclosed in the certification. (iv) An annual report of usage conforms with the standards of this paragraph (j) if it presents fairly, in all material respects, the blanket licensee’s usage of the copyright owner’s musical works under blanket license during the period covered by the annual report of usage, the statutory royalties applicable thereto, and such other data as are relevant to the calculation of statutory royalties in accordance with 17 U.S.C. 115 and applicable regulations. (v) Each certificate shall be signed by an individual, or in the name of a partnership or a professional corporation with two or more shareholders. The certificate number and jurisdiction are not required if the certificate is signed in the name of a VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 partnership or a professional corporation with two or more shareholders. (3) If the annual report of usage is delivered electronically, the blanket licensee may deliver an electronic facsimile of the original certification of the annual report of usage signed by the licensed certified public accountant. The blanket licensee shall retain the original certification of the annual report of usage signed by the licensed certified public accountant for the period identified in paragraph (m) of this section, which shall be made available to the mechanical licensing collective upon demand. (k) Adjustments. (1) A blanket licensee may adjust one or more previously delivered monthly reports of usage or annual reports of usage, including related royalty payments, by delivering to the mechanical licensing collective a report of adjustment. A report of adjustment adjusting one or more monthly reports of usage may, but need not, be combined with the annual report of usage for the annual period covering such monthly reports of usage and related payments. In such cases, such an annual report of usage shall also be considered a report of adjustment, and must satisfy the requirements of both paragraphs (f) and (k) of this section. (2) A report of adjustment, except when combined with an annual report of usage, shall be clearly and prominently identified as a ‘‘Report of Adjustment Under Compulsory Blanket License for Making and Distributing Phonorecords.’’ A report of adjustment that is combined with an annual report of usage shall be identified in the same manner as any other annual report of usage. (3) A report of adjustment shall include a clear statement of the following information: (i) The previously delivered monthly reports of usage or annual reports of usage, including related royalty payments, to which the adjustment applies. (ii) The specific change(s) to the applicable previously delivered monthly reports of usage or annual reports of usage, including the monetary amount of the adjustment and a detailed description of any changes to any of the inputs upon which computation of the royalties payable by the blanket licensee under the blanket license depends. Such description shall include a detailed and step-by-step accounting of the calculation of the adjustment sufficient to allow the mechanical licensing collective to assess the manner in which the blanket licensee determined the PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 22545 adjustment and the accuracy of the adjustment. As appropriate, an adjustment may be calculated using estimates permitted under paragraph (d)(2)(i) of this section. (iii) Where applicable, the particular sound recordings and uses to which the adjustment applies. (iv) A description of the reason(s) for the adjustment. (4) In the case of an underpayment of royalties, the blanket licensee shall pay the difference to the mechanical licensing collective contemporaneously with delivery of the report of adjustment. A report of adjustment and its related royalty payment may be delivered together or separately, but if delivered separately, the payment must include information reasonably sufficient to allow the mechanical licensing collective to match the report of adjustment to the payment. (5) In the case of an overpayment of royalties, the mechanical licensing collective shall appropriately credit or offset the excess payment amount and apply it to the blanket licensee’s account. (6) A report of adjustment adjusting an annual report of usage may only be made: (i) In exceptional circumstances; (ii) When making an adjustment to a previously estimated input under paragraph (d)(2)(i) of this section; (iii) Following an audit under 17 U.S.C. 115(d)(4)(D); or (iv) In response to a change in applicable rates or terms under part 385 of this title. (7) A report of adjustment adjusting a monthly report of usage must be certified in the same manner as a monthly report of usage under paragraph (i) of this section. A report of adjustment adjusting an annual report of usage must be certified in the same manner as an annual report of usage under paragraph (j) of this section, except that the examination by a certified public accountant under paragraph (j)(2) of this section may be limited to the adjusted material and related recalculation of royalties payable. Where a report of adjustment is combined with an annual report of usage, its content shall be subject to the certification covering the annual report of usage with which it is combined. (l) Clear statements. The information required by this section requires intelligible, legible, and unambiguous statements in the reports of usage, without incorporation by reference of facts or information contained in other documents or records. (m) Documentation and records of use. (1) Each blanket licensee shall, for E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22546 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules a period of at least five years from the date of delivery of a report of usage to the mechanical licensing collective, keep and retain in its possession all records and documents necessary and appropriate to support fully the information set forth in such report of usage, including but not limited to the following: (i) Records and documents accounting for digital phonorecord deliveries that do not constitute plays, constructive plays, or other payable units. (ii) Records and documents pertaining to any promotional or free trial uses that are required to be maintained under applicable provisions of part 385 of this title. (iii) Records and documents identifying or describing each of the blanket licensee’s applicable activities or offerings including as may be defined in part 385 of this title, including information sufficient to reasonably demonstrate whether the activity or offering qualifies as any particular activity or offering for which specific rates and terms have been established in part 385 of this title, and which specific rates and terms apply to such activity or offering. (iv) Records and documents with information sufficient to reasonably demonstrate, if applicable, whether service revenue and total cost of content, as those terms may be defined in part 385 of this title, are properly calculated in accordance with part 385 of this title. (v) Records and documents with information sufficient to reasonably demonstrate whether and how any royalty floor established in part 385 of this title does or does not apply. (vi) Records and documents containing such other information as is necessary to reasonably support and confirm all usage and calculations contained in the report of usage, including but not limited to, as applicable, relevant information concerning subscriptions, devices and platforms, discount plans (including how eligibility was assessed), bundled offerings (including their constituent components and pricing information), and numbers of end users and subscribers (including unadjusted numbers and numbers adjusted as may be permitted by part 385 of this title). (vii) Any other records or documents that may be appropriately examined pursuant to an audit under 17 U.S.C. 115(d)(4)(D). (2) Each blanket licensee shall, for the period described in paragraph (m)(3) of this section, keep and retain in its possession the following additional records and documents: VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 (i) With respect to each sound recording, that embodies a musical work, first licensed or obtained for use in covered activities by the blanket licensee after the effective date of its blanket license, one or more of the following dates: (A) The date on which the sound recording is first reproduced by the blanket licensee on its server; (B) The date on which the blanket licensee first obtains the sound recording; or (C) The date of the grant first authorizing the blanket licensee’s use of the sound recording. (ii) A record of all sound recordings embodying musical works in its database or similar electronic system as of immediately prior to the effective date of its blanket license. (3) The records and documents described in paragraph (m)(2) of this section must be kept and retained for a period of at least five years from the relevant date described in paragraph (m)(2) of this section, provided that at least 90 calendar days before destroying or discarding any such records or documents the blanket licensee notifies the mechanical licensing collective in writing and provides an opportunity for the collective to claim and retrieve such records and documents. In no event shall a blanket licensee be required to keep and retain any such records or documents for more than 50 years. (4) The mechanical licensing collective or its agent shall be entitled to reasonable access to all records and documents described in this paragraph (m) upon reasonable request, subject to any applicable confidentiality rules established by the Copyright Office. Each report of usage must include clear instructions on how to request such access to such records and documents. (n) Voluntary agreements with mechanical licensing collective to alter process. Subject to the provisions of 17 U.S.C. 115, a blanket licensee and the mechanical licensing collective may agree to vary or supplement the procedures described in this section, including but not limited to pursuant to an agreement to administer a voluntary license, provided that any such change does not materially prejudice copyright owners owed royalties due under a blanket license. The procedures surrounding the certification requirements of paragraphs (i) and (j) of this section may not be altered by agreement. § 210.28 Reports of usage for significant nonblanket licensees. (a) General. This section prescribes rules for the preparation and delivery of PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 reports of usage for the making and distribution of phonorecords of nondramatic musical works to the mechanical licensing collective by a significant nonblanket licensee pursuant to 17 U.S.C. 115(d)(6)(A)(ii). A significant nonblanket licensee shall report to the mechanical licensing collective on a monthly basis in accordance with 17 U.S.C. 115(d)(6)(A)(ii) and this section. A significant nonblanket licensee may make adjustments to its reports of usage in accordance with this section. (b) Definitions. For purposes of this section, in addition to those terms defined in § 210.22: (1) The term report of usage, unless otherwise specified, refers to all reports of usage required to be delivered by a significant nonblanket licensee to the mechanical licensing collective, including reports of adjustment. As used in this section, it does not refer to reports required to be delivered by blanket licensees under 17 U.S.C. 115(d)(4)(A) and § 210.27. (2) A monthly report of usage is a report of usage identified in 17 U.S.C. 115(d)(6)(A)(ii), and required to be delivered by a significant nonblanket licensee to the mechanical licensing collective. (3) A report of adjustment is a report delivered by a significant nonblanket licensee to the mechanical licensing collective adjusting one or more previously delivered monthly reports of usage. (c) Content of monthly reports of usage. A monthly report of usage shall be clearly and prominently identified as a ‘‘Significant Nonblanket Licensee Monthly Report of Usage for Making and Distributing Phonorecords,’’ and shall include a clear statement of the following information: (1) The period (month and year) covered by the monthly report of usage. (2) The full legal name of the significant nonblanket licensee and, if different, the trade or consumer-facing brand name(s) of the service(s), including any specific offering(s), through which the significant nonblanket licensee engages in covered activities. If the significant nonblanket licensee has a unique DDEX identifier number, it must also be provided. (3) The full address, including a specific number and street name or rural route, of the place of business of the significant nonblanket licensee. A post office box or similar designation will not be sufficient except where it is the only address that can be used in that geographic location. (4) For each sound recording embodying a musical work that is used E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules by the significant nonblanket licensee in covered activities during the applicable monthly reporting period, a detailed statement, from which the mechanical licensing collective may separate reported information for each applicable activity or offering including as may be defined in part 385 of this title, of all of: (i) The royalty payment and accounting information required by paragraph (d) of this section; and (ii) The sound recording and musical work information required by paragraph (e) of this section. (5) For each voluntary license and individual download license in effect during the applicable monthly reporting period, the information required under § 210.24(b)(8). If this information has been separately provided to the mechanical licensing collective, it need not be contained in the monthly report of usage, provided the report states that the information has been provided separately and includes the date on which such information was last provided to the mechanical licensing collective. (d) Royalty payment and accounting information. The royalty payment and accounting information called for by paragraph (c)(4)(i) of this section shall consist of the following: (1) The mechanical royalties payable by the significant nonblanket licensee for the applicable monthly reporting period for engaging in covered activities pursuant to each applicable voluntary license and individual download license. (2) The number of payable units, including, as applicable, permanent downloads, plays, and constructive plays, for each reported sound recording. (e) Sound recording and musical work information. (1) The following information must be provided for each sound recording embodying a musical work required to be reported under paragraph (c)(4)(ii) of this section: (i) Identifying information for the sound recording, including but not limited to: (A) Sound recording name(s), including, to the extent practicable, all known alternative and parenthetical titles for the sound recording; (B) Featured artist(s); (C) Unique identifier(s) assigned by the significant nonblanket licensee, if any, including any code(s) that can be used to locate and listen to the sound recording through the significant nonblanket licensee’s public-facing service; (D) Playing time; and (E) To the extent acquired by the significant nonblanket licensee in VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 connection with its use of sound recordings of musical works to engage in covered activities, and to the extent practicable: (1) Sound recording copyright owner(s); (2) Producer(s); (3) ISRC(s); (4) Any other unique identifier(s) for or associated with the sound recording, including any unique identifier(s) for any associated album, including but not limited to: (i) Catalog number(s); (ii) UPC(s); and (iii) Unique identifier(s) assigned by any distributor; (5) Version(s); (6) Release date(s); (7) Album title(s); (8) Label name(s); (9) Distributor(s); and (10) Other information commonly used in the industry to identify sound recordings and match them to the musical works the sound recordings embody. (ii) Identifying information for the musical work embodied in the reported sound recording, to the extent acquired by the significant nonblanket licensee in the metadata provided by sound recording copyright owners or other licensors of sound recordings in connection with the use of sound recordings of musical works to engage in covered activities, and to the extent practicable: (A) Information concerning authorship and ownership of the applicable rights in the musical work embodied in the sound recording, including but not limited to: (1) Songwriter(s); (2) Publisher(s) with applicable U.S. rights; (3) Musical work copyright owner(s); (4) ISNI(s) and IPI(s) for each such songwriter, publisher, and musical work copyright owner; and (5) Respective ownership shares of each such musical work copyright owner; (B) ISWC(s) for the musical work embodied in the sound recording; and (C) Musical work name(s) for the musical work embodied in the sound recording, including any alternative or parenthetical titles for the musical work. (iii) Whether the significant nonblanket licensee, or any corporate parent or subsidiary of the significant nonblanket licensee, is a copyright owner of the musical work embodied in the sound recording. (2) Subject to paragraph (e)(3) of this section, where any of the information called for by paragraph (e)(1) of this section is acquired by the significant PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 22547 nonblanket licensee from sound recording copyright owners or other licensors of sound recordings (or their representatives), and the significant nonblanket licensee revises, re-titles, or otherwise edits or modifies the information, it shall be sufficient for the significant nonblanket licensee to report either the originally acquired version or the modified version of such information to satisfy its obligations under paragraph (e)(1) of this section, unless one or more of the following scenarios apply, in which case either the unaltered version or both versions must be reported: (i) If the mechanical licensing collective has adopted a particular nationally or internationally recognized reporting or data standard or format (e.g., DDEX) that is being used by the particular significant nonblanket licensee, and either the unaltered version or both versions are required to be reported under such standard or format. (ii) Either the unaltered version or both versions are reported by the particular significant nonblanket licensee pursuant to any voluntary license or individual download license. (iii) Either the unaltered version or both versions were periodically reported by the particular significant nonblanket licensee prior to the license availability date. (3) Notwithstanding paragraph (e)(2) of this section, a significant nonblanket licensee shall not be able to satisfy its obligations under paragraph (e)(1) of this section by reporting a modified version of any information belonging to a category of information that was not periodically revised, re-titled, or otherwise edited or modified by the particular significant nonblanket licensee prior to the license availability date, and in no case shall a modified version of any unique identifier (including but not limited to ISRC and ISWC), playing time, or release date be sufficient to satisfy a significant nonblanket licensee’s obligations under paragraph (e)(1) of this section. (4) Any obligation under paragraph (e)(1) of this section concerning information about sound recording copyright owners may be satisfied by reporting the information for applicable sound recordings provided to the significant nonblanket licensee by sound recording copyright owners or other licensors of sound recordings (or their representatives) contained in each of the following DDEX fields: DDEX Party Identifier (DPID), LabelName, and PLine. Where a significant nonblanket licensee acquires this information in addition to other information E:\FR\FM\22APP2.SGM 22APP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 22548 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules identifying a relevant sound recording copyright owner, all such information must be reported to the extent practicable. (5) As used in paragraph (e) of this section, it is practicable to provide the enumerated information if: (i) It belongs to a category of information expressly required by the enumerated list of information contained in 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa) or (bb); (ii) Where the mechanical licensing collective has adopted a particular nationally or internationally recognized reporting or data standard or format (e.g., DDEX) that is being used by the particular significant nonblanket licensee, it belongs to a category of information required to be reported under such standard or format; (iii) It belongs to a category of information that is reported by the particular significant nonblanket licensee pursuant to any voluntary license or individual download license; or (iv) It belongs to a category of information that was periodically reported by the particular significant nonblanket licensee prior to the license availability date. (f) Timing. (1) An initial report of usage must be delivered to the mechanical licensing collective contemporaneously with the significant nonblanket licensee’s notice of nonblanket activity. Each subsequent monthly report of usage must be delivered to the mechanical licensing collective no later than 45 calendar days after the end of the applicable monthly reporting period. (2) A report of adjustment may only be delivered to the mechanical licensing collective once annually, between the end of the significant nonblanket licensee’s fiscal year and 6 months after the end of its fiscal year. Such report may only adjust one or more previously delivered monthly reports of usage from the applicable fiscal year. (g) Format and delivery. (1) Reports of usage shall be delivered to the mechanical licensing collective in any format accepted by the mechanical licensing collective for blanket licensees under § 210.27(h). With respect to any modifications to formatting requirements that the mechanical licensing collective adopts, significant nonblanket licensees shall be entitled to the same advance notice and grace periods as apply to blanket licensees under § 210.27(h), except the mechanical licensing collective shall use the contact information provided in each respective significant nonblanket licensee’s notice of nonblanket activity. VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 (2) A separate monthly report of usage shall be delivered for each month during which there is any activity relevant to the payment of mechanical royalties for covered activities. (3) Where a significant nonblanket licensee attempts to timely deliver a report of usage to the mechanical licensing collective but cannot because of the fault of the collective or an error, outage, disruption, or other issue with any of the collective’s applicable information technology systems (whether or not such issue is within the collective’s direct control), if the significant nonblanket licensee attempts to contact the collective about the problem within 2 business days, provides a sworn statement detailing the encountered problem to the Copyright Office within 5 business days (emailed to the Office of the General Counsel at USCOGeneralCounsel@copyright.gov), and delivers the report of usage to the collective within 5 business days after receiving written notice from the collective that the problem is resolved, then neither the mechanical licensing collective nor the digital licensee coordinator may use the untimely delivery of the report of usage as a basis to engage in legal enforcement efforts under 17 U.S.C. 115(d)(6)(C). (h) Certification of monthly reports of usage. Each monthly report of usage shall be accompanied by: (1) The name of the person who is signing and certifying the monthly report of usage. (2) A signature, which in the case of a significant nonblanket licensee that is a corporation or partnership, shall be the signature of a duly authorized officer of the corporation or of a partner. (3) The date of signature and certification. (4) If the significant nonblanket licensee is a corporation or partnership, the title or official position held in the partnership or corporation by the person who is signing and certifying the monthly report of usage. (5) One of the following statements: (i) Statement one: I certify that (1) I am duly authorized to sign this monthly report of usage on behalf of the significant nonblanket licensee; (2) I have examined this monthly report of usage; and (3) all statements of fact contained herein are true, complete, and correct to the best of my knowledge, information, and belief, and are made in good faith. (ii) Statement two: I certify that (1) I am duly authorized to sign this monthly report of usage on behalf of the significant nonblanket licensee, (2) I have prepared or supervised the preparation of the data used by the significant nonblanket licensee and/or its agent to generate this PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 monthly report of usage, (3) such data is true, complete, and correct to the best of my knowledge, information, and belief, and was prepared in good faith, and (4) this monthly report of usage was prepared by the significant nonblanket licensee and/or its agent using processes and internal controls that were subject to an examination, during the past year, by a licensed certified public accountant in accordance with the attestation standards established by the American Institute of Certified Public Accountants, the opinion of whom was that the processes and internal controls were suitably designed to generate monthly reports of usage that accurately reflect, in all material respects, the significant nonblanket licensee’s usage of musical works and the royalties applicable thereto. (i) Adjustments. (1) A significant nonblanket licensee may adjust one or more previously delivered monthly reports of usage by delivering to the mechanical licensing collective a report of adjustment. (2) A report of adjustment shall be clearly and prominently identified as a ‘‘Significant Nonblanket Licensee Report of Adjustment for Making and Distributing Phonorecords.’’ (3) A report of adjustment shall include a clear statement of the following information: (i) The previously delivered monthly report(s) of usage to which the adjustment applies. (ii) The specific change(s) to the applicable previously delivered monthly report(s) of usage. (iii) Where applicable, the particular sound recordings and uses to which the adjustment applies. (iv) A description of the reason(s) for the adjustment. (4) A report of adjustment must be certified in the same manner as a monthly report of usage under paragraph (h) of this section. (j) Clear statements. The information required by this section requires intelligible, legible, and unambiguous statements in the reports of usage, without incorporation by reference of facts or information contained in other documents or records. (k) Harmless errors. Errors in the delivery or content of a report of usage that do not materially affect the adequacy of the information required to serve the purpose of 17 U.S.C. 115(d) shall be deemed harmless, and shall not render the report invalid or provide a basis for the mechanical licensing collective or digital licensee coordinator to engage in legal enforcement efforts under 17 U.S.C. 115(d)(6)(C). This paragraph (k) shall apply only to errors made in good faith and without any intention to deceive, mislead, or conceal relevant information. E:\FR\FM\22APP2.SGM 22APP2 Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / Proposed Rules (l) Voluntary agreements with mechanical licensing collective to alter process. Subject to the provisions of 17 U.S.C. 115, a significant nonblanket licensee and the mechanical licensing collective may agree to vary or supplement the procedures described in this section, including but not limited to pursuant to an agreement to administer a voluntary license, provided that any such change does not materially prejudice copyright owners owed royalties due under a blanket license. The procedures surrounding the certification requirements of paragraph (h) of this section may not be altered by agreement. Dated: April 15, 2020. Regan A. Smith, General Counsel and Associate Register of Copyrights. [FR Doc. 2020–08379 Filed 4–17–20; 4:15 pm] BILLING CODE 1410–30–P LIBRARY OF CONGRESS U.S. Copyright Office 37 CFR Part 210 [Docket No. 2020–6] Reporting and Distribution of Royalties to Copyright Owners by the Mechanical Licensing Collective U.S. Copyright Office, Library of Congress. ACTION: Notice of proposed rulemaking. AGENCY: The U.S. Copyright Office is issuing a notice of proposed rulemaking regarding the obligations of the mechanical licensing collective to report and distribute royalties paid by digital music providers under the blanket license to musical work copyright owners 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 establishing the timing, form, delivery, and certification of statements accompanying royalty distributions to musical work copyright owners. The Office solicits additional public comments on the proposed rule. This notice concerns only royalty statements and distributions regarding matched uses of musical works embodied in sound recordings and does not address issues related to the distribution of unclaimed, accrued royalties. khammond on DSKJM1Z7X2PROD with PROPOSALS2 SUMMARY: Written comments must be received no later than 11:59 Eastern Time on May 22, 2020. DATES: VerDate Sep<11>2014 18:10 Apr 21, 2020 Jkt 250001 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:// www.copyright.gov/rulemaking/mmaroyalty-statements. 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 email at regans@copyright.gov or Terry Hart, Assistant General Counsel, by email at tehart@copyright.gov. Each can be contacted by telephone by calling (202) 707–8350. SUPPLEMENTARY INFORMATION: ADDRESSES: I. Background Title I of the Music Modernization Act (‘‘MMA’’), the Musical Works Modernization Act, substantially modifies the compulsory ‘‘mechanical’’ license for making and distributing phonorecords of nondramatic musical works available under 17 U.S.C. 115. Prior to the MMA, a compulsory license was obtained by licensees on a perwork, song-by-song basis, and required a licensee to serve a notice of intention to obtain a compulsory license (‘‘NOI’’) on the relevant copyright owner (or file the NOI with the Copyright Office if the Office’s public records did not identify the copyright owner and include an address at which notice could be served) and then pay applicable royalties accompanied by accounting statements.1 The MMA amends this regime in multiple ways, most significantly by establishing a new blanket compulsory license that digital music providers (‘‘DMPs’’) may obtain to make digital phonorecord deliveries (‘‘DPDs’’) of musical works, including in the form of permanent downloads, limited downloads, or interactive streams.2 Instead of licensing one song at a time by serving NOIs on individual copyright 1 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). 2 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 new mechanical licensing collective); S. Rep. No. 115–339, at 3–6 (same). PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 22549 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.3 Under the MMA, compulsory licensing of phonorecords that are not DPDs (e.g., CDs, vinyl, tapes, and other types of physical phonorecords) (the ‘‘non-blanket license’’) continues to operate on a perwork, song-by-song basis, the same as before.4 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’’).5 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 nonvoting member of the MLC, and to carry out other functions.6 A. Reporting and Payment Obligations Under Non-Blanket License The proposed rule is informed by the preexisting section 115 regulations that still apply to non-blanket licenses. Under a non-blanket license, copyright owners receive royalties and statements of account directly from compulsory licensees. Timely payment and statements of account are a condition of the non-blanket compulsory license, and failure to comply with the requirements could lead to default.7 Default can subject a licensee to the remedies provided by sections 502 through 506 for infringement.8 The statute requires licensees to make monthly and annual statements of account, along with payment of royalties, in compliance with regulations promulgated by the Office.9 Regulations covering monthly and annual statements of account prescribe, among other things, requirements regarding the content such statements 3 17 U.S.C. 115(d)(1), (3); 84 FR 32274 (July 8, 2019). 4 17 U.S.C. 115(b)(1); see H.R. Rep. No. 115–651, at 3 (noting ‘‘[t]his is the historical method by which record labels have obtained compulsory licenses’’); S. Rep. No. 115–339, at 3 (same); see also U.S. Copyright Office, Orrin G. Hatch-Bob Goodlatte Music Modernization Act, https:// www.copyright.gov/music-modernization/ (last visited Apr. 2, 2020). 5 17 U.S.C. 115(d)(7)(D). 6 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). 7 17 U.S.C. 115(c)(2)(J). 8 Id. 9 Id. at 115(c)(2)(I). See generally 37 CFR 210.11. E:\FR\FM\22APP2.SGM 22APP2

Agencies

Library of Congress
U.S. Copyright Office

[Federal Register Volume 85, Number 78 (Wednesday, April 22, 2020)]
[Proposed Rules]
[Pages 22518-22549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08379]



[[Page 22517]]

Vol. 85

Wednesday,

No. 78

April 22, 2020

Part II





Library of Congress





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U.S. Copyright Office





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37 CFR Part 210





Music Modernization Act Notices of License, Notices of Nonblanket 
Activity, Data Collection and Delivery Efforts, and Reports of Usage 
and Payment; Reporting and Distribution of Royalties to Copyright 
Owners by the Mechanical Licensing Collective; Treatment of 
Confidential Information by the Mechanical Licensing Collective and 
Digital Licensee Coordinator; Transparency of the Mechanical Licensing 
Collective and Its Database of Musical Works Information; Proposed 
Rules

Federal Register / Vol. 85, No. 78 / Wednesday, April 22, 2020 / 
Proposed Rules

[[Page 22518]]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2020-5]


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

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Copyright Office is issuing a notice of proposed 
rulemaking regarding information to be provided by digital music 
providers pursuant to the new compulsory blanket license to make and 
deliver digital phonorecords of musical works established by title I of 
the Orrin G. Hatch-Bob Goodlatte Music Modernization Act. The law 
establishes a new blanket license, to be administered by a mechanical 
licensing collective, and to become available on January 1, 2021. 
Having solicited public comments through a previous notification of 
inquiry, through this notice, the Office is proposing regulations 
concerning notices of license, data collection and delivery efforts, 
and reports of usage and payment by digital music providers. The Office 
is also proposing regulations concerning notices of nonblanket activity 
and reports of usage by significant nonblanket licensees, as well as 
language addressing data collection efforts by musical work copyright 
owners.

DATES: Written comments must be received no later than 11:59 p.m. 
Eastern Time on May 22, 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's website 
at https://www.copyright.gov/rulemaking/mma-notices-reports/. If 
electronic submission of comments is not feasible due to lack of access 
to a computer and/or the internet, please contact the Office using the 
contact information below for special instructions.

FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and 
Associate Register of Copyrights, by email at [email protected], 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

    This notice of proposed rulemaking (``NPRM'') is being issued 
subsequent to a notification of inquiry, published in the Federal 
Register on September 24, 2019, that describes in detail the 
legislative background and regulatory scope of the present rulemaking 
proceeding.\1\ The Copyright Office assumes familiarity with that 
document, and encourages anyone reading this NPRM who has not reviewed 
it to do so before continuing.
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    \1\ 84 FR 49966 (Sept. 24, 2019). All rulemaking activity, 
including public comments, as well as legislative history and 
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. Related ex parte letters are 
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. References to these 
comments and letters are by party name (abbreviated where 
appropriate), followed by ``Initial,'' ``Reply,'' or ``Ex Parte 
Letter'' as appropriate.
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    On October 11, 2018, the president signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') which, among 
other things, substantially modifies the compulsory ``mechanical'' 
license for making and distributing phonorecords of nondramatic musical 
works under 17 U.S.C. 115.\2\ It does so by switching from a song-by-
song licensing system to a blanket licensing regime that will become 
available on January 1, 2021 (the ``license availability date''), and 
be administered by a mechanical licensing collective (``MLC'') 
designated by the Copyright Office. Digital music providers (``DMPs'') 
will be able to obtain the new compulsory blanket license to make 
digital phonorecord deliveries (``DPDs'') of musical works, including 
in the form of permanent downloads, limited downloads, or interactive 
streams (referred to in the statute as ``covered activity,'' where such 
activity qualifies for a compulsory license), subject to compliance 
with various requirements, including reporting obligations.\3\ DMPs may 
also continue to engage in those activities through voluntary, or 
direct licensing with copyright owners, in which case the DMP may be 
considered a significant nonblanket licensee (``SNBL'') under the 
statute, subject to separate reporting obligations.
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    \2\ Public Law 115-264, 132 Stat. 3676 (2018).
    \3\ As permitted under the MMA, the Office designated a digital 
licensee coordinator (``DLC'') to represent licensees in proceedings 
before the Copyright Royalty Judges (``CRJs'') and the Copyright 
Office, to serve as a non-voting member of the MLC, and to carry out 
other functions. 17 U.S.C. 115(d)(5)(B); 84 FR 32274 (July 8, 2019); 
see also 17 U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C).
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    As detailed in the previous notification of inquiry, the statute 
specifically directs the Copyright Office to adopt a number of 
regulations to govern the new blanket licensing regime and vests the 
Office with broad general authority to adopt such regulations as may be 
necessary or appropriate to effectuate the new blanket licensing 
structure.
    Having solicited public comments through the notification of 
inquiry, the Office is preparing multiple notices of proposed 
rulemaking to address various subjects presented in the notification. 
This NPRM specifically addresses notices of license, notices of 
nonblanket activity, data collection and delivery efforts, and reports 
of usage and payment, which were among those topics requested by 
various commenters to be prioritized because they relate to core 
information needed by both DMPs and the MLC to prepare and ready their 
operations in advance of the blanket license becoming available.\4\ 
Notices addressing confidentiality, the musical works database, and 
accounting statements to copyright owners are being published 
simultaneously with this NPRM, and the Office will continue to consider 
whether further rulemakings are appropriate. For example, the Office is 
separately engaged in a policy study regarding best practices that the 
MLC may consider to reduce the incidence of unclaimed accrued 
royalties. A notification of inquiry seeking comment regarding that 
study will be forthcoming in connection with considerations of 
potential regulatory activity related to the distribution of such 
royalties by the MLC to musical work copyright owners identified in the 
musical works database in years following the license availability 
date.\5\
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    \4\ DLC Reply at 1; MLC Initial at 2; Future of Music Coalition 
(``FMC'') Reply at 3.
    \5\ More information about the unclaimed royalties study can be 
found at https://www.copyright.gov/policy/unclaimed-royalties/.
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    The MMA significantly altered the complex music licensing landscape 
after careful congressional deliberation following extensive input 
from, and negotiations between, a variety of stakeholders.\6\ In this 
NPRM, as well as

[[Page 22519]]

the other notices published concurrently, the Copyright Office has 
endeavored to build upon that foundation and propose a reasonable 
regulatory framework for the MLC, DMPs, copyright owners and 
songwriters, and other interested parties to operationalize the various 
duties and entitlements set out by statute.\7\ The subjects of this 
proposed rule, as much as any the MMA charges the Office with 
implementing, have made it necessary to propose regulatory language 
that navigates convoluted nuances of the music data supply chain and 
differing expectations of the MLC, DMPs, and other stakeholders, while 
remaining cognizant of the potential effect upon varied business 
practices across the digital music marketplace.\8\ While the Office's 
task was aided by receipt of numerous helpful and substantive comments 
representing interests from across the music ecosystem, in many cases, 
the comments also uncovered divergent assumptions and expectations as 
to the shouldering and execution of relevant duties assigned by the 
MMA.
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    \6\ 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. . . . 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.''). See also U.S. Copyright Office, 
Copyright and the Music Marketplace at Preface (2015), https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf (noting ``the problems in the music 
marketplace need to be evaluated as a whole, rather than as isolated 
or individual concerns of particular stakeholders'').
    \7\ See Alliance of Artists & Recording Cos. v. DENSO Int'l Am., 
Inc., 947 F.3d 849, 863 (D.C. Cir. 2020) (``[T]he best evidence of a 
law's purpose is the statutory text, and most certainly when that 
text is the result of carefully negotiated compromise among the 
stakeholders who will be directly affected by the legislation.'') 
(internal quotation marks, brackets, and citations omitted).
    \8\ See, e.g., Nat'l Cable & Telecomms. Ass'n v. Brand X 
internet Servs., 545 U.S. 967, 980 (2005) (``[A]mbiguities in 
statutes within an agency's jurisdiction to administer are 
delegations of authority to the agency to fill the statutory gap in 
reasonable fashion.'') (citing Chevron, U.S.A., Inc. v. Nat. Res. 
Def. Council, Inc., 467 U.S. 837 (1984)); see also Report and 
Section-by-Section Analysis of H.R. 1551 by the Chairmen and Ranking 
Members of Senate and House Judiciary Committees, at 12 (2018), 
https://www.copyright.gov/legislation/mma_conference_report.pdf 
(``Conf. Rep.'') (acknowledging that ``it is to be expected that 
situations will arise that were not contemplated by the 
legislation,'' and that ``[t]he Office is expected to use its best 
judgement in determining the appropriate steps in those 
situations'').
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    In proposing the following rule, where comments diverged sharply, 
the Office has proposed regulatory language that it believes best 
reflects the statutory language and its animating goals in light of the 
record before it.\9\ As the Office previously noted, the ``MLC has a 
tight deadline to become fully operational,'' and it encourages 
continued dialogue to expeditiously resolve or refine areas of 
disagreement among interested stakeholders.\10\ Accordingly, the Office 
also welcomes parties to file joint comments on issues of common 
agreement and consensus.\11\ If parties disagree with aspects of the 
Office's proposal, they are encouraged to provide specific alternative 
regulatory language for the Office to consider.\12\
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    \9\ See H.R. Rep. No. 115-651, at 14 (2018); S. Rep. No. 115-
339, at 15 (2018); Conf. Rep. at 12 (``The Copyright Office has the 
knowledge and expertise regarding music licensing through its past 
rulemakings and recent assistance to the Committee[s] during the 
drafting of this legislation.''); see also 84 FR at 49967-68.
    \10\ 84 FR at 32296.
    \11\ See, e.g., Joint Comments of Dig. Media Ass'n, Nat'l Music 
Publishers' Ass'n, Recording Indus. Ass'n of Am., Harry Fox Agency, 
Inc., & Music Reports, Inc. Submitted in Response to U.S. Copyright 
Office's July 27, 2012, Notice of Proposed Rulemaking (Oct. 25, 
2012) (regarding section 115 statement of account regulations).
    \12\ 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 Office seeks public comments on all aspects of this NPRM, but 
asks that any comments directed at other subjects discussed in the 
notification of inquiry be reserved for the appropriate notice of 
proposed rulemaking. In recognition of the significant changes brought 
by the MMA, and challenges both in setting up a fully functional MLC 
and for DMPs to adjust their internal practices, the Office also 
invites comment on whether it would be beneficial to adopt the proposed 
rule on an interim basis. If necessary, based on feedback received, the 
Office would make appropriate adjustments to the regulatory language 
before the rule is finalized, and following the license availability 
date. This approach would allow the Office more flexibly to make 
necessary modifications in response to new evidence, unforeseen issues, 
or where something is otherwise not functioning as intended.

II. Proposed Rule

    Having reviewed and considered all relevant comments received in 
response to the notification of inquiry, and having engaged in a number 
of ex parte communications with commenters, the Office has weighed all 
appropriate legal, business, and practical implications and equities 
that have been raised, and proposes the following with respect to 
notices of license, notices of nonblanket activity, data collection and 
delivery efforts, and reports of usage and payment under the MMA.\13\
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    \13\ In addition to these substantive topics, the rule also 
proposes a technical reorganization of part 210 of the Office's 
regulations, whereby the current subpart A and subpart B are flipped 
so that when final, subpart A will contain the Office's current 
regulations for the non-blanket section 115 license and subpart B 
will contain the Office's new regulations for the blanket license.
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A. Notices of License and Nonblanket Activity

    The MMA requires entities engaging in covered activities to file 
notice with the MLC regarding such activities. A DMP seeking a blanket 
license must file a notice of license (``NOL''), while an entity 
qualifying as an SNBL must file a notice of nonblanket activity 
(``NNBA''). The Copyright Office must prescribe regulations regarding 
the form and content for these notices.\14\
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    \14\ See 84 FR at 49969.
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1. Notices of License
    In response to the Office's notification of inquiry, the MLC and 
DLC offer disparate views as to what NOLs should look like and how they 
should operate. The DLC argues that NOLs should be relatively brief and 
high-level in describing the DMP's covered activities, and should only 
need to be filed once.\15\ The MLC seeks considerably more detail about 
the DMP's activities, as well as an ongoing duty to file an amended NOL 
whenever any information changes.\16\ The DLC also seeks a harmless 
error rule (whereby immaterial errors in an NOL would not render it 
invalid), while the MLC argues against one.\17\ Both the MLC and DLC 
provide specific regulatory language for their competing views.\18\ 
Among other commenters weighing in on the issue of NOLs, the 
International

[[Page 22520]]

Confederation of Societies of Authors and Composers (``CISAC'') & the 
International Organisation representing Mechanical Rights Societies 
(``BIEM'') and Monica Corton Consulting advocate for having a clear and 
sufficiently detailed description of the DMP's activities.\19\ Music 
Reports proposes that DMPs be required to submit a concise description 
of their activities, and also information about the individual sound 
recordings made available.\20\ Based on the record before it, the 
Office proposes the following rules for NOLs.
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    \15\ DLC Initial at 5; DLC Reply at 2-5.
    \16\ MLC Initial at 2-9; MLC Reply at 2-7; see also Nat'l Music 
Publishers' Ass'n (``NMPA'') Reply at 2-3 (agreeing with the MLC's 
position).
    \17\ DLC Initial at 5; MLC Reply at 8-9.
    \18\ DLC Reply Add. at A-2-3; MLC Reply App. A at 1-3.
    \19\ CISAC & BIEM Reply at 4; Monica Corton Consulting Reply at 
1.
    \20\ Music Reports Initial at 2-3.
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    Name and contact information. The Office proposes requiring 
essentially the same name and contact information for DMPs as proposed 
by the MLC and DLC, which is also in general accord with the current 
requirements both for completing a notice of intention to obtain a 
compulsory license under section 115 (``NOI'') \21\ and a notice of use 
of sound recordings under the sections 112 and 114 statutory licenses 
(``NOU'').\22\
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    \21\ See 37 CFR 201.18(d)(1)(i) and (ii).
    \22\ See id. at Sec.  370.2(b)(1) through (4).
---------------------------------------------------------------------------

    Submission. The Office proposes rules governing the submission 
criteria for NOLs that are generally in line with the commenters' 
proposals and the requirements of existing Copyright Office filings, 
namely that NOLs be submitted in a manner reasonably determined by the 
MLC, that NOLs be signed by an appropriate representative of the DMP 
who certifies to his or her authority to make the submission and the 
truth of the submitted information, and the MLC confirms receipt of 
NOLs.\23\
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    \23\ See, e.g., id. at Sec. Sec.  201.18(c), (d)(3), and (e), 
201.35(f)(3), and 370.2(c).
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    Description of DMP and its covered activities. The proposed rule 
diverges from both the DLC and MLC proposals as to the requisite level 
of detail NOLs must contain to describe the DMP and its covered 
activities. At one end, the DLC's proposal to only provide ``[a] 
general description of the covered activities,'' seems inconsistent 
with the statute.\24\ NOLs must ``specif[y] the particular covered 
activities in which the digital music provider seeks to engage.'' \25\ 
Moreover, the statute tasks the MLC not merely with ``receiv[ing]'' 
NOLs, but also ``review[ing], and confirm[ing] or reject[ing]'' 
them.\26\ And one of the grounds for rejecting an NOL is if ``the 
digital music provider or notice of license does not meet the 
requirements of this section or applicable regulations.'' \27\ Taken 
together, the Office believes that the statute requires an NOL to 
contain a description that is sufficient to reasonably establish the 
DMP's eligibility for a blanket license and to provide reasonable 
notice of the manner in which the DMP seeks to engage in covered 
activities under the blanket license.
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    \24\ See DLC Reply Add. at A-2.
    \25\ 17 U.S.C. 115(d)(2)(A) (emphasis added).
    \26\ Id. at 115(d)(3)(F)(i).
    \27\ Id. at 115(d)(2)(A)(iii)(I) (emphasis added).
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    To that end, the rule proposes that NOLs contain a statement from 
the DMP that it has a good-faith belief in its eligibility for the 
blanket license and its ability to comply with all payments, terms, and 
other responsibilities under the blanket license. In specifying its 
particular covered activities, the Office proposes that the DMP specify 
or check off each applicable DPD configuration and service type from a 
list.\28\ By DPD configuration, the Office refers to the different 
types of DPDs a DMP might make, such as permanent downloads, limited 
downloads, interactive streams, and noninteractive streams. By service 
type, the Office refers to the general types of offerings through which 
a user may receive DPDs, such as whether the service is subscription-
based, part of a bundle, a locker, free to the user, and/or part of a 
discount plan. The proposed rule does not require that the description 
of the DMP's service type(s) be tied to the specific categories of 
activities or offerings adopted by the Copyright Royalty Judges 
(``CRJs'') in 37 CFR part 385 (although such information would be 
permitted), because such details may go beyond the more general notice 
function the Office understands NOLs to serve; in any event, that 
information will be reported in reports of usage, as discussed below.
---------------------------------------------------------------------------

    \28\ See MLC Initial at 9 (proposing that information be 
provided ``through a simple `check the box' method''). This is also 
somewhat similar to how the current NOU form works.
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    In proposing this middle-ground approach, the Office tentatively 
concludes that the MLC's position bends the statute too far the other 
way. To the extent the MLC may need any of the more detailed 
information it proposes to require through NOLs to fulfill its 
obligations under the statute, the Office generally agrees with the DLC 
that it would be more appropriate for such information to be provided 
as part of each DMP's monthly reports of usage, addressed separately 
below.\29\ While the MLC contends that there is value in obtaining this 
sort of information ahead of the DMPs' reports,\30\ at least based on 
the current record, this potential value does not seem to outweigh the 
potential burden on DMPs to provide such duplicative information, 
especially if DMPs are required to amend NOLs with changes of practice, 
as the MLC proposes.
---------------------------------------------------------------------------

    \29\ See DLC Reply at 4.
    \30\ See MLC Ex Parte Letter Jan. 29, 2020 (``MLC Ex Parte 
Letter #1'') at 3-4.
---------------------------------------------------------------------------

    The Office is inclined, however, to make an exception for 
information concerning any applicable voluntary license or individual 
download license the DMP may be operating under concurrently with the 
blanket license. The Office tentatively agrees with the MLC that 
obtaining such information from DMPs in advance of any pertinent report 
of usage is beneficial, because the MLC may need to identify specific 
musical works subject to such licenses so that they can be carved out 
from the blanket license royalty calculations, which the MLC asserts 
will be ``very complicated and time-consuming.'' \31\ While the DLC 
requests that this not be imposed as a legal requirement in the NOL 
regulations themselves, the DLC does concede that, ``[i]f there is some 
operational need,'' this is reasonable information for the MLC to seek 
``during the on-boarding process, prior to the filing of the first 
report of usage.'' \32\
---------------------------------------------------------------------------

    \31\ See MLC Ex Parte Letter Feb. 26, 2020 (``MLC Ex Parte 
Letter #2'') at 2; see also MLC Reply at 3-4.
    \32\ See DLC Reply at 5.
---------------------------------------------------------------------------

    Harmless errors. In accord with the DLC's proposal, the Office 
proposes a harmless error rule similar to others it has previously 
adopted, including for section 115 notices of intention to obtain a 
compulsory license sent under the song-by-song licensing process.\33\ 
Given the material consequences of being denied a blanket license that 
could otherwise result from a trivial deficiency in an NOL, the Office 
believes that such a provision is reasonable.\34\ The Office is 
inclined to disagree with the MLC's arguments that such a provision 
would be ambiguous and unnecessary. While the statutory cure period 
\35\ may lessen the need for a harmless error provision, it does not 
seem to obviate the need completely. As to any ambiguity, the Office is 
not aware of any difficulties with applying the Office's current 
harmless error rules. Moreover, such a rule would be in accord with the 
MMA's default and termination provision, which refers to ``material[ ] 
deficien[cies]'' and noncompliance with ``material term[s]

[[Page 22521]]

or condition[s] of the blanket license.'' \36\
---------------------------------------------------------------------------

    \33\ See 37 CFR 201.18(h); see also id at Sec.  201.10(e) 
(notices of termination).
    \34\ See 66 FR 45241, 45243 (Aug. 28, 2001) (``[P]otential 
licensees should not be denied the use of the license if such errors 
do not affect the legal sufficiency of the notice.'').
    \35\ 17 U.S.C. 115(d)(2)(A)(iv).
    \36\ See id. at 115(d)(4)(E)(i) (emphasis added).
---------------------------------------------------------------------------

    Amendments. In accord with the MLC's proposal, the rule proposes 
requiring DMPs to amend their NOLs within 45 days of any information 
changing. Given the notice function NOLs are supposed to serve, it does 
not strike the Office as unreasonable to require DMPs to amend NOLs 
when DMPs make significant changes to how they are engaging, or seeking 
to engage, in covered activities or when their contact information 
changes. Having considered the DLC's arguments on this matter, the 
Office concludes that the following reasons support an amendment 
requirement. First, the statute expressly provides for ``an amended 
notice of license'' in the context of curing deficiencies in a rejected 
NOL.\37\ Second, there would seem to be little meaning behind the 
requirement that NOLs ``specif[y] the particular covered activities in 
which the digital music provider seeks to engage,'' if DMPs never need 
to provide notice of changes to those particulars.\38\ Third, the 
statute requires the MLC to ``maintain a current, publicly accessible 
list of blanket licenses that includes contact information for the 
licensees and the effective dates of such licenses.'' \39\ The Office 
has previously adopted an amendment requirement pursuant to a similarly 
worded statutory provision, and believes one is reasonable in this 
context as well so as to ensure that the contact information the MLC is 
required to make publicly available is always kept up to date.\40\ 
Fourth, although section 115 NOIs have no such amendment requirement, 
NOUs do,\41\ meaning that services operating under sections 112 and 114 
are already complying with a similar requirement. Finally, between the 
reasonable amount of information the Office proposes be required, the 
statutory notice and cure mechanism, and the proposed inclusion of a 
harmless error rule, the amendment requirement would not be unduly 
burdensome or amount to a ``trap for the unwary'' as the DLC 
contends.\42\ The Office proposes that information about voluntary 
licenses and individual download licenses be subject to their own 
amendment requirement, separate from NOL amendments.
---------------------------------------------------------------------------

    \37\ See id. at 115(d)(2)(A)(iv).
    \38\ See id. at 115(d)(2)(A); see also MLC Reply at 5-6.
    \39\ Id. at 115(d)(3)(F)(i) (emphasis added).
    \40\ See 37 CFR 201.38(c)(3) (a requirement to ``timely updat[e] 
information when it has changed,'' adopted under 17 U.S.C. 
512(c)(2), which states that the Copyright Office ``shall maintain a 
current directory of agents available to the public for 
inspection'').
    \41\ Id. at Sec.  370.2(e).
    \42\ Cf. 81 FR 75695, 75704 (Nov. 1, 2016) (with respect to 
adopting a renewal requirement for online service providers to keep 
current their designations with the Copyright Office for purposes of 
the section 512 safe harbor, the Office concluded that ``[n]or does 
the rule create `a trap for the unwary' as some opponents allege,'' 
because ``[i]f, after [receiving] multiple reminders, a service 
provider fails to renew its designation, it can hardly be said to 
have let its designation lapse unwittingly'').
---------------------------------------------------------------------------

    Delegation of authority to the MLC. The Office generally agrees 
with the DLC that the MLC need not have authority, delegated by 
regulation, to require additional substantive information from DMPs 
with respect to NOLs.\43\ If, in the course of establishment, the MLC 
identifies a legitimate need for additional information, the Office 
will make adjustment to the regulatory language. Of course, the MLC may 
ask DMPs for additional information, which DMPs may voluntarily elect 
to provide. The Office believes that certain matters, such as the 
precise format and method of submission of NOLs, are best left flexible 
and subject to the MLC's commercially reasonable discretion and 
business judgment.\44\
---------------------------------------------------------------------------

    \43\ See DLC Reply at 6.
    \44\ See SoundExchange Initial at 15-16.
---------------------------------------------------------------------------

    Reporting sound recordings. The Office disagrees with Music 
Reports' proposal that NOLs contain a list of all sound recordings made 
available to the public for substantially the same reasons as set forth 
by the DLC.\45\
---------------------------------------------------------------------------

    \45\ See DLC Reply at 6.
---------------------------------------------------------------------------

    Transition to blanket licenses. The rule proposes that DMPs 
obtaining the blanket license automatically pursuant to 17 U.S.C. 
115(d)(9)(A) must still submit valid NOLs.
    Public access. To govern the MLC's obligations under 17 U.S.C. 
115(d)(3)(F)(i), and for transparency in how the MLC confirms or 
rejects NOLs, and terminates blanket licenses, the rule proposes that 
the MLC be required to maintain a current, free, and publicly 
accessible and searchable online list of all blanket licenses, 
including various details, such as information from NOLs, whether an 
NOL has been rejected and why, and whether a blanket license has been 
terminated and why.
2. Notices of Nonblanket Activity
    Based on the record before it, the Office generally agrees with 
commenters that NOLs and NNBAs should not differ substantially, as they 
serve similar purposes.\46\ Thus, the Office proposes that the 
regulations for NNBAs generally mirror the requirements for NOLs, with 
conforming adjustments reflecting appropriate distinctions between the 
two types of notices.
---------------------------------------------------------------------------

    \46\ See DLC Initial at 3; MLC Initial at 10-11; MLC Reply at 8; 
Music Reports Initial at 2-3; CISAC & BIEM Reply at 4.
---------------------------------------------------------------------------

B. Data Collection and Delivery Efforts

    While the MLC is ultimately tasked with the core project of 
matching musical works to sound recordings embodying those works, and 
identifying and locating the copyright owners of those works (and 
shares thereof), the MMA outlines roles for certain DMPs and copyright 
owners to facilitate this task by collecting and providing related data 
to the MLC. DMPs using the blanket license must ``engage in good-faith, 
commercially reasonable efforts to obtain'' various sound recording and 
musical work information from sound recording copyright owners and 
other licensors of sound recordings made available through the DMP's 
service.\47\ As the Office observed in the notification of inquiry, 
this obligation is directly connected to the reports of usage discussed 
below. The MMA also obligates musical work copyright owners with works 
that are listed in the MLC's database to ``engage in commercially 
reasonable efforts to deliver'' to the MLC for the database, if not 
already listed, ``information regarding the names of the sound 
recordings in which that copyright owner's musical works (or shares 
thereof) are embodied, to the extent practicable.'' \48\ In the 
notification of inquiry, the Office asked whether it is appropriate to 
promulgate regulations concerning these provisions.\49\
---------------------------------------------------------------------------

    \47\ 17 U.S.C. 115(d)(4)(B).
    \48\ Id. at 115(d)(3)(E)(iv).
    \49\ See 84 FR at 49969-70.
---------------------------------------------------------------------------

1. Efforts by Digital Music Providers
    Most comments received by the Office concerning data collection and 
delivery efforts pertain to requirements for DMPs under the blanket 
license; the MLC and DLC each propose specific regulatory language. The 
MLC's proposal is expansive.\50\ First, it would require DMPs to 
collect and provide ``all identifying information'' about relevant 
sound recordings and musical works from ``the record label or other 
entity furnishing rights to the sound recording'' that is ``in the 
entity's

[[Page 22522]]

possession.'' \51\ Second, DMPs would have to undertake ``all 
reasonable steps'' to ensure collection of this information, 
``including affirmatively requiring'' the entity to provide it 
``whether through contract or otherwise.'' \52\ Third, it would require 
a DMP to also provide ``all information that is in its possession 
concerning sound recording[s] and musical work[s] used on its 
service,'' regardless of when, how, or from where it was obtained.\53\ 
Fourth, it would require all collected information to be provided to 
the MLC promptly after being received and contemporaneously with 
monthly reports of usage.\54\ Fifth, the information would have to be 
delivered to the MLC in the same format with the same content as it was 
delivered to the DMP, without any revisions, re-titling, or other 
modifications to the information.\55\ Sixth, DMPs would have to provide 
timely updates to all such information.\56\ Lastly, DMPs would have to 
certify as to their compliance with these requirements.\57\
---------------------------------------------------------------------------

    \50\ See MLC Reply App. B at 7-8; see also MLC Reply at 10 
(``[T]he DMPs' existing mechanisms for obtaining sound recording 
information have been insufficient, resulting in numerous recordings 
that cannot be matched to musical compositions, which led to the MMA 
specifically requiring greater efforts from the DMPs.''); NMPA Reply 
at 3-4 (same); FMC Reply at 3 (``Clear and robust guidelines are 
necessary to ensure that licensees are making aggressive efforts to 
get the data as complete and accurate as possible.'').
    \51\ MLC Reply App. B at 7.
    \52\ Id. at 7; see also Barker Initial at 10 (proposing that 
DMPs not release sound recordings unless and until they receive 
appropriate data from the record label); CISAC & BIEM Reply at 6 
(agreeing with the MLC that DMPs should take ``all reasonable 
steps'').
    \53\ MLC Reply App. B at 7.
    \54\ Id. at 7.
    \55\ Id. at 8.
    \56\ Id.
    \57\ Id.
---------------------------------------------------------------------------

    The DLC strongly opposes the MLC's proposal, arguing that DMPs' 
obligations should be limited to providing whatever information can be 
obtained from record labels and distributors, and passing that 
information on to the MLC.\58\ The DLC contends that DMPs have no 
ability to compel record labels and distributors to provide them with 
information, and further asserts that DMPs are only obligated to 
provide information to the MLC via their reports of usage.\59\ The 
DLC's competing proposal essentially restates the statute as to what is 
required of DMPs, but further proposes that DMPs can satisfy their 
obligations under section 115(d)(4)(B) ``by collectively arranging for 
the [MLC] to obtain'' the required information from SoundExchange,\60\ 
``which shall provide this information at reasonable or no cost.'' \61\
---------------------------------------------------------------------------

    \58\ DLC Initial at 7; DLC Reply at 6-11.
    \59\ DLC Reply at 8-9.
    \60\ SoundExchange is the collective designated by the CRJs to 
collect and distribute royalties under the section 112 and section 
114 statutory licenses concerning noninteractive digital audio 
transmissions of sound recordings.
    \61\ DLC Reply Add. at A-4; see also DLC Reply at 10-11.
---------------------------------------------------------------------------

    Two particular issues surrounding these proposals were discussed at 
length in the comments and during several ex parte communications. The 
first is the DLC's proposal for DMPs to be able to satisfy their 
section 115(d)(4)(B) obligations by arranging for the MLC to receive 
data from SoundExchange. Several commenters assert that the record 
labels themselves are the best source of authoritative sound recording 
data, and that it is important that the MLC's sound recording 
information come from an authoritative source.\62\ The DLC and others 
(including A2IM, RIAA, and industry standards consultant Paul Jessop 
\63\) further argue that a single, aggregated, unaltered, regularly 
updated, and verified feed of this information from SoundExchange 
(which is sourced directly from sound recording copyright owners) would 
be ideal, and avoid the possibility that different DMPs would submit 
disparate and potentially contradictory data that the MLC would need to 
expend time and resources to reconcile.\64\ The DLC also argues that 
under this proposal, the MLC could rely on only a single or limited 
number of data fields from DMPs' reports of usage (e.g., international 
standard recording code (``ISRC'')) to find the sound recording to 
engage in matching efforts.\65\
---------------------------------------------------------------------------

    \62\ See Recording Industry Association of America, Inc. 
(``RIAA'') Initial at 4; American Association of Independent Music 
(``A2IM'') & RIAA Reply at 2-3; Jessop Initial at 2-3; Recording 
Academy Initial at 2.
    \63\ Mr. Jessop, a former U.S. and U.K. recording association 
executive, has participated in the development or revision of 
various relevant standards bodies or individual codes, including 
ISRC, ISWC, and ISNI. Jessop Initial at 1-2.
    \64\ DLC Reply at 10; RIAA Initial at 4-5; A2IM & RIAA Reply at 
2-3 (also noting that record labels vary their own data sent to 
different DMPs to meet different DMP requirements); Jessop Reply at 
2; see also Universal Music Group (``UMG'') & RIAA Ex Parte Letter 
at 2 (``SoundExchange gets the same data feeds as the DMPs . . . but 
then it dedupes and deconflicts the data.''); Sony Music (``Sony'') 
& RIAA Ex Parte Letter at 2.
    \65\ DLC Reply at 10.
---------------------------------------------------------------------------

    The MLC, while acknowledging that it ``intends to use SoundExchange 
as a valuable source of information for sound recording identifying 
information,'' opposes this proposal.\66\ A main argument of the MLC is 
that even if the DMPs were to provide the MLC with access to 
SoundExchange's data to satisfy their data collection obligations, it 
would not be a substitute for their reporting obligations because the 
DMPs are the only ones with the authoritative data as to what they 
actually streamed.\67\ The MLC also says that receiving only ISRCs from 
DMPs, as the DLC suggests, would be insufficient for proper sound 
recording identification, contending that ``[t]here is no 
comprehensive, authoritative, central database for matching ISRC codes 
with other metadata fields, there are incorrect ISRC codes in use, and 
attempting to match streaming uses based on ISRC reporting alone would 
be unreliable, unprecedented and highly inappropriate.'' \68\
---------------------------------------------------------------------------

    \66\ MLC Reply at 11 n.7.
    \67\ MLC Ex Parte Letter #2 at 5, 7; see MLC Ex Parte Letter #1 
at 2.
    \68\ MLC Reply at 16 n.9; MLC Ex Parte Letter #2 at 5; MLC Ex 
Parte Letter Apr. 3, 2020 (``MLC Ex Parte Letter #4'') at 9.
---------------------------------------------------------------------------

    The second issue concerns the MLC's proposal to require DMPs to 
provide the MLC with the information provided by sound recording 
copyright owners and licensors in the original, unmodified form in 
which it is received by the DMP, without any revisions, re-titling, or 
other edits or changes. The MLC and others explain that DMPs alter some 
amount of sound recording data, generally titles, artist names, and 
versions for display purposes in their public-facing service (e.g., 
changing ``Hello'' to ``Hello (Radio Edit),'' or changing ``Puff 
Daddy,'' ``P. Diddy,'' and ``Puffy'' all to ``Diddy''), and suggest 
that merely passing on the modified data to the MLC would frustrate 
matching efforts.\69\ The MLC also argues that, in connection with the 
proposal to permit DMPs to provide access to SoundExchange's data to 
avoid having to report unaltered data, having to match the DMPs' 
reports against SoundExchange's data in an attempt to recapture what 
was originally delivered to the DMPs by record labels and distributors 
is ``unworkable and wildly inefficient.'' \70\
---------------------------------------------------------------------------

    \69\ MLC Reply at 11; RIAA Initial at 3, 5-6; Sony & RIAA Ex 
Parte Letter at 2 (Dec. 9, 2019); MLC Ex Parte Letter #1 at 2; MLC 
Ex Parte Letter #2 at 5-6; MLC Ex Parte Letter #4 at 8-9; Jessop 
Initial at 2-3; A2IM & RIAA Reply at 2-3, 3 n.1.
    \70\ MLC Ex Parte Letter #2 at 5-6.
---------------------------------------------------------------------------

    On the other hand, to support their position that the MLC should 
obtain authoritative sound recording data from a single source for its 
database, A2IM & RIAA point out that their ``member labels vary the 
metadata they send the different DMPs in order to meet the services' 
idiosyncratic display requirements. Even if the DMPs were to pass on 
those feeds to the MLC unaltered, the MLC would still receive 
conflicting data that it will have to spend time and resources 
reconciling.'' \71\ Music Reports similarly points out that ``a row of 
sound recording metadata provided by one DMP in relation to a discrete 
sound recording may differ from the row of metadata a second DMP 
provides in relation to the same sound recording, with additional or 
different data fields

[[Page 22523]]

or identifiers unique to that DMP.'' \72\ The MLC does not address this 
issue in its comments.
---------------------------------------------------------------------------

    \71\ A2IM & RIAA Reply at 2.
    \72\ Music Reports Initial at 3.
---------------------------------------------------------------------------

    The DLC readily acknowledges that individual DMPs may alter certain 
data fields, characterizing it as necessarily cleaning and fixing the 
data so that information related to a recording's artist name, title, 
or other listener-facing fields are normalized.\73\ The DLC asserts 
that it would be highly burdensome for DMPs to retain and report 
unaltered data, because for many services, usage reporting pipelines 
have been designed to pull data from product databases that feature the 
``corrected'' fields; it suggests that the MLC's proposal would require 
an unnecessary maintaining of a parallel archive of data that may 
entail material engineering efforts.\74\ The DLC also argues that 
providing each of these fields unaltered is unlikely to palpably 
improve the MLC's matching efforts, because other data fields that 
remain unaltered, in particular the ISRC (which both the DLC and MLC 
seem to agree exists for over 99% of reported tracks), are far better 
for identifying sound recordings.\75\ The DLC also states that 
alteration happens relatively infrequently, citing that for at least 
two DMPs, fewer than 1% of track titles are modified, and that 
alterations are minor, such that any reasonably sophisticated matching 
algorithm should not be stymied.\76\
---------------------------------------------------------------------------

    \73\ DLC Reply at 9-10; DLC Ex Parte Letter Feb. 14, 2020 (``DLC 
Ex Parte Letter #1) Presentation at 15 (discussing ``Hello (Radio 
Edit)'' example; explaining that a DMP may receive information from 
different sources listing a band name in various fashions such as 
``Cure,'' ``The Cure,'' and ``Cure, The'' which would be reconciled 
into ``The Cure'' for display on the service's platform).
    \74\ See DLC Ex Parte Letter #1 Presentation at 15.
    \75\ DLC Ex Parte Letter Mar. 4, 2020 (``DLC Ex Parte Letter 
#3'') at 2.
    \76\ DLC Ex Parte Letter #3 at 2 (discussing MediaNet and 
YouTube, and noting that all of MediaNet's alterations are made at 
the request of the record labels).
---------------------------------------------------------------------------

    The MMA was designed in part to address challenges related to data 
delivery in the digital supply chain, and after analyzing the comments 
and conducting repeated meetings with the MLC, DLC, and recording 
company and publishing interests, it is apparent to the Copyright 
Office that abstruse business complexities and misunderstandings 
persist. As discussed further below, it is not clear that the relevant 
parties agree on exactly which fields reported from sound recording 
owners or distributors to DMPs are most useful to pass through to the 
MLC, which fields the MLC should be expected or does expect to 
materially rely upon in conducting its matching efforts, or which 
fields are typical or commercially reasonable for DMPs to alter, such 
as in the course of arranging for all songs by the same artist (e.g., 
``Diddy'') to be retrieved in an organized fashion in response to an 
end user's search. And while the Office reached out to the MLC and DLC 
shortly after these entities were designated to encourage cooperation 
on these business-specific questions in anticipation of the significant 
prospective regulatory work, and understands they have engaged in 
dialogue, particularly after the submission of initial comments, it 
does not appear that discussions have yet bridged these areas of 
difference.\77\
---------------------------------------------------------------------------

    \77\ See MLC Initial at 1 n.2 (``While the MLC and the [DLC] 
have not collaborated on the submission of initial comments in this 
proceeding, collaboration has been discussed and is anticipated in 
connection with reply comments, with the intent to provide 
supplemental information in reply comments as to any areas of common 
agreement.''); DLC Initial at 2 n.3 (``While the MLC and DLC have 
not collaborated on the submission of initial comments in this 
proceeding, collaboration has been discussed and is anticipated in 
connection with reply comments, with the intent to provide 
supplemental information in reply comments as to any areas of common 
agreement.''); MLC Reply at 1 n.2 (``Following the filing of the 
initial comments, the DLC and the MLC have engaged in a concerted 
effort to reach compromise on regulatory language. While the 
complexity of the issues has made it difficult to reach compromise, 
the DLC and the MLC plan to continue discussions and will revert 
back to the Office with any areas of compromise.''); DLC Reply at 1 
n.3 (``Following the filing of the initial comments, DLC and MLC 
have engaged in a concerted effort to reach compromise on regulatory 
language. While the complexity of the issues has made it difficult 
to reach compromise, the DLC and MLC plan to continue discussions 
and will revert back to the Office with any areas of compromise.''). 
To the Office's knowledge, the MLC and DLC were not able to reach 
agreement on any areas.
---------------------------------------------------------------------------

    To a certain extent, the MLC and DLC also appear to advance 
positions that go somewhat further than necessary even under their 
preferred approaches. For example, although the MLC does not intend to 
use every required or requested field in its matching processes,\78\ 
its proposed language would require every reportable sound recording 
field to be provided in unaltered form.\79\ Similarly, the Office 
understands that DMPs may typically alter only a few fields (e.g., 
titles, artist names, and versions) relevant to its consumer-facing 
platform fronts, yet the DLC has proposed language that would not 
restrict services from editing even universal identifiers. Relatedly, 
both parties may somewhat underestimate certain business realities that 
drive the other's positions: It seems reasonable to the Office both 
that different streaming services may choose to display the same artist 
or recording title in a different way as a competitive or data 
architecture matter (e.g., ``I Feel Good'' vs. ``I Got You (I Feel 
Good)'') and have designed reporting systems around the fields as used 
on their products, and also that such discrepancies in artist or title 
names may add complexity to the MLC's efforts to match sound recordings 
to underlying musical works. Based on the record, it thus appears that 
the MLC's matching efforts will need to involve analysis of multiple 
fields (i.e., not just ISRCs), and also that the MLC will need to 
reconcile certain sound recording information against its database.
---------------------------------------------------------------------------

    \78\ MLC Ex Parte Letter #4 at 10-11 (noting that the MLC ``does 
not anticipate'' the ``sound recording copyright owner'' or 
``producer'' fields ``being utilized in matching,'' and contemplates 
using ``some, but not all'' of other specific fields for matching).
    \79\ See MLC Reply App. C at 11.
---------------------------------------------------------------------------

    In light of these disagreements and areas of uncertainty, and the 
considerable, yet non-exhaustive,\80\ information submitted in this 
rulemaking, the Office sought to craft a reasonable approach that 
satisfies the main concerns of the most interested parties. Based on 
the record before it, the Office proposes the following rules with 
respect to DMP data collection and delivery efforts.
---------------------------------------------------------------------------

    \80\ For example, while all were discussed at length in concept, 
the Office did not receive a full listing of which fields in the ERN 
specification any of the parties wish to be passed through, a 
comparison to licensable fields in the SoundExchange database, or 
certain ``information concerning the use in the DDEX DSRF format of 
different metadata fields related to identification of sound 
recordings and musical works identification.'' See MLC Ex Parte 
Letter #3 at 3. At this stage, commenters remain encouraged to 
submit additional data, but along with a clear explanation of why 
such data might support a change in the proposed regulatory 
language.
---------------------------------------------------------------------------

    Relationship to reports of usage. The MMA's data collection efforts 
and reports of usage provisions are best read together, with section 
115(d)(4)(B) describing the appropriate efforts DMPs must engage in to 
acquire the information to be reported to the MLC in reports of usage 
under section 115(d)(4)(A). Section 115(d)(4)(B) only refers to 
``[c]ollecti[ng]'' and ``obtain[ing]'' information, while section 
115(d)(4)(A) refers to ``reporting'' and expressly requires that 
certain information ``acquired'' by the DMP, ``including pursuant to 
[section 115(d)(4)(B)],'' be reported.\81\ Consequently, the rule 
proposes that the data collected pursuant to section 115(d)(4)(B) be 
delivered to the MLC in DMPs' reports of usage in accordance with the 
rules governing such reports (discussed below). This would not 
foreclose the MLC from seeking information from DMPs outside of their

[[Page 22524]]

reports of usage on a voluntary basis, or even potentially that, upon a 
different showing, a different rule requiring delivery of certain 
information outside of reports of usage could be appropriate.
---------------------------------------------------------------------------

    \81\ See 17 U.S.C. 115(d)(4)(A)-(B).
---------------------------------------------------------------------------

    Appropriate efforts. At least on the record before it, the Office 
declines to propose a one-size-fits-all approach as to what constitutes 
``good-faith, commercially reasonable efforts to obtain,'' and so is 
disinclined to adopt a rule as strict as the MLC proposes. First, what 
may be commercially reasonable for one DMP may not be commercially 
reasonable for another, and even for the same DMP, a commercially 
reasonable action with respect to one sound recording copyright owner 
may not be commercially reasonable with respect to another. Second, the 
MMA did not impose a data delivery burden on sound recording copyright 
owners and licensors, so any rule compelling their compliance would 
seem to be at odds with Congress's intent. DMPs must make genuine 
efforts to attempt to collect information from record labels and other 
distributors, but if those parties ultimately refuse, it does not 
necessarily mean that the DMP has not satisfied its collection effort 
obligations. Thus, the Office is wary of proposals mandating DMPs to 
require delivery of information from sound recording copyright owners 
and licensors through contractual or other means. Third, while it is 
important for DMPs to genuinely and fruitfully engage in appropriate 
collection and reporting efforts, the primary tasks of matching and 
data curation are assigned to the MLC, and the DMPs must fully fund the 
MLC's undertaking of these critical tasks. Fourth, it does not appear 
that DMPs are necessarily required by the statute to deliver all 
pertinent information known to them or in their possession. For 
example, section 115(d)(4)(B) only refers to information obtained 
specifically ``from sound recording copyright owners and other 
licensors of sound recordings,'' and the musical work information 
required to be reported under section 115(d)(4)(A)(ii)(I)(bb) is 
limited to information ``acquired by the digital music provider in the 
metadata provided by sound recording copyright owners or other 
licensors of sound recordings in connection with the use of sound 
recordings of musical works to engage in covered activities.'' \82\
---------------------------------------------------------------------------

    \82\ See id. at 115(d)(4)(A)-(B).
---------------------------------------------------------------------------

    With these observations in mind, the Office proposes to codify a 
minimal floor requirement that should not unduly burden DMPs, but which 
will still constitute a continuous and ongoing obligation to attempt to 
collect relevant data. The Office also proposes, in accord with the 
DLC's proposal, to adopt a rule providing that a DMP may satisfy its 
obligations under section 115(d)(4)(B) by arranging for the MLC to 
receive appropriate data from an authoritative source, such as 
SoundExchange. Though, as explained further below, this would not 
obviate the need to report data to the MLC in reports of usage.
    Under the proposed floor requirement, where a DMP has not obtained 
all applicable sound recording and musical work information from sound 
recording copyright owners and licensors, the DMP will have a 
continuous and ongoing obligation to formally request such information 
in writing on a quarterly basis. The rule further proposes that DMPs 
request updates for obtained data periodically and at the MLC's 
request. This proposal is to ensure that DMPs make ongoing active 
efforts to get missing and outdated information from record labels and 
distributors without burdening DMPs or sound recording copyright owners 
and licensors in ways the statute does not seem to intend.
    The Office is generally inclined to agree with commenters regarding 
provision of access to the SoundExchange database, and proposes that it 
be an option for interested DMPs. Based on all of the comments, it 
seems efficient for the MLC to have access to an aggregated, regularly 
updated, and verified feed of the applicable data sourced directly from 
copyright owners, rather than consistently need to sort through 
potentially contradictory DMP-provided label data--especially where the 
Office has been told that labels sometimes provide different data for 
the same works to different DMPs, and that labels themselves sometimes 
send updates that alter previously-reported fields.\83\ To be clear, 
DMPs would not be required to arrange for the MLC to have access to 
SoundExchange's data; it would just be one option for complying with 
their data collection obligations. And the MLC would not be required to 
rely on these data; it would also receive data from monthly reports of 
usage and from musical work copyright owners, and would remain free to 
gather data from other sources to build and supplement its database as 
well. In sum, the record suggests that access to such a sound recording 
database can be expected to provide the MLC with more authoritative 
sound recording ownership data than it may otherwise get from 
individual DMPs engaging in separate efforts to coax additional 
information from entities that are under no obligation to provide it 
for purposes of the section 115 license.
---------------------------------------------------------------------------

    \83\ See A2IM & RIAA Reply at 2; DLC Ex Parte Letter #3 at 2.
---------------------------------------------------------------------------

    In particular, SoundExchange's repertoire database appears to be a 
reasonable analog for the data DMPs might otherwise obtain from sound 
recording copyright owners and licensors through the collection efforts 
mandated by section 115(d)(4)(B). In its role as administrator under 
the section 112 and section 114 licenses, SoundExchange appears to 
receive largely the same record label and distributor data feeds that 
the DMPs receive.\84\ And its database appears to be robust:
---------------------------------------------------------------------------

    \84\ See, e.g., UMG & RIAA Ex Parte Letter at 2 (Dec. 6, 2019) 
(``SoundExchange gets the same data feeds as the DMPs. . . . 
SoundExchange receives data from approximately 3400 labels, 
including certain independent distributors (e.g., CdBaby).'').

    SoundExchange has worked for years and spent many millions of 
dollars to develop its repertoire database, an authoritative 
repository of information identifying approximately 30 million sound 
recordings, all of which was sourced directly from the copyright 
owners of the recordings. . . . This database collects about 50 
fields of information on each recording in the database, and 
includes [ISRCs] for all of those recordings. . . . To keep this 
database up to date with information about new releases, 
SoundExchange receives electronic data feeds directly from record 
companies and distributors that together cover more than 100 rights 
owners. This real-time data covers almost all commercially-
significant U.S. recordings, and a large number of foreign-origin 
recordings as well. We have also received repertoire information in 
other forms from more than 20,000 other rights owners.\85\
---------------------------------------------------------------------------

    \85\ SoundExchange Initial at 2-3.

    The Office is, however, inclined to agree with the MLC that DMPs 
are the only authoritative source for what they actually used, and no 
amount of data from other sources can tell the MLC what was truly 
played on the DMP's service. Therefore, the proposed rule makes clear 
that while DMPs may satisfy their section 115(d)(4)(B) collection 
obligations in this manner, it does not excuse DMPs from their 
reporting obligations under section 115(d)(4)(A) (discussed below). 
DMPs would still have to report all required information, subject to 
the applicable qualifications (e.g., having been acquired in the 
metadata provided to the DMP by sound recording copyright owners). 
There would just not be any further obligation to take affirmative 
steps to obtain additional information beyond what the DMP otherwise

[[Page 22525]]

acquires in the ordinary course of engaging in covered activities.
    The Office's proposed rule makes other additional adjustments to 
the DLC's proposal. First, the source of the data could be another 
similarly authoritative source with a database size similar to 
SoundExchange; it would not specifically have to be SoundExchange. 
Second, the proposed rule would not require the authoritative source to 
provide its data at ``reasonable or no cost.'' As discussed above, the 
statute does not impose reporting burdens on sound recording copyright 
owners and, by extension, SoundExchange. Third, the Office proposes 
that if the DMP knows that a specific sound recording or set of 
recordings is not in the database, then provision of access to that 
database is insufficient and the DMP must, for such recording(s), 
formally request information in writing on a quarterly basis from the 
label or other distributor who supplied the recording, as described 
above.
    Appropriate information. The Office is inclined to disagree with 
the breadth of the MLC's proposal to require the collection of ``all 
identifying information.'' The statute specifically enumerates 
information that is required to be collected, which is connected with 
the list of information required to be reported.\86\ Thus, the rule 
instead proposes that collection efforts extend to the statutorily 
enumerated information and any additional information required by the 
Copyright Office to be included in reports of usage (discussed below).
---------------------------------------------------------------------------

    \86\ See 17 U.S.C. 115(d)(4)(A)-(B).
---------------------------------------------------------------------------

    With respect to the question of whether DMPs must provide the 
applicable information in unaltered form, the Office proposes a 
compromise approach. The Office notes that the proposed regulatory 
language addresses this in the section on reports of usage, rather than 
data collection, but since this issue was mostly raised by commenters 
in the context of data collection efforts, it is discussed here instead 
of below. The Office has essentially been told by the DLC that 
retaining and reporting unaltered data is generally burdensome and 
unhelpful for matching, while the MLC and others argue that it is 
generally needed and helpful for matching. Both positions seem to have 
at least some degree of merit with respect to certain aspects. The 
Office therefore offers what it believes to be a reasonable middle 
ground to balance these competing concerns.
    Instead of requiring DMPs to always report unaltered data or 
permitting DMPs to never report it, the rule proposes that a DMP can 
satisfy its reporting obligations by reporting either the originally 
acquired version of data within a specific field or the modified 
version, but subject to important limitations.
    First, the DMP would have to report the unaltered data in any of 
the following three cases: (1) Where the MLC has adopted a nationally 
or internationally recognized standard, such as DDEX, that is being 
used by the particular DMP, and either the unaltered version or both 
versions are required to be reported under that standard; (2) where 
either the unaltered version or both versions are reported by the 
particular DMP pursuant to any voluntary license or individual download 
license; or (3) where either the unaltered version or both versions 
were periodically reported by the particular DMP to its licensing 
administrator or to copyright owners directly prior to the license 
availability date. The first scenario tethers the requirement to 
provide unaltered data to whether a recognized standard setting body, 
for a standard the DMP uses, concludes that the information is 
important enough to be required. In such cases, it seems reasonable to 
require DMPs to undertake such burdens as may be necessary to comply 
with that decision.\87\ The second and third scenarios connect the 
requirement to provide unaltered data to the capabilities of the DMP's 
systems. If a DMP was reporting the unaltered version, or both 
versions, prior to the license availability date or reports the 
unaltered version, or both versions, under other licenses, the DMP must 
similarly report such data to the MLC. The Office is also contemplating 
a fourth scenario for commenters to consider: Where the unaltered 
version or both versions are/were commonly reported in the industry by 
a majority of DMPs of comparable size and sophistication to the 
particular DMP either currently or prior to the license availability 
date.
---------------------------------------------------------------------------

    \87\ See DLC Ex Parte Letter #3 at 4 (``DDEX has an extensive 
and rigorous process of evaluating the fields that are required to 
be reported to assist with matching.'').
---------------------------------------------------------------------------

    The second limitation would be that DMPs would not be permitted to 
only report modified versions of any unique identifier, playing time, 
or release date. The record does not suggest that DMPs typically adjust 
these particular items, but to the extent they do or might consider it 
in the future, it would seem to be particularly harmful to the MLC's 
matching efforts. The DLC itself acknowledges the primacy of unique 
identifiers like ISRCs. And playing time and release date seem to be 
particularly helpful for matching, especially when distinguishing 
between different recorded versions of a song by the same artist. The 
Office invites comment on this aspect of the proposed rule, including 
whether ``release date'' should be further qualified as ``release 
year.''
    Third, a DMP would not be permitted to only report modified 
versions of information belonging to categories that the DMP was not 
periodically altering prior to the license availability date. That 
would ensure that to the extent a DMP makes changes to its systems to 
alter new types of data, the DMP would need to retain the ability to 
report the unaltered versions.
    Certification. The Office is inclined to agree with the MLC's 
proposal to require DMPs to certify as to their compliance with their 
section 115(d)(4)(B) obligations, and proposes that such a 
certification be included in DMPs' reports of usage. Such a requirement 
would be analogous to other related certification requirements.\88\
---------------------------------------------------------------------------

    \88\ See 17 U.S.C. 115(d)(10)(B)(iv)(III)(aa); 37 CFR 
201.18(d)(1)(vi).
---------------------------------------------------------------------------

2. Efforts by Copyright Owners
    Only a few commenters spoke to the collection efforts of copyright 
owners; the MLC and DLC each propose specific regulatory language. The 
MLC's proposed language essentially restates the statute.\89\ The MLC 
argues that what constitutes commercially reasonable efforts for all 
musical work copyright owners cannot be defined because of the broad 
spectrum of musical work copyright owners, ranging from multinational 
publishing companies to individual do-it-yourself singer-
songwriters.\90\ The MLC's comments characterize its proposal as 
imposing an obligation on musical work copyright owners ``to provide 
information in their possession, custody or control,'' ensuring ``that 
large music publishers with detailed records of sound recordings 
embodying their musical compositions will be obligated to provide such 
information to the MLC, while still allowing for individual songwriters 
to comply with the regulation without undue hardship.'' \91\ The MLC 
also asserts that DMPs are better positioned to collect sound recording 
data because they deal directly with sound recording copyright

[[Page 22526]]

owners and licensors, whereas the existence of the compulsory license 
makes it so that many musical work copyright owners have no 
relationship with sound recording copyright owners or licensors, and so 
it would be inappropriate to require them to seek out and deliver 
information they do not already have.\92\
---------------------------------------------------------------------------

    \89\ MLC Reply App. B at 8.
    \90\ MLC Initial at 15.
    \91\ MLC Reply at 12.
    \92\ MLC Initial at 16; MLC Reply at 13.
---------------------------------------------------------------------------

    The DLC's proposal would require musical work copyright owners to 
engage in commercially reasonable efforts to collect all available 
information about the applicable sound recordings, including at least 
the title, featured artist, and, if available, ISRC.\93\ The DLC's 
proposal would also require copyright owners to provide the MLC with 
all available information related to performing rights societies 
through which performance rights in each musical work are licensed.\94\ 
The DLC asserts that copyright owners are best positioned to provide 
the relevant information and disagrees with the MLC's characterization, 
stating that musical work copyright owners can obtain sound recording 
information in a variety of ways.\95\
---------------------------------------------------------------------------

    \93\ DLC Reply Add. at A-4.
    \94\ Id. at A-5.
    \95\ DLC Initial at 8; DLC Reply at 12, Add. A-5.
---------------------------------------------------------------------------

    A2IM & RIAA also commented on this issue, related to their overall 
viewpoint that the MLC should get sound recording data from a single 
authoritative source, rather than from DMPs and musical work copyright 
owners.\96\ They further suggest that publishers should have to provide 
sufficient information to unambiguously identify sound recordings, 
which they say would generally entail a title, featured artist, and 
ISRC.\97\
---------------------------------------------------------------------------

    \96\ A2IM & RIAA Reply at 2; see also RIAA Initial at 9 
(proposing that ``commercially reasonable efforts'' be defined as 
requiring the MLC to leverage existing industry infrastructure, 
including DDEX, SoundExchange's ISRC lookup service, and 
SoundExchange's Music Data Exchange).
    \97\ A2IM & RIAA Reply at 12-13; see also RIAA Initial at 7-9.
---------------------------------------------------------------------------

    Based on the record before it, the Office proposes the following 
rules with respect to musical work copyright owner data collection and 
delivery efforts.
    Appropriate efforts. The Office agrees with the MLC that the wide 
variety of musical work copyright owners makes it challenging to adopt 
a one-size-fits-all approach as to what constitutes ``commercially 
reasonable efforts to deliver.'' Consequently, the Office proposes to 
codify a minimal floor requirement that should not unduly burden less-
sophisticated musical work copyright owners--similar in approach to the 
minimal floor requirement discussed above for DMPs. The rule proposes 
that musical work copyright owners periodically monitor the MLC's 
database for missing and inaccurate sound recording information 
relating to their musical works, and if an issue is discovered, then 
the copyright owner must provide the pertinent sound recording 
information to the MLC if the information is known to the copyright 
owner or, as the MLC proposes, is otherwise within the copyright 
owner's possession, custody, or control. By limiting the obligation in 
this manner, musical work copyright owners would not have to 
affirmatively seek out information from sound recording copyright 
owners or licensors they may have no relationship with, but would have 
to provide information that may be contained in some of the sources the 
DLC discusses (e.g., royalty statements under the compulsory license 
and reporting from performing rights organizations). As to the proposal 
from A2IM & RIAA, the statute imposes a requirement on musical work 
copyright owners--not the MLC--so the Office does not interpret this 
provision to encompass requiring the MLC to obtain sound recording data 
from certain sources.
    Appropriate information. The Office is inclined to agree with the 
DLC and A2IM & RIAA that more than just the sound recording title 
should be provided. Section 115(d)(3)(E)(iv) refers to ``information 
regarding the names of the sound recordings,'' while in other places, 
the MMA only refers to ``the name of the sound recording'' or ``sound 
recording name.'' \98\ Moreover, as the RIAA points out, in most cases, 
sound recordings are likely to share the same name as the underlying 
musical work, making a requirement limited to the sound recording's 
title largely meaningless.\99\ Thus, the rule proposes, in accord with 
the comments of the DLC and A2IM & RIAA, that sound recording titles, 
including alternative and parenthetical titles, featured artists, and 
ISRCs should all be provided (subject to the appropriate efforts 
discussed above). The Office does not agree with the DLC's proposal 
regarding performing rights organization information for musical works, 
as that information does not seem to fit within the meaning of 
``information regarding the names of the sound recordings.'' \100\
---------------------------------------------------------------------------

    \98\ Compare 17 U.S.C. 115(d)(3)(E)(iv) (emphasis added) with 
id. at 115(d)(3)(E)(ii)(IV)(bb), (d)(3)(E)(iii)(I)(dd), 
(d)(4)(A)(ii)(I)(aa).
    \99\ See RIAA Initial at 8-9; see also DLC Initial at 8.
    \100\ See 17 U.S.C. 115(d)(3)(E)(iv) (emphasis added).
---------------------------------------------------------------------------

C. Reports of Usage and Payment--Digital Music Providers

    As discussed in the notification of inquiry, DMPs operating under 
the blanket license must report their usage of musical works and pay 
applicable royalties to the MLC. The statute contains two relevant 
reporting and payment provisions, sections 115(c)(2)(I) and 
115(d)(4)(A), and the Copyright Office is to prescribe regulations 
pursuant to both.\101\ These regulations are to cover matters such as 
the form, content, delivery, certification, and adjustment of reports 
of usage and payment, as well as requirements under which records of 
use must be maintained and made available to the MLC by DMPs.\102\
---------------------------------------------------------------------------

    \101\ See 84 FR at 49970-71.
    \102\ See id.
---------------------------------------------------------------------------

    Various commenters spoke to issues concerning reports of usage in 
responding to the notification of inquiry, and the MLC, DLC, and Music 
Reports provided proposed regulatory language.
    In promulgating reporting and payment rules for the section 115 
license, the Copyright Office has long followed a ``guiding principle'' 
that ``the regulations should preserve the compulsory license as a 
workable tool, while at the same time assuring that copyright owners 
will receive full and prompt payment for all phonorecords made and 
distributed.'' \103\ The Office has ``accordingly evaluated proposed 
regulatory features using `three fundamental criteria' '': (1) `` `the 
accounting procedures must not be so complicated as to make use of the 
compulsory license impractical;' '' (2) `` `the accounting system must 
insure full payment, but not overpayment;' '' and (3) `` `the 
accounting system must insure prompt payment.' '' \104\ The Office has 
also previously stressed that ``transparency is critical where 
copyright owners are compelled by law to license their works.'' \105\ 
Today, the Office reaffirms these conclusions, which the Office has 
carefully considered in formulating this proposed rule. The Office also 
credits Congress's intention that, under the MMA, reports of usage 
``should be consistent with then-current industry practices regarding 
how . . . limited downloads and interactive streams are tracked and 
reported.'' \106\
---------------------------------------------------------------------------

    \103\ 79 FR 56190, 56190 (Sept. 18, 2014) (internal quotation 
marks omitted) (quoting 45 FR 79038, 79039 (Nov. 28, 1980)).
    \104\ Id. (internal brackets omitted) (quoting 45 FR 79038, 
79039 (Nov. 28, 1980)).
    \105\ 79 FR at 56201.
    \106\ See H.R. Rep. No. 115-651, at 12; S. Rep. No. 115-339, at 
13; Conf. Rep. at 10; see also U.S. Copyright Office, Copyright and 
the Music Marketplace at 30-31 (noting that pre-MMA, mechanical 
licenses were overwhelmingly administered through direct licenses).

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

[[Page 22527]]

    Based on the record before it, and with these guiding principles in 
mind, the Office proposes the following rules with respect to reports 
of usage and payment to be delivered to the MLC by DMPs under the 
blanket license.
    General operation and timing. The rule proposes a general scheme 
whereby DMPs operating under the blanket license must report usage and 
pay royalties to the MLC on a monthly basis, with a cumulative annual 
report due each year, and an ability to make adjustments to monthly and 
annual reports and related royalty payments, including to correct 
errors and replace estimated inputs with finally determined figures.
    As required by section 115(d)(4)(A)(i), the rule proposes that 
monthly reports of usage and related royalty payments must be delivered 
to the MLC within 45 day of the end of the applicable monthly reporting 
period.\107\ The Office disagrees with the MLC, which would read the 
statute as requiring royalty payments to be due within 20 days rather 
than within the same 45-day period as their associated reports of 
usage.\108\ As the DLC points out, the statute and legislative history 
counsel that both are due within 45 days.\109\ Section 115(d)(4)(A)(i) 
states that DMPs shall ``report and pay'' ``in accordance with'' 
section 115(c)(2)(I), ``except that the monthly reporting shall be due 
on the date that is 45 calendar days, rather than 20 calendar days, 
after the end of the monthly reporting period,'' while section 
115(c)(2)(I) states that ``[e]xcept as provided in paragraph[] 
(4)(A)(i) . . . of subsection (d), royalty payments shall be made on or 
before the twentieth day of each month.'' \110\ Given that one 
provision refers to ``monthly reporting'' and the other refers to 
``royalty payments,'' in order to give meaning to the ``except'' 
language, it would seem that both provisions must be read as referring 
to both reporting and payment. The legislative history confirms this 
intent.\111\ And it is in accord with the Office's longstanding 
interpretation of section 115.\112\
---------------------------------------------------------------------------

    \107\ See 17 U.S.C. 115(d)(4)(A)(i).
    \108\ See MLC Reply at 23.
    \109\ See DLC Ex Parte Letter #1 Presentation at 2-3.
    \110\ 17 U.S.C. 115(c)(2)(I), (d)(4)(A)(i) (emphasis added).
    \111\ See H.R. Rep. No. 115-651, at 27 (``Subparagraph A 
identifies the data that must be reported to the collective by a 
digital music provider along with its royalty payments due 45 
calendar days after the end of a monthly reporting period.'') 
(emphasis added); S. Rep. No. 115-339, at 24 (same); Conf. Rep. at 
20 (same).
    \112\ See 37 CFR 201.19(b)(5) (1978) (``Each Monthly Statement 
of Account shall be served . . . together with the total royalty . . 
. on or before the twentieth day of the immediately succeeding 
month.'') (emphasis added).
---------------------------------------------------------------------------

    Under the proposed rule, an annual report of usage would be due on 
the 20th day of the sixth month after the end of the DMP's fiscal 
year--the same timing as currently required for annual statements of 
account under the non-blanket section 115 license, and the same timing 
as proposed by Music Reports.\113\ The Office is inclined to disagree 
with the DLC that the statute does not require annual reporting 
certified by a certified public accountant (``CPA'').\114\ The Office 
has reasonably considered the DLC's various arguments on this subject, 
but the plain language of section 115(c)(2)(I) seems to clearly state 
that ``detailed cumulative annual statements of account, certified by a 
certified public accountant, shall be filed for every compulsory 
license under subsection (a).'' \115\ Even if that were not the case, 
the Office tentatively concludes that requiring CPA certification of 
annual reporting, pursuant to the Office's broad regulatory authority, 
is reasonable and appropriate. While, as the DLC notes, the MMA creates 
a new triennial audit right, copyright owners remain unable to directly 
audit DMPs--they can only audit the MLC, which may, but is not required 
to, audit DMPs.\116\ And certified annual reporting may diminish the 
need to initiate the same level of audits of individual DMPs by the 
MLC; as the DLC is well-aware, DMPs effectively fund such audits 
through the administrative assessment. An annual CPA certification 
would also occur more frequently than these triennial audits, to the 
extent audits occur at all.\117\ Thus, requiring an annual CPA-
certified report would ensure that copyright owners continue to be 
given at least as much comfort in the accuracy of DMP reporting as 
before the MMA.\118\ The MMA is intended to increase transparency, not 
diminish it.\119\
---------------------------------------------------------------------------

    \113\ See id. at Sec.  210.17(g)(1); Music Reports Initial at 
18.
    \114\ See DLC Initial at 9-12; DLC Reply at 22 n.97.
    \115\ See 17 U.S.C. 115(c)(2)(I) (emphasis added).
    \116\ See id. 115(d)(3)(L), (d)(4)(D).
    \117\ See MLC Ex Parte Letter #2 at 4 (noting that the MLC is 
not funded at a level necessary to audit every DMP every three 
years).
    \118\ See 79 FR at 56203 (``[T]he purpose of the CPA 
certification requirement is to give the copyright owner firm 
assurance that it is receiving all the royalties to which it is 
entitled.'').
    \119\ As the DLC points out, the audit right was adopted in part 
upon the recommendation of the Copyright Office; this recommendation 
was not made with a corresponding suggestion to decrease the 
potential reliability of indicia provided in licensee annual 
statements. See DLC Initial at 11 (citing U.S. Copyright Office, 
Copyright and the Music Marketplace at 173-74). See also, e.g., 164 
Cong. Rec. S6292, 6293 (daily ed. Sept. 25, 2018) (statement of Sen. 
Hatch) (``I need to thank Chairman Grassley, who shepherded this 
bill through the committee and made important contributions to the 
bill's oversight and transparency provisions.''); 164 Cong. Rec. 
S501, 504 (daily ed. Jan. 24, 2018) (statement of Sen. Coons) 
(``This important piece of legislation will bring much-needed 
transparency and efficiency to the music marketplace.''); Proposal 
of DLC Submitted in Response to U.S. Copyright Office's Dec. 21, 
2018, Notice of Inquiry, Ex. C at 2 (Mar. 21, 2019) (recognizing 
``the goals of the MMA to provide licensing efficiency and 
transparency'').
---------------------------------------------------------------------------

    Regarding adjustments, the rule proposes that a report adjusting a 
monthly report of usage can be delivered to the MLC any time between 
delivery of the monthly report being adjusted and delivery of the 
annual report covering that monthly report. The rule would also permit 
a DMP, at its option, to forego filing a separate report of adjustment 
and instead combine it with the applicable annual report. The latter 
option is similar to how adjustments to monthly statements currently 
operate under the non-blanket section 115 license,\120\ and the former 
option, allowing adjustments to be made at an earlier point in time, is 
something both the MLC and DLC propose and that the Office believes 
reasonably provides additional flexibility and may facilitate more 
prompt and accurate payments to copyright owners.\121\ In accord with 
the DLC's proposal, and as is the case currently for monthly accounting 
statements under the non-blanket section 115 license, this effectively 
would require any adjustment to a monthly report of usage to be made 
within six months \122\ of the end of the relevant annual period 
covering that monthly report (which, as discussed above, is the 
proposed deadline for delivering the annual report).\123\
---------------------------------------------------------------------------

    \120\ See 37 CFR 210.16(d)(3)(i), 210.17(d)(2)(ii).
    \121\ See DLC Reply at 21-22, Add. A-10-11; MLC Initial at 19-
20; MLC Reply at 27, App. C at 14.
    \122\ Technically the 20th day of the sixth month.
    \123\ See DLC Reply at 21-22, Add. A-10-11. While the MLC 
proposes a different deadline, the MLC seems to concede that the 
DLC's proposed timing would be reasonable. See MLC Reply at 27.
---------------------------------------------------------------------------

    The Office is inclined to agree with both the MLC and DLC that 
certain items may still need to be adjusted after the end of this six-
month period,\124\ as is permitted currently in connection with 
performance royalty estimates under the non-blanket section 115 
license.\125\ The Office thus proposes that an annual report of usage 
may be adjusted within six months (the same

[[Page 22528]]

timing as is currently permitted in connection with performance royalty 
estimates \126\) of any one of the following occurrences, which are 
drawn from both the MLC and DLC proposals and strike the Office as 
being reasonable: (1) Exceptional circumstances; (2) when adjusting a 
previously estimated input after the input becomes finally established 
(see below); (3) following an audit; or (4) in response to a change in 
applicable rates or terms under 37 CFR part 385.\127\
---------------------------------------------------------------------------

    \124\ See DLC Reply at 22, Add. A-10-11; MLC Initial at 19-20; 
MLC Reply App. C at 14.
    \125\ See 37 CFR 210.17(d)(2)(iii) (describing amended annual 
statements of account).
    \126\ See id.
    \127\ See DLC Reply at 22, Add. A-10-11; MLC Reply App. C at 14.
---------------------------------------------------------------------------

    Processing, invoices, and response files. A significant issue 
raised by the DLC throughout the rulemaking proceeding is that there 
must be a back-and-forth process through which DMPs receive royalty 
invoices and response files \128\ from the MLC after delivering monthly 
reports of usage, but before royalty payments are made or deducted from 
a DMP's account with the MLC. The DLC states that this process is an 
industry-standard practice for many DMPs that use third-party vendors 
to calculate and process their royalty payments.\129\ The DLC is 
specifically concerned with the handling of voluntary licenses, 
explaining that because such licenses are often procured through 
blanket deals covering all musical works in a publisher's catalog, the 
DMP usually does not know which specific musical works are covered, and 
will be reliant on the MLC to make that determination based on its 
statutorily directed matching efforts; this in turn affects the amount 
of royalties the DMP owes under the blanket license.\130\ The DLC seems 
especially worried that if invoices and response files are not 
required, DMPs will be effectively compelled to also use the MLC to 
administer their voluntary licenses (compared to a DMP processing in-
house or through an alternate vendor) because the DMPs will not 
otherwise be able to properly account to copyright owners under these 
direct deals.\131\ At bottom, the DLC ostensibly seeks to retain the 
status quo for these deliverables whereby the MLC, in fulfilling the 
matching and calculation role previously performed by DMPs and their 
vendors, would provide the royalty invoices and response files DMPs 
either generated or received from their vendors under the pre-MMA 
regime.\132\
---------------------------------------------------------------------------

    \128\ The DLC describes ``response files'' as detailing the 
results of the matching process and essentially serving as the 
``backup'' to the invoice, confirming where royalties are being 
paid, DLC Reply at 16, and including such information as song title, 
vendor-assigned song code, composer(s), publisher name, publisher 
split, vendor-assigned publisher number, publisher/license status, 
and royalties per track, DLC Ex Parte Letter #1 Presentation at 11.
    \129\ See DLC Initial at 13-14; DLC Reply at 13-16; DLC Ex Parte 
Letter Feb. 14, 2020 (``DLC Ex Parte Letter #1'') at 1-2; DLC Ex 
Parte Letter #1 Presentation at 3-13; DLC Ex Parte Letter #3 at 4.
    \130\ DLC Initial at 13-14; DLC Reply at 13-16; DLC Ex Parte 
Letter #1 Presentation at 3-13.
    \131\ DLC Ex Parte Letter #1 Presentation at 3-13.
    \132\ DLC Reply at 16.
---------------------------------------------------------------------------

    To this end, the DLC proposes that DMPs first deliver their monthly 
reports of usage to the MLC, and that the MLC then use the reported 
data to match reported sound recordings to musical works and their 
copyright owners, confirm uses subject to voluntary licenses and the 
corresponding amounts to be deducted from royalties otherwise due under 
the blanket license, calculate royalties owed under the blanket 
license, and deliver an invoice to the DMP setting forth the royalties 
owed along with a response file.\133\ The DLC proposes not to prescribe 
when a DMP must deliver its report of usage, so long as it is before 
the statutory 45-day deadline, but would require the MLC to provide 
invoices and the response file within 15 days of receiving a monthly 
report of usage.\134\
---------------------------------------------------------------------------

    \133\ Id. at Add. A-9; see also id. at 15-16.
    \134\ Id. at Add. A-9; DLC Ex Parte Letter #3 at 4; see also DLC 
Ex Parte Letter #1 at 1-2 (``[D]ifferent services have different 
internal accounting and payment practices, and imposing a rigid 
interim reporting deadline on all services will impede rather than 
accommodate those different practices.'').
---------------------------------------------------------------------------

    The MLC does not seem to generally disagree with this choreography 
and ultimately states that it intends to provide DMPs with both 
invoices and response files, but argues that such matters, particularly 
with respect to timing, are not ripe for rulemaking.\135\ The MLC 
further states that to be logistically workable, there must be a fixed 
DMP reporting deadline, to provide the MLC with predictability in its 
staffing and resources.\136\ It proposes that, to the extent the Office 
adopts a rule, DMPs be required to deliver reports within 15 days after 
the end of the monthly reporting period and believes it can process 
them within 25 days, which would then allow 5 days to remit payment (or 
have the MLC charge a DMP's account) before the statutory 45-day 
deadline expires.\137\
---------------------------------------------------------------------------

    \135\ MLC Ex Parte Letter #2 at 2-3.
    \136\ Id. at 2.
    \137\ The MLC addressed planned timing with the Office during 
its February 21, 2020, ex parte communication. See generally MLC Ex 
Parte Letter #2 at 2.
---------------------------------------------------------------------------

    Having carefully considered this issue, the Office proposes a 
process that would require the MLC to provide invoices and response 
files generally along the outlines of the DLC's proposal.\138\ The 
Office, however, generally proposes to adopt the timing deadlines that 
the MLC indicates would be acceptable to its operations. Given that the 
current non-blanket section 115 license requires monthly reporting and 
payment within 20 days, and commenters state that DMPs generally report 
to their vendors within 10 days or less,\139\ the proposed 15-day 
deadline should not be burdensome. To the extent it is, it is optional; 
a DMP could take the full 45 days permitted under the statute, but it 
would not be entitled to an invoice if it does, absent special 
arrangement with the MLC (see ``Voluntary agreements to alter process'' 
below). The rule further proposes that response files must be requested 
by DMPs, in which case they must be delivered by the MLC within the 
same 25-day period the MLC will have to process reports.\140\ The 
Office believes the proposed rule is a reasonable approach to ensuring 
that DMPs that need invoices and response files can get them, while 
providing the MLC the time it needs to generate them. The proposed rule 
is intended to further the Office's longstanding policy objective that 
the compulsory license should be a realistic and practical alternative 
to voluntary licensing. The Office appreciates the MLC's position 
requesting the Office refrain from issuing a rule on this matter for 
the time being, but tentatively agrees with the DLC that a rule would 
ultimately be valuable to build reliance that DMPs can obtain these 
items. The Office is not opposed to revisiting the precise choreography 
at a later date.
---------------------------------------------------------------------------

    \138\ The Office is inclined to disagree with the DLC's proposal 
that the MLC provide the DMP with the amount of royalties owed under 
voluntary licenses. See DLC Reply Add. at A-9. That seems more like 
something the MLC would only be obligated to calculate and provide 
if it is privately engaged as the DMPs administrator for such 
voluntary licenses. See 17 U.S.C. 115(d)(3)(C)(iii); see also MLC Ex 
Parte Letter #2 at 3.
    \139\ See Music Reports Initial at 7; MLC Ex Parte Letter #2 at 
2.
    \140\ The rule also proposes that a DMP may request a response 
file even when it is not entitled to an invoice because the 
information may still be of use to the DMP, such as for its 
voluntary licenses. In such cases, the MLC would have 25 days from 
the end of the 45-day reporting deadline to deliver the response 
file.
---------------------------------------------------------------------------

    Content of monthly reports of usage. In addition to basic 
information like the covered period and the name of the DMP and its 
associated services, the rule proposes that monthly reports of usage 
contain a detailed statement covering the royalty payment and 
accounting information and sound recording and musical work information 
discussed below. Such information would be required for each sound 
recording embodying a musical work

[[Page 22529]]

that is used by the DMP in covered activities during the applicable 
monthly reporting period.\141\ As required by the statute, this would 
cover ``usage data for musical works used under the blanket license and 
usage data for musical works used in covered activities under voluntary 
licenses and individual download licenses.'' \142\ The rule proposes, 
in accord with the proposals of the MLC and DLC, that information be 
reported in such a manner as from which the MLC may separate the 
reported information for each different applicable activity or 
offering, including each different applicable activity and offering 
defined by the CRJs in 37 CFR part 385.\143\ This seems necessary for 
the MLC to be able to properly confirm DMP royalty payments considering 
that different activities and offerings are subject to different rate 
calculations under part 385, and part 385 specifically provides that 
``royalties must be calculated separately with respect to each Offering 
taking into consideration Service Provider Revenue and expenses 
associated with each Offering.'' \144\ Monthly reports would also have 
to contain appropriate information about applicable voluntary licenses 
and individual download licenses to the extent not otherwise provided 
separately as discussed above with respect to NOLs.\145\
---------------------------------------------------------------------------

    \141\ See MLC Reply App. C at 9-10; DLC Reply Add. at A-6.
    \142\ See 17 U.S.C. 115(d)(4)(A)(ii).
    \143\ See MLC Initial at 18; MLC Reply App. C at 9; DLC Reply 
Add. at A-6.
    \144\ See 37 CFR 385.21(b) (emphasis added).
    \145\ See 17 U.S.C. 115(d)(4)(A)(ii)(II).
---------------------------------------------------------------------------

    The MLC asks the Office to clarify ``that offerings with different 
consumer price points are different offerings to be reported 
separately.'' \146\ The DLC disagrees.\147\ This issue does not seem 
appropriate for the Office to opine on one way or the other. The CRJs 
in part 385 use the terms ``Licensed Activity'' and ``Offering,'' and 
provide definitions for both, which are relevant to the rate 
calculations.\148\ Any concerns should be addressed to the CRJs.
---------------------------------------------------------------------------

    \146\ MLC Ex Parte Letter #2 at 4; see MLC Ex Parte Letter Mar. 
24, 2020 (``MLC Ex Parte Letter #3'') at 2.
    \147\ DLC Ex Parte Letter #3 at 3 (``The rates established by 
the Copyright Royalty Board, however, are not based on customer 
price points, which is why reporting based on those distinctions 
should not be required.'').
    \148\ See 37 CFR 385.2, 385.21, 385.22, 385.31.
---------------------------------------------------------------------------

    The Office is inclined to disagree with the MLC with respect to 
requiring DMPs to report usage for non-music content (e.g., 
podcasts).\149\ Such information seems only relevant if somehow 
necessary for calculating statutory royalties, in which case, the 
proposed rule would cover it. The Office, at least on the record before 
it, is not persuaded by the MLC's more general argument that nascent 
DMPs may not understand the difference between section 115 offerings 
and non-section 115 offerings.\150\
---------------------------------------------------------------------------

    \149\ See MLC Reply App. C at 12.
    \150\ See MLC Initial at 5, 18-19; see also DLC Reply at 20 
(opposing the MLC's proposal).
---------------------------------------------------------------------------

    As with NOLs discussed above, the Office is also not inclined to 
provide the MLC with authority to require additional substantive 
information from DMPs in connection with their reports of usage, as the 
MLC proposes, although such information could be provided 
permissively.\151\ Particularly if issued on an interim basis, the 
Office will consider adjusting the relevant rule in the future if 
necessary.
---------------------------------------------------------------------------

    \151\ See MLC Reply App. C at 10, 12; see also DLC Reply at 20 
(opposing the MLC's proposal).
---------------------------------------------------------------------------

    The Office is also not inclined to adopt a default rule entitling 
DMPs to provide various required information to the MLC separately from 
their reports, as the DLC proposes.\152\ The Office has concerns about 
potential logistical challenges it could create for the MLC, but has no 
objection to DMPs doing this if the MLC agrees (see ``Voluntary 
agreements to alter process'' below).
---------------------------------------------------------------------------

    \152\ See DLC Reply at 17, Add. A-7.
---------------------------------------------------------------------------

    Royalty payment and accounting information. With respect to 
specific accounting information and royalty calculation details 
required to be reported, the Office proposes to essentially retain the 
current rule governing non-blanket section 115 licenses, but with two 
paths to account for whether the DMP delivering the report is entitled 
to an invoice or not (which in turn, depends upon the date on which the 
DMP's report is delivered to the MLC).\153\ Where the DMP will receive 
an invoice, it would be required to report all information necessary 
for the MLC to compute the royalties payable under the blanket license, 
in accordance with part 385, and all information necessary to enable 
the MLC to provide a detailed and step-by-step accounting of the 
calculation of such royalties, sufficient to allow each applicable 
copyright owner, in turn, to assess the manner in which the MLC, using 
the DMP's information, determined the royalty owed and the accuracy of 
the royalty calculations. Where the DMP is not entitled to an invoice, 
it would be required to make its own calculations and provide the same 
detailed and step-by-step accounting of the calculation of such 
royalties, sufficient for the MLC to assess their accuracy. In both 
cases, the DMP would be required to report the number of payable units 
(e.g., permanent downloads, plays, constructive plays) for each 
reported sound recording, whether pursuant to a blanket license, 
voluntary license, or individual download license. In neither case 
would the DMP be expected to calculate or estimate per-work royalty 
allocations.
---------------------------------------------------------------------------

    \153\ See 37 CFR 210.16(c)(2); see also MLC Initial at 18 
(supporting retention); Music Reports Initial at 11 (same).
---------------------------------------------------------------------------

    In proposing to carry forward the current regulatory construct, the 
Office observes that the MMA does not appear to require any specific 
accounting or calculation details beyond the number of DPDs,\154\ and, 
as noted above, the MMA's legislative history suggests that Congress 
did not intend for such reporting details to necessarily change.\155\ 
The Office, therefore, is not inclined to substantially deviate from 
its existing rule.
---------------------------------------------------------------------------

    \154\ See 17 U.S.C. 115(d)(4)(A)(ii); see also Music Reports 
Initial at 4 (observing that the MMA has ``a glaring gap'' that 
``omits any requirement that DMPs deliver to the MLC . . . any of 
the underlying information that would be required to show how the 
DMPs have calculated their royalty payments'').
    \155\ See H.R. Rep. No. 115-651, at 12; S. Rep. No. 115-339, at 
13; Conf. Rep. at 10.
---------------------------------------------------------------------------

    The MLC and DLC sharply disagree on this matter. The MLC argues 
that the current level of accounting detail in reporting is 
insufficient and opaque, and proposes that the regulations remedy this 
by enumerating a considerable amount of detailed royalty accounting 
calculation and background information that DMPs must be required to 
report.\156\ The DLC objects to the MLC's purported need for much of 
this information, and argues that compiling that level of information 
into monthly reports would be operationally burdensome and ``will be a 
substantial engineering challenge.'' \157\ The DLC further argues that 
it would be more appropriate for the information sought by the MLC to 
be obtained via the

[[Page 22530]]

statutorily permitted audits.\158\ The MLC contends that these 
triennial audits are insufficient.\159\
---------------------------------------------------------------------------

    \156\ See MLC Initial at 19; MLC Reply at 14, 19-20, App. C at 
9-12; MLC Ex Parte Letter #2 at 3. Some examples of what the MLC 
seeks include information regarding how the DMP calculates service 
revenue and total cost of content (including e.g., categories of 
revenue, subscription prices, deductions from revenue, and the types 
of consideration expensed for obtaining sound recording rights), 
information about bundles, discounts, free trials, and promotional 
offerings (including e.g., family and student plan data, which 
products/services constitute a bundle, and bundle component 
pricing), and information about DPDs for which the DMP does not pay 
royalties.
    \157\ DLC Ex Parte Letter #1 at 2; DLC Ex Parte Letter #1 
Presentation at 14 (``The MLC has not explained why it needs this 
data to perform its core matching, collection, and distribution 
activities. Moreover, these changes will be a substantial 
engineering challenge. For instance, the inputs into determining the 
prices of the elements of a bundle are not data that is stored in a 
format amenable to reporting.''); DLC Reply at 17-20.
    \158\ DLC Reply at 17; DLC Ex Parte Letter #1 at 2.
    \159\ MLC Ex Parte Letter #2 at 4.
---------------------------------------------------------------------------

    Regardless of whatever the current reporting situation may be, the 
Office tentatively concludes that the MLC should have access to much of 
the information it seeks, but that it may be appropriate for some of 
this underlying backup information to be made available separate from 
monthly reports of use. As previously noted, ``transparency is critical 
where copyright owners are compelled by law to license their works,'' 
\160\ and so it seems appropriate for the MLC to have access to as much 
information as is reasonably necessary for it to ``engage in efforts to 
. . . confirm proper payment of royalties due.'' \161\ That the scope 
of that information may be cumbersome for DMPs is a product of the 
complexity of the rate structure adopted by the CRJs (which presumably 
could be changed in future ratemakings). The Office, however, is also 
mindful of other previously noted guiding principles, that the 
compulsory license must remain a ``workable tool'' and that ``the 
accounting procedures must not be so complicated as to make use of the 
compulsory license impractical.'' \162\ To appropriately balance these 
competing concerns, the Office proposes a compromise approach whereby 
DMPs must make much of the information proposed by the MLC available to 
the MLC as part of their records of use.\163\ As discussed below in 
more detail, the Office proposes to clarify its recordkeeping rule with 
enumerated examples of the types of records DMPs must retain and make 
available.
---------------------------------------------------------------------------

    \160\ 79 FR at 56201.
    \161\ See 17 U.S.C. 115(d)(3)(G)(i)(I)(cc).
    \162\ 79 FR at 56190.
    \163\ See 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I).
---------------------------------------------------------------------------

    The MLC and DLC both acknowledge the practical reality that 
reporting will need to use estimates in certain circumstances,\164\ as 
is permitted for performance royalties under the current rules 
governing the non-blanket section 115 license.\165\ While the MLC 
proposes that estimates be limited to performance royalties,\166\ the 
DLC proposes a broader provision covering any royalty calculation 
``input that is unable to be finally determined.'' \167\ The DLC 
asserts that this expansion is appropriate because there are other 
royalty calculation inputs, such as the applicable consideration 
expensed for sound recording rights, that may not be established when 
an applicable report may be due.\168\
---------------------------------------------------------------------------

    \164\ See DLC Reply at 16, Add. A-8; MLC Reply App. C at 13.
    \165\ See 37 CFR 210.16(d)(3)(i).
    \166\ MLC Reply App. C at 13.
    \167\ DLC Reply Add. at A-8.
    \168\ DLC Reply at 16; see also DLC Initial at 15-16.
---------------------------------------------------------------------------

    The rule proposes that a reasonable estimate be permitted for any 
royalty calculation input that is unable to be finally determined at 
the time the report is delivered to the MLC, if the reason the input 
cannot be finally determined is outside the DMP's control. It seems 
reasonable to permit such estimations, but only where the DMP cannot 
unilaterally finalize the input. The proposed rule would allow use of 
an estimate where an input remains uncertain because of a bona fide 
dispute between the DMP and another party. But using an estimate 
because of a purely internal tracking or accounting issue, for example, 
would not be acceptable. The rule would require the DMP to deliver a 
report of adjustment after any estimated input becomes finally 
determined. The Office also proposes to specifically permit DMPs to 
calculate their total royalties owed under the blanket license by using 
a reasonable estimate of the amount to deduct for usage subject to 
voluntary licenses and individual download licenses, where the DMP is 
not entitled to an invoice but still dependent on the MLC to confirm 
such usage. The rule would require the DMP to deliver a report of 
adjustment after the MLC confirms such usage.
    The Office is not inclined to adopt the DLC's proposal to clarify 
that making any adjustments to these estimates would not be a basis for 
charging late fees, terminating a blanket license, or requiring payment 
of audit fees.\169\ Any applicable late fees are governed by the CRJs, 
and any clarification should come from them. Whether or not payment of 
audit fees is incurred is governed by 17 U.S.C. 115(d)(4)(D). And 
whether or not the license can be terminated is governed by 17 U.S.C. 
115(d)(4)(E).
---------------------------------------------------------------------------

    \169\ See DLC Reply at 16-17, Add. A-8; see also MLC Ex Parte 
Letter #2 at 7-8 (opposing the DLC's proposal).
---------------------------------------------------------------------------

    Sound recording and musical work information. With respect to the 
specific information required to be reported for purposes of 
identifying each sound recording embodying a musical work used by a 
DMP, the proposed rule is derived from the statute, current 
regulations, and the public comments (including the specific proposals 
of the MLC and DLC). In alignment with the statute, the proposed rule 
essentially has three tiers of information: (1) Sound recording 
information that must always be reported (e.g., sound recording name 
and featured artist); (2) sound recording information that must be 
reported ``to the extent acquired by the [DMP] in connection with its 
use of sound recordings of musical works to engage in covered 
activities, including pursuant to [section 115(d)(4)](B)'' (e.g., sound 
recording copyright owner, producer, and ISRC); (3) and associated 
musical work information that must be reported ``to the extent acquired 
by the [DMP] in the metadata provided by sound recording copyright 
owners or other licensors of sound recordings in connection with the 
use of sound recordings of musical works to engage in covered 
activities, including pursuant to [section 115(d)(4)](B)'' (e.g., 
songwriter, publisher, and international standard musical work code 
(``ISWC'')).\170\
---------------------------------------------------------------------------

    \170\ See 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa)-(bb).
---------------------------------------------------------------------------

    In addition to the statutorily enumerated information, the Office 
is proposing certain additional data fields that the record indicates 
are likely to be beneficial to the MLC's key function of engaging in 
matching efforts to identify reported sound recordings, the musical 
works embodied in them, and the related copyright owners due royalties. 
For example, within the first tier described above--that must always be 
reported--the Office proposes including playing time \171\ and any 
unique identifier assigned by the DMP (including any code that can be 
used to locate and listen to the sound recording on the DMP's 
service).\172\ Besides being helpful for matching, particularly where 
there are multiple versions of a recording, playing time can be 
necessary for computing royalties.\173\
---------------------------------------------------------------------------

    \171\ See 37 CFR 210.16(c)(3)(v); Music Reports Initial at 12; 
DLC Reply Add. at A-7; MLC Reply App. C at 11; RIAA Initial at 6; 
Recording Academy Initial at 3; FMC Reply at 4.
    \172\ See 37 CFR 210.16(c)(3)(iii)(C); Music Reports Initial at 
12.
    \173\ See id. at Sec.  385.11(a) and 385.21(c).
---------------------------------------------------------------------------

    Regarding DMP identifiers, at this time, the Office is inclined to 
agree with the DLC's proposal that DMPs provide these in lieu of the 
audio links the MLC requests.\174\ The MLC argues that these links may 
be critical to properly match and pay royalties because the audio is 
``the only truly authoritative evidence of the digital use,'' and 
claims that it would not be burdensome for DMPs to provide them.\175\ 
Specifically, it points out that audio links have been provided by 
certain DMPs in connection with past settlements related to unclaimed

[[Page 22531]]

royalties, and suggests that audio links would be particularly useful 
to reduce the incidence of unclaimed royalties and ownership 
disputes.\176\ The DLC contends that it would be burdensome to require 
``all digital music providers to engineer their systems'' to provide 
active links in monthly reporting, and suggests that identifiers serve 
as a workable alternative, stating that, at least for Amazon, Apple, 
Google, Pandora, and Spotify, these identifiers would be sufficient for 
the MLC to locate and listen to a particular track using the search 
feature on each DMP's consumer-facing service.\177\
---------------------------------------------------------------------------

    \174\ See DLC Ex Parte Letter #1 Presentation at 15; DLC Ex 
Parte Letter #2 at 3; MLC Initial at 20; MLC Reply at 18-19, App. C 
at 10.
    \175\ MLC Reply at 18-19; see also MLC Ex Parte Letter #1 at 2-
3; MLC Ex Parte Letter #4 at 5.
    \176\ MLC Ex Parte Letter #1 at 2-3.
    \177\ See DLC Ex Parte Letter #2 at 3; see also DLC Reply at 17-
18; DLC Ex Parte Letter #1 Presentation at 15. The MLC disputes the 
utility and widespread existence of such identifiers. MLC Ex Parte 
Letter #2 at 6; MLC Ex Parte Letter #4 at 5.
---------------------------------------------------------------------------

    The Office understands the MLC to believe that audio links will be 
most useful not in connection with automated matching efforts, but 
rather to feature on its online claiming portal, similar to claiming 
portals used in connection with class settlements over unclaimed 
royalties or collective management organizations that operate claims-
based systems.\178\ It is not clear whether links might be featured for 
all sound recordings embodying musical works listed in the database, or 
only those with missing or incomplete ownership information. Either 
way, while the planned inclusion of audio links is commendable, the 
record to date does not establish that the method by which the MLC 
receives audio links should be a regulatory issue, rather than an 
operational matter potentially resolved by MLC and DLC members, 
including through the MLC's operations advisory committee.
---------------------------------------------------------------------------

    \178\ See MLC Ex Parte Letter #4 at 5 (``[I]t would be unfair, 
and economically infeasible for many songwriters, to require the 
purchase of monthly subscriptions to each DMP service in order to 
fully utilize the statutorily-mandated claiming portal.'').
---------------------------------------------------------------------------

    For example, while the DLC suggests that inclusion of audio links 
for every recording reported on a monthly basis by each DMP would be 
burdensome, a few DLC members suggested in passing to the Office that 
they could just provide the MLC with a free monthly subscription in 
lieu of such reporting. It is not clear to what extent the parties have 
engaged on such logistical discussions to determine if this, or other 
operational solutions, may serve as a workable alternative. The Office 
declines at this time to propose a rule including audio links in 
monthly reporting, but encourages the parties, including individual DLC 
members, to further collaborate upon a solution for the MLC portal to 
include access to specific tracks (or portions thereof) when necessary, 
without cost to songwriters or copyright owners. The Office hopes that 
this matter can be resolved after the parties confer further, but 
remains open to adjusting this aspect of the proposed rule if 
developments indicate it is necessary.
    In the second tier described above--sound recording information 
that must only be reported to the extent acquired--the rule proposes to 
include version,\179\ release date,\180\ album title,\181\ label 
name,\182\ distributor,\183\ and other unique identifiers beyond ISRC, 
including catalog number,\184\ universal product code,\185\ and any 
distributor-assigned identifier.\186\
---------------------------------------------------------------------------

    \179\ See DLC Reply Add. at A-7; MLC Reply App. C at 11; RIAA 
Initial at 6; Recording Academy Initial at 3; FMC Reply at 4.
    \180\ See DLC Reply Add. at A-7; MLC Reply App. C at 11; RIAA 
Initial at 6; Recording Academy Initial at 3; FMC Reply at 4.
    \181\ See DLC Ex Parte Letter #1 Presentation at 15; MLC Ex 
Parte Letter #4 at 11.
    \182\ See 37 CFR 210.16(c)(3)(iii)(A); Music Reports Initial at 
12; MLC Ex Parte Letter #4 at 11.
    \183\ See DLC Reply Add. at A-7; MLC Reply App. C at 10.
    \184\ See 37 CFR 210.16(c)(3)(iii)(A); Music Reports Initial at 
12; MLC Ex Parte Letter #4 at 11.
    \185\ See 37 CFR 210.16(c)(3)(iii)(B); Music Reports Initial at 
12; DLC Ex Parte Letter #1 Presentation at 15; MLC Ex Parte Letter 
#4 at 11.
    \186\ See 37 CFR 210.16(c)(3)(iii)(C); Music Reports Initial at 
12.
---------------------------------------------------------------------------

    In the third tier described above--related musical work information 
that must only be reported to the extent acquired in the metadata 
provided by sound recording copyright owners and licensors--the rule 
proposes to include musical work name,\187\ musical work copyright 
owner,\188\ and international standard name identifier (``ISNI'') and 
interested parties information code (``IPI'') for each songwriter, 
publisher, and musical work copyright owner.\189\
---------------------------------------------------------------------------

    \187\ See 37 CFR 210.16(c)(3)(i); Music Reports Initial at 12.
    \188\ Though the statute already requires songwriter, publisher, 
and respective ownership share, the publisher may not always be the 
copyright owner, and in some cases, the owner may be neither the 
publisher nor the songwriter.
    \189\ See 37 CFR 210.16(c)(3)(vii); Music Reports Initial at 12; 
MLC Ex Parte Letter #4 at 11.
---------------------------------------------------------------------------

    The Office disagrees with the MLC's proposal that the musical work 
information enumerated in the statute be required ``to the extent 
otherwise known by the [DMP].'' \190\ This seems directly at odds with 
the statute, which states that such information shall be provided ``to 
the extent acquired by the [DMP] in the metadata provided by sound 
recording copyright owners or other licensors of sound recordings in 
connection with the use of sound recordings of musical works to engage 
in covered activities, including pursuant to [section 115(d)(4)](B).'' 
\191\ As the Office previously cautioned, ``while the Office's 
regulatory authority is relatively broad, it is obviously constrained 
by the law Congress enacted; the Office can fill statutory gaps, but 
will not entertain proposals that conflict with the statute.'' \192\
---------------------------------------------------------------------------

    \190\ See MLC Reply App. C at 11; see also MLC Initial at 17 
n.7.
    \191\ See 17 U.S.C. 115(d)(4)(A)(ii)(I)(bb); see also DLC Reply 
at 18 (disagreeing with the MLC's proposal for the same reason).
    \192\ 84 FR at 49968 (citations omitted).
---------------------------------------------------------------------------

    In addition to establishing the three tiers described above, the 
Office further proposes that certain information, primarily that 
covered by the second and third tiers, must only be reported to the 
extent ``practicable,'' a term defined in the proposed rule. Similar to 
the arguments made with respect to the collection and reporting of 
unaltered data discussed above, the DLC asserts that it would be 
burdensome from an operational and engineering standpoint for DMPs to 
report additional categories of data not currently reported, and that 
DMPs should not be required to do so unless it would actually improve 
the MLC's matching ability.\193\ The record suggests that all of the 
data categories described above possess some level of utility, 
although, as noted above, there is disagreement as to the particular 
degree of usefulness of each. It would seem that different data points 
may be of varying degrees of helpfulness depending on what other data 
points for a work may or may not be available.
---------------------------------------------------------------------------

    \193\ See DLC Ex Parte Letter #1 at 2; DLC Ex Parte Letter #3 at 
2.
---------------------------------------------------------------------------

    The proposed rule therefore defines ``practicable'' in a very 
specific way. First, the proposed definition would always require 
reporting of the expressly enumerated statutory categories (e.g., sound 
recording copyright owner, producer, ISRC, songwriter, publisher, 
ownership share, and ISWC must always be reported, to the extent 
appropriately acquired, regardless of any associated DMP burden). 
Second, it would require reporting of any other applicable categories 
of information (e.g., catalog number, version, release date, ISNI, 
etc.) under the same three scenarios discussed above with respect to 
unaltered data, and for the same reasons discussed above: (1) Where the 
MLC has adopted a nationally or internationally recognized standard, 
such as DDEX, that is being used by the particular DMP, and the 
information belongs to a category of information required to be 
reported under that standard; (2) where the information belongs to a 
category of information that is reported by the

[[Page 22532]]

particular DMP pursuant to any voluntary license or individual download 
license; or (3) where the information belongs to a category of 
information that was periodically reported by the particular DMP to its 
licensing administrator or to copyright owners directly prior to the 
license availability date. The Office is also contemplating a fourth 
scenario for commenters to consider: Where the information belongs to a 
category of information that is/was commonly reported in the industry 
by a majority of DMPs of comparable size and sophistication to the 
particular DMP either currently or prior to the license availability 
date. As with the rules about whether a DMP needs to provide unaltered 
data, the Office's proposed compromise seeks to appropriately balance 
the need for the MLC to receive detailed reporting with the burden that 
more detailed reporting may place on certain DMPs.\194\
---------------------------------------------------------------------------

    \194\ See also 17 U.S.C. 115(d)(4)(E)(i)(III) (one of the 
conditions of default is where a DMP provides a report ``that, on 
the whole, is . . . materially deficient as a result of inaccurate, 
missing, or unreadable data, where the correct data was available to 
the [DMP] and required to be reported'').
---------------------------------------------------------------------------

    With respect to the term ``producer,'' the Office agrees with 
commenters that it may be confusing and warrants definition.\195\ The 
Office proposes to adopt the proposal to use the Recording Academy's 
Producers and Engineers Wing definition.\196\
---------------------------------------------------------------------------

    \195\ See RIAA Initial at 11; Recording Academy Initial at 3; 
see also MLC Reply at 34-35 (explaining the MLC's own confusion over 
the term).
    \196\ See RIAA Initial at 11; Recording Academy Initial at 3.
---------------------------------------------------------------------------

    With respect to the term ``sound recording copyright owner,'' A2IM 
& RIAA raise concerns over the reporting of this information and its 
use by the MLC, asserting that there is a disconnect between the use of 
the term in the statute and the actual information included in the 
digital supply chain about different parties associated with a given 
sound recording.\197\ In light of this discussion, the Office proposes 
that DMPs may satisfy their obligations to report sound recording 
copyright owner information by reporting the three DDEX fields 
identified by A2IM & RIAA as being most relevant (to the extent such 
data is provided to DMPs by sound recording copyright owners or 
licensors): DDEX Party Identifier (DPID), LabelName, and PLine.\198\
---------------------------------------------------------------------------

    \197\ See A2IM & RIAA Reply at 8-9. Because the main of those 
concerns centers around the potential for confusion in the MLC's 
public database, the Office has addressed this issue in more depth 
in connection with a separately-issued notification of inquiry. See 
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.
    \198\ See A2IM & RIAA Reply at 8-9 (explaining the details of 
these different fields and asserting that ``each may assist the MLC 
in different ways with its task of associating sound recordings with 
musical works''); see also MLC Ex Parte Letter #4 at 10.
---------------------------------------------------------------------------

    Server fixation date and termination. With respect to the MLC's 
proposal to require DMPs to report the date on which each sound 
recording is first reproduced by the DMP on its server, the rule 
proposes an alternative approach. As a result of the new blanket 
licensing system, the MLC contends that the server fixation date is 
``required to determine which rights owner is to be paid where one or 
more grants pursuant to which a musical work was reproduced in a sound 
recording has been terminated pursuant to Section 203 or 304 of the 
[Copyright] Act.'' \199\ The Copyright Act permits authors or their 
heirs, under certain circumstances and within certain windows of time, 
to terminate the exclusive or nonexclusive grant of a transfer or 
license of an author's copyright in a work or of any right under a 
copyright.\200\ The statute, however, contains an exception with 
respect to derivative works, stating that ``[a] derivative work 
prepared under authority of the grant before its termination may 
continue to be utilized under the terms of the grant after its 
termination, but this privilege does not extend to the preparation 
after the termination of other derivative works based upon the 
copyrighted work covered by the terminated grant.'' \201\
---------------------------------------------------------------------------

    \199\ MLC Reply at 19; see also MLC Initial at 20; MLC Ex Parte 
Letter #2 at 6-7; MLC Ex Parte Letter #4 at 6-7.
    \200\ See 17 U.S.C. 203, 304(c).
    \201\ Id. at 203(b)(1), 304(c)(6)(A).
---------------------------------------------------------------------------

    As the MLC explains it, ``because the sound recording is a 
derivative work, it may continue to be exploited pursuant to the 
`panoply of contractual obligations that governed pre-termination uses 
of derivative works by derivative work owners or their licensees.' '' 
\202\ The MLC contends that the section 115 compulsory license can be 
part of this ``panoply,'' and therefore, if the compulsory license 
``was issued before the termination date, the pre-termination owner is 
paid. Otherwise, the post-termination owner is paid.'' \203\ The MLC 
further explains that ``under the prior NOI regime, the license date 
for each particular musical work was considered to be the date of the 
NOI for that work,'' but ``[u]nder the new blanket license, there is no 
license date for each individual work.'' \204\ Thus, the MLC believes 
that ``the date that the work was fixed on the DMP's server--which is 
the initial reproduction of the work under the blanket license--is the 
most accurate date for the beginning of the license for that work.'' 
\205\
---------------------------------------------------------------------------

    \202\ MLC Reply at 19 (quoting Woods v. Bourne Co., 60 F.3d 978, 
987 (2d Cir. 1995)); see also MLC Ex Parte Letter #2 at 6-7; MLC Ex 
Parte Letter #4 at 6-7.
    \203\ See MLC Ex Parte Letter #2 at 6-7; MLC Ex Parte Letter #4 
at 6-7.
    \204\ MLC Ex Parte Letter #4 at 6-7.
    \205\ MLC Ex Parte Letter #2 at 6-7.
---------------------------------------------------------------------------

    The MLC argues that including the server date in reports of usage 
should not be burdensome for DMPs because they currently possess and 
report this information.\206\ The DLC disagrees, stating that not all 
DMPs store this information, let alone report it.\207\ The DLC also 
attacks the merits of the MLC's reason for wanting the server date, but 
at a relatively high-level.\208\ No other commenter directly spoke to 
this issue, though one commenter with experience in music publishing 
administration suggests concurrence with the MLC's position.\209\
---------------------------------------------------------------------------

    \206\ See MLC Reply at 19; MLC Ex Parte Letter #1 at 3; MLC Ex 
Parte Letter #2 at 6-7 (``Server Fixation Date is currently a 
mandatory field that is reported on the License Request Form from 
HFA.''); MLC Ex Parte Letter #4 at 6-7 (``[A]ll file storage systems 
log such dates.'').
    \207\ DLC Ex Parte Letter #2 at 4; DLC Ex Parte Letter #3 at 5.
    \208\ See DLC Ex Parte Letter #2 at 4.
    \209\ See Barker Initial at 3-4 (``When [termination] occurs, 
the law allows the original copyright owner of the . . . terminated 
work to continue to collect royalties for certain uses licensed 
prior to the effective date of . . . termination of transfer, while 
the new copyright owner of the work may exclusively license all 
future uses, and collect royalties for those and certain earlier 
uses.'').
---------------------------------------------------------------------------

    The MLC's interpretation of the derivative works exception seems at 
least colorable, and no publisher or songwriter (or representative 
organization) submitted comments disagreeing with what the MLC 
characterizes as industry custom and understanding.\210\ Under the MMA, 
the MLC's dispute resolution committee will establish policies and 
procedures to address ownership disputes (though not resolve legal 
claims), and, at least where there is no live controversy between 
parties, practices regarding the default payee pursuant to the 
derivative works exception is an area where the MLC may need to adopt a 
policy for handling in the ordinary course.\211\ Of course, any 
songwriter or publisher (or other relevant party) disagreeing with the

[[Page 22533]]

MLC's approach may also challenge such practice, but to the extent the 
MLC's approach is not invalidated, or superseded by precedent, it seems 
reasonable for the MLC to want to know the applicable license date.
---------------------------------------------------------------------------

    \210\ See Woods, 60 F.3d at 986-88. The Office does not 
foreclose the possibility of other interpretations, but also does 
not find it prudent to itself elaborate upon or offer an 
interpretation of the scope of the derivative works exception in 
this particular rulemaking proceeding, which is not primarily 
focused on termination issues and which has thus far engendered 
relatively little commentary on this discrete point.
    \211\ See 17 U.S.C. 115(d)(3)(K).
---------------------------------------------------------------------------

    It is not clear to the Office, however, whether the MLC has a need 
for the server fixation dates of musical works licensed by DMPs prior 
to the license availability date, even under its legal theory. With 
respect to most musical works first used before the license 
availability date, an NOI should have been served on the copyright 
owner or filed with the Copyright Office, or the work should have been 
otherwise licensed by a voluntary agreement. In cases where the license 
was obtained by service of an NOI upon the copyright owner, it would 
seem that the MLC could continue to use the relevant NOI date for 
termination purposes, as it asserts has been the customary 
practice.\212\ Since the MLC represents that this practice was working 
fairly well prior to the MMA, the rule does not now propose regulatory 
language on this issue. And for those works used via voluntary license, 
presumably the parties have relevant records of this agreement, but in 
any event, addressing issues related to the administration of such 
voluntary agreements may be outside the ambit of the proposed rule. The 
Office welcomes comment on this understanding.
---------------------------------------------------------------------------

    \212\ See id. at 115(d)(9)(A)(``On the license availability 
date, a blanket license shall, without any interruption in license 
authority enjoyed by such digital music provider, be automatically 
substituted for and supersede any existing compulsory license 
previously obtained under this section by the digital music provider 
from a copyright owner to engage in 1 or more covered activities 
with respect to a musical work.'').
---------------------------------------------------------------------------

    In other cases, the effective date of a DMP's blanket license 
(which for any currently-operating DMP should ostensibly be the license 
availability date) would seem to be the relevant license date, 
including for some musical works already being used by DMPs prior to 
obtaining a blanket license. For those works being used by a DMP under 
the authority of NOIs that had been filed with the Copyright Office, 
the statute provides that such ``notices of intention filed before the 
enactment date will no longer be effective or provide license authority 
with respect to covered activities,'' and so the blanket license date 
may become a new, relevant license date.\213\ Musical works may also 
have been previously used without a license, whether because the use 
qualified for a copyright exception, limitation, or safe harbor (such 
as section 512 or the current transition period for good faith efforts 
made under section 115(d)(10)), or because the use may have been 
infringing, including in cases where the NOI was not valid or 
appropriately served. For uses of those works, the effective date of 
the DMP's blanket license may similarly be the relevant license date 
for termination purposes. A record of the DMP's repertoire as of that 
date could be relevant to demonstrate which works were being used at 
the time the blanket license attached. To accommodate those instances, 
the rule proposes that each DMP take a snapshot of its sound recording 
database or otherwise make an archive as it exists immediately prior to 
the effective date of its blanket license.\214\
---------------------------------------------------------------------------

    \213\ See id. at 115(d)(9)(D)(ii).
    \214\ Cf. Music Reports Initial at 3 (proposing that DMPs be 
required in their NOLs ``to include lists of sound recordings they 
make available to the public'').
---------------------------------------------------------------------------

    Going forward, to accommodate those musical works that subsequently 
become licensed pursuant to a blanket license after the effective date 
of a given DMP's blanket license,\215\ the rule proposes that each DMP 
operating under a blanket license keep and retain at least one of three 
dates for each sound recording embodying such a musical work. First, 
the rule proposes including the server fixation date sought by the MLC. 
Because it is not clear, however, that this date is the best or only 
potential proxy for the relevant license date, the rule also proposes 
two other date options as reasonable proxies for the relevant license 
date: The date of the grant first authorizing the DMP's use of the 
sound recording and the date on which the DMP first obtains the sound 
recording.\216\ Permitting multiple reasonable options may also help 
alleviate any particular operational burdens that may exist with 
respect to a DMP being required to track the server date specifically. 
The Office seeks comment specifically on this aspect of the proposed 
rule.
---------------------------------------------------------------------------

    \215\ See 17 U.S.C. 115(d)(1)(B)(i) (``A blanket license . . . 
covers all musical works (or shares of such works) available for 
compulsory licensing under this section for purposes of engaging in 
covered activities, except as provided in subparagraph (C) 
[discussing voluntary licenses and individual download 
licenses].''). Cf. U.S. Copyright Office, Compendium of U.S. 
Copyright Office Practices sec. 2310.3(C)(3) (3d ed. 2017) (``[A] 
transfer that predates the existence of the copyrighted work cannot 
be effective (and therefore cannot be `executed') until the work of 
authorship (and the copyright) come into existence.'').
    \216\ Indeed, in many cases the Office assumes these three dates 
would likely be very close in time, and perhaps even be identical.
---------------------------------------------------------------------------

    The rule proposes that the required information described above 
need not be reported to the MLC in monthly reports of usage. Rather, 
the Office proposes that such information be kept by the DMP in its 
records of use, which must be made available to the MLC. These 
particular records would be subject to the same five-year retention 
period proposed for other records, but since they may be pertinent to 
administering the blanket license decades later, the DMP would be 
required to provide the MLC with at least 90 days' notice and an 
opportunity to claim and retrieve the records before they can be 
destroyed or discarded.
    It generally seems reasonable to expect that DMPs would track dates 
relevant to the licensing of sound recordings, and in the context of 
the blanket license, which was specifically adopted to increase 
transparency and better ensure that copyright owners receive their due 
royalties, it seems particularly reasonable to require DMPs to provide 
information that may bear on termination issues that are potentially 
clouded by the creation of the blanket license. The Office recognizes 
that this particular area is one of the more complicated ones in this 
proceeding, and additional comments are especially welcome on this 
topic.
    Content of annual reports of usage. In general accord with the 
MLC's proposal, the Office proposes that annual reports contain 
cumulative information for the applicable fiscal year, broken down by 
month and by activity and offering, including the total royalty 
payable, the total sum paid, the total adjustments made, the total 
number of payable units, and to the extent applicable to calculating 
the royalties owed, total service provider revenue, total costs of 
content, total performance royalty deductions, and total 
subscribers.\217\ Receiving these totals and having them broken down 
this way seems beneficial to the MLC in confirming proper royalties, 
while not unreasonably burdening DMPs, who would not have to re-provide 
all of the information contained in the monthly reports covered by the 
annual reporting period.
---------------------------------------------------------------------------

    \217\ See MLC Reply App. C at 13-14.
---------------------------------------------------------------------------

    Format and delivery. The Office proposes, in accord with the MLC's 
proposal, that separate monthly reports of usage must be delivered for 
each month during which there is any activity relevant to the payment 
of mechanical royalties for covered activities, and that an annual 
report must be delivered for each year during which at least one 
monthly report was required to be delivered.\218\
---------------------------------------------------------------------------

    \218\ See id. at 16.
---------------------------------------------------------------------------

    The Office proposes that reports of usage must be delivered to the 
MLC in

[[Page 22534]]

a machine-readable format that is compatible with the information 
technology systems of the MLC as reasonably determined by the MLC, 
which in turn must take into consideration relevant industry standards 
and the potential for different degrees of sophistication among DMPs. 
In accord with both the MLC and DLC proposals, the Office does not 
propose to provide more detailed requirements in the regulations, in 
order to leave flexibility as to the precise standards and 
formats.\219\ For this reason, the Office is not inclined to require 
that reporting must specifically utilize DDEX, as proposed by some 
\220\--though the Office notes that the MLC plans to support DDEX for 
reports of usage.\221\ The Office further proposes to specifically 
require the MLC to offer at least two options, where one is dedicated 
to smaller DMPs that may not be reasonably capable of complying with 
the requirements that the MLC may see fit to adopt for larger DMPs. 
This would help ensure that all those qualifying for the blanket 
license can make use of it as a practical matter.\222\ The Office 
invites comment on this aspect of the proposed rule.
---------------------------------------------------------------------------

    \219\ See MLC Initial at 20; MLC Reply at 21, App. C at 16; DLC 
Initial at 15; DLC Reply at 21, Add. A-8; see also SoundExchange 
Initial at 16.
    \220\ See A2IM & RIAA Reply at 11; Jessop Reply at 2.
    \221\ MLC Reply at 21-22, 35.
    \222\ See id. at 21-22 (``While the MLC supports the use of [the 
DDEX] format . . . it is mindful of the varying data formats used by 
DMPs with varying resources.''); DLC Reply at 21 (stating that the 
regulations must ``ensure that the full range of licensees will be 
able to report their usage to the MLC without substantial upfront 
burdens'').
---------------------------------------------------------------------------

    To maintain appropriate flexibility, the Office also proposes that 
royalty payments similarly must be delivered in such manner and form as 
the MLC may reasonably determine. The Office further proposes a 
mechanism by which the MLC may modify its formatting and delivery 
requirements after providing appropriate notice to DMPs. The rule 
proposes an extended notice period for certain significant changes 
because of the level of effort that could potentially be involved for a 
DMP to comply.\223\
---------------------------------------------------------------------------

    \223\ The Office's proposed rule is somewhat similar to the 
MLC's proposal for changing data formats or standards in the context 
of the musical works database. See MLC Reply App. F at 22.
---------------------------------------------------------------------------

    The Office also proposes a mechanism by which a DMP may be excused 
from default under the blanket license and any incurred late fees 
because of an untimely delivered report or payment where the reason for 
the untimeliness is either the MLC's fault or results from an issue 
with the MLC's applicable IT systems. This seems like a reasonable and 
equitable accommodation where DMPs are statutorily required to rely on 
the MLC and its systems to satisfy certain obligations.
    Certifications. The Office proposes applying the current 
certification requirements in 37 CFR 210.16(f) and 210.17(f) for 
monthly and annual statements of account under the non-blanket section 
115 license to monthly and annual reports of usage under the blanket 
license.\224\ The current certification requirements were adopted in 
2014 after careful consideration by the Office,\225\ and the Office is 
disinclined to relitigate the details of these provisions unless 
presented with a strong showing that they are unworkable either because 
of something specifically to do with the changes made by the MMA or 
some other significant industry change that occurred after they were 
adopted.
---------------------------------------------------------------------------

    \224\ See MLC Reply App. C at 15 (proposing retention of current 
monthly certification); DLC Reply Add. at A-8 (proposing a monthly 
certification that is substantially similar to one of the current 
monthly certification options); Music Reports Initial at 13, 16-17 
(proposing retention of one of the current monthly certification 
options and one of the current annual certification options).
    \225\ See 79 FR 56190.
---------------------------------------------------------------------------

    Content of reports of adjustment. In general accord with both the 
MLC and DLC proposals, the Office proposes that reports of adjustment 
contain the following information: (1) An identification of the 
previously delivered monthly or annual report(s) being adjusted; (2) 
the specific change(s) to such report(s), including the monetary amount 
of the adjustment and a detailed description of any changes to any of 
the inputs upon which computation of the payable royalties depends, 
along with appropriate step-by-step calculations; (3) the particular 
sound recordings and uses to which the adjustment applies; and (4) a 
description of the reason(s) for the adjustment.\226\ The proposed rule 
is also in general accord with the MLC and DLC proposals with respect 
to the mechanisms to account for overpayment and underpayment of 
royalties: an underpayment will need to accompany delivery of the 
report of adjustment, while an overpayment will be credited to the 
DMP's account by the MLC.\227\ These requirements strike the Office as 
reasonable, and the proposed content should provide the MLC with 
sufficient information to confirm the adjustment and properly account 
for it to copyright owners.
---------------------------------------------------------------------------

    \226\ See DLC Reply Add. at A-10; MLC Reply App. C at 14.
    \227\ See DLC Reply Add. at A-10; MLC Reply App. C at 14.
---------------------------------------------------------------------------

    Voluntary agreements to alter process. The Office tentatively 
agrees with both the MLC and DLC that it would be beneficial to permit 
individual DMPs and the MLC to agree to vary or supplement the 
particular reporting procedures adopted by the Office--such as the 
specific mechanics relating to adjustments or invoices and response 
files.\228\ This would permit a degree of flexibility to help address 
the specific needs of a particular DMP. The Office proposes two caveats 
to this proposal to safeguard copyright owner interests because they 
would not be party to any such agreements. First, any voluntarily 
agreed-to changes could not materially prejudice copyright owners owed 
royalties under the blanket license. Second, the procedures surrounding 
the certification requirements would not be alterable because they 
serve as an important check on the DMPs that is ultimately to the 
benefit of copyright owners.
---------------------------------------------------------------------------

    \228\ See DLC Reply Add. at A-11; MLC Reply App. C at 17.
---------------------------------------------------------------------------

    Documentation and records of use. The rule proposes, in accord with 
the MLC's proposal, to generally carry forward the current rule under 
the non-blanket section 115 license, whereby DMPs would be required to 
keep and retain all records and documents necessary and appropriate to 
support fully all of the information set forth in their reports of 
usage for a period of at least five years from the date of delivery of 
the particular report.\229\ The Office is not inclined to shorten the 
retention period to three years as the DLC proposes \230\ given that 
the Office in 2014 found it appropriate to extend the period from three 
years to five years.\231\ If anything, the Office may consider 
extending the retention period to seven years to align with the 
statutory recordkeeping requirements the MMA places on the MLC.\232\ 
The Office is also not inclined to adopt the DLC's proposal that 
recordkeeping requirements be subject to each DMP's ``generally 
applicable privacy and data retention policies,'' and be limited merely 
to the ``data included in'' the report of usage.\233\ That proposal is 
a step in the wrong direction with respect to transparency.\234\ In 
accordance with the MMA's requirement that records of use be ``made 
available to the [MLC] by [DMPs],'' the rule proposes that the

[[Page 22535]]

MLC be entitled to reasonable access to these records and documents 
upon reasonable request, subject to any applicable confidentiality 
rules the Office may adopt (and the Office has concurrently published a 
notice of proposed rulemaking regarding confidentiality issues).\235\
---------------------------------------------------------------------------

    \229\ See MLC Reply App. C at 16; 37 CFR 210.18.
    \230\ See DLC Reply at 23, Add. A-11.
    \231\ See 79 FR at 56205; see also MLC Ex Parte Letter #2 at 5 
(``[T]he three-year audit period look back does not mean that 
documents dated more than three years earlier are not relevant to 
audits.'').
    \232\ See 17 U.S.C. 115(d)(3)(M)(i).
    \233\ See DLC Reply Add. at A-11.
    \234\ See MLC Reply at 25-26 (``Each DMP should not be permitted 
to self-determine its recordkeeping requirements.'').
    \235\ See 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I); U.S. Copyright 
Office, Notice of Proposed Rulemaking, Treatment of Confidential 
Information by the Mechanical Licensing Collective and Digital 
Licensee Coordinator, Dkt. No. 2020-7, published elsewhere in this 
issue of the Federal Register.
---------------------------------------------------------------------------

    As noted above, the Office is proposing to clarify its 
recordkeeping rules by enumerating several nonexclusive examples of the 
types of records DMPs are obligated to retain and make available to the 
MLC. The Office continues to generally agree with the ``minimalist 
approach'' it took in 2014 with respect to importing details from the 
CRJs' rates and terms regulations in 37 CFR part 385, and therefore the 
Office is not inclined to include the level of detail contained in the 
MLC's comments.\236\ Rather, the Office proposes to more broadly 
articulate requirements encompassing what the MLC seeks. For example: 
Records accounting for non-play and other non-royalty-bearing DPDs, 
records of promotional and free trial uses required to be maintained 
under part 385, records describing each of the DMP's activities or 
offerings in sufficient detail to reasonably demonstrate which 
activities or offerings they are under part 385 and which rates and 
terms apply to them, records with sufficient information to reasonably 
demonstrate whether service revenue and total cost of content are 
properly calculated in accordance with part 385, records with 
sufficient information to reasonably demonstrate whether and how any 
royalty floor under part 385 does or does not apply, and records with 
such other information as is necessary to reasonably support and 
confirm all usage and calculations contained in each report of usage, 
including relevant information about subscriptions, bundles, devices, 
discount plans, and subscribers.
---------------------------------------------------------------------------

    \236\ See 79 FR at 56193.
---------------------------------------------------------------------------

    Each DMP operating under the blanket license will need to know this 
information (to the extent applicable to its services), and so the 
Office expects it should not be burdensome to retain and make available 
corresponding records.\237\ While described in more generalized terms 
than proposed by the MLC, the Office recognizes that the above list is 
still fairly tailored to the CRJs' Phonorecords III determination; the 
Office will be prepared to revise these examples as necessary to align 
with such royalty rates and terms as the CRJs may subsequently adopt.
---------------------------------------------------------------------------

    \237\ See DLC Ex Parte Letter #3 at 3 (noting the DLC's openness 
to this proposal).
---------------------------------------------------------------------------

D. Reports of Usage--Significant Nonblanket Licensees

    As discussed in the notification of inquiry, SNBLs are also 
required to deliver reports of usage to the MLC.\238\ Although the 
Office asked ``how such reports may differ from the reports filed by 
digital music providers under the blanket license,'' the comments 
received in response were fairly sparse.\239\ The MLC argues that 
reports of usage for SNBLs should be essentially the same as those of 
DMPs operating under the blanket license.\240\ While the MLC concedes 
various differences between blanket licensees and SNBLs, it asserts 
that it needs the same information because the MLC must (1) administer 
the process by which unclaimed royalties are to be distributed to 
copyright owners identified in the records of the MLC based on market 
share of usage under both statutory and voluntary licenses, and (2) 
administer collections of the administrative assessment paid by both 
blanket licensees and SNBLs to fund the MLC.\241\ The DLC argues that 
SNBL reports should be different and need not contain as much 
information because ``they do not need to provide information related 
to calculation or payment of royalties.'' \242\ The DLC's proposal for 
SNBLs omits items contained in its proposal for blanket licensees, such 
as royalty calculation data, estimates, adjustments, processing, and 
records of use.\243\ The DLC does not directly respond to the MLC's 
assertions. Music Reports proposes that blanket licensee and SNBL 
reports be substantially the same, except that SNBL reports need not 
contain any royalty calculation information.\244\
---------------------------------------------------------------------------

    \238\ 84 FR at 49971.
    \239\ See id.
    \240\ MLC Initial at 20-21; see MLC Reply App. C.
    \241\ See MLC Initial at 10-11, 20-21; MLC Reply at 21.
    \242\ DLC Initial at 16; see also DLC Reply at 23.
    \243\ Compare DLC Reply Add. at A-6-11 with id. at A-12-14.
    \244\ Music Reports Initial at 4.
---------------------------------------------------------------------------

    The statutory requirements for blanket licensees and SNBLs differ 
in a number of material ways. Most notably, SNBLs do not operate under 
the blanket license and do not pay statutory royalties to the MLC. 
Moreover, royalties paid under voluntary licenses are generally 
calculated pursuant to those private agreements, rather than being tied 
to particular rates and terms established by the CRJs in 37 CFR part 
385. While blanket licensees must deliver reports of usage under 
section 115(d)(4)(A), SNBLs are ``not obligated to provide reports of 
usage reflecting covered activities under subsection (d)(4)(A),'' but 
rather report under section 115(d)(6)(A)(ii).\245\ While that provision 
states that SNBL reports of usage are to ``contain[ ] the information 
described in paragraph (4)(A)(ii),'' the other requirements of section 
115(d)(4), such as with respect to reporting in accordance with section 
115(c)(2)(I), formatting, adjustments, and records of use, do not 
expressly apply.\246\ By not being required to report in accordance 
with section 115(c)(2)(I), SNBLs are not required to deliver CPA-
certified annual reports.\247\ SNBLs are also not subject to data 
collection efforts under section 115(d)(4)(B) or audits under section 
115(d)(4)(D).
---------------------------------------------------------------------------

    \245\ See 17 U.S.C. 115(e)(31).
    \246\ See id. at 115(d)(6)(A)(ii).
    \247\ See id. at 115(c)(2)(I) (only requiring such reporting for 
``compulsory license[s]'').
---------------------------------------------------------------------------

    With these observations in mind, it seems reasonable to fashion the 
proposed rule for SNBL reports of usage as an abbreviated version of 
the reporting provided by blanket licensees. The proposed rule for 
SNBLs generally tracks the proposed rule for blanket licensees, but 
makes several changes, somewhat along the lines of the DLC's proposal. 
For example, provisions about estimates, processing, and records of use 
are omitted. The proposed rule also omits an annual reporting 
requirement. In contrast to the DLC's proposal, the Office does, 
however, propose to require SNBLs to report their payable royalties for 
covered activities under relevant voluntary licenses and individual 
download licenses, but without reporting any underlying calculations. 
The proposed rule also contains an adjustments provision so that SNBLs 
have a mechanism to update anything if needed, such as if a play count 
error is discovered later on.
    In light of the particularly thin record on SNBLs, the Office 
encourages further comment on these issues to better inform the 
rulemaking process. For example, do other commenters agree with the MLC 
that the main purposes of SNBL reporting are to assist the MLC in 
distributing unclaimed royalties and collecting the administrative 
assessment? If commenters believe that SNBL reporting should serve 
other purposes (for example, assisting the MLC's overall matching 
efforts), they should identify those additional aims, along with any 
adjustments to the information the rule proposes to be reported. Noting 
that the MLC must

[[Page 22536]]

distribute unclaimed accrued royalties ``to copyright owners identified 
in the records of the collective,'' the Office also seeks comment 
regarding whether and to what extent the MLC anticipates incorporating 
SNBL-supplied information into its public database.\248\
---------------------------------------------------------------------------

    \248\ Id. at 115(d)(3)(J).
---------------------------------------------------------------------------

    Further, the Office solicits comment regarding whether the proposed 
rule appropriately prescribes reporting of information relevant to the 
MLC's tasks in distributing unclaimed royalties and collecting the 
administrative assessment. The Office specifically seeks comment as to 
what extent the information sought by the MLC is relevant to the 
administrative assessment, noting that the method for allocating the 
assessment among blanket licensees and SNBLs adopted by the CRJs is 
based solely on ``the number of unique and royalty-bearing sound 
recordings used per month . . . in Section 115 covered activities.'' 
\249\ Similarly, the Office welcomes comment regarding whether the 
proposed rule provides adequate (or excessive) information to the MLC 
for purposes of the MLC calculating market share for distributing 
unclaimed royalties.\250\ As noted above, the Office will separately 
consider any regulatory activity related to the distribution of such 
royalties in connection with its ongoing related policy study.
---------------------------------------------------------------------------

    \249\ See 37 CFR 390.1 (defining ``Unique Sound Recordings 
Count'') (emphasis added).
    \250\ For example, the MLC's proposed language seeks information 
specific to the part 385 calculations. Does the MLC seek to take 
SNBL usage data and apply the part 385 royalty rate calculations 
used for blanket licensees as part of determining a transparent and 
equitable manner of distribution?
---------------------------------------------------------------------------

III. Subjects of Inquiry

    The proposed rule is designed to reasonably implement a number of 
regulatory duties assigned to the Copyright Office under the MMA and 
facilitate the MLC's administration of the blanket licensing system. 
The Office solicits additional public comment on all aspects of the 
proposed rule.

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 A [Removed]

0
2. Remove subpart A.

Subpart B [Redesignated as Subpart A] and Sec. Sec.  210.11 Through 
210.21 [Redesignated as Sec. Sec.  210.1 Through 210.11]

0
3. Redesignate subpart B as subpart A and, in newly redesignated 
subpart A, Sec. Sec.  210.11 through 210.21 are redesignated as 
Sec. Sec.  210.1 through 210.11.

Subpart A [Amended]

0
4. In newly redesignated subpart A:
0
a. Remove ``Sec.  210.12'' and add in its place ``Sec.  210.2'';
0
b. Remove ``Sec.  210.15'' and add in its place ``Sec.  210.5'';
0
c. Remove ``Sec.  210.16'' and add in its place ``Sec.  210.6'';
0
d. Remove ``Sec.  210.17'' and add in its place ``Sec.  210.7''; and
0
e. Remove ``Sec.  210.21'' and add in its place ``Sec.  210.11''.
0
5. Amend newly redesignated Sec.  210.1 by adding a sentence after the 
first sentence to read as follows:


Sec.  210.1  General.

    * * * Rules governing notices of intention to obtain a compulsory 
license for making and distributing phonorecords of nondramatic musical 
works are located in Sec.  201.18. * * *


Sec.  Sec.  210.12 through 210.20   [Added and Reserved]

0
6. Add reserve Sec. Sec.  210.12 through 210.20.
0
7. Add a new subpart B to read as follows:

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

Sec.
210.21 General.
210.22 Definitions.
210.23 Designation of the mechanical licensing collective and 
digital licensee coordinator.
210.24 Notices of blanket license.
210.25 Notices of nonblanket activity.
210.26 Data collection and delivery efforts by digital music 
providers and musical work copyright owners.
210.27 Reports of usage and payment for blanket licensees.
210.28 Reports of usage for significant nonblanket licensees.


Sec.  210.21  General.

    This subpart prescribes rules for the compulsory blanket license to 
make and distribute digital phonorecord deliveries of nondramatic 
musical works pursuant to 17 U.S.C. 115(d), including rules for digital 
music providers, significant nonblanket licensees, the mechanical 
licensing collective, and the digital licensee coordinator.


Sec.  210.22  Definitions.

    For purposes of this subpart:
    (a) Unless otherwise specified, the terms used have the meanings 
set forth in 17 U.S.C. 115(e).
    (b) A blanket licensee is a digital music provider operating under 
a blanket license.
    (c) The term DDEX means Digital Data Exchange, LLC.
    (d) The term GAAP means U.S. Generally Accepted Accounting 
Principles, except that if the U.S. Securities and Exchange Commission 
permits or requires entities with securities that are publicly traded 
in the U.S. to employ International Financial Reporting Standards, as 
issued by the International Accounting Standards Board, or as accepted 
by the Securities and Exchange Commission if different from that issued 
by the International Accounting Standards Board, in lieu of Generally 
Accepted Accounting Principles, then an entity may employ International 
Financial Reporting Standards as ``GAAP'' for purposes of this section.
    (e) The term IPI means interested parties information code.
    (f) The term ISNI means international standard name identifier.
    (g) The term ISRC means international standard recording code.
    (h) The term ISWC means international standard musical work code.
    (i) The term producer means the primary person(s) contracted by and 
accountable to the content owner for the task of delivering the sound 
recording as a finished product.
    (j) The term UPC means universal product code.


Sec.  210.23  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 is available on the Copyright Office's website.
    (a) Mechanical Licensing Collective, Inc., incorporated in Delaware 
on March

[[Page 22537]]

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.  210.24  Notices of blanket license.

    (a) General. This section prescribes rules under which a digital 
music provider completes and submits a notice of license to the 
mechanical licensing collective pursuant to 17 U.S.C. 115(d)(2)(A) for 
purposes of obtaining a statutory blanket license.
    (b) Form and content. A notice of license shall be prepared in 
accordance with any reasonable formatting instructions established by 
the mechanical licensing collective, and shall include all of the 
following information:
    (1) The full legal name of the digital music provider and, if 
different, the trade or consumer-facing brand name(s) of the 
service(s), including any specific offering(s), through which the 
digital music provider is engaging, or seeks to engage, in any covered 
activity.
    (2) The full address, including a specific number and street name 
or rural route, of the place of business of the digital music provider. 
A post office box or similar designation will not be sufficient except 
where it is the only address that can be used in that geographic 
location.
    (3) A telephone number and email address for the digital music 
provider where an individual responsible for managing the blanket 
license can be reached.
    (4) Any website(s), software application(s), or other online 
locations(s) where the digital music provider's applicable service(s) 
is/are, or expected to be, made available.
    (5) A description sufficient to reasonably establish the digital 
music provider's eligibility for a blanket license and to provide 
reasonable notice to the mechanical licensing collective, copyright 
owners, and songwriters of the manner in which the digital music 
provider is engaging, or seeks to engage, in any covered activity 
pursuant to the blanket license. Such description shall be sufficient 
if it includes at least the following information:
    (i) A statement that the digital music provider has a good-faith 
belief, informed by review of relevant law and regulations, that it:
    (A) Satisfies all requirements to be eligible for a blanket 
license, including that it satisfies the eligibility criteria to be 
considered a digital music provider pursuant to 17 U.S.C. 115(e)(8); 
and
    (B) Is, or will be before the date of initial use of musical works 
pursuant to the blanket license, able to comply with all payments, 
terms, and responsibilities associated with the blanket license.
    (ii) A statement that where the digital music provider seeks or 
expects to engage in any activity identified in its notice of license, 
it has a good-faith intention to do so within a reasonable period of 
time.
    (iii) A general description of the digital music provider's 
service(s), or expected service(s), and the manner in which it uses, or 
seeks to use, phonorecords of nondramatic musical works.
    (iv) Identification of each of the following digital phonorecord 
delivery configurations the digital music provider is, or seeks to be, 
making as part of its covered activities:
    (A) Permanent downloads.
    (B) Limited downloads.
    (C) Interactive streams.
    (D) Noninteractive streams.
    (E) Other configurations, accompanied by a brief description.
    (v) Identification of each of the following service types the 
digital music provider offers, or seeks to offer, as part of its 
covered activities (the digital music provider may, but is not required 
to, associate specific service types with specific digital phonorecord 
delivery configurations or with particular types of activities or 
offerings that may be defined in part 385 of this title):
    (A) Subscriptions.
    (B) Bundles.
    (C) Lockers.
    (D) Discounted, but not free-to-the-user, services.
    (E) Free-to-the-user services.
    (F) Other applicable services, accompanied by a brief description.
    (vi) Any other information the digital music provider wishes to 
provide.
    (6) The date, or expected date, of initial use of musical works 
pursuant to the blanket license.
    (7) Identification of any amendment made pursuant to paragraph (f) 
of this section, including the submission date of the notice being 
amended.
    (8) 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). This description 
should be provided as an addendum to the rest of the notice of license 
to help preserve any confidentiality it may be entitled to under 
regulations adopted by the Copyright Office. Such description shall be 
sufficient if it includes at least the following information:
    (i) An identification of each of the digital music provider's 
services, including by reference to any applicable types of activities 
or offerings that may be defined in part 385 of this title, through 
which musical works are, or are expected to be, used pursuant to any 
such voluntary license or individual download license. If such a 
license pertains to all of the digital music provider's applicable 
services, it may state so without identifying each service.
    (ii) The start and end dates.
    (iii) The musical work copyright owner, identified by name and any 
known and appropriate unique identifiers, and appropriate contact 
information for the musical work copyright owner or for an 
administrator or other representative who has entered into an 
applicable license on behalf of the relevant copyright owner.
    (iv) A satisfactory identification of any applicable catalog 
exclusions.
    (v) At the digital music provider's option, and in lieu of 
providing the information listed in paragraph (b)(8)(iv) of this 
section, a list of all covered musical works, identified by appropriate 
unique identifiers.
    (c) Certification and signature. The notice of license shall be 
signed by an appropriate duly authorized officer or representative of 
the digital music provider. The signature shall be accompanied by the 
name and title of the person signing the notice and the date of the 
signature. The notice may be signed electronically. The person signing 
the notice shall certify that he or she has appropriate authority to 
submit the notice of license to the mechanical licensing collective on 
behalf of the digital music provider and that all information submitted 
as part of the notice is true, accurate, and complete to the best of 
the signer's knowledge, information, and belief, and is provided in 
good faith.
    (d) Submission, fees, and acceptance. Except as provided by 17 
U.S.C. 115(d)(9)(A), to obtain a blanket license, a digital music 
provider must submit a notice of license to the mechanical licensing 
collective. Notices of license shall be submitted to the mechanical 
licensing collective in a manner reasonably determined by the 
collective. No fee may be charged for submitting notices of license. 
Upon submitting a notice of license to the mechanical licensing 
collective, a digital music provider shall be provided with a prompt 
response from the collective confirming receipt of the notice and the 
date of receipt. The mechanical

[[Page 22538]]

licensing collective shall send any rejection of a notice of license to 
both the street address and email address provided in the notice.
    (e) Harmless errors. Errors in the submission or content of a 
notice of license that do not materially affect the adequacy of the 
information required to serve the purposes of 17 U.S.C. 115(d) shall be 
deemed harmless, and shall not render the notice invalid or provide a 
basis for the mechanical licensing collective to reject a notice or 
terminate a blanket license. This paragraph (e) shall apply only to 
errors made in good faith and without any intention to deceive, 
mislead, or conceal relevant information.
    (f) Amendments. A digital music provider may submit an amended 
notice of license to cure any deficiency in a rejected notice pursuant 
to 17 U.S.C. 115(d)(2)(A). A digital music provider operating under a 
blanket license must submit a new notice of license within 45 calendar 
days after any of the information required by paragraphs (b)(1) through 
(6) of this section contained in the notice on file with the mechanical 
licensing collective has changed. An amended notice shall indicate that 
it is an amendment and shall contain the submission date of the notice 
being amended. The mechanical licensing collective shall retain copies 
of all prior notices of license submitted by a digital music provider. 
Where the information required by paragraph (b)(8) of this section has 
changed, instead of submitting an amended notice of license, the 
digital music provider must promptly deliver updated information to the 
mechanical licensing collective in an alternative manner reasonably 
determined by the collective. To the extent commercially reasonable, 
the digital music provider must deliver such updated information at 
least 30 calendar days before delivering a report of usage covering a 
period where such license is in effect.
    (g) Transition to blanket licenses. Where a digital music provider 
obtains a blanket license automatically pursuant to 17 U.S.C. 
115(d)(9)(A) and seeks to continue operating under the blanket license, 
a notice of license must be submitted to the mechanical licensing 
collective within 45 calendar days after the license availability date. 
In such cases, the blanket license shall continue to be effective as of 
the license availability date, rather than the date on which the notice 
is submitted to the collective.
    (h) Additional information. Nothing in this section shall be 
construed to prohibit the mechanical licensing collective from seeking 
additional information from a digital music provider that is not 
required by this section, which the digital music provider may 
voluntarily elect to provide, provided that the collective may not 
represent that such information is required to comply with the terms of 
this section.
    (i) Public access. The mechanical licensing collective shall 
maintain a current, free, and publicly accessible and searchable online 
list of all blanket licenses that, subject to any applicable 
confidentiality rules established by the Copyright Office, includes:
    (1) All information contained in each notice of license, including 
amended and rejected notices;
    (2) Contact information for all blanket licensees;
    (3) The effective dates of all blanket licenses;
    (4) For any amended or rejected notice, a clear indication of its 
amended or rejected status and its relationship to other relevant 
notices;
    (5) For any rejected notice, the collective's reason(s) for 
rejecting it; and
    (6) For any terminated blanket license, a clear indication of its 
terminated status, the date of termination, and the collective's 
reason(s) for terminating it.


Sec.  210.25  Notices of nonblanket activity.

    (a) General. This section prescribes rules under which a 
significant nonblanket licensee completes and submits a notice of 
nonblanket activity to the mechanical licensing collective pursuant to 
17 U.S.C. 115(d)(6)(A) for purposes of notifying the mechanical 
licensing collective that the licensee has been engaging in covered 
activities.
    (b) Form and content. A notice of nonblanket activity shall be 
prepared in accordance with any reasonable formatting instructions 
established by the mechanical licensing collective, and shall include 
all of the following information:
    (1) The full legal name of the significant nonblanket licensee and, 
if different, the trade or consumer-facing brand name(s) of the 
service(s), including any specific offering(s), through which the 
significant nonblanket licensee is engaging, or expects to engage, in 
any covered activity.
    (2) The full address, including a specific number and street name 
or rural route, of the place of business of the significant nonblanket 
licensee. A post office box or similar designation will not be 
sufficient except where it is the only address that can be used in that 
geographic location.
    (3) A telephone number and email address for the significant 
nonblanket licensee where an individual responsible for managing 
licenses associated with covered activities can be reached.
    (4) Any website(s), software application(s), or other online 
locations(s) where the significant nonblanket licensee's applicable 
service(s) is/are, or expected to be, made available.
    (5) A description sufficient to reasonably establish the licensee's 
qualifications as a significant nonblanket licensee and to provide 
reasonable notice to the mechanical licensing collective, digital 
licensee coordinator, copyright owners, and songwriters of the manner 
in which the significant nonblanket licensee is engaging, or expects to 
engage, in any covered activity. Such description shall be sufficient 
if it includes at least the following information:
    (i) A statement that the significant nonblanket licensee has a 
good-faith belief, informed by review of relevant law and regulations, 
that it satisfies all requirements to qualify as a significant 
nonblanket licensee under 17 U.S.C. 115(e)(31).
    (ii) A statement that where the significant nonblanket licensee 
expects to engage in any activity identified in its notice of 
nonblanket activity, it has a good-faith intention to do so within a 
reasonable period of time.
    (iii) A general description of the significant nonblanket 
licensee's service(s), or expected service(s), and the manner in which 
it uses, or expects to use, phonorecords of nondramatic musical works.
    (iv) Identification of each of the following digital phonorecord 
delivery configurations the significant nonblanket licensee is, or 
expects to be, making as part of its covered activities:
    (A) Permanent downloads.
    (B) Limited downloads.
    (C) Interactive streams.
    (D) Noninteractive streams.
    (E) Other configurations, accompanied by a brief description.
    (v) Identification of each of the following service types the 
significant nonblanket licensee offers, or expects to offer, as part of 
its covered activities (the significant nonblanket licensee may, but is 
not required to, associate specific service types with specific digital 
phonorecord delivery configurations or with particular types of 
activities or offerings that may be defined in part 385 of this title):
    (A) Subscriptions.
    (B) Bundles.
    (C) Lockers.

[[Page 22539]]

    (D) Discounted, but not free-to-the-user, services.
    (E) Free-to-the-user services.
    (F) Other applicable services, accompanied by a brief description.
    (vi) Any other information the significant nonblanket licensee 
wishes to provide.
    (6) Acknowledgement of whether the significant nonblanket licensee 
is operating under one or more individual download licenses.
    (7) The date of initial use of musical works pursuant to any 
covered activity.
    (8) Identification of any amendment made pursuant to paragraph (f) 
of this section, including the submission date of the notice being 
amended.
    (c) Certification and signature. The notice of nonblanket activity 
shall be signed by an appropriate duly authorized officer or 
representative of the significant nonblanket licensee. The signature 
shall be accompanied by the name and title of the person signing the 
notice and the date of the signature. The notice may be signed 
electronically. The person signing the notice shall certify that he or 
she has appropriate authority to submit the notice of nonblanket 
activity to the mechanical licensing collective on behalf of the 
significant nonblanket licensee and that all information submitted as 
part of the notice is true, accurate, and complete to the best of the 
signer's knowledge, information, and belief, and is provided in good 
faith.
    (d) Submission, fees, and acceptance. Notices of nonblanket 
activity shall be submitted to the mechanical licensing collective in a 
manner reasonably determined by the collective. No fee may be charged 
for submitting notices of nonblanket activity. Upon submitting a notice 
of nonblanket activity to the mechanical licensing collective, a 
significant nonblanket licensee shall be provided with a prompt 
response from the collective confirming receipt of the notice and the 
date of receipt.
    (e) Harmless errors. Errors in the submission or content of a 
notice of nonblanket activity that do not materially affect the 
adequacy of the information required to serve the purposes of 17 U.S.C. 
115(d) shall be deemed harmless, and shall not render the notice 
invalid or provide a basis for the mechanical licensing collective or 
digital licensee coordinator to engage in legal enforcement efforts 
under 17 U.S.C. 115(d)(6)(C). This paragraph (e) shall apply only to 
errors made in good faith and without any intention to deceive, 
mislead, or conceal relevant information.
    (f) Amendments. A significant nonblanket licensee must submit a new 
notice of nonblanket activity with its report of usage that is next due 
after any of the information required by paragraphs (b)(1) through (7) 
of this section contained in the notice on file with the mechanical 
licensing collective has changed. An amended notice shall indicate that 
it is an amendment and shall contain the submission date of the notice 
being amended. The mechanical licensing collective shall retain copies 
of all prior notices of nonblanket activity submitted by a significant 
nonblanket licensee.
    (g) Transition to blanket licenses. Where a digital music provider 
that would otherwise qualify as a significant nonblanket licensee 
obtains a blanket license automatically pursuant to 17 U.S.C. 
115(d)(9)(A) and does not seek to operate under the blanket license, if 
such licensee submits a valid notice of nonblanket activity within 45 
calendar days after the license availability date in accordance with 17 
U.S.C. 115(d)(6)(A)(i), such licensee shall not be considered to have 
ever operated under the statutory blanket license until such time as 
the licensee submits a valid notice of license pursuant to 17 U.S.C. 
115(d)(2)(A).
    (h) Additional information. Nothing in this section shall be 
construed to prohibit the mechanical licensing collective from seeking 
additional information from a significant nonblanket licensee that is 
not required by this section, which the significant nonblanket licensee 
may voluntarily elect to provide, provided that the collective may not 
represent that such information is required to comply with the terms of 
this section.
    (i) Public access. The mechanical licensing collective shall 
maintain a current, free, and publicly accessible and searchable online 
list of all significant nonblanket licensees that, subject to any 
applicable confidentiality rules established by the Copyright Office, 
includes:
    (1) All information contained in each notice of nonblanket 
activity, including amended notices;
    (2) Contact information for all significant nonblanket licensees;
    (3) The date of receipt of each notice of nonblanket activity; and
    (4) For any amended notice, a clear indication of its amended 
status and its relationship to other relevant notices.


Sec.  210.26  Data collection and delivery efforts by digital music 
providers and musical work copyright owners.

    (a) General. This section prescribes rules under which digital 
music providers and musical work copyright owners shall engage in 
efforts to collect and provide information to the mechanical licensing 
collective that may assist the collective in matching musical works to 
sound recordings embodying those works and identifying and locating the 
copyright owners of those works.
    (b) Digital music providers. (1) Pursuant to 17 U.S.C. 
115(d)(4)(B), in addition to obtaining sound recording names and 
featured artists and providing them in reports of usage, a digital 
music provider operating under a blanket license shall engage in good-
faith, commercially reasonable efforts to obtain from sound recording 
copyright owners and other licensors of sound recordings made available 
through the service(s) of such digital music provider the following 
information for each such sound recording embodying a musical work:
    (i) The sound recording copyright owner(s), producer(s), ISRC(s), 
and any other information commonly used in the industry to identify 
sound recordings and match them to the musical works the sound 
recordings embody as may be required by the Copyright Office to be 
included in reports of usage provided to the mechanical licensing 
collective by digital music providers.
    (ii) With respect to the musical work embodied in such sound 
recording, the songwriter(s), publisher name(s), ownership share(s), 
ISWC(s), and any other musical work authorship or ownership information 
as may be required by the Copyright Office to be included in reports of 
usage provided to the mechanical licensing collective by digital music 
providers.
    (2) As used in paragraph (b)(1) of this section, ``good-faith, 
commercially reasonable efforts to obtain'' shall include performing 
all of the following acts, subject to paragraph (b)(3) of this section:
    (i) Where the digital music provider has not obtained from 
applicable sound recording copyright owners or other licensors of sound 
recordings (or their representatives) all of the information listed in 
paragraph (b)(1) of this section, or where any such information was 
obtained before [effective date of final rule] and is no longer in such 
form that the digital music provider can use it to comply with 
paragraph (b)(2)(iii) of this section, the digital music provider shall 
have an ongoing and continuous obligation to, at least on a quarterly 
basis, request in writing such information from applicable sound 
recording copyright owners and other licensors of sound recordings. 
Such requests may be directed to a representative of any such owner or 
licensor.

[[Page 22540]]

    (ii) With respect to any of the information listed in paragraph 
(b)(1) of this section that the digital music provider has obtained 
from applicable sound recording copyright owners or other licensors of 
sound recordings (or their representatives), the digital music provider 
shall have an ongoing and continuous obligation to, on a periodic basis 
or as otherwise requested by the mechanical licensing collective, 
request in writing from such owners or licensors any updates to any 
such information. Such requests may be directed to a representative of 
any such owner or licensor.
    (iii) Any information listed in paragraph (b)(1) of this section, 
including any updates to such information, provided to the digital 
music provider by sound recording copyright owners or other licensors 
of sound recordings (or their representatives) shall be delivered to 
the mechanical licensing collective in reports of usage in accordance 
with Sec.  210.27(e).
    (3) Notwithstanding paragraph (b)(2) of this section, a digital 
music provider may satisfy its obligations under 17 U.S.C. 115(d)(4)(B) 
with respect to a particular sound recording by arranging, or 
collectively arranging with others, for the mechanical licensing 
collective to receive the information listed in paragraph (b)(1) of 
this section from an authoritative source, such as the collective 
designated by the Copyright Royalty Judges to collect and distribute 
royalties under the statutory licenses established in 17 U.S.C. 112 and 
114, provided that such digital music provider does not know such 
source to lack such information for the relevant sound recording. 
Satisfying the requirements of 17 U.S.C. 115(d)(4)(B) in this manner 
does not excuse a digital music provider from having to report sound 
recording and musical work information in accordance with Sec.  
210.27(e).
    (4) The requirements of paragraph (b) of this section are without 
prejudice to what a court of competent jurisdiction may determine 
constitutes good-faith, commercially reasonable efforts for purposes of 
eligibility for the limitation on liability described in 17 U.S.C. 
115(d)(10).
    (c) Musical work copyright owners. (1) Pursuant to 17 U.S.C. 
115(d)(3)(E)(iv), each musical work copyright owner with any musical 
work listed in the musical works database shall engage in commercially 
reasonable efforts to deliver to the mechanical licensing collective, 
including for use in the musical works database, to the extent such 
information is not then available in the database, information 
regarding the names of the sound recordings in which that copyright 
owner's musical works (or shares thereof) are embodied, to the extent 
practicable.
    (2) As used in paragraph (c)(1) of this section, ``information 
regarding the names of the sound recordings'' shall include, for each 
applicable sound recording:
    (i) Sound recording name(s), including any alternative or 
parenthetical titles for the sound recording;
    (ii) Featured artist(s); and
    (iii) ISRC(s).
    (3) As used in paragraph (c)(1) of this section, ``commercially 
reasonable efforts to deliver'' shall include:
    (i) Periodically monitoring the musical works database for missing 
and inaccurate sound recording information relating to applicable 
musical works; and
    (ii) After finding any of the information listed in paragraph 
(c)(2) of this section to be missing or inaccurate as to any applicable 
musical work, promptly delivering complete and correct sound recording 
information to the mechanical licensing collective, by any means 
reasonably available to the copyright owner, if the information is 
known to or otherwise within the possession, custody, or control of the 
copyright owner.


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

    (a) General. This section prescribes rules for the preparation and 
delivery of reports of usage and payment of royalties for the making 
and distribution of phonorecords of nondramatic musical works to the 
mechanical licensing collective by a digital music provider operating 
under a blanket license pursuant to 17 U.S.C. 115(d). A blanket 
licensee shall report and pay royalties to the mechanical licensing 
collective on a monthly basis in accordance with 17 U.S.C. 
115(c)(2)(I), 17 U.S.C. 115(d)(4)(A), and this section. A blanket 
licensee shall also report to the mechanical licensing collective on an 
annual basis in accordance with 17 U.S.C. 115(c)(2)(I) and this 
section. A blanket licensee may make adjustments to its reports of 
usage and royalty payments in accordance with this section.
    (b) Definitions. For purposes of this section, in addition to those 
terms defined in Sec.  210.22:
    (1) The term report of usage, unless otherwise specified, refers to 
all reports of usage required to be delivered by a blanket licensee to 
the mechanical licensing collective under the blanket license, 
including reports of adjustment. As used in this section, it does not 
refer to reports required to be delivered by significant nonblanket 
licensees under 17 U.S.C. 115(d)(6)(A)(ii) and Sec.  210.28.
    (2) A monthly report of usage is a report of usage accompanying 
monthly royalty payments identified in 17 U.S.C. 115(c)(2)(I) and 17 
U.S.C. 115(d)(4)(A), and required to be delivered by a blanket licensee 
to the mechanical licensing collective under the blanket license.
    (3) An annual report of usage is a statement of account identified 
in 17 U.S.C. 115(c)(2)(I), and required to be delivered by a blanket 
licensee annually to the mechanical licensing collective under the 
blanket license.
    (4) A report of adjustment is a report delivered by a blanket 
licensee to the mechanical licensing collective under the blanket 
license adjusting one or more previously delivered monthly reports of 
usage or annual reports of usage, including related royalty payments.
    (c) Content of monthly reports of usage. A monthly report of usage 
shall be clearly and prominently identified as a ``Monthly Report of 
Usage Under Compulsory Blanket License for Making and Distributing 
Phonorecords,'' and shall include a clear statement of the following 
information:
    (1) The period (month and year) covered by the monthly report of 
usage.
    (2) The full legal name of the blanket licensee and, if different, 
the trade or consumer-facing brand name(s) of the service(s), including 
any specific offering(s), through which the blanket licensee engages in 
covered activities. If the blanket licensee has a unique DDEX 
identifier number, it must also be provided.
    (3) The full address, including a specific number and street name 
or rural route, of the place of business of the blanket licensee. A 
post office box or similar designation will not be sufficient except 
where it is the only address that can be used in that geographic 
location.
    (4) For each sound recording embodying a musical work that is used 
by the blanket licensee in covered activities during the applicable 
monthly reporting period, a detailed statement, from which the 
mechanical licensing collective may separate reported information for 
each applicable activity or offering including as may be defined in 
part 385 of this title, of all of:
    (i) The royalty payment and accounting information required by 
paragraph (d) of this section; and
    (ii) The sound recording and musical work information required by 
paragraph (e) of this section.

[[Page 22541]]

    (5) For any voluntary license or individual download license in 
effect during the applicable monthly reporting period, the information 
required under Sec.  210.24(b)(8). If this information has been 
separately provided to the mechanical licensing collective, it need not 
be contained in the monthly report of usage, provided the report states 
that the information has been provided separately and includes the date 
on which such information was last provided to the mechanical licensing 
collective.
    (6) Where the blanket licensee is not entitled to an invoice under 
paragraph (g)(1) of this section:
    (i) The total royalty payable by the blanket licensee under the 
blanket license for the applicable monthly reporting period, computed 
in accordance with the requirements of this section and part 385 of 
this title, and including detailed information regarding how the 
royalty was computed, with such total royalty payable broken down by 
each applicable activity or offering including as may be defined in 
part 385 of this title; and
    (ii) The amount of late fees, if applicable, included in the 
payment associated with the monthly report of usage.
    (d) Royalty payment and accounting information. The royalty payment 
and accounting information called for by paragraph (c)(4)(i) of this 
section shall consist of the following:
    (1) Calculations. (i) Where the blanket licensee is not entitled to 
an invoice under paragraph (g)(1) of this section, a detailed and step-
by-step accounting of the calculation of royalties payable by the 
blanket licensee under the blanket license under applicable provisions 
of this section and part 385 of this title, sufficient to allow the 
mechanical licensing collective to assess the manner in which the 
blanket licensee determined the royalty owed and the accuracy of the 
royalty calculations, including but not limited to the number of 
payable units, including, as applicable, permanent downloads, plays, 
and constructive plays, for each reported sound recording, whether 
pursuant to a blanket license, voluntary license, or individual 
download license.
    (ii) Where the blanket licensee is entitled to an invoice under 
paragraph (g)(1) of this section, all information necessary for the 
mechanical licensing collective to compute, in accordance with the 
requirements of this section and part 385 of this title, the royalties 
payable by the blanket licensee under the blanket license, and all 
information necessary to enable the mechanical licensing collective to 
provide a detailed and step-by-step accounting of the calculation of 
such royalties under applicable provisions of this section and part 385 
of this title, sufficient to allow each applicable copyright owner to 
assess the manner in which the mechanical licensing collective, using 
the blanket licensee's information, determined the royalty owed and the 
accuracy of the royalty calculations, including but not limited to the 
number of payable units, including, as applicable, permanent downloads, 
plays, and constructive plays, for each reported sound recording, 
whether pursuant to a blanket license, voluntary license, or individual 
download license.
    (2) Estimates. (i) Where computation of the royalties payable by 
the blanket licensee under the blanket license depends on an input that 
is unable to be finally determined at the time the report of usage is 
delivered to the mechanical licensing collective and where the reason 
the input cannot be finally determined is outside of the blanket 
licensee's control (e.g., as applicable, the amount of applicable 
public performance royalties and the amount of applicable consideration 
for sound recording copyright rights), a reasonable estimation of such 
input, determined in accordance with GAAP, may be used or provided by 
the blanket licensee. Royalty payments based on such estimates shall be 
adjusted pursuant to paragraph (k) of this section after being finally 
determined.
    (ii) Where the blanket licensee is not entitled to an invoice under 
paragraph (g)(1) of this section, and the blanket licensee is dependent 
upon the mechanical licensing collective to confirm usage subject to 
applicable voluntary licenses and individual download licenses, the 
blanket licensee shall compute the royalties payable by the blanket 
licensee under the blanket license using a reasonable estimation of the 
amount of payment for such non-blanket usage to be deducted from 
royalties that would otherwise be due under the blanket license, 
determined in accordance with GAAP. Royalty payments based on such 
estimates shall be adjusted pursuant to paragraph (k) of this section 
after the mechanical licensing collective confirms such amount to be 
deducted and notifies the blanket licensee under paragraph (g)(2) of 
this section. Where the blanket licensee is entitled to an invoice 
under paragraph (g)(1) of this section, the blanket licensee shall not 
provide an estimate of or deduct such amount in the information 
delivered to the mechanical licensing collective under paragraph 
(d)(1)(ii) of this section.
    (3) Good faith. All information and calculations provided pursuant 
to paragraph (d) of this section shall be made in good faith and on the 
basis of the best knowledge, information, and belief of the blanket 
licensee at the time the report of usage is delivered to the mechanical 
licensing collective, and subject to any additional accounting and 
certification requirements under 17 U.S.C. 115 and this section.
    (e) Sound recording and musical work information. (1) The following 
information must be provided for each sound recording embodying a 
musical work required to be reported under paragraph (c)(4)(ii) of this 
section:
    (i) Identifying information for the sound recording, including but 
not limited to:
    (A) Sound recording name(s), including, to the extent practicable, 
all known alternative and parenthetical titles for the sound recording;
    (B) Featured artist(s);
    (C) Unique identifier(s) assigned by the blanket licensee, if any, 
including any code(s) that can be used to locate and listen to the 
sound recording through the blanket licensee's public-facing service;
    (D) Playing time; and
    (E) To the extent acquired by the blanket licensee in connection 
with its use of sound recordings of musical works to engage in covered 
activities, including pursuant to 17 U.S.C. 115(d)(4)(B), and to the 
extent practicable:
    (1) Sound recording copyright owner(s);
    (2) Producer(s);
    (3) ISRC(s);
    (4) Any other unique identifier(s) for or associated with the sound 
recording, including any unique identifier(s) for any associated album, 
including but not limited to:
    (i) Catalog number(s);
    (ii) UPC(s); and
    (iii) Unique identifier(s) assigned by any distributor;
    (5) Version(s);
    (6) Release date(s);
    (7) Album title(s);
    (8) Label name(s);
    (9) Distributor(s); and
    (10) Other information commonly used in the industry to identify 
sound recordings and match them to the musical works the sound 
recordings embody.
    (ii) Identifying information for the musical work embodied in the 
reported sound recording, to the extent acquired by the blanket 
licensee in the metadata provided by sound recording copyright owners 
or other licensors of sound recordings in connection with the use of

[[Page 22542]]

sound recordings of musical works to engage in covered activities, 
including pursuant to 17 U.S.C. 115(d)(4)(B), and to the extent 
practicable:
    (A) Information concerning authorship and ownership of the 
applicable rights in the musical work embodied in the sound recording, 
including but not limited to:
    (1) Songwriter(s);
    (2) Publisher(s) with applicable U.S. rights;
    (3) Musical work copyright owner(s);
    (4) ISNI(s) and IPI(s) for each such songwriter, publisher, and 
musical work copyright owner; and
    (5) Respective ownership shares of each such musical work copyright 
owner;
    (B) ISWC(s) for the musical work embodied in the sound recording; 
and
    (C) Musical work name(s) for the musical work embodied in the sound 
recording, including any alternative or parenthetical titles for the 
musical work.
    (iii) Whether the blanket licensee, or any corporate parent or 
subsidiary of the blanket licensee, is a copyright owner of the musical 
work embodied in the sound recording.
    (2) Subject to paragraph (e)(3) of this section, where any of the 
information called for by paragraph (e)(1) of this section is acquired 
by the blanket licensee from sound recording copyright owners or other 
licensors of sound recordings (or their representatives), and the 
blanket licensee revises, re-titles, or otherwise edits or modifies the 
information, it shall be sufficient for the blanket licensee to report 
either the originally acquired version or the modified version of such 
information to satisfy its obligations under paragraph (e)(1) of this 
section, unless one or more of the following scenarios apply, in which 
case either the unaltered version or both versions must be reported:
    (i) If the mechanical licensing collective has adopted a particular 
nationally or internationally recognized reporting or data standard or 
format (e.g., DDEX) that is being used by the particular blanket 
licensee, and either the unaltered version or both versions are 
required to be reported under such standard or format.
    (ii) Either the unaltered version or both versions are reported by 
the particular blanket licensee pursuant to any voluntary license or 
individual download license.
    (iii) Either the unaltered version or both versions were 
periodically reported by the particular blanket licensee prior to the 
license availability date.
    (3) Notwithstanding paragraph (e)(2) of this section, a blanket 
licensee shall not be able to satisfy its obligations under paragraph 
(e)(1) of this section by reporting a modified version of any 
information belonging to a category of information that was not 
periodically revised, re-titled, or otherwise edited or modified by the 
particular blanket licensee prior to the license availability date, and 
in no case shall a modified version of any unique identifier (including 
but not limited to ISRC and ISWC), playing time, or release date be 
sufficient to satisfy a blanket licensee's obligations under paragraph 
(e)(1) of this section.
    (4) Any obligation under paragraph (e)(1) of this section 
concerning information about sound recording copyright owners may be 
satisfied by reporting the information for applicable sound recordings 
provided to the blanket licensee by sound recording copyright owners or 
other licensors of sound recordings (or their representatives) 
contained in each of the following DDEX fields: DDEX Party Identifier 
(DPID), LabelName, and PLine. Where a blanket licensee acquires this 
information in addition to other information identifying a relevant 
sound recording copyright owner, all such information must be reported 
to the extent practicable.
    (5) As used in paragraph (e) of this section, it is practicable to 
provide the enumerated information if:
    (i) It belongs to a category of information expressly required by 
the enumerated list of information contained in 17 U.S.C. 
115(d)(4)(A)(ii)(I)(aa) or (bb);
    (ii) Where the mechanical licensing collective has adopted a 
particular nationally or internationally recognized reporting or data 
standard or format (e.g., DDEX) that is being used by the particular 
blanket licensee, it belongs to a category of information required to 
be reported under such standard or format;
    (iii) It belongs to a category of information that is reported by 
the particular blanket licensee pursuant to any voluntary license or 
individual download license; or
    (iv) It belongs to a category of information that was periodically 
reported by the particular blanket licensee prior to the license 
availability date.
    (f) Content of annual reports of usage. An annual report of usage, 
covering the full fiscal year of the blanket licensee, shall be clearly 
and prominently identified as an ``Annual Report of Usage Under 
Compulsory Blanket License for Making and Distributing Phonorecords,'' 
and shall include a clear statement of the following information:
    (1) The fiscal year covered by the annual report of usage.
    (2) The full legal name of the blanket licensee and, if different, 
the trade or consumer-facing brand name(s) of the service(s), including 
any specific offering(s), through which the blanket licensee engages in 
covered activities. If the blanket licensee has a unique DDEX 
identifier number, it must also be provided.
    (3) The full address, including a specific number and street name 
or rural route, of the place of business of the blanket licensee. A 
post office box or similar designation will not be sufficient except 
where it is the only address that can be used in that geographic 
location.
    (4) The following information, cumulative for the applicable annual 
reporting period, for each month for each applicable activity or 
offering including as may be defined in part 385 of this title, and 
broken down by month and by each such applicable activity or offering:
    (i) The total royalty payable by the blanket licensee under the 
blanket license, computed in accordance with the requirements of this 
section and part 385 of this title.
    (ii) The total sum paid to the mechanical licensing collective 
under the blanket license, including the amount of any adjustment 
delivered contemporaneously with the annual report of usage.
    (iii) The total adjustment(s) made by any report of adjustment 
adjusting any monthly report of usage covered by the applicable annual 
reporting period, including any adjustment made in connection with the 
annual report of usage as described in paragraph (k)(1) of this 
section.
    (iv) The total number of payable units, including, as applicable, 
permanent downloads, plays, and constructive plays, for each sound 
recording used, whether pursuant to a blanket license, voluntary 
license, or individual download license.
    (v) To the extent applicable to the calculation of royalties owed 
by the blanket licensee under the blanket license:
    (A) Total service provider revenue, as may be defined in part 385 
of this title.
    (B) Total costs of content, as may be defined in part 385 of this 
title.
    (C) Total deductions of performance royalties, as may be defined in 
and permitted by part 385 of this title.
    (D) Total subscribers, as may be defined in part 385 of this title.
    (5) The amount of late fees, if applicable, included in any payment 
associated with the annual report of usage.

[[Page 22543]]

    (g) Processing and timing. (1) Each monthly report of usage and 
related royalty payment must be delivered to the mechanical licensing 
collective no later than 45 calendar days after the end of the 
applicable monthly reporting period. Where a monthly report of usage 
satisfying the requirements of 17 U.S.C. 115 and this section is 
delivered to the mechanical licensing collective no later than 15 
calendar days after the end of the applicable monthly reporting period, 
the blanket licensee shall be entitled to receive an invoice from the 
mechanical licensing collective setting forth the royalties payable by 
the blanket licensee under the blanket license for the applicable 
monthly reporting period, which shall be broken down by each applicable 
activity or offering including as may be defined in part 385 of this 
title.
    (2) After receiving a monthly report of usage, the mechanical 
licensing collective shall engage in the following actions, among any 
other actions required of it:
    (i) The mechanical licensing collective shall engage in efforts to 
identify the musical works embodied in sound recordings reflected in 
such report, and the copyright owners of such musical works (and shares 
thereof).
    (ii) The mechanical licensing collective shall engage in efforts to 
confirm uses of musical works subject to voluntary licenses and 
individual download licenses, and, if applicable, the corresponding 
amounts to be deducted from royalties that would otherwise be due under 
the blanket license.
    (iii) Where the blanket licensee is not entitled to an invoice 
under paragraph (g)(1) of this section, the mechanical licensing 
collective shall engage in efforts to confirm proper payment of the 
royalties payable by the blanket licensee under the blanket license for 
the applicable monthly reporting period, computed in accordance with 
the requirements of this section and part 385 of this title, after 
accounting for, if applicable, amounts to be deducted under paragraph 
(g)(2)(ii) of this section.
    (iv) Where the blanket licensee is entitled to an invoice under 
paragraph (g)(1) of this section, the mechanical licensing collective 
shall engage in efforts to compute, in accordance with the requirements 
of this section and part 385 of this title, the royalties payable by 
the blanket licensee under the blanket license for the applicable 
monthly reporting period, after accounting for, if applicable, amounts 
to be deducted under paragraph (g)(2)(ii) of this section.
    (v) Where the blanket licensee is entitled to an invoice under 
paragraph (g)(1) of this section, the mechanical licensing collective 
shall deliver such invoice to the blanket licensee no later than 40 
calendar days after the end of the applicable monthly reporting period.
    (vi) The mechanical licensing collective shall deliver a response 
file to the blanket licensee if requested by the blanket licensee. 
Where the blanket licensee is entitled to an invoice under paragraph 
(g)(1) of this section, the mechanical licensing collective shall 
deliver the response file to the blanket licensee contemporaneously 
with such invoice. Where the blanket licensee is not entitled to an 
invoice under paragraph (g)(1) of this section, the mechanical 
licensing collective shall deliver the response file to the blanket 
licensee no later than 70 calendar days after the end of the applicable 
monthly reporting period. In all cases, the response file shall contain 
such information as is common in the industry to be reported in 
response files, backup files, and any other similar such files provided 
to digital music providers by applicable third-party administrators, 
and shall include the results of the process described in paragraphs 
(g)(2)(i) through (iv) of this section on a track-by-track and 
ownership-share basis, with updates to reflect any new results from the 
previous month.
    (3) Each annual report of usage and, if any, related royalty 
payment must be delivered to the mechanical licensing collective no 
later than the 20th day of the sixth month following the end of the 
fiscal year covered by the annual report of usage.
    (4) The required timing for any report of adjustment and, if any, 
related royalty payment shall be as follows:
    (i) Where a report of adjustment adjusting a monthly report of 
usage is not combined with an annual report of usage, as described in 
paragraph (k)(1) of this section, a report of adjustment adjusting a 
monthly report of usage must be delivered to the mechanical licensing 
collective after delivery of the monthly report of usage being adjusted 
and before delivery of the annual report of usage for the annual period 
covering such monthly report of usage.
    (ii) A report of adjustment adjusting an annual report of usage 
must be delivered to the mechanical licensing collective no later than 
6 months after the occurrence of any of the scenarios specified by 
paragraph (k)(6) of this section, where such an event necessitates an 
adjustment. Where more than one scenario applies to the same annual 
report of usage at different points in time, a separate 6-month period 
runs for each such triggering event.
    (h) Format and delivery. (1) Reports of usage shall be delivered to 
the mechanical licensing collective in a machine-readable format that 
is compatible with the information technology systems of the mechanical 
licensing collective as reasonably determined by the mechanical 
licensing collective and set forth on its website, taking into 
consideration relevant industry standards and the potential for 
different degrees of sophistication among blanket licensees. The 
mechanical licensing collective must offer at least two options, where 
one is dedicated to smaller blanket licensees that may not be 
reasonably capable of complying with the requirements of a reporting or 
data standard or format that the mechanical licensing collective may 
see fit to adopt for larger blanket licensees with more sophisticated 
operations. Nothing in this section shall be construed as prohibiting 
the mechanical licensing collective from adopting more than two 
reporting or data standards or formats.
    (2) Royalty payments shall be delivered to the mechanical licensing 
collective in such manner and form as the mechanical licensing 
collective may reasonably determine and set forth on its website. A 
report of usage and its related royalty payment may be delivered 
together or separately, but if delivered separately, the payment must 
include information reasonably sufficient to allow the mechanical 
licensing collective to match the report of usage to the payment.
    (3) The mechanical licensing collective may modify the requirements 
it adopts under paragraphs (h)(1) and (2) of this section at any time, 
provided that advance notice of any such change is reflected on its 
website and delivered to blanket licensees using the contact 
information provided in each respective licensee's notice of license. A 
blanket licensee shall not be required to comply with any such change 
before the first reporting period ending at least 30 calendar days 
after delivery of such notice, unless such change is a significant 
change, in which case, compliance shall not be required before the 
first reporting period ending at least 6 months after delivery of such 
notice. For purposes of this paragraph (h)(3), a significant change 
occurs as to a particular blanket licensee where the mechanical 
licensing collective changes any policy requiring information to be 
provided under particular reporting or data standards or formats being 
used by the blanket licensee, or where the mechanical licensing 
collective has

[[Page 22544]]

adopted a particular nationally or internationally recognized reporting 
or data standard or format (e.g., DDEX) that is being used by the 
blanket licensee and such standard or format is modified by the 
standard-setting organization. Where delivery of the notice required by 
this paragraph (h)(3) is attempted but unsuccessful because the contact 
information in the blanket licensee's notice of license is not current, 
the grace periods established by this paragraph (h)(3) shall begin to 
run from the date of attempted delivery.
    (4) The mechanical licensing collective shall, by no later than the 
license availability date, establish an appropriate process by which 
any blanket licensee may voluntarily make advance deposits of funds 
with the mechanical licensing collective against which future royalty 
payments may be charged.
    (5) A separate monthly report of usage shall be delivered for each 
month during which there is any activity relevant to the payment of 
mechanical royalties for covered activities. An annual report of usage 
shall be delivered for each fiscal year during which at least one 
monthly report of usage was required to have been delivered. An annual 
report of usage does not replace any monthly report of usage.
    (6) Where a blanket licensee attempts to timely deliver a report of 
usage and/or related royalty payment to the mechanical licensing 
collective but cannot because of the fault of the collective or an 
error, outage, disruption, or other issue with any of the collective's 
applicable information technology systems (whether or not such issue is 
within the collective's direct control), if the blanket licensee 
attempts to contact the collective about the problem within 2 business 
days, provides a sworn statement detailing the encountered problem to 
the Copyright Office within 5 business days (emailed to the Office of 
the General Counsel at [email protected]), and delivers 
the report of usage and/or related royalty payment to the collective 
within 5 business days after receiving written notice from the 
collective that the problem is resolved, then the mechanical licensing 
collective shall act as follows:
    (i) The mechanical licensing collective shall fully credit the 
blanket licensee for any applicable late fee paid by the blanket 
licensee as a result of the untimely delivery of the report of usage 
and/or related royalty payment.
    (ii) The mechanical licensing collective shall not use the untimely 
delivery of the report of usage and/or related royalty payment as a 
basis to terminate the blanket licensee's blanket license.
    (i) Certification of monthly reports of usage. Each monthly report 
of usage shall be accompanied by:
    (1) The name of the person who is signing and certifying the 
monthly report of usage.
    (2) A signature, which in the case of a blanket licensee that is a 
corporation or partnership, shall be the signature of a duly authorized 
officer of the corporation or of a partner.
    (3) The date of signature and certification.
    (4) If the blanket licensee is a corporation or partnership, the 
title or official position held in the partnership or corporation by 
the person who is signing and certifying the monthly report of usage.
    (5) One of the following statements:
    (i) Statement one:

    I certify that (1) I am duly authorized to sign this monthly 
report of usage on behalf of the blanket licensee; (2) I have 
examined this monthly report of usage; and (3) all statements of 
fact contained herein are true, complete, and correct to the best of 
my knowledge, information, and belief, and are made in good faith.

    (ii) Statement two:

    I certify that (1) I am duly authorized to sign this monthly 
report of usage on behalf of the blanket licensee, (2) I have 
prepared or supervised the preparation of the data used by the 
blanket licensee and/or its agent to generate this monthly report of 
usage, (3) such data is true, complete, and correct to the best of 
my knowledge, information, and belief, and was prepared in good 
faith, and (4) this monthly report of usage was prepared by the 
blanket licensee and/or its agent using processes and internal 
controls that were subject to an examination, during the past year, 
by a licensed certified public accountant in accordance with the 
attestation standards established by the American Institute of 
Certified Public Accountants, the opinion of whom was that the 
processes and internal controls were suitably designed to generate 
monthly reports of usage that accurately reflect, in all material 
respects, the blanket licensee's usage of musical works, the 
statutory royalties applicable thereto, and any other data that is 
necessary for the proper calculation of the statutory royalties in 
accordance with 17 U.S.C. 115 and applicable regulations.

    (6) A certification that the blanket licensee has, for the period 
covered by the monthly report of usage, engaged in good-faith, 
commercially reasonable efforts to obtain information about applicable 
sound recordings and musical works pursuant to 17 U.S.C. 115(d)(4)(B) 
and Sec.  210.26.
    (j) Certification of annual reports of usage. (1) Each annual 
report of usage shall be accompanied by:
    (i) The name of the person who is signing the annual report of 
usage on behalf of the blanket licensee.
    (ii) A signature, which in the case of a blanket licensee that is a 
corporation or partnership, shall be the signature of a duly authorized 
officer of the corporation or of a partner.
    (iii) The date of signature.
    (iv) If the blanket licensee is a corporation or partnership, the 
title or official position held in the partnership or corporation by 
the person signing the annual report of usage.
    (v) The following statement: I am duly authorized to sign this 
annual report of usage on behalf of the blanket licensee.
    (vi) A certification that the blanket licensee has, for the period 
covered by the annual report of usage, engaged in good-faith, 
commercially reasonable efforts to obtain information about applicable 
sound recordings and musical works pursuant to 17 U.S.C. 115(d)(4)(B) 
and Sec.  210.26.
    (2) Each annual report of usage shall also be certified by a 
licensed certified public accountant. Such certification shall comply 
with the following requirements:
    (i) Except as provided in paragraph (j)(2)(ii) of this section, the 
accountant shall certify that it has conducted an examination of the 
annual report of usage prepared by the blanket licensee in accordance 
with the attestation standards established by the American Institute of 
Certified Public Accountants, and has rendered an opinion based on such 
examination that the annual report of usage conforms with the standards 
in paragraph (j)(2)(iv) of this section.
    (ii) If such accountant determines in its professional judgment 
that the volume of data attributable to a particular blanket licensee 
renders it impracticable to certify the annual report of usage as 
required by paragraph (j)(2)(i) of this section, the accountant may 
instead certify the following:
    (A) That the accountant has conducted an examination in accordance 
with the attestation standards established by the American Institute of 
Certified Public Accountants of the following assertions by the blanket 
licensee's management:
    (1) That the processes used by or on behalf of the blanket 
licensee, including calculation of statutory royalties, generated 
annual reports of usage that conform with the standards in paragraph 
(j)(2)(iv) of this section; and
    (2) That the internal controls relevant to the processes used by or 
on behalf of the blanket licensee to generate annual reports of usage 
were suitably designed and operated effectively during the

[[Page 22545]]

period covered by the annual reports of usage.
    (B) That such examination included examining, either on a test 
basis or otherwise as the accountant considered necessary under the 
circumstances and in its professional judgment, evidence supporting the 
management assertions in paragraph (j)(2)(ii)(A) of this section, 
including data relevant to the calculation of statutory royalties, and 
performing such other procedures as the accountant considered necessary 
in the circumstances.
    (C) That the accountant has rendered an opinion based on such 
examination that the processes used to generate the annual report of 
usage were designed and operated effectively to generate annual reports 
of usage that conform with the standards in paragraph (j)(2)(iv) of 
this section, and that the internal controls relevant to the processes 
used to generate annual reports of usage were suitably designed and 
operated effectively during the period covered by the annual reports of 
usage.
    (iii) In the event a third party or third parties acting on behalf 
of the blanket licensee provided services related to the annual report 
of usage, the accountant making a certification under either paragraph 
(j)(2)(i) or (ii) of this section may, as the accountant considers 
necessary under the circumstances and in its professional judgment, 
rely on a report and opinion rendered by a licensed certified public 
accountant in accordance with the attestation standards established by 
the American Institute of Certified Public Accountants that the 
processes and/or internal controls of the third party or third parties 
relevant to the generation of the blanket licensee's annual reports of 
usage were suitably designed and operated effectively during the period 
covered by the annual reports of usage, if such reliance is disclosed 
in the certification.
    (iv) An annual report of usage conforms with the standards of this 
paragraph (j) if it presents fairly, in all material respects, the 
blanket licensee's usage of the copyright owner's musical works under 
blanket license during the period covered by the annual report of 
usage, the statutory royalties applicable thereto, and such other data 
as are relevant to the calculation of statutory royalties in accordance 
with 17 U.S.C. 115 and applicable regulations.
    (v) Each certificate shall be signed by an individual, or in the 
name of a partnership or a professional corporation with two or more 
shareholders. The certificate number and jurisdiction are not required 
if the certificate is signed in the name of a partnership or a 
professional corporation with two or more shareholders.
    (3) If the annual report of usage is delivered electronically, the 
blanket licensee may deliver an electronic facsimile of the original 
certification of the annual report of usage signed by the licensed 
certified public accountant. The blanket licensee shall retain the 
original certification of the annual report of usage signed by the 
licensed certified public accountant for the period identified in 
paragraph (m) of this section, which shall be made available to the 
mechanical licensing collective upon demand.
    (k) Adjustments. (1) A blanket licensee may adjust one or more 
previously delivered monthly reports of usage or annual reports of 
usage, including related royalty payments, by delivering to the 
mechanical licensing collective a report of adjustment. A report of 
adjustment adjusting one or more monthly reports of usage may, but need 
not, be combined with the annual report of usage for the annual period 
covering such monthly reports of usage and related payments. In such 
cases, such an annual report of usage shall also be considered a report 
of adjustment, and must satisfy the requirements of both paragraphs (f) 
and (k) of this section.
    (2) A report of adjustment, except when combined with an annual 
report of usage, shall be clearly and prominently identified as a 
``Report of Adjustment Under Compulsory Blanket License for Making and 
Distributing Phonorecords.'' A report of adjustment that is combined 
with an annual report of usage shall be identified in the same manner 
as any other annual report of usage.
    (3) A report of adjustment shall include a clear statement of the 
following information:
    (i) The previously delivered monthly reports of usage or annual 
reports of usage, including related royalty payments, to which the 
adjustment applies.
    (ii) The specific change(s) to the applicable previously delivered 
monthly reports of usage or annual reports of usage, including the 
monetary amount of the adjustment and a detailed description of any 
changes to any of the inputs upon which computation of the royalties 
payable by the blanket licensee under the blanket license depends. Such 
description shall include a detailed and step-by-step accounting of the 
calculation of the adjustment sufficient to allow the mechanical 
licensing collective to assess the manner in which the blanket licensee 
determined the adjustment and the accuracy of the adjustment. As 
appropriate, an adjustment may be calculated using estimates permitted 
under paragraph (d)(2)(i) of this section.
    (iii) Where applicable, the particular sound recordings and uses to 
which the adjustment applies.
    (iv) A description of the reason(s) for the adjustment.
    (4) In the case of an underpayment of royalties, the blanket 
licensee shall pay the difference to the mechanical licensing 
collective contemporaneously with delivery of the report of adjustment. 
A report of adjustment and its related royalty payment may be delivered 
together or separately, but if delivered separately, the payment must 
include information reasonably sufficient to allow the mechanical 
licensing collective to match the report of adjustment to the payment.
    (5) In the case of an overpayment of royalties, the mechanical 
licensing collective shall appropriately credit or offset the excess 
payment amount and apply it to the blanket licensee's account.
    (6) A report of adjustment adjusting an annual report of usage may 
only be made:
    (i) In exceptional circumstances;
    (ii) When making an adjustment to a previously estimated input 
under paragraph (d)(2)(i) of this section;
    (iii) Following an audit under 17 U.S.C. 115(d)(4)(D); or
    (iv) In response to a change in applicable rates or terms under 
part 385 of this title.
    (7) A report of adjustment adjusting a monthly report of usage must 
be certified in the same manner as a monthly report of usage under 
paragraph (i) of this section. A report of adjustment adjusting an 
annual report of usage must be certified in the same manner as an 
annual report of usage under paragraph (j) of this section, except that 
the examination by a certified public accountant under paragraph (j)(2) 
of this section may be limited to the adjusted material and related 
recalculation of royalties payable. Where a report of adjustment is 
combined with an annual report of usage, its content shall be subject 
to the certification covering the annual report of usage with which it 
is combined.
    (l) Clear statements. The information required by this section 
requires intelligible, legible, and unambiguous statements in the 
reports of usage, without incorporation by reference of facts or 
information contained in other documents or records.
    (m) Documentation and records of use. (1) Each blanket licensee 
shall, for

[[Page 22546]]

a period of at least five years from the date of delivery of a report 
of usage to the mechanical licensing collective, keep and retain in its 
possession all records and documents necessary and appropriate to 
support fully the information set forth in such report of usage, 
including but not limited to the following:
    (i) Records and documents accounting for digital phonorecord 
deliveries that do not constitute plays, constructive plays, or other 
payable units.
    (ii) Records and documents pertaining to any promotional or free 
trial uses that are required to be maintained under applicable 
provisions of part 385 of this title.
    (iii) Records and documents identifying or describing each of the 
blanket licensee's applicable activities or offerings including as may 
be defined in part 385 of this title, including information sufficient 
to reasonably demonstrate whether the activity or offering qualifies as 
any particular activity or offering for which specific rates and terms 
have been established in part 385 of this title, and which specific 
rates and terms apply to such activity or offering.
    (iv) Records and documents with information sufficient to 
reasonably demonstrate, if applicable, whether service revenue and 
total cost of content, as those terms may be defined in part 385 of 
this title, are properly calculated in accordance with part 385 of this 
title.
    (v) Records and documents with information sufficient to reasonably 
demonstrate whether and how any royalty floor established in part 385 
of this title does or does not apply.
    (vi) Records and documents containing such other information as is 
necessary to reasonably support and confirm all usage and calculations 
contained in the report of usage, including but not limited to, as 
applicable, relevant information concerning subscriptions, devices and 
platforms, discount plans (including how eligibility was assessed), 
bundled offerings (including their constituent components and pricing 
information), and numbers of end users and subscribers (including 
unadjusted numbers and numbers adjusted as may be permitted by part 385 
of this title).
    (vii) Any other records or documents that may be appropriately 
examined pursuant to an audit under 17 U.S.C. 115(d)(4)(D).
    (2) Each blanket licensee shall, for the period described in 
paragraph (m)(3) of this section, keep and retain in its possession the 
following additional records and documents:
    (i) With respect to each sound recording, that embodies a musical 
work, first licensed or obtained for use in covered activities by the 
blanket licensee after the effective date of its blanket license, one 
or more of the following dates:
    (A) The date on which the sound recording is first reproduced by 
the blanket licensee on its server;
    (B) The date on which the blanket licensee first obtains the sound 
recording; or
    (C) The date of the grant first authorizing the blanket licensee's 
use of the sound recording.
    (ii) A record of all sound recordings embodying musical works in 
its database or similar electronic system as of immediately prior to 
the effective date of its blanket license.
    (3) The records and documents described in paragraph (m)(2) of this 
section must be kept and retained for a period of at least five years 
from the relevant date described in paragraph (m)(2) of this section, 
provided that at least 90 calendar days before destroying or discarding 
any such records or documents the blanket licensee notifies the 
mechanical licensing collective in writing and provides an opportunity 
for the collective to claim and retrieve such records and documents. In 
no event shall a blanket licensee be required to keep and retain any 
such records or documents for more than 50 years.
    (4) The mechanical licensing collective or its agent shall be 
entitled to reasonable access to all records and documents described in 
this paragraph (m) upon reasonable request, subject to any applicable 
confidentiality rules established by the Copyright Office. Each report 
of usage must include clear instructions on how to request such access 
to such records and documents.
    (n) Voluntary agreements with mechanical licensing collective to 
alter process. Subject to the provisions of 17 U.S.C. 115, a blanket 
licensee and the mechanical licensing collective may agree to vary or 
supplement the procedures described in this section, including but not 
limited to pursuant to an agreement to administer a voluntary license, 
provided that any such change does not materially prejudice copyright 
owners owed royalties due under a blanket license. The procedures 
surrounding the certification requirements of paragraphs (i) and (j) of 
this section may not be altered by agreement.


Sec.  210.28  Reports of usage for significant nonblanket licensees.

    (a) General. This section prescribes rules for the preparation and 
delivery of reports of usage for the making and distribution of 
phonorecords of nondramatic musical works to the mechanical licensing 
collective by a significant nonblanket licensee pursuant to 17 U.S.C. 
115(d)(6)(A)(ii). A significant nonblanket licensee shall report to the 
mechanical licensing collective on a monthly basis in accordance with 
17 U.S.C. 115(d)(6)(A)(ii) and this section. A significant nonblanket 
licensee may make adjustments to its reports of usage in accordance 
with this section.
    (b) Definitions. For purposes of this section, in addition to those 
terms defined in Sec.  210.22:
    (1) The term report of usage, unless otherwise specified, refers to 
all reports of usage required to be delivered by a significant 
nonblanket licensee to the mechanical licensing collective, including 
reports of adjustment. As used in this section, it does not refer to 
reports required to be delivered by blanket licensees under 17 U.S.C. 
115(d)(4)(A) and Sec.  210.27.
    (2) A monthly report of usage is a report of usage identified in 17 
U.S.C. 115(d)(6)(A)(ii), and required to be delivered by a significant 
nonblanket licensee to the mechanical licensing collective.
    (3) A report of adjustment is a report delivered by a significant 
nonblanket licensee to the mechanical licensing collective adjusting 
one or more previously delivered monthly reports of usage.
    (c) Content of monthly reports of usage. A monthly report of usage 
shall be clearly and prominently identified as a ``Significant 
Nonblanket Licensee Monthly Report of Usage for Making and Distributing 
Phonorecords,'' and shall include a clear statement of the following 
information:
    (1) The period (month and year) covered by the monthly report of 
usage.
    (2) The full legal name of the significant nonblanket licensee and, 
if different, the trade or consumer-facing brand name(s) of the 
service(s), including any specific offering(s), through which the 
significant nonblanket licensee engages in covered activities. If the 
significant nonblanket licensee has a unique DDEX identifier number, it 
must also be provided.
    (3) The full address, including a specific number and street name 
or rural route, of the place of business of the significant nonblanket 
licensee. A post office box or similar designation will not be 
sufficient except where it is the only address that can be used in that 
geographic location.
    (4) For each sound recording embodying a musical work that is used

[[Page 22547]]

by the significant nonblanket licensee in covered activities during the 
applicable monthly reporting period, a detailed statement, from which 
the mechanical licensing collective may separate reported information 
for each applicable activity or offering including as may be defined in 
part 385 of this title, of all of:
    (i) The royalty payment and accounting information required by 
paragraph (d) of this section; and
    (ii) The sound recording and musical work information required by 
paragraph (e) of this section.
    (5) For each voluntary license and individual download license in 
effect during the applicable monthly reporting period, the information 
required under Sec.  210.24(b)(8). If this information has been 
separately provided to the mechanical licensing collective, it need not 
be contained in the monthly report of usage, provided the report states 
that the information has been provided separately and includes the date 
on which such information was last provided to the mechanical licensing 
collective.
    (d) Royalty payment and accounting information. The royalty payment 
and accounting information called for by paragraph (c)(4)(i) of this 
section shall consist of the following:
    (1) The mechanical royalties payable by the significant nonblanket 
licensee for the applicable monthly reporting period for engaging in 
covered activities pursuant to each applicable voluntary license and 
individual download license.
    (2) The number of payable units, including, as applicable, 
permanent downloads, plays, and constructive plays, for each reported 
sound recording.
    (e) Sound recording and musical work information. (1) The following 
information must be provided for each sound recording embodying a 
musical work required to be reported under paragraph (c)(4)(ii) of this 
section:
    (i) Identifying information for the sound recording, including but 
not limited to:
    (A) Sound recording name(s), including, to the extent practicable, 
all known alternative and parenthetical titles for the sound recording;
    (B) Featured artist(s);
    (C) Unique identifier(s) assigned by the significant nonblanket 
licensee, if any, including any code(s) that can be used to locate and 
listen to the sound recording through the significant nonblanket 
licensee's public-facing service;
    (D) Playing time; and
    (E) To the extent acquired by the significant nonblanket licensee 
in connection with its use of sound recordings of musical works to 
engage in covered activities, and to the extent practicable:
    (1) Sound recording copyright owner(s);
    (2) Producer(s);
    (3) ISRC(s);
    (4) Any other unique identifier(s) for or associated with the sound 
recording, including any unique identifier(s) for any associated album, 
including but not limited to:
    (i) Catalog number(s);
    (ii) UPC(s); and
    (iii) Unique identifier(s) assigned by any distributor;
    (5) Version(s);
    (6) Release date(s);
    (7) Album title(s);
    (8) Label name(s);
    (9) Distributor(s); and
    (10) Other information commonly used in the industry to identify 
sound recordings and match them to the musical works the sound 
recordings embody.
    (ii) Identifying information for the musical work embodied in the 
reported sound recording, to the extent acquired by the significant 
nonblanket licensee in the metadata provided by sound recording 
copyright owners or other licensors of sound recordings in connection 
with the use of sound recordings of musical works to engage in covered 
activities, and to the extent practicable:
    (A) Information concerning authorship and ownership of the 
applicable rights in the musical work embodied in the sound recording, 
including but not limited to:
    (1) Songwriter(s);
    (2) Publisher(s) with applicable U.S. rights;
    (3) Musical work copyright owner(s);
    (4) ISNI(s) and IPI(s) for each such songwriter, publisher, and 
musical work copyright owner; and
    (5) Respective ownership shares of each such musical work copyright 
owner;
    (B) ISWC(s) for the musical work embodied in the sound recording; 
and
    (C) Musical work name(s) for the musical work embodied in the sound 
recording, including any alternative or parenthetical titles for the 
musical work.
    (iii) Whether the significant nonblanket licensee, or any corporate 
parent or subsidiary of the significant nonblanket licensee, is a 
copyright owner of the musical work embodied in the sound recording.
    (2) Subject to paragraph (e)(3) of this section, where any of the 
information called for by paragraph (e)(1) of this section is acquired 
by the significant nonblanket licensee from sound recording copyright 
owners or other licensors of sound recordings (or their 
representatives), and the significant nonblanket licensee revises, re-
titles, or otherwise edits or modifies the information, it shall be 
sufficient for the significant nonblanket licensee to report either the 
originally acquired version or the modified version of such information 
to satisfy its obligations under paragraph (e)(1) of this section, 
unless one or more of the following scenarios apply, in which case 
either the unaltered version or both versions must be reported:
    (i) If the mechanical licensing collective has adopted a particular 
nationally or internationally recognized reporting or data standard or 
format (e.g., DDEX) that is being used by the particular significant 
nonblanket licensee, and either the unaltered version or both versions 
are required to be reported under such standard or format.
    (ii) Either the unaltered version or both versions are reported by 
the particular significant nonblanket licensee pursuant to any 
voluntary license or individual download license.
    (iii) Either the unaltered version or both versions were 
periodically reported by the particular significant nonblanket licensee 
prior to the license availability date.
    (3) Notwithstanding paragraph (e)(2) of this section, a significant 
nonblanket licensee shall not be able to satisfy its obligations under 
paragraph (e)(1) of this section by reporting a modified version of any 
information belonging to a category of information that was not 
periodically revised, re-titled, or otherwise edited or modified by the 
particular significant nonblanket licensee prior to the license 
availability date, and in no case shall a modified version of any 
unique identifier (including but not limited to ISRC and ISWC), playing 
time, or release date be sufficient to satisfy a significant nonblanket 
licensee's obligations under paragraph (e)(1) of this section.
    (4) Any obligation under paragraph (e)(1) of this section 
concerning information about sound recording copyright owners may be 
satisfied by reporting the information for applicable sound recordings 
provided to the significant nonblanket licensee by sound recording 
copyright owners or other licensors of sound recordings (or their 
representatives) contained in each of the following DDEX fields: DDEX 
Party Identifier (DPID), LabelName, and PLine. Where a significant 
nonblanket licensee acquires this information in addition to other 
information

[[Page 22548]]

identifying a relevant sound recording copyright owner, all such 
information must be reported to the extent practicable.
    (5) As used in paragraph (e) of this section, it is practicable to 
provide the enumerated information if:
    (i) It belongs to a category of information expressly required by 
the enumerated list of information contained in 17 U.S.C. 
115(d)(4)(A)(ii)(I)(aa) or (bb);
    (ii) Where the mechanical licensing collective has adopted a 
particular nationally or internationally recognized reporting or data 
standard or format (e.g., DDEX) that is being used by the particular 
significant nonblanket licensee, it belongs to a category of 
information required to be reported under such standard or format;
    (iii) It belongs to a category of information that is reported by 
the particular significant nonblanket licensee pursuant to any 
voluntary license or individual download license; or
    (iv) It belongs to a category of information that was periodically 
reported by the particular significant nonblanket licensee prior to the 
license availability date.
    (f) Timing. (1) An initial report of usage must be delivered to the 
mechanical licensing collective contemporaneously with the significant 
nonblanket licensee's notice of nonblanket activity. Each subsequent 
monthly report of usage must be delivered to the mechanical licensing 
collective no later than 45 calendar days after the end of the 
applicable monthly reporting period.
    (2) A report of adjustment may only be delivered to the mechanical 
licensing collective once annually, between the end of the significant 
nonblanket licensee's fiscal year and 6 months after the end of its 
fiscal year. Such report may only adjust one or more previously 
delivered monthly reports of usage from the applicable fiscal year.
    (g) Format and delivery. (1) Reports of usage shall be delivered to 
the mechanical licensing collective in any format accepted by the 
mechanical licensing collective for blanket licensees under Sec.  
210.27(h). With respect to any modifications to formatting requirements 
that the mechanical licensing collective adopts, significant nonblanket 
licensees shall be entitled to the same advance notice and grace 
periods as apply to blanket licensees under Sec.  210.27(h), except the 
mechanical licensing collective shall use the contact information 
provided in each respective significant nonblanket licensee's notice of 
nonblanket activity.
    (2) A separate monthly report of usage shall be delivered for each 
month during which there is any activity relevant to the payment of 
mechanical royalties for covered activities.
    (3) Where a significant nonblanket licensee attempts to timely 
deliver a report of usage to the mechanical licensing collective but 
cannot because of the fault of the collective or an error, outage, 
disruption, or other issue with any of the collective's applicable 
information technology systems (whether or not such issue is within the 
collective's direct control), if the significant nonblanket licensee 
attempts to contact the collective about the problem within 2 business 
days, provides a sworn statement detailing the encountered problem to 
the Copyright Office within 5 business days (emailed to the Office of 
the General Counsel at [email protected]), and delivers 
the report of usage to the collective within 5 business days after 
receiving written notice from the collective that the problem is 
resolved, then neither the mechanical licensing collective nor the 
digital licensee coordinator may use the untimely delivery of the 
report of usage as a basis to engage in legal enforcement efforts under 
17 U.S.C. 115(d)(6)(C).
    (h) Certification of monthly reports of usage. Each monthly report 
of usage shall be accompanied by:
    (1) The name of the person who is signing and certifying the 
monthly report of usage.
    (2) A signature, which in the case of a significant nonblanket 
licensee that is a corporation or partnership, shall be the signature 
of a duly authorized officer of the corporation or of a partner.
    (3) The date of signature and certification.
    (4) If the significant nonblanket licensee is a corporation or 
partnership, the title or official position held in the partnership or 
corporation by the person who is signing and certifying the monthly 
report of usage.
    (5) One of the following statements:
    (i) Statement one:

    I certify that (1) I am duly authorized to sign this monthly 
report of usage on behalf of the significant nonblanket licensee; 
(2) I have examined this monthly report of usage; and (3) all 
statements of fact contained herein are true, complete, and correct 
to the best of my knowledge, information, and belief, and are made 
in good faith.

    (ii) Statement two:

    I certify that (1) I am duly authorized to sign this monthly 
report of usage on behalf of the significant nonblanket licensee, 
(2) I have prepared or supervised the preparation of the data used 
by the significant nonblanket licensee and/or its agent to generate 
this monthly report of usage, (3) such data is true, complete, and 
correct to the best of my knowledge, information, and belief, and 
was prepared in good faith, and (4) this monthly report of usage was 
prepared by the significant nonblanket licensee and/or its agent 
using processes and internal controls that were subject to an 
examination, during the past year, by a licensed certified public 
accountant in accordance with the attestation standards established 
by the American Institute of Certified Public Accountants, the 
opinion of whom was that the processes and internal controls were 
suitably designed to generate monthly reports of usage that 
accurately reflect, in all material respects, the significant 
nonblanket licensee's usage of musical works and the royalties 
applicable thereto.

    (i) Adjustments. (1) A significant nonblanket licensee may adjust 
one or more previously delivered monthly reports of usage by delivering 
to the mechanical licensing collective a report of adjustment.
    (2) A report of adjustment shall be clearly and prominently 
identified as a ``Significant Nonblanket Licensee Report of Adjustment 
for Making and Distributing Phonorecords.''
    (3) A report of adjustment shall include a clear statement of the 
following information:
    (i) The previously delivered monthly report(s) of usage to which 
the adjustment applies.
    (ii) The specific change(s) to the applicable previously delivered 
monthly report(s) of usage.
    (iii) Where applicable, the particular sound recordings and uses to 
which the adjustment applies.
    (iv) A description of the reason(s) for the adjustment.
    (4) A report of adjustment must be certified in the same manner as 
a monthly report of usage under paragraph (h) of this section.
    (j) Clear statements. The information required by this section 
requires intelligible, legible, and unambiguous statements in the 
reports of usage, without incorporation by reference of facts or 
information contained in other documents or records.
    (k) Harmless errors. Errors in the delivery or content of a report 
of usage that do not materially affect the adequacy of the information 
required to serve the purpose of 17 U.S.C. 115(d) shall be deemed 
harmless, and shall not render the report invalid or provide a basis 
for the mechanical licensing collective or digital licensee coordinator 
to engage in legal enforcement efforts under 17 U.S.C. 115(d)(6)(C). 
This paragraph (k) shall apply only to errors made in good faith and 
without any intention to deceive, mislead, or conceal relevant 
information.

[[Page 22549]]

    (l) Voluntary agreements with mechanical licensing collective to 
alter process. Subject to the provisions of 17 U.S.C. 115, a 
significant nonblanket licensee and the mechanical licensing collective 
may agree to vary or supplement the procedures described in this 
section, including but not limited to pursuant to an agreement to 
administer a voluntary license, provided that any such change does not 
materially prejudice copyright owners owed royalties due under a 
blanket license. The procedures surrounding the certification 
requirements of paragraph (h) of this section may not be altered by 
agreement.

    Dated: April 15, 2020.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2020-08379 Filed 4-17-20; 4:15 pm]
 BILLING CODE 1410-30-P

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