Music Modernization Act Notices of License, Notices of Nonblanket Activity, Data Collection and Delivery Efforts, and Reports of Usage and Payment, 58114-58158 [2020-20077]

Download as PDF 58114 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations LIBRARY OF CONGRESS 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: Interim rule. AGENCY: The U.S. Copyright Office is issuing an interim rule 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 the January 1, 2021 license availability date. Having solicited multiple rounds of public comments through a notification of inquiry and notice of proposed rulemaking, the Office is adopting interim regulations concerning notices of license, data collection and delivery efforts, and reports of usage and payment by digital music providers. The Office is also adopting interim regulations concerning notices of nonblanket activity and reports of usage by significant nonblanket licensees and data collection efforts by musical work copyright owners. DATES: Effective October 19, 2020. FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and Associate Register of Copyrights, by email at regans@copyright.gov, Jason E. Sloan, Assistant General Counsel, by email at jslo@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: jbell on DSKJLSW7X2PROD with RULES2 SUMMARY: I. Background On October 11, 2018, the president signed into law the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (‘‘MMA’’) which, among other things, substantially modifies the compulsory ‘‘mechanical’’ license for making and distributing phonorecords of nondramatic musical works under 17 U.S.C. 115.1 It does so by switching 1 Public Law 115–264, 132 Stat. 3676 (2018). VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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.2 DMPs may also continue to engage in those activities solely through voluntary, or direct, licensing with copyright owners, in which case the DMP may be considered a significant nonblanket licensee (‘‘SNBL’’) under the statute, subject to separate reporting obligations. In September 2019, the Office issued a notification of inquiry (‘‘NOI’’) that describes in detail the legislative background and regulatory scope of the present rulemaking proceeding.3 As detailed in the NOI, 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. After thoroughly considering the public comments received in response, the Office issued a series of notices addressing various subjects presented in the NOI. In April 2020, the Office issued a notice of proposed rulemaking (‘‘NPRM’’) specifically addressing notices of license, notices of nonblanket activity, data collection and delivery efforts, and reports of usage and payment, and is now promulgating an interim rule based upon that NPRM.4 2 As permitted under the MMA, the Office designated a digital licensee coordinator (‘‘DLC’’) to represent licensees in proceedings before the Copyright Royalty Judges (‘‘CRJs’’) and the 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). 3 84 FR 49966 (Sept. 24, 2019). 4 85 FR 22518 (Apr. 22, 2020). All rulemaking activity, including public comments, as well as educational material regarding the Music Modernization Act, can currently be accessed via navigation from https://www.copyright.gov/musicmodernization/. Specifically, comments received in response to the NOI are available at https:// www.regulations.gov/docketBrowser?rpp= 25&po=0&dct=PS&D=COLC-2019-0002&refD =COLC-2019-0002-0001 and comments received in response to the NPRM are available at https:// PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 The Office received comments from a number of stakeholders in response to the NPRM, largely expressing support for the overall proposed rule. The MLC ‘‘appreciates the significant time, effort and thoughtfulness that the Office expended to craft these substantial rules’’ and ‘‘agrees with the bulk of the language in the Proposed Regulations as appropriate and well-crafted to implement the MMA.’’ 5 The DLC ‘‘commends the Office for its thoughtful, careful, and thorough consideration of many highly complex issues that are posed by this rulemaking,’’ and states that ‘‘the Proposed Rule largely succeeds in fusing the MMA’s statutory design with what is reasonable and practical from an industry perspective.’’ 6 Others expressed similar sentiments. For example, Music Reports ‘‘acknowledges the massive effort that the Office has undertaken in constructing these extensive proposed rules, and enthusiastically endorses the overall framework and degree of balance achieved throughout’’ 7 and the National Music Publishers’ Association (‘‘NMPA’’) ‘‘lauds the Copyright Office for its thorough and educated work.’’ 8 Commenters also acknowledged the inclusiveness and fairness the Office showed to all parties’ concerns in the proposed rule. For example, the Recording Academy states that ‘‘[t]he NPRM strikes an appropriate balance to a number of complex and technical questions, and throughout the rulemaking process the Office was inclusive of stakeholders’ comments, input, and ideas’’ 9 and Future of Music Coalition (‘‘FMC’’) noted ‘‘the Office’s ongoing efforts to implement the Music Modernization Act in ways that accord with legislative intent, that demonstrate ongoing concern for fairness to all parties, that increase transparency, and that harmonize the public interest with the interests of creators, including songwriters and composers.’’ 10 That said, the public comments also revealed a number of discrete issues for the Copyright Office to consider and www.regulations.gov/docket Browser?rpp=25&so=ASC&sb= title&po=0&dct=PS&D=COLC-2020-0005. Guidelines for ex parte communications, along with records of such communications, are available at https://www.copyright.gov/rulemaking/mmaimplementation/ex-parte-communications.html. References to these comments are by party name (abbreviated where appropriate), followed by ‘‘Initial NOI Comment,’’ ‘‘Reply NOI Comment,’’ ‘‘NPRM Comment,’’ ‘‘Letter,’’ or ‘‘Ex Parte Letter,’’ as appropriate. 5 MLC NPRM Comment at 2. 6 DLC NPRM Comment at 1. 7 Music Reports NPRM Comment at 2. 8 NMPA NPRM Comment at 1. 9 Recording Academy NPRM Comment at 1. 10 FMC NPRM Comment at 1. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 address in promulgating this rule. The MMA significantly altered the complex music licensing landscape after careful congressional deliberation following extensive input from, and negotiations between, a variety of stakeholders.11 The Office has endeavored to build upon that foundation and adopt 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.12 The subjects of this rule have made it necessary to adopt regulations that navigate 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.13 As noted in 11 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) (‘‘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’’). 12 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); see also 17 U.S.C. 115(d)(12)(A) (‘‘The Register of Copyrights may conduct such proceedings and adopt such regulations as may be necessary or appropriate to effectuate the provisions of this subsection.’’). 13 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 the NPRM, while the Office’s task was aided by receipt of numerous helpful and substantive comments representing interests from across the music ecosystem, the comments also uncovered divergent assumptions and expectations as to the shouldering and execution of relevant duties assigned by the MMA. Although the Office has encouraged continued dialogue to expeditiously resolve or refine these areas of stakeholder disagreement—in particular, to facilitate cooperation between the MLC and DLC on businessspecific questions 14—areas of consensus have remained sparse.15 While the Copyright Office appreciates that the relevant stakeholders remain in active discussions on operational matters, the administrative record reflects spots of significant stakeholder disagreement despite the broad general support for the overall framework of the proposed rule. The Office facilitated the rulemaking process by, among other things, convening ex parte meetings with groups of stakeholders to discuss aspects of the proposed rule and granting requests for additional time to submit comments.16 At times, the Office found it necessary to address a lack of agreement or a dearth of sufficiently detailed information through additional requests for information and/or convening joint ex parte meetings to 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’’); H.R. Rep. No. 115–651, at 14 (2018); S. Rep. No. 115–339, at 15 (2018); 17 U.S.C. 115(d)(12)(A). 14 See 85 FR at 22519, 22523; see also 84 FR at 32296; 84 FR at 49968. 15 For example, the MLC and DLC did not collaborate before submitting initial comments in response to the notification of inquiry. MLC Initial NOI Comment 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 NOI Comment at 2 n.3 (same). After extending the deadline for reply comments at the MLC’s and DLC’s shared request, no compromise resulted. MLC Reply NOI Comment 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 NOI Comment at 1 n.3 (same). See also DLC Letter July 8, 2020 at 2 (‘‘DLC reached out to the MLC to schedule an OAC meeting before submitting this letter, as the Office had requested. That meeting has not yet been scheduled.’’); MLC Letter July 8, 2020 (no mention of meeting or Office’s request). 16 See, e.g., U.S. Copyright Office Letter June 8, 2020; U.S. Copyright Office Letter June 10, 2020; U.S. Copyright Office Letter June 30, 2020; 84 FR 65739 (Nov. 29, 2019). PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 58115 confirm issues of nuance, which complicated the pace of this rulemaking, but was helpful to gather useful information for the Office to consider in promulgating the regulations. The Office thanks the commenters for their thoughtful perspectives and would welcome continued dialogue across industry stakeholders and with the Office in the months before the license availability date. In recognition of the significant legal changes brought by the MMA, and challenges both in setting up a fully functional MLC and for DMPs to adjust their internal practices, the NPRM invited comments on whether it would be beneficial to adopt the rule on an interim basis.17 The majority of commenters weighing in on this issue support an interim rule.18 The MLC, for example, says ‘‘[t]here are many moving pieces and tight statutory deadlines, and permitting further adjustment to these Proposed Regulations after the interested parties have lived with and been operating under them for a reasonable period of time is a practical and flexible approach’’ and ‘‘may be particularly useful with respect to the Proposed Regulations concerning the substantive information DMPs are to provide in their Usage Reports.’’ 19 The DLC sounded caution, stating that ‘‘it is critical that [DMPs], [SNBLs], and other participants have clarity and certainty about the regulatory regime as they begin to build systems to accommodate that regime.’’ 20 After careful consideration of these comments, the Office has decided to adopt this rule on an interim basis for those reasons expressed in the NPRM and identified by commenters in support of the proposal. In doing so, the Office emphasizes that adoption of this rule on an interim basis is not an openended invitation to revisit settled provisions or rehash arguments, but rather is intended to maintain flexibility to make necessary modifications in response to new evidence, unforeseen 17 85 FR at 22519. e.g., The Alliance for Recorded Music (‘‘ARM’’) NPRM Comment at 11; MLC NPRM Comment at 45; Music Reports NPRM Comment at 2–3 (‘‘[I]t would be beneficial for the Office to adopt the proposed rule on an interim basis due to the intricacies of the subject matter and the further issues likely to arise during the MLC’s first full year of operation following the blanket license availability date.’’); Peermusic NPRM Comment at 2 (‘‘[T]his is an excellent suggestion.’’); FMC NPRM Comment at 1–2 (calling the proposal a ‘‘reasonable idea,’’ but saying, ‘‘[w]hat we don’t want to do is have an interim rule that sets out ambitious goals and standard-setting best practices and then a final rule that rolls back some of that ambition’’). 19 MLC NPRM Comment at 45. 20 DLC NPRM Comment at 1. 18 See, E:\FR\FM\17SER2.SGM 17SER2 58116 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations issues, or where something is otherwise not functioning as intended. Moreover, if any significant changes prove necessary, the Office intends, as the DLC requests, to provide adequate and appropriate transition periods.21 During the proceeding, the DLC has advocated for collaboration through the MLC’s operations advisory committee to address various issues and ‘‘evaluate potential areas for improvement once all parties have had more experience with the new blanket license system.’’ 22 The Office supports collaboration between the MLC and DLC, and believes that adopting the rule on an interim basis will help facilitate any necessary rule changes identified through such cooperation. Going forward, the Office particularly invites the operations advisory committee, or the MLC and DLC collectively, to inform the Office on any aspects of the interim rule where there is consensus that a modification is needed. Having now reviewed and considered all relevant comments received in response to the NOI and NPRM, including through a number of ex parte communications as detailed under the Office’s procedures, the Office has weighed all appropriate legal, business, and practical implications and equities that have been raised, and pursuant to its authority under 17 U.S.C. 115 and 702 is adopting interim regulations with respect to notices of license, notices of nonblanket activity, data collection and delivery efforts, and reports of usage and payment under the MMA. The Office has adopted regulations that it believes best reflect the statutory language and its animating goals in light of the record before it.23 Indeed, the Office has ‘‘use[d] its best judgment in determining the appropriate steps.’’ 24 II. Interim Rule Based on the public comments received in response to the NPRM, the Office finds it reasonable to adopt the majority of the proposed rule as interim regulations. As noted above, commenters generally strongly supported the overall rule as well as 21 See id. Ex Parte Letter July 24, 2020 at 2; see also DLC Ex Parte Letter June 23, 2020 at 5–6; DLC Letter July 8, 2020 at 2; DLC Ex Parte Letter June 26, 2020 at 2; DLC Letter July 13, 2020 at 6. 23 See H.R. Rep. No. 115–651, at 14; S. Rep. No. 115–339, at 15; 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 17 U.S.C. 115(d)(12)(A); 84 FR at 49967–68. 24 H.R. Rep. No. 115–651, at 14; S. Rep. No. 115– 339, at 15; Conf. Rep. at 12; see 17 U.S.C. 115(d)(12)(A); Brand X, 545 U.S. at 980 (citing Chevron, 467 U.S. 837). jbell on DSKJLSW7X2PROD with RULES2 22 DLC VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 particular provisions. Where parties have objected to certain aspects of the proposed rule, the Office has considered those comments and resolved these issues as discussed below. If not otherwise discussed, the Office has concluded that the relevant proposed provision should be adopted for the reasons stated in the NPRM. The resulting interim rule is intended to represent a balanced approach that, on the one hand, ensures the MLC will receive the information it needs to successfully fulfill its statutory duties, while mindfully accounting for the operational and engineering challenges being imposed on DMPs to provide this information. In some instances, the interim rule expands DMP reporting obligations, such as in connection with unaltered metadata and by eliminating a ‘‘practicability’’ exception—both areas of the proposed rule over which the MLC expressed significant concern. But the interim rule also acknowledges competing concerns raised by the DLC and creates transition periods for DMPs to update their systems. In other instances, the interim rule expands or preserves DMP reporting flexibility, though similarly taking into account the MLC’s concerns. For example, in connection with monthly royalty payments, the interim rule retains the proposed rule’s generally open approach to permitting DMPs to reasonably use estimates as royalty accounting inputs, but to address the MLC’s comments, it requires DMPs to provide additional information about the estimates they may use. The interim rule also benefits from input received from a multitude of other interested parties. For example, the interim rule significantly revises the proposed approach to certain information relating to statutory termination rights in light of comments from groups representing songwriter interests, and in response to sound recording copyright owners, limits MLC access to certain data held by DMPs flagged as being particularly business-sensitive. A. Notices of License and Nonblanket Activity Commenters agreed with the general framework of the NPRM regarding the notice of license (‘‘NOL’’) and notice of nonblanket activity (‘‘NNBA’’) requirements, with a number of minor adjustments proposed, as discussed below.25 25 See, e.g., Songwriters of North America (‘‘SONA’’) & Music Artists Coalition (‘‘MAC’’) NPRM Comment at 4 (supporting the proposed information DMPs must provide in notices of license, including with respect to voluntary licenses); ARM NPRM Comment at 3 (supporting PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 1. Notices of License Name and contact information and submission criteria. The NPRM generally adopted the requirements for name and contact information and submission criteria suggested by the MLC, DLC, and other commenters in response to the NOI. The proposed language regarding the requirements for providing a description of the DMP and its covered activities were unopposed by the MLC, while the DLC recommended two adjustments. First, the DLC requested that the Office remove ‘‘noninteractive streams’’ from the list of DPD configurations required to be identified in the notice of license.26 The DLC explained, ‘‘industry practice and customs for decades have acknowledged that noninteractive streaming does not require a mechanical license, and this rulemaking should not include any language that could call that industry practice into question.’’ 27 It added that it ‘‘is unaware of any noninteractive streaming service that obtains mechanical licenses.’’ 28 The Office declines to adopt this suggestion. As the Office has explained in rulemakings predating the MMA, while it may be uncommon for a noninteractive stream to result in a DPD, there is nothing in the statutory language that categorically prevents it.29 Section 115 provides only that a specific type of noninteractive stream is not a DPD, namely: ‘‘[a] digital phonorecord delivery does not result from a realtime, noninteractive subscription transmission of a sound recording where no reproduction of the sound recording or the musical work embodied therein is made from the inception of the transmission through to its receipt by the transmission recipient in order to make the sound recording audible.’’ 30 The MMA did not alter the statutory definition of a DPD with respect to noninteractive streams, and the existence of any industry customs or norms to the contrary (or lack of a current rate) do not override the plain language of the statute. Accordingly, the Office has retained the proposed language in the interim rule. The Office also declines to adopt the DLC’s suggestion to remove requirement that MLC ‘‘maintain a current, free, and publicly accessible and searchable online list of all blanket licenses including information about whether a notice of license was rejected and why and whether a blanket license has been terminated and why’’). 26 DLC NPRM Comment at 3. 27 Id. 28 Id. 29 74 FR 4537, 4541 (Jan. 26, 2009); 73 FR 66173, 66180–81 (Nov. 7, 2008). 30 17 U.S.C. 115(e)(10). E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations ‘‘Discounted, but not free-to-the-user’’ from the list of service types the DMP offers,31 but it has amended the language of that provision in response to the DLC’s comments. The Office agrees with the MLC that it is likely important to the MLC and copyright owners to know when services are offered at discounted rates, and so those should be identified in NOLs.32 At the same time, the Office accepts the DLC’s point that a discounted service is not actually a separate service type but rather ‘‘a particular pricing level for a service type.’’ 33 The Office has clarified the language of that provision. Finally, the Office declines to adopt the Future of Music Coalition’s (‘‘FMC’’) suggestion to require that the description of the DMP’s service type be tied to the specific categories of activities or offerings adopted by the Copyright Royalty Judges.34 While the Office supports FMC’s stated aims of increasing trust and transparency, as noted in the NPRM, ‘‘such details may go beyond the more general notice function the Office understands NOLs to serve’’ and will be reported to the MLC in reports of usage 35 (and, as addressed in a separate rulemaking, to copyright owners in royalty statements).36 Voluntary license numerical identifier. Music Reports proposed requiring DMPs to include a unique, persistent identifier in NOLs for each voluntary license described therein, saying it would promote efficiency and ‘‘provide a strong foundation for other administrative functions.’’ 37 Music Reports proposed that the MLC should, in turn, include the same numerical identifiers in response files sent to DMPs, and that the DMPs should include them in reports of usage.38 In response, the MLC stated that while it ‘‘intends to include in response files a persistent and unique (to that DMP) identifier for voluntary licenses,’’ and ‘‘DMPs would provide those identifiers when they provide (or update) their voluntary license repertoires,’’ it did ‘‘not believe that DMPs need to be required to include these identifiers in their monthly usage reporting,’’ since that would essentially require DMPs to duplicate the matching work that the 31 DLC NPRM Comment at 3. MLC Initial NOI Comment at 5. 33 DLC NPRM Comment at 3. 34 FMC NPRM Comment at 2. 35 85 FR at 22520. 36 See U.S. Copyright Office, Interim Rule, Royalty Reporting and Distribution Obligations of the Mechanical Licensing Collective, Dkt. No. 2020– 6, published elsewhere in this issue of the Federal Register. 37 Music Reports NPRM Comment at 4. 38 Id. at 5–6. jbell on DSKJLSW7X2PROD with RULES2 32 See VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 MLC is charged with administering.39 The Office adopts Music Reports’ proposal except as to the requirement for DMPs to report a numerical identifier in reports of usage for the reasons identified by the MLC. Voluntary license descriptions. The NPRM required DMPs to provide a description of any applicable voluntary license or individual download license that it is operating under (or expects to be operating under) concurrently with the blanket license to aid the MLC 40 in fulfilling its obligations to ‘‘confirm uses of musical works subject to voluntary licenses and individual download licenses, and the corresponding pro rata amounts to be deducted from royalties that would otherwise be due under the blanket license.’’ 41 The MLC and DLC each commented on the timing aspects of this proposal. With respect to voluntary licenses taking effect before March 31, 2021, the MLC requested that DMPs who wish to have these licenses carved out of their blanket license royalty processing be required to provide this information at least 90 days prior to the first reporting of usage under such voluntary licenses, to allow the MLC sufficient time to process early 2021 usage and avoid a ‘‘processing logjam.’’ 42 The DLC concurred generally that the MLC will face significant burdens around the license availability date, but suggested that the proposed language requiring the submission of updated information about voluntary licenses ‘‘at least 30 calendar days before delivering a report of usage covering a period where such license is in effect’’ could ‘‘cause confusion.’’ 43 The DLC contended that ‘‘[i]t is common for voluntary licenses to cover past period terms,’’ meaning that even when a DMP delivers information about such licenses promptly after execution of such deals, the description would not be considered timely under the language of the rule if the period the license covers began more than 30 days prior to execution.44 In response, the MLC said while it ‘‘does not oppose clarifying that notice of a retroactive license is not a violation,’’ ‘‘the regulation should be clear that the MLC cannot be required to process voluntary licenses that have not been submitted sufficiently in advance of usage reporting, and also that the voluntary license should be reported promptly, to 39 MLC Ex Parte Letter Aug. 16, 2020 at 5. FR at 22520. 41 17 U.S.C. 115(d)(3)(G)(i)(I)(bb). 42 MLC NPRM Comment at 6. 43 DLC NPRM Comment at 1, 4. 44 Id. at 4. 40 85 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 58117 minimize adjustments that copyright owners would have to address.’’ 45 The Office is adjusting the interim rule to address these concerns, and has adopted deadline language similar to what the MLC has proposed.46 At the same time, the Office also credits the DLC’s suggestion that the rule expressly account for retroactive licenses, to avoid a situation where descriptions of such licenses would potentially inevitably be untimely submitted. The interim rule has been amended to take these considerations into account with respect to submissions of descriptions of voluntary licenses prior to the first usage reporting date following the license availability date as well as subsequent amendments. It also excuses the MLC from undertaking any related obligations for descriptions submitted either less than 90 calendar days prior to the delivery of a report of usage prior to March 31, 2021, or less than 30 calendar days prior to the delivery of a report of usage after that date. The Office notes that the timing requirement for DMPs to deliver updated information regarding voluntary licenses is already subject to the qualification that it be to the extent commercially reasonable. It would not be commercially reasonable to expect the impossible (i.e., delivery of a retroactive license prior to it going into effect). In connection with the description of a voluntary license, Music Reports proposed amending the proposed requirement to identify the musical work copyright owner to instead alternatively permit identification of a licensor or administrator.47 Although Music Reports persuasively outlined the practical realities underlying this request,48 the Office believes the NPRM best reflects the statutory language requiring DMPs to ‘‘identify and provide contact information for all musical work copyright owners for works embodied in sound recordings as to which a voluntary license, rather than the 45 MLC Ex Parte Letter Aug. 16, 2020 at 4. discussed below, the DLC separately proposes that DMPs be permitted to submit NOLs at least 30 days prior to the license availability date, which supports the reasonableness of the MLC’s proposed timeline for voluntary license submissions (which works out to being 45 days before the license availability date for a voluntary license subject to the January 2021 reporting period for a DMP intending to receive an invoice from the MLC prior to delivering its royalty payment). See DLC NPRM Comment at 1–2. 47 Music Reports NPRM Comment at 6. 48 Id. (‘‘DMPs notoriously do not have a clear view of all the distinct copyright owners that may be administered from time to time by the publishing administrators with whom they have licenses, much less the contact information for such copyright owners.’’). 46 As E:\FR\FM\17SER2.SGM 17SER2 58118 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations blanket license, is in effect with respect to the uses being reported.’’ 49 In addition, while Music Reports suggests that this amendment would provide clarity to DMPs,50 the DLC did not itself call for such an amendment or object to the provision as it appeared in the NPRM. The interim rule retains the requirement to identify the musical work copyright owner, but allows contact information for a relevant administrator or other licensor to be listed instead of contact information for the copyright owner. Harmless errors. The DLC suggested that the harmless error rule proposed in the NPRM—which provides that ‘‘[e]rrors 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’’ 51—should be extended to apply to ‘‘failures in the timeliness in amendments.’’ 52 The Office has amended the interim rule to include good faith failures in the timeliness in amendments within the scope of the harmless error rule. Transition to blanket license. The NPRM proposed that DMPs should submit notices of license to the MLC within 45 days after the license availability date where such DMPs automatically transition to operating under the blanket license pursuant to 17 U.S.C. 115(d)(9)(A). The DLC suggested the rule should allow DMPs to submit notices earlier—at least 30 days prior to the license availability date—and to provide that the blanket license would become effective as of the license availability date for such notices.53 The MLC has represented that it intends to begin accepting NOLs even sooner—‘‘as soon as these regulations have been promulgated and the MLC is able to complete its online NOL form and make it available.’’ 54 The Office agrees that this is reasonable and has amended the language of the rule to require the MLC to begin accepting such notices no less 49 17 U.S.C. 115(d)(4)(A)(ii)(II) (emphasis added). Reports NPRM Comment at 6. 51 85 FR at 22538 (proposed § 210.24(e)). The harmless error provision further requires that it ‘‘shall apply only to errors made in good faith and without any intention to deceive, mislead, or conceal relevant information.’’ 52 DLC NPRM Comment at 2. 53 Id. at 1–2. The DLC made this suggestion ‘‘[i]n order to lay the groundwork for an orderly processing of the notices (and avoid overwhelming the MLC with the simultaneous submission of notices from every licensee on the license availability date).’’ Id. at 1. 54 MLC Ex Parte Letter Aug. 16, 2020 at 5. jbell on DSKJLSW7X2PROD with RULES2 50 Music VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 than 30 days prior to the license availability date. The DLC separately requested that the rule clarify, for notices of licenses submitted during this period of transition to the blanket license, that ‘‘the rejection of such a notice of license based on any challenge the MLC may make to the adequacy of the notice will not immediately terminate the blanket license during the notice and cure period or any follow-on litigation challenging the MLC’s final decision to reject the notice of license, provided the blanket licensee meets the blanket license’s other required terms.’’ 55 The Office has considered this comment and made an adjustment to this aspect of the interim rule. The NPRM articulated the Office’s view that the statutory provisions regarding notices of license and the transition to the blanket license must be read together, such that DMPs transitioning to the blanket license must still submit notices of license to the MLC. But because the statute provides that the blanket license ‘‘shall, without any interruption in license authority enjoyed by such [DMP], be automatically substituted for and supersede any existing compulsory license,’’ the Office agrees with the DLC that clarification may be helpful.56 In general, because a compliant notice of license is a condition to ‘‘obtain’’ a blanket license, a notice of license in the first instance that has been finally rejected (i.e., where the alleged deficiency is not cured within the relative period and/or the rejection overruled by an appropriate district court) by the MLC would seem to never take effect.57 In the case of a defective notice of license submitted in connection with a DMP’s transition from existing compulsory license(s) to the blanket license, however, because the blanket license is ‘‘automatically substituted,’’ a finally rejected notice of license may be more akin to a default, which would begin after the resolution of the notice and cure period or any follow-on litigation challenging the MLC’s final decision to reject the notice of license, provided the blanket licensee meets the blanket license’s other required terms. 2. Notices of Nonblanket Activity The proposed regulations for notices of nonblanket activity (‘‘NNBAs’’) from SNBLs generally mirror the requirements for NOLs, with 55 DLC NPRM Comment at 2. U.S.C. 115(d)(9)(A). 57 See id. at 115(d)(2)(A) (detailing procedure for obtaining blanket license, including specifying requirements for rejection of license and the operation of a related notice and cure period). 56 17 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 conforming adjustments reflecting appropriate distinctions between the two types of notices. The DLC submitted comments regarding the description of the DMP and its covered activities and the harmless error rule that mirror its suggestions for these two issues for NOLs. For the same reasons discussed above, the Office incorporates the DLC’s proposed changes into the interim rule. B. Data Collection and Delivery Efforts While the MLC is ultimately tasked with matching musical works to sound recordings embodying those works and identifying and locating the copyright owners of those works (and shares thereof), DMPs and musical work copyright owners also have certain obligations under the MMA to engage in data collection efforts. The Office proposed regulations related to the obligations of both sets of parties, discussed in turn below. 1. Efforts by Digital Music Providers The MMA requires DMPs to ‘‘engage in good-faith, commercially reasonable efforts to obtain from sound recording copyright owners and other licensors of sound recordings’’ certain data about sound recordings and musical works.58 A DMP that fails to fulfill this obligation may be in default of the blanket license if, after being served written notice by the MLC, it refuses to cure its noncompliance within 60 days.59 The NPRM proposed a minimum set of acts that would be a part of good-faith, commercially reasonable efforts under the MMA. These acts would have included requesting in writing ‘‘from sound recording copyright owners and other licensors of sound recordings’’ specific information about the sound recordings and underlying musical works that it had not previously obtained on an ongoing basis, at least once per quarter.60 For information that a DMP has already obtained, the rule proposed an ongoing and continuous obligation to request any updates from owners or licensors.61 Alternatively, the proposed rule permitted DMPs to satisfy their obligations to obtain the desired information from sound recording copyright owners and other licensors by arranging for the MLC to receive this information from an authoritative source of such information, such as SoundExchange, unless the DMP has actual knowledge that the source lacks such information for the relevant 58 Id. at 115(d)(4)(B). at 115(d)(4)(E)(i)(V). 60 85 FR at 22524. The information required to be collected by the NPRM mirrored the information enumerated in 17 U.S.C. 115(d)(4)(B). 61 Id. at 22524, 22540. 59 Id. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations work.62 The NPRM noted the relationship between data collection efforts by DMPs and reports of usage. Because of this, some issues raised during this proceeding are relevant to both provisions. One such issue is the reporting by DMPs of sound recording metadata that has been altered by DMPs for normalization and display purposes. This issue is discussed below in the section on reports of usage. In addition to comments from parties on various aspects of this issue, the MLC and DLC both proposed regulatory text.63 Several commenters expressed their support for the general approach taken by the NPRM. They include representatives of the sound recording copyright owner community, who disagreed with calls for more robust obligations. ARM agreed specifically with the NPRM’s approach of not imposing a requirement for DMPs to contractually require sound recording copyright owners to provide DMPs with the information required by regulations, opining that such a requirement ‘‘run[s] counter to the statute.’’ 64 The Recording Academy also supported the approach outlined in the NPRM, calling it a ‘‘balanced process.’’ 65 Others advanced alternative proposals to the obligations provided in the NPRM. The MLC urged stronger obligations on the part of DMPs to obtain sound recording information, saying the NPRM ‘‘read[s] the requirement to make such efforts out of the statute, substituting a plain request for information, with no true affirmative steps to achieve the MMA’s required efforts to ‘obtain’ the data.’’ 66 The MLC proposed revisions to the regulatory language in accordance with its position; these included ‘‘[s]pecificity in correspondence,’’ ‘‘[t]argeted followup,’’ ‘‘[r]eporting on efforts,’’ ‘‘[r]eporting on failures,’’ ‘‘[c]ertification of compliance,’’ and ‘‘[e]nforcement.’’ 67 It also called for a most-favored-nationtype provision that would require that ‘‘a DMP shall undertake no lesser efforts to obtain the [applicable] metadata . . . than it has undertaken to obtain any other sound recording or musical work information from such sound recording copyright owners or licensors,’’ arguing 62 Id. at 22524–25, 22540. NPRM Comment Add. at A–9–A–10; MLC NPRM Comment App. B. 64 ARM NPRM Comment at 2. See also 85 FR 22518 at 22524 (concluding that ‘‘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’’). 65 Recording Academy NPRM Comment at 1–2. 66 MLC NPRM Comment at 8. 67 Id. at 10–11; see MLC Reply NOI Comment App. B at 7–8. jbell on DSKJLSW7X2PROD with RULES2 63 DLC VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 that ‘‘[r]egardless of the differences among DMPs, every DMP can undertake the same level of efforts [for the statutory data collection requirement] that it has undertaken to obtain other metadata from the same licensors where it desired such data for its own business purposes.’’ 68 The music publishing community generally echoed the position of the MLC on this issue and called for greater obligations on DMPs to provide sound recording and musical work information to the MLC.69 The DLC agreed with the general approach of the NPRM but offered some amendments. Several concerned the collection and reporting of unaltered sound recording or musical work data and are addressed below in the section on reports of usage. The DLC asked the Office to clarify that ‘‘a digital music provider can satisfy the ‘good-faith, commercially reasonable efforts’ standard by relying on’’ a data feed of metadata that it receives from a record label or distributor, ‘‘and is not obligated to manually incorporate additional data that it may happen to receive through other means, such as through emails,’’ since doing so would be ‘‘inefficient and time-consuming.’’ 70 While, as noted, ARM was supportive of the NPRM’s rejection of any obligations for DMPs to contractually require information from sound recording copyright owners, it ‘‘strongly oppose[d]’’ the requirement for DMPs to request metadata from sound recording copyright owners on a quarterly basis.71 It noted that the major record labels already provide regular metadata feeds to DMPs, which ‘‘include weekly delivery of the sound recording metadata that accompanies that week’s new releases and real-time updates and corrections to previously provided sound recording metadata.’’ 72 ARM argued, ‘‘[g]iven the comprehensiveness, frequency and immediacy of the record companies’ metadata updates, the proposal to have DMPs request quarterly and other ad hoc updates from sound recording copyright owners is nothing more than makework.’’ 73 Good-faith efforts. The Office has adjusted the interim rule based on public feedback. First, no commenter supported the Office’s proposal regarding quarterly written requests for sound recording and 68 MLC NPRM Comment at 11–12. 69 NMPA NPRM Comment at 3–4; Association of Independent Music Publishers (‘‘AIMP’’) NPRM Comment at 3–4; PeerMusic NPRM Comment at 3– 4. 70 DLC NPRM Comment at 7. 71 ARM NPRM Comment at 7. 72 Id. 73 Id. at 8. PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 58119 musical work information. The rule adopts a more flexible requirement that such efforts be taken ‘‘periodically,’’ rather than specifying the period. Adopting some of the MLC’s proposals, the interim rule requires such efforts to be ‘‘specific and targeted’’ toward obtaining any missing information. DMPs are also required to solicit updates of any previously obtained information if requested by the MLC and keep the MLC ‘‘reasonably informed’’ of all data collection efforts. Finally, the interim rule retains the requirement from the proposed rule that DMPs certify to their compliance with these obligations as part of their reports of usage, but the Office does not find it necessary to adopt the additional certification requirement proposed by the MLC. The certification language adopted as proposed in the NPRM is based in part on the MLC’s comments to the September NOI.74 As with the approach taken in the NPRM, the interim rule establishes a floor for what constitutes good-faith, commercially reasonable efforts.75 Each DMP will have to decide based on its own circumstances whether the statute requires it to undertake efforts going beyond this floor.76 The DLC has previously endorsed such an approach, saying the statute is sufficiently specific as to a DMP’s data collection obligations so as to make additional regulatory guidance unnecessary.77 Although it has eliminated the quarterly reporting requirement in favor of a ‘‘periodic’’ standard, the Office finds ARM’s characterization of the provision as ‘‘makework’’ to be somewhat of an overstatement. While it may be that in many cases, particularly involving more sophisticated sound recording copyright owners or licensors, such requests could yield little or no new information not already provided to DMPs, the record does not establish the futility of such requests across the board. The DLC noted that there are instances where DMPs do request and receive additional metadata from sound recording copyright owners—it explained that, for example, ‘‘record labels sometimes provide blank fields’’ for some of the data types DMPs are required to report to the MLC, and ‘‘DMPs may leave that metadata as is, 74 MLC Reply NOI Comment App. at 8. FR at 22524. 76 See id. (observing what constitutes appropriate efforts under the statute). 77 DLC Initial NOI Comment at 3 (‘‘Finally, we do not believe any rulemaking is necessary or appropriate with respect to data collection efforts by licensees. The MMA already has specific requirements that do not need to be supplemented by regulation.’’). 75 85 E:\FR\FM\17SER2.SGM 17SER2 58120 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 or, in order to satisfy the ingestion requirements of their particular systems, may fill in the blanks based on their own research or ask the label to redeliver a more complete set of metadata.’’ 78 Moreover, the statutory provisions on data collection efforts would largely be rendered superfluous if DMPs had no obligations beyond merely passing through what sound recording and musical work information they received from sound recording copyright owners in the ordinary course of business. Congress clearly envisioned that additional efforts would play some role in obtaining data, otherwise it would not have included the provision. Thus, the Office declines to adopt the DLC’s proposed clarification that would limit DMPs’ obligations to providing just the data it receives from a record label feed. The Office again declines to mandate that DMPs require delivery of information from sound recording copyright owners and licensors through contractual or other means for the same reasons identified in the NPRM.79 The Office does, however, presume that at least some DMPs and sound recording copyright owners may include such data delivery obligations in subsequent contracts even absent a regulatory requirement. DMPs have an incentive to ensure they are fulfilling their data collection obligations, and labels are also incentivized to ensure accurate and robust metadata accompanies the licensing and use of their recordings. Relatedly, the Office declines to adopt the most-favored-nation provision proposed by the MLC (and supported by NMPA). In some cases, DMPs may have entered into licensing agreements with sound recording copyright owners that require the provision of sound recording or musical work information; a mostfavored-nation provision would under those circumstances obligate DMPs to contractually require other sound recording copyright owners to provide such information or alter existing agreements, a requirement that the Office has previously rejected.80 78 DLC Letter July 13, 2020 at 7 (emphasis added). The DLC added, by way of example, ‘‘MediaNet’s platform requires certain metadata fields to be present in order to ingest the content itself. MediaNet therefore must fill in the blanks for those data types, either through one-off research or seeking redelivery from the relevant record label.’’ Id. at 7 n.10. 79 85 FR at 22524. The Office explained that ‘‘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.’’ Id. 80 As noted in the NPRM, the Office ‘‘is wary of proposals mandating DMPs to require delivery of information from sound recording copyright owners VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 Finally, the MLC highlighted what it considered a ‘‘circularity’’ in the data collection requirements.81 It observed that while the regulations obligate DMPs to obtain sound recording information that is required by the Office to be included in reports of usage, the reports of usage regulations do not ‘‘strictly require’’ many items to be reported by DMPs.82 The MLC argued that the result of this circularity would ‘‘render null’’ the obligation to make efforts to obtain sound recording information by DMPs.83 This was not the Office’s intent, and to address the MLC’s concerns, the interim rule clarifies that the required categories of information to which DMP data collection obligations apply are without regard to any limitations that may apply to the reporting of such information in reports of usage.84 SoundExchange option. The interim rule retains the proposed ability for DMPs to alternatively satisfy their data collection obligations by arranging for the MLC to receive the required information from an authoritative source of information provided by sound recording copyright owners and other licensors, such as SoundExchange. As the Office noted in its NPRM, ‘‘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.’’ 85 SoundExchange in particular has assembled a large set of data due to its administration of the section 114 license, and since July 22, 2020, has been designated as the authoritative source of ISRC data in the United States.86 The proposal drew support from a number of commenters; 87 no one, including the MLC, objected to this provision. Both the DLC and MLC suggested amendments to this option. The DLC proposed language to clarify that the proposed knowledge standard meant ‘‘actual knowledge’’ and that the provision does not require ‘‘DMPs to affirmatively engage in a track-by-track assessment of whether a particular sound recording is or is not in the SoundExchange database.’’ 88 The MLC essentially seeks the opposite, that a DMP should only be able to use this option where it affirmatively knows that the third-party data source has the relevant information for the relevant recording.89 The MLC expressed concern that without prematching by a DMP of its library to a third-party database, the job of cross-matching DMP feeds with third-party data would fall on the MLC itself, a project of large scope and scale that it asserts is outside the MLC’s core responsibilities.90 In addition, the MLC noted ‘‘even a source such a[s] SoundExchange does not have data for all of the sound recordings that any particular DMP may stream (as a reminder of scale, even 99 percent coverage of a 50 million track catalog leaves 500,000 tracks not covered).’’ It also suggested that the SoundExchange database lacked corresponding musical work metadata for sound recordings in its database,91 although the MLC subsequently stated that it intends to populate the public database with information from musical works copyright owners, and rely on the same data for matching.92 In balancing these interests, the Office is mindful that a main goal underlying the data collection provision is to ensure the MLC is receiving adequate and accurate data to assist in the core task of matching musical works and their owners to the sound recordings that are reported by DMPs, ultimately leading to musical work copyright and licensors through contractual or other means.’’ See id. 81 MLC NPRM Comment at 15–17. 82 Id. at 15–16. 83 Id. at 16. 84 The interim rule also explicitly cross-references the relevant categories of information listed in the report of usage provision rather than enumerating a separate list for collection efforts. 85 85 FR at 22524. 86 SoundExchange Ex Parte Letter July 24, 2020 at 1; SoundExchange Ex Parte Letter Sept. 1, 2020, at 2; ARM Ex Parte Letter July 27, 2020 at 2 (citing RIAA, RIAA Designates SoundExchange as Authoritative Source of ISRC Data in the United States (July 22, 2020), https://www.riaa.com/riaadesignates-soundexchange-as-authoritative-sourceof-isrc-data-in-the-united-states/; see also SoundExchange Initial NOI Comment at 2–3. 87 ARM NPRM Comment at 2; Recording Academy NPRM Comment at 1–2; DLC NPRM Comment at 7 (‘‘In general, DLC appreciates the Office’s decision to create this option for DMPs to satisfy their data collection obligations’’). 88 DLC NPRM Comment at 8. 89 MLC NPRM Comment at 14–15, App. at viii. 90 Id. at 13–15. 91 Id. at 14. Compare ARM NPRM Comment at 9 (describing the Music Data Exchange (‘‘MDX’’) system operated by SoundExchange, stating it is ‘‘a central ‘portal’ that facilitates the exchange of sound recording and publishing data between record labels and music publishers for new releases and establishes a sound recording-musical work link’’ and ‘‘a far more efficient source of musical work data for new releases than any metadata various DMPs are likely to receive . . . from the record companies’’). 92 See MLC Ex Parte Letter Aug. 21, 2020 at 2 (‘‘For musical works information, the MLC maintains that it ‘‘will be sourced from copyright owners.’’). PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations owners receiving the royalties to which they are entitled. The Office acknowledges what it understands to be the MLC’s position, that DMPs should be sufficiently motivated to engage in data collection efforts for those edge cases that may not appear in a thirdparty database, as well as the MLC’s concern that the proposed language ‘‘might be misread to imply that, as long as a DMP remains ignorant of exactly which particular sound recordings are not covered by the third party, it can use an incomplete resource to substitute for complete efforts.’’ 93 At the same time, however the Office is reluctant to accept the MLC’s proposal that DMPs must prematch their libraries against a thirdparty database to take advantage of this option, as it seems to go so far as to make this option, one that might seemingly aid the MLC as well as individual DMPs, impractical from a DMP perspective.94 The Office has therefore adjusted the proposed rule. Under the interim rule, a DMP can satisfy its obligations under this provision by arranging for the MLC to receive the required information from an authoritative source of sound recording information, unless it either has actual knowledge that the source lacks such information as to the relevant sound recording or a set of sound recordings, or has been notified about the lack of information by the source, the MLC, or a copyright owner, licensor, or author (or their respective representatives, including by an administrator or a collective management organization) of the relevant sound recording or underlying musical work. The introduction of this notification provision establishes a mechanism for the MLC or others who are similarly incentivized to identify those gaps. Moreover, for a DMP to use this option, its arrangement with the third-party data source must require that source to report such gaps as are known to it. The Office notes that this provision applies not only to gaps as to specific sound recordings but also gaps as to specific data fields for sound recordings, specific labels and distributors, and specific categories of sound recordings, such as those from missing or underrepresented genres or countries of origin. This approach is intended to empower the MLC and others to notify DMPs regarding areas where it believes the data may fall short, in service of the statutory obligation for each DMP to engage in good faith efforts to obtain this additional data. 93 See 94 See MLC NPRM Comment at 14. DLC NPRM Comment at 8. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 2. Efforts by Copyright Owners The MMA requires musical work copyright owners whose works are listed in the MLC’s public database to ‘‘engage in commercially reasonable efforts to deliver to the mechanical licensing collective, [] 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.’’ 95 Many commenters speaking to the issue of musical work copyright owner efforts contended that the proposed rule’s requirements were too onerous.96 The Office did not intend for this aspect of the proposed rule to impose a significantly greater burden on musical work copyright owners than the statute already prescribes.97 The proposed obligation to ‘‘monitor[] the musical works database for missing and inaccurate sound recording information relating to applicable musical works’’ was not meant to require copyright owners to regularly review the entirety of the MLC’s database. And while the MLC and others criticize the proposed reference to provision of information within the copyright owner’s ‘‘possession, custody, or control,’’ 98 that language came from the MLC’s comments.99 Further, the provision referring to delivery to the MLC ‘‘by any 95 17 U.S.C. 115(d)(3)(E)(iv). e.g., MLC NPRM Comment at 18–20; Nashville Songwriters Association International (‘‘NSAI’’) NPRM Comment at 4; NMPA NPRM Comment at 5–6; Peermusic NPRM Comment at 4; Songwriters Guild of America, Inc. (‘‘SGA’’) NPRM Comment at 2–3. But see Recording Academy NPRM Comment at 2 (‘‘appreciat[ing] the consideration the Office shows for independent and self-published songwriters who could be vulnerable to overly burdensome requirements and regulations,’’ and stating that the ‘‘proposal to adopt a minimal floor requirement is a fair approach, and strikes a proper balance to avoid instituting an undue burden for independent and self-published songwriters’’). Regarding SGA’s proposal that the MLC have a ‘‘parallel requirement . . . to utilize best efforts to provide adequate hands-on help, technical guidance and active assistance to all Copyright Owners in order to prompt the highest achievable level of compliance,’’ SGA NPRM Comment at 2, that is beyond the scope of this proceeding, but the MLC’s duties are addressed elsewhere in the statute and potentially germane to the Office’s ongoing Unclaimed Royalties Study. See, e.g., 17 U.S.C. 115(d)(3)(J)(iii)(II)(bb); 85 FR at 33735. 97 See 85 FR at 22526 (‘‘[T]he Office proposes to codify a minimal floor requirement that should not unduly burden less-sophisticated musical work copyright owners.’’). 98 See MLC NPRM Comment at 12 n.4, 19; NMPA NPRM Comment at 5. 99 See MLC Reply NOI Comment at 12 (‘‘[U]nder the MLC’s proposal, the musical work copyright owners would be required to provide the sound recording information they actually have in their possession, custody, or control.’’). 96 See, PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 58121 means reasonably available to the copyright owner’’ was not meant to compel delivery by any means reasonably available, but rather permit delivery by any such means of the owner’s choosing. Nevertheless, given the comments, the Office is amenable to clarification and acknowledges that under the statute, copyright owners are already incentivized to provide this information to the MLC to help ensure their works are matched and that they receive full and proper royalty payments.100 Indeed, copyright owners are further incentivized to ensure that the MLC has much greater information, such as about their identity, location, and musical works, than just the sound recording information required by 17 U.S.C. 115(d)(3)(E)(iv) and addressed by this aspect of the proposed rule. Consequently, the Office believes it is reasonable for the interim rule to track the MLC’s proposed language, under which musical work copyright owners should provide the applicable sound recording information to the extent the owner has the information and becomes aware that it is missing from the MLC’s database.101 Regarding the information required to be delivered, the Office again declines the DLC’s request to require provision of performing rights organization information.102 Assuming arguendo that the DLC is correct that such a requirement is within the Office’s authority to compel, the current record does not indicate that such information is sufficiently relevant to the MLC’s matching efforts or the mechanical licensing of musical works so as to persuade the Office to require it to be provided at this time.103 The MLC, of course, may permissively accept such information, although the MMA explicitly restricts the MLC from licensing performance rights.104 C. Reports of Usage and Payment— Digital Music Providers Commenters raised a number of issues related to the NPRM’s provisions covering the form, content, delivery, certification, and adjustment of reports of usage and payment, as well as requirements under which records of 100 See MLC NPRM Comment at 19 & n.8; NMPA NPRM Comment at 5–6; NSAI NPRM Comment at 4; SoundExchange NPRM Comment at 4. 101 See MLC NPRM Comment App. at viii–ix. 102 See DLC NPRM Comment at 8–9; see also 85 FR at 22526. 103 See, e.g., Recording Academy NPRM Comment at 3 (‘‘[P]erformance rights organization information is not relevant data.’’); DLC Initial NOI Comment at 20; MLC Reply NOI Comment at 36. 104 See 17 U.S.C. 115(d)(3)(C)(ii)–(iii). E:\FR\FM\17SER2.SGM 17SER2 58122 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations use must be maintained and made available to the MLC by DMPs. 1. Content of Monthly Reports of Usage i. Royalty Pool Calculation Information The MLC proposed that the language regarding usage reporting be ‘‘amended to expressly reference royalty pool information’’ to provide what it says is needed clarity.105 The Office has considered this request but does not currently believe the added language is necessary. Based on its comments, the MLC seems to be referring to the topline payable royalty pool calculation inputs, such as service provider revenue, total cost of content, performance royalties, and user/ subscriber counts.106 DMPs are already required to report these inputs to the extent they are 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.’’ 107 ii. Sound Recording and Musical Work Information The interim rule retains the same three tiers of sound recording and musical work information proposed in the NPRM, with some modifications to certain categories of information discussed below.108 The DLC does not propose eliminating any of the proposed categories 109 and the MLC states that ‘‘[a]ll of the metadata fields proposed in § 210.27(e)(1) will be used as part of the MLC’s matching efforts.’’ 110 Other commenters concur, including the Recording Academy, which agrees that the ‘‘proposed tiers of information for sound recordings is an accurate interpretation of the statute, identifies a simple and standardized process for the DMPs to follow, and will help improve matching and minimize instances of unclaimed royalties.’’ 111 While ARM 105 MLC NPRM Comment at 40–41. at 40; see also 37 CFR 385.21–385.22. 107 Interim rule at section 210.27(d)(1)(i). For similar reasons, the Office is not amending section 210.27(d)(1)(ii), to which the MLC proposed adding the same language. 108 See 85 FR at 22530–32, 22541–42. 109 DLC NPRM Comment Add. at A–15–16. 110 MLC Letter July 13, 2020 at 7. 111 Recording Academy NPRM Comment at 2 (‘‘[T]he Academy appreciates and concurs with the Office’s proposal to include certain additional data fields that will prove beneficial in the matching efforts.’’); see, e.g., SONA & MAC NPRM Comment at 2, 6 (‘‘Additional data fields proposed to be added by the Office . . . will also play a critical role in identification and matching efforts.’’). The Office declines SONA & MAC’s request ‘‘to elevate [the second and third tiers of information] to the first tier of mandatory information.’’ See SONA & MAC NPRM Comment at 6–7. Much of the second and third tier information is enumerated in the jbell on DSKJLSW7X2PROD with RULES2 106 Id. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 questions the value of certain categories of information, and seeks to confirm that sound recording copyright owners are not obligated to provide DMPs with data outside of the regular digital supply chain, ARM does not ultimately oppose their inclusion in the rule.112 As discussed above, although the statute does not place any affirmative obligation on sound recording copyright owners to provide data, it does establish a framework whereby DMPs must engage in appropriate efforts to obtain sound recording and musical work information from sound recording copyright owners that such owners may not have otherwise provided to DMPs. iii. Playing Time During the course of the proceeding it came to light that the playing time reported to DMPs by sound recording copyright owners may not always be accurate.113 Having accurate playing time is critical because it can have a bearing on the computation of royalties.114 Therefore, in accord with the positions of both the MLC and DLC, the interim rule makes clear that DMPs must report the actual playing time as measured from the sound recording audio file itself.115 iv. Release Dates The proposed rule would require provision of ‘‘release date(s)’’ and the NPRM invited comment as to whether this proposed requirement should be explicitly limited to reporting only release years instead.116 While ARM and the Recording Academy suggested that release years alone are sufficient,117 FMC contends that it can be useful to have full dates ‘‘[b]ecause it’s not uncommon for multiple versions of a statute, which expressly states that it be provided ‘‘to the extent acquired.’’ See 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa)–(bb); see also 85 FR at 22531 (rejecting a similar request from the MLC). 112 See ARM NPRM Comment at 9, 11. The Office disagrees with ARM’s suggestion to delete the requirement that DMPs report ‘‘[o]ther information commonly used in the industry to identify sound recordings and match them to the musical works the sound recordings embody.’’ See id. at 9. That requirement is enumerated in the statute. 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa). 113 ARM NPRM Comment at 6–7; DLC Letter July 13, 2020 at 4, 7; DLC Ex Parte Letter July 24, 2020 at 4. 114 See 37 CFR 385.11(a), 385.21(c). 115 See DLC Ex Parte Letter July 24, 2020 at 4 n.12 (‘‘DLC would not oppose a requirement to report, in all instances, the playing time value based on the processing of the actual sound recording file, rather than the value reported by the label.’’); MLC Ex Parte Letter July 24, 2020 at 9 (‘‘Playing Time could be reported either as the unaltered version or as calculated automatically based upon an analysis of the audio file being streamed.’’). 116 See 85 FR at 22525, 22541. 117 ARM NPRM Comment at 7; Recording Academy NPRM Comment at 2–3. PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 track to be released within the same calendar year’’ and it ‘‘would help distinguish between the versions to ensure the right publishers and songwriters are compensated if there is any ambiguity, or if other data fields are missing for any reason.’’ 118 The MLC and DLC did not comment on this issue.119 Based on the current record, the Office is not convinced that the requirement should be explicitly limited to only the release year, and has adopted the language as proposed. v. Sound Recording Copyright Owners The NPRM proposed that DMPs may satisfy their obligations to report sound recording copyright owner information by reporting three DDEX fields identified by the American Association of Independent Music (‘‘A2IM’’) & the Recording Industry Association of America (‘‘RIAA’’) as fields that may provide indicia relevant to determining sound recording copyright ownership 120 (to the extent such data is provided to DMPs by sound recording copyright owners or licensors): DDEX Party Identifier (DPID), LabelName, and PLine.121 In response, the MLC, DLC, and DDEX express concern with using DPID, with DDEX explaining that ‘‘although a unique identifier and in relevant instances an identifier of ‘record companies,’ [DPID] does not identify sound recording copyright owners,’’ but rather ‘‘only identifies the sender and recipient of a DDEX formatted message and, in certain circumstances, the party that the message is being sent on behalf of.’’ 122 DDEX further states that ‘‘[i]n the vast majority of cases . . . the DPIDs . . . will not be attempting to identify the copyright owner of the sound recordings.’’ 123 The MLC agrees, explaining that DPID ‘‘does not identify sound recording copyright owner, but rather, the sender and/or recipient of a DDEX-formatted message.’’ 124 ARM 118 FMC NPRM Comment at 2–3. DLC NPRM Comment Add. at A–15; MLC NPRM Comment App. at xv. 120 During the proceeding, RIAA submitted comments both individually and jointly with other commenters, including with A2IM. A2IM and the RIAA also submitted comments together under the name of an organization called the Alliance for Recorded Music (‘‘ARM’’). References herein are to the name used in each respective comment (e.g., ‘‘RIAA,’’ ‘‘A2IM & RIAA,’’ ‘‘ARM,’’ etc.). 121 85 FR at 22532, 22542. 122 Digital Data Exchange, LLC (‘‘DDEX’’) NPRM Comment at 2; see DLC Letter July 13, 2020 at 10– 11; DLC Ex Parte Letter July 24, 2020 at 5 n.15; MLC Ex Parte Letter July 24, 2020; see also A2IM & RIAA Reply NOI Comment at 8–9, 11. 123 DDEX NPRM Comment at 2. 124 MLC NOI Comment at 13, U.S. Copyright Office Dkt. No. 2020–8, available at https:// beta.regulations.gov/document/COLC-2020-00060001. 119 See E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations does not dispute this position, but suggests that DPID should nonetheless be retained because its inclusion in the public musical works database ‘‘will be useful to members of the public who are looking for a [sound recording] licensing contact.’’ 125 By contrast, the DLC contends that DPID ‘‘is not a highly valuable data field,’’ and that the burden of converting DPID numerical codes into parties’ names (to address ARM’s concern about displaying the numerical identifier) outweighs ‘‘the benefit that would accrue from requiring DMPs to convert DPID numerical codes into parties’ names.’’ 126 Having considered these comments, it seems that DPID may not have a strong connection to the MLC’s matching efforts or the mechanical licensing of musical works. In light of this, and the commenters’ concerns, the Office declines at this time to require DMPs to report DPID, although they are not precluded from reporting it. In concurrent rulemakings, the Office is separately considering related comments regarding the display of information provided through fields relevant to the statutory references to ‘‘sound recording copyright owners’’ in the public musical works database and in royalty statements provided to copyright owners.127 vi. Audio Access jbell on DSKJLSW7X2PROD with RULES2 The NPRM proposed requiring DMPs to report 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 125 ARM Ex Parte Letter July 27, 2020 at 4. ARM does not object to including the DPID party’s name in the public musical works database, but does ‘‘object to the numerical identifier being disclosed, as the list of assigned DPID numbers is not public and disclosing individual numbers (and/or the complete list of numbers) could have unintended consequences.’’ ARM NPRM Comments at 10, U.S. Copyright Office Dkt. No. 2020–5, available at https://beta.regulations.gov/document/COLC-20200005-0001. 126 DLC Letter July 13, 2020 at 10 (stating that while converting the DPID numerical code into the party’s actual name for reporting purposes ‘‘is conceptually possible’’ for DMPs, ‘‘it would require at least a substantial effort for some services’’ (around one year of development), and ‘‘would be an impracticable burden for some others’’). 127 See, e.g., RIAA Initial NOI Comment at 2–3; A2IM & RIAA Reply NOI Comment at 8–10; ARM NOI Comment at 4, U.S. Copyright Office Dkt. No. 2020–8, available at https://beta.regulations.gov/ document/COLC-2020-0006-0001; see also U.S. Copyright Office, Notice of Proposed Rulemaking, The Public Musical Works Database and Transparency of the Mechanical Licensing Collective, Dkt. No. 2020–8, published elsewhere in this issue of the Federal Register; U.S. Copyright Office, Interim Rule, Royalty Reporting and Distribution Obligations of the Mechanical Licensing Collective, Dkt. No. 2020–6, published elsewhere in this issue of the Federal Register. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 service.128 In doing so, the NPRM adopted the DLC’s proposal that DMPs provide these in lieu of the audio links the MLC had requested.129 The NPRM described the dispute on this point, and noted that ‘‘while the [MLC’s] planned inclusion of audio links [in its claiming portal] 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.’’ 130 The Office concluded that it ‘‘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.’’ 131 Despite the Office’s encouragement, this issue has not yet been resolved, although the parties provided additional information underlying their respective positions. The MLC maintains that audio links should be included in monthly reports of usage, stating they are ‘‘a critical tool for addressing the toughest of the unmatched.’’ 132 The MLC states that it does not seek to host any copies of the audio on its own servers but rather link to audio files residing on the DMPs’ respective servers; it further proposes to limit audio access to registered users of its password-protected claiming portal, to provide audio only for unmatched uses, and to limit access to 30-second previews or samples of the audio.133 NSAI, SONA & MAC, and the MLC Unclaimed Royalties Oversight Committee also submitted comments discussing the importance of audio access in identifying unmatched works.134 NSAI, for example, reiterates 128 85 FR at 22530–31, 22541. at 22530–31. The Office understands that an audio link is a unique identifier, but not necessarily the other way around, as some services use different types of unique identifiers, such as numbers or codes rather than links, which can be used within a platform to access a given recording. 130 Id. at 22531. 131 Id. 132 MLC NPRM Comment at 39–40. 133 Id. at 39–40, 39 n.12, App. at xiv. 134 NSAI NPRM Comment at 4–5 (‘‘The most difficult sound recordings to match will be those that have substantially missing or inaccurate metadata. In these situations, there may be no other 129 Id. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 58123 a concern previously raised by the MLC that songwriters may need to purchase subscriptions to the majority of the DMPs’ services to be able to actually use the proposed unique identifiers to listen to the audio.135 The DLC’s comments to the NPRM do not address this issue, although it reported separate engagement on the subject with the MLC.136 ARM supports the use of unique identifiers instead of links, but does not object to links ‘‘to the extent that the MLC seeks the audio links solely for inclusion in its private, password-protected claiming portal in order to assist musical work copyright owners in identifying and claiming their works,’’ and ‘‘provided that the links take the user to the DMPs, that no audio files reside on the MLC’s servers and that links are only provided for unmatched works.’’ 137 ARM seeks to ensure that the MLC’s portal and database do not become ‘‘a free online jukebox that competes with DMPs.’’ 138 In light of these comments, to help progress the rulemaking, the Office sent a letter to these parties seeking additional information and responses to specific questions on this issue.139 The Office then held an ex parte meeting with these commenters to further discuss the matter, which was followed up with additional written submissions.140 These efforts revealed further details concerning how the MLC intends to use sound recording audio obtained through DMP reporting and the obstacles DMPs face in accommodating what the MLC seeks. For example, the MLC confirms that it does not intend to make or host any copies of such sound recordings, or use audio access to undertake matching efforts involving digital fingerprinting possible way to make a match except through the audio.’’); SONA & MAC NPRM Comment at 7–8; MLC Unclaimed Royalties Oversight Committee NPRM Comment at 2–5 (‘‘[A] readily available audio reference is the easiest, most reliable and transparent way to confirm ownership of a song.’’). 135 NSAI NPRM Comment at 5; see MLC Ex Parte Letter Apr. 3, 2020 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.’’). 136 DLC Letter June 15, 2020 at 1. 137 ARM NPRM Comment at 3. 138 Id. 139 U.S. Copyright Office Letter June 8, 2020; see DLC Letter June 15, 2020; MLC Letter June 15, 2020; MLC Unclaimed Royalties Oversight Committee Letter June 15, 2020. 140 See DLC Ex Parte Letter June 23, 2020; MLC Ex Parte Letter June 23, 2020; MLC Unclaimed Royalties Oversight Committee Ex Parte Letter June 23, 2020; MAC Ex Parte Letter June 23, 2020; NSAI Ex Parte Letter June 24, 2020; RIAA Ex Parte Letter June 22, 2020; SONA Ex Parte Letter June 23, 2020; DLC Letter July 8, 2020; MLC Letter July 8, 2020; RIAA Letter July 8, 2020. E:\FR\FM\17SER2.SGM 17SER2 58124 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 analysis (though the MLC says it ‘‘will explore a more systematic and direct process’’ for utilizing audio content analysis to help reduce the incidence of unmatched works).141 It appears to the Office that what the MLC essentially wants is for its claiming portal to have an embedded player (or something similar) where, even though the audio files still reside with the DMPs, portal users would be able to listen to the audio directly within the portal environment without having to link out or navigate away to each DMP’s service.142 The DLC raises numerous concerns with what the MLC seeks, which it summarizes as ‘‘three main problems, which are interrelated: (1) The use case for the audio links is overly vague and requires better definition and development; (2) there are significant licensing issues impacting (and currently, prohibiting) the MLC from streaming music or the DMPs from streaming music outside of their services; and (3) there are significant technological challenges that make the MLC’s proposal unripe for regulation, and in some instances would likely render it cost-prohibitive.’’ 143 Notably, the DLC asserts that while ‘‘[a]ll DLC members use unique identifiers for tracks,’’ 144 ‘‘[t]he idea of a persistent, clickable ‘audio link’ to be used as the MLC describes simply does not exist today.’’ 145 The RIAA also expresses concern over licensing issues, as well as content protection, and states that the ‘‘simplest approach is to have DMPs provide web links that take portal users directly to the referenced track or parent album on the DMP’s service.’’ 146 141 MLC Letter June 15, 2020 at 6–7; MLC Ex Parte Letter June 23, 2020 at 2; see also SONA & MAC NPRM Comment at 7–8 (‘‘[T]he ability to employ ‘fingerprinting’ technology to compare unidentified audio files to known sound recordings would augment and improve matching and claiming efforts.’’). 142 See MLC Ex Parte Letter June 23, 2020 at 2– 3; MLC Letter June 15, 2020 at 5–6, 6 n. 5; DLC Ex Parte Letter June 23, 2020 at 2. 143 DLC Ex Parte Letter June 23, 2020 at 1–2; see also id. at 2–6; DLC Letter June 15, 2020 at 2–5. The DLC also disputes the MLC’s assertions that this has been done before in other contexts. DLC Ex Parte Letter June 23, 2020 at 2 (‘‘[T]hese claiming portals do not contain audio assets and users cannot listen to tracks directly within the portals; instead, and only in the case of certain DMP agreements, users are redirected to the DMP’s individual service, where they can listen to the track after logging in.’’); DLC Letter July 8, 2020 at 2. 144 DLC Letter June 15, 2020 at 5; see also MLC Ex Parte Letter June 23, 2020 at 2 (‘‘[A] unique DMP identifier is already reported under the DDEX DSRF standard.’’). 145 DLC Ex Parte Letter June 23, 2020 at 3. 146 RIAA Letter July 8, 2020 at 1–2 (‘‘[R]equiring every DMP to build an embedded audio player that can be incorporated into the MLC portal will mean DMP/label contract amendments and expensive service functionality changes that could introduce VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 Despite concerns with the manner in which the MLC seeks to provide portal users with audio access, the DLC agrees that the availability of audio can improve the incidence of unmatched works, and emphasizes its commitment and willingness to work on this issue further with the MLC, including through the operations advisory committee.147 The MLC concedes that unique identifiers ‘‘could be acceptable if instructions were also provided to convert the identifiers into links to provide [no-cost audio] access to portal users.’’ 148 But the MLC prefers that the Office adopt a rule specifically requiring the provision of links, even though the MLC also seems to agree that there is much left to be worked out between the MLC and the DMPs to implement such a requirement. To that end, the MLC proposes an additional provision that it says ‘‘provides a framework to support and address any audio link implementation concerns while maintaining the acknowledged imperative of reaching the goal, and also delivers flexibility by explicitly providing for the Register to adjust the commencement date for the audio link usage reporting, if appropriate, based upon [joint reporting of implementation obstacles and responsive strategies] from the MLC and DLC.’’ 149 Absent such adjustment, however, the MLC’s proposed approach would require DMPs to provide audio links in monthly reports of usage as early as the first reporting period, a condition the DLC security holes leading to piracy and loss of revenue.’’); RIAA Ex Parte Letter June 22, 2020 at 2 (‘‘[I]t would be inappropriate for the Copyright Office to issue regulations that would have the effect of mandating that certain terms be included in private marketplace deals between record companies and DMPs.’’). 147 DLC Letter June 15, 2020 at 1; DLC Ex Parte Letter June 23, 2020 at 1, 3–4, 5–6; DLC Letter July 8, 2020 at 2. 148 MLC Ex Parte Letter June 23, 2020 at 2–3 (‘‘Whatever process is used to resolve the stable DMP identifier into the audio access is the relevant process.’’); MLC Letter June 15, 2020 at 5–6, 6 n.5; see also MLC Unclaimed Royalties Oversight Committee Letter June 15, 2020 at 2 (seeking that ‘‘[r]ights holders are entitled to full & frictionless transparency, for themselves and for their clients to whom they are accountable,’’ though ‘‘defer[ring] to The MLC’s position on this from an operational perspective’’). 149 MLC Letter July 8, 2020 at 2, Ex. A. See MLC Ex Parte Letter June 23, 2020 at 2–4; see also NSAI Ex Parte Letter June 24, 2020 at 1(‘‘The USCO must mandate a set timeline and framework for DSPs to be able to provide those audio links.’’); MAC Ex Parte Letter June 23, 2020 at 2 (asking the Office ‘‘to adopt a rule requiring DMPs to provide such links even if DMPs are not able to make the audio files immediately available’’ by the license availability date, and observing that there is a ‘‘lack of agreement on how to coordinate the operationalization of these links within the MLC claiming portal’’); SONA Ex Parte Letter June 23, 2020 at 2 (same). PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 represents is not operationally possible. The DLC’s most recent submission on this issue contains information describing the degree of audio access that can be obtained using the unique identifiers assigned by each DLC member and instructions on how to use the identifiers to obtain such access.150 From this information, it appears that most tracks (or at least 30-second clips of most tracks), with relatively few exceptions, can be accessed for free through most DLC members’ services using a unique identifier, and that for most DLC members, the way the unique identifier is used is by plugging it into a URL that can be used either in the address bar of a web browser or to create a hyperlink.151 Indeed, the DLC states 150 DLC Letter July 8, 2020 Add. DLC Letter July 8, 2020 Add. For example, for Amazon, the URL formula is https:// music.amazon.com/albums/;album ID/track ID. Id. at 3. According to the DLC, and from some spottesting by the Office, it appears that the degree of audio access currently offered by each DLC member is as follows: Amazon’s unique identifiers can be converted into URLs (an album identifier and track identifier are needed) and used to locate tracks, but a subscription is required to listen to a specific track on demand. See id. at 3–4. Apple’s unique identifiers can be converted into URLs and used to locate and listen to ‘‘30-second clips of tracks . . . without a login or subscription.’’ See id. at 5–6. Google/YouTube’s unique identifiers can be converted into URLs or entered into a search bar and can be used to locate and listen to full tracks without a login or subscription, except for ‘‘[a] small percentage of content [which] requires a subscription for access (per label policy).’’ See id. at 7–9. Pandora’s unique identifiers can be converted into URLs and used to locate and listen to full tracks without a subscription by launching an adbased ‘‘Premium Session’’ within a free tier account. ‘‘In some instances, the URL navigates to a different version of the same sound recording (e.g., studio release vs. ‘best of’).’’ See id. at 10–11. Qobuz’s unique identifiers can be converted into URLs and used to locate and listen to ‘‘30-second clips of most tracks . . . without a login or subscription.’’ See id. at 12–13. SoundCloud’s unique identifiers can be converted into URLs (an artist name, song title, and track identifier are needed) and used to locate and listen to ‘‘30-second clips of most tracks . . . without a login or subscription[.] A small percentage of content is not available for 30-second clips and requires a subscription for access (per label policy).’’ See id. at 14–17. Spotify’s unique identifiers can be entered into a search bar and used to locate and listen to full tracks without a subscription by using a free tier, ad-based account. It appears that access may be more limited when using Spotify’s mobile app. Spotify’s unique identifiers can also be used to generate an embeddable player. ‘‘Certain 30-second clips may be available without logging in depending on the terms of label agreements.’’ See id. at 18–22. Tidal’s unique identifiers can be converted into URLs and used to locate and listen to ‘‘30-second clips of all tracks . . . without a login or subscription.’’ See id. at 23–25. MediaNet ‘‘does not own or operate a consumerfacing service in which playing audio tracks is 151 See E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 that the MLC ‘‘should easily be able to add functionality to convert the unique DMP identifier into a clickable URL on the portal.’’ 152 It further appears that at least one major DMP (Spotify) already offers an embeddable player that the MLC can integrate into its portal so users can listen without navigating away.153 After careful consideration of the record on this issue, the Office concludes that the proposed rule should be modified. The interim rule retains the requirement to report unique identifiers instead of audio links, but with important changes. First, the rule requires DMP-assigned unique identifiers, including unique identifiers that can be used to locate and listen to reported sound recordings, to always be reported, subject to exceptions discussed below, in contrast to the proposed rule which was limited to ‘‘if any.’’ In consideration of the importance of audio access emphasized by the MLC and others, the DLC’s agreement that audio access can improve the incidence of unmatched works, and the fact that the Office has not been made aware of any DMP that does not currently use unique identifiers for its tracks, the Office believes this to be a reasonable change that will facilitate access of audio when necessary for matching and claiming purposes.154 Second, in light of being informed that one of the DLC’s members does not operate its own consumer-facing service,155 the proposed language referring to access being through the DMP’s public-facing service has been dropped. In its place, the interim rule instead requires DMPs to provide clear instructions describing how their unique identifiers can be used to locate and listen to the reported sound recordings. This approach requires that audio access be obtainable, but flexibly allows each DMP to specify how such access may be achieved in accordance with its licensed offerings. For example, it could be by using an identifier as part of a URL or as part of a service’s search function. A DMP without its own consumer-facing service could provide instructions on how unique identifiers can be used to access audio through a service it supports, or otherwise provide possible for any purpose[.] Accordingly, MediaNet does not have a publicly accessible search function that uses unique identifiers as inputs; MediaNet utilizes unique links that are usable for a single play only.’’ See id. at 26–27. 152 DLC Letter July 8, 2020 at 1. 153 DLC Letter July 8, 2020 Add. at 18–19. 154 See DLC Letter June 15, 2020 at 5 (‘‘All DLC members use unique identifiers for tracks.’’). 155 See DLC Ex Parte Letter June 23, 2020 at 3 n.7; DLC Letter July 8, 2020 Add. at 27. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 some kind of customer service mechanism. With respect to these changes, the Office is cognizant that if a DMP’s unique identifiers cannot currently be used to obtain audio access, it may take some time for the DMP to be able to fully comply with the interim rule. Consequently, the rule includes a oneyear transition period for a DMP that is not already equipped to comply to begin reporting unique identifiers that can be used to locate and listen to sound recordings, accompanied by clear instructions describing how to do so. To make use of the transition period, the DMP will need to notify the MLC and describe any implementation obstacles. The DMP will also still need to report DMP-assigned unique identifiers generally; the transition period is only, as needed, for identifiers and instructions relating to audio access. Nothing, of course, prevents an eligible DMP from providing this information before the end of the transition period. Third, since the MLC and others 156 agree they are adequate, and the DLC states that several DMPs already provide free access to them,157 the interim rule permits DMPs, in their discretion, to limit audio access to 30-second clips. The interim rule’s updated approach is intended to better ensure that, subject to the transition period, audio can be accessed where necessary for the MLC’s duties. Based on the record, for most tracks on most DLC-member services, such access is currently available to users without a paid subscription and can be obtained using URLs, thus largely achieving what the MLC and others seek. To help ensure that current levels of access are not reduced in the future, the interim rule includes a provision restricting DMPs from imposing conditions that materially diminish the degree of access to sound recordings in relation to their potential use by the MLC or its registered users in connection with their use of the MLC’s claiming portal. For example, if a paid subscription is not required to listen to a sound recording as of the license availability date, the DMP should not later impose a subscription fee for users to access the recording through the portal. This restriction does not apply to other users or methods of accessing the DMP’s service (including the general public), if subsequent conditions resulting in diminished access are required by a relevant 156 See, e.g., NSAI Ex Parte Letter June 24, 2020 at 1 (‘‘[E]ven a 15–20 second audio clip would suffice.’’). 157 See DLC Letter July 8, 2020 Add. at 5, 12, 14, 18, 23. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 58125 licensing agreement, or where such sound recordings are no longer made available through the DMP’s service. In promulgating this aspect of the interim rule, the Office notes that the MLC, DLC, and others have suggested that further operational discussions may be fruitful. A seamless experience using embedded audio is a commendable goal worthy of further exploration, but in the meantime, where significant engineering, licensing, or other unresolved hurdles stand in the way, providing hyperlinks in the portal— which it seems can be done at present for most DLC-member services based on the record—or other identifiers that permit access to a recording appears to be a reasonable compromise.158 But to incentivize future discussions, the interim rule includes a provision, similar to the MLC’s proposal, requiring the MLC and DLC to report to the Office, over the next year or as otherwise requested, about identified implementation obstacles preventing the audio of any reported sound recording from being accessed directly or indirectly through the portal without cost to portal users, and any other obstacles to improving the experience of portal users. Such reporting should also identify an implementation strategy for addressing any identified obstacles, and any applicable progress made. The Office expects such reporting will help inform it as to whether any modifications to the interim rule prove necessary on this subject, and facilitate continued good-faith collaboration through the MLC’s operations advisory committee. Finally, the reporting should also identify any agreements between the MLC and DMPs to provide for access to relevant sound recordings for portal users through an alternate method rather than by reporting unique identifiers (e.g., separately licensed solutions). The interim rule provides that if such an alternate method is implemented pursuant to any such 158 Some commenters raised the issue of audio deduplication in the claiming portal. See DLC Ex Parte Letter June 23, 2020 at 5 (asking ‘‘whether and how the MLC’s portal would ‘de-duplicate’ files so that a user does not need to listen through the same song 10 times on 10 different services’’); RIAA Letter July 8, 2020 at 2 (‘‘[W]ill portal users be required to listen to every unidentified track on every service (which is not realistic) or does the solution leverage recording industry standard identifiers such as ISRC codes so that identifying a track once is sufficient (because the track has the same ISRC across all services).’’). The Office is addressing audio deduplication in the portal and public musical works database in a parallel rulemaking. See U.S. Copyright Office, Notice of Proposed Rulemaking, The Public Musical Works Database and Transparency of the Mechanical Licensing Collective, Dkt. No. 2020–8, published elsewhere in this issue of the Federal Register. E:\FR\FM\17SER2.SGM 17SER2 58126 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 agreement, the requirement to report identifiers and instructions to obtain audio access is lifted for the relevant DMP(s) for the duration of the agreement. The purpose of this provision is to provide flexibility for the MLC and DMPs to collaboratively find other mutually agreeable ways of ensuring relatively easy audio access to portal users seeking to identify works. vii. Altered Data One of the more contested issues in this proceeding concerns the practice of DMPs sometimes altering certain data received from sound recording copyright owners and other licensors for normalization and display purposes in their public-facing services, and whether DMPs should be permitted to report the modified data to the MLC or instead be required to report data in the original unmodified form in which it is received. The NPRM explained that: ‘‘[A]fter 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 . . . . [I]t 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.’’ 159 Ultimately, the Office explained that: ‘‘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.’’ 160 The proposed middle ground was one where altered data could be reported, but subject to what the Office believed to be meaningful limitations. The first limitation was that DMPs would have been required to report 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 159 85 160 Id. FR at 22523. at 22525. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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 second limitation was that DMPs would not have been permitted to report only modified versions of any unique identifier, playing time, or release date. The third limitation was that DMPs would not have been permitted to report only modified versions of information belonging to categories that the DMP was not periodically altering prior to the license availability date. In response, the MLC and others reject the proposed approach, reasserting that having unaltered data is imperative for matching, and arguing that the DLC has not sufficiently supported its assertions of DMP burdens associated with reorienting existing reporting practices.161 The DLC objects to most of the conditions under the first limitation described above (the first and third scenarios),162 but does not object to the second or third limitations.163 ARM also commented regarding its members’ equities on this subject, but noted its ‘‘primary concern,’’ rather than MLC matching efforts, ‘‘is ensuring that all sound recording data that ultimately appears in the MLC’s public-facing database is as accurate as possible and is taken from an authoritative source (e.g., SoundExchange).’’ 164 To that end, ARM states that while ‘‘sympathetic to the operational challenges’’ that would be created by requiring DMPs to maintain a ‘‘parallel archive’’ of data, ‘‘this task would be made easier if the DMPs were required to populate their monthly reports of usage with only unaltered data.’’ 165 In light of these comments, and at ARM’s suggestion,166 the Office sent a 161 MLC NPRM Comment at 21–26, App. at xvi– xvii; see, e.g., NMPA NPRM Comment at 6–9; Peermusic NPRM Comment at 2–3. 162 DLC NPRM Comment at 5–7, Add. at A–16– 17. 163 DLC NPRM Comment Add. at A–17. 164 ARM NPRM Comment at 6–7. The Office is addressing the display of sound recording data in the public musical works database in a parallel rulemaking. See U.S. Copyright Office, Notice of Proposed Rulemaking, The Public Musical Works Database and Transparency of the Mechanical Licensing Collective, Dkt. No. 2020–8, published elsewhere in this issue of the Federal Register. 165 ARM NPRM Comment at 6. 166 Id. (‘‘If the Office wishes to convene some sort of informal stakeholder meeting to explore PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 letter seeking additional information from the MLC and DLC on this issue.167 The Office then held an ex parte meeting with the commenters on this matter, which was followed up with additional written submissions.168 Although the MLC and DLC largely maintain the same general positions about burdens and usefulness for matching, these efforts have revealed additional helpful information, discussed below. In light of the further-developed record, the Office has made certain revisions to the proposed rule. First, the rule has been clarified or adjusted in light of a few areas of agreement. The relevant provisions on altered data no longer apply to playing time because, as discussed above, actual playing time must be reported by DMPs. The interim rule also clarifies, as the DLC requests and as the MLC agrees, that where the regulations refer to modifying data, modification does not include the act of filling in or supplementing empty or blank data fields with information known to the DMP, nor does it include updating information at the direction of the sound recording copyright owner or licensor (such as when a record label may send an email updating information previously provided in an ERN message).169 The modification at issue is modification of information actually acquired from a sound recording copyright owner or licensor that the DMP then changes in some fashion without being directed to by the owner or licensor.170 The interim rule has also removed the reference requiring reporting of unaltered data where this reporting is required by a nationally or internationally recognized standard that has been adopted by the MLC and used by the particular DMP, e.g., DDEX.171 At bottom, although this provision was intended to allow room for future solutions to this particular issue, we and relevant executives from our member companies would be happy to participate in such a process. SoundExchange . . . should also be included in any such meeting.’’). 167 U.S. Copyright Office Letter June 30, 2020; see DLC Letter July 13, 2020; MLC Letter July 13, 2020. 168 See ARM Ex Parte Letter July 27, 2020; DLC Ex Parte Letter July 24, 2020; MLC Ex Parte Letter July 24, 2020; SoundExchange Ex Parte Letter July 24, 2020. 169 See DLC NPRM Comment at 5, Add. at A–16– 17; DLC Letter July 13, 2020 at 7–8; MLC Letter July 13, 2020 at 2; MLC Ex Parte Letter July 24, 2020 at 9. 170 See MLC Letter July 13, 2020 at 2 (‘‘If, for example, a sound recording copyright owner conveyed generally to DMPs a request to update Title metadata for a particular licensed sound recording, the new title should qualify as metadata ‘acquired from’ the sound recording copyright owner.’’). 171 See 85 FR at 22525. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 consensus to emerge among relevant copyright owners and DMPs through their chosen participation in nongovernmental standards-setting processes, the comments suggest the parties would prefer clear and immediate direction from the Office. The MLC, DLC, and others are in agreement that this provision should be eliminated.172 In the case of DDEX, the MLC and others explain that, if DMPs do not want to report unaltered data (or anything else for that matter), it is unlikely that a consensus will be reached for DDEX to mandate such reporting, absent regulation.173 Conversely, the DLC expresses concern that future changes adopted by a standards-setting body could expand the categories of information otherwise required by the rule to be reported unaltered, in its view effectively delegating future adjustments to the rule.174 As the commenters recognize, any changes that may need to be made to DDEX’s standards to accommodate the Office’s regulations will either need to be pursued by the parties or some other reporting mechanism will need to be used.175 Turning to the larger question regarding altered data and its role in matching, the DLC characterizes the issue as a marginal one and notes that DMPs only make minor, mostly cleanup, modifications to a fraction of fields for a small fraction of tracks (estimated at less than 1%).176 It asserts that the MLC’s matching processes should be sophisticated enough to overcome these alterations, and that the MLC should be able to use an ISRC, artist, and title keyword to identify over 90% of recordings through automated matching by using SoundExchange’s database.177 In the DLC’s words, ‘‘[i]t 172 See DLC NPRM Comment at 5, 10; MLC NPRM Comment at 22–23; NMPA NPRM Comment at 8– 9; Peermusic NPRM Comment at 3; MLC Ex Parte Letter July 24, 2020 at 7. 173 See MLC NPRM Comment at 22–23; NMPA NPRM Comment at 8–9; MLC Ex Parte Letter July 24, 2020 at 7; see also DLC Letter July 13, 2020 at 9 (acknowledging that ‘‘DDEX is a consensus-driven organization’’). 174 DLC NPRM Comment at 5 (raising practical questions such as whether optional fields would be required for reporting or whether the rule would account for different versions of the relevant standard). 175 See MLC NPRM Comment at 23; NMPA NPRM Comment at 8–9; Peermusic NPRM Comment at 3; ARM NPRM Comment at 10; MLC Ex Parte Letter July 24, 2020 at 7. 176 DLC Letter July 13, 2020 at 2–4; DLC Ex Parte Letter July 24, 2020 at 2–3. 177 DLC Letter July 13, 2020 at 2–4 (‘‘[T]he MLC’s continued insistence on regulating the nuances of highly variegated metadata practices reflects a failure of prioritization. . . . Hairsplitting among metadata fields . . . is not mission-critical.’’); DLC Ex Parte Letter July 24, 2020 at 2–3. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 should be (and is) the MLC’s job to construct technological solutions to handle those minor differences in the matching process, not DMPs’ job to reengineer their platforms, ingestion protocols, and data retention practices so that the MLC receives inputs it likely does not require.’’ 178 (Relatedly, ARM strongly opines that the ISRC is a reliable identifier, noting that all ARM members distribute tracks pursuant to direct licenses that require provision of ISRCs to the DMPs, and that all major record labels use ISRCs to process royalties.179 SoundExchange subsequently supplied further information regarding the effectiveness and reliability of ISRC identifiers.180) The DLC also explains that providing unaltered data is challenging because ‘‘label metadata isn’t simply saved wholesale in a single table,’’ but instead ‘‘is processed and divided into a number of different systems built for distinct purposes, and royalty accounting systems pull from those various systems for purposes of generating a report,’’ and ‘‘[i]t is that entire chain that would need to be reengineered to ensure that label metadata is passed through in unaltered form.’’ 181 But ultimately, the DLC characterizes the incremental costs to provide at least limited types of unaltered data, as compared to the costs of creating the broader DMP-to-MLC reporting infrastructure, as ‘‘minimal’’ for most DMPs and requests that if the scope of unaltered data is expanded then DMPs be given a one-year transition period to comply.182 The DLC 178 DLC Letter July 13, 2020 at 2 (‘‘Even on the altered fields, it should be trivial to construct ‘fuzzy’ search or matching technologies that render immaterial the differences between original and altered data.’’); DLC Ex Parte Letter July 24, 2020 at 3 (‘‘If the MLC’s matching algorithm cannot handle simple variations like ‘The Beatles’ versus ‘Beatles, The,’ it needs to adopt a better algorithm.’’). 179 See ARM Ex Parte Letter July 27, 2020 at 2. According to ARM, the companies it represents ‘‘collectively create, manufacture and/or distribute nearly all of the sound recordings commercially produced and distributed in the United States.’’ ARM NPRM Comment at 1. ARM also informs that the RIAA has designated SoundExchange as the authoritative source of ISRC data in the United States. ARM Ex Parte Letter July 27, 2020 at 2. 180 SoundExchange Ex Parte Letter Sept. 1, 2020. SoundExchange states that ISRC, ‘‘while used imperfectly when first introduced, has become the standard for uniquely identifying music asserts’’ because they ‘‘are used by everyone in the recorded music ecosystem.’’ Id. 181 DLC Ex Parte Letter July 24, 2020 at 2 & n.4; DLC Letter July 13, 2020 at 2 (‘‘For at least some DMPs, doing this work would touch every part of the digital supply chain, involving interactions from multiple cross-functional teams, modifications of legacy systems, and new engineering pathways to capture, store, and report unaltered data.’’). 182 See DLC Letter July 13, 2020 at 4–5. The DLC later asserts that ballpark cost estimates for a larger PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 58127 further states that ‘‘[m]any DMPs do not alter metadata at all.’’ 183 Lastly, the DLC notes that at least some DMPs have not maintained the original unaltered data, meaning they no longer have it available to report ‘‘for the tens of millions of tracks currently in their systems.’’ 184 The DLC and ARM oppose any rule requiring DMPs to recreate this data from new feeds from sound recording copyright owners.185 In contrast, the MLC generally argues that receipt of the sound recording copyright owner or licensor’s unaltered data is critical for proper and efficient matching, explaining how its absence can frustrate and obstruct automated efforts.186 The MLC asserts that this will lead to more tracks needing to be matched manually, and that manual matching is made all the more difficult where an unknown multiplication of different data variations are reported due to DMP alteration.187 While the MLC concedes that it will need to deal with other data issues, it says that ‘‘there is no ‘inefficiency cap’ when it comes to metadata inconsistencies,’’ and that ‘‘each additional metadata inconsistency compounds the previous one and makes the process even harder as they synergise with each other.’’ 188 The MLC states that it is impossible to quantify to what extent permitting reporting of altered data will affect matching because there are too many unknown variables about the scope of DMP alterations, but nonetheless argues that this is not as minor an issue as the DLC characterizes it.189 Rather, the MLC contends that even if only a small fraction of 1% of tracks are implicated, given the number of DMPs and the massive size of their libraries, ‘‘it could pass through of unaltered data could ‘‘reach as high as millions of dollars.’’ DLC Ex Parte Letter July 24, 2020 at 4 n.10. 183 DLC Letter July 13, 2020 at 1, 3. 184 DLC Ex Parte Letter July 24, 2020 at 2. 185 Id.; ARM Ex Parte Letter July 27, 2020 at 3– 4. 186 MLC Letter July 13, 2020 at 3–4 (‘‘While a matching algorithm may not be fully defeated by a minor or cosmetic change to a single metadata field, the alteration of metadata makes the algorithms harder to maintain, and reduces the confidence levels, and thus the automated matching rate regardless of how sophisticated the algorithms are.’’); MLC Ex Parte Letter July 24, 2020 at 3. 187 MLC Letter July 13, 2020 at 4–5 (suggesting a possibility of getting as many as 50 different variations for each data field for a single sound recording from 50 different DMPs). 188 Id. at 6 (‘‘[A]ltered metadata will be a force for reducing matching efficiency and effectiveness, and will only compound the negative effects that arise from other metadata inconsistencies.’’). 189 Id. at 4–5; MLC Ex Parte Letter July 24, 2020 at 8 n. 5 (‘‘[U]sage reporting of both unaltered and altered metadata is the only way that one could precisely quantify the effect of altered metadata reporting on matching performance.’’). E:\FR\FM\17SER2.SGM 17SER2 58128 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 amount to millions of works thrown into manual matching, which could amount to literally hundreds of human work years reestablishing matches.’’ 190 In terms of relative burdens, the MLC argues that the DLC has not made a satisfactory showing of undue burden on DMPs 191 and points out the ‘‘asymmetry’’ between requiring DMPs ‘‘to make a one-time workflow change’’ and the ‘‘ongoing and constant drain and wear on [the MLC’s] systems, making its automated processes harder to maintain and less effective, and also compounding the amount of manual review required, increasing costs and decreasing efficiency.’’ 192 Moreover, the MLC contends that ‘‘[f]orcing the MLC to use the same altered metadata that the DMPs used that contributed to the system that the MLC was created to fix is inconsistent with the statutory goals.’’ 193 Regarding the contention that the MLC can use an ISRC, artist, and title keyword to match using SoundExchange’s database, the MLC disagrees, asserting, among other things, that SoundExchange cannot be compelled to provide its data, that its coverage is not 100% and may omit ‘‘possibly the majority of track entries that the MLC must match each month,’’ that such cross-matching would be obstructed if the artist or title have themselves been altered, and that ‘‘tasking the MLC with trying to clean sound recording data for public display by cross-matching and ‘rolling up’ DMP reporting against a third-party database is not part of the MLC’s mandate.’’ 194 The MLC also emphasizes that ‘‘[t]he problems necessitating the establishment of the MLC were not centered around the matching of works embodied in established catalogs and hits,’’ and thus ‘‘the MLC sees the matching of [ ] ‘edge cases’ as perhaps its most critical mandate.’’ 195 In response to the DLC’s identification of the particular categories of information DMPs sometimes modify,196 the MLC states that of those data fields, the MLC must have the unaltered version of the sound recording name, featured artist, ISRC, version, album title, and songwriter.197 With respect to the DLC’s 190 MLC Letter July 13, 2020 at 5; MLC Ex Parte Letter July 24, 2020 at 3; see also MLC NPRM Comment at 25 n.10 (noting that reporting unaltered data will ‘‘greatly improv[e] . . . the speed and accuracy of royalty processing and accounting’’). 191 MLC Ex Parte Letter July 24, 2020 at 4–6. 192 MLC Letter July 13, 2020 at 5–6. 193 Id. at 6. 194 MLC Ex Parte Letter July 24, 2020 at 2–3. 195 Id. at 3–4. 196 DLC Letter July 13, 2020 at 2–3. 197 MLC Ex Parte Letter July 24, 2020 at 9. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 statement that some DMPs cannot report unaltered data for tracks currently in their systems because they no longer have such data, the MLC requests that such DMPs be required to certify that they no longer have the data before being excused from reporting it.198 Subsequent discussions seemingly revealed agreement among the participants that such DMPs should not be required to obtain from sound recording copyright owners, and such owners not be required to provide to DMPs, replacement ‘‘back catalog’’ data.199 While the Office has taken note of the thoughtful points raised by the DLC, it is ultimately persuaded by the MLC and others to update the regulatory language from the proposed rule to require reporting of four additional fields of unaltered data, subject to the requested on-ramp period. At bottom, millions of tracks are still millions of tracks, and the need to match ‘‘edge’’ cases potentially affects a large number of copyright owners and songwriters, even if only a fraction of the DMPs’ aggregated libraries, and the number of altered tracks will only grow over time.200 A core goal of the MMA is ‘‘ensuring fair and timely payment to all creators’’ of musical works used by DMPs.201 As Congress has recognized, even seemingly minor inconsistencies can still pose a problem in the matching 198 Id. at 10. DLC Ex Parte Letter July 24, 2020 at 2 (noting the meeting’s ‘‘apparent agreement between the MLC, DLC and record label representatives that there should be no obligation for DMPs to try to recreate such data from new feeds from the sound recording copyright owners’’). The MLC subsequently asserts in its letter that ‘‘there should be no carve out from the DMP efforts obligation for this metadata, and further that an efforts carve out would conflict with the MMA’s unreserved efforts requirement.’’ MLC Ex Parte Letter July 24, 2020 at 10–11. The interim rule does not adopt an explicit carve out, but the Office questions, in light of this apparent consensus or near-consensus (especially between the DMPs and sound recording copyright owners regarding their direct deals), whether efforts to reobtain such a large amount of data can be fairly characterized as ‘‘commercially reasonable efforts.’’ Having said that, if sound recording copyright owners do provide this data, DMPs would still be obligated to report it to the extent required by the interim rule. 200 See MLC Ex Parte Letter Apr. 3, 2020 at 8 (‘‘[D]uring an earnings call last year, Spotify’s CEO stated that Spotify ingests about 40,000 tracks every day.’’). 201 See Conf. Rep. at 6 (emphasis added) (‘‘Th[e present] situation must end so that all artists are paid for their creations and that so-called ‘black box’ revenue is not a drain on the success of the entire industry.’’); H.R. Rep. No. 115–651, at 7–8; S. Rep. No. 115–339, at 8; Letter from Lindsey Graham, Chairman, Senate Committee on the Judiciary, to Karyn Temple, Register of Copyrights, U.S. Copyright Office (Nov. 1, 2019) (‘‘All artists deserve to be fully paid for the uses of their works and the adoption of accurate metadata . . . will be key to accomplishing this.’’). 199 See PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 process.202 The MLC, as bolstered by other commenters,203 has made a reasonable showing that receiving only the modified DMP data for the fields atissue 204 may hinder its intended matching efforts, or at least take additional time to match, thus delaying prompt and accurate royalty payments to copyright owners and songwriters.205 The MLC has a strong incentive to match to the greatest extent reasonably possible, and so has a corresponding operational equity with respect to its professed metadata needs.206 Additionally, while the Office agrees with the DLC that ‘‘[t]he MLC’s system is meant to be a pacesetter in the industry,’’ 207 as the MLC points out, this may not necessarily support the reporting of potentially millions of tracks with certain metadata in a lessadvantaged state. While the DLC also raises points worthy of consideration regarding the apparent feasibility of technological approaches to tackle cleanup edits which perhaps the 202 See Conf. Rep. at 6 (‘‘Unmatched works routinely occur as a result of different spellings of artist names and song titles. Even differing punctuation in the name of a work has been enough to create unmatched works.’’); H.R. Rep. No. 115– 651, at 8; S. Rep. No. 115–339, at 8. 203 See, e.g., RIAA Initial NOI Comment at 3, 5– 6 (explaining that passing through altered data ‘‘will make it difficult, if not impossible, for the MLC to do machine matching without intervention from a knowledgeable human’’); Jessop Initial NOI Comment at 2–3 (explaining that altered data ‘‘make[s] matching much harder’’); NMPA NPRM Comment at 7–9; Peermusic NPRM Comment at 2– 3. 204 Of the fields the DLC says DMPs sometimes modify, the MLC says it needs the unaltered version of the sound recording name, featured artist, ISRC, version, album title, and songwriter. See DLC Letter July 13, 2020 at 2–3; MLC Ex Parte Letter July 24, 2020 at 9. 205 See also Conf. Rep. at 6 (observing that the status quo ‘‘has led to significant challenges in ensuring fair and timely payment to all creators’’); H.R. Rep. No. 115–651, at 7–8; S. Rep. No. 115–339, at 8; Letter from Lindsey Graham, Chairman, Senate Committee on the Judiciary, to Karyn Temple, Register of Copyrights, U.S. Copyright Office (Nov. 1, 2019) (observing one of the causes of unmatched royalties to be ‘‘errors and omissions in metadata as the work is commercialized’’); 85 FR at 22526 (‘‘In promulgating reporting and payment rules for the section 115 license,’’ one of the ‘‘‘fundamental criteria’’’ used to ‘‘‘evaluate[ ] proposed regulatory features’’’ is that it ‘‘‘must insure prompt payment’’’) (quoting 79 FR 56190, 56190 (Sept. 18, 2014)). 206 See 17 U.S.C. 115(d)(3)(B)(ii); 84 FR at 32283 (‘‘[I]f the designated entity were to make unreasonable distributions of unclaimed royalties, that could be grounds for concern and may call into question whether the entity has the ‘administrative and technological capabilities to perform the required functions of the [MLC].’’’) (quoting 17 U.S.C. 115(d)(3)(A)(iii)); Letter from Lindsey Graham, Chairman, Senate Committee on the Judiciary, to Karyn Temple, Register of Copyrights, U.S. Copyright Office (Nov. 1, 2019) (‘‘Reducing unmatched funds is the measure by which the success of [the MMA] should be measured.’’). 207 See DLC Letter July 13, 2020 at 2. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 operations advisory committee should discuss, its comments do not address other instances raised by commenters where ‘‘‘fuzzy’ search[es] or matching technologies’’ are unlikely to resolve a discrepancy.208 Finally, ARM, while advocating for the MLC to obtain sound recording metadata from a single source with respect to its public-facing database, also acknowledges the utility of it receiving unaltered metadata from DMPs as opposed to data that reflects alteration by individual DMPs.209 Concerning the issues raised regarding the MLC’s potential use of SoundExchange’s database, as discussed above and in the NPRM,210 the Office notes the DLC’s and ARM’s explanations how access to a third party’s authoritative sound recording data may be generally advantageous to the MLC in fulfilling its statutory objectives.211 The Office has also noticed this issue in a parallel proceeding regarding the public musical works database, including the MLC’s assertion that cleaning and/or deduping sound recording information is not part of its statutory mandate.212 Specifically as to the DLC’s suggestion that the MLC should be able to use an ISRC, artist, and title keyword to identify over 90% of recordings through automated matching by using SoundExchange’s database,213 while not opining as to the 208 See id. For example, using ‘‘fuzzy’’ matching would not help with an altered release date. See id. at 4. Nor would it help with wholesale data replacement, such as where ‘‘Puffy’’ is changed to ‘‘Diddy,’’ see DLC Reply NOI Comment at 9, or ‘‘An der scho¨nen, blauen Donau’’ is changed to ‘‘Blue Danube Waltz,’’ see Jessop Initial NOI Comment at 2. 209 See ARM NPRM Comment at 6; ARM Ex Parte Letter July 27, 2020 at 1–2; A2IM & RIAA Reply NOI Comment at 3 n.1 (‘‘In the event the Office rejects our call for the sound recording metadata to come from a single authoritative source, any metadata the DMPs are required to provide to the MLC must be provided in the exact same form in which it is received from record labels and other sound recording copyright owners (i.e., in an unaltered form).’’). 210 See 85 FR at 22524. 211 DLC NPRM Comment at 7–8; ARM NPRM Comment at 6–9; see also, e.g., SoundExchange Ex Parte Letter July 24, 2020 at 1 (explaining how SoundExchange has a database of all the variations of sound recording information reported by DMPs, a separate database of authoritative sound recording data populated with information submitted by rights owners, and then a proprietary matching algorithm to join the two together); SoundExchange NPRM Comment at 2–6. 212 See U.S. Copyright Office, Notice of Proposed Rulemaking, The Public Musical Works Database and Transparency of the Mechanical Licensing Collective, Dkt. No. 2020–8, published elsewhere in this issue of the Federal Register; MLC Letter June 15, 2020 at 3 n.3. 213 DLC Ex Parte Letter July 24, 2020 at 2–3. SoundExchange subsequently clarified that ‘‘ISRCs in SoundExchange’s repertoire database cover 90 percent of the value of commercially released tracks based on SoundExchange distributions,’’ and that VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 comparative feasibility of that approach, for purposes of the interim rule, the Office finds it reasonable to accept the MLC’s assertion that such access alone would be an inadequate substitute for having DMPs report unaltered data. As discussed above, even a relatively small percentage gap in repertoire coverage can translate to a substantial number of tracks. Moreover, the Office cannot compel SoundExchange to provide its data.214 This approach seemingly fits within the statutory framework. The MMA obligates DMPs to facilitate the MLC’s matching duties by engaging in efforts to collect data from sound recording copyright owners and passing it through to the MLC via reports of usage. A requirement to report such collected data in unaltered form is consonant with that structure, as the statute specifically contemplates musical work information being passed through from ‘‘the metadata provided by sound recording copyright owners or other licensors of sound recordings.’’ 215 While the reporting of sound recording information does not have this same limitation, its inclusion with respect to musical work information nevertheless signals that Congress contemplated sound recording information being passed through from the metadata as well; the material difference being that DMPs have an added burden with respect to sound recording information, but not musical work information, to report missing metadata from another source ‘‘to the extent acquired.’’ 216 That being said, the interim rule also adopts the one-year transition period the DLC requests, to afford adequate time both for DMPs to reengineer their reporting systems and, if necessary, for DDEX to update its standards. As with the provision adopted concerning unique identifiers relevant to audio access, the Office concludes that the DLC’s requested transition period is appropriate. The statute seemingly does not contemplate the engineering time that both the MLC and DLC have identified as necessary for the MLC and DMPs to operationalize their respective ‘‘a significant portion of the remaining 10 percent would likely match to repertoire data as well.’’ SoundExchange Ex Parte Letter Sept. 1, 2020 at 2. 214 See also ARM NPRM Comment at 6; ARM Ex Parte Letter July 27, 2020 at 1–2; A2IM & RIAA Reply NOI Comment at 3 n.1. 215 See 17 U.S.C. 115(d)(4)(A)(ii)(I)(bb). 216 See id. at 115(d)(4)(A)(ii)(I)(aa)–(bb) (noting that sound recording name and featured artist must always be reported). With respect to the requirement for most sound recording and musical work information to be reported ‘‘to the extent acquired,’’ at least in the strictest sense, acquired data that is altered is no longer the same as what was acquired. PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 58129 obligations.217 To start, each entity has a core statutory duty to ‘‘participate in proceedings before the Copyright Office,’’ but neither one existed at the law’s enactment. Instead, following the development of its own extensive public record, the Copyright Office concluded a proceeding to designate the MLC and DLC in July, 2019, in full conformance with the statutory timeframe, but leaving less than 18 months before the license availability date.218 The first notification of inquiry for this (and parallel) rulemakings was issued in September 2019, at a time when the MLC and DLC were separately engaged in an assessment proceeding before the CRJs, as also contemplated by the statute.219 The Office has conducted this rulemaking at an industrious clip, while maintaining due attention to adequately developing and analyzing the nowexpansive record. Indeed, in one academic study analyzing over 16,000 proceedings, rulemakings were generally found to take, on average, 462.79 days to complete; an unrelated GAO study of rulemakings conducted by various executive branch agencies concluded that rulemakings take on average four years to complete.220 But even with this diligence, given the statutory clock remaining before the license availability date, the Office concludes that it is appropriate to adopt reasonable transition periods with 217 See, e.g., MLC Ex Parte Letter Jan. 29, 2020 at 2; DLC Letter July 13, 2020 at 1; Spotify Ex Parte Letter Aug. 26, 2020 at 1. 218 See 84 FR at 32274 (designating the MLC and DLC); 17 U.S.C. 115(d)(3)(B)(i) (‘‘Not later than 270 days after the enactment date, the Register of Copyrights shall initially designate the mechanical licensing collective . . .’’); 17 U.S.C. 115(e)(15) ‘‘The term ‘license availability date’ means January 1 following the expiration of the 2-year period beginning on the enactment date.’’). 219 See 84 FR at 49966; U.S. Copyright Royalty Board, Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective, Docket No. 19–CRB–0009– AA. As noted in the comments to the NOI, the Office understands the contemporaneous assessment proceeding, to have deferred, to some extent, discussions between the MLC and DLC in this rulemaking. See 84 FR 65739 (Nov. 29, 2019) (extending comment period for reply comments to NOI, at commenters’ requests). 220 Anne Joseph O’Connell, Agency Rulemaking and Political Transitions, 105 Nw. L. Rev. 471, 513 (2011); U.S. Government Accountability Office, Improvements Needed to Monitoring and Evaluation of Rules Development as Well as to the Transparency of OMB Regulatory Reviews 5–6 (2009), available at https://www.gao.gov/new.items/ d09205.pdf (‘‘GAO Report’’). See also Christopher Carrigan & Russell W. Mills, Organizational Process, Rulemaking Pace, and the Shadow of Judicial Review, 79 Public Admin. Rev. 721, 726– 27 (2019) (for economically significant rules, finding a mean of 360.3 days from publication of proposed rule or interim final rule to publication of final rule). E:\FR\FM\17SER2.SGM 17SER2 58130 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 respect to certain identified operational needs.221 During the one-year transition period, reporting altered data is permitted, subject to the same two limitations proposed in the NPRM that the DLC did not oppose: (1) DMPs are not permitted to report only modified versions of any unique identifier or release date; and (2) DMPs are not permitted to report only modified versions of any information belonging to categories that the DMP was not periodically altering prior to the license availability date. After the oneyear transition period ends, DMPs additionally must report unmodified versions of any sound recording name, featured artist, version, or album title— which are the remaining categories of information that the DLC says at least some DMPs alter and that the MLC says it needs in unaltered form, with one exception. The Office declines the MLC’s requested inclusion of the songwriter field at this time because it is a musical work field rather than a sound recording field, and according to the DLC, when it is provided by sound recording copyright owners, it is usually duplicative of the featured artist field, which will already have to be reported unaltered.222 As the DLC requests, the interim rule includes an exception for where DMPs cannot report unaltered data for tracks currently in their systems because they no longer have such data.223 Obviously DMPs cannot report what they do not have, but the Office agrees with the MLC that the ability to use the exception should be contingent upon an appropriate certification. The interim rule, therefore, requires the DMP to certify to the best of its knowledge that: (1) The information at issue belongs to a category (each of which must be identified) that the DMP was periodically altering prior to the 221 The Office’s reasoning is further supported by the delayed statutory timeframe before the MLC may consider distributing unclaimed, unmatched funds. Because the MLC will have at least three years to engage in matching activities with respect to a particular work, this additional time may be used by the MLC to make up for any inefficiencies felt during a relevant transition period, rather than have a rule adopted that limited consideration to only changes that would be operationally feasible by the license availability date. 17 U.S.C. 115(d)(3)(H)(i), (J)(i)(I); 85 FR 33735, 33738 (June 2, 2020). 222 See DLC Letter July 13, 2020 at 7–8. The MLC has stated in the Office’s concurrent rulemaking about the musical works database that ‘‘[t]he musical works data will be sourced from copyright owners.’’ MLC Ex Parte Letter Aug. 21, 2020 at 2. 223 See DLC Ex Parte Letter July 24, 2020 at 2; MLC Ex Parte Letter July 24, 2020 at 10 (proposing regulatory language); see also DLC Ex Parte Letter July 24, 2020 at 2 n.3 (‘‘DMPs should [not] be held to a ‘burden of proof’ about the absence of data they were never required to maintain.’’). VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 effective date of the interim rule; and (2) despite engaging in good-faith, commercially reasonable efforts, the DMP has not located the unaltered version of the information in its records. Since DMPs that no longer have this information may not know with granularity which data is in fact altered, the interim rule also makes clear that the certification need not identify specific sound recordings or musical works, and that a single certification may be used to encompass all unaltered information satisfying the conditions that must be certified to. For any DMP that to the best of its knowledge no longer has the unaltered data in its possession, this should not be an onerous burden. The Office would welcome updates from the MLC’s operations advisory committee, or the MLC or DLC separately, on any emerging or unforeseen issues that may arise during the one-year transition period. viii. Practicability In addition to the three tiers of sound recording and musical work information described in the NPRM, the Office further proposed that certain information, primarily that covered by the second and third tiers, must be reported only to the extent ‘‘practicable,’’ a term defined in the proposed rule.224 The DLC had asserted 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.225 Based on the record, the NPRM observed that all of the proposed data categories appeared to possess some level of utility, despite disagreement as to the particular degree of usefulness of each, and that different data points may be of varying degrees of helpfulness depending on which other data points for a work may or may not be available.226 Consequently, the proposed rule defined ‘‘practicable’’ in a specific way.227 First, the proposed definition would have always required reporting of the expressly enumerated statutory categories (i.e., sound recording copyright owner, producer, ISRC, songwriter, publisher, ownership share, and ISWC, to the extent appropriately acquired, regardless of any associated DMP burden). Second, it would have required reporting of any other applicable categories of 224 85 225 Id. FR at 22531–32, 22541–42. at 22531. 226 Id. 227 Id. PO 00000 at 22531–32. Frm 00018 Fmt 4701 Sfmt 4700 information (e.g., catalog number, version, release date, ISNI, etc.) under the same three scenarios that were proposed with respect to unaltered data: (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 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 NPRM explained that, as with the proposed rules about unaltered data, the Office’s proposed compromise sought to appropriately balance the need for the MLC to receive detailed reporting with the burden that more detailed reporting may place on certain DMPs.228 In response to the NPRM, the MLC argues against the proposed rule, questioning how it can be impracticable for a DMP to report information it has in fact acquired, and generally contending that the DLC has not sufficiently supported its assertions of DMP operational burdens.229 The DLC’s comments do not propose any changes to this aspect of the proposed rule.230 The Office gave the DLC an opportunity to elaborate on this matter and address the MLC’s contentions, asking the DLC to ‘‘[l]ist each data field proposed in § 210.27(e)(1) that the DLC contends would be overly burdensome for certain DLC members to report if the Office does not limit reporting to the extent practicable’’ and, for any such field, to ‘‘[d]escribe the estimated burden, including time, expense, and nature of obstacle, that individual DLC members anticipate they will incur if required to report.’’ 231 The DLC responded by stating that ‘‘assuming (against experience) that DMPs actually acquired all of the metadata types listed in subsections (e)(1)(i)(E) and (e)(1)(ii), the answer is that it would be impracticable (and for some data fields, impossible) to report subsection (e)(1)(ii)’s musical work information to the MLC.’’ 232 The 228 Id. at 22532. MLC NPRM Comment at 4, 16–17, 38; see also NMPA NPRM Comment at 2. 230 DLC NPRM Comment Add. at A–17–18. 231 U.S. Copyright Office Letter June 30, 2020 at 3–4. 232 DLC Letter July 13, 2020 at 8–9. For reference, paragraphs (e)(1)(i)(E) and (e)(1)(ii) cover all sound 229 See E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 DLC explains that ‘‘[t]he fundamental problem arises from the fact that for subsection (e)(1)(ii)’s data types, there are no mandatory DDEX data fields, and in some instances, no data fields at all.’’ 233 In light of these comments, the Office concludes that this reporting limitation should be revised, and so the interim rule replaces this concept with a oneyear transition period. The DLC states that it is only impracticable to provide musical work information (not sound recording information), because of a current lack of DDEX data fields. As discussed above, however, the Office is persuaded that it should not refer to DDEX’s requirements in promulgating these rules, and that parties may need to pursue changes to DDEX’s standards to accommodate the Office’s regulations if they wish to use that standard.234 Additionally, some of the musical work fields that the DLC says are impracticable to report because of DDEX are statutorily required, which means that not reporting them was never a possibility, including under the originally proposed practicability limitation. Moreover, the MLC states that ‘‘[a]ll of the metadata fields proposed in § 210.27(e)(1) will be used as part of the MLC’s matching efforts.’’ 235 The Office is mindful that it will take time both for DMPs to reengineer their reporting systems and for DDEX to update its standards. The interim rule establishes a one-year transition period (the length of time the DLC states is necessary for DMPs to make significant reporting changes) 236 during which DMPs may report largely in accord with what was proposed in the NPRM, though for clarity, the regulatory language has been amended to address this condition in terms of the transition period, rather than the previously proposed defined term ‘‘practicable.’’ The main substantive change is that, following the reasoning above, the Office has eliminated the scenario where the MLC has adopted a nationally recording and musical work data fields except for sound recording name, featured artist, playing time, and DMP-assigned unique identifier. 233 Id. at 9. 234 The Office, therefore, disagrees with the DLC’s proposed approach that ‘‘the MLC should be left to progress these issues with DDEX in the absence of regulation or any other insertion of the Office into those ongoing discussions.’’ See DLC Letter July 13, 2020 at 9. Especially considering that the DLC in other contexts argues that the Office should not ‘‘delegate[ ] any future determination about the wisdom of adopting [reporting requirements] to a standards-setting body.’’ See DLC NPRM Comment at 5, 10. 235 MLC Letter July 13, 2020 at 7. 236 DLC NPRM Comment at 6, 11; DLC Letter July 13, 2020 at 5. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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.237 ix. Server Fixation Date and Termination Another disputed issue in this proceeding has been 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. As discussed in the NPRM, the MLC said it needs this date to operationalize its interpretation of the derivative works exception to the Copyright Act’s termination provisions in sections 203 and 304(c).238 Under the MLC’s legal interpretation, the exception applies to the section 115 compulsory license, 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.’’ 239 The MLC argued that, in contrast to the prior regime where ‘‘the license date for each particular musical work was considered to be the date of the NOI 240 for that work,’’ under ‘‘the new blanket license, there is no license date for each individual work,’’ 241 and, therefore, the MLC sought the so-called server fixation date, which it contended is ‘‘the most accurate date for the beginning of the license for that work.’’ 242 The DLC said that not all DMPs store this information and argued that it should not need to be reported.243 No other commenter directly spoke to this issue prior to the issuance of the NPRM. Based on the record to that point, the Office suggested that the MLC’s interpretation ‘‘seems at least colorable,’’ noting the lack of comments disagreeing with what the MLC had characterized as industry custom and understanding.244 The Office also said that, to the extent the MLC’s approach 237 The NPRM had noted that the Office was contemplating a potential fourth scenario where reporting would have been considered practicable, see 85 FR at 22532, but since the Office is only retaining this limitation on reporting temporarily, the Office does not find it prudent to include the additional scenario. See DLC NPRM Comment at 6 (arguing that the scenario is ‘‘not workable’’ because it ‘‘embeds too many questions, to which the answers are too subjective, for useful and operable regulation to take hold’’). 238 See 85 FR at 22532–33. 239 MLC Ex Parte Letter Feb. 26, 2020 at 6. 240 In this discussion, ‘‘NOI’’ refers to notices of intention to obtain a compulsory license under section 115. See 37 CFR 201.18. 241 MLC Ex Parte Letter Apr. 3, 2020 at 6. 242 MLC Ex Parte Letter Feb. 26, 2020 at 7. 243 85 FR at 22532. 244 Id. PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 58131 is not invalidated or superseded by precedent, it seemed reasonable for the MLC to want to know the applicable first use date, upon which to base a license date, so it could essentially have a default practice to follow in the absence of a live controversy between parties or a challenge to the MLC’s approach.245 Without opining on the merits of the MLC’s interpretation, the Office proposed a rule concerning what related information DMPs should maintain or provide.246 The NPRM distinguished among three categories of works.247 First, the rule did not propose regulatory language to govern musical works licensed by a DMP prior to the license availability date because it did not seem necessary to disrupt whatever the status quo may be in such cases. Second, for musical works being used by a DMP prior to the effective date of that DMP’s blanket license (which for any currently operating DMP should ostensibly be the license availability date) either pursuant to a NOI filed with the Office or without a license, the Office observed that this blanket license effective date may be the relevant license date, and proposed requiring each DMP to take an archival snapshot of its database as it exists immediately prior to that date to establish a record of the DMP’s repertoire at that point in time. Last, for musical works that subsequently become licensed pursuant to a blanket license after the effective date of a given DMP’s blanket license, the rule proposed requiring each DMP to keep and retain in its records, but not provide in monthly reports of usage, at least one of three dates for each sound recording embodying such a musical work: (1) Server fixation date; (2) date of the grant first authorizing the DMP’s use of the sound recording; and (3) date on which the DMP first obtained the sound recording. In response to the NPRM, in addition to further comments from the MLC and DLC, the Office received comments from a publisher, generally supporting the MLC’s position, and a number of organizations representing songwriter interests that raised notes of caution regarding that position.248 Following an ex parte meeting with commenters to further discuss the matter, the Office received additional written submissions 245 Id. at 22532–33. id. at 22533, 22546. 246 See 247 Id. 248 See MLC NPRM Comment at 26–32, App. at xiv–xv, xxviii–xxix; DLC NPRM Comment at 15–16, Add. at A–29–30; Peermusic NPRM Comment at 5– 6; SONA & MAC NPRM Comment at 8–12; Recording Academy NPRM Comment at 3. E:\FR\FM\17SER2.SGM 17SER2 58132 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 on this issue.249 The record has benefited from this expansion of perspectives. Because the voting publisher members of the MLC’s board must be publishers ‘‘to which songwriters have assigned [certain] exclusive rights’’ and the voting songwriter members of the MLC’s board must be songwriters ‘‘who have retained and exercise [certain] exclusive rights,’’ the MLC’s views, however well-meaning and informed, are not presumptively representative of the interests of those who may exercise termination rights in the future.250 In sum, and as discussed below, commenters representing songwriter interests are generally deeply concerned with protecting termination rights and ensuring that those rights are not adversely impacted by anything in this proceeding or any action taken by the MLC; the MLC seeks reporting of information it believes it needs to operate effectively; and the DLC seeks to ensure that any requirements placed upon DMPs are reasonable. Additionally, there seems to be at least some level of agreement that knowing the date of first use of the particular sound recording by the particular DMP may be of some utility, and various additional dates other than server fixation date have been suggested to represent that date, such as the recording’s street date (the date on which the sound recording was first released on the DMP’s service). Having considered these comments, the Office is adjusting the proposed regulatory language as discussed below. The Office also offers some clarifications concerning the underlying termination issues that have been raised and the MLC’s related administrative functions. Although the NPRM suggested that the MLC’s interpretation might be colorable, the Office’s intent was neither to endorse nor reject the MLC’s position; the Office made clear that it ‘‘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.’’ 251 Indeed, a position contrary to the MLC’s may well be valid, as the issue does not appear definitively tested by the courts. For example, 249 See U.S. Copyright Office Letter June 10, 2020; DLC Ex Parte Letter June 26, 2020; MLC Ex Parte Letter June 26, 2020; MAC Ex Parte Letter June 26, 2020; NSAI Ex Parte Letter June 26, 2020; Peermusic Ex Parte Letter June 26, 2020; Recording Academy Ex Parte Letter June 26, 2020; SGA Ex Parte Letter June 26, 2020; SONA Ex Parte Letter June 26, 2020. 250 See 17 U.S.C. 115(d)(3)(D)(i)(I)–(II). 251 See 85 FR 22532 & n.210. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 Nimmer’s treatise expresses the opinion that ‘‘a compulsory license of rights in a musical work is not subject to termination’’ because ‘‘it is executed by operation of law, not by the consent of the author or his successors,’’ 252 which Nimmer says means that where a songwriter (or heir) terminates an assignment to a publisher, ‘‘at that point the compulsory license royalties would be payable solely to [the terminating songwriter (or heir)] as copyright owner[ ], rather than to [the terminated publisher] whose copyright ownership at that point would cease.’’ 253 The Office again stresses that in this proceeding it is not making any substantive judgment about the proper interpretation of the Copyright Act’s termination provisions, the derivative works exception, or their application to section 115. Nor is the Office opining as to how the derivative works exception, if applicable, may operate in this particular context, including with respect to what information may or may not be appropriate to reference in determining who is entitled to royalty payments. To this end, as requested by several commenters representing songwriter interests and agreed to by the MLC, the interim rule includes express limiting language to this effect.254 In light of the additional comments, the Office is not convinced of the need for the MLC to implement an automatically administered process for handling this aspect of termination matters. Rather, as others suggest, it seems reasonable for the MLC to act in accordance with letters of direction received from the relevant parties, or else hold applicable royalties pending 252 Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright sec. 11.02 n.121 (2020); see Mills Music, Inc. v. Snyder, 469 U.S. 153, 168 n.36 (1985) (referring to the section 115 license as ‘‘selfexecuting’’); see also Paul Goldstein, Goldstein on Copyright sec. 5.4.1.1.a. (3d ed. 2020) (‘‘The requirement that, to be terminable, a grant must have been ‘executed’ implies that compulsory licenses, such as section 115’s compulsory license for making and distributing phonorecords of nondramatic musical works, are not subject to termination.’’). 253 Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright sec. 11.02 n.121 (2020); see Mills Music, Inc. v. Snyder, 469 U.S. 153, 185 n.12 (1985) (White, J., dissenting) (stating that the statutory royalty for the section 115 license ‘‘is payable to the current owner of the copyright’’); see also Recording Academy Ex Parte Letter at 2 (June 26, 2020) (‘‘[T]he Office’s rulemaking should not imply or assume that a terminated party necessarily continues to benefit from the blanket license after termination.’’). 254 See SONA & MAC NPRM Comment at 12; MAC Ex Parte Letter June 26, 2020 at 2; Recording Academy Ex Parte Letter June 26, 2020 at 2–3; SGA Ex Parte Letter June 26, 2020 at 1–2; SONA Ex Parte Letter June 26, 2020 at 3–4; NSAI Ex Parte Letter June 26, 2020 at 1; MLC Ex Parte Letter June 26, 2020 at 4, 5; Peermusic Ex Parte Letter June 26, 2020 at 1–2. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 direction or resolution of any dispute by the parties.255 The Office understands and appreciates the MLC’s general need to operationalize its various functions and desire to have a default method of administration for terminated works in the normal course. The comments, however, suggest that this might stray the MLC from its acknowledged province into establishing what would essentially be a new industry standard based on an approach that others argue is legally erroneous and harmful to songwriters.256 The information that may be relevant in administering termination rights may not be the same as what the MLC may be able to most readily obtain and operationalize.257 While the MLC does intend to follow letters of direction, it states that they ‘‘typically do not have [the necessary] level of detail, which underscores the importance of having a data point to assist with identifying whether first use by a DMP falls before or after statutory termination.’’ 258 MAC, however, states that ‘‘Letters of Direction universally supply an operative date.’’ 259 In cases where the MLC lacks sufficient ownership and payment information resulting from termination of transfers, a cautious approach may be to simply continue holding the relevant royalties 255 See, e.g., SONA & MAC NPRM Comment at 11–12 (‘‘The allocation of royalty income for a song as between the terminated grantee and the owner of the termination rights is a legal question and is typically communicated by the parties to a licensing administrator via a letter of direction. . . . To the extent a legal dispute were to arise . . . it would be best resolved by a court based on the facts of that particular dispute.’’); MAC Ex Parte Letter June 26, 2020 at 3 (‘‘MAC also questioned the operational reasoning for MLC gathering the server fixation data as MLC will ultimately rely on the parties to resolve disputes. After all, Letters of Direction universally supply an operative date.’’); SONA Ex Parte Letter June 26, 2020 at 3 (‘‘[T]ermination rights are typically administered according to letters of direction submitted by the interested parties . . .’’); Recording Academy Ex Parte Letter June 26, 2020 at 2 (‘‘[T]hese questions could be negotiated or litigated by future parties in a dispute.’’). 256 See, e.g., SONA & MAC NPRM Comment at 8– 11 (expressing ‘‘serious reservations about [the MLC’s] approach, which would seemingly redefine and could adversely impact songwriters’ termination rights’’); Recording Academy Ex Parte Letter June 26, 2020 at 2 (‘‘MLC was erroneously using the server fixation date as a proxy for a grant of a license.’’); SONA Ex Parte Letter June 26, 2020 at 2; MAC Ex Parte Letter June 26, 2020 at 2. 257 See MLC NPRM Comment at 30–31 (arguing against aspects of the proposed rule by asserting, for example, that certain information ‘‘would be impossible for the DMPs or the MLC to ascertain,’’ ‘‘the Proposed Regulation does not require [thirdparty] vendors to provide the NOIs or their dates,’’ and ‘‘[t]he MLC also may not have the date of a voluntary license’’). Cf. id. at 30 (‘‘An arbitrary decision by a DMP as to which date to provide cannot be the basis for determining whether the pre- or post-termination copyright owner is paid.’’) 258 MLC Ex Parte Letter June 26, 2020 at 4. 259 MAC Ex Parte Letter June 26, 2020 at 3. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations until it receives a letter of direction or other submissions from the relevant musical work copyright owner(s) that have sufficient detail to enable the MLC to carry out the parties’ wishes.260 Moreover, if the MLC establishes a default process that applied the derivative works exception, the appropriate dividing line for determining who is entitled to relevant royalty payments remains unclear (and beyond the scope of this proceeding). SONA & MAC provide the following example to illustrate why ‘‘the serverfixation approach could cause economic harm to songwriters’’: [I]f a sound recording derivative is first reproduced on a server by DMP X in 2015 under a voluntary license granted by Publisher Y, and Songwriter Z terminates the grant to Publisher Y and recaptures her rights in 2020 before the blanket license goes into effect, under the server-fixation rule articulated by the MLC, the ‘license date’ for that derivative would be 2015. Accordingly, Publisher Y, rather than Songwriter Z, would continue to receive royalties for DMP X’s exploitation of the musical work as embodied in that sound recording, even if the voluntary license came to an end and the DMP X began operating under the new blanket license as of January 1, 2021.261 jbell on DSKJLSW7X2PROD with RULES2 Other suggested dates, such as street date, may raise similar questions. The same concern could arise after the license availability date as well—for example where a DMP in 2022 has both a blanket license and a voluntary license, the DMP first uses a work in 2024 pursuant to the voluntary license, a relevant termination occurs in 2028, the voluntary license expires in 2030, and afterward the DMP continues using the work but, for the first time, pursuant to its blanket license—because ‘‘[w]here a voluntary license or individual download license applies, the license authority provided under the blanket license shall exclude any musical works (or shares thereof) subject to the voluntary license or individual download license.’’ 262 In that instance, using SONA’s nomenclature and assuming the derivative work exception applies, the work terminated in 2028 should see royalties payable to Songwriter Z starting in 2030 (once the 260 Compare MLC Ex Parte Letter Aug. 21, 2020 at 2 (indicating that ownership information pertaining to musical works in the public database ‘‘will be sourced from copyright owners’’). 261 SONA & MAC NPRM Comment at 11; see id. at 8 (noting that termination rights ‘‘are tied to grants of copyright interests—not when or where a work is reproduced’’); SONA Ex Parte Letter June 26, 2020 at 3 (‘‘SONA representatives underscored the distinction between utilization of a work and a license grant, which are not the same and should not be conflated . . .’’). 262 17 U.S.C. 115(d)(1)(C)(i); see also id. at 115(d)(1)(B)(i). VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 pre-termination grant ends by its own terms), but a reliance upon the server fixation date would result in continued payment to Publisher Y. And following from the interpretation advanced regarding section 115 and termination rights, it seems that there may be other potentially relevant dates not raised by the commenters, for example: The date that the particular musical work becomes covered by the DMP’s blanket license, i.e., the date that it becomes ‘‘available for compulsory licensing’’ and not subject to a voluntary license or individual download license held by that DMP (e.g., 2030 and posttermination in the previous example, as opposed to 2024 and pre-termination if a street, server, or other first-use date is applied).263 Of course this would have to be assessed in conjunction with the date of creation of the relevant sound recording derivative.264 Additionally, while the MLC does not see its function as enforcing termination rights or otherwise resolving disputes over terminations or copyright ownership, stating repeatedly that it takes no position on what the law should be and that it is not seeking to change the law,265 its position on the proposed rule may unintentionally be in 263 See id. at 115(d)(1)(B)(i), (C). The MLC states that ‘‘[u]nder the new blanket license, there will no longer be a specific license date for each individual work; the license date for all musical works will be the date the DMP first obtained the blanket license, and that date could potentially remain in effect indefinitely for millions of musical works, even as new ones are created and subsequently become subject to the blanket license.’’ MLC NPRM Comment at 27; see also Peermusic NPRM Comment at 5 (‘‘[T]he NOL date will cover all works then subject to the compulsory license as well as all works created later, as long as the NOL remains in effect.’’). But that is a significant and seemingly erroneous assumption with respect to works created post-blanket license or licensed voluntarily. See 17 U.S.C. 115(d)(1)(B)(i), (C). 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.’’) (quotation omitted); Waite v. UMG Recordings, Inc., No. 19–cv–1091(LAK), 2020 WL 4586893, at *6 (S.D.N.Y. Aug. 10, 2020) (‘‘If a work does not exist when the parties enter into a transfer or assignment agreement, there is no copyright that an artist (or third party company) can transfer.’’). 264 See Mills Music, Inc. v. Snyder, 469 U.S. 153, 173 (1985) (‘‘The critical point in determining whether the right to continue utilizing a derivative work survives the termination of a transfer of a copyright is whether it was ‘prepared’ before the termination. Pretermination derivative works— those prepared under the authority of the terminated grant—may continue to be utilized under the terms of the terminated grant. Derivative works prepared after the termination of the grant are not extended this exemption from the termination provisions.’’). 265 MLC Ex Parte Letter June 26, 2020 at 2; see also Peermusic Ex Parte Letter June 26, 2020 at 1; NSAI Ex Parte Letter June 26, 2020 at 1. PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 58133 tension with its stated goals.266 For example, the MLC’s view assumes the derivative works exception applies, would reject the alternative dates proposed by the NPRM because they ‘‘will not resolve the issue of whether the pre- or post-termination rights owner is entitled to payment,’’ and proposes receiving certain dates for works licensed before the license availability date despite its statement that customary practice is to use NOI dates instead.267 Similarly, MLC board member Peermusic characterizes the MLC’s approach as a ‘‘ ‘fix’ . . . to avoid confusion in the marketplace (and to head off disputes among copyrightowning clients of the MLC)’’ by ‘‘designat[ing]’’ an ‘‘appropriate substitute for the prior individual NOI license date.’’ 268 Based on the foregoing, it does not seem prudent to incentivize the MLC to make substantive decisions about an unsettled area of the law on a default basis. But the record also suggests that the transition to the blanket license represents a significant change to the status quo that may eliminate certain dates, such as NOI dates, that may have historically been used in posttermination activities, such as the renegotiation and execution of new agreements between the relevant parties to continue their relationship on new terms.269 Perhaps as a result, after discussion, some commenters representing songwriter interests supported the preservation of various dates ‘‘that may be pertinent and necessary to the determination of future legal issues.’’ 270 Accordingly, the interim rule maintains the proposed requirement for DMPs to retain certain information, adjusted as discussed below. The purpose of this rule is to aid retention of certain information that commenters 266 See Recording Academy Ex Parte Letter June 26, 2020 at 1–2 (‘‘Despite stating repeatedly that the MLC has no interest in altering, changing, or diminishing the termination rights of songwriters, it was clearly conveyed that one of the primary reasons for seeking this data is to determine the appropriate payee for the use of a musical work that is the subject of a termination. The Academy’s view is that using the data in this way would diminish termination rights.’’). 267 See MLC NPRM Comment at 29; see id. at 30 (‘‘The date provided will be the dividing line that will determine which copyright owner—the pre- or post-termination owner—will be paid.’’). 268 Peermusic NPRM Comment at 5–6; see id. at 6 (‘‘[T]he alternatives proposed do not provide for the certainty that is required in establishing dates of grants under Sections 203 and 304.’’). 269 See Peermusic Ex Parte Letter June 26, 2020 at 1 (‘‘[T]he MMA’s elimination of individual NOIs has in fact already upset the status quo.’’). 270 See SGA Ex Parte Letter June 26, 2020 at 2; see also SONA Ex Parte Letter June 26, 2020 at 3, 4; NSAI Ex Parte Letter June 26, 2020 at 1. E:\FR\FM\17SER2.SGM 17SER2 58134 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 have signaled may be useful in facilitating post-termination activities, such as via inclusion in letters of direction to the MLC, that may not otherwise be available when the time comes if not kept by the DMPs.271 To be clear, the Office is not adopting or endorsing a specific ‘‘proxy’’ for a grant date.272 After considering relevant comments, including the MLC’s arguments to the contrary, the interim rule maintains the NPRM’s proposed approach of tiering the requirements according to when, out of three time periods, the musical work was licensed by a DMP.273 Maintaining the status quo, the interim rule does not include regulatory language to govern musical works licensed by a DMP prior to the license availability date. If previous industry consensus was to use NOI dates (a factual matter the Office passes no judgment on), then the Office sees no reason why that should necessarily change.274 As it has not been suggested that the relevant parties’ access to historic NOI (or voluntary license) dates is any different than preMMA, it does not seem appropriate to require DMPs to retain any additional information for such parties’ potential future use in directing the MLC with respect to this category of works. Next, to provide a data point with respect to works that first become licensed as of a DMP’s respective blanket license effective date, the interim rule largely adopts the proposed database snapshot requirement. The DLC does not object to this general requirement, but requests two modifications to the proposed language to be practical for DMPs to implement: The required data fields for the snapshot should be limited to those the MLC reasonably requires and that the DMP has reasonably available (which the DLC says are sound recording name, featured artist, playing time, and DMP-assigned unique identifier); and instead of the snapshot needing to be of the database as it exists immediately prior to the effective date of the DMP’s blanket 271 See, e.g., SGA Ex Parte Letter June 26, 2020 at 2; Recording Academy Ex Parte Letter June 26, 2020 at 2; SONA Ex Parte Letter June 26, 2020 at 4. 272 SONA & MAC NPRM Comment at 10 (‘‘There is no suggestion that the correct payee can or should be determined based upon a ‘proxy’ server fixation date or other than as provided in the Copyright Act.’’); id. at 8, 10–11; SONA Ex Parte Letter June 26, 2020 at 2 (‘‘[SONA] would be apprehensive of any rule treating a piece of data as a ‘proxy’ for a grant under copyright law.’’); Recording Academy Ex Parte Letter June 26, 2020 at 3 (‘‘The data . . . should not be interpreted to represent, or serve as a proxy for, a grant of a license.’’); id. at 2. 273 See MLC NPRM Comment at 30–31. 274 See id. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 license, it should be as it exists at a time reasonably approximate to that date.275 The MLC opposes the DLC’s proposal to limit the data fields of the snapshot.276 The Office finds the DLC’s requested modifications to be reasonable, and adopts them with two slight changes. First, although requiring all of the data fields required for usage reporting and matching, as the MLC requests, seems unnecessary for the markedly different purpose of the snapshot, the interim rule adds ISRC (to the extent acquired by the DMP) so that, at least for most tracks, there is a second unique identifier in case the DMP-assigned unique identifier fails for some reason.277 Second, while the Office finds that, based on the technological issues discussed in the DLC’s comments, it is reasonable to permit the snapshot to be of a time reasonably approximate to the attachment of the DMP’s blanket license, the interim rule requires DMPs to use commercially reasonable efforts to make the snapshot as accurate and complete as reasonably possible in representing the service’s repertoire as of immediately prior to the effective date of the DMP’s blanket license. As for the last category—musical works that subsequently become licensed pursuant to a blanket license after the effective date of a given DMP’s blanket license—the comments reflect that the proposed rule should be updated. As discussed below, the interim rule requires each DMP to retain, to the extent reasonably available, both the server fixation date and street date for each sound recording embodying a musical work that is part of this category. If a DMP only has one of these dates, it should retain that one. If a DMP has neither, then the DMP should retain the date that, in the 275 DLC NPRM Comment at 15–16 (explaining that ‘‘the number of data fields and volume of data contained in the snapshot or archive is likely to be enormous—unduly burdensome and impractical both for the DMPs to produce and for the MLC to use,’’ and that ‘‘the process of creating the snapshot or archive will . . . involve so much data that it cannot be completed in a single day’’ which means that ‘‘works that are added to the service while the snapshotting or archiving process is underway may not ultimately be captured in the archive’’); id. at 16 & n.66, Add. at A–30; DLC Ex Parte Letter June 26, 2020 at 4. While the DLC requests that the snapshot be at a time reasonably approximate to the ‘‘license availability date,’’ the Office believes the DLC meant for that to mean the effective date of the DMP’s blanket license. This requirement will also apply to any new DMP that first obtains a blanket license at a time subsequent to the license availability date. 276 See MLC Ex Parte Letter June 26, 2020 at 6– 7. 277 See id. (asserting that other fields like ISRC and version ‘‘can be critical for aligning the records where the unique identifier fails’’). PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 assessment of the DMP, provides a reasonable estimate of the date the sound recording was first distributed on its service within the U.S. For each retained date, the DMP should also identify which type of date it is (i.e., server date, street date, or estimated first distribution date), so any party seeking to use such information will know which date is being relied upon.278 This approach strives to accommodate the competing equities raised over this issue. The comments indicate some level of agreement that knowing the date of first use of the particular sound recording by the particular DMP may be of some utility—regardless of whether such date may or may not be the ‘‘correct’’ item to look at under the Copyright Act.279 And among those commenters suggesting particular dates, there seems to be a general consensus that the server and street dates may be appropriate representations or approximations of first use.280 Other proposed dates have not been included generally because they do not seem to be dates that DMPs would have in their possession, there lacks consensus that such dates would be useful, and/or confidentiality concerns have been raised by the RIAA with respect to private agreements between individual record companies and individual DMPs. Although confidentiality concerns were also broached by the RIAA over the server date and estimated first distribution date, the Office understands those concerns to be less significant than with other data and disputed by the DLC,281 and the Office finds those 278 See MLC NPRM Comment at 32, App. at xiv– xv (proposing DMPs identify which type of date it is). 279 See id. at 32, App. at xiv; MLC Ex Parte Letter June 26, 2020 at 2 (‘‘[T]he call confirmed consensus’’ that DMPs should ‘‘include a data field identifying a date that reflects the first use of each sound recording by the service.’’); id. at 2–4, 6; SONA Ex Parte Letter June 26, 2020 at 4 (stating ‘‘the initial utilization date can be critical’’); id. at 3–4; SGA Ex Parte Letter June 26, 2020 at 2; NSAI Ex Parte Letter June 26, 2020 at 1. 280 See MLC NPRM Comment at 32, App. at xiv; MLC Ex Parte Letter June 26, 2020 at 2–4, 6; SONA Ex Parte Letter June 26, 2020 at 4 (‘‘[I]t seems that both server fixation date and the ‘street date’ specific to a particular DMP may be useful to establish initial utilization of a specific sound recording by a particular service.’’); id. at 3; SGA Ex Parte Letter June 26, 2020 at 2; NSAI Ex Parte Letter June 26, 2020 at 1. 281 See RIAA Ex Parte Letter Aug. 24, 2020 at 1– 2. Potentially contradictory, despite concerns with the estimated first distribution date, the RIAA has no concerns with the date that a track is first streamed. See id. The DLC disagrees that the estimated first distribution date is confidential data because it is ‘‘generated by the DMPs themselves, and therefore could not be considered proprietary to the record labels.’’ DLC Ex Parte Letter Aug. 27, 2020 at 2. It also states that dates generated by DMPs themselves should not be confidential. The Office is considering confidentiality issues E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 concerns as articulated to be outweighed by the need to provide DMPs with a reasonable degree of flexibility in carrying out the obligations this aspect of the interim rule places upon them. The dates incorporated into the interim rule represent three of the four dates for which the DLC said would be feasible for DMPs to retain at least one.282 Although the Office declines to include the fourth date, ingestion date, because there was no consensus as to its utility,283 the interim rule does include the DLC’s proposed ‘‘catch-all’’ estimated first distribution date, such that all DMPs should be able to comply with the rule even if not in possession of a server or street date for a given recording.284 For this same reason, and also because the retention requirement is limited to where the server and street dates are reasonably available to the DMP, the requirement to potentially have to retain both of these dates (where available), instead of merely a single date of the DMP’s choosing, is not anticipated to be overly burdensome.285 The Office again declines the MLC’s suggestion that DMPs should have to provide this information in their monthly reports of usage, instead encouraging the MLC to view the administration of terminations of transfers as more akin to one of a number of changes in musical work ownership or licensing administration scenarios the MLC is readying itself to administer apart from the DMPs’ monthly usage reporting. Although the MLC warns of processing inefficiencies and potential delays if it does not receive the pertinent information in monthly reporting, it is unclear why this concerning the MLC in a parallel rulemaking. See 85 FR 22559 (Apr. 22, 2020). 282 See DLC Ex Parte Letter June 25, 2020 at 2– 3. Although the DLC had previously discussed street date in terms of an ERN data field called ‘‘StartDate,’’ which the Office understands to be more of a planned or intended street date that does not necessarily equate to the actual street date (and which the RIAA says the use of would raise confidentiality concerns, see RIAA Ex Parte Letter Aug. 24, 2020 at 1), the DLC does not object to using the actual street date, so long as it is not the only date option. See DLC Ex Parte Letter Aug. 27, 2020 at 2. 283 See MLC NPRM Comment at 30 (‘‘The ‘date on which the blanket licensee first obtains the sound recording’ is . . . vague and can be interpreted many different ways by many different DMPs, resulting in inconsistent dates.’’). The RIAA also raised confidentiality concerns over this date, RIAA Ex Parte Letter Aug. 24, 2020 at 1–2, but the DLC disputes that this information can properly be considered confidential, DLC Ex Parte Letter Aug. 27, 2020 at 2. 284 See DLC Ex Parte Letter June 26, 2020 at 3. 285 See id. at 2 (‘‘[DMPs] should be given a choice of the date to report, based on the [DMP’s] specific operational and technical needs.’’); id. at 3 n.4. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 would be the case.286 As discussed above, the Office presumes the MLC will be operating in accordance with letters of direction (or other instructions or orders) that provide the requisite information needed for the MLC to properly distribute the relevant royalties to the correct party. In cases where the MLC is directed to use the DMPretained information, it would seem that the MLC, as a one-time matter, could pull the information for each DMP for that work and apply it appropriately. The DLC makes a similar observation and further explains that monthly reporting is unnecessary because ‘‘termination is relevant to only a subset of musical works . . . [a]nd only a (likely small) subset of grants are terminated in any event,’’ and that ‘‘as to each work, termination is an event that happens once every few decades.’’ 287 The MLC does not address these points. While the MLC seems to characterize its need for this data as a usage matching issue, it seems more appropriately understood as a change in ownership issue, and the record does not address why a change in ownership prompted by a termination of transfer would be materially more difficult to operationalize than any other change in ownership the MLC will have to handle in the ordinary course, including by following the procedures recommended by its dispute resolution committee. Nevertheless, the Office recognizes that it may take more time for the MLC to request access to the relevant information from the DMPs, rather than having it on hand upon receiving appropriate direction about a termination. While not requiring monthly reporting, the interim rule requires DMPs to report the relevant information to the MLC annually and grant the MLC reasonable access to the records of such information if needed by the MLC prior to it being reported. The DLC previously requested that if the Office requires affirmative reporting of 286 See MLC Ex Parte Letter June 26, 2020 at 4 (‘‘If instead that data was only maintained in records of use and not reported monthly, the MLC would be required to create a parallel monthly reporting process, and that process would not be able to begin until after the MLC received the regular usage reporting, at which point the MLC would need to contact each DMP each month to request the data, and then each DMP would have to send a separate transmission with such data, which the MLC would have to reintegrate with all of the data that had been reported in the standard monthly reporting.’’); MLC NPRM Comment at 31; see also Peermusic Ex Parte Letter June 26, 2020 at 2; NSAI Ex Parte Letter June 26, 2020 at 1. 287 DLC Ex Parte Letter June 26, 2020 at 3; see id. at 4 (‘‘The MLC has not adequately justified imposing the investment that would be required by DSPs to engineer their reports of usage to include this date field.’’). PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 58135 this information that it be on a quarterly basis and subject to a one-year transition period, so the Office believes this to be a reasonable annual requirement.288 The Office also expects this adjustment to alleviate some of the MLC’s concerns with the proposed rule’s retention provision discussed above.289 This reporting may, but need not, be connected to the DMP’s annual report of usage, and DMPs may of course report this information more frequently at their option. Such reporting should also include the same data fields required for the snapshot discussed above to assist in work identification and reconciliation. Information for the same track does not need to be reported more than once. With respect to the required snapshot discussed above, that should be delivered to the MLC as soon as commercially reasonable, but no later than contemporaneously with the first annual reporting. 2. Royalty Payment and Accounting Information The NPRM required DMPs that do not receive an invoice from the MLC to provide ‘‘a detailed and step-by-step accounting of the calculation of royalties payable by the blanket licensee under the blanket license . . . including but not limited to the number of payable units . . . whether pursuant to a blanket license, voluntary license, or individual download license.’’ 290 Similarly, blanket licensees that do receive an invoice are required to provide ‘‘all information necessary for the mechanical licensing collective to compute . . . the royalties payable under the blanket license . . . including but not limited to the number of payable units . . . whether pursuant to a blanket license, voluntary license, or individual download license.’’ The DLC asked the Office to confirm its understanding that this language only requires reporting usage information, not royalty payment or accounting information, for any uses under voluntary licenses or individual download licenses.291 The DLC is correct in its understanding that the language requires DMPs to report only usage information for uses made under voluntary or individual download licenses. The International Confederation of Societies of Authors and Composers (‘‘CISAC’’) & the International Organisation representing Mechanical 288 See id. at 4. also renders moot Peermusic’s concerns about the length of the proposed rule’s retention period. See Peermusic NPRM Comment at 6; Peermusic Ex Parte Letter June 26, 2020 at 2. 290 85 FR at 22541 (emphasis added). 291 DLC NPRM Comment at 12. 289 It E:\FR\FM\17SER2.SGM 17SER2 58136 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations Rights Societies (‘‘BIEM’’) raised a pair of issues which the Office address here. First, CISAC & BIEM said, ‘‘[t]he Proposed Rulemaking does not provide rules enabling the MLC to compute and check the calculation of the royalty payment, which will be based on information provided unilaterally by DMPs, with no clear indication of the amount deducted for the performing rights’ share.’’ 292 CISAC & BIEM additionally proposed that the interim rule ‘‘introduce clear provisions on back-claims in order to enable the MLC to claim works after the documentation has been properly set in the MLC database. For instance, the MLC should be able to invoice works previously used by DMPs, but which had not been ingested until afterwards into the MLC database, or which were subject to conflicting claim [sic].’’ 293 Regarding the first issue, the Office believes the statute and proposed rule already adequately address CISAC & BIEM’s concern. The MLC has access to DMP records of use under the interim rule and the statutory right to conduct a triennial audit to confirm the accuracy of royalty payments, which together provide the MLC with sufficient ability to compute and check DMP calculations of royalty payments.294 Regarding the second issue, the statute and proposed regulations also already address the substance of CISAC & BIEM’s proposal.295 Upon receiving reports of usage from DMPs, the MLC will be able to match royalties for musical works where it has data identifying the work and copyright owner. For those works that are not initially matched due to insufficient data, the MLC is required to engage in ongoing matching efforts.296 As part of those efforts, the MLC is required to create and maintain a database of 292 CISAC & BIEM NPRM Comment at 3–4. at 4. 294 17 U.S.C. 115(d)(4)(D). DMPs are also required to have annual reports of usage certified by a CPA, providing an additional check on the accuracy of royalties. 295 The Copyright Office has commissioned and published a report on Collective Rights Management Practices Around the World as baseline informational material for the public to reference in replying to a notice of inquiry seeking public comment in connection with the Office’s policy study regarding best practices the MLC may implement to reduce the overall incidence of unclaimed royalties. Susan Butler, Collective Rights Management Practices Around the World: A Survey of CMO Practices to Reduce the Occurrence of Unclaimed Royalties in Musical Works 3 (2020), https://www.copyright.gov/policy/unclaimedroyalties/CMO-full-report.pdf. The report may also be helpful in highlighting the similarities and differences between the MLC’s processes and existing processes used by foreign CMOs as they pertain to this proceeding. 296 17 U.S.C. 115(d)(3)(C)(i)(III). jbell on DSKJLSW7X2PROD with RULES2 293 Id. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 musical works that identifies their copyright owners and the sound recordings in which they are embodied.297 The MLC is expected to employ a variety of automated matching efforts, and also manual matching in some cases. Musical work copyright owners themselves are required to ‘‘engage in commercially reasonable efforts’’ to provide information to the MLC and its database regarding names of sound recordings in which their musical works are embodied.298 The MLC will operate a publicly accessible claiming portal through which copyright owners may claim ownership of musical works, and will operate a dispute resolution committee for resolving any ownership disputes that may arise over musical works, including implementation of ‘‘a mechanism to hold disputed funds pending the resolution of the dispute.’’ 299 Together, these provisions provide mechanisms that Congress considered to be reasonably sufficient for ensuring that royalties that are not initially matched to musical works are ultimately distributed to copyright owners once either (1) the musical work or copyright owner is identified and located through the MLC’s ongoing matching efforts, or (2) the work is claimed by the copyright owner, which is what CISAC & BIEM are essentially proposing, as the Office understands it. Separately, but relatedly, CISAC & BIEM recommended the Office promulgate regulations on ‘‘issues such as dispute resolution procedures or claiming processes that would allow Copyright Owners to raise identification conflicts before the MLC,’’ and asked, ‘‘How will claims be reconciled in case a work is also covered by a voluntary licence? Is the MLC also in charge of matching voluntary licences?’’ 300 Regarding the first question, as noted above, a DMP is required to provide the MLC with applicable voluntary license information as part of its NOL. Thus, instances where the MLC erroneously distributes blanket license royalties for a work that is covered by a voluntary license should be minimal. Disputes over which license is applicable to a given work will be addressed by 297 Id. at 115(d)(3)(E). at 115(d)(3)(E)(iv). 299 Id. at 115(d)(3)(K)(ii), (J)(iii)(I); MLC Initial NOI Comment at 84, U.S. Copyright Office Dkt. No. 2018–11, available at https://www.regulations.gov/ docketBrowser?rpp=25&po=0&dct=PS&D=COLC2018-0011&refD=COLC-2018-0011-0001. The MLC is required to ‘‘deposit into an interest-bearing account . . . royalties that cannot be distributed due to . . . a pending dispute before the dispute resolution committee . . .’’ 17 U.S.C. 115(d)(3)(G)(i)(III)(bb). 300 CISAC & BIEM NPRM Comment at 4. 298 Id. PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 procedures established by the MLC’s dispute resolution committee. The statute provides that this committee ‘‘shall establish policies and procedures . . . for copyright owners to address in a timely and equitable manner disputes relating to ownership interests in musical works licensed under this section,’’ although actions by the MLC will not affect the legal remedies available to persons ‘‘concerning ownership of, and entitlement to royalties for, a musical work.’’ 301 Regarding the second question, the MLC will, as part of its matching efforts, ‘‘confirm uses of musical works subject to voluntary licenses’’ and deduct those amounts from the royalties due from DMPs.302 The MLC does not otherwise administer voluntary licenses unless designated to do so by copyright owners and blanket licensees.303 i. Late Fees The NPRM was silent on the issue of when late fees are imposed on adjustments to estimates. As it did in comments to the NOI, the DLC called for language to ensure DMPs are not subject to late fees for adjustments to estimates after final figures are determined, so long as adjustments are made ‘‘either before (as permitted under the Proposed Rule) or with the annual report of adjustment or, if not finally determined by then, promptly after the estimated amount is finally determined.’’ 304 In support of its proposal, the DLC said, ‘‘[a]lthough the CRJs set the amount of the late fee, the Office is responsible for establishing due dates for adjusted payments. It is those due dates that establish whether or not a late fee is owed.’’ 305 Several commenters objected to this proposal.306 In particular, the MLC was ‘‘troubled by the DLC’s arguments’’ and explained that ‘‘if the DMPs are concerned about having to pay late fees, whenever they estimate an input they should do so in a manner that ensures that there will not be an underpayment of royalties. To permit DMPs to estimate inputs in a manner that results in underpayment to songwriters and copyright owners, without the penalty of late fees, encourages DMPs to underpay, to the detriment of songwriters and copyright owners.’’ 307 The MLC proposed to add language prescribing that no use of an 301 17 U.S.C. 115(d)(3)(K). at 115(d)(3)(G)(i)(I)(bb). 303 Id. at 115(d)(11)(C), (d)(3)(C)(iii). 304 DLC NPRM Comment at 14. 305 Id. 306 See MLC NPRM Comment at 36–37; AIMP NPRM Comment at 4–5; Peermusic NPRM Comment at 5. 307 MLC NPRM Comment at 36–37. 302 Id. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations estimate changes or affects the statutory due dates for royalty payments or the applicability of late fees to any underpayment of royalties that results from using an estimate.308 AIMP raised general concerns about the problem of late royalty payments and said ‘‘expanded use of estimates, and the result of retroactive adjustment of royalty payments, does create increased risk and additional burden to copyright owners.’’ 309 And Peermusic wrote that it ‘‘appreciate[d] the Copyright Office’s rejection of the DLC request that underpayments, when tied to ‘estimates,’ should not be subject to the late fee provision of the CRJ regulations governing royalties payable under Section 115, and we would request that the regulations be clear on this point.’’ 310 After careful consideration, the Office has adopted the language as proposed in the NPRM.311 The Office appreciates the need for relevant regulations to avoid unfairly penalizing DMPs who make good faith estimates from incurring late fees due to subsequent finalization of those inputs outside the DMPs’ control, and also to avoid incentivizing DMPs from applying estimates in a manner that results in an initial underpayment that delays royalty payments to copyright owners and other songwriters. Under the currently operative CRJ regulation, late fees are due ‘‘for any payment owed to a Copyright Owner and remaining unpaid after the due date established in [ ] 115(d)(4)(A)(i),’’ 312 that is, ‘‘45 calendar days [ ] after the end of the monthly reporting period.’’ 313 The statute itself specifies that where ‘‘the Copyright Royalty Judges establish a late fee for late payment of royalties for uses of musical works under this section, such fee shall apply to covered activities under blanket licenses, as follows: (i) Late fees for past due royalty payments shall accrue from the due date for payment until payment is received by the 308 MLC NPRM Comment App. at xiv. NPRM Comment at 4–5. 310 Peermusic NPRM Comment at 5. 311 Relatedly, though, the Office understands that a DMP following the adjustment process laid out in the regulations should not be deemed in default for failure to make earlier payments, provided the adjustment is timely made. For example, if a DMP made a reasonable good-faith estimate of a performance royalty that turned out to result in a significant underpayment of the relevant mechanical royalties, upon the establishment of the final rates, as long as the DMP paid the remainder mechanical royalties in accordance with the adjustment process, neither this timing nor the underpayment would be deemed material or otherwise put the DMP in default. 312 37 CFR 385.3. 313 17 U.S.C. 115(d)(4)(A)(i). jbell on DSKJLSW7X2PROD with RULES2 309 AIMP VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 mechanical licensing collective.’’ 314 Meanwhile, the Office is now adopting, as directed by statute, regulations regarding adjustments to these reports, including ‘‘mechanisms to account for overpayment and underpayment of royalties in prior periods’’ and associated timing for such adjustments.315 It is not clear that the best course is for the Office to promulgate language under this mandate that accounts for the interplay between the CRJs’ late fee regulation and the Office’s interim rule’s provision for adjustments, particularly where the CRJs may wish themselves to take the occasion of remand or otherwise update their operative regulation in light of the interim rule.316 The Office intends to monitor the operation of this aspect of the interim rule, and as appropriate in consultation with the CRJs. ii. Estimates The Office also declines to adopt the MLC’s proposal to narrow a DMP’s ability to use estimates for any inputs that cannot be finally determined at the time a report of usage is due, an ability the MLC described as ‘‘overly broad and permissive.’’ 317 The Office concludes that the NPRM does not provide unwarranted discretion to DMPs to use estimates. An input is either finally determined at the time a report of usage is due or it is not, and in the latter case, the rule provides that a DMP can only rely on estimates when the reason for the lack of a final input is beyond the DMP’s control. Furthermore, the Office notes that while the MLC originally proposed limiting the use of estimates to performance royalties,318 it has now expanded its proposal to include two additional circumstances where DMPs could provide estimates that the Office provided as examples in the NPRM preamble (total cost of content and inputs, subject to bona fide, good faith disputes between the DMP and a third party).319 The Office believes the 314 Id. at 115(d)(8)(B). at 115(d)(4)(A)(iv)(II). 316 See 85 FR at 22530 (‘‘Any applicable late fees are governed by the CRJs, and any clarification should come from them.’’). 317 MLC NPRM Comment at 33. See also AIMP NPRM Comment at 4–5 (‘‘It is also important to note that expanded use of estimates, and the result of retroactive adjustment of royalty payments, does create increased risk and additional burden to copyright owners’’); Peermusic NPRM Comment at 5 (‘‘Peermusic is particularly concerned about what appears to an expansion in the proposed rules to DMP’s use of estimates in royalty calculations’’). 318 85 FR at 22530. 319 Compare MLC NPRM Comment App. at xii– xiii, with 85 FR at 22530 (inputs subject to bona fide, good faith disputes between the DMP and a third party), 85 FR at 22541 (‘‘the amount of 315 Id. PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 58137 interim rule will benefit from the flexibility the current language provides and, based on the current record, that the potential for abuse is minimal. The Office does appreciate the concerns raised by the MLC and others regarding the use of estimates, so while it declines to narrow the ability to use estimates, it has adopted the majority of the MLC’s proposal to require DMPs using estimates to ‘‘(i) clearly identify in its Usage Report any and all royalty calculation inputs that have been estimated; (ii) provide the justification for the use of estimate; (iii) provide an explanation as to how the estimate was made, and (iv) in each succeeding Usage Report, provide an update and report on the status of all estimates taken in prior statements.’’ 320 The interim rule includes the first three requirements but not the fourth; the Office believes the rules provide sufficient transparency because they already include deadlines for making adjustments of estimates and require DMPs to explain reason(s) for adjustments when they deliver a report of adjustment after the estimate becomes final. One additional scenario where DMPs may need to rely on estimates is where a DMP is operating under both the blanket license and voluntary licenses, has not filed a report of usage within 15 days of the end of the applicable reporting period, and thus will not receive an invoice prior to the royalty payment deadline, but will receive notification from the MLC of any underpayment or overpayment by day 70.321 The MLC acknowledged the need for estimates under these circumstances, but added, ‘‘there should not be an extensive delay between the time of the estimate and the time the adjustment based on actual usage can be made. The required adjustment should be made within 5 calendar days of the provision to the DMP of the response file, and the DMP should not be permitted to make this adjustment 18 months after the estimate, as is currently permitted in the Proposed Regulation by reference to § 210.27(k).’’ 322 The interim rule adopts the MLC’s proposed amendment, and no report of adjustment is required in that circumstance. iii. Invoices and Response Files A persistent issue throughout this rulemaking has been how the regulations should address the applicable consideration for sound recording copyright rights’’). 320 MLC NPRM Comment at 34; see also AIMP NPRM Comment at 5; Peermusic NPRM Comment at 5. 321 MLC NPRM Comment at 34–35. 322 Id. E:\FR\FM\17SER2.SGM 17SER2 58138 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations choreography between a DMP and the MLC through which a DMP receives royalty invoices and response files 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.323 Although the MMA does not explicitly address invoices and response files, the DLC has consistently articulated the importance of addressing requirements for each in Copyright Office regulations.324 The Office endeavored in its NPRM to balance the operational concerns of all parties consistent with the MMA’s legal framework and underlying goals. The DLC, MLC, and Music Reports each commented on this aspect of the NPRM, and the interim rule updates the proposed rule in some ways based on these comments, as discussed below.325 While ‘‘appreciat[ing]’’ the proposed rule’s general approach, the DLC recommended requiring the MLC to provide an invoice to a DMP five days earlier than what the Office proposed.326 The Office declines to adopt this recommendation because it believes the timeline in the proposed rule is reasonable and can be adjusted if necessary once the blanket license becomes operational. The Office also declines to add the MLC’s proffered amendment that would only require it to ‘‘engage in efforts’’ to deliver an invoice within 40 days after the end of the reporting period for timely reports of usage; the MLC has represented that 25 days is sufficient for it to process a report of usage and return an invoice, so if a DMP submits a report of usage within the time period entitling it to an invoice under the interim rule (which is 30 days earlier than it is required to submit a report of usage under the statute), it seems reasonable for the DMP to have certainty that it will receive an invoice prior to the statutory royalty payment deadline.327 The interim rule clarifies when the MLC must provide a response file to a DMP. The rule essentially takes the approach proposed by the MLC that eliminates any set deadline for the MLC to provide a response file if a DMP fails to file a report of usage within the 323 See 85 FR at 22528. Initial NOI Comment at 13; DLC Reply NOI Comment at 13–16; DLC Ex Parte Letter Feb. 14, 2020. 325 Music Reports’ suggestion that the MLC includes a unique, persistent numerical identifier for individual shares of a work in response files is addressed above. 326 DLC NPRM Comment at 12. 327 85 FR at 22528. jbell on DSKJLSW7X2PROD with RULES2 324 DLC VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 statutory timeframe,328 by providing that the MLC need only provide a response file ‘‘in a reasonably timely manner’’ in such circumstances. It also accepts the DLC’s recommendation of permitting a DMP to request an invoice even when it did not submit its monthly report of usage within 15 calendar days after the end of the applicable monthly reporting period. 329 The MLC asked the Office to clarify that a DMP is required by statute to pay royalties owed within 45 days after the end of the reporting period, even if the MLC is unable to deliver a response file within the time period required under the rule, and that the rule should only require the MLC to ‘‘use its efforts’’ to meet the interim response file deadline.330 The Office declines to adopt this proposal—the payment deadline is already spelled out in the statute, so any rule would be redundant.331 The NPRM provided that response files should generally ‘‘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 DMPs by applicable third-party administrators.’’ The DLC requested that the rule ‘‘should provide further specification and detail regarding the content’’ in response files to ‘‘ensure the regular and prompt receipt of necessary accounting information.’’ 332 Specifically, the DLC proposed requiring the following fields: ‘‘song title, vendor-assigned song code, composer(s), publisher name, publisher split, vendor-assigned publisher number, publisher/license status, [ ] royalties per track[,] . . . top publisher, original publisher, admin publisher and effective per play rate[,] and time adjusted plays.’’ 333 In an ex parte meeting, the MLC reiterated its position that the regulations need not set forth this level of detail, but confirmed that it intended to include the information identified by the DLC in response files.334 The interim rule adopts the DLC’s proposal to spell out the minimum information required in response files, with the Office using 328 MLC NPRM Comment at 43–44. This concern stems from the requirement that the MLC provide response files within 70 days of the end of the applicable month. The MLC suggested that the text of the rule could be read to require a response file from the MLC on day 70 even if a DMP submitted a usage report on day 69, which would be operationally untenable. Id. at 44. 329 DLC NPRM Comment at 12–13. 330 MLC NPRM Comment at 43. 331 17 U.S.C. 115(d)(4)(A)(i). 332 DLC NPRM Comment at 13. 333 Id. (internal quotation marks omitted). 334 MLC Ex Parte Letter Aug. 16, 2020 at 3. PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 language that conforms with the MLC’s terminology. Finally, the Office has added language that permits DMPs to make a one-time request for response files in light of comments from the DLC stating that ‘‘the operational need for a response file is unlikely to change from month to month.’’ 335 The Office recognizes the above provisions addressing invoices and response files include a number of specific deadlines for both the MLC and DMPs and understands that they have been made based on reasonable estimates, but that before the blanket license becomes operational they remain only estimates. The Office would welcome updates from the MLC’s operations advisory committee, or the MLC or DLC separately if, once the process becomes operational, the parties believe changes are necessary. iv. Adjustments The DLC proposed deleting two portions of the proposed rule addressing reports of adjustments: First, the requirement that DMPs include in the description of adjustment ‘‘the monetary amount of the adjustment’’ and second, the requirement to 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.’’ 336 The DLC explained, ‘‘[a]lthough DMPs must provide inputs to the MLC, it is typically the MLC, not the providers, that will use those inputs to perform a ‘step-by-step accounting’ and determine the ‘monetary amount[s]’ due to be paid.’’ 337 In response, the MLC confirmed its shared understanding that it would be verifying this math and did not oppose the DLC’s proposal.338 The MLC proposed additional language, modeled off language in the monthly usage reporting provisions found in § 210.27(d)(1)(ii) of the proposed rule to confirm ‘‘that DMPs must always provide all necessary royalty pool calculation information.’’ 339 Finding the above reasonable, the Office adopts the DLC’s proposal with the addition of the language proposed by the MLC. The DLC separately requested that the rule permit a DMP the option of 335 DLC NPRM Comment at 12 n.48. The DLC added, ‘‘[w]e understand from our initial conversations with the MLC that it plans to provide such a mechanism.’’ Id. 336 Id. at 13–14. 337 Id. at 13. 338 MLC Ex Parte Letter Aug. 16, 2020 at 2. 339 Id. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations requesting a refund for overpayments instead of an offset or credit.340 The Office has added this option to the rule.341 Regarding the permissible categories that may be adjusted for annual reports of usage, ARM suggested a slight expansion of the audit exception in the proposed rule to include audits by sound recording copyright owners.342 It explained that ‘‘[i]t is highly unlikely that an audit by a sound recording copyright owner would be completed before an annual statement issues, meaning that there should be an exception for adjusting TCC in past annual statements based on a sound recording audit.’’ 343 The Office accepts ARM’s suggestion as reasonable and has added slightly broader language to permit a report of adjustment adjusting an annual report of usage following any audit of a blanket licensee. DLC’s proposal runs contrary to the logic for requiring a simplified format. And the MLC’s proposal would seem unnecessary given the flexibility afforded by the rule; the MLC retains the discretion to include limitations in its format requirements that address its concerns, and its ability to work with DMPs to develop such requirements would likely produce more optimal results on this issue than bright-line regulations developed by the Office. The Office has adopted the DLC’s proposal to include a requirement that the MLC provide DMPs with confirmation of receipt of both reports of usage and payment.348 The Office additionally has determined that such confirmation should be provided within a specified time period and believes that two business days is reasonable, given that this process will likely be automated. implement modifications made by the MLC to reporting or data formats or standards from six months to one year, noting the operational challenges for services to ‘‘implement new data fields and protocols on a platform-wide basis.’’ 351 The Office is persuaded by the DLC’s explanation and incorporates the proposal in the interim rule. Finally, the DLC also expressed concern that a proposed provision which addressed instances of IT outages by the MLC did not encompass instances where the DMP is unaware of the outage resulting in a usage report or royalty payment not being received by the MLC.352 It stated, ‘‘[l]icensees should not be held to a strict 2- or 5-day deadline to rectify problems of which they are not immediately aware,’’ and proposed regulatory language to address this scenario.353 The Office has adopted this proposal in the interim rule. 3. Format and Delivery The MLC and DLC each offered suggested changes to the report of usage format and delivery requirements. The MLC asked that DMPs that either also engage in voluntary licensing or operate as ‘‘white-label’’ services be excluded from being able to use a simplified format for reports of usage.344 The DLC recommended amending the proposed rule in the opposite direction and permit all DMPs, regardless of size or level of sophistication, to elect to use a simplified report of usage format.345 The Office declines to make either change. As noted in the NPRM, ‘‘[i]n 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.’’ 346 The NPRM proposed to ‘‘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.’’ 347 The i. Modification of Report of Usage Format Requirements The DLC raised concerns about what it describes as the ‘‘unfettered authority’’ for the MLC to modify format and payment method requirements and proposed the addition of procedural guardrails in the rule, specifically, ‘‘that the MLC cannot impose new requirements under Section 210.27(h) except after a thorough and good-faith consultation with the Operations Advisory Committee established by the MMA, with due consideration to the technological and cost burdens that would result, and the proportionality of those burdens to any expected benefits.’’ 349 Although the Office assumes that the MLC and DLC will regularly consult on these and other operational issues, particularly through the operations advisory committee, it has added the suggested language to the interim rule. The DLC raised a related concern that this provision ‘‘could be used [by the MLC] to override the Office’s determinations about the appropriate content of the reports of usage.’’ 350 The Office adopts the DLC’s proposed language prohibiting the MLC from imposing reporting requirements otherwise inconsistent with this section. Next, the DLC proposed increasing the time period in which DMPs must ii. Certification of Monthly and Annual Reports of Usage The NPRM included rules regarding certification by DMPs of both monthly and annual reports of usage, which generated a number of comments. SGA supported the annual certification requirement, saying, ‘‘[t]his tool of oversight is essential to the smooth functioning of the MLC, and will assist in the fulfillment of three of the most important mandates of the Act: efficiency, openness and accountability.’’ 354 SONA supported the certification requirements in general and specifically called the annual certification requirement ‘‘imperative,’’ saying, ‘‘[t]his level of certification is a fundamental element of promoting accuracy and transparency in royalty reporting and payments to copyright owners whose musical works are being used by these DMPs.’’ 355 As noted above, the MLC proposed an amendment to the certification requirement with respect to data collection efforts.356 Finally, the DLC proposed two amendments, discussed in turn below. First, the DLC proposed language to address its concern that the proposed rule would require DMPs to certify royalty calculations they do not make, 340 DLC NPRM Comment at 14. Office has also made clear that any underpayment is due from DMPs contemporaneously with delivery of the report of adjustment, or promptly after being notified by the mechanical licensing collective of the amount due. 342 ARM NPRM Comment at 5 n.4. 343 Id. 344 MLC NPRM Comment at 42. 345 DLC NPRM Comment at 10. 346 85 FR at 22534. 347 Id. Separately, the Office notes the reply comments from Music Librarians, Archivists, and Library Copyright Specialists in response to the NOI, which encouraged ‘‘the Office to include options in the new blanket licensing structure appropriate for libraries, archives, museums, and other educational and cultural institutions.’’ Quilter, et al. Reply NOI Comment at 1. Although 341 The jbell on DSKJLSW7X2PROD with RULES2 58139 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 351 Id. 352 Id. those comments spoke broadly about flexible licensing options, and the Office cannot expand the statutory contours of the section 115 compulsory license, the requirement for the MLC to provide a simplified report of usage format can be seen as one specific way for ensuring the blanket license is a workable option for the types of nonprofit and educational institutions identified in the comment. 348 DLC NPRM Comment at 13. 349 Id. at 11. 350 Id. at 10. PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 at 11. at 17. 353 Id. 354 SGA NPRM Comment at 2. NPRM Comment at 5; see id. at 4 (‘‘SONA and MAC are pleased that the Copyright Office has confirmed the importance of robust certification requirements for usage reports provided under blanket licenses by DMPs.’’). 356 MLC NPRM Comment at 10–11; see also Peermusic NPRM Comment at 4 (agreeing with MLC’s recommendation for ‘‘robust certification of compliance’’). 355 SONA E:\FR\FM\17SER2.SGM 17SER2 58140 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations since it is the MLC that generally bears responsibility for applying and calculating the statutory royalties based on the DMPs’ reported usage.357 The Office has adopted the majority of the DLC’s proposed language, with some changes. First, the interim rule uses the language ‘‘to the extent reported’’ in place of the DLC’s proposed ‘‘only if the blanket licensee chose to include a calculation of such royalties.’’ The Office believes this more accurately clarifies that, under the blanket license, DMPs are no longer solely responsible for making all royalty calculations.358 Notwithstanding this clarification, the Office draws attention to the interim rule’s further requirement that DMPs must still certify to any underlying data necessary for such calculations. Second, the DLC commented that ‘‘there are inconsistencies in the regulatory text’s description of the accountant’s certifications. After consulting with the auditor for one of the DLC member companies, we have proposed changes that use more consistent language throughout and are in better alignment with the relevant accounting standards and practices.’’ 359 No party raised objections to these proposed technical changes. The Office believes it is reasonable to largely accept the representation that this language better conforms to and reflects standard accounting practices and has largely adopted the DLC’s proposed language.360 357 DLC NPRM Comment at 18. Office notes that under the blanket license, while DMPs are never making the actual ultimate royalty calculation for a particular musical work, they are doing varying degrees of relevant and important calculations along the way, the extent to which depends on whether or not they will receive an invoice under paragraph (g)(1)—if a DMP does not, then it must calculate the total royalty pool; if it does, then it must calculate or provide the underlying inputs or components that the MLC will use to calculate the pool, and then the amount per work from there. 359 DLC NPRM Comment at 19. 360 Among the changes the Office declines to make is substituting ‘‘presents fairly’’ for ‘‘accurately represents.’’ While the Office appreciates the DLC’s representation of its proposed changes as increasing consistency and alignment with relevant accounting standards and practices, this particular change strikes the Office as perhaps more meaningful, and the Office is hesitant to adopt it without further elaboration. See 85 FR at 22534 (‘‘The current certification requirements were adopted in 2014 after careful consideration by the Office, 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.’’). jbell on DSKJLSW7X2PROD with RULES2 358 The VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 iii. Voluntary Agreements to Alter Process The NPRM ‘‘permit[ted] 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,’’ with two caveats to safeguard copyright owner interests.361 ‘‘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.’’ 362 Two commenters raised concerns with this proposal. FMC appreciated the proposal but asked the Office to consider ‘‘language to stipulate how any voluntary agreements between the MLC and DLC would be disclosed and/or announced publicly, for the sake of additional transparency.’’ 363 SONA said that the caveats were insufficient because they would not prevent the MLC from entering into an agreement with a DMP that disregards statutory or regulatory terms, and SONA ‘‘oppose[s] the adoption of any rule that would permit a blanket licensee to provide less robust reporting that what the MMA and reporting regulations require.364 The interim rule addresses both these concerns. It requires the MLC to maintain a publicly accessible list of voluntary agreements and specifies that such agreements are considered records that a copyright owner is entitled to access and inspect under 17 U.S.C. 115(d)(3)(M)(ii).365 It also clarifies that voluntary agreements are limited to modifying only procedures for usage reporting and royalty payment, not substantive requirements such as sound recording and musical work information DMPs are required to report. 4. Documentation of Records of Use Pursuant to its statutory authority, the Office proposed ‘‘regulations setting forth requirements under which records 361 Id. 362 Id. 363 FMC NPRM Comment at 3. NPRM Comment at 13. 365 Under the statute, such records are ‘‘subject to the confidentiality requirements prescribed by the Register of Copyrights.’’ 17 U.S.C. 115(d)(3)(M)(i). The Office is addressing confidentiality considerations in a parallel rulemaking. 85 FR at 22559. While the interim rule refers to confidential information in a few provisions, it does not directly reference the Office’s forthcoming confidentiality regulations. The Office intends to adjust the interim rule to directly reference the Office’s confidentiality regulations once they take effect. 364 SONA PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 of use shall be maintained and made available to the mechanical licensing collective by digital music providers engaged in covered activities under a blanket license.’’ 366 The proposed rule adopted the same general approach regarding records of use under the MMA that was previously taken with regards to the nonblanket section 115 license, obligating DMPs to retain documents and records that are ‘‘necessary and appropriate’’ to support the information provided in their reports of usage. Some records may be relevant to a DMP’s calculations of an input in its report of usage without being necessary and appropriate to support the calculation, and thus outside the scope of the documentation requirement. The NPRM further clarified this language by ‘‘enumerating several nonexclusive examples of the types of records DMPs are obligated to retain and make available to the MLC.’’ 367 These examples are meant to be illustrative of the types of ‘‘necessary and appropriate’’ documents and records required to be retained under this provision,368 rather than materially increasing the types of records DMPs currently retain. The MLC and NSAI supported the proposed records of use provisions, with both proposing the addition of a deadline for DMP compliance with reasonable requests by the MLC for access to records of use.369 By contrast, the DLC expressed ‘‘significant concerns about these provisions.’’ 370 The DLC’s overall concern is that the documentation requirements are ‘‘significantly more extensive than DLC proposed in its comments,’’ and raised 366 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I). FR at 22535. 368 For example, the proposed rule requires DMPs to retain ‘‘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’’ and ‘‘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.’’ Id. at 22546. Under the current 37 CFR 385.22, certain royalty floors are calculated based on the number of DMP subscribers, and the Office understands reports of usage to typically only provide the total number of subscribers. But DMPs may offer different types of subscription plans, such as a family plan or a student plan, and under 37 CFR 385.22(b), such subscribers are weighted when calculating total subscribers (a family plan is treated as 1.5 subscribers, while a student plan is treated as 0.5 subscribers under the regulation). This provision would permit the MLC to access documentation that discloses those underlying numbers if necessary to support the reported total subscriber number. 369 MLC NPRM Comment at 44–45; NSAI NPRM Comment at 2. 370 DLC NPRM Comment at 19–20. 367 85 E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations questions about the interplay between this provision and the MLC’s statutory triennial audit right, allowing for a more thorough examination of royalty calculation records.371 While the Office has adjusted the proposed rule, as addressed below in response to other specific DLC suggestions, it believes these general objections were essentially already considered and appropriately addressed by the NPRM.372 As noted, the proposed rule was intended as a compromise between the need for transparency and the ability of the MLC to ‘‘engage in efforts to . . . confirm proper payment of royalties due’’ 373 on the one hand, with a desire to ensure that the blanket license remains a workable tool and the accounting procedures are not so complicated that they make the license impractical on the other.374 The provisions are meant to allow the MLC to spot-check royalty provisions; 375 but not to provide the MLC with unfettered access to DMP records and documentation. And setting aside MLC access, general obligations relating to retention of records have been a feature of the section 115 regulations since at least implementation of the Copyright Act of 1976.376 As an interim rule, the Office can subsequently expand or limit the recordkeeping provisions, if necessary.377 iv. Retention Period The NPRM proposed requiring DMPs operating under the blanket license to ‘‘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’’ for a period of five years from the date of delivery of a report of usage to the MLC. The Office noted it ‘‘may consider extending the retention period to seven years to align with the statutory 371 Id. at 19. See 17 U.S.C. 115(d)(4)(D)(i). e.g., 85 FR at 22529–30 (rejecting the MLC’s proposal for monthly reporting of certain types of information but explaining they would be included in recordkeeping requirements, addressing interplay with the triennial audit right); id. at 22535 (proposing recordkeeping retention and access requirements, including declining to adopt some of the MLC’s more expansive proposals). 373 See 17 U.S.C. 115(d)(3)(G)(i)(I)(cc). 374 85 FR at 22526. 375 See NSAI NPRM Comment at 2 (‘‘[W]hile the MLC’s ability to audit a digital service once every three years is an important tool for license administration, it is no substitute for a trusted administrator like the MLC having ongoing visibility into royalty accounting practices.’’). 376 See 42 FR 64889, 64894 (Dec. 29, 1977). See also 43 FR 44511, 44515 (Sept. 28, 1978) (discussing records of use retention period provision in connection with statute of limitations for potential claims). 377 The Office can also update this rule if the relevant provisions of 37 CFR part 385 change. jbell on DSKJLSW7X2PROD with RULES2 372 See, VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 recordkeeping requirements the MMA places on the MLC.’’ 378 FMC supported this extension, saying, it ‘‘would help engender necessary trust in the system from songwriters—if there are questions or problems, parties would be able to go back and look at the data.’’ 379 The MLC also proposed extending the retention period from five to seven years.380 No commenter opposed the proposed extension. Therefore, the Office is adopting a seven-year retention period in the interim rule to afford greater transparency and harmonize the record retention period for DMPs with the statutory retention period for the MLC.381 Additionally, the Office is adopting the MLC’s proposed amendment clarifying that the retention period for records relating to an estimate accrues from receipt of the report containing the final adjustment. This rule is roughly analogous to the current documentation rule in 37 CFR 210.18, which bases the retention period for licensees from the date of service of an annual or amended annual statement. v. Non-Royalty Bearing DPDs Another concern raised by the DLC relates to the proposed requirement to retain records and documents accounting for DPDs that do not constitute plays, constructive plays, or other payable units. Although the DLC says this provision is ‘‘unnecessary because these are not relevant to the information set forth in a report of usage,’’ 382 the Office disagrees; this provision is relevant to confirming reported royalty-bearing uses. ‘‘Play’’ is a defined term under the current section 385, and retention of these records may facilitate transparency in understanding adherence to this regulatory definition. The DLC further argues that the CRJs have already ‘‘issued regulations related to recordkeeping of a narrower set of uses that do not affect royalties— promotional and free trial uses—after an extensive ratesetting proceeding, pursuant to its separate authority to issue recordkeeping requirements,’’ and that ‘‘[r]ather than dividing responsibility for establishing recordkeeping rules for these closely related categories of uses between the Copyright Office and the CRB, it would be far more appropriate for the CRB to address any need to retain an expanded universe of non-royalty-related information, in the context of the next ratemaking proceeding.’’ 383 The DLC misconstrues the division of authority between the Office and the CRJs. The Office has previously opined on the division of authority between it and the CRJs over the pre-MMA section 115 license and concluded that ‘‘the scope of the CRJs’ authority in the areas of notice and recordkeeping for the section 115 license must be construed in light of Congress’s more specific delegation of responsibility to the Register of Copyrights.’’ 384 The CRJs have also previously stated that they can adopt notice and recordkeeping rules ‘‘to the extent the Judges find it necessary to augment the Register’s reporting rules.’’ 385 Finally, notwithstanding the CRJs’ authority to ‘‘specify notice and recordkeeping requirements of users of the copyrights at issue,’’ in their determinations,386 the MMA eliminated the section 115 provision regarding CRJ recordkeeping authority 387 and specifically assigned that authority, for the blanket license, to the Copyright Office.388 The Office concludes that it is the appropriate body to promulgate these recordkeeping provisions under the MMA. vi. Royalty Floors The DLC raised some concern that the requirement for keeping ‘‘records and documents regarding whether and how any royalty floor is established [ ] is redundant of the other provisions, particularly paragraph (m)(1)(vi), which already requires retention of all information needed to support royalty calculations, including the various inputs into royalty floors.’’ 389 The Office notes that there is conceivably some distinction between records about whether and how floors apply and records about the various inputs that go into the determination of applying the floors, meaning the two provisions are not superfluous. And to the extent there is any redundancy between recordkeeping provisions, such overlap would seem to be harmless, and so the Office has not removed the provision identified by the DLC. vii. Access By the MLC The NPRM also limited access to records of use by the MLC. The interim rule is amended to require a DMP to make arrangements for access to records 383 Id. 384 73 FR 48396, 48397–98 (Aug. 19, 2008). FR 1918, 1962 (Feb. 5, 2019). 386 17 U.S.C. 803(c)(3). 387 See id. at 115(c)(3)(D) (2017). 388 Id. at 115(d)(4)(A)(iii), (iv)(I); see also 73 FR at 48397–98 (discussing Congress’s more specific delegation to the Copyright Office). 389 DLC NPRM Comment at 19. 385 84 378 85 FR at 22534. NPRM Comment at 3. 380 MLC NPRM Comment App. at xxvii. 381 17 U.S.C. 115(d)(3)(M)(i). 382 DLC NPRM Comment at 19 (internal quotation marks and brackets omitted). 379 FMC PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 58141 E:\FR\FM\17SER2.SGM 17SER2 58142 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations within 30 days of a request from the MLC, as suggested by the MLC and endorsed by NSAI.390 The interim rule also limits the frequency that the MLC can request records of use to address concerns raised by the DLC, but with a less expansive limit than the DLC suggested.391 Factoring into account the MLC’s countervailing comments, the Office believes a more frequent period may be appropriate, and the interim rule thus limits the MLC to one request to a particular DMP per quarter, covering a period of one quarter in the aggregate. Finally, the Office clarifies its understanding that the requirement to retain ‘‘[a]ny other records or documents that may be appropriately examined pursuant to an audit under 17 U.S.C. 115(d)(4)(D)’’ should not be read as giving the MLC access to documents held pursuant to this category outside of such an audit.392 viii. Total Cost of Content jbell on DSKJLSW7X2PROD with RULES2 Because the total cost of content (‘‘TCC’’) is a fundamental component of the current royalty rates under the blanket license, the NPRM included language permitting the MLC access to ‘‘[r]ecords and documents with information sufficient to reasonably demonstrate . . . whether . . . total cost of content . . . [is] properly calculated.’’ ARM voiced strong opposition to this provision.393 It contended that such access would interfere with highly commercially sensitive agreements between its member record labels and DMPs, and that confidentiality regulations proposed by the Office lacked sufficient enforcement mechanisms to remedy any breach that might occur.394 The RIAA reiterated its concern in an ex parte meeting that access to underlying records and inputs 390 See MLC NPRM Comment at 44–45 (‘‘The MLC retains a concern about the absence of a prescribed time frame for DMP compliance with reasonable requests by the MLC for access to records of use, which could delay the MLC’s access to information that the MLC may require on a timely basis. The MLC therefore requests that DMPs be required to provide access to requested information within 30 days of the MLC’s request.’’); NSAI NPRM Comment at 2 (‘‘NSAI agrees with the MLC that the digital services’ obligation to provide reasonable access to records of use on request should have a prompt deadline in the regulations. This will prevent stonewalling and avoid disagreement over such timing.’’). 391 DLC NPRM Comment at 20 (stating ‘‘since the MMA limits audits both in their frequency and their scope, similar limits should apply to the MLC’s access to documentation and records of use. DLC therefore proposes that the MLC’s access be limited in frequency to once per 12-month period, and limited in scope to no more than two months (in the aggregate) of records.’’). 392 See id. at 21, Add. at A–29–30. 393 ARM NPRM Comment at 4. 394 Id. at 4–5. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 used to calculate the TCC could undermine ‘‘the confidentiality of commercial agreements negotiated between individual record companies and digital music providers (‘‘DMPs’’) in a competitive marketplace.’’ 395 The RIAA recognized that the MLC may have a need to confirm that the usage reports were calculated in accordance with the total aggregated TCC figure reflected in DMP financial records (as opposed to terms of agreements with individual record labels or other distributors), and that there may be separate needs for document retention beyond access by the MLC for routine administration functions.396 Accordingly, it suggested that with respect to TCC, access by the MLC to DMP records ‘‘should be limited to confirming that the DMP accurately reported to the MLC the aggregated TCC figure kept on its books.’’ 397 The interim rule has thus retained an obligation on the part of DMPs to keep records sufficient to reasonably support and confirm the accuracy of the TCC figure, while amending the access provision to limit the MLC to only the aggregated figure. D. Reports of Usage—Significant Nonblanket Licensees As discussed in the NOI and NPRM, SNBLs are also required to deliver reports of usage to the MLC.398 Based on the ‘‘fairly sparse’’ comments received in response to the notification and the Office’s observation that ‘‘[t]he statutory requirements for blanket licensees and SNBLs differ in a number of material ways,’’ the Office concluded that it seemed ‘‘reasonable to fashion the proposed rule for SNBL reports of usage as an abbreviated version of the reporting provided by blanket licensees.’’ 399 In light of the 395 RIAA Ex Parte Letter June 16, 2020 at 1. The RIAA elaborated, ‘‘[c]ommercial agreements between record companies and DMPs are so highly competitively sensitive they amount to trade secrets and must be treated as such. Because these agreements typically have short terms, they are renegotiated frequently and any leakage of their terms and conditions could have a significant detrimental impact on the streaming marketplace. There are several important considerations: (1) Individual MLC board members may be employees of companies owned by a music group competitor; (2) It is possible to derive the percentage of revenue equivalent of a DMP’s payment to each record company once it is known (a) the amount the DMP paid to each record company that month and (b) the DMP’s monthly Service Provider Revenue(which is a required part of its monthly mechanical royalty calculation, see 37 CFR 385.21); and (3) There is no clear remedy for violating proposed confidentiality regulations, especially given the damage that could ensue.’’ Id. at 1–2. 396 See, e.g., supra note 376. 397 RIAA Ex Parte Letter Aug. 24, 2020 at 2. 398 84 FR at 49971; 85 FR at 22535. 399 85 FR at 22535. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 ‘‘particularly thin record on SNBLs,’’ the Office particularly encouraged further comment on this issue.400 The Office received little more in response. Only the MLC, DLC, and FMC comments discuss SNBLs, all in brief.401 FMC says it ‘‘agree[s] that SNBL reporting can serve an array of aims, including distribution of unclaimed royalties and administrative assessment calculations, and general matching support,’’ and also ‘‘transparency aims.’’ 402 FMC further states that it thus ‘‘tend[s] to favor more robust reporting requirements’’ and that ‘‘[r]ecords of use, in particular, should be included.’’ 403 FMC does not propose specific regulatory language. The MLC says that ‘‘it seems possible that the MLC may have good reason to include [SNBL] data in the public database to the extent such data is not otherwise available,’’ that it plans to ‘‘use usage reporting from SNBLs . . . as part of the determination of administrative assessment allocations,’’ and that ‘‘[t]he rule does not provide excessive information, as use in connection with any market share calculation for any distribution of unclaimed accrued royalties would require a full processing and matching of the usage reporting data.’’ 404 The MLC does not propose any changes to the NPRM’s regulatory language that do not align with changes it also proposed with respect to blanket licensee reporting.405 The DLC’s proposed regulatory language also largely mirrors, to the extent applicable, its proposal for blanket licensee reporting.406 The DLC further requests a modification to one of the certification provisions specifically for SNBL reporting because it says that it ‘‘incorrectly assumes that such licensees engage in a CPA certification process.’’ 407 Having considered these comments, the record does not indicate to the Office that it should change its overall proposed approach to SNBL reporting requirements. Therefore, the Office is essentially adopting the proposed rule as an interim rule, but with appropriate updates to incorporate and apply the relevant decisions detailed above that the Office has made with respect to blanket licensee reporting requirements. The Office has not carried over the 400 Id. at 22535–36. MLC NPRM Comment at 46, App. at xxx– xxxvii; DLC NPRM Comment at 18, Add. at A–30– 38; FMC NPRM Comment at 3. 402 FMC NPRM Comment at 3. 403 Id. 404 MLC NPRM Comment at 46. 405 See MLC NPRM Comment App. at xxx–xxxvii. 406 See DLC NPRM Comment Add. at A–30–38. 407 DLC NPRM Comment at 18, Add. at A–37. 401 See E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations interim rule’s expanded audio access and unaltered data requirements because it does not seem necessary to impose those additional obligations on SNBLs given the purpose their reporting serves as compared to blanket licensee reporting. Similarly, regarding FMC’s request to add a records of use provision and generally require more robust reporting, the Office declines to do so at this time, at least based upon the thin current record. The Office believes the interim rule strikes an appropriate balance with respect to SNBLs given the material differences between them and blanket licensees—most notably that SNBLs do not operate under the blanket license and do not pay statutory royalties to the MLC.408 As to the DLC’s proposal concerning the certification language, the Office declines this request at this time. At least based on the limited record, the Office is not persuaded that the certification requirement for SNBLs should materially differ from the requirement for blanket licensees. The fact that SNBLs may not have traditionally engaged in a CPA certification process in connection with their voluntary licenses does not move the Office to eliminate this component of the certification in the different context of their new statutory obligation to report to the MLC for purposes that go beyond their private agreements— especially considering that the rule does not impose a records of use requirement on SNBLs. To the extent an SNBL does not wish to engage in a CPA certification process, the alternative certification option provided for in the regulations remains available to them. List of Subjects in 37 CFR Part 210 Copyright, Phonorecords, Recordings. Interim Regulations For the reasons set forth in the preamble, the Copyright Office amends 37 CFR part 210 as follows: PART 210—COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS 1. The authority citation for part 210 continues to read as follows: ■ jbell on DSKJLSW7X2PROD with RULES2 Authority: 17 U.S.C. 115, 702. Subpart A [Removed] ■ 2. Remove subpart A. 408 As noted in the NPRM, the statutory records of use requirement for blanket licensees does not expressly apply to SNBLs. 85 FR at 22535. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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(g)(3)(i),’’ ‘‘§ 210.12(g)(3)(ii),’’ ‘‘§ 210.12(g)(3),’’ ‘‘§ 210.12(g),’’ ‘‘§ 210.12(h),’’ and ‘‘§ 210.12(i)’’ and add in their places ‘‘§ 210.2(g)(3)(i),’’ ‘‘§ 210.2(g)(3)(ii),’’ ‘‘§ 210.2(g)(3),’’ ‘‘§ 210.2(g),’’ ‘‘§ 210.2(h),’’ and ‘‘§ 210.2(i),’’ respectively; ■ b. Remove ‘‘§ 210.15’’ and add in its place ‘‘§ 210.5’’; ■ c. Remove ‘‘§ 210.16(d)(2),’’ ‘‘§ 210.16,’’ ‘‘§ 210.16(g),’’ and ‘‘§ 210.16(g)(3)’’ and add in their places ‘‘§ 210.6(d)(2),’’ ‘‘§ 210.6,’’ ‘‘§ 210.6(g),’’ and ‘‘§ 210.6(g)(3),’’ respectively; ■ d. Remove ‘‘§ 210.17(d)(2)(iii)’’ and ‘‘§ 210.17 of this subpart’’ and add in their places ‘‘§ 210.7(d)(2)(iii)’’ and ‘‘§ 210.7,’’ respectively; ■ e. Remove ‘‘§ 210.18’’ and add in its place ‘‘§ 210.8’’; and ■ f. 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: ■ 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. PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 58143 210.27 Reports of usage and payment for blanket licensees. 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) The term blanket licensee means 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, incorporated in Delaware on March 5, E:\FR\FM\17SER2.SGM 17SER2 58144 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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. jbell on DSKJLSW7X2PROD with RULES2 § 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 18:09 Sep 16, 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) Services available through discounted pricing plans, such as for families or students. (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 to which it may be entitled. With respect to any PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 applicable voluntary license or individual download license executed and in effect before March 31, 2021, the description required by this paragraph (b)(8) must be delivered to the mechanical licensing collective either no later than 10 business days after such license is executed, or at least 90 calendar days before delivering a report of usage covering the first reporting period during which such license is in effect, whichever is later. For any reporting period ending on or before March 31, 2021, the mechanical licensing collective shall not be required to undertake any obligations otherwise imposed on it by this subpart with respect to any voluntary license or individual download license for which the collective has not received the description required by this paragraph (b)(8) at least 90 calendar days prior to the delivery of a report of usage for such period, but such obligations attach and are ongoing with respect to such license for subsequent periods. The rest of the notice of license may be delivered separately from such description. The description required by this paragraph (b)(8) 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. (vi) A unique identifier for each such license. (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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 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, including the failure to timely submit an amended 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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 either no later than 10 business days after such license is executed, or at least 30 calendar days before delivering a report of usage covering the first reporting period during which such license is in effect, whichever is later. Except as otherwise provided for by paragraph (b)(8) of this section, the mechanical licensing collective shall not be required to undertake any obligations otherwise imposed on it by this subpart with respect to any voluntary license or individual download license for which the collective has not received the description required by paragraph (b)(8) of this section at least 30 calendar days prior to the delivery of a report of usage for such period, but such obligations attach and are ongoing with respect to such license for subsequent periods. (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 and the mechanical licensing collective shall begin accepting such notices at least 30 calendar days before the license availability date, provided, however, that any description required by paragraph (b)(8) of this section must be delivered within the time period described in paragraph (b)(8). In such cases, the blanket license shall be effective as of the license availability date, rather than the date on which the notice is submitted to the collective. Failure to comply with this paragraph (g), including by failing to timely submit the required notice or cure a rejected notice, shall not affect an applicable digital music provider’s blanket license, except that such blanket license may become subject to default and termination under 17 U.S.C. 115(d)(4)(E). The mechanical licensing collective shall not take any action pursuant to 17 U.S.C. 115(d)(4)(E) before the conclusion of any proceedings under 17 U.S.C. 115(d)(2)(A)(iv) or (v), provided that the digital music provider PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 58145 meets the blanket license’s other required terms and conditions. (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 confidentiality to which they may be entitled, 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58146 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 offerings that may be defined in part 385 of this title): (A) Subscriptions. (B) Bundles. (C) Lockers. (D) Services available through discounted pricing plans, such as for families or students. (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, including the failure to timely submit an amended 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 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 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 confidentiality to which they may be entitled, 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. E:\FR\FM\17SER2.SGM 17SER2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 § 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)(i) 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 information belonging to the categories identified in § 210.27(e)(1)(i)(E) and (e)(1)(ii), without regard to any limitations that may apply to the reporting of such information in reports of usage. Such efforts must be undertaken periodically, and be specific and targeted to obtaining information not previously obtained from the applicable owner or other licensor for the specific sound recordings and musical works embodied therein for which the digital music provider lacks such information. Such efforts must also solicit updates for any previously obtained information if reasonably requested by the mechanical licensing collective. The digital music provider shall keep the mechanical licensing collective reasonably informed of the efforts it undertakes pursuant to this section. (ii) Any information required by paragraph (b)(1)(i) 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). (2)(i) Notwithstanding paragraph (b)(1) 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 required by paragraph (b)(1)(i) of this section from an VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 authoritative source of sound recording information, 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: (A) Such arrangement requires such source to inform, including through periodic updates, the digital music provider and mechanical licensing collective about any relevant gaps in its repertoire coverage known to such source, including but not limited to particular categories of information identified in § 210.27(e)(1)(i)(E) and (e)(1)(ii), sound recording copyright owners and/or other licensors of sound recordings (e.g., labels, distributors), genres, and/or countries of origin, that are either not covered or materially underrepresented as compared to overall market representation; and (B) Such digital music provider does not have actual knowledge or has not been notified by the source, the mechanical licensing collective, or a copyright owner, licensor, or author (or their respective representatives, including by an administrator or a collective management organization) of the relevant sound recording or musical work that is embodied in such sound recording, that the source lacks such information for the relevant sound recording or a set of sound recordings encompassing such sound recording. (ii) Satisfying the requirements of 17 U.S.C. 115(d)(4)(B) in the manner set out in paragraph (b)(2)(i) of this section does not excuse a digital music provider from having to report sound recording and musical work information in accordance with § 210.27(e). (3) 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, by providing, to the extent a musical work copyright owner becomes aware that such information is not then available in the database and to the extent the musical work copyright owner has such missing information, information regarding the names of the sound recordings in which that copyright owner’s musical works PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 58147 (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). § 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 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58148 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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. (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 will not receive an invoice prior to delivering its royalty payment 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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 will not receive an invoice prior to delivering its royalty payment 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 will receive an invoice prior to delivering its royalty payment 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 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 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. A report of usage containing an estimate permitted by this paragraph (d)(2)(i) should identify each input that has been estimated, and provide the reason(s) why such input(s) needed to be estimated and an explanation as to the basis for the estimate(s). (ii) Where the blanket licensee will not receive an invoice prior to delivering its royalty payment 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 within 5 calendar days after the mechanical licensing collective confirms such amount to be deducted and notifies the blanket licensee under paragraph (g)(2) of this section. Any overpayment of royalties shall be handled in accordance with paragraph (k)(5) of this section. Where the blanket licensee will receive an invoice prior to delivering its royalty payment 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 all known alternative and parenthetical titles for the sound recording; (B) Featured artist(s); (C) Unique identifier(s) assigned by the blanket licensee, including unique identifier(s) (such as, if applicable, Uniform Resource Locators (URLs)) that can be used to locate and listen to the sound recording, accompanied by clear instructions describing how to do so (such audio access may be limited to a preview or sample of the sound recording lasting at least 30 seconds), subject to paragraph (e)(3) of this section; (D) Actual playing time measured from the sound recording audio file; 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): (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 sound recordings of musical works to engage in covered activities, including pursuant to 17 U.S.C. 115(d)(4)(B): VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 (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, subsidiary, or affiliate of the blanket licensee, is a copyright owner of the musical work embodied in the sound recording. (2) Where any of the information called for by paragraph (e)(1) of this section, except for playing time, 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 modifies such information (which, for avoidance of doubt, does not include the act of filling in or supplementing empty or blank data fields, to the extent such information is known to the licensee), the blanket licensee shall report as follows: (i) It shall be sufficient for the blanket licensee to report either the licensorprovided version or the modified version of such information to satisfy its obligations under paragraph (e)(1) of this section, except for the reporting of any information belonging to a category of information that was not periodically modified by that blanket licensee prior to the license availability date, any unique identifier (including but not limited to ISRC and ISWC), or any release date. On and after September 17, 2021, it additionally shall not be sufficient for the blanket licensee to report a modified version of any sound recording name, featured artist, version, or album title. (ii) Where the blanket licensee must otherwise report the licensor-provided version of such information under paragraph (e)(2)(i) of this section, but to the best of its knowledge, information, and belief no longer has possession, custody, or control of the licensorprovided version, reporting the modified version of such information will satisfy its obligations under PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 58149 paragraph (e)(1) of this section if the blanket licensee certifies to the mechanical licensing collective that to the best of the blanket licensee’s knowledge, information, and belief: The information at issue belongs to a category of information called for by paragraph (e)(1) of this section (each of which must be identified) that was periodically modified by the particular blanket licensee prior to October 19, 2020; and that despite engaging in goodfaith, commercially reasonable efforts, the blanket licensee has not located the licensor-provided version in its records. A certification need not identify specific sound recordings or musical works, and a single certification may encompass all licensor-provided information satisfying the conditions of the preceding sentence. The blanket licensee should deliver this certification prior to or contemporaneously with the firstdelivered report of usage containing information to which this paragraph (e)(2)(ii) is applicable and need not provide the same certification to the mechanical licensing collective more than once. (3) With respect to the obligation under paragraph (e)(1) of this section for blanket licensees to report unique identifiers that can be used to locate and listen to sound recordings accompanied by clear instructions describing how to do so: (i) On and after the license availability date, blanket licensees providing such unique identifiers may not impose conditions that materially diminish the degree of access to sound recordings in connection with their potential use by the mechanical licensing collective or its registered users in connection with their use of the collective’s claiming portal (e.g., if a paid subscription is not required to listen to a sound recording as of the license availability date, the blanket licensee should not later impose a subscription fee for users to access the recording through the portal). Nothing in this paragraph (e)(3)(i) shall be construed as restricting a blanket licensee from otherwise imposing conditions or diminishing access to sound recordings: With respect to other users or methods of access to its service(s), including the general public; if required by a relevant agreement with a sound recording copyright owner or other licensor of sound recordings; or where such sound recordings are no longer made available through its service(s). (ii) Blanket licensees who do not assign such unique identifiers as of September 17, 2020, may make use of a transition period ending September 17, 2021, during which the requirement to E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58150 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations report such unique identifiers accompanied by instructions shall be waived upon notification, including a description of any implementation obstacles, to the mechanical licensing collective. (iii)(A) By no later than December 16, 2020, and on a quarterly basis for the succeeding year, or as otherwise directed by the Copyright Office, the mechanical licensing collective and digital licensee coordinator shall report to the Copyright Office regarding the ability of users to listen to sound recordings for identification purposes through the collective’s claiming portal. In addition to any other information requested, each report shall: (1) Identify any implementation obstacles preventing the audio of any reported sound recording from being accessed directly or indirectly through the portal without cost to portal users (including any obstacles described by any blanket licensee pursuant to paragraph (e)(3)(ii) of this section, along with such licensee’s identity), and any other obstacles to improving the experience of portal users seeking to identify musical works and their owners; (2) Identify an implementation strategy for addressing any identified obstacles, and, as applicable, what progress has been made in addressing such obstacles; and (3) Identify any agreements between the mechanical licensing collective and blanket licensee(s) to provide for access to the relevant sound recordings for portal users seeking to identify musical works and their owners through an alternate method rather than by reporting unique identifiers through reports of usage (e.g., separately licensed solutions). If such an alternate method is implemented pursuant to any such agreement, the requirement to report unique identifiers that can be used to locate and listen to sound recordings accompanied by clear instructions describing how to do so is lifted for the relevant blanket licensee(s) for the duration of the agreement. (B) The mechanical licensing collective and digital licensee coordinator shall cooperate in good faith to produce the reports required under paragraph (e)(3)(iii)(A) of this section, and shall submit joint reports with respect to areas on which they can reach substantial agreement, but which may contain separate report sections on areas where they are unable to reach substantial agreement. Such cooperation may include work through the operations advisory committee. (4) Any obligation under paragraph (e)(1) of this section concerning VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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: 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 should be reported. (5) A blanket licensee may make use of a transition period ending September 17, 2021, during which the blanket licensee need not report information that would otherwise be required by paragraph (e)(1)(i)(E) or (e)(1)(ii) of this section, unless: (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) 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 (iii) 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 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 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. (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 mechanical licensing collective shall deliver an invoice to the blanket licensee no later than 40 calendar days after the end of the applicable monthly reporting period that sets 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 will not receive an invoice prior to delivering its royalty payment 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 will receive an invoice prior to delivering its royalty payment 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) The mechanical licensing collective shall deliver a response file to the blanket licensee if requested by the blanket licensee, and the blanket licensee may request an invoice even if not entitled to an invoice prior to delivering its royalty payment under paragraph (g)(1) of this section. Such requests may be made in connection with a particular monthly report of usage or via a one-time request that applies to future reporting periods. Where the blanket licensee will receive an invoice prior to delivering its royalty payment under paragraph (g)(1) of this section, the mechanical licensing collective shall deliver the response file to the blanket licensee contemporaneously with such invoice. VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 The mechanical licensing collective shall otherwise deliver the response file and/or invoice, as applicable, to the blanket licensee in a reasonably timely manner, but no later than 70 calendar days after the end of the applicable monthly reporting period if the blanket licensee has delivered its monthly report of usage and related royalty payment no later than 45 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. Response files shall include the following minimum information: song title, mechanical licensing collective-assigned song code, composer(s), publisher name, including top publisher, original publisher, and admin publisher, publisher split, mechanical licensing collectiveassigned publisher number, publisher/ license status (whether each work share is subject to the blanket license or a voluntary license or individual download license), royalties per work share, effective per-play rate, timeadjusted plays, and the unique identifier for each applicable voluntary license or individual download license provided to the mechanical licensing collective pursuant to § 210.24(b)(8)(vi). (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 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 58151 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, after goodfaith consultation with the operations advisory committee and taking into consideration any technological and cost burdens that may reasonably be expected to result and the proportionality of those burdens to any reasonably expected benefits, 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58152 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations significant change, in which case, compliance shall not be required before the first reporting period ending at least one year after delivery of such notice. For purposes of this paragraph (h)(3), a significant change occurs where the mechanical licensing collective changes any policy requiring information to be provided under particular reporting or data standards or formats. 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. Nothing in this paragraph (h)(3) empowers the mechanical licensing collective to impose reporting requirements that are otherwise inconsistent with the regulations prescribed by this section. (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)(i) 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) the occurrence of which the blanket licensee knew or should have known at the time, 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 mechanical licensing collective shall act as follows: (A) 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. (B) 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. (ii) In the event of a good-faith dispute regarding whether a blanket licensee knew or should have known of the occurrence of an error, outage, disruption, or other issue with any of the mechanical licensing collective’s applicable information technology systems, a blanket licensee that complies with the requirements of paragraph (h)(6)(i) of this section within a reasonable period of time shall receive the protections of paragraphs (h)(6)(i)(A) and (B) of this section. (7) The mechanical licensing collective shall provide a blanket licensee with written confirmation of receipt no later than 2 business days after receiving a report of usage and no later than 2 business days after receiving any payment. (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 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 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 (A) the processes generated monthly reports of usage that accurately reflect, in all material respects, the blanket licensee’s usage of musical works, the statutory royalties applicable thereto (to the extent reported), 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, and (B) the internal controls relevant to the processes used by or on behalf of the blanket licensee to generate monthly reports of usage were suitably designed and operated effectively during the period covered by the monthly reports of usage. (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: (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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 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 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, 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 generated 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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 musical works in covered activities during the period covered by the annual report of usage, the statutory royalties applicable thereto (to the extent reported), 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. PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 58153 (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 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 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 adjusted 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 the adjustment 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 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 or promptly after being notified by the mechanical licensing collective of the amount due. 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. E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58154 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations (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, or upon request, issue a refund within a reasonable period of time. (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); (iv) Following any other audit of a blanket licensee that concludes after the annual report of usage is delivered and that has the result of affecting the computation of the royalties payable by the blanket licensee under the blanket license (e.g., as applicable, an audit by a sound recording copyright owner concerning the amount of applicable consideration paid for sound recording copyright rights); or (v) 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 of facts or information contained in other documents or records. (m) Documentation and records of use. (1) Each blanket licensee shall, for a period of at least seven 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 (except that such records and documents that relate to an estimated input permitted under paragraph (d)(2) of this section must be kept and retained VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 for a period of at least seven years from the date of delivery of the report of usage containing the final adjustment of such input), 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 (including of any inputs provided to the mechanical licensing collective to enable further 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) The mechanical licensing collective or its agent shall be entitled to reasonable access to records and documents described in paragraph (m)(1) of this section, which shall be provided promptly and arranged for no later than 30 calendar days after the PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 mechanical licensing collective’s reasonable request, subject to any confidentiality to which they may be entitled. The mechanical licensing collective shall be entitled to make one request per quarter covering a period of up to one quarter in the aggregate. With respect to the total cost of content, as that term may be defined in part 385 of this title, the access permitted by this paragraph (m)(2) shall be limited to accessing the aggregated figure kept by the blanket licensee on its books for the relevant reporting period(s). Neither the mechanical licensing collective nor its agent shall be entitled to access any records or documents retained solely pursuant to paragraph (m)(1)(vii) of this section outside of an applicable audit. Each report of usage must include clear instructions on how to request access to records and documents under this paragraph (m). (3) Each blanket licensee shall, in accordance with paragraph (m)(4) of this section, keep and retain in its possession and report the following information: (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 on or after the effective date of its blanket license: (A) Each of the following dates to the extent reasonably available: (1) The date on which the sound recording was first reproduced by the blanket licensee on its server (‘‘server fixation date’’). (2) The date on which the sound recording was first released on the blanket licensee’s service (‘‘street date’’). (B) If neither of the dates specified in paragraph (m)(3)(i)(A) of this section is reasonably available, the date that, in the assessment of the blanket licensee, provides a reasonable estimate of the date the sound recording was first distributed on its service within the United States (‘‘estimated first distribution date’’). (ii) A record of materially all sound recordings embodying musical works in its database or similar electronic system as of a time reasonably approximate to the effective date of its blanket license. For each recording, the record shall include the sound recording name(s), featured artist(s), unique identifier(s) assigned by the blanket licensee, actual playing time, and, to the extent acquired by the blanket licensee in connection with its use of sound recordings of musical works to engage in covered activities, ISRC(s). The blanket licensee shall use commercially reasonable efforts to make this record as accurate and complete as reasonably possible in E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations representing the blanket licensee’s repertoire as of immediately prior to the effective date of its blanket license. (4)(i) Each blanket licensee must deliver the information described in paragraph (m)(3)(i) of this section to the mechanical licensing collective at least annually and keep and retain this information until delivered. Such reporting must include the following: (A) For each sound recording, the same categories of information described in paragraph (m)(3)(ii) of this section. (B) For each date, an identification of which type of date it is (i.e., server fixation date, street date, or estimated first distribution date). (ii) A blanket licensee must deliver the information described in paragraph (m)(3)(ii) of this section to the mechanical licensing collective as soon as commercially reasonable, and no later than contemporaneously with its first reporting under paragraph (m)(4)(i) of this section. (iii) Prior to being delivered to the mechanical licensing collective, the collective or its agent shall be entitled to reasonable access to the information kept and retained pursuant to paragraphs (m)(4)(i) and (ii) of this section if needed in connection with applicable directions, instructions, or orders concerning the distribution of royalties. (5) Nothing in paragraph (m)(3) or (4) of this section, nor the collection, maintenance, or delivery of information under paragraphs (m)(3) and (4) of this section, nor the information itself, shall be interpreted or construed: (i) To alter, limit, or diminish in any way the ability of an author or any other person entitled to exercise rights of termination under section 203 or 304 of title 17 of the United States Code from fully exercising or benefiting from such rights; (ii) As determinative of the date of the license grant with respect to works as it pertains to sections 203 and 304 of title 17 of the United States Code; or (iii) To affect in any way the scope or effectiveness of the exercise of termination rights, including as pertaining to derivative works, under section 203 or 304 of title 17 of the United States Code. (n) Voluntary agreements with mechanical licensing collective to alter process. (1) Subject to the provisions of 17 U.S.C. 115, a blanket licensee and the mechanical licensing collective may agree in writing 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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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. This paragraph (n)(1) does not empower the mechanical licensing collective to agree to alter any substantive requirements described in this section, including but not limited to the required royalty payment and accounting information and sound recording and musical work information. (2) The mechanical licensing collective shall maintain a current, free, and publicly accessible online list of all agreements made pursuant to paragraph (n)(1) of this section that includes the name of the blanket licensee (and, if different, the trade or consumer-facing brand name(s) of the services(s), including any specific offering(s), through which the blanket licensee engages in covered activities) and the start and end dates of the agreement. Any such agreement shall be considered a record that a copyright owner may access in accordance with 17 U.S.C. 115(d)(3)(M)(ii). Where an agreement made pursuant to paragraph (n)(1) of this section is made pursuant to an agreement to administer a voluntary license or any other agreement, only those portions that vary or supplement the procedures described in this section and that pertain to the administration of a requesting copyright owner’s musical works must be made available to that copyright owner. § 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 § 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 PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 58155 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 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 E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 58156 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations 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 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) Actual playing time measured from the sound recording audio file; 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: (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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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: (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, subsidiary, or affiliate of the significant nonblanket licensee, is a copyright owner of the musical work embodied in the sound recording. (2) Where any of the information called for by paragraph (e)(1) of this section, except for playing time, 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 modifies such information (which, for avoidance of doubt, does not include the act of filling in or supplementing empty or blank data fields, to the extent such information is known to the licensee), the significant nonblanket licensee shall report as follows: (i) It shall be sufficient for the significant nonblanket licensee to report either the licensor-provided version or the modified version of such information to satisfy its obligations under paragraph (e)(1) of this section, except that it shall not be sufficient for the significant nonblanket licensee to report a modified version of any information belonging to a category of information that was not periodically modified by that significant nonblanket licensee prior to the license availability PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 date, any unique identifier (including but not limited to ISRC and ISWC), or any release date. (ii) Where the significant nonblanket licensee must otherwise report the licensor-provided version of such information under paragraph (e)(2)(i) of this section, but to the best of its knowledge, information, and belief no longer has possession, custody, or control of the licensor-provided version, reporting the modified version of such information will satisfy its obligations under paragraph (e)(1) of this section if the significant nonblanket licensee certifies to the mechanical licensing collective that to the best of the significant nonblanket licensee’s knowledge, information, and belief: The information at issue belongs to a category of information called for by paragraph (e)(1) of this section (each of which must be identified) that was periodically modified by the particular significant nonblanket licensee prior to October 19, 2020; and that despite engaging in good-faith, commercially reasonable efforts, the significant nonblanket licensee has not located the licensor-provided version in its records. A certification need not identify specific sound recordings or musical works, and a single certification may encompass all licensor-provided information satisfying the conditions of the preceding sentence. The significant nonblanket licensee should deliver this certification prior to or contemporaneously with the first-delivered report of usage containing information to which this paragraph (e)(2)(ii) is applicable and need not provide the same certification to the mechanical licensing collective more than once. (3) 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: LabelName and PLine. Where a significant nonblanket licensee acquires this information in addition to other information identifying a relevant sound recording copyright owner, all such information should be reported. (4) A significant nonblanket licensee may make use of a transition period ending September 17, 2021, during which the significant nonblanket licensee need not report information that would otherwise be required by paragraph (e)(1)(i)(E) or (e)(1)(ii) of this section, unless: E:\FR\FM\17SER2.SGM 17SER2 jbell on DSKJLSW7X2PROD with RULES2 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations (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) 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 (iii) 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, the mechanical licensing collective shall follow the consultation process as under § 210.27(h), and 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. Nothing in this paragraph (g)(1) empowers the mechanical licensing collective to impose reporting requirements that are otherwise inconsistent with the regulations prescribed by this section. (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 VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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) the occurrence of which the significant nonblanket licensee knew or should have known at the time, 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). In the event of a good-faith dispute regarding whether a significant nonblanket licensee knew or should have known of the occurrence of an error, outage, disruption, or other issue with any of the mechanical licensing collective’s applicable information technology systems, 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) as long as the significant nonblanket licensee complies with the requirements of this paragraph (g)(3) within a reasonable period of time. (4) The mechanical licensing collective shall provide a significant nonblanket licensee with written confirmation of receipt no later than 2 business days after receiving a report of usage. (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 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 58157 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 (A) the processes generated 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, and (B) the internal controls relevant to the processes used by or on behalf of the significant nonblanket licensee to generate monthly reports of usage were suitably designed and operated effectively during the period covered by the monthly reports of usage. (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. E:\FR\FM\17SER2.SGM 17SER2 58158 Federal Register / Vol. 85, No. 181 / Thursday, September 17, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES2 (j) Clear statements. The information required by this section requires intelligible, legible, and unambiguous statements in the reports of usage, without incorporation 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. (l) Voluntary agreements with mechanical licensing collective to alter process. (1) Subject to the provisions of 17 U.S.C. 115, a significant nonblanket licensee and the mechanical licensing collective may agree in writing to vary VerDate Sep<11>2014 18:09 Sep 16, 2020 Jkt 250001 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. This paragraph (l)(1) does not empower the mechanical licensing collective to agree to alter any substantive requirements described in this section, including but not limited to the required royalty payment and accounting information and sound recording and musical work information. (2) The mechanical licensing collective shall maintain a current, free, and publicly accessible online list of all agreements made pursuant to paragraph (l)(1) of this section that includes the name of the significant nonblanket licensee (and, if different, the trade or consumer-facing brand name(s) of the services(s), including any specific PO 00000 Frm 00046 Fmt 4701 Sfmt 9990 offering(s), through which the significant nonblanket licensee engages in covered activities) and the start and end dates of the agreement. Any such agreement shall be considered a record that a copyright owner may access in accordance with 17 U.S.C. 115(d)(3)(M)(ii). Where an agreement made pursuant to paragraph (l)(1) of this section is made pursuant to an agreement to administer a voluntary license or any other agreement, only those portions that vary or supplement the procedures described in this section and that pertain to the administration of a requesting copyright owner’s musical works must be made available to that copyright owner. Dated: September 3, 2020. Maria Strong, Acting Register of Copyrights and Director of the U.S. Copyright Office. Approved by: Carla D. Hayden, Librarian of Congress. [FR Doc. 2020–20077 Filed 9–16–20; 8:45 am] BILLING CODE 1410–30–P E:\FR\FM\17SER2.SGM 17SER2

Agencies

[Federal Register Volume 85, Number 181 (Thursday, September 17, 2020)]
[Rules and Regulations]
[Pages 58114-58158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20077]



[[Page 58113]]

Vol. 85

Thursday,

No. 181

September 17, 2020

Part II





Library of Congress





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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; Interim Rule

Federal Register / Vol. 85 , No. 181 / Thursday, September 17, 2020 / 
Rules and Regulations

[[Page 58114]]


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LIBRARY OF CONGRESS

 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: Interim rule.

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SUMMARY: The U.S. Copyright Office is issuing an interim rule 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 the January 1, 2021 license availability date. 
Having solicited multiple rounds of public comments through a 
notification of inquiry and notice of proposed rulemaking, the Office 
is adopting interim regulations concerning notices of license, data 
collection and delivery efforts, and reports of usage and payment by 
digital music providers. The Office is also adopting interim 
regulations concerning notices of nonblanket activity and reports of 
usage by significant nonblanket licensees and data collection efforts 
by musical work copyright owners.

DATES: Effective October 19, 2020.

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

SUPPLEMENTARY INFORMATION:

I. Background

    On October 11, 2018, the president signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') which, among 
other things, substantially modifies the compulsory ``mechanical'' 
license for making and distributing phonorecords of nondramatic musical 
works under 17 U.S.C. 115.\1\ It does so by switching from a song-by-
song licensing system to a blanket licensing regime that 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.\2\ DMPs may 
also continue to engage in those activities solely through voluntary, 
or direct, licensing with copyright owners, in which case the DMP may 
be considered a significant nonblanket licensee (``SNBL'') under the 
statute, subject to separate reporting obligations.
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    \1\ Public Law 115-264, 132 Stat. 3676 (2018).
    \2\ As permitted under the MMA, the Office designated a digital 
licensee coordinator (``DLC'') to represent licensees in proceedings 
before the Copyright Royalty Judges (``CRJs'') and the 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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    In September 2019, the Office issued a notification of inquiry 
(``NOI'') that describes in detail the legislative background and 
regulatory scope of the present rulemaking proceeding.\3\ As detailed 
in the NOI, 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. After thoroughly considering the public 
comments received in response, the Office issued a series of notices 
addressing various subjects presented in the NOI. In April 2020, the 
Office issued a notice of proposed rulemaking (``NPRM'') specifically 
addressing notices of license, notices of nonblanket activity, data 
collection and delivery efforts, and reports of usage and payment, and 
is now promulgating an interim rule based upon that NPRM.\4\
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    \3\ 84 FR 49966 (Sept. 24, 2019).
    \4\ 85 FR 22518 (Apr. 22, 2020). All rulemaking activity, 
including public comments, as well as educational material regarding 
the Music Modernization Act, can currently be accessed via 
navigation from https://www.copyright.gov/music-modernization/. 
Specifically, comments received in response to the NOI are available 
at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2019-0002&refD=COLC-2019-0002-0001 and comments received in response to the NPRM are 
available at https://www.regulations.gov/docketBrowser?rpp=25&so=ASC&sb=title&po=0&dct=PS&D=COLC-2020-0005. 
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. 
References to these comments are by party name (abbreviated where 
appropriate), followed by ``Initial NOI Comment,'' ``Reply NOI 
Comment,'' ``NPRM Comment,'' ``Letter,'' or ``Ex Parte Letter,'' as 
appropriate.
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    The Office received comments from a number of stakeholders in 
response to the NPRM, largely expressing support for the overall 
proposed rule. The MLC ``appreciates the significant time, effort and 
thoughtfulness that the Office expended to craft these substantial 
rules'' and ``agrees with the bulk of the language in the Proposed 
Regulations as appropriate and well-crafted to implement the MMA.'' \5\ 
The DLC ``commends the Office for its thoughtful, careful, and thorough 
consideration of many highly complex issues that are posed by this 
rulemaking,'' and states that ``the Proposed Rule largely succeeds in 
fusing the MMA's statutory design with what is reasonable and practical 
from an industry perspective.'' \6\ Others expressed similar 
sentiments. For example, Music Reports ``acknowledges the massive 
effort that the Office has undertaken in constructing these extensive 
proposed rules, and enthusiastically endorses the overall framework and 
degree of balance achieved throughout'' \7\ and the National Music 
Publishers' Association (``NMPA'') ``lauds the Copyright Office for its 
thorough and educated work.'' \8\ Commenters also acknowledged the 
inclusiveness and fairness the Office showed to all parties' concerns 
in the proposed rule. For example, the Recording Academy states that 
``[t]he NPRM strikes an appropriate balance to a number of complex and 
technical questions, and throughout the rulemaking process the Office 
was inclusive of stakeholders' comments, input, and ideas'' \9\ and 
Future of Music Coalition (``FMC'') noted ``the Office's ongoing 
efforts to implement the Music Modernization Act in ways that accord 
with legislative intent, that demonstrate ongoing concern for fairness 
to all parties, that increase transparency, and that harmonize the 
public interest with the interests of creators, including songwriters 
and composers.'' \10\
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    \5\ MLC NPRM Comment at 2.
    \6\ DLC NPRM Comment at 1.
    \7\ Music Reports NPRM Comment at 2.
    \8\ NMPA NPRM Comment at 1.
    \9\ Recording Academy NPRM Comment at 1.
    \10\ FMC NPRM Comment at 1.
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    That said, the public comments also revealed a number of discrete 
issues for the Copyright Office to consider and

[[Page 58115]]

address in promulgating this rule. The MMA significantly altered the 
complex music licensing landscape after careful congressional 
deliberation following extensive input from, and negotiations between, 
a variety of stakeholders.\11\ The Office has endeavored to build upon 
that foundation and adopt 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.\12\ The subjects of this rule have made it necessary to 
adopt regulations that navigate 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.\13\ As 
noted in the NPRM, while the Office's task was aided by receipt of 
numerous helpful and substantive comments representing interests from 
across the music ecosystem, 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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    \11\ 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) (``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'').
    \12\ 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); see 
also 17 U.S.C. 115(d)(12)(A) (``The Register of Copyrights may 
conduct such proceedings and adopt such regulations as may be 
necessary or appropriate to effectuate the provisions of this 
subsection.'').
    \13\ 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''); H.R. Rep. No. 115-651, at 14 (2018); S. Rep. No. 115-
339, at 15 (2018); 17 U.S.C. 115(d)(12)(A).
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    Although the Office has encouraged continued dialogue to 
expeditiously resolve or refine these areas of stakeholder 
disagreement--in particular, to facilitate cooperation between the MLC 
and DLC on business-specific questions \14\--areas of consensus have 
remained sparse.\15\ While the Copyright Office appreciates that the 
relevant stakeholders remain in active discussions on operational 
matters, the administrative record reflects spots of significant 
stakeholder disagreement despite the broad general support for the 
overall framework of the proposed rule. The Office facilitated the 
rulemaking process by, among other things, convening ex parte meetings 
with groups of stakeholders to discuss aspects of the proposed rule and 
granting requests for additional time to submit comments.\16\ At times, 
the Office found it necessary to address a lack of agreement or a 
dearth of sufficiently detailed information through additional requests 
for information and/or convening joint ex parte meetings to confirm 
issues of nuance, which complicated the pace of this rulemaking, but 
was helpful to gather useful information for the Office to consider in 
promulgating the regulations. The Office thanks the commenters for 
their thoughtful perspectives and would welcome continued dialogue 
across industry stakeholders and with the Office in the months before 
the license availability date.
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    \14\ See 85 FR at 22519, 22523; see also 84 FR at 32296; 84 FR 
at 49968.
    \15\ For example, the MLC and DLC did not collaborate before 
submitting initial comments in response to the notification of 
inquiry. MLC Initial NOI Comment 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 NOI Comment at 2 n.3 (same). After 
extending the deadline for reply comments at the MLC's and DLC's 
shared request, no compromise resulted. MLC Reply NOI Comment 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 NOI Comment at 1 n.3 (same). See also DLC 
Letter July 8, 2020 at 2 (``DLC reached out to the MLC to schedule 
an OAC meeting before submitting this letter, as the Office had 
requested. That meeting has not yet been scheduled.''); MLC Letter 
July 8, 2020 (no mention of meeting or Office's request).
    \16\ See, e.g., U.S. Copyright Office Letter June 8, 2020; U.S. 
Copyright Office Letter June 10, 2020; U.S. Copyright Office Letter 
June 30, 2020; 84 FR 65739 (Nov. 29, 2019).
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    In recognition of the significant legal changes brought by the MMA, 
and challenges both in setting up a fully functional MLC and for DMPs 
to adjust their internal practices, the NPRM invited comments on 
whether it would be beneficial to adopt the rule on an interim 
basis.\17\ The majority of commenters weighing in on this issue support 
an interim rule.\18\ The MLC, for example, says ``[t]here are many 
moving pieces and tight statutory deadlines, and permitting further 
adjustment to these Proposed Regulations after the interested parties 
have lived with and been operating under them for a reasonable period 
of time is a practical and flexible approach'' and ``may be 
particularly useful with respect to the Proposed Regulations concerning 
the substantive information DMPs are to provide in their Usage 
Reports.'' \19\ The DLC sounded caution, stating that ``it is critical 
that [DMPs], [SNBLs], and other participants have clarity and certainty 
about the regulatory regime as they begin to build systems to 
accommodate that regime.'' \20\
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    \17\ 85 FR at 22519.
    \18\ See, e.g., The Alliance for Recorded Music (``ARM'') NPRM 
Comment at 11; MLC NPRM Comment at 45; Music Reports NPRM Comment at 
2-3 (``[I]t would be beneficial for the Office to adopt the proposed 
rule on an interim basis due to the intricacies of the subject 
matter and the further issues likely to arise during the MLC's first 
full year of operation following the blanket license availability 
date.''); Peermusic NPRM Comment at 2 (``[T]his is an excellent 
suggestion.''); FMC NPRM Comment at 1-2 (calling the proposal a 
``reasonable idea,'' but saying, ``[w]hat we don't want to do is 
have an interim rule that sets out ambitious goals and standard-
setting best practices and then a final rule that rolls back some of 
that ambition'').
    \19\ MLC NPRM Comment at 45.
    \20\ DLC NPRM Comment at 1.
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    After careful consideration of these comments, the Office has 
decided to adopt this rule on an interim basis for those reasons 
expressed in the NPRM and identified by commenters in support of the 
proposal. In doing so, the Office emphasizes that adoption of this rule 
on an interim basis is not an open-ended invitation to revisit settled 
provisions or rehash arguments, but rather is intended to maintain 
flexibility to make necessary modifications in response to new 
evidence, unforeseen

[[Page 58116]]

issues, or where something is otherwise not functioning as intended. 
Moreover, if any significant changes prove necessary, the Office 
intends, as the DLC requests, to provide adequate and appropriate 
transition periods.\21\ During the proceeding, the DLC has advocated 
for collaboration through the MLC's operations advisory committee to 
address various issues and ``evaluate potential areas for improvement 
once all parties have had more experience with the new blanket license 
system.'' \22\ The Office supports collaboration between the MLC and 
DLC, and believes that adopting the rule on an interim basis will help 
facilitate any necessary rule changes identified through such 
cooperation. Going forward, the Office particularly invites the 
operations advisory committee, or the MLC and DLC collectively, to 
inform the Office on any aspects of the interim rule where there is 
consensus that a modification is needed.
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    \21\ See id.
    \22\ DLC Ex Parte Letter July 24, 2020 at 2; see also DLC Ex 
Parte Letter June 23, 2020 at 5-6; DLC Letter July 8, 2020 at 2; DLC 
Ex Parte Letter June 26, 2020 at 2; DLC Letter July 13, 2020 at 6.
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    Having now reviewed and considered all relevant comments received 
in response to the NOI and NPRM, including through a number of ex parte 
communications as detailed under the Office's procedures, the Office 
has weighed all appropriate legal, business, and practical implications 
and equities that have been raised, and pursuant to its authority under 
17 U.S.C. 115 and 702 is adopting interim regulations with respect to 
notices of license, notices of nonblanket activity, data collection and 
delivery efforts, and reports of usage and payment under the MMA. The 
Office has adopted regulations that it believes best reflect the 
statutory language and its animating goals in light of the record 
before it.\23\ Indeed, the Office has ``use[d] its best judgment in 
determining the appropriate steps.'' \24\
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    \23\ See H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 
15; 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 17 U.S.C. 115(d)(12)(A); 84 FR at 49967-
68.
    \24\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15; 
Conf. Rep. at 12; see 17 U.S.C. 115(d)(12)(A); Brand X, 545 U.S. at 
980 (citing Chevron, 467 U.S. 837).
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II. Interim Rule

    Based on the public comments received in response to the NPRM, the 
Office finds it reasonable to adopt the majority of the proposed rule 
as interim regulations. As noted above, commenters generally strongly 
supported the overall rule as well as particular provisions. Where 
parties have objected to certain aspects of the proposed rule, the 
Office has considered those comments and resolved these issues as 
discussed below. If not otherwise discussed, the Office has concluded 
that the relevant proposed provision should be adopted for the reasons 
stated in the NPRM.
    The resulting interim rule is intended to represent a balanced 
approach that, on the one hand, ensures the MLC will receive the 
information it needs to successfully fulfill its statutory duties, 
while mindfully accounting for the operational and engineering 
challenges being imposed on DMPs to provide this information. In some 
instances, the interim rule expands DMP reporting obligations, such as 
in connection with unaltered metadata and by eliminating a 
``practicability'' exception--both areas of the proposed rule over 
which the MLC expressed significant concern. But the interim rule also 
acknowledges competing concerns raised by the DLC and creates 
transition periods for DMPs to update their systems. In other 
instances, the interim rule expands or preserves DMP reporting 
flexibility, though similarly taking into account the MLC's concerns. 
For example, in connection with monthly royalty payments, the interim 
rule retains the proposed rule's generally open approach to permitting 
DMPs to reasonably use estimates as royalty accounting inputs, but to 
address the MLC's comments, it requires DMPs to provide additional 
information about the estimates they may use. The interim rule also 
benefits from input received from a multitude of other interested 
parties. For example, the interim rule significantly revises the 
proposed approach to certain information relating to statutory 
termination rights in light of comments from groups representing 
songwriter interests, and in response to sound recording copyright 
owners, limits MLC access to certain data held by DMPs flagged as being 
particularly business-sensitive.

A. Notices of License and Nonblanket Activity

    Commenters agreed with the general framework of the NPRM regarding 
the notice of license (``NOL'') and notice of nonblanket activity 
(``NNBA'') requirements, with a number of minor adjustments proposed, 
as discussed below.\25\
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    \25\ See, e.g., Songwriters of North America (``SONA'') & Music 
Artists Coalition (``MAC'') NPRM Comment at 4 (supporting the 
proposed information DMPs must provide in notices of license, 
including with respect to voluntary licenses); ARM NPRM Comment at 3 
(supporting requirement that MLC ``maintain a current, free, and 
publicly accessible and searchable online list of all blanket 
licenses including information about whether a notice of license was 
rejected and why and whether a blanket license has been terminated 
and why'').
---------------------------------------------------------------------------

1. Notices of License
    Name and contact information and submission criteria. The NPRM 
generally adopted the requirements for name and contact information and 
submission criteria suggested by the MLC, DLC, and other commenters in 
response to the NOI. The proposed language regarding the requirements 
for providing a description of the DMP and its covered activities were 
unopposed by the MLC, while the DLC recommended two adjustments. First, 
the DLC requested that the Office remove ``noninteractive streams'' 
from the list of DPD configurations required to be identified in the 
notice of license.\26\ The DLC explained, ``industry practice and 
customs for decades have acknowledged that noninteractive streaming 
does not require a mechanical license, and this rulemaking should not 
include any language that could call that industry practice into 
question.'' \27\ It added that it ``is unaware of any noninteractive 
streaming service that obtains mechanical licenses.'' \28\ The Office 
declines to adopt this suggestion. As the Office has explained in 
rulemakings predating the MMA, while it may be uncommon for a 
noninteractive stream to result in a DPD, there is nothing in the 
statutory language that categorically prevents it.\29\ Section 115 
provides only that a specific type of noninteractive stream is not a 
DPD, namely: ``[a] digital phonorecord delivery does not result from a 
real-time, noninteractive subscription transmission of a sound 
recording where no reproduction of the sound recording or the musical 
work embodied therein is made from the inception of the transmission 
through to its receipt by the transmission recipient in order to make 
the sound recording audible.'' \30\ The MMA did not alter the statutory 
definition of a DPD with respect to noninteractive streams, and the 
existence of any industry customs or norms to the contrary (or lack of 
a current rate) do not override the plain language of the statute. 
Accordingly, the Office has retained the proposed language in the 
interim rule.
---------------------------------------------------------------------------

    \26\ DLC NPRM Comment at 3.
    \27\ Id.
    \28\ Id.
    \29\ 74 FR 4537, 4541 (Jan. 26, 2009); 73 FR 66173, 66180-81 
(Nov. 7, 2008).
    \30\ 17 U.S.C. 115(e)(10).
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    The Office also declines to adopt the DLC's suggestion to remove

[[Page 58117]]

``Discounted, but not free-to-the-user'' from the list of service types 
the DMP offers,\31\ but it has amended the language of that provision 
in response to the DLC's comments. The Office agrees with the MLC that 
it is likely important to the MLC and copyright owners to know when 
services are offered at discounted rates, and so those should be 
identified in NOLs.\32\ At the same time, the Office accepts the DLC's 
point that a discounted service is not actually a separate service type 
but rather ``a particular pricing level for a service type.'' \33\ The 
Office has clarified the language of that provision.
---------------------------------------------------------------------------

    \31\ DLC NPRM Comment at 3.
    \32\ See MLC Initial NOI Comment at 5.
    \33\ DLC NPRM Comment at 3.
---------------------------------------------------------------------------

    Finally, the Office declines to adopt the Future of Music 
Coalition's (``FMC'') suggestion to require that the description of the 
DMP's service type be tied to the specific categories of activities or 
offerings adopted by the Copyright Royalty Judges.\34\ While the Office 
supports FMC's stated aims of increasing trust and transparency, as 
noted in the NPRM, ``such details may go beyond the more general notice 
function the Office understands NOLs to serve'' and will be reported to 
the MLC in reports of usage \35\ (and, as addressed in a separate 
rulemaking, to copyright owners in royalty statements).\36\
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    \34\ FMC NPRM Comment at 2.
    \35\ 85 FR at 22520.
    \36\ See U.S. Copyright Office, Interim Rule, Royalty Reporting 
and Distribution Obligations of the Mechanical Licensing Collective, 
Dkt. No. 2020-6, published elsewhere in this issue of the Federal 
Register.
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    Voluntary license numerical identifier. Music Reports proposed 
requiring DMPs to include a unique, persistent identifier in NOLs for 
each voluntary license described therein, saying it would promote 
efficiency and ``provide a strong foundation for other administrative 
functions.'' \37\ Music Reports proposed that the MLC should, in turn, 
include the same numerical identifiers in response files sent to DMPs, 
and that the DMPs should include them in reports of usage.\38\ In 
response, the MLC stated that while it ``intends to include in response 
files a persistent and unique (to that DMP) identifier for voluntary 
licenses,'' and ``DMPs would provide those identifiers when they 
provide (or update) their voluntary license repertoires,'' it did ``not 
believe that DMPs need to be required to include these identifiers in 
their monthly usage reporting,'' since that would essentially require 
DMPs to duplicate the matching work that the MLC is charged with 
administering.\39\ The Office adopts Music Reports' proposal except as 
to the requirement for DMPs to report a numerical identifier in reports 
of usage for the reasons identified by the MLC.
---------------------------------------------------------------------------

    \37\ Music Reports NPRM Comment at 4.
    \38\ Id. at 5-6.
    \39\ MLC Ex Parte Letter Aug. 16, 2020 at 5.
---------------------------------------------------------------------------

    Voluntary license descriptions. The NPRM required DMPs to provide a 
description of any applicable voluntary license or individual download 
license that it is operating under (or expects to be operating under) 
concurrently with the blanket license to aid the MLC \40\ in fulfilling 
its obligations to ``confirm uses of musical works subject to voluntary 
licenses and individual download licenses, and the corresponding pro 
rata amounts to be deducted from royalties that would otherwise be due 
under the blanket license.'' \41\ The MLC and DLC each commented on the 
timing aspects of this proposal. With respect to voluntary licenses 
taking effect before March 31, 2021, the MLC requested that DMPs who 
wish to have these licenses carved out of their blanket license royalty 
processing be required to provide this information at least 90 days 
prior to the first reporting of usage under such voluntary licenses, to 
allow the MLC sufficient time to process early 2021 usage and avoid a 
``processing logjam.'' \42\ The DLC concurred generally that the MLC 
will face significant burdens around the license availability date, but 
suggested that the proposed language requiring the submission of 
updated information about voluntary licenses ``at least 30 calendar 
days before delivering a report of usage covering a period where such 
license is in effect'' could ``cause confusion.'' \43\ The DLC 
contended that ``[i]t is common for voluntary licenses to cover past 
period terms,'' meaning that even when a DMP delivers information about 
such licenses promptly after execution of such deals, the description 
would not be considered timely under the language of the rule if the 
period the license covers began more than 30 days prior to 
execution.\44\ In response, the MLC said while it ``does not oppose 
clarifying that notice of a retroactive license is not a violation,'' 
``the regulation should be clear that the MLC cannot be required to 
process voluntary licenses that have not been submitted sufficiently in 
advance of usage reporting, and also that the voluntary license should 
be reported promptly, to minimize adjustments that copyright owners 
would have to address.'' \45\
---------------------------------------------------------------------------

    \40\ 85 FR at 22520.
    \41\ 17 U.S.C. 115(d)(3)(G)(i)(I)(bb).
    \42\ MLC NPRM Comment at 6.
    \43\ DLC NPRM Comment at 1, 4.
    \44\ Id. at 4.
    \45\ MLC Ex Parte Letter Aug. 16, 2020 at 4.
---------------------------------------------------------------------------

    The Office is adjusting the interim rule to address these concerns, 
and has adopted deadline language similar to what the MLC has 
proposed.\46\ At the same time, the Office also credits the DLC's 
suggestion that the rule expressly account for retroactive licenses, to 
avoid a situation where descriptions of such licenses would potentially 
inevitably be untimely submitted. The interim rule has been amended to 
take these considerations into account with respect to submissions of 
descriptions of voluntary licenses prior to the first usage reporting 
date following the license availability date as well as subsequent 
amendments. It also excuses the MLC from undertaking any related 
obligations for descriptions submitted either less than 90 calendar 
days prior to the delivery of a report of usage prior to March 31, 
2021, or less than 30 calendar days prior to the delivery of a report 
of usage after that date. The Office notes that the timing requirement 
for DMPs to deliver updated information regarding voluntary licenses is 
already subject to the qualification that it be to the extent 
commercially reasonable. It would not be commercially reasonable to 
expect the impossible (i.e., delivery of a retroactive license prior to 
it going into effect).
---------------------------------------------------------------------------

    \46\ As discussed below, the DLC separately proposes that DMPs 
be permitted to submit NOLs at least 30 days prior to the license 
availability date, which supports the reasonableness of the MLC's 
proposed timeline for voluntary license submissions (which works out 
to being 45 days before the license availability date for a 
voluntary license subject to the January 2021 reporting period for a 
DMP intending to receive an invoice from the MLC prior to delivering 
its royalty payment). See DLC NPRM Comment at 1-2.
---------------------------------------------------------------------------

    In connection with the description of a voluntary license, Music 
Reports proposed amending the proposed requirement to identify the 
musical work copyright owner to instead alternatively permit 
identification of a licensor or administrator.\47\ Although Music 
Reports persuasively outlined the practical realities underlying this 
request,\48\ the Office believes the NPRM best reflects the statutory 
language requiring DMPs to ``identify and provide contact information 
for all musical work copyright owners for works embodied in sound 
recordings as to which a voluntary license, rather than the

[[Page 58118]]

blanket license, is in effect with respect to the uses being 
reported.'' \49\ In addition, while Music Reports suggests that this 
amendment would provide clarity to DMPs,\50\ the DLC did not itself 
call for such an amendment or object to the provision as it appeared in 
the NPRM. The interim rule retains the requirement to identify the 
musical work copyright owner, but allows contact information for a 
relevant administrator or other licensor to be listed instead of 
contact information for the copyright owner.
---------------------------------------------------------------------------

    \47\ Music Reports NPRM Comment at 6.
    \48\ Id. (``DMPs notoriously do not have a clear view of all the 
distinct copyright owners that may be administered from time to time 
by the publishing administrators with whom they have licenses, much 
less the contact information for such copyright owners.'').
    \49\ 17 U.S.C. 115(d)(4)(A)(ii)(II) (emphasis added).
    \50\ Music Reports NPRM Comment at 6.
---------------------------------------------------------------------------

    Harmless errors. The DLC suggested that the harmless error rule 
proposed in the NPRM--which provides that ``[e]rrors 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'' \51\--should be 
extended to apply to ``failures in the timeliness in amendments.'' \52\ 
The Office has amended the interim rule to include good faith failures 
in the timeliness in amendments within the scope of the harmless error 
rule.
---------------------------------------------------------------------------

    \51\ 85 FR at 22538 (proposed Sec.  210.24(e)). The harmless 
error provision further requires that it ``shall apply only to 
errors made in good faith and without any intention to deceive, 
mislead, or conceal relevant information.''
    \52\ DLC NPRM Comment at 2.
---------------------------------------------------------------------------

    Transition to blanket license. The NPRM proposed that DMPs should 
submit notices of license to the MLC within 45 days after the license 
availability date where such DMPs automatically transition to operating 
under the blanket license pursuant to 17 U.S.C. 115(d)(9)(A). The DLC 
suggested the rule should allow DMPs to submit notices earlier--at 
least 30 days prior to the license availability date--and to provide 
that the blanket license would become effective as of the license 
availability date for such notices.\53\ The MLC has represented that it 
intends to begin accepting NOLs even sooner--``as soon as these 
regulations have been promulgated and the MLC is able to complete its 
online NOL form and make it available.'' \54\ The Office agrees that 
this is reasonable and has amended the language of the rule to require 
the MLC to begin accepting such notices no less than 30 days prior to 
the license availability date.
---------------------------------------------------------------------------

    \53\ Id. at 1-2. The DLC made this suggestion ``[i]n order to 
lay the groundwork for an orderly processing of the notices (and 
avoid overwhelming the MLC with the simultaneous submission of 
notices from every licensee on the license availability date).'' Id. 
at 1.
    \54\ MLC Ex Parte Letter Aug. 16, 2020 at 5.
---------------------------------------------------------------------------

    The DLC separately requested that the rule clarify, for notices of 
licenses submitted during this period of transition to the blanket 
license, that ``the rejection of such a notice of license based on any 
challenge the MLC may make to the adequacy of the notice will not 
immediately terminate the blanket license during the notice and cure 
period or any follow-on litigation challenging the MLC's final decision 
to reject the notice of license, provided the blanket licensee meets 
the blanket license's other required terms.'' \55\ The Office has 
considered this comment and made an adjustment to this aspect of the 
interim rule. The NPRM articulated the Office's view that the statutory 
provisions regarding notices of license and the transition to the 
blanket license must be read together, such that DMPs transitioning to 
the blanket license must still submit notices of license to the MLC. 
But because the statute provides that the blanket license ``shall, 
without any interruption in license authority enjoyed by such [DMP], be 
automatically substituted for and supersede any existing compulsory 
license,'' the Office agrees with the DLC that clarification may be 
helpful.\56\ In general, because a compliant notice of license is a 
condition to ``obtain'' a blanket license, a notice of license in the 
first instance that has been finally rejected (i.e., where the alleged 
deficiency is not cured within the relative period and/or the rejection 
overruled by an appropriate district court) by the MLC would seem to 
never take effect.\57\ In the case of a defective notice of license 
submitted in connection with a DMP's transition from existing 
compulsory license(s) to the blanket license, however, because the 
blanket license is ``automatically substituted,'' a finally rejected 
notice of license may be more akin to a default, which would begin 
after the resolution of the notice and cure period or any follow-on 
litigation challenging the MLC's final decision to reject the notice of 
license, provided the blanket licensee meets the blanket license's 
other required terms.
---------------------------------------------------------------------------

    \55\ DLC NPRM Comment at 2.
    \56\ 17 U.S.C. 115(d)(9)(A).
    \57\ See id. at 115(d)(2)(A) (detailing procedure for obtaining 
blanket license, including specifying requirements for rejection of 
license and the operation of a related notice and cure period).
---------------------------------------------------------------------------

2. Notices of Nonblanket Activity
    The proposed regulations for notices of nonblanket activity 
(``NNBAs'') from SNBLs generally mirror the requirements for NOLs, with 
conforming adjustments reflecting appropriate distinctions between the 
two types of notices. The DLC submitted comments regarding the 
description of the DMP and its covered activities and the harmless 
error rule that mirror its suggestions for these two issues for NOLs. 
For the same reasons discussed above, the Office incorporates the DLC's 
proposed changes into the interim rule.

B. Data Collection and Delivery Efforts

    While the MLC is ultimately tasked with matching musical works to 
sound recordings embodying those works and identifying and locating the 
copyright owners of those works (and shares thereof), DMPs and musical 
work copyright owners also have certain obligations under the MMA to 
engage in data collection efforts. The Office proposed regulations 
related to the obligations of both sets of parties, discussed in turn 
below.
1. Efforts by Digital Music Providers
    The MMA requires DMPs to ``engage in good-faith, commercially 
reasonable efforts to obtain from sound recording copyright owners and 
other licensors of sound recordings'' certain data about sound 
recordings and musical works.\58\ A DMP that fails to fulfill this 
obligation may be in default of the blanket license if, after being 
served written notice by the MLC, it refuses to cure its noncompliance 
within 60 days.\59\ The NPRM proposed a minimum set of acts that would 
be a part of good-faith, commercially reasonable efforts under the MMA. 
These acts would have included requesting in writing ``from sound 
recording copyright owners and other licensors of sound recordings'' 
specific information about the sound recordings and underlying musical 
works that it had not previously obtained on an ongoing basis, at least 
once per quarter.\60\ For information that a DMP has already obtained, 
the rule proposed an ongoing and continuous obligation to request any 
updates from owners or licensors.\61\ Alternatively, the proposed rule 
permitted DMPs to satisfy their obligations to obtain the desired 
information from sound recording copyright owners and other licensors 
by arranging for the MLC to receive this information from an 
authoritative source of such information, such as SoundExchange, unless 
the DMP has actual knowledge that the source lacks such information for 
the relevant

[[Page 58119]]

work.\62\ The NPRM noted the relationship between data collection 
efforts by DMPs and reports of usage. Because of this, some issues 
raised during this proceeding are relevant to both provisions. One such 
issue is the reporting by DMPs of sound recording metadata that has 
been altered by DMPs for normalization and display purposes. This issue 
is discussed below in the section on reports of usage.
---------------------------------------------------------------------------

    \58\ Id. at 115(d)(4)(B).
    \59\ Id. at 115(d)(4)(E)(i)(V).
    \60\ 85 FR at 22524. The information required to be collected by 
the NPRM mirrored the information enumerated in 17 U.S.C. 
115(d)(4)(B).
    \61\ Id. at 22524, 22540.
    \62\ Id. at 22524-25, 22540.
---------------------------------------------------------------------------

    In addition to comments from parties on various aspects of this 
issue, the MLC and DLC both proposed regulatory text.\63\ Several 
commenters expressed their support for the general approach taken by 
the NPRM. They include representatives of the sound recording copyright 
owner community, who disagreed with calls for more robust obligations. 
ARM agreed specifically with the NPRM's approach of not imposing a 
requirement for DMPs to contractually require sound recording copyright 
owners to provide DMPs with the information required by regulations, 
opining that such a requirement ``run[s] counter to the statute.'' \64\ 
The Recording Academy also supported the approach outlined in the NPRM, 
calling it a ``balanced process.'' \65\
---------------------------------------------------------------------------

    \63\ DLC NPRM Comment Add. at A-9-A-10; MLC NPRM Comment App. B.
    \64\ ARM NPRM Comment at 2. See also 85 FR 22518 at 22524 
(concluding that ``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'').
    \65\ Recording Academy NPRM Comment at 1-2.
---------------------------------------------------------------------------

    Others advanced alternative proposals to the obligations provided 
in the NPRM. The MLC urged stronger obligations on the part of DMPs to 
obtain sound recording information, saying the NPRM ``read[s] the 
requirement to make such efforts out of the statute, substituting a 
plain request for information, with no true affirmative steps to 
achieve the MMA's required efforts to `obtain' the data.'' \66\ The MLC 
proposed revisions to the regulatory language in accordance with its 
position; these included ``[s]pecificity in correspondence,'' 
``[t]argeted follow-up,'' ``[r]eporting on efforts,'' ``[r]eporting on 
failures,'' ``[c]ertification of compliance,'' and ``[e]nforcement.'' 
\67\ It also called for a most-favored-nation-type provision that would 
require that ``a DMP shall undertake no lesser efforts to obtain the 
[applicable] metadata . . . than it has undertaken to obtain any other 
sound recording or musical work information from such sound recording 
copyright owners or licensors,'' arguing that ``[r]egardless of the 
differences among DMPs, every DMP can undertake the same level of 
efforts [for the statutory data collection requirement] that it has 
undertaken to obtain other metadata from the same licensors where it 
desired such data for its own business purposes.'' \68\ The music 
publishing community generally echoed the position of the MLC on this 
issue and called for greater obligations on DMPs to provide sound 
recording and musical work information to the MLC.\69\
---------------------------------------------------------------------------

    \66\ MLC NPRM Comment at 8.
    \67\ Id. at 10-11; see MLC Reply NOI Comment App. B at 7-8.
    \68\ MLC NPRM Comment at 11-12.
    \69\ NMPA NPRM Comment at 3-4; Association of Independent Music 
Publishers (``AIMP'') NPRM Comment at 3-4; PeerMusic NPRM Comment at 
3-4.
---------------------------------------------------------------------------

    The DLC agreed with the general approach of the NPRM but offered 
some amendments. Several concerned the collection and reporting of 
unaltered sound recording or musical work data and are addressed below 
in the section on reports of usage. The DLC asked the Office to clarify 
that ``a digital music provider can satisfy the `good-faith, 
commercially reasonable efforts' standard by relying on'' a data feed 
of metadata that it receives from a record label or distributor, ``and 
is not obligated to manually incorporate additional data that it may 
happen to receive through other means, such as through emails,'' since 
doing so would be ``inefficient and time-consuming.'' \70\
---------------------------------------------------------------------------

    \70\ DLC NPRM Comment at 7.
---------------------------------------------------------------------------

    While, as noted, ARM was supportive of the NPRM's rejection of any 
obligations for DMPs to contractually require information from sound 
recording copyright owners, it ``strongly oppose[d]'' the requirement 
for DMPs to request metadata from sound recording copyright owners on a 
quarterly basis.\71\ It noted that the major record labels already 
provide regular metadata feeds to DMPs, which ``include weekly delivery 
of the sound recording metadata that accompanies that week's new 
releases and real-time updates and corrections to previously provided 
sound recording metadata.'' \72\ ARM argued, ``[g]iven the 
comprehensiveness, frequency and immediacy of the record companies' 
metadata updates, the proposal to have DMPs request quarterly and other 
ad hoc updates from sound recording copyright owners is nothing more 
than makework.'' \73\
---------------------------------------------------------------------------

    \71\ ARM NPRM Comment at 7.
    \72\ Id.
    \73\ Id. at 8.
---------------------------------------------------------------------------

    Good-faith efforts.
    The Office has adjusted the interim rule based on public feedback. 
First, no commenter supported the Office's proposal regarding quarterly 
written requests for sound recording and musical work information. The 
rule adopts a more flexible requirement that such efforts be taken 
``periodically,'' rather than specifying the period. Adopting some of 
the MLC's proposals, the interim rule requires such efforts to be 
``specific and targeted'' toward obtaining any missing information. 
DMPs are also required to solicit updates of any previously obtained 
information if requested by the MLC and keep the MLC ``reasonably 
informed'' of all data collection efforts. Finally, the interim rule 
retains the requirement from the proposed rule that DMPs certify to 
their compliance with these obligations as part of their reports of 
usage, but the Office does not find it necessary to adopt the 
additional certification requirement proposed by the MLC. The 
certification language adopted as proposed in the NPRM is based in part 
on the MLC's comments to the September NOI.\74\
---------------------------------------------------------------------------

    \74\ MLC Reply NOI Comment App. at 8.
---------------------------------------------------------------------------

    As with the approach taken in the NPRM, the interim rule 
establishes a floor for what constitutes good-faith, commercially 
reasonable efforts.\75\ Each DMP will have to decide based on its own 
circumstances whether the statute requires it to undertake efforts 
going beyond this floor.\76\ The DLC has previously endorsed such an 
approach, saying the statute is sufficiently specific as to a DMP's 
data collection obligations so as to make additional regulatory 
guidance unnecessary.\77\
---------------------------------------------------------------------------

    \75\ 85 FR at 22524.
    \76\ See id. (observing what constitutes appropriate efforts 
under the statute).
    \77\ DLC Initial NOI Comment at 3 (``Finally, we do not believe 
any rulemaking is necessary or appropriate with respect to data 
collection efforts by licensees. The MMA already has specific 
requirements that do not need to be supplemented by regulation.'').
---------------------------------------------------------------------------

    Although it has eliminated the quarterly reporting requirement in 
favor of a ``periodic'' standard, the Office finds ARM's 
characterization of the provision as ``makework'' to be somewhat of an 
overstatement. While it may be that in many cases, particularly 
involving more sophisticated sound recording copyright owners or 
licensors, such requests could yield little or no new information not 
already provided to DMPs, the record does not establish the futility of 
such requests across the board. The DLC noted that there are instances 
where DMPs do request and receive additional metadata from sound 
recording copyright owners--it explained that, for example, ``record 
labels sometimes provide blank fields'' for some of the data types DMPs 
are required to report to the MLC, and ``DMPs may leave that metadata 
as is,

[[Page 58120]]

or, in order to satisfy the ingestion requirements of their particular 
systems, may fill in the blanks based on their own research or ask the 
label to redeliver a more complete set of metadata.'' \78\ Moreover, 
the statutory provisions on data collection efforts would largely be 
rendered superfluous if DMPs had no obligations beyond merely passing 
through what sound recording and musical work information they received 
from sound recording copyright owners in the ordinary course of 
business. Congress clearly envisioned that additional efforts would 
play some role in obtaining data, otherwise it would not have included 
the provision. Thus, the Office declines to adopt the DLC's proposed 
clarification that would limit DMPs' obligations to providing just the 
data it receives from a record label feed.
---------------------------------------------------------------------------

    \78\ DLC Letter July 13, 2020 at 7 (emphasis added). The DLC 
added, by way of example, ``MediaNet's platform requires certain 
metadata fields to be present in order to ingest the content itself. 
MediaNet therefore must fill in the blanks for those data types, 
either through one-off research or seeking redelivery from the 
relevant record label.'' Id. at 7 n.10.
---------------------------------------------------------------------------

    The Office again declines to mandate that DMPs require delivery of 
information from sound recording copyright owners and licensors through 
contractual or other means for the same reasons identified in the 
NPRM.\79\ The Office does, however, presume that at least some DMPs and 
sound recording copyright owners may include such data delivery 
obligations in subsequent contracts even absent a regulatory 
requirement. DMPs have an incentive to ensure they are fulfilling their 
data collection obligations, and labels are also incentivized to ensure 
accurate and robust metadata accompanies the licensing and use of their 
recordings. Relatedly, the Office declines to adopt the most-favored-
nation provision proposed by the MLC (and supported by NMPA). In some 
cases, DMPs may have entered into licensing agreements with sound 
recording copyright owners that require the provision of sound 
recording or musical work information; a most-favored-nation provision 
would under those circumstances obligate DMPs to contractually require 
other sound recording copyright owners to provide such information or 
alter existing agreements, a requirement that the Office has previously 
rejected.\80\
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    \79\ 85 FR at 22524. The Office explained that ``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.'' Id.
    \80\ As noted in the NPRM, 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.'' See id.
---------------------------------------------------------------------------

    Finally, the MLC highlighted what it considered a ``circularity'' 
in the data collection requirements.\81\ It observed that while the 
regulations obligate DMPs to obtain sound recording information that is 
required by the Office to be included in reports of usage, the reports 
of usage regulations do not ``strictly require'' many items to be 
reported by DMPs.\82\ The MLC argued that the result of this 
circularity would ``render null'' the obligation to make efforts to 
obtain sound recording information by DMPs.\83\ This was not the 
Office's intent, and to address the MLC's concerns, the interim rule 
clarifies that the required categories of information to which DMP data 
collection obligations apply are without regard to any limitations that 
may apply to the reporting of such information in reports of usage.\84\
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    \81\ MLC NPRM Comment at 15-17.
    \82\ Id. at 15-16.
    \83\ Id. at 16.
    \84\ The interim rule also explicitly cross-references the 
relevant categories of information listed in the report of usage 
provision rather than enumerating a separate list for collection 
efforts.
---------------------------------------------------------------------------

    SoundExchange option.
    The interim rule retains the proposed ability for DMPs to 
alternatively satisfy their data collection obligations by arranging 
for the MLC to receive the required information from an authoritative 
source of information provided by sound recording copyright owners and 
other licensors, such as SoundExchange. As the Office noted in its 
NPRM, ``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.'' \85\ SoundExchange in 
particular has assembled a large set of data due to its administration 
of the section 114 license, and since July 22, 2020, has been 
designated as the authoritative source of ISRC data in the United 
States.\86\ The proposal drew support from a number of commenters; \87\ 
no one, including the MLC, objected to this provision.
---------------------------------------------------------------------------

    \85\ 85 FR at 22524.
    \86\ SoundExchange Ex Parte Letter July 24, 2020 at 1; 
SoundExchange Ex Parte Letter Sept. 1, 2020, at 2; ARM Ex Parte 
Letter July 27, 2020 at 2 (citing RIAA, RIAA Designates 
SoundExchange as Authoritative Source of ISRC Data in the United 
States (July 22, 2020), https://www.riaa.com/riaa-designates-soundexchange-as-authoritative-source-of-isrc-data-in-the-united-states/; see also SoundExchange Initial NOI Comment at 2-3.
    \87\ ARM NPRM Comment at 2; Recording Academy NPRM Comment at 1-
2; DLC NPRM Comment at 7 (``In general, DLC appreciates the Office's 
decision to create this option for DMPs to satisfy their data 
collection obligations'').
---------------------------------------------------------------------------

    Both the DLC and MLC suggested amendments to this option. The DLC 
proposed language to clarify that the proposed knowledge standard meant 
``actual knowledge'' and that the provision does not require ``DMPs to 
affirmatively engage in a track-by-track assessment of whether a 
particular sound recording is or is not in the SoundExchange 
database.'' \88\ The MLC essentially seeks the opposite, that a DMP 
should only be able to use this option where it affirmatively knows 
that the third-party data source has the relevant information for the 
relevant recording.\89\ The MLC expressed concern that without 
prematching by a DMP of its library to a third-party database, the job 
of cross-matching DMP feeds with third-party data would fall on the MLC 
itself, a project of large scope and scale that it asserts is outside 
the MLC's core responsibilities.\90\ In addition, the MLC noted ``even 
a source such a[s] SoundExchange does not have data for all of the 
sound recordings that any particular DMP may stream (as a reminder of 
scale, even 99 percent coverage of a 50 million track catalog leaves 
500,000 tracks not covered).'' It also suggested that the SoundExchange 
database lacked corresponding musical work metadata for sound 
recordings in its database,\91\ although the MLC subsequently stated 
that it intends to populate the public database with information from 
musical works copyright owners, and rely on the same data for 
matching.\92\
---------------------------------------------------------------------------

    \88\ DLC NPRM Comment at 8.
    \89\ MLC NPRM Comment at 14-15, App. at viii.
    \90\ Id. at 13-15.
    \91\ Id. at 14. Compare ARM NPRM Comment at 9 (describing the 
Music Data Exchange (``MDX'') system operated by SoundExchange, 
stating it is ``a central `portal' that facilitates the exchange of 
sound recording and publishing data between record labels and music 
publishers for new releases and establishes a sound recording-
musical work link'' and ``a far more efficient source of musical 
work data for new releases than any metadata various DMPs are likely 
to receive . . . from the record companies'').
    \92\ See MLC Ex Parte Letter Aug. 21, 2020 at 2 (``For musical 
works information, the MLC maintains that it ``will be sourced from 
copyright owners.'').
---------------------------------------------------------------------------

    In balancing these interests, the Office is mindful that a main 
goal underlying the data collection provision is to ensure the MLC is 
receiving adequate and accurate data to assist in the core task of 
matching musical works and their owners to the sound recordings that 
are reported by DMPs, ultimately leading to musical work copyright

[[Page 58121]]

owners receiving the royalties to which they are entitled. The Office 
acknowledges what it understands to be the MLC's position, that DMPs 
should be sufficiently motivated to engage in data collection efforts 
for those edge cases that may not appear in a third-party database, as 
well as the MLC's concern that the proposed language ``might be misread 
to imply that, as long as a DMP remains ignorant of exactly which 
particular sound recordings are not covered by the third party, it can 
use an incomplete resource to substitute for complete efforts.'' \93\ 
At the same time, however the Office is reluctant to accept the MLC's 
proposal that DMPs must prematch their libraries against a third-party 
database to take advantage of this option, as it seems to go so far as 
to make this option, one that might seemingly aid the MLC as well as 
individual DMPs, impractical from a DMP perspective.\94\
---------------------------------------------------------------------------

    \93\ See MLC NPRM Comment at 14.
    \94\ See DLC NPRM Comment at 8.
---------------------------------------------------------------------------

    The Office has therefore adjusted the proposed rule. Under the 
interim rule, a DMP can satisfy its obligations under this provision by 
arranging for the MLC to receive the required information from an 
authoritative source of sound recording information, unless it either 
has actual knowledge that the source lacks such information as to the 
relevant sound recording or a set of sound recordings, or has been 
notified about the lack of information by the source, the MLC, or a 
copyright owner, licensor, or author (or their respective 
representatives, including by an administrator or a collective 
management organization) of the relevant sound recording or underlying 
musical work. The introduction of this notification provision 
establishes a mechanism for the MLC or others who are similarly 
incentivized to identify those gaps. Moreover, for a DMP to use this 
option, its arrangement with the third-party data source must require 
that source to report such gaps as are known to it. The Office notes 
that this provision applies not only to gaps as to specific sound 
recordings but also gaps as to specific data fields for sound 
recordings, specific labels and distributors, and specific categories 
of sound recordings, such as those from missing or underrepresented 
genres or countries of origin. This approach is intended to empower the 
MLC and others to notify DMPs regarding areas where it believes the 
data may fall short, in service of the statutory obligation for each 
DMP to engage in good faith efforts to obtain this additional data.
2. Efforts by Copyright Owners
    The MMA requires musical work copyright owners whose works are 
listed in the MLC's public database to ``engage in commercially 
reasonable efforts to deliver to the mechanical licensing collective, 
[] 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.'' \95\ Many commenters speaking to 
the issue of musical work copyright owner efforts contended that the 
proposed rule's requirements were too onerous.\96\ The Office did not 
intend for this aspect of the proposed rule to impose a significantly 
greater burden on musical work copyright owners than the statute 
already prescribes.\97\ The proposed obligation to ``monitor[] the 
musical works database for missing and inaccurate sound recording 
information relating to applicable musical works'' was not meant to 
require copyright owners to regularly review the entirety of the MLC's 
database. And while the MLC and others criticize the proposed reference 
to provision of information within the copyright owner's ``possession, 
custody, or control,'' \98\ that language came from the MLC's 
comments.\99\ Further, the provision referring to delivery to the MLC 
``by any means reasonably available to the copyright owner'' was not 
meant to compel delivery by any means reasonably available, but rather 
permit delivery by any such means of the owner's choosing.
---------------------------------------------------------------------------

    \95\ 17 U.S.C. 115(d)(3)(E)(iv).
    \96\ See, e.g., MLC NPRM Comment at 18-20; Nashville Songwriters 
Association International (``NSAI'') NPRM Comment at 4; NMPA NPRM 
Comment at 5-6; Peermusic NPRM Comment at 4; Songwriters Guild of 
America, Inc. (``SGA'') NPRM Comment at 2-3. But see Recording 
Academy NPRM Comment at 2 (``appreciat[ing] the consideration the 
Office shows for independent and self-published songwriters who 
could be vulnerable to overly burdensome requirements and 
regulations,'' and stating that the ``proposal to adopt a minimal 
floor requirement is a fair approach, and strikes a proper balance 
to avoid instituting an undue burden for independent and self-
published songwriters''). Regarding SGA's proposal that the MLC have 
a ``parallel requirement . . . to utilize best efforts to provide 
adequate hands-on help, technical guidance and active assistance to 
all Copyright Owners in order to prompt the highest achievable level 
of compliance,'' SGA NPRM Comment at 2, that is beyond the scope of 
this proceeding, but the MLC's duties are addressed elsewhere in the 
statute and potentially germane to the Office's ongoing Unclaimed 
Royalties Study. See, e.g., 17 U.S.C. 115(d)(3)(J)(iii)(II)(bb); 85 
FR at 33735.
    \97\ See 85 FR at 22526 (``[T]he Office proposes to codify a 
minimal floor requirement that should not unduly burden less-
sophisticated musical work copyright owners.'').
    \98\ See MLC NPRM Comment at 12 n.4, 19; NMPA NPRM Comment at 5.
    \99\ See MLC Reply NOI Comment at 12 (``[U]nder the MLC's 
proposal, the musical work copyright owners would be required to 
provide the sound recording information they actually have in their 
possession, custody, or control.'').
---------------------------------------------------------------------------

    Nevertheless, given the comments, the Office is amenable to 
clarification and acknowledges that under the statute, copyright owners 
are already incentivized to provide this information to the MLC to help 
ensure their works are matched and that they receive full and proper 
royalty payments.\100\ Indeed, copyright owners are further 
incentivized to ensure that the MLC has much greater information, such 
as about their identity, location, and musical works, than just the 
sound recording information required by 17 U.S.C. 115(d)(3)(E)(iv) and 
addressed by this aspect of the proposed rule. Consequently, the Office 
believes it is reasonable for the interim rule to track the MLC's 
proposed language, under which musical work copyright owners should 
provide the applicable sound recording information to the extent the 
owner has the information and becomes aware that it is missing from the 
MLC's database.\101\
---------------------------------------------------------------------------

    \100\ See MLC NPRM Comment at 19 & n.8; NMPA NPRM Comment at 5-
6; NSAI NPRM Comment at 4; SoundExchange NPRM Comment at 4.
    \101\ See MLC NPRM Comment App. at viii-ix.
---------------------------------------------------------------------------

    Regarding the information required to be delivered, the Office 
again declines the DLC's request to require provision of performing 
rights organization information.\102\ Assuming arguendo that the DLC is 
correct that such a requirement is within the Office's authority to 
compel, the current record does not indicate that such information is 
sufficiently relevant to the MLC's matching efforts or the mechanical 
licensing of musical works so as to persuade the Office to require it 
to be provided at this time.\103\ The MLC, of course, may permissively 
accept such information, although the MMA explicitly restricts the MLC 
from licensing performance rights.\104\
---------------------------------------------------------------------------

    \102\ See DLC NPRM Comment at 8-9; see also 85 FR at 22526.
    \103\ See, e.g., Recording Academy NPRM Comment at 3 
(``[P]erformance rights organization information is not relevant 
data.''); DLC Initial NOI Comment at 20; MLC Reply NOI Comment at 
36.
    \104\ See 17 U.S.C. 115(d)(3)(C)(ii)-(iii).
---------------------------------------------------------------------------

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

    Commenters raised a number of issues related to the NPRM's 
provisions covering the form, content, delivery, certification, and 
adjustment of reports of usage and payment, as well as requirements 
under which records of

[[Page 58122]]

use must be maintained and made available to the MLC by DMPs.
1. Content of Monthly Reports of Usage
i. Royalty Pool Calculation Information
    The MLC proposed that the language regarding usage reporting be 
``amended to expressly reference royalty pool information'' to provide 
what it says is needed clarity.\105\ The Office has considered this 
request but does not currently believe the added language is necessary. 
Based on its comments, the MLC seems to be referring to the top-line 
payable royalty pool calculation inputs, such as service provider 
revenue, total cost of content, performance royalties, and user/
subscriber counts.\106\ DMPs are already required to report these 
inputs to the extent they are 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.'' \107\
---------------------------------------------------------------------------

    \105\ MLC NPRM Comment at 40-41.
    \106\ Id. at 40; see also 37 CFR 385.21-385.22.
    \107\ Interim rule at section 210.27(d)(1)(i). For similar 
reasons, the Office is not amending section 210.27(d)(1)(ii), to 
which the MLC proposed adding the same language.
---------------------------------------------------------------------------

ii. Sound Recording and Musical Work Information
    The interim rule retains the same three tiers of sound recording 
and musical work information proposed in the NPRM, with some 
modifications to certain categories of information discussed 
below.\108\ The DLC does not propose eliminating any of the proposed 
categories \109\ and the MLC states that ``[a]ll of the metadata fields 
proposed in Sec.  210.27(e)(1) will be used as part of the MLC's 
matching efforts.'' \110\ Other commenters concur, including the 
Recording Academy, which agrees that the ``proposed tiers of 
information for sound recordings is an accurate interpretation of the 
statute, identifies a simple and standardized process for the DMPs to 
follow, and will help improve matching and minimize instances of 
unclaimed royalties.'' \111\ While ARM questions the value of certain 
categories of information, and seeks to confirm that sound recording 
copyright owners are not obligated to provide DMPs with data outside of 
the regular digital supply chain, ARM does not ultimately oppose their 
inclusion in the rule.\112\ As discussed above, although the statute 
does not place any affirmative obligation on sound recording copyright 
owners to provide data, it does establish a framework whereby DMPs must 
engage in appropriate efforts to obtain sound recording and musical 
work information from sound recording copyright owners that such owners 
may not have otherwise provided to DMPs.
---------------------------------------------------------------------------

    \108\ See 85 FR at 22530-32, 22541-42.
    \109\ DLC NPRM Comment Add. at A-15-16.
    \110\ MLC Letter July 13, 2020 at 7.
    \111\ Recording Academy NPRM Comment at 2 (``[T]he Academy 
appreciates and concurs with the Office's proposal to include 
certain additional data fields that will prove beneficial in the 
matching efforts.''); see, e.g., SONA & MAC NPRM Comment at 2, 6 
(``Additional data fields proposed to be added by the Office . . . 
will also play a critical role in identification and matching 
efforts.''). The Office declines SONA & MAC's request ``to elevate 
[the second and third tiers of information] to the first tier of 
mandatory information.'' See SONA & MAC NPRM Comment at 6-7. Much of 
the second and third tier information is enumerated in the statute, 
which expressly states that it be provided ``to the extent 
acquired.'' See 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa)-(bb); see also 85 
FR at 22531 (rejecting a similar request from the MLC).
    \112\ See ARM NPRM Comment at 9, 11. The Office disagrees with 
ARM's suggestion to delete the requirement that DMPs report 
``[o]ther information commonly used in the industry to identify 
sound recordings and match them to the musical works the sound 
recordings embody.'' See id. at 9. That requirement is enumerated in 
the statute. 17 U.S.C. 115(d)(4)(A)(ii)(I)(aa).
---------------------------------------------------------------------------

iii. Playing Time
    During the course of the proceeding it came to light that the 
playing time reported to DMPs by sound recording copyright owners may 
not always be accurate.\113\ Having accurate playing time is critical 
because it can have a bearing on the computation of royalties.\114\ 
Therefore, in accord with the positions of both the MLC and DLC, the 
interim rule makes clear that DMPs must report the actual playing time 
as measured from the sound recording audio file itself.\115\
---------------------------------------------------------------------------

    \113\ ARM NPRM Comment at 6-7; DLC Letter July 13, 2020 at 4, 7; 
DLC Ex Parte Letter July 24, 2020 at 4.
    \114\ See 37 CFR 385.11(a), 385.21(c).
    \115\ See DLC Ex Parte Letter July 24, 2020 at 4 n.12 (``DLC 
would not oppose a requirement to report, in all instances, the 
playing time value based on the processing of the actual sound 
recording file, rather than the value reported by the label.''); MLC 
Ex Parte Letter July 24, 2020 at 9 (``Playing Time could be reported 
either as the unaltered version or as calculated automatically based 
upon an analysis of the audio file being streamed.'').
---------------------------------------------------------------------------

iv. Release Dates
    The proposed rule would require provision of ``release date(s)'' 
and the NPRM invited comment as to whether this proposed requirement 
should be explicitly limited to reporting only release years 
instead.\116\ While ARM and the Recording Academy suggested that 
release years alone are sufficient,\117\ FMC contends that it can be 
useful to have full dates ``[b]ecause it's not uncommon for multiple 
versions of a track to be released within the same calendar year'' and 
it ``would help distinguish between the versions to ensure the right 
publishers and songwriters are compensated if there is any ambiguity, 
or if other data fields are missing for any reason.'' \118\ The MLC and 
DLC did not comment on this issue.\119\ Based on the current record, 
the Office is not convinced that the requirement should be explicitly 
limited to only the release year, and has adopted the language as 
proposed.
---------------------------------------------------------------------------

    \116\ See 85 FR at 22525, 22541.
    \117\ ARM NPRM Comment at 7; Recording Academy NPRM Comment at 
2-3.
    \118\ FMC NPRM Comment at 2-3.
    \119\ See DLC NPRM Comment Add. at A-15; MLC NPRM Comment App. 
at xv.
---------------------------------------------------------------------------

v. Sound Recording Copyright Owners
    The NPRM proposed that DMPs may satisfy their obligations to report 
sound recording copyright owner information by reporting three DDEX 
fields identified by the American Association of Independent Music 
(``A2IM'') & the Recording Industry Association of America (``RIAA'') 
as fields that may provide indicia relevant to determining sound 
recording copyright ownership \120\ (to the extent such data is 
provided to DMPs by sound recording copyright owners or licensors): 
DDEX Party Identifier (DPID), LabelName, and PLine.\121\ In response, 
the MLC, DLC, and DDEX express concern with using DPID, with DDEX 
explaining that ``although a unique identifier and in relevant 
instances an identifier of `record companies,' [DPID] does not identify 
sound recording copyright owners,'' but rather ``only identifies the 
sender and recipient of a DDEX formatted message and, in certain 
circumstances, the party that the message is being sent on behalf of.'' 
\122\ DDEX further states that ``[i]n the vast majority of cases . . . 
the DPIDs . . . will not be attempting to identify the copyright owner 
of the sound recordings.'' \123\ The MLC agrees, explaining that DPID 
``does not identify sound recording copyright owner, but rather, the 
sender and/or recipient of a DDEX-formatted message.'' \124\ ARM

[[Page 58123]]

does not dispute this position, but suggests that DPID should 
nonetheless be retained because its inclusion in the public musical 
works database ``will be useful to members of the public who are 
looking for a [sound recording] licensing contact.'' \125\ By contrast, 
the DLC contends that DPID ``is not a highly valuable data field,'' and 
that the burden of converting DPID numerical codes into parties' names 
(to address ARM's concern about displaying the numerical identifier) 
outweighs ``the benefit that would accrue from requiring DMPs to 
convert DPID numerical codes into parties' names.'' \126\
---------------------------------------------------------------------------

    \120\ During the proceeding, RIAA submitted comments both 
individually and jointly with other commenters, including with A2IM. 
A2IM and the RIAA also submitted comments together under the name of 
an organization called the Alliance for Recorded Music (``ARM''). 
References herein are to the name used in each respective comment 
(e.g., ``RIAA,'' ``A2IM & RIAA,'' ``ARM,'' etc.).
    \121\ 85 FR at 22532, 22542.
    \122\ Digital Data Exchange, LLC (``DDEX'') NPRM Comment at 2; 
see DLC Letter July 13, 2020 at 10-11; DLC Ex Parte Letter July 24, 
2020 at 5 n.15; MLC Ex Parte Letter July 24, 2020; see also A2IM & 
RIAA Reply NOI Comment at 8-9, 11.
    \123\ DDEX NPRM Comment at 2.
    \124\ MLC NOI Comment at 13, U.S. Copyright Office Dkt. No. 
2020-8, available at https://beta.regulations.gov/document/COLC-2020-0006-0001.
    \125\ ARM Ex Parte Letter July 27, 2020 at 4. ARM does not 
object to including the DPID party's name in the public musical 
works database, but does ``object to the numerical identifier being 
disclosed, as the list of assigned DPID numbers is not public and 
disclosing individual numbers (and/or the complete list of numbers) 
could have unintended consequences.'' ARM NPRM Comments at 10, U.S. 
Copyright Office Dkt. No. 2020-5, available at https://beta.regulations.gov/document/COLC-2020-0005-0001.
    \126\ DLC Letter July 13, 2020 at 10 (stating that while 
converting the DPID numerical code into the party's actual name for 
reporting purposes ``is conceptually possible'' for DMPs, ``it would 
require at least a substantial effort for some services'' (around 
one year of development), and ``would be an impracticable burden for 
some others'').
---------------------------------------------------------------------------

    Having considered these comments, it seems that DPID may not have a 
strong connection to the MLC's matching efforts or the mechanical 
licensing of musical works. In light of this, and the commenters' 
concerns, the Office declines at this time to require DMPs to report 
DPID, although they are not precluded from reporting it. In concurrent 
rulemakings, the Office is separately considering related comments 
regarding the display of information provided through fields relevant 
to the statutory references to ``sound recording copyright owners'' in 
the public musical works database and in royalty statements provided to 
copyright owners.\127\
---------------------------------------------------------------------------

    \127\ See, e.g., RIAA Initial NOI Comment at 2-3; A2IM & RIAA 
Reply NOI Comment at 8-10; ARM NOI Comment at 4, U.S. Copyright 
Office Dkt. No. 2020-8, available at https://beta.regulations.gov/document/COLC-2020-0006-0001; see also U.S. Copyright Office, Notice 
of Proposed Rulemaking, The Public Musical Works Database and 
Transparency of the Mechanical Licensing Collective, Dkt. No. 2020-
8, published elsewhere in this issue of the Federal Register; U.S. 
Copyright Office, Interim Rule, Royalty Reporting and Distribution 
Obligations of the Mechanical Licensing Collective, Dkt. No. 2020-6, 
published elsewhere in this issue of the Federal Register.
---------------------------------------------------------------------------

vi. Audio Access
    The NPRM proposed requiring DMPs to report 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.\128\ In doing so, 
the NPRM adopted the DLC's proposal that DMPs provide these in lieu of 
the audio links the MLC had requested.\129\ The NPRM described the 
dispute on this point, and noted that ``while the [MLC's] planned 
inclusion of audio links [in its claiming portal] 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.'' \130\ The 
Office concluded that it ``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.'' 
\131\
---------------------------------------------------------------------------

    \128\ 85 FR at 22530-31, 22541.
    \129\ Id. at 22530-31. The Office understands that an audio link 
is a unique identifier, but not necessarily the other way around, as 
some services use different types of unique identifiers, such as 
numbers or codes rather than links, which can be used within a 
platform to access a given recording.
    \130\ Id. at 22531.
    \131\ Id.
---------------------------------------------------------------------------

    Despite the Office's encouragement, this issue has not yet been 
resolved, although the parties provided additional information 
underlying their respective positions. The MLC maintains that audio 
links should be included in monthly reports of usage, stating they are 
``a critical tool for addressing the toughest of the unmatched.'' \132\ 
The MLC states that it does not seek to host any copies of the audio on 
its own servers but rather link to audio files residing on the DMPs' 
respective servers; it further proposes to limit audio access to 
registered users of its password-protected claiming portal, to provide 
audio only for unmatched uses, and to limit access to 30-second 
previews or samples of the audio.\133\ NSAI, SONA & MAC, and the MLC 
Unclaimed Royalties Oversight Committee also submitted comments 
discussing the importance of audio access in identifying unmatched 
works.\134\ NSAI, for example, reiterates a concern previously raised 
by the MLC that songwriters may need to purchase subscriptions to the 
majority of the DMPs' services to be able to actually use the proposed 
unique identifiers to listen to the audio.\135\ The DLC's comments to 
the NPRM do not address this issue, although it reported separate 
engagement on the subject with the MLC.\136\ ARM supports the use of 
unique identifiers instead of links, but does not object to links ``to 
the extent that the MLC seeks the audio links solely for inclusion in 
its private, password-protected claiming portal in order to assist 
musical work copyright owners in identifying and claiming their 
works,'' and ``provided that the links take the user to the DMPs, that 
no audio files reside on the MLC's servers and that links are only 
provided for unmatched works.'' \137\ ARM seeks to ensure that the 
MLC's portal and database do not become ``a free online jukebox that 
competes with DMPs.'' \138\
---------------------------------------------------------------------------

    \132\ MLC NPRM Comment at 39-40.
    \133\ Id. at 39-40, 39 n.12, App. at xiv.
    \134\ NSAI NPRM Comment at 4-5 (``The most difficult sound 
recordings to match will be those that have substantially missing or 
inaccurate metadata. In these situations, there may be no other 
possible way to make a match except through the audio.''); SONA & 
MAC NPRM Comment at 7-8; MLC Unclaimed Royalties Oversight Committee 
NPRM Comment at 2-5 (``[A] readily available audio reference is the 
easiest, most reliable and transparent way to confirm ownership of a 
song.'').
    \135\ NSAI NPRM Comment at 5; see MLC Ex Parte Letter Apr. 3, 
2020 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.'').
    \136\ DLC Letter June 15, 2020 at 1.
    \137\ ARM NPRM Comment at 3.
    \138\ Id.
---------------------------------------------------------------------------

    In light of these comments, to help progress the rulemaking, the 
Office sent a letter to these parties seeking additional information 
and responses to specific questions on this issue.\139\ The Office then 
held an ex parte meeting with these commenters to further discuss the 
matter, which was followed up with additional written submissions.\140\
---------------------------------------------------------------------------

    \139\ U.S. Copyright Office Letter June 8, 2020; see DLC Letter 
June 15, 2020; MLC Letter June 15, 2020; MLC Unclaimed Royalties 
Oversight Committee Letter June 15, 2020.
    \140\ See DLC Ex Parte Letter June 23, 2020; MLC Ex Parte Letter 
June 23, 2020; MLC Unclaimed Royalties Oversight Committee Ex Parte 
Letter June 23, 2020; MAC Ex Parte Letter June 23, 2020; NSAI Ex 
Parte Letter June 24, 2020; RIAA Ex Parte Letter June 22, 2020; SONA 
Ex Parte Letter June 23, 2020; DLC Letter July 8, 2020; MLC Letter 
July 8, 2020; RIAA Letter July 8, 2020.
---------------------------------------------------------------------------

    These efforts revealed further details concerning how the MLC 
intends to use sound recording audio obtained through DMP reporting and 
the obstacles DMPs face in accommodating what the MLC seeks. For 
example, the MLC confirms that it does not intend to make or host any 
copies of such sound recordings, or use audio access to undertake 
matching efforts involving digital fingerprinting

[[Page 58124]]

analysis (though the MLC says it ``will explore a more systematic and 
direct process'' for utilizing audio content analysis to help reduce 
the incidence of unmatched works).\141\ It appears to the Office that 
what the MLC essentially wants is for its claiming portal to have an 
embedded player (or something similar) where, even though the audio 
files still reside with the DMPs, portal users would be able to listen 
to the audio directly within the portal environment without having to 
link out or navigate away to each DMP's service.\142\ The DLC raises 
numerous concerns with what the MLC seeks, which it summarizes as 
``three main problems, which are interrelated: (1) The use case for the 
audio links is overly vague and requires better definition and 
development; (2) there are significant licensing issues impacting (and 
currently, prohibiting) the MLC from streaming music or the DMPs from 
streaming music outside of their services; and (3) there are 
significant technological challenges that make the MLC's proposal 
unripe for regulation, and in some instances would likely render it 
cost-prohibitive.'' \143\ Notably, the DLC asserts that while ``[a]ll 
DLC members use unique identifiers for tracks,'' \144\ ``[t]he idea of 
a persistent, clickable `audio link' to be used as the MLC describes 
simply does not exist today.'' \145\ The RIAA also expresses concern 
over licensing issues, as well as content protection, and states that 
the ``simplest approach is to have DMPs provide web links that take 
portal users directly to the referenced track or parent album on the 
DMP's service.'' \146\
---------------------------------------------------------------------------

    \141\ MLC Letter June 15, 2020 at 6-7; MLC Ex Parte Letter June 
23, 2020 at 2; see also SONA & MAC NPRM Comment at 7-8 (``[T]he 
ability to employ `fingerprinting' technology to compare 
unidentified audio files to known sound recordings would augment and 
improve matching and claiming efforts.'').
    \142\ See MLC Ex Parte Letter June 23, 2020 at 2-3; MLC Letter 
June 15, 2020 at 5-6, 6 n. 5; DLC Ex Parte Letter June 23, 2020 at 
2.
    \143\ DLC Ex Parte Letter June 23, 2020 at 1-2; see also id. at 
2-6; DLC Letter June 15, 2020 at 2-5. The DLC also disputes the 
MLC's assertions that this has been done before in other contexts. 
DLC Ex Parte Letter June 23, 2020 at 2 (``[T]hese claiming portals 
do not contain audio assets and users cannot listen to tracks 
directly within the portals; instead, and only in the case of 
certain DMP agreements, users are redirected to the DMP's individual 
service, where they can listen to the track after logging in.''); 
DLC Letter July 8, 2020 at 2.
    \144\ DLC Letter June 15, 2020 at 5; see also MLC Ex Parte 
Letter June 23, 2020 at 2 (``[A] unique DMP identifier is already 
reported under the DDEX DSRF standard.'').
    \145\ DLC Ex Parte Letter June 23, 2020 at 3.
    \146\ RIAA Letter July 8, 2020 at 1-2 (``[R]equiring every DMP 
to build an embedded audio player that can be incorporated into the 
MLC portal will mean DMP/label contract amendments and expensive 
service functionality changes that could introduce security holes 
leading to piracy and loss of revenue.''); RIAA Ex Parte Letter June 
22, 2020 at 2 (``[I]t would be inappropriate for the Copyright 
Office to issue regulations that would have the effect of mandating 
that certain terms be included in private marketplace deals between 
record companies and DMPs.'').
---------------------------------------------------------------------------

    Despite concerns with the manner in which the MLC seeks to provide 
portal users with audio access, the DLC agrees that the availability of 
audio can improve the incidence of unmatched works, and emphasizes its 
commitment and willingness to work on this issue further with the MLC, 
including through the operations advisory committee.\147\ The MLC 
concedes that unique identifiers ``could be acceptable if instructions 
were also provided to convert the identifiers into links to provide 
[no-cost audio] access to portal users.'' \148\ But the MLC prefers 
that the Office adopt a rule specifically requiring the provision of 
links, even though the MLC also seems to agree that there is much left 
to be worked out between the MLC and the DMPs to implement such a 
requirement. To that end, the MLC proposes an additional provision that 
it says ``provides a framework to support and address any audio link 
implementation concerns while maintaining the acknowledged imperative 
of reaching the goal, and also delivers flexibility by explicitly 
providing for the Register to adjust the commencement date for the 
audio link usage reporting, if appropriate, based upon [joint reporting 
of implementation obstacles and responsive strategies] from the MLC and 
DLC.'' \149\ Absent such adjustment, however, the MLC's proposed 
approach would require DMPs to provide audio links in monthly reports 
of usage as early as the first reporting period, a condition the DLC 
represents is not operationally possible. The DLC's most recent 
submission on this issue contains information describing the degree of 
audio access that can be obtained using the unique identifiers assigned 
by each DLC member and instructions on how to use the identifiers to 
obtain such access.\150\ From this information, it appears that most 
tracks (or at least 30-second clips of most tracks), with relatively 
few exceptions, can be accessed for free through most DLC members' 
services using a unique identifier, and that for most DLC members, the 
way the unique identifier is used is by plugging it into a URL that can 
be used either in the address bar of a web browser or to create a 
hyperlink.\151\ Indeed, the DLC states

[[Page 58125]]

that the MLC ``should easily be able to add functionality to convert 
the unique DMP identifier into a clickable URL on the portal.'' \152\ 
It further appears that at least one major DMP (Spotify) already offers 
an embeddable player that the MLC can integrate into its portal so 
users can listen without navigating away.\153\
---------------------------------------------------------------------------

    \147\ DLC Letter June 15, 2020 at 1; DLC Ex Parte Letter June 
23, 2020 at 1, 3-4, 5-6; DLC Letter July 8, 2020 at 2.
    \148\ MLC Ex Parte Letter June 23, 2020 at 2-3 (``Whatever 
process is used to resolve the stable DMP identifier into the audio 
access is the relevant process.''); MLC Letter June 15, 2020 at 5-6, 
6 n.5; see also MLC Unclaimed Royalties Oversight Committee Letter 
June 15, 2020 at 2 (seeking that ``[r]ights holders are entitled to 
full & frictionless transparency, for themselves and for their 
clients to whom they are accountable,'' though ``defer[ring] to The 
MLC's position on this from an operational perspective'').
    \149\ MLC Letter July 8, 2020 at 2, Ex. A. See MLC Ex Parte 
Letter June 23, 2020 at 2-4; see also NSAI Ex Parte Letter June 24, 
2020 at 1(``The USCO must mandate a set timeline and framework for 
DSPs to be able to provide those audio links.''); MAC Ex Parte 
Letter June 23, 2020 at 2 (asking the Office ``to adopt a rule 
requiring DMPs to provide such links even if DMPs are not able to 
make the audio files immediately available'' by the license 
availability date, and observing that there is a ``lack of agreement 
on how to coordinate the operationalization of these links within 
the MLC claiming portal''); SONA Ex Parte Letter June 23, 2020 at 2 
(same).
    \150\ DLC Letter July 8, 2020 Add.
    \151\ See DLC Letter July 8, 2020 Add. For example, for Amazon, 
the URL formula is https://music.amazon.com/albums/;album ID/track 
ID. Id. at 3. According to the DLC, and from some spot-testing by 
the Office, it appears that the degree of audio access currently 
offered by each DLC member is as follows:
    Amazon's unique identifiers can be converted into URLs (an album 
identifier and track identifier are needed) and used to locate 
tracks, but a subscription is required to listen to a specific track 
on demand. See id. at 3-4.
    Apple's unique identifiers can be converted into URLs and used 
to locate and listen to ``30-second clips of tracks . . . without a 
login or subscription.'' See id. at 5-6.
    Google/YouTube's unique identifiers can be converted into URLs 
or entered into a search bar and can be used to locate and listen to 
full tracks without a login or subscription, except for ``[a] small 
percentage of content [which] requires a subscription for access 
(per label policy).'' See id. at 7-9.
    Pandora's unique identifiers can be converted into URLs and used 
to locate and listen to full tracks without a subscription by 
launching an ad-based ``Premium Session'' within a free tier 
account. ``In some instances, the URL navigates to a different 
version of the same sound recording (e.g., studio release vs. `best 
of').'' See id. at 10-11.
    Qobuz's unique identifiers can be converted into URLs and used 
to locate and listen to ``30-second clips of most tracks . . . 
without a login or subscription.'' See id. at 12-13.
    SoundCloud's unique identifiers can be converted into URLs (an 
artist name, song title, and track identifier are needed) and used 
to locate and listen to ``30-second clips of most tracks . . . 
without a login or subscription[.] A small percentage of content is 
not available for 30-second clips and requires a subscription for 
access (per label policy).'' See id. at 14-17.
    Spotify's unique identifiers can be entered into a search bar 
and used to locate and listen to full tracks without a subscription 
by using a free tier, ad-based account. It appears that access may 
be more limited when using Spotify's mobile app. Spotify's unique 
identifiers can also be used to generate an embeddable player. 
``Certain 30-second clips may be available without logging in 
depending on the terms of label agreements.'' See id. at 18-22.
    Tidal's unique identifiers can be converted into URLs and used 
to locate and listen to ``30-second clips of all tracks . . . 
without a login or subscription.'' See id. at 23-25.
    MediaNet ``does not own or operate a consumer-facing service in 
which playing audio tracks is possible for any purpose[.] 
Accordingly, MediaNet does not have a publicly accessible search 
function that uses unique identifiers as inputs; MediaNet utilizes 
unique links that are usable for a single play only.'' See id. at 
26-27.
    \152\ DLC Letter July 8, 2020 at 1.
    \153\ DLC Letter July 8, 2020 Add. at 18-19.
---------------------------------------------------------------------------

    After careful consideration of the record on this issue, the Office 
concludes that the proposed rule should be modified. The interim rule 
retains the requirement to report unique identifiers instead of audio 
links, but with important changes. First, the rule requires DMP-
assigned unique identifiers, including unique identifiers that can be 
used to locate and listen to reported sound recordings, to always be 
reported, subject to exceptions discussed below, in contrast to the 
proposed rule which was limited to ``if any.'' In consideration of the 
importance of audio access emphasized by the MLC and others, the DLC's 
agreement that audio access can improve the incidence of unmatched 
works, and the fact that the Office has not been made aware of any DMP 
that does not currently use unique identifiers for its tracks, the 
Office believes this to be a reasonable change that will facilitate 
access of audio when necessary for matching and claiming purposes.\154\
---------------------------------------------------------------------------

    \154\ See DLC Letter June 15, 2020 at 5 (``All DLC members use 
unique identifiers for tracks.'').
---------------------------------------------------------------------------

    Second, in light of being informed that one of the DLC's members 
does not operate its own consumer-facing service,\155\ the proposed 
language referring to access being through the DMP's public-facing 
service has been dropped. In its place, the interim rule instead 
requires DMPs to provide clear instructions describing how their unique 
identifiers can be used to locate and listen to the reported sound 
recordings. This approach requires that audio access be obtainable, but 
flexibly allows each DMP to specify how such access may be achieved in 
accordance with its licensed offerings. For example, it could be by 
using an identifier as part of a URL or as part of a service's search 
function. A DMP without its own consumer-facing service could provide 
instructions on how unique identifiers can be used to access audio 
through a service it supports, or otherwise provide some kind of 
customer service mechanism.
---------------------------------------------------------------------------

    \155\ See DLC Ex Parte Letter June 23, 2020 at 3 n.7; DLC Letter 
July 8, 2020 Add. at 27.
---------------------------------------------------------------------------

    With respect to these changes, the Office is cognizant that if a 
DMP's unique identifiers cannot currently be used to obtain audio 
access, it may take some time for the DMP to be able to fully comply 
with the interim rule. Consequently, the rule includes a one-year 
transition period for a DMP that is not already equipped to comply to 
begin reporting unique identifiers that can be used to locate and 
listen to sound recordings, accompanied by clear instructions 
describing how to do so. To make use of the transition period, the DMP 
will need to notify the MLC and describe any implementation obstacles. 
The DMP will also still need to report DMP-assigned unique identifiers 
generally; the transition period is only, as needed, for identifiers 
and instructions relating to audio access. Nothing, of course, prevents 
an eligible DMP from providing this information before the end of the 
transition period.
    Third, since the MLC and others \156\ agree they are adequate, and 
the DLC states that several DMPs already provide free access to 
them,\157\ the interim rule permits DMPs, in their discretion, to limit 
audio access to 30-second clips.
---------------------------------------------------------------------------

    \156\ See, e.g., NSAI Ex Parte Letter June 24, 2020 at 1 
(``[E]ven a 15-20 second audio clip would suffice.'').
    \157\ See DLC Letter July 8, 2020 Add. at 5, 12, 14, 18, 23.
---------------------------------------------------------------------------

    The interim rule's updated approach is intended to better ensure 
that, subject to the transition period, audio can be accessed where 
necessary for the MLC's duties. Based on the record, for most tracks on 
most DLC-member services, such access is currently available to users 
without a paid subscription and can be obtained using URLs, thus 
largely achieving what the MLC and others seek. To help ensure that 
current levels of access are not reduced in the future, the interim 
rule includes a provision restricting DMPs from imposing conditions 
that materially diminish the degree of access to sound recordings in 
relation to their potential use by the MLC or its registered users in 
connection with their use of the MLC's claiming portal. For example, if 
a paid subscription is not required to listen to a sound recording as 
of the license availability date, the DMP should not later impose a 
subscription fee for users to access the recording through the portal. 
This restriction does not apply to other users or methods of accessing 
the DMP's service (including the general public), if subsequent 
conditions resulting in diminished access are required by a relevant 
licensing agreement, or where such sound recordings are no longer made 
available through the DMP's service.
    In promulgating this aspect of the interim rule, the Office notes 
that the MLC, DLC, and others have suggested that further operational 
discussions may be fruitful. A seamless experience using embedded audio 
is a commendable goal worthy of further exploration, but in the 
meantime, where significant engineering, licensing, or other unresolved 
hurdles stand in the way, providing hyperlinks in the portal--which it 
seems can be done at present for most DLC-member services based on the 
record--or other identifiers that permit access to a recording appears 
to be a reasonable compromise.\158\
---------------------------------------------------------------------------

    \158\ Some commenters raised the issue of audio deduplication in 
the claiming portal. See DLC Ex Parte Letter June 23, 2020 at 5 
(asking ``whether and how the MLC's portal would `de-duplicate' 
files so that a user does not need to listen through the same song 
10 times on 10 different services''); RIAA Letter July 8, 2020 at 2 
(``[W]ill portal users be required to listen to every unidentified 
track on every service (which is not realistic) or does the solution 
leverage recording industry standard identifiers such as ISRC codes 
so that identifying a track once is sufficient (because the track 
has the same ISRC across all services).''). The Office is addressing 
audio deduplication in the portal and public musical works database 
in a parallel rulemaking. See U.S. Copyright Office, Notice of 
Proposed Rulemaking, The Public Musical Works Database and 
Transparency of the Mechanical Licensing Collective, Dkt. No. 2020-
8, published elsewhere in this issue of the Federal Register.
---------------------------------------------------------------------------

    But to incentivize future discussions, the interim rule includes a 
provision, similar to the MLC's proposal, requiring the MLC and DLC to 
report to the Office, over the next year or as otherwise requested, 
about identified implementation obstacles preventing the audio of any 
reported sound recording from being accessed directly or indirectly 
through the portal without cost to portal users, and any other 
obstacles to improving the experience of portal users. Such reporting 
should also identify an implementation strategy for addressing any 
identified obstacles, and any applicable progress made. The Office 
expects such reporting will help inform it as to whether any 
modifications to the interim rule prove necessary on this subject, and 
facilitate continued good-faith collaboration through the MLC's 
operations advisory committee.
    Finally, the reporting should also identify any agreements between 
the MLC and DMPs to provide for access to relevant sound recordings for 
portal users through an alternate method rather than by reporting 
unique identifiers (e.g., separately licensed solutions). The interim 
rule provides that if such an alternate method is implemented pursuant 
to any such

[[Page 58126]]

agreement, the requirement to report identifiers and instructions to 
obtain audio access is lifted for the relevant DMP(s) for the duration 
of the agreement. The purpose of this provision is to provide 
flexibility for the MLC and DMPs to collaboratively find other mutually 
agreeable ways of ensuring relatively easy audio access to portal users 
seeking to identify works.
vii. Altered Data
    One of the more contested issues in this proceeding concerns the 
practice of DMPs sometimes altering certain data received from sound 
recording copyright owners and other licensors for normalization and 
display purposes in their public-facing services, and whether DMPs 
should be permitted to report the modified data to the MLC or instead 
be required to report data in the original unmodified form in which it 
is received. The NPRM explained that: ``[A]fter 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 . . . . [I]t 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.'' \159\ Ultimately, the 
Office explained that: ``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.'' \160\ The proposed middle 
ground was one where altered data could be reported, but subject to 
what the Office believed to be meaningful limitations. The first 
limitation was that DMPs would have been required to report 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 second limitation was that DMPs would not have 
been permitted to report only modified versions of any unique 
identifier, playing time, or release date. The third limitation was 
that DMPs would not have been permitted to report only modified 
versions of information belonging to categories that the DMP was not 
periodically altering prior to the license availability date.
---------------------------------------------------------------------------

    \159\ 85 FR at 22523.
    \160\ Id. at 22525.
---------------------------------------------------------------------------

    In response, the MLC and others reject the proposed approach, 
reasserting that having unaltered data is imperative for matching, and 
arguing that the DLC has not sufficiently supported its assertions of 
DMP burdens associated with reorienting existing reporting 
practices.\161\ The DLC objects to most of the conditions under the 
first limitation described above (the first and third scenarios),\162\ 
but does not object to the second or third limitations.\163\ ARM also 
commented regarding its members' equities on this subject, but noted 
its ``primary concern,'' rather than MLC matching efforts, ``is 
ensuring that all sound recording data that ultimately appears in the 
MLC's public-facing database is as accurate as possible and is taken 
from an authoritative source (e.g., SoundExchange).'' \164\ To that 
end, ARM states that while ``sympathetic to the operational 
challenges'' that would be created by requiring DMPs to maintain a 
``parallel archive'' of data, ``this task would be made easier if the 
DMPs were required to populate their monthly reports of usage with only 
unaltered data.'' \165\
---------------------------------------------------------------------------

    \161\ MLC NPRM Comment at 21-26, App. at xvi-xvii; see, e.g., 
NMPA NPRM Comment at 6-9; Peermusic NPRM Comment at 2-3.
    \162\ DLC NPRM Comment at 5-7, Add. at A-16-17.
    \163\ DLC NPRM Comment Add. at A-17.
    \164\ ARM NPRM Comment at 6-7. The Office is addressing the 
display of sound recording data in the public musical works database 
in a parallel rulemaking. See U.S. Copyright Office, Notice of 
Proposed Rulemaking, The Public Musical Works Database and 
Transparency of the Mechanical Licensing Collective, Dkt. No. 2020-
8, published elsewhere in this issue of the Federal Register.
    \165\ ARM NPRM Comment at 6.
---------------------------------------------------------------------------

    In light of these comments, and at ARM's suggestion,\166\ the 
Office sent a letter seeking additional information from the MLC and 
DLC on this issue.\167\ The Office then held an ex parte meeting with 
the commenters on this matter, which was followed up with additional 
written submissions.\168\ Although the MLC and DLC largely maintain the 
same general positions about burdens and usefulness for matching, these 
efforts have revealed additional helpful information, discussed below.
---------------------------------------------------------------------------

    \166\ Id. (``If the Office wishes to convene some sort of 
informal stakeholder meeting to explore solutions to this particular 
issue, we and relevant executives from our member companies would be 
happy to participate in such a process. SoundExchange . . . should 
also be included in any such meeting.'').
    \167\ U.S. Copyright Office Letter June 30, 2020; see DLC Letter 
July 13, 2020; MLC Letter July 13, 2020.
    \168\ See ARM Ex Parte Letter July 27, 2020; DLC Ex Parte Letter 
July 24, 2020; MLC Ex Parte Letter July 24, 2020; SoundExchange Ex 
Parte Letter July 24, 2020.
---------------------------------------------------------------------------

    In light of the further-developed record, the Office has made 
certain revisions to the proposed rule. First, the rule has been 
clarified or adjusted in light of a few areas of agreement. The 
relevant provisions on altered data no longer apply to playing time 
because, as discussed above, actual playing time must be reported by 
DMPs. The interim rule also clarifies, as the DLC requests and as the 
MLC agrees, that where the regulations refer to modifying data, 
modification does not include the act of filling in or supplementing 
empty or blank data fields with information known to the DMP, nor does 
it include updating information at the direction of the sound recording 
copyright owner or licensor (such as when a record label may send an 
email updating information previously provided in an ERN message).\169\ 
The modification at issue is modification of information actually 
acquired from a sound recording copyright owner or licensor that the 
DMP then changes in some fashion without being directed to by the owner 
or licensor.\170\
---------------------------------------------------------------------------

    \169\ See DLC NPRM Comment at 5, Add. at A-16-17; DLC Letter 
July 13, 2020 at 7-8; MLC Letter July 13, 2020 at 2; MLC Ex Parte 
Letter July 24, 2020 at 9.
    \170\ See MLC Letter July 13, 2020 at 2 (``If, for example, a 
sound recording copyright owner conveyed generally to DMPs a request 
to update Title metadata for a particular licensed sound recording, 
the new title should qualify as metadata `acquired from' the sound 
recording copyright owner.'').
---------------------------------------------------------------------------

    The interim rule has also removed the reference requiring reporting 
of unaltered data where this reporting is required by a nationally or 
internationally recognized standard that has been adopted by the MLC 
and used by the particular DMP, e.g., DDEX.\171\ At bottom, although 
this provision was intended to allow room for future

[[Page 58127]]

consensus to emerge among relevant copyright owners and DMPs through 
their chosen participation in non-governmental standards-setting 
processes, the comments suggest the parties would prefer clear and 
immediate direction from the Office. The MLC, DLC, and others are in 
agreement that this provision should be eliminated.\172\ In the case of 
DDEX, the MLC and others explain that, if DMPs do not want to report 
unaltered data (or anything else for that matter), it is unlikely that 
a consensus will be reached for DDEX to mandate such reporting, absent 
regulation.\173\ Conversely, the DLC expresses concern that future 
changes adopted by a standards-setting body could expand the categories 
of information otherwise required by the rule to be reported unaltered, 
in its view effectively delegating future adjustments to the rule.\174\ 
As the commenters recognize, any changes that may need to be made to 
DDEX's standards to accommodate the Office's regulations will either 
need to be pursued by the parties or some other reporting mechanism 
will need to be used.\175\
---------------------------------------------------------------------------

    \171\ See 85 FR at 22525.
    \172\ See DLC NPRM Comment at 5, 10; MLC NPRM Comment at 22-23; 
NMPA NPRM Comment at 8-9; Peermusic NPRM Comment at 3; MLC Ex Parte 
Letter July 24, 2020 at 7.
    \173\ See MLC NPRM Comment at 22-23; NMPA NPRM Comment at 8-9; 
MLC Ex Parte Letter July 24, 2020 at 7; see also DLC Letter July 13, 
2020 at 9 (acknowledging that ``DDEX is a consensus-driven 
organization'').
    \174\ DLC NPRM Comment at 5 (raising practical questions such as 
whether optional fields would be required for reporting or whether 
the rule would account for different versions of the relevant 
standard).
    \175\ See MLC NPRM Comment at 23; NMPA NPRM Comment at 8-9; 
Peermusic NPRM Comment at 3; ARM NPRM Comment at 10; MLC Ex Parte 
Letter July 24, 2020 at 7.
---------------------------------------------------------------------------

    Turning to the larger question regarding altered data and its role 
in matching, the DLC characterizes the issue as a marginal one and 
notes that DMPs only make minor, mostly cleanup, modifications to a 
fraction of fields for a small fraction of tracks (estimated at less 
than 1%).\176\ It asserts that the MLC's matching processes should be 
sophisticated enough to overcome these alterations, and that the MLC 
should be able to use an ISRC, artist, and title keyword to identify 
over 90% of recordings through automated matching by using 
SoundExchange's database.\177\ In the DLC's words, ``[i]t should be 
(and is) the MLC's job to construct technological solutions to handle 
those minor differences in the matching process, not DMPs' job to re-
engineer their platforms, ingestion protocols, and data retention 
practices so that the MLC receives inputs it likely does not require.'' 
\178\ (Relatedly, ARM strongly opines that the ISRC is a reliable 
identifier, noting that all ARM members distribute tracks pursuant to 
direct licenses that require provision of ISRCs to the DMPs, and that 
all major record labels use ISRCs to process royalties.\179\ 
SoundExchange subsequently supplied further information regarding the 
effectiveness and reliability of ISRC identifiers.\180\) The DLC also 
explains that providing unaltered data is challenging because ``label 
metadata isn't simply saved wholesale in a single table,'' but instead 
``is processed and divided into a number of different systems built for 
distinct purposes, and royalty accounting systems pull from those 
various systems for purposes of generating a report,'' and ``[i]t is 
that entire chain that would need to be reengineered to ensure that 
label metadata is passed through in unaltered form.'' \181\ But 
ultimately, the DLC characterizes the incremental costs to provide at 
least limited types of unaltered data, as compared to the costs of 
creating the broader DMP-to-MLC reporting infrastructure, as 
``minimal'' for most DMPs and requests that if the scope of unaltered 
data is expanded then DMPs be given a one-year transition period to 
comply.\182\ The DLC further states that ``[m]any DMPs do not alter 
metadata at all.'' \183\ Lastly, the DLC notes that at least some DMPs 
have not maintained the original unaltered data, meaning they no longer 
have it available to report ``for the tens of millions of tracks 
currently in their systems.'' \184\ The DLC and ARM oppose any rule 
requiring DMPs to recreate this data from new feeds from sound 
recording copyright owners.\185\
---------------------------------------------------------------------------

    \176\ DLC Letter July 13, 2020 at 2-4; DLC Ex Parte Letter July 
24, 2020 at 2-3.
    \177\ DLC Letter July 13, 2020 at 2-4 (``[T]he MLC's continued 
insistence on regulating the nuances of highly variegated metadata 
practices reflects a failure of prioritization. . . . Hairsplitting 
among metadata fields . . . is not mission-critical.''); DLC Ex 
Parte Letter July 24, 2020 at 2-3.
    \178\ DLC Letter July 13, 2020 at 2 (``Even on the altered 
fields, it should be trivial to construct `fuzzy' search or matching 
technologies that render immaterial the differences between original 
and altered data.''); DLC Ex Parte Letter July 24, 2020 at 3 (``If 
the MLC's matching algorithm cannot handle simple variations like 
`The Beatles' versus `Beatles, The,' it needs to adopt a better 
algorithm.'').
    \179\ See ARM Ex Parte Letter July 27, 2020 at 2. According to 
ARM, the companies it represents ``collectively create, manufacture 
and/or distribute nearly all of the sound recordings commercially 
produced and distributed in the United States.'' ARM NPRM Comment at 
1. ARM also informs that the RIAA has designated SoundExchange as 
the authoritative source of ISRC data in the United States. ARM Ex 
Parte Letter July 27, 2020 at 2.
    \180\ SoundExchange Ex Parte Letter Sept. 1, 2020. SoundExchange 
states that ISRC, ``while used imperfectly when first introduced, 
has become the standard for uniquely identifying music asserts'' 
because they ``are used by everyone in the recorded music 
ecosystem.'' Id.
    \181\ DLC Ex Parte Letter July 24, 2020 at 2 & n.4; DLC Letter 
July 13, 2020 at 2 (``For at least some DMPs, doing this work would 
touch every part of the digital supply chain, involving interactions 
from multiple cross-functional teams, modifications of legacy 
systems, and new engineering pathways to capture, store, and report 
unaltered data.'').
    \182\ See DLC Letter July 13, 2020 at 4-5. The DLC later asserts 
that ballpark cost estimates for a larger pass through of unaltered 
data could ``reach as high as millions of dollars.'' DLC Ex Parte 
Letter July 24, 2020 at 4 n.10.
    \183\ DLC Letter July 13, 2020 at 1, 3.
    \184\ DLC Ex Parte Letter July 24, 2020 at 2.
    \185\ Id.; ARM Ex Parte Letter July 27, 2020 at 3-4.
---------------------------------------------------------------------------

    In contrast, the MLC generally argues that receipt of the sound 
recording copyright owner or licensor's unaltered data is critical for 
proper and efficient matching, explaining how its absence can frustrate 
and obstruct automated efforts.\186\ The MLC asserts that this will 
lead to more tracks needing to be matched manually, and that manual 
matching is made all the more difficult where an unknown multiplication 
of different data variations are reported due to DMP alteration.\187\ 
While the MLC concedes that it will need to deal with other data 
issues, it says that ``there is no `inefficiency cap' when it comes to 
metadata inconsistencies,'' and that ``each additional metadata 
inconsistency compounds the previous one and makes the process even 
harder as they synergise with each other.'' \188\ The MLC states that 
it is impossible to quantify to what extent permitting reporting of 
altered data will affect matching because there are too many unknown 
variables about the scope of DMP alterations, but nonetheless argues 
that this is not as minor an issue as the DLC characterizes it.\189\ 
Rather, the MLC contends that even if only a small fraction of 1% of 
tracks are implicated, given the number of DMPs and the massive size of 
their libraries, ``it could

[[Page 58128]]

amount to millions of works thrown into manual matching, which could 
amount to literally hundreds of human work years reestablishing 
matches.'' \190\ In terms of relative burdens, the MLC argues that the 
DLC has not made a satisfactory showing of undue burden on DMPs \191\ 
and points out the ``asymmetry'' between requiring DMPs ``to make a 
one-time workflow change'' and the ``ongoing and constant drain and 
wear on [the MLC's] systems, making its automated processes harder to 
maintain and less effective, and also compounding the amount of manual 
review required, increasing costs and decreasing efficiency.'' \192\ 
Moreover, the MLC contends that ``[f]orcing the MLC to use the same 
altered metadata that the DMPs used that contributed to the system that 
the MLC was created to fix is inconsistent with the statutory goals.'' 
\193\
---------------------------------------------------------------------------

    \186\ MLC Letter July 13, 2020 at 3-4 (``While a matching 
algorithm may not be fully defeated by a minor or cosmetic change to 
a single metadata field, the alteration of metadata makes the 
algorithms harder to maintain, and reduces the confidence levels, 
and thus the automated matching rate regardless of how sophisticated 
the algorithms are.''); MLC Ex Parte Letter July 24, 2020 at 3.
    \187\ MLC Letter July 13, 2020 at 4-5 (suggesting a possibility 
of getting as many as 50 different variations for each data field 
for a single sound recording from 50 different DMPs).
    \188\ Id. at 6 (``[A]ltered metadata will be a force for 
reducing matching efficiency and effectiveness, and will only 
compound the negative effects that arise from other metadata 
inconsistencies.'').
    \189\ Id. at 4-5; MLC Ex Parte Letter July 24, 2020 at 8 n. 5 
(``[U]sage reporting of both unaltered and altered metadata is the 
only way that one could precisely quantify the effect of altered 
metadata reporting on matching performance.'').
    \190\ MLC Letter July 13, 2020 at 5; MLC Ex Parte Letter July 
24, 2020 at 3; see also MLC NPRM Comment at 25 n.10 (noting that 
reporting unaltered data will ``greatly improv[e] . . . the speed 
and accuracy of royalty processing and accounting'').
    \191\ MLC Ex Parte Letter July 24, 2020 at 4-6.
    \192\ MLC Letter July 13, 2020 at 5-6.
    \193\ Id. at 6.
---------------------------------------------------------------------------

    Regarding the contention that the MLC can use an ISRC, artist, and 
title keyword to match using SoundExchange's database, the MLC 
disagrees, asserting, among other things, that SoundExchange cannot be 
compelled to provide its data, that its coverage is not 100% and may 
omit ``possibly the majority of track entries that the MLC must match 
each month,'' that such cross-matching would be obstructed if the 
artist or title have themselves been altered, and that ``tasking the 
MLC with trying to clean sound recording data for public display by 
cross-matching and `rolling up' DMP reporting against a third-party 
database is not part of the MLC's mandate.'' \194\ The MLC also 
emphasizes that ``[t]he problems necessitating the establishment of the 
MLC were not centered around the matching of works embodied in 
established catalogs and hits,'' and thus ``the MLC sees the matching 
of [ ] `edge cases' as perhaps its most critical mandate.'' \195\ In 
response to the DLC's identification of the particular categories of 
information DMPs sometimes modify,\196\ the MLC states that of those 
data fields, the MLC must have the unaltered version of the sound 
recording name, featured artist, ISRC, version, album title, and 
songwriter.\197\ With respect to the DLC's statement that some DMPs 
cannot report unaltered data for tracks currently in their systems 
because they no longer have such data, the MLC requests that such DMPs 
be required to certify that they no longer have the data before being 
excused from reporting it.\198\ Subsequent discussions seemingly 
revealed agreement among the participants that such DMPs should not be 
required to obtain from sound recording copyright owners, and such 
owners not be required to provide to DMPs, replacement ``back catalog'' 
data.\199\
---------------------------------------------------------------------------

    \194\ MLC Ex Parte Letter July 24, 2020 at 2-3.
    \195\ Id. at 3-4.
    \196\ DLC Letter July 13, 2020 at 2-3.
    \197\ MLC Ex Parte Letter July 24, 2020 at 9.
    \198\ Id. at 10.
    \199\ See DLC Ex Parte Letter July 24, 2020 at 2 (noting the 
meeting's ``apparent agreement between the MLC, DLC and record label 
representatives that there should be no obligation for DMPs to try 
to recreate such data from new feeds from the sound recording 
copyright owners''). The MLC subsequently asserts in its letter that 
``there should be no carve out from the DMP efforts obligation for 
this metadata, and further that an efforts carve out would conflict 
with the MMA's unreserved efforts requirement.'' MLC Ex Parte Letter 
July 24, 2020 at 10-11. The interim rule does not adopt an explicit 
carve out, but the Office questions, in light of this apparent 
consensus or near-consensus (especially between the DMPs and sound 
recording copyright owners regarding their direct deals), whether 
efforts to reobtain such a large amount of data can be fairly 
characterized as ``commercially reasonable efforts.'' Having said 
that, if sound recording copyright owners do provide this data, DMPs 
would still be obligated to report it to the extent required by the 
interim rule.
---------------------------------------------------------------------------

    While the Office has taken note of the thoughtful points raised by 
the DLC, it is ultimately persuaded by the MLC and others to update the 
regulatory language from the proposed rule to require reporting of four 
additional fields of unaltered data, subject to the requested on-ramp 
period. At bottom, millions of tracks are still millions of tracks, and 
the need to match ``edge'' cases potentially affects a large number of 
copyright owners and songwriters, even if only a fraction of the DMPs' 
aggregated libraries, and the number of altered tracks will only grow 
over time.\200\ A core goal of the MMA is ``ensuring fair and timely 
payment to all creators'' of musical works used by DMPs.\201\ As 
Congress has recognized, even seemingly minor inconsistencies can still 
pose a problem in the matching process.\202\ The MLC, as bolstered by 
other commenters,\203\ has made a reasonable showing that receiving 
only the modified DMP data for the fields at-issue \204\ may hinder its 
intended matching efforts, or at least take additional time to match, 
thus delaying prompt and accurate royalty payments to copyright owners 
and songwriters.\205\ The MLC has a strong incentive to match to the 
greatest extent reasonably possible, and so has a corresponding 
operational equity with respect to its professed metadata needs.\206\ 
Additionally, while the Office agrees with the DLC that ``[t]he MLC's 
system is meant to be a pacesetter in the industry,'' \207\ as the MLC 
points out, this may not necessarily support the reporting of 
potentially millions of tracks with certain metadata in a less-
advantaged state. While the DLC also raises points worthy of 
consideration regarding the apparent feasibility of technological 
approaches to tackle cleanup edits which perhaps the

[[Page 58129]]

operations advisory committee should discuss, its comments do not 
address other instances raised by commenters where ```fuzzy' search[es] 
or matching technologies'' are unlikely to resolve a discrepancy.\208\ 
Finally, ARM, while advocating for the MLC to obtain sound recording 
metadata from a single source with respect to its public-facing 
database, also acknowledges the utility of it receiving unaltered 
metadata from DMPs as opposed to data that reflects alteration by 
individual DMPs.\209\
---------------------------------------------------------------------------

    \200\ See MLC Ex Parte Letter Apr. 3, 2020 at 8 (``[D]uring an 
earnings call last year, Spotify's CEO stated that Spotify ingests 
about 40,000 tracks every day.'').
    \201\ See Conf. Rep. at 6 (emphasis added) (``Th[e present] 
situation must end so that all artists are paid for their creations 
and that so-called `black box' revenue is not a drain on the success 
of the entire industry.''); H.R. Rep. No. 115-651, at 7-8; S. Rep. 
No. 115-339, at 8; Letter from Lindsey Graham, Chairman, Senate 
Committee on the Judiciary, to Karyn Temple, Register of Copyrights, 
U.S. Copyright Office (Nov. 1, 2019) (``All artists deserve to be 
fully paid for the uses of their works and the adoption of accurate 
metadata . . . will be key to accomplishing this.'').
    \202\ See Conf. Rep. at 6 (``Unmatched works routinely occur as 
a result of different spellings of artist names and song titles. 
Even differing punctuation in the name of a work has been enough to 
create unmatched works.''); H.R. Rep. No. 115-651, at 8; S. Rep. No. 
115-339, at 8.
    \203\ See, e.g., RIAA Initial NOI Comment at 3, 5-6 (explaining 
that passing through altered data ``will make it difficult, if not 
impossible, for the MLC to do machine matching without intervention 
from a knowledgeable human''); Jessop Initial NOI Comment at 2-3 
(explaining that altered data ``make[s] matching much harder''); 
NMPA NPRM Comment at 7-9; Peermusic NPRM Comment at 2-3.
    \204\ Of the fields the DLC says DMPs sometimes modify, the MLC 
says it needs the unaltered version of the sound recording name, 
featured artist, ISRC, version, album title, and songwriter. See DLC 
Letter July 13, 2020 at 2-3; MLC Ex Parte Letter July 24, 2020 at 9.
    \205\ See also Conf. Rep. at 6 (observing that the status quo 
``has led to significant challenges in ensuring fair and timely 
payment to all creators''); H.R. Rep. No. 115-651, at 7-8; S. Rep. 
No. 115-339, at 8; Letter from Lindsey Graham, Chairman, Senate 
Committee on the Judiciary, to Karyn Temple, Register of Copyrights, 
U.S. Copyright Office (Nov. 1, 2019) (observing one of the causes of 
unmatched royalties to be ``errors and omissions in metadata as the 
work is commercialized''); 85 FR at 22526 (``In promulgating 
reporting and payment rules for the section 115 license,'' one of 
the ```fundamental criteria''' used to ```evaluate[ ] proposed 
regulatory features''' is that it ```must insure prompt payment''') 
(quoting 79 FR 56190, 56190 (Sept. 18, 2014)).
    \206\ See 17 U.S.C. 115(d)(3)(B)(ii); 84 FR at 32283 (``[I]f the 
designated entity were to make unreasonable distributions of 
unclaimed royalties, that could be grounds for concern and may call 
into question whether the entity has the `administrative and 
technological capabilities to perform the required functions of the 
[MLC].''') (quoting 17 U.S.C. 115(d)(3)(A)(iii)); Letter from 
Lindsey Graham, Chairman, Senate Committee on the Judiciary, to 
Karyn Temple, Register of Copyrights, U.S. Copyright Office (Nov. 1, 
2019) (``Reducing unmatched funds is the measure by which the 
success of [the MMA] should be measured.'').
    \207\ See DLC Letter July 13, 2020 at 2.
    \208\ See id. For example, using ``fuzzy'' matching would not 
help with an altered release date. See id. at 4. Nor would it help 
with wholesale data replacement, such as where ``Puffy'' is changed 
to ``Diddy,'' see DLC Reply NOI Comment at 9, or ``An der 
sch[ouml]nen, blauen Donau'' is changed to ``Blue Danube Waltz,'' 
see Jessop Initial NOI Comment at 2.
    \209\ See ARM NPRM Comment at 6; ARM Ex Parte Letter July 27, 
2020 at 1-2; A2IM & RIAA Reply NOI Comment at 3 n.1 (``In the event 
the Office rejects our call for the sound recording metadata to come 
from a single authoritative source, any metadata the DMPs are 
required to provide to the MLC must be provided in the exact same 
form in which it is received from record labels and other sound 
recording copyright owners (i.e., in an unaltered form).'').
---------------------------------------------------------------------------

    Concerning the issues raised regarding the MLC's potential use of 
SoundExchange's database, as discussed above and in the NPRM,\210\ the 
Office notes the DLC's and ARM's explanations how access to a third 
party's authoritative sound recording data may be generally 
advantageous to the MLC in fulfilling its statutory objectives.\211\ 
The Office has also noticed this issue in a parallel proceeding 
regarding the public musical works database, including the MLC's 
assertion that cleaning and/or deduping sound recording information is 
not part of its statutory mandate.\212\ Specifically as to the DLC's 
suggestion that the MLC should be able to use an ISRC, artist, and 
title keyword to identify over 90% of recordings through automated 
matching by using SoundExchange's database,\213\ while not opining as 
to the comparative feasibility of that approach, for purposes of the 
interim rule, the Office finds it reasonable to accept the MLC's 
assertion that such access alone would be an inadequate substitute for 
having DMPs report unaltered data. As discussed above, even a 
relatively small percentage gap in repertoire coverage can translate to 
a substantial number of tracks. Moreover, the Office cannot compel 
SoundExchange to provide its data.\214\
---------------------------------------------------------------------------

    \210\ See 85 FR at 22524.
    \211\ DLC NPRM Comment at 7-8; ARM NPRM Comment at 6-9; see 
also, e.g., SoundExchange Ex Parte Letter July 24, 2020 at 1 
(explaining how SoundExchange has a database of all the variations 
of sound recording information reported by DMPs, a separate database 
of authoritative sound recording data populated with information 
submitted by rights owners, and then a proprietary matching 
algorithm to join the two together); SoundExchange NPRM Comment at 
2-6.
    \212\ See U.S. Copyright Office, Notice of Proposed Rulemaking, 
The Public Musical Works Database and Transparency of the Mechanical 
Licensing Collective, Dkt. No. 2020-8, published elsewhere in this 
issue of the Federal Register; MLC Letter June 15, 2020 at 3 n.3.
    \213\ DLC Ex Parte Letter July 24, 2020 at 2-3. SoundExchange 
subsequently clarified that ``ISRCs in SoundExchange's repertoire 
database cover 90 percent of the value of commercially released 
tracks based on SoundExchange distributions,'' and that ``a 
significant portion of the remaining 10 percent would likely match 
to repertoire data as well.'' SoundExchange Ex Parte Letter Sept. 1, 
2020 at 2.
    \214\ See also ARM NPRM Comment at 6; ARM Ex Parte Letter July 
27, 2020 at 1-2; A2IM & RIAA Reply NOI Comment at 3 n.1.
---------------------------------------------------------------------------

    This approach seemingly fits within the statutory framework. The 
MMA obligates DMPs to facilitate the MLC's matching duties by engaging 
in efforts to collect data from sound recording copyright owners and 
passing it through to the MLC via reports of usage. A requirement to 
report such collected data in unaltered form is consonant with that 
structure, as the statute specifically contemplates musical work 
information being passed through from ``the metadata provided by sound 
recording copyright owners or other licensors of sound recordings.'' 
\215\ While the reporting of sound recording information does not have 
this same limitation, its inclusion with respect to musical work 
information nevertheless signals that Congress contemplated sound 
recording information being passed through from the metadata as well; 
the material difference being that DMPs have an added burden with 
respect to sound recording information, but not musical work 
information, to report missing metadata from another source ``to the 
extent acquired.'' \216\
---------------------------------------------------------------------------

    \215\ See 17 U.S.C. 115(d)(4)(A)(ii)(I)(bb).
    \216\ See id. at 115(d)(4)(A)(ii)(I)(aa)-(bb) (noting that sound 
recording name and featured artist must always be reported). With 
respect to the requirement for most sound recording and musical work 
information to be reported ``to the extent acquired,'' at least in 
the strictest sense, acquired data that is altered is no longer the 
same as what was acquired.
---------------------------------------------------------------------------

    That being said, the interim rule also adopts the one-year 
transition period the DLC requests, to afford adequate time both for 
DMPs to reengineer their reporting systems and, if necessary, for DDEX 
to update its standards. As with the provision adopted concerning 
unique identifiers relevant to audio access, the Office concludes that 
the DLC's requested transition period is appropriate. The statute 
seemingly does not contemplate the engineering time that both the MLC 
and DLC have identified as necessary for the MLC and DMPs to 
operationalize their respective obligations.\217\ To start, each entity 
has a core statutory duty to ``participate in proceedings before the 
Copyright Office,'' but neither one existed at the law's enactment. 
Instead, following the development of its own extensive public record, 
the Copyright Office concluded a proceeding to designate the MLC and 
DLC in July, 2019, in full conformance with the statutory timeframe, 
but leaving less than 18 months before the license availability 
date.\218\ The first notification of inquiry for this (and parallel) 
rulemakings was issued in September 2019, at a time when the MLC and 
DLC were separately engaged in an assessment proceeding before the 
CRJs, as also contemplated by the statute.\219\ The Office has 
conducted this rulemaking at an industrious clip, while maintaining due 
attention to adequately developing and analyzing the now-expansive 
record. Indeed, in one academic study analyzing over 16,000 
proceedings, rulemakings were generally found to take, on average, 
462.79 days to complete; an unrelated GAO study of rulemakings 
conducted by various executive branch agencies concluded that 
rulemakings take on average four years to complete.\220\ But even with 
this diligence, given the statutory clock remaining before the license 
availability date, the Office concludes that it is appropriate to adopt 
reasonable transition periods with

[[Page 58130]]

respect to certain identified operational needs.\221\
---------------------------------------------------------------------------

    \217\ See, e.g., MLC Ex Parte Letter Jan. 29, 2020 at 2; DLC 
Letter July 13, 2020 at 1; Spotify Ex Parte Letter Aug. 26, 2020 at 
1.
    \218\ See 84 FR at 32274 (designating the MLC and DLC); 17 
U.S.C. 115(d)(3)(B)(i) (``Not later than 270 days after the 
enactment date, the Register of Copyrights shall initially designate 
the mechanical licensing collective . . .''); 17 U.S.C. 115(e)(15) 
``The term `license availability date' means January 1 following the 
expiration of the 2-year period beginning on the enactment date.'').
    \219\ See 84 FR at 49966; U.S. Copyright Royalty Board, 
Determination and Allocation of Initial Administrative Assessment to 
Fund Mechanical Licensing Collective, Docket No. 19-CRB-0009-AA. As 
noted in the comments to the NOI, the Office understands the 
contemporaneous assessment proceeding, to have deferred, to some 
extent, discussions between the MLC and DLC in this rulemaking. See 
84 FR 65739 (Nov. 29, 2019) (extending comment period for reply 
comments to NOI, at commenters' requests).
    \220\ Anne Joseph O'Connell, Agency Rulemaking and Political 
Transitions, 105 Nw. L. Rev. 471, 513 (2011); U.S. Government 
Accountability Office, Improvements Needed to Monitoring and 
Evaluation of Rules Development as Well as to the Transparency of 
OMB Regulatory Reviews 5-6 (2009), available at https://www.gao.gov/new.items/d09205.pdf (``GAO Report''). See also Christopher Carrigan 
& Russell W. Mills, Organizational Process, Rulemaking Pace, and the 
Shadow of Judicial Review, 79 Public Admin. Rev. 721, 726-27 (2019) 
(for economically significant rules, finding a mean of 360.3 days 
from publication of proposed rule or interim final rule to 
publication of final rule).
    \221\ The Office's reasoning is further supported by the delayed 
statutory timeframe before the MLC may consider distributing 
unclaimed, unmatched funds. Because the MLC will have at least three 
years to engage in matching activities with respect to a particular 
work, this additional time may be used by the MLC to make up for any 
inefficiencies felt during a relevant transition period, rather than 
have a rule adopted that limited consideration to only changes that 
would be operationally feasible by the license availability date. 17 
U.S.C. 115(d)(3)(H)(i), (J)(i)(I); 85 FR 33735, 33738 (June 2, 
2020).
---------------------------------------------------------------------------

    During the one-year transition period, reporting altered data is 
permitted, subject to the same two limitations proposed in the NPRM 
that the DLC did not oppose: (1) DMPs are not permitted to report only 
modified versions of any unique identifier or release date; and (2) 
DMPs are not permitted to report only modified versions of any 
information belonging to categories that the DMP was not periodically 
altering prior to the license availability date. After the one-year 
transition period ends, DMPs additionally must report unmodified 
versions of any sound recording name, featured artist, version, or 
album title--which are the remaining categories of information that the 
DLC says at least some DMPs alter and that the MLC says it needs in 
unaltered form, with one exception. The Office declines the MLC's 
requested inclusion of the songwriter field at this time because it is 
a musical work field rather than a sound recording field, and according 
to the DLC, when it is provided by sound recording copyright owners, it 
is usually duplicative of the featured artist field, which will already 
have to be reported unaltered.\222\
---------------------------------------------------------------------------

    \222\ See DLC Letter July 13, 2020 at 7-8. The MLC has stated in 
the Office's concurrent rulemaking about the musical works database 
that ``[t]he musical works data will be sourced from copyright 
owners.'' MLC Ex Parte Letter Aug. 21, 2020 at 2.
---------------------------------------------------------------------------

    As the DLC requests, the interim rule includes an exception for 
where DMPs cannot report unaltered data for tracks currently in their 
systems because they no longer have such data.\223\ Obviously DMPs 
cannot report what they do not have, but the Office agrees with the MLC 
that the ability to use the exception should be contingent upon an 
appropriate certification. The interim rule, therefore, requires the 
DMP to certify to the best of its knowledge that: (1) The information 
at issue belongs to a category (each of which must be identified) that 
the DMP was periodically altering prior to the effective date of the 
interim rule; and (2) despite engaging in good-faith, commercially 
reasonable efforts, the DMP has not located the unaltered version of 
the information in its records. Since DMPs that no longer have this 
information may not know with granularity which data is in fact 
altered, the interim rule also makes clear that the certification need 
not identify specific sound recordings or musical works, and that a 
single certification may be used to encompass all unaltered information 
satisfying the conditions that must be certified to. For any DMP that 
to the best of its knowledge no longer has the unaltered data in its 
possession, this should not be an onerous burden.
---------------------------------------------------------------------------

    \223\ See DLC Ex Parte Letter July 24, 2020 at 2; MLC Ex Parte 
Letter July 24, 2020 at 10 (proposing regulatory language); see also 
DLC Ex Parte Letter July 24, 2020 at 2 n.3 (``DMPs should [not] be 
held to a `burden of proof' about the absence of data they were 
never required to maintain.'').
---------------------------------------------------------------------------

    The Office would welcome updates from the MLC's operations advisory 
committee, or the MLC or DLC separately, on any emerging or unforeseen 
issues that may arise during the one-year transition period.
viii. Practicability
    In addition to the three tiers of sound recording and musical work 
information described in the NPRM, the Office further proposed that 
certain information, primarily that covered by the second and third 
tiers, must be reported only to the extent ``practicable,'' a term 
defined in the proposed rule.\224\ The DLC had asserted 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.\225\ Based on the record, the NPRM 
observed that all of the proposed data categories appeared to possess 
some level of utility, despite disagreement as to the particular degree 
of usefulness of each, and that different data points may be of varying 
degrees of helpfulness depending on which other data points for a work 
may or may not be available.\226\ Consequently, the proposed rule 
defined ``practicable'' in a specific way.\227\ First, the proposed 
definition would have always required reporting of the expressly 
enumerated statutory categories (i.e., sound recording copyright owner, 
producer, ISRC, songwriter, publisher, ownership share, and ISWC, to 
the extent appropriately acquired, regardless of any associated DMP 
burden). Second, it would have required reporting of any other 
applicable categories of information (e.g., catalog number, version, 
release date, ISNI, etc.) under the same three scenarios that were 
proposed with respect to unaltered data: (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 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 NPRM explained 
that, as with the proposed rules about unaltered data, the Office's 
proposed compromise sought to appropriately balance the need for the 
MLC to receive detailed reporting with the burden that more detailed 
reporting may place on certain DMPs.\228\
---------------------------------------------------------------------------

    \224\ 85 FR at 22531-32, 22541-42.
    \225\ Id. at 22531.
    \226\ Id.
    \227\ Id. at 22531-32.
    \228\ Id. at 22532.
---------------------------------------------------------------------------

    In response to the NPRM, the MLC argues against the proposed rule, 
questioning how it can be impracticable for a DMP to report information 
it has in fact acquired, and generally contending that the DLC has not 
sufficiently supported its assertions of DMP operational burdens.\229\ 
The DLC's comments do not propose any changes to this aspect of the 
proposed rule.\230\ The Office gave the DLC an opportunity to elaborate 
on this matter and address the MLC's contentions, asking the DLC to 
``[l]ist each data field proposed in Sec.  210.27(e)(1) that the DLC 
contends would be overly burdensome for certain DLC members to report 
if the Office does not limit reporting to the extent practicable'' and, 
for any such field, to ``[d]escribe the estimated burden, including 
time, expense, and nature of obstacle, that individual DLC members 
anticipate they will incur if required to report.'' \231\ The DLC 
responded by stating that ``assuming (against experience) that DMPs 
actually acquired all of the metadata types listed in subsections 
(e)(1)(i)(E) and (e)(1)(ii), the answer is that it would be 
impracticable (and for some data fields, impossible) to report 
subsection (e)(1)(ii)'s musical work information to the MLC.'' \232\ 
The

[[Page 58131]]

DLC explains that ``[t]he fundamental problem arises from the fact that 
for subsection (e)(1)(ii)'s data types, there are no mandatory DDEX 
data fields, and in some instances, no data fields at all.'' \233\
---------------------------------------------------------------------------

    \229\ See MLC NPRM Comment at 4, 16-17, 38; see also NMPA NPRM 
Comment at 2.
    \230\ DLC NPRM Comment Add. at A-17-18.
    \231\ U.S. Copyright Office Letter June 30, 2020 at 3-4.
    \232\ DLC Letter July 13, 2020 at 8-9. For reference, paragraphs 
(e)(1)(i)(E) and (e)(1)(ii) cover all sound recording and musical 
work data fields except for sound recording name, featured artist, 
playing time, and DMP-assigned unique identifier.
    \233\ Id. at 9.
---------------------------------------------------------------------------

    In light of these comments, the Office concludes that this 
reporting limitation should be revised, and so the interim rule 
replaces this concept with a one-year transition period. The DLC states 
that it is only impracticable to provide musical work information (not 
sound recording information), because of a current lack of DDEX data 
fields. As discussed above, however, the Office is persuaded that it 
should not refer to DDEX's requirements in promulgating these rules, 
and that parties may need to pursue changes to DDEX's standards to 
accommodate the Office's regulations if they wish to use that 
standard.\234\ Additionally, some of the musical work fields that the 
DLC says are impracticable to report because of DDEX are statutorily 
required, which means that not reporting them was never a possibility, 
including under the originally proposed practicability limitation. 
Moreover, the MLC states that ``[a]ll of the metadata fields proposed 
in Sec.  210.27(e)(1) will be used as part of the MLC's matching 
efforts.'' \235\
---------------------------------------------------------------------------

    \234\ The Office, therefore, disagrees with the DLC's proposed 
approach that ``the MLC should be left to progress these issues with 
DDEX in the absence of regulation or any other insertion of the 
Office into those ongoing discussions.'' See DLC Letter July 13, 
2020 at 9. Especially considering that the DLC in other contexts 
argues that the Office should not ``delegate[ ] any future 
determination about the wisdom of adopting [reporting requirements] 
to a standards-setting body.'' See DLC NPRM Comment at 5, 10.
    \235\ MLC Letter July 13, 2020 at 7.
---------------------------------------------------------------------------

    The Office is mindful that it will take time both for DMPs to 
reengineer their reporting systems and for DDEX to update its 
standards. The interim rule establishes a one-year transition period 
(the length of time the DLC states is necessary for DMPs to make 
significant reporting changes) \236\ during which DMPs may report 
largely in accord with what was proposed in the NPRM, though for 
clarity, the regulatory language has been amended to address this 
condition in terms of the transition period, rather than the previously 
proposed defined term ``practicable.'' The main substantive change is 
that, following the reasoning above, the Office has eliminated the 
scenario 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.\237\
---------------------------------------------------------------------------

    \236\ DLC NPRM Comment at 6, 11; DLC Letter July 13, 2020 at 5.
    \237\ The NPRM had noted that the Office was contemplating a 
potential fourth scenario where reporting would have been considered 
practicable, see 85 FR at 22532, but since the Office is only 
retaining this limitation on reporting temporarily, the Office does 
not find it prudent to include the additional scenario. See DLC NPRM 
Comment at 6 (arguing that the scenario is ``not workable'' because 
it ``embeds too many questions, to which the answers are too 
subjective, for useful and operable regulation to take hold'').
---------------------------------------------------------------------------

ix. Server Fixation Date and Termination
    Another disputed issue in this proceeding has been 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. As discussed in 
the NPRM, the MLC said it needs this date to operationalize its 
interpretation of the derivative works exception to the Copyright Act's 
termination provisions in sections 203 and 304(c).\238\ Under the MLC's 
legal interpretation, the exception applies to the section 115 
compulsory license, 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.'' \239\ The MLC argued 
that, in contrast to the prior regime where ``the license date for each 
particular musical work was considered to be the date of the NOI \240\ 
for that work,'' under ``the new blanket license, there is no license 
date for each individual work,'' \241\ and, therefore, the MLC sought 
the so-called server fixation date, which it contended is ``the most 
accurate date for the beginning of the license for that work.'' \242\ 
The DLC said that not all DMPs store this information and argued that 
it should not need to be reported.\243\ No other commenter directly 
spoke to this issue prior to the issuance of the NPRM.
---------------------------------------------------------------------------

    \238\ See 85 FR at 22532-33.
    \239\ MLC Ex Parte Letter Feb. 26, 2020 at 6.
    \240\ In this discussion, ``NOI'' refers to notices of intention 
to obtain a compulsory license under section 115. See 37 CFR 201.18.
    \241\ MLC Ex Parte Letter Apr. 3, 2020 at 6.
    \242\ MLC Ex Parte Letter Feb. 26, 2020 at 7.
    \243\ 85 FR at 22532.
---------------------------------------------------------------------------

    Based on the record to that point, the Office suggested that the 
MLC's interpretation ``seems at least colorable,'' noting the lack of 
comments disagreeing with what the MLC had characterized as industry 
custom and understanding.\244\ The Office also said that, to the extent 
the MLC's approach is not invalidated or superseded by precedent, it 
seemed reasonable for the MLC to want to know the applicable first use 
date, upon which to base a license date, so it could essentially have a 
default practice to follow in the absence of a live controversy between 
parties or a challenge to the MLC's approach.\245\
---------------------------------------------------------------------------

    \244\ Id.
    \245\ Id. at 22532-33.
---------------------------------------------------------------------------

    Without opining on the merits of the MLC's interpretation, the 
Office proposed a rule concerning what related information DMPs should 
maintain or provide.\246\ The NPRM distinguished among three categories 
of works.\247\ First, the rule did not propose regulatory language to 
govern musical works licensed by a DMP prior to the license 
availability date because it did not seem necessary to disrupt whatever 
the status quo may be in such cases. Second, for musical works being 
used by a DMP prior to the effective date of that DMP's blanket license 
(which for any currently operating DMP should ostensibly be the license 
availability date) either pursuant to a NOI filed with the Office or 
without a license, the Office observed that this blanket license 
effective date may be the relevant license date, and proposed requiring 
each DMP to take an archival snapshot of its database as it exists 
immediately prior to that date to establish a record of the DMP's 
repertoire at that point in time. Last, for musical works that 
subsequently become licensed pursuant to a blanket license after the 
effective date of a given DMP's blanket license, the rule proposed 
requiring each DMP to keep and retain in its records, but not provide 
in monthly reports of usage, at least one of three dates for each sound 
recording embodying such a musical work: (1) Server fixation date; (2) 
date of the grant first authorizing the DMP's use of the sound 
recording; and (3) date on which the DMP first obtained the sound 
recording.
---------------------------------------------------------------------------

    \246\ See id. at 22533, 22546.
    \247\ Id.
---------------------------------------------------------------------------

    In response to the NPRM, in addition to further comments from the 
MLC and DLC, the Office received comments from a publisher, generally 
supporting the MLC's position, and a number of organizations 
representing songwriter interests that raised notes of caution 
regarding that position.\248\ Following an ex parte meeting with 
commenters to further discuss the matter, the Office received 
additional written submissions

[[Page 58132]]

on this issue.\249\ The record has benefited from this expansion of 
perspectives. Because the voting publisher members of the MLC's board 
must be publishers ``to which songwriters have assigned [certain] 
exclusive rights'' and the voting songwriter members of the MLC's board 
must be songwriters ``who have retained and exercise [certain] 
exclusive rights,'' the MLC's views, however well-meaning and informed, 
are not presumptively representative of the interests of those who may 
exercise termination rights in the future.\250\ In sum, and as 
discussed below, commenters representing songwriter interests are 
generally deeply concerned with protecting termination rights and 
ensuring that those rights are not adversely impacted by anything in 
this proceeding or any action taken by the MLC; the MLC seeks reporting 
of information it believes it needs to operate effectively; and the DLC 
seeks to ensure that any requirements placed upon DMPs are reasonable. 
Additionally, there seems to be at least some level of agreement that 
knowing the date of first use of the particular sound recording by the 
particular DMP may be of some utility, and various additional dates 
other than server fixation date have been suggested to represent that 
date, such as the recording's street date (the date on which the sound 
recording was first released on the DMP's service).
---------------------------------------------------------------------------

    \248\ See MLC NPRM Comment at 26-32, App. at xiv-xv, xxviii-
xxix; DLC NPRM Comment at 15-16, Add. at A-29-30; Peermusic NPRM 
Comment at 5-6; SONA & MAC NPRM Comment at 8-12; Recording Academy 
NPRM Comment at 3.
    \249\ See U.S. Copyright Office Letter June 10, 2020; DLC Ex 
Parte Letter June 26, 2020; MLC Ex Parte Letter June 26, 2020; MAC 
Ex Parte Letter June 26, 2020; NSAI Ex Parte Letter June 26, 2020; 
Peermusic Ex Parte Letter June 26, 2020; Recording Academy Ex Parte 
Letter June 26, 2020; SGA Ex Parte Letter June 26, 2020; SONA Ex 
Parte Letter June 26, 2020.
    \250\ See 17 U.S.C. 115(d)(3)(D)(i)(I)-(II).
---------------------------------------------------------------------------

    Having considered these comments, the Office is adjusting the 
proposed regulatory language as discussed below. The Office also offers 
some clarifications concerning the underlying termination issues that 
have been raised and the MLC's related administrative functions. 
Although the NPRM suggested that the MLC's interpretation might be 
colorable, the Office's intent was neither to endorse nor reject the 
MLC's position; the Office made clear that it ``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.'' 
\251\ Indeed, a position contrary to the MLC's may well be valid, as 
the issue does not appear definitively tested by the courts. For 
example, Nimmer's treatise expresses the opinion that ``a compulsory 
license of rights in a musical work is not subject to termination'' 
because ``it is executed by operation of law, not by the consent of the 
author or his successors,'' \252\ which Nimmer says means that where a 
songwriter (or heir) terminates an assignment to a publisher, ``at that 
point the compulsory license royalties would be payable solely to [the 
terminating songwriter (or heir)] as copyright owner[ ], rather than to 
[the terminated publisher] whose copyright ownership at that point 
would cease.'' \253\
---------------------------------------------------------------------------

    \251\ See 85 FR 22532 & n.210.
    \252\ Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright 
sec. 11.02 n.121 (2020); see Mills Music, Inc. v. Snyder, 469 U.S. 
153, 168 n.36 (1985) (referring to the section 115 license as 
``self-executing''); see also Paul Goldstein, Goldstein on Copyright 
sec. 5.4.1.1.a. (3d ed. 2020) (``The requirement that, to be 
terminable, a grant must have been `executed' implies that 
compulsory licenses, such as section 115's compulsory license for 
making and distributing phonorecords of nondramatic musical works, 
are not subject to termination.'').
    \253\ Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright 
sec. 11.02 n.121 (2020); see Mills Music, Inc. v. Snyder, 469 U.S. 
153, 185 n.12 (1985) (White, J., dissenting) (stating that the 
statutory royalty for the section 115 license ``is payable to the 
current owner of the copyright''); see also Recording Academy Ex 
Parte Letter at 2 (June 26, 2020) (``[T]he Office's rulemaking 
should not imply or assume that a terminated party necessarily 
continues to benefit from the blanket license after termination.'').
---------------------------------------------------------------------------

    The Office again stresses that in this proceeding it is not making 
any substantive judgment about the proper interpretation of the 
Copyright Act's termination provisions, the derivative works exception, 
or their application to section 115. Nor is the Office opining as to 
how the derivative works exception, if applicable, may operate in this 
particular context, including with respect to what information may or 
may not be appropriate to reference in determining who is entitled to 
royalty payments. To this end, as requested by several commenters 
representing songwriter interests and agreed to by the MLC, the interim 
rule includes express limiting language to this effect.\254\
---------------------------------------------------------------------------

    \254\ See SONA & MAC NPRM Comment at 12; MAC Ex Parte Letter 
June 26, 2020 at 2; Recording Academy Ex Parte Letter June 26, 2020 
at 2-3; SGA Ex Parte Letter June 26, 2020 at 1-2; SONA Ex Parte 
Letter June 26, 2020 at 3-4; NSAI Ex Parte Letter June 26, 2020 at 
1; MLC Ex Parte Letter June 26, 2020 at 4, 5; Peermusic Ex Parte 
Letter June 26, 2020 at 1-2.
---------------------------------------------------------------------------

    In light of the additional comments, the Office is not convinced of 
the need for the MLC to implement an automatically administered process 
for handling this aspect of termination matters. Rather, as others 
suggest, it seems reasonable for the MLC to act in accordance with 
letters of direction received from the relevant parties, or else hold 
applicable royalties pending direction or resolution of any dispute by 
the parties.\255\ The Office understands and appreciates the MLC's 
general need to operationalize its various functions and desire to have 
a default method of administration for terminated works in the normal 
course. The comments, however, suggest that this might stray the MLC 
from its acknowledged province into establishing what would essentially 
be a new industry standard based on an approach that others argue is 
legally erroneous and harmful to songwriters.\256\ The information that 
may be relevant in administering termination rights may not be the same 
as what the MLC may be able to most readily obtain and 
operationalize.\257\ While the MLC does intend to follow letters of 
direction, it states that they ``typically do not have [the necessary] 
level of detail, which underscores the importance of having a data 
point to assist with identifying whether first use by a DMP falls 
before or after statutory termination.'' \258\ MAC, however, states 
that ``Letters of Direction universally supply an operative date.'' 
\259\ In cases where the MLC lacks sufficient ownership and payment 
information resulting from termination of transfers, a cautious 
approach may be to simply continue holding the relevant royalties

[[Page 58133]]

until it receives a letter of direction or other submissions from the 
relevant musical work copyright owner(s) that have sufficient detail to 
enable the MLC to carry out the parties' wishes.\260\
---------------------------------------------------------------------------

    \255\ See, e.g., SONA & MAC NPRM Comment at 11-12 (``The 
allocation of royalty income for a song as between the terminated 
grantee and the owner of the termination rights is a legal question 
and is typically communicated by the parties to a licensing 
administrator via a letter of direction. . . . To the extent a legal 
dispute were to arise . . . it would be best resolved by a court 
based on the facts of that particular dispute.''); MAC Ex Parte 
Letter June 26, 2020 at 3 (``MAC also questioned the operational 
reasoning for MLC gathering the server fixation data as MLC will 
ultimately rely on the parties to resolve disputes. After all, 
Letters of Direction universally supply an operative date.''); SONA 
Ex Parte Letter June 26, 2020 at 3 (``[T]ermination rights are 
typically administered according to letters of direction submitted 
by the interested parties . . .''); Recording Academy Ex Parte 
Letter June 26, 2020 at 2 (``[T]hese questions could be negotiated 
or litigated by future parties in a dispute.'').
    \256\ See, e.g., SONA & MAC NPRM Comment at 8-11 (expressing 
``serious reservations about [the MLC's] approach, which would 
seemingly redefine and could adversely impact songwriters' 
termination rights''); Recording Academy Ex Parte Letter June 26, 
2020 at 2 (``MLC was erroneously using the server fixation date as a 
proxy for a grant of a license.''); SONA Ex Parte Letter June 26, 
2020 at 2; MAC Ex Parte Letter June 26, 2020 at 2.
    \257\ See MLC NPRM Comment at 30-31 (arguing against aspects of 
the proposed rule by asserting, for example, that certain 
information ``would be impossible for the DMPs or the MLC to 
ascertain,'' ``the Proposed Regulation does not require [third-
party] vendors to provide the NOIs or their dates,'' and ``[t]he MLC 
also may not have the date of a voluntary license''). Cf. id. at 30 
(``An arbitrary decision by a DMP as to which date to provide cannot 
be the basis for determining whether the pre- or post-termination 
copyright owner is paid.'')
    \258\ MLC Ex Parte Letter June 26, 2020 at 4.
    \259\ MAC Ex Parte Letter June 26, 2020 at 3.
    \260\ Compare MLC Ex Parte Letter Aug. 21, 2020 at 2 (indicating 
that ownership information pertaining to musical works in the public 
database ``will be sourced from copyright owners'').
---------------------------------------------------------------------------

    Moreover, if the MLC establishes a default process that applied the 
derivative works exception, the appropriate dividing line for 
determining who is entitled to relevant royalty payments remains 
unclear (and beyond the scope of this proceeding). SONA & MAC provide 
the following example to illustrate why ``the server-fixation approach 
could cause economic harm to songwriters'':

    [I]f a sound recording derivative is first reproduced on a 
server by DMP X in 2015 under a voluntary license granted by 
Publisher Y, and Songwriter Z terminates the grant to Publisher Y 
and recaptures her rights in 2020 before the blanket license goes 
into effect, under the server-fixation rule articulated by the MLC, 
the `license date' for that derivative would be 2015. Accordingly, 
Publisher Y, rather than Songwriter Z, would continue to receive 
royalties for DMP X's exploitation of the musical work as embodied 
in that sound recording, even if the voluntary license came to an 
end and the DMP X began operating under the new blanket license as 
of January 1, 2021.\261\
---------------------------------------------------------------------------

    \261\ SONA & MAC NPRM Comment at 11; see id. at 8 (noting that 
termination rights ``are tied to grants of copyright interests--not 
when or where a work is reproduced''); SONA Ex Parte Letter June 26, 
2020 at 3 (``SONA representatives underscored the distinction 
between utilization of a work and a license grant, which are not the 
same and should not be conflated . . .'').

    Other suggested dates, such as street date, may raise similar 
questions. The same concern could arise after the license availability 
date as well--for example where a DMP in 2022 has both a blanket 
license and a voluntary license, the DMP first uses a work in 2024 
pursuant to the voluntary license, a relevant termination occurs in 
2028, the voluntary license expires in 2030, and afterward the DMP 
continues using the work but, for the first time, pursuant to its 
blanket license--because ``[w]here a voluntary license or individual 
download license applies, the license authority provided under the 
blanket license shall exclude any musical works (or shares thereof) 
subject to the voluntary license or individual download license.'' 
\262\ In that instance, using SONA's nomenclature and assuming the 
derivative work exception applies, the work terminated in 2028 should 
see royalties payable to Songwriter Z starting in 2030 (once the pre-
termination grant ends by its own terms), but a reliance upon the 
server fixation date would result in continued payment to Publisher Y. 
And following from the interpretation advanced regarding section 115 
and termination rights, it seems that there may be other potentially 
relevant dates not raised by the commenters, for example: The date that 
the particular musical work becomes covered by the DMP's blanket 
license, i.e., the date that it becomes ``available for compulsory 
licensing'' and not subject to a voluntary license or individual 
download license held by that DMP (e.g., 2030 and post-termination in 
the previous example, as opposed to 2024 and pre-termination if a 
street, server, or other first-use date is applied).\263\ Of course 
this would have to be assessed in conjunction with the date of creation 
of the relevant sound recording derivative.\264\
---------------------------------------------------------------------------

    \262\ 17 U.S.C. 115(d)(1)(C)(i); see also id. at 
115(d)(1)(B)(i).
    \263\ See id. at 115(d)(1)(B)(i), (C). The MLC states that 
``[u]nder the new blanket license, there will no longer be a 
specific license date for each individual work; the license date for 
all musical works will be the date the DMP first obtained the 
blanket license, and that date could potentially remain in effect 
indefinitely for millions of musical works, even as new ones are 
created and subsequently become subject to the blanket license.'' 
MLC NPRM Comment at 27; see also Peermusic NPRM Comment at 5 
(``[T]he NOL date will cover all works then subject to the 
compulsory license as well as all works created later, as long as 
the NOL remains in effect.''). But that is a significant and 
seemingly erroneous assumption with respect to works created post-
blanket license or licensed voluntarily. See 17 U.S.C. 
115(d)(1)(B)(i), (C). 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.'') (quotation 
omitted); Waite v. UMG Recordings, Inc., No. 19-cv-1091(LAK), 2020 
WL 4586893, at *6 (S.D.N.Y. Aug. 10, 2020) (``If a work does not 
exist when the parties enter into a transfer or assignment 
agreement, there is no copyright that an artist (or third party 
company) can transfer.'').
    \264\ See Mills Music, Inc. v. Snyder, 469 U.S. 153, 173 (1985) 
(``The critical point in determining whether the right to continue 
utilizing a derivative work survives the termination of a transfer 
of a copyright is whether it was `prepared' before the termination. 
Pretermination derivative works--those prepared under the authority 
of the terminated grant--may continue to be utilized under the terms 
of the terminated grant. Derivative works prepared after the 
termination of the grant are not extended this exemption from the 
termination provisions.'').
---------------------------------------------------------------------------

    Additionally, while the MLC does not see its function as enforcing 
termination rights or otherwise resolving disputes over terminations or 
copyright ownership, stating repeatedly that it takes no position on 
what the law should be and that it is not seeking to change the 
law,\265\ its position on the proposed rule may unintentionally be in 
tension with its stated goals.\266\ For example, the MLC's view assumes 
the derivative works exception applies, would reject the alternative 
dates proposed by the NPRM because they ``will not resolve the issue of 
whether the pre- or post-termination rights owner is entitled to 
payment,'' and proposes receiving certain dates for works licensed 
before the license availability date despite its statement that 
customary practice is to use NOI dates instead.\267\ Similarly, MLC 
board member Peermusic characterizes the MLC's approach as a `` `fix' . 
. . to avoid confusion in the marketplace (and to head off disputes 
among copyright-owning clients of the MLC)'' by ``designat[ing]'' an 
``appropriate substitute for the prior individual NOI license date.'' 
\268\
---------------------------------------------------------------------------

    \265\ MLC Ex Parte Letter June 26, 2020 at 2; see also Peermusic 
Ex Parte Letter June 26, 2020 at 1; NSAI Ex Parte Letter June 26, 
2020 at 1.
    \266\ See Recording Academy Ex Parte Letter June 26, 2020 at 1-2 
(``Despite stating repeatedly that the MLC has no interest in 
altering, changing, or diminishing the termination rights of 
songwriters, it was clearly conveyed that one of the primary reasons 
for seeking this data is to determine the appropriate payee for the 
use of a musical work that is the subject of a termination. The 
Academy's view is that using the data in this way would diminish 
termination rights.'').
    \267\ See MLC NPRM Comment at 29; see id. at 30 (``The date 
provided will be the dividing line that will determine which 
copyright owner--the pre- or post-termination owner--will be 
paid.'').
    \268\ Peermusic NPRM Comment at 5-6; see id. at 6 (``[T]he 
alternatives proposed do not provide for the certainty that is 
required in establishing dates of grants under Sections 203 and 
304.'').
---------------------------------------------------------------------------

    Based on the foregoing, it does not seem prudent to incentivize the 
MLC to make substantive decisions about an unsettled area of the law on 
a default basis. But the record also suggests that the transition to 
the blanket license represents a significant change to the status quo 
that may eliminate certain dates, such as NOI dates, that may have 
historically been used in post-termination activities, such as the 
renegotiation and execution of new agreements between the relevant 
parties to continue their relationship on new terms.\269\ Perhaps as a 
result, after discussion, some commenters representing songwriter 
interests supported the preservation of various dates ``that may be 
pertinent and necessary to the determination of future legal issues.'' 
\270\
---------------------------------------------------------------------------

    \269\ See Peermusic Ex Parte Letter June 26, 2020 at 1 (``[T]he 
MMA's elimination of individual NOIs has in fact already upset the 
status quo.'').
    \270\ See SGA Ex Parte Letter June 26, 2020 at 2; see also SONA 
Ex Parte Letter June 26, 2020 at 3, 4; NSAI Ex Parte Letter June 26, 
2020 at 1.
---------------------------------------------------------------------------

    Accordingly, the interim rule maintains the proposed requirement 
for DMPs to retain certain information, adjusted as discussed below. 
The purpose of this rule is to aid retention of certain information 
that commenters

[[Page 58134]]

have signaled may be useful in facilitating post-termination 
activities, such as via inclusion in letters of direction to the MLC, 
that may not otherwise be available when the time comes if not kept by 
the DMPs.\271\ To be clear, the Office is not adopting or endorsing a 
specific ``proxy'' for a grant date.\272\
---------------------------------------------------------------------------

    \271\ See, e.g., SGA Ex Parte Letter June 26, 2020 at 2; 
Recording Academy Ex Parte Letter June 26, 2020 at 2; SONA Ex Parte 
Letter June 26, 2020 at 4.
    \272\ SONA & MAC NPRM Comment at 10 (``There is no suggestion 
that the correct payee can or should be determined based upon a 
`proxy' server fixation date or other than as provided in the 
Copyright Act.''); id. at 8, 10-11; SONA Ex Parte Letter June 26, 
2020 at 2 (``[SONA] would be apprehensive of any rule treating a 
piece of data as a `proxy' for a grant under copyright law.''); 
Recording Academy Ex Parte Letter June 26, 2020 at 3 (``The data . . 
. should not be interpreted to represent, or serve as a proxy for, a 
grant of a license.''); id. at 2.
---------------------------------------------------------------------------

    After considering relevant comments, including the MLC's arguments 
to the contrary, the interim rule maintains the NPRM's proposed 
approach of tiering the requirements according to when, out of three 
time periods, the musical work was licensed by a DMP.\273\ Maintaining 
the status quo, the interim rule does not include regulatory language 
to govern musical works licensed by a DMP prior to the license 
availability date. If previous industry consensus was to use NOI dates 
(a factual matter the Office passes no judgment on), then the Office 
sees no reason why that should necessarily change.\274\ As it has not 
been suggested that the relevant parties' access to historic NOI (or 
voluntary license) dates is any different than pre-MMA, it does not 
seem appropriate to require DMPs to retain any additional information 
for such parties' potential future use in directing the MLC with 
respect to this category of works.
---------------------------------------------------------------------------

    \273\ See MLC NPRM Comment at 30-31.
    \274\ See id.
---------------------------------------------------------------------------

    Next, to provide a data point with respect to works that first 
become licensed as of a DMP's respective blanket license effective 
date, the interim rule largely adopts the proposed database snapshot 
requirement. The DLC does not object to this general requirement, but 
requests two modifications to the proposed language to be practical for 
DMPs to implement: The required data fields for the snapshot should be 
limited to those the MLC reasonably requires and that the DMP has 
reasonably available (which the DLC says are sound recording name, 
featured artist, playing time, and DMP-assigned unique identifier); and 
instead of the snapshot needing to be of the database as it exists 
immediately prior to the effective date of the DMP's blanket license, 
it should be as it exists at a time reasonably approximate to that 
date.\275\ The MLC opposes the DLC's proposal to limit the data fields 
of the snapshot.\276\ The Office finds the DLC's requested 
modifications to be reasonable, and adopts them with two slight 
changes. First, although requiring all of the data fields required for 
usage reporting and matching, as the MLC requests, seems unnecessary 
for the markedly different purpose of the snapshot, the interim rule 
adds ISRC (to the extent acquired by the DMP) so that, at least for 
most tracks, there is a second unique identifier in case the DMP-
assigned unique identifier fails for some reason.\277\ Second, while 
the Office finds that, based on the technological issues discussed in 
the DLC's comments, it is reasonable to permit the snapshot to be of a 
time reasonably approximate to the attachment of the DMP's blanket 
license, the interim rule requires DMPs to use commercially reasonable 
efforts to make the snapshot as accurate and complete as reasonably 
possible in representing the service's repertoire as of immediately 
prior to the effective date of the DMP's blanket license.
---------------------------------------------------------------------------

    \275\ DLC NPRM Comment at 15-16 (explaining that ``the number of 
data fields and volume of data contained in the snapshot or archive 
is likely to be enormous--unduly burdensome and impractical both for 
the DMPs to produce and for the MLC to use,'' and that ``the process 
of creating the snapshot or archive will . . . involve so much data 
that it cannot be completed in a single day'' which means that 
``works that are added to the service while the snapshotting or 
archiving process is underway may not ultimately be captured in the 
archive''); id. at 16 & n.66, Add. at A-30; DLC Ex Parte Letter June 
26, 2020 at 4. While the DLC requests that the snapshot be at a time 
reasonably approximate to the ``license availability date,'' the 
Office believes the DLC meant for that to mean the effective date of 
the DMP's blanket license. This requirement will also apply to any 
new DMP that first obtains a blanket license at a time subsequent to 
the license availability date.
    \276\ See MLC Ex Parte Letter June 26, 2020 at 6-7.
    \277\ See id. (asserting that other fields like ISRC and version 
``can be critical for aligning the records where the unique 
identifier fails'').
---------------------------------------------------------------------------

    As for the last category--musical works that subsequently become 
licensed pursuant to a blanket license after the effective date of a 
given DMP's blanket license--the comments reflect that the proposed 
rule should be updated. As discussed below, the interim rule requires 
each DMP to retain, to the extent reasonably available, both the server 
fixation date and street date for each sound recording embodying a 
musical work that is part of this category. If a DMP only has one of 
these dates, it should retain that one. If a DMP has neither, then the 
DMP should retain the date that, in the assessment of the DMP, provides 
a reasonable estimate of the date the sound recording was first 
distributed on its service within the U.S. For each retained date, the 
DMP should also identify which type of date it is (i.e., server date, 
street date, or estimated first distribution date), so any party 
seeking to use such information will know which date is being relied 
upon.\278\
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    \278\ See MLC NPRM Comment at 32, App. at xiv-xv (proposing DMPs 
identify which type of date it is).
---------------------------------------------------------------------------

    This approach strives to accommodate the competing equities raised 
over this issue. The comments indicate some level of agreement that 
knowing the date of first use of the particular sound recording by the 
particular DMP may be of some utility--regardless of whether such date 
may or may not be the ``correct'' item to look at under the Copyright 
Act.\279\ And among those commenters suggesting particular dates, there 
seems to be a general consensus that the server and street dates may be 
appropriate representations or approximations of first use.\280\ Other 
proposed dates have not been included generally because they do not 
seem to be dates that DMPs would have in their possession, there lacks 
consensus that such dates would be useful, and/or confidentiality 
concerns have been raised by the RIAA with respect to private 
agreements between individual record companies and individual DMPs. 
Although confidentiality concerns were also broached by the RIAA over 
the server date and estimated first distribution date, the Office 
understands those concerns to be less significant than with other data 
and disputed by the DLC,\281\ and the Office finds those

[[Page 58135]]

concerns as articulated to be outweighed by the need to provide DMPs 
with a reasonable degree of flexibility in carrying out the obligations 
this aspect of the interim rule places upon them.
---------------------------------------------------------------------------

    \279\ See id. at 32, App. at xiv; MLC Ex Parte Letter June 26, 
2020 at 2 (``[T]he call confirmed consensus'' that DMPs should 
``include a data field identifying a date that reflects the first 
use of each sound recording by the service.''); id. at 2-4, 6; SONA 
Ex Parte Letter June 26, 2020 at 4 (stating ``the initial 
utilization date can be critical''); id. at 3-4; SGA Ex Parte Letter 
June 26, 2020 at 2; NSAI Ex Parte Letter June 26, 2020 at 1.
    \280\ See MLC NPRM Comment at 32, App. at xiv; MLC Ex Parte 
Letter June 26, 2020 at 2-4, 6; SONA Ex Parte Letter June 26, 2020 
at 4 (``[I]t seems that both server fixation date and the `street 
date' specific to a particular DMP may be useful to establish 
initial utilization of a specific sound recording by a particular 
service.''); id. at 3; SGA Ex Parte Letter June 26, 2020 at 2; NSAI 
Ex Parte Letter June 26, 2020 at 1.
    \281\ See RIAA Ex Parte Letter Aug. 24, 2020 at 1-2. Potentially 
contradictory, despite concerns with the estimated first 
distribution date, the RIAA has no concerns with the date that a 
track is first streamed. See id. The DLC disagrees that the 
estimated first distribution date is confidential data because it is 
``generated by the DMPs themselves, and therefore could not be 
considered proprietary to the record labels.'' DLC Ex Parte Letter 
Aug. 27, 2020 at 2. It also states that dates generated by DMPs 
themselves should not be confidential. The Office is considering 
confidentiality issues concerning the MLC in a parallel rulemaking. 
See 85 FR 22559 (Apr. 22, 2020).
---------------------------------------------------------------------------

    The dates incorporated into the interim rule represent three of the 
four dates for which the DLC said would be feasible for DMPs to retain 
at least one.\282\ Although the Office declines to include the fourth 
date, ingestion date, because there was no consensus as to its 
utility,\283\ the interim rule does include the DLC's proposed ``catch-
all'' estimated first distribution date, such that all DMPs should be 
able to comply with the rule even if not in possession of a server or 
street date for a given recording.\284\ For this same reason, and also 
because the retention requirement is limited to where the server and 
street dates are reasonably available to the DMP, the requirement to 
potentially have to retain both of these dates (where available), 
instead of merely a single date of the DMP's choosing, is not 
anticipated to be overly burdensome.\285\
---------------------------------------------------------------------------

    \282\ See DLC Ex Parte Letter June 25, 2020 at 2-3. Although the 
DLC had previously discussed street date in terms of an ERN data 
field called ``StartDate,'' which the Office understands to be more 
of a planned or intended street date that does not necessarily 
equate to the actual street date (and which the RIAA says the use of 
would raise confidentiality concerns, see RIAA Ex Parte Letter Aug. 
24, 2020 at 1), the DLC does not object to using the actual street 
date, so long as it is not the only date option. See DLC Ex Parte 
Letter Aug. 27, 2020 at 2.
    \283\ See MLC NPRM Comment at 30 (``The `date on which the 
blanket licensee first obtains the sound recording' is . . . vague 
and can be interpreted many different ways by many different DMPs, 
resulting in inconsistent dates.''). The RIAA also raised 
confidentiality concerns over this date, RIAA Ex Parte Letter Aug. 
24, 2020 at 1-2, but the DLC disputes that this information can 
properly be considered confidential, DLC Ex Parte Letter Aug. 27, 
2020 at 2.
    \284\ See DLC Ex Parte Letter June 26, 2020 at 3.
    \285\ See id. at 2 (``[DMPs] should be given a choice of the 
date to report, based on the [DMP's] specific operational and 
technical needs.''); id. at 3 n.4.
---------------------------------------------------------------------------

    The Office again declines the MLC's suggestion that DMPs should 
have to provide this information in their monthly reports of usage, 
instead encouraging the MLC to view the administration of terminations 
of transfers as more akin to one of a number of changes in musical work 
ownership or licensing administration scenarios the MLC is readying 
itself to administer apart from the DMPs' monthly usage reporting. 
Although the MLC warns of processing inefficiencies and potential 
delays if it does not receive the pertinent information in monthly 
reporting, it is unclear why this would be the case.\286\ As discussed 
above, the Office presumes the MLC will be operating in accordance with 
letters of direction (or other instructions or orders) that provide the 
requisite information needed for the MLC to properly distribute the 
relevant royalties to the correct party. In cases where the MLC is 
directed to use the DMP-retained information, it would seem that the 
MLC, as a one-time matter, could pull the information for each DMP for 
that work and apply it appropriately. The DLC makes a similar 
observation and further explains that monthly reporting is unnecessary 
because ``termination is relevant to only a subset of musical works . . 
. [a]nd only a (likely small) subset of grants are terminated in any 
event,'' and that ``as to each work, termination is an event that 
happens once every few decades.'' \287\ The MLC does not address these 
points. While the MLC seems to characterize its need for this data as a 
usage matching issue, it seems more appropriately understood as a 
change in ownership issue, and the record does not address why a change 
in ownership prompted by a termination of transfer would be materially 
more difficult to operationalize than any other change in ownership the 
MLC will have to handle in the ordinary course, including by following 
the procedures recommended by its dispute resolution committee.
---------------------------------------------------------------------------

    \286\ See MLC Ex Parte Letter June 26, 2020 at 4 (``If instead 
that data was only maintained in records of use and not reported 
monthly, the MLC would be required to create a parallel monthly 
reporting process, and that process would not be able to begin until 
after the MLC received the regular usage reporting, at which point 
the MLC would need to contact each DMP each month to request the 
data, and then each DMP would have to send a separate transmission 
with such data, which the MLC would have to reintegrate with all of 
the data that had been reported in the standard monthly 
reporting.''); MLC NPRM Comment at 31; see also Peermusic Ex Parte 
Letter June 26, 2020 at 2; NSAI Ex Parte Letter June 26, 2020 at 1.
    \287\ DLC Ex Parte Letter June 26, 2020 at 3; see id. at 4 
(``The MLC has not adequately justified imposing the investment that 
would be required by DSPs to engineer their reports of usage to 
include this date field.'').
---------------------------------------------------------------------------

    Nevertheless, the Office recognizes that it may take more time for 
the MLC to request access to the relevant information from the DMPs, 
rather than having it on hand upon receiving appropriate direction 
about a termination. While not requiring monthly reporting, the interim 
rule requires DMPs to report the relevant information to the MLC 
annually and grant the MLC reasonable access to the records of such 
information if needed by the MLC prior to it being reported. The DLC 
previously requested that if the Office requires affirmative reporting 
of this information that it be on a quarterly basis and subject to a 
one-year transition period, so the Office believes this to be a 
reasonable annual requirement.\288\ The Office also expects this 
adjustment to alleviate some of the MLC's concerns with the proposed 
rule's retention provision discussed above.\289\ This reporting may, 
but need not, be connected to the DMP's annual report of usage, and 
DMPs may of course report this information more frequently at their 
option. Such reporting should also include the same data fields 
required for the snapshot discussed above to assist in work 
identification and reconciliation. Information for the same track does 
not need to be reported more than once. With respect to the required 
snapshot discussed above, that should be delivered to the MLC as soon 
as commercially reasonable, but no later than contemporaneously with 
the first annual reporting.
---------------------------------------------------------------------------

    \288\ See id. at 4.
    \289\ It also renders moot Peermusic's concerns about the length 
of the proposed rule's retention period. See Peermusic NPRM Comment 
at 6; Peermusic Ex Parte Letter June 26, 2020 at 2.
---------------------------------------------------------------------------

2. Royalty Payment and Accounting Information
    The NPRM required DMPs that do not receive an invoice from the MLC 
to provide ``a detailed and step-by-step accounting of the calculation 
of royalties payable by the blanket licensee under the blanket license 
. . . including but not limited to the number of payable units . . . 
whether pursuant to a blanket license, voluntary license, or individual 
download license.'' \290\ Similarly, blanket licensees that do receive 
an invoice are required to provide ``all information necessary for the 
mechanical licensing collective to compute . . . the royalties payable 
under the blanket license . . . including but not limited to the number 
of payable units . . . whether pursuant to a blanket license, voluntary 
license, or individual download license.'' The DLC asked the Office to 
confirm its understanding that this language only requires reporting 
usage information, not royalty payment or accounting information, for 
any uses under voluntary licenses or individual download licenses.\291\ 
The DLC is correct in its understanding that the language requires DMPs 
to report only usage information for uses made under voluntary or 
individual download licenses.
---------------------------------------------------------------------------

    \290\ 85 FR at 22541 (emphasis added).
    \291\ DLC NPRM Comment at 12.
---------------------------------------------------------------------------

    The International Confederation of Societies of Authors and 
Composers (``CISAC'') & the International Organisation representing 
Mechanical

[[Page 58136]]

Rights Societies (``BIEM'') raised a pair of issues which the Office 
address here. First, CISAC & BIEM said, ``[t]he Proposed Rulemaking 
does not provide rules enabling the MLC to compute and check the 
calculation of the royalty payment, which will be based on information 
provided unilaterally by DMPs, with no clear indication of the amount 
deducted for the performing rights' share.'' \292\ CISAC & BIEM 
additionally proposed that the interim rule ``introduce clear 
provisions on back-claims in order to enable the MLC to claim works 
after the documentation has been properly set in the MLC database. For 
instance, the MLC should be able to invoice works previously used by 
DMPs, but which had not been ingested until afterwards into the MLC 
database, or which were subject to conflicting claim [sic].'' \293\ 
Regarding the first issue, the Office believes the statute and proposed 
rule already adequately address CISAC & BIEM's concern. The MLC has 
access to DMP records of use under the interim rule and the statutory 
right to conduct a triennial audit to confirm the accuracy of royalty 
payments, which together provide the MLC with sufficient ability to 
compute and check DMP calculations of royalty payments.\294\
---------------------------------------------------------------------------

    \292\ CISAC & BIEM NPRM Comment at 3-4.
    \293\ Id. at 4.
    \294\ 17 U.S.C. 115(d)(4)(D). DMPs are also required to have 
annual reports of usage certified by a CPA, providing an additional 
check on the accuracy of royalties.
---------------------------------------------------------------------------

    Regarding the second issue, the statute and proposed regulations 
also already address the substance of CISAC & BIEM's proposal.\295\ 
Upon receiving reports of usage from DMPs, the MLC will be able to 
match royalties for musical works where it has data identifying the 
work and copyright owner. For those works that are not initially 
matched due to insufficient data, the MLC is required to engage in 
ongoing matching efforts.\296\ As part of those efforts, the MLC is 
required to create and maintain a database of musical works that 
identifies their copyright owners and the sound recordings in which 
they are embodied.\297\ The MLC is expected to employ a variety of 
automated matching efforts, and also manual matching in some cases. 
Musical work copyright owners themselves are required to ``engage in 
commercially reasonable efforts'' to provide information to the MLC and 
its database regarding names of sound recordings in which their musical 
works are embodied.\298\ The MLC will operate a publicly accessible 
claiming portal through which copyright owners may claim ownership of 
musical works, and will operate a dispute resolution committee for 
resolving any ownership disputes that may arise over musical works, 
including implementation of ``a mechanism to hold disputed funds 
pending the resolution of the dispute.'' \299\
---------------------------------------------------------------------------

    \295\ The Copyright Office has commissioned and published a 
report on Collective Rights Management Practices Around the World as 
baseline informational material for the public to reference in 
replying to a notice of inquiry seeking public comment in connection 
with the Office's policy study regarding best practices the MLC may 
implement to reduce the overall incidence of unclaimed royalties. 
Susan Butler, Collective Rights Management Practices Around the 
World: A Survey of CMO Practices to Reduce the Occurrence of 
Unclaimed Royalties in Musical Works 3 (2020), https://www.copyright.gov/policy/unclaimed-royalties/CMO-full-report.pdf. 
The report may also be helpful in highlighting the similarities and 
differences between the MLC's processes and existing processes used 
by foreign CMOs as they pertain to this proceeding.
    \296\ 17 U.S.C. 115(d)(3)(C)(i)(III).
    \297\ Id. at 115(d)(3)(E).
    \298\ Id. at 115(d)(3)(E)(iv).
    \299\ Id. at 115(d)(3)(K)(ii), (J)(iii)(I); MLC Initial NOI 
Comment at 84, U.S. Copyright Office Dkt. No. 2018-11, available at 
https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2018-0011&refD=COLC-2018-0011-0001. The MLC is required to ``deposit 
into an interest-bearing account . . . royalties that cannot be 
distributed due to . . . a pending dispute before the dispute 
resolution committee . . .'' 17 U.S.C. 115(d)(3)(G)(i)(III)(bb).
---------------------------------------------------------------------------

    Together, these provisions provide mechanisms that Congress 
considered to be reasonably sufficient for ensuring that royalties that 
are not initially matched to musical works are ultimately distributed 
to copyright owners once either (1) the musical work or copyright owner 
is identified and located through the MLC's ongoing matching efforts, 
or (2) the work is claimed by the copyright owner, which is what CISAC 
& BIEM are essentially proposing, as the Office understands it.
    Separately, but relatedly, CISAC & BIEM recommended the Office 
promulgate regulations on ``issues such as dispute resolution 
procedures or claiming processes that would allow Copyright Owners to 
raise identification conflicts before the MLC,'' and asked, ``How will 
claims be reconciled in case a work is also covered by a voluntary 
licence? Is the MLC also in charge of matching voluntary licences?'' 
\300\ Regarding the first question, as noted above, a DMP is required 
to provide the MLC with applicable voluntary license information as 
part of its NOL. Thus, instances where the MLC erroneously distributes 
blanket license royalties for a work that is covered by a voluntary 
license should be minimal. Disputes over which license is applicable to 
a given work will be addressed by procedures established by the MLC's 
dispute resolution committee. The statute provides that this committee 
``shall establish policies and procedures . . . for copyright owners to 
address in a timely and equitable manner disputes relating to ownership 
interests in musical works licensed under this section,'' although 
actions by the MLC will not affect the legal remedies available to 
persons ``concerning ownership of, and entitlement to royalties for, a 
musical work.'' \301\
---------------------------------------------------------------------------

    \300\ CISAC & BIEM NPRM Comment at 4.
    \301\ 17 U.S.C. 115(d)(3)(K).
---------------------------------------------------------------------------

    Regarding the second question, the MLC will, as part of its 
matching efforts, ``confirm uses of musical works subject to voluntary 
licenses'' and deduct those amounts from the royalties due from 
DMPs.\302\ The MLC does not otherwise administer voluntary licenses 
unless designated to do so by copyright owners and blanket 
licensees.\303\
---------------------------------------------------------------------------

    \302\ Id. at 115(d)(3)(G)(i)(I)(bb).
    \303\ Id. at 115(d)(11)(C), (d)(3)(C)(iii).
---------------------------------------------------------------------------

i. Late Fees
    The NPRM was silent on the issue of when late fees are imposed on 
adjustments to estimates. As it did in comments to the NOI, the DLC 
called for language to ensure DMPs are not subject to late fees for 
adjustments to estimates after final figures are determined, so long as 
adjustments are made ``either before (as permitted under the Proposed 
Rule) or with the annual report of adjustment or, if not finally 
determined by then, promptly after the estimated amount is finally 
determined.'' \304\ In support of its proposal, the DLC said, 
``[a]lthough the CRJs set the amount of the late fee, the Office is 
responsible for establishing due dates for adjusted payments. It is 
those due dates that establish whether or not a late fee is owed.'' 
\305\ Several commenters objected to this proposal.\306\ In particular, 
the MLC was ``troubled by the DLC's arguments'' and explained that ``if 
the DMPs are concerned about having to pay late fees, whenever they 
estimate an input they should do so in a manner that ensures that there 
will not be an underpayment of royalties. To permit DMPs to estimate 
inputs in a manner that results in underpayment to songwriters and 
copyright owners, without the penalty of late fees, encourages DMPs to 
underpay, to the detriment of songwriters and copyright owners.'' \307\ 
The MLC proposed to add language prescribing that no use of an

[[Page 58137]]

estimate changes or affects the statutory due dates for royalty 
payments or the applicability of late fees to any underpayment of 
royalties that results from using an estimate.\308\ AIMP raised general 
concerns about the problem of late royalty payments and said ``expanded 
use of estimates, and the result of retroactive adjustment of royalty 
payments, does create increased risk and additional burden to copyright 
owners.'' \309\ And Peermusic wrote that it ``appreciate[d] the 
Copyright Office's rejection of the DLC request that underpayments, 
when tied to `estimates,' should not be subject to the late fee 
provision of the CRJ regulations governing royalties payable under 
Section 115, and we would request that the regulations be clear on this 
point.'' \310\
---------------------------------------------------------------------------

    \304\ DLC NPRM Comment at 14.
    \305\ Id.
    \306\ See MLC NPRM Comment at 36-37; AIMP NPRM Comment at 4-5; 
Peermusic NPRM Comment at 5.
    \307\ MLC NPRM Comment at 36-37.
    \308\ MLC NPRM Comment App. at xiv.
    \309\ AIMP NPRM Comment at 4-5.
    \310\ Peermusic NPRM Comment at 5.
---------------------------------------------------------------------------

    After careful consideration, the Office has adopted the language as 
proposed in the NPRM.\311\ The Office appreciates the need for relevant 
regulations to avoid unfairly penalizing DMPs who make good faith 
estimates from incurring late fees due to subsequent finalization of 
those inputs outside the DMPs' control, and also to avoid incentivizing 
DMPs from applying estimates in a manner that results in an initial 
underpayment that delays royalty payments to copyright owners and other 
songwriters. Under the currently operative CRJ regulation, late fees 
are due ``for any payment owed to a Copyright Owner and remaining 
unpaid after the due date established in [ ] 115(d)(4)(A)(i),'' \312\ 
that is, ``45 calendar days [ ] after the end of the monthly reporting 
period.'' \313\ The statute itself specifies that where ``the Copyright 
Royalty Judges establish a late fee for late payment of royalties for 
uses of musical works under this section, such fee shall apply to 
covered activities under blanket licenses, as follows: (i) Late fees 
for past due royalty payments shall accrue from the due date for 
payment until payment is received by the mechanical licensing 
collective.'' \314\ Meanwhile, the Office is now adopting, as directed 
by statute, regulations regarding adjustments to these reports, 
including ``mechanisms to account for overpayment and underpayment of 
royalties in prior periods'' and associated timing for such 
adjustments.\315\ It is not clear that the best course is for the 
Office to promulgate language under this mandate that accounts for the 
interplay between the CRJs' late fee regulation and the Office's 
interim rule's provision for adjustments, particularly where the CRJs 
may wish themselves to take the occasion of remand or otherwise update 
their operative regulation in light of the interim rule.\316\ The 
Office intends to monitor the operation of this aspect of the interim 
rule, and as appropriate in consultation with the CRJs.
---------------------------------------------------------------------------

    \311\ Relatedly, though, the Office understands that a DMP 
following the adjustment process laid out in the regulations should 
not be deemed in default for failure to make earlier payments, 
provided the adjustment is timely made. For example, if a DMP made a 
reasonable good-faith estimate of a performance royalty that turned 
out to result in a significant underpayment of the relevant 
mechanical royalties, upon the establishment of the final rates, as 
long as the DMP paid the remainder mechanical royalties in 
accordance with the adjustment process, neither this timing nor the 
underpayment would be deemed material or otherwise put the DMP in 
default.
    \312\ 37 CFR 385.3.
    \313\ 17 U.S.C. 115(d)(4)(A)(i).
    \314\ Id. at 115(d)(8)(B).
    \315\ Id. at 115(d)(4)(A)(iv)(II).
    \316\ See 85 FR at 22530 (``Any applicable late fees are 
governed by the CRJs, and any clarification should come from 
them.'').
---------------------------------------------------------------------------

ii. Estimates
    The Office also declines to adopt the MLC's proposal to narrow a 
DMP's ability to use estimates for any inputs that cannot be finally 
determined at the time a report of usage is due, an ability the MLC 
described as ``overly broad and permissive.'' \317\ The Office 
concludes that the NPRM does not provide unwarranted discretion to DMPs 
to use estimates. An input is either finally determined at the time a 
report of usage is due or it is not, and in the latter case, the rule 
provides that a DMP can only rely on estimates when the reason for the 
lack of a final input is beyond the DMP's control. Furthermore, the 
Office notes that while the MLC originally proposed limiting the use of 
estimates to performance royalties,\318\ it has now expanded its 
proposal to include two additional circumstances where DMPs could 
provide estimates that the Office provided as examples in the NPRM 
preamble (total cost of content and inputs, subject to bona fide, good 
faith disputes between the DMP and a third party).\319\ The Office 
believes the interim rule will benefit from the flexibility the current 
language provides and, based on the current record, that the potential 
for abuse is minimal.
---------------------------------------------------------------------------

    \317\ MLC NPRM Comment at 33. See also AIMP NPRM Comment at 4-5 
(``It is also important to note that expanded use of estimates, and 
the result of retroactive adjustment of royalty payments, does 
create increased risk and additional burden to copyright owners''); 
Peermusic NPRM Comment at 5 (``Peermusic is particularly concerned 
about what appears to an expansion in the proposed rules to DMP's 
use of estimates in royalty calculations'').
    \318\ 85 FR at 22530.
    \319\ Compare MLC NPRM Comment App. at xii-xiii, with 85 FR at 
22530 (inputs subject to bona fide, good faith disputes between the 
DMP and a third party), 85 FR at 22541 (``the amount of applicable 
consideration for sound recording copyright rights'').
---------------------------------------------------------------------------

    The Office does appreciate the concerns raised by the MLC and 
others regarding the use of estimates, so while it declines to narrow 
the ability to use estimates, it has adopted the majority of the MLC's 
proposal to require DMPs using estimates to ``(i) clearly identify in 
its Usage Report any and all royalty calculation inputs that have been 
estimated; (ii) provide the justification for the use of estimate; 
(iii) provide an explanation as to how the estimate was made, and (iv) 
in each succeeding Usage Report, provide an update and report on the 
status of all estimates taken in prior statements.'' \320\ The interim 
rule includes the first three requirements but not the fourth; the 
Office believes the rules provide sufficient transparency because they 
already include deadlines for making adjustments of estimates and 
require DMPs to explain reason(s) for adjustments when they deliver a 
report of adjustment after the estimate becomes final.
---------------------------------------------------------------------------

    \320\ MLC NPRM Comment at 34; see also AIMP NPRM Comment at 5; 
Peermusic NPRM Comment at 5.
---------------------------------------------------------------------------

    One additional scenario where DMPs may need to rely on estimates is 
where a DMP is operating under both the blanket license and voluntary 
licenses, has not filed a report of usage within 15 days of the end of 
the applicable reporting period, and thus will not receive an invoice 
prior to the royalty payment deadline, but will receive notification 
from the MLC of any underpayment or overpayment by day 70.\321\ The MLC 
acknowledged the need for estimates under these circumstances, but 
added, ``there should not be an extensive delay between the time of the 
estimate and the time the adjustment based on actual usage can be made. 
The required adjustment should be made within 5 calendar days of the 
provision to the DMP of the response file, and the DMP should not be 
permitted to make this adjustment 18 months after the estimate, as is 
currently permitted in the Proposed Regulation by reference to Sec.  
210.27(k).'' \322\ The interim rule adopts the MLC's proposed 
amendment, and no report of adjustment is required in that 
circumstance.
---------------------------------------------------------------------------

    \321\ MLC NPRM Comment at 34-35.
    \322\ Id.
---------------------------------------------------------------------------

iii. Invoices and Response Files
    A persistent issue throughout this rulemaking has been how the 
regulations should address the

[[Page 58138]]

choreography between a DMP and the MLC through which a DMP receives 
royalty invoices and response files 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.\323\ Although the MMA does 
not explicitly address invoices and response files, the DLC has 
consistently articulated the importance of addressing requirements for 
each in Copyright Office regulations.\324\ The Office endeavored in its 
NPRM to balance the operational concerns of all parties consistent with 
the MMA's legal framework and underlying goals. The DLC, MLC, and Music 
Reports each commented on this aspect of the NPRM, and the interim rule 
updates the proposed rule in some ways based on these comments, as 
discussed below.\325\
---------------------------------------------------------------------------

    \323\ See 85 FR at 22528.
    \324\ DLC Initial NOI Comment at 13; DLC Reply NOI Comment at 
13-16; DLC Ex Parte Letter Feb. 14, 2020.
    \325\ Music Reports' suggestion that the MLC includes a unique, 
persistent numerical identifier for individual shares of a work in 
response files is addressed above.
---------------------------------------------------------------------------

    While ``appreciat[ing]'' the proposed rule's general approach, the 
DLC recommended requiring the MLC to provide an invoice to a DMP five 
days earlier than what the Office proposed.\326\ The Office declines to 
adopt this recommendation because it believes the timeline in the 
proposed rule is reasonable and can be adjusted if necessary once the 
blanket license becomes operational. The Office also declines to add 
the MLC's proffered amendment that would only require it to ``engage in 
efforts'' to deliver an invoice within 40 days after the end of the 
reporting period for timely reports of usage; the MLC has represented 
that 25 days is sufficient for it to process a report of usage and 
return an invoice, so if a DMP submits a report of usage within the 
time period entitling it to an invoice under the interim rule (which is 
30 days earlier than it is required to submit a report of usage under 
the statute), it seems reasonable for the DMP to have certainty that it 
will receive an invoice prior to the statutory royalty payment 
deadline.\327\
---------------------------------------------------------------------------

    \326\ DLC NPRM Comment at 12.
    \327\ 85 FR at 22528.
---------------------------------------------------------------------------

    The interim rule clarifies when the MLC must provide a response 
file to a DMP. The rule essentially takes the approach proposed by the 
MLC that eliminates any set deadline for the MLC to provide a response 
file if a DMP fails to file a report of usage within the statutory 
timeframe,\328\ by providing that the MLC need only provide a response 
file ``in a reasonably timely manner'' in such circumstances. It also 
accepts the DLC's recommendation of permitting a DMP to request an 
invoice even when it did not submit its monthly report of usage within 
15 calendar days after the end of the applicable monthly reporting 
period. \329\
---------------------------------------------------------------------------

    \328\ MLC NPRM Comment at 43-44. This concern stems from the 
requirement that the MLC provide response files within 70 days of 
the end of the applicable month. The MLC suggested that the text of 
the rule could be read to require a response file from the MLC on 
day 70 even if a DMP submitted a usage report on day 69, which would 
be operationally untenable. Id. at 44.
    \329\ DLC NPRM Comment at 12-13.
---------------------------------------------------------------------------

    The MLC asked the Office to clarify that a DMP is required by 
statute to pay royalties owed within 45 days after the end of the 
reporting period, even if the MLC is unable to deliver a response file 
within the time period required under the rule, and that the rule 
should only require the MLC to ``use its efforts'' to meet the interim 
response file deadline.\330\ The Office declines to adopt this 
proposal--the payment deadline is already spelled out in the statute, 
so any rule would be redundant.\331\
---------------------------------------------------------------------------

    \330\ MLC NPRM Comment at 43.
    \331\ 17 U.S.C. 115(d)(4)(A)(i).
---------------------------------------------------------------------------

    The NPRM provided that response files should generally ``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 DMPs by applicable third-party administrators.'' The DLC requested 
that the rule ``should provide further specification and detail 
regarding the content'' in response files to ``ensure the regular and 
prompt receipt of necessary accounting information.'' \332\ 
Specifically, the DLC proposed requiring the following fields: ``song 
title, vendor-assigned song code, composer(s), publisher name, 
publisher split, vendor-assigned publisher number, publisher/license 
status, [ ] royalties per track[,] . . . top publisher, original 
publisher, admin publisher and effective per play rate[,] and time 
adjusted plays.'' \333\ In an ex parte meeting, the MLC reiterated its 
position that the regulations need not set forth this level of detail, 
but confirmed that it intended to include the information identified by 
the DLC in response files.\334\ The interim rule adopts the DLC's 
proposal to spell out the minimum information required in response 
files, with the Office using language that conforms with the MLC's 
terminology.
---------------------------------------------------------------------------

    \332\ DLC NPRM Comment at 13.
    \333\ Id. (internal quotation marks omitted).
    \334\ MLC Ex Parte Letter Aug. 16, 2020 at 3.
---------------------------------------------------------------------------

    Finally, the Office has added language that permits DMPs to make a 
one-time request for response files in light of comments from the DLC 
stating that ``the operational need for a response file is unlikely to 
change from month to month.'' \335\
---------------------------------------------------------------------------

    \335\ DLC NPRM Comment at 12 n.48. The DLC added, ``[w]e 
understand from our initial conversations with the MLC that it plans 
to provide such a mechanism.'' Id.
---------------------------------------------------------------------------

    The Office recognizes the above provisions addressing invoices and 
response files include a number of specific deadlines for both the MLC 
and DMPs and understands that they have been made based on reasonable 
estimates, but that before the blanket license becomes operational they 
remain only estimates. The Office would welcome updates from the MLC's 
operations advisory committee, or the MLC or DLC separately if, once 
the process becomes operational, the parties believe changes are 
necessary.
iv. Adjustments
    The DLC proposed deleting two portions of the proposed rule 
addressing reports of adjustments: First, the requirement that DMPs 
include in the description of adjustment ``the monetary amount of the 
adjustment'' and second, the requirement to 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.'' \336\ The DLC explained, ``[a]lthough DMPs must 
provide inputs to the MLC, it is typically the MLC, not the providers, 
that will use those inputs to perform a `step-by-step accounting' and 
determine the `monetary amount[s]' due to be paid.'' \337\ In response, 
the MLC confirmed its shared understanding that it would be verifying 
this math and did not oppose the DLC's proposal.\338\ The MLC proposed 
additional language, modeled off language in the monthly usage 
reporting provisions found in Sec.  210.27(d)(1)(ii) of the proposed 
rule to confirm ``that DMPs must always provide all necessary royalty 
pool calculation information.'' \339\ Finding the above reasonable, the 
Office adopts the DLC's proposal with the addition of the language 
proposed by the MLC.
---------------------------------------------------------------------------

    \336\ Id. at 13-14.
    \337\ Id. at 13.
    \338\ MLC Ex Parte Letter Aug. 16, 2020 at 2.
    \339\ Id.
---------------------------------------------------------------------------

    The DLC separately requested that the rule permit a DMP the option 
of

[[Page 58139]]

requesting a refund for overpayments instead of an offset or 
credit.\340\ The Office has added this option to the rule.\341\
---------------------------------------------------------------------------

    \340\ DLC NPRM Comment at 14.
    \341\ The Office has also made clear that any underpayment is 
due from DMPs contemporaneously with delivery of the report of 
adjustment, or promptly after being notified by the mechanical 
licensing collective of the amount due.
---------------------------------------------------------------------------

    Regarding the permissible categories that may be adjusted for 
annual reports of usage, ARM suggested a slight expansion of the audit 
exception in the proposed rule to include audits by sound recording 
copyright owners.\342\ It explained that ``[i]t is highly unlikely that 
an audit by a sound recording copyright owner would be completed before 
an annual statement issues, meaning that there should be an exception 
for adjusting TCC in past annual statements based on a sound recording 
audit.'' \343\ The Office accepts ARM's suggestion as reasonable and 
has added slightly broader language to permit a report of adjustment 
adjusting an annual report of usage following any audit of a blanket 
licensee.
---------------------------------------------------------------------------

    \342\ ARM NPRM Comment at 5 n.4.
    \343\ Id.
---------------------------------------------------------------------------

3. Format and Delivery
    The MLC and DLC each offered suggested changes to the report of 
usage format and delivery requirements. The MLC asked that DMPs that 
either also engage in voluntary licensing or operate as ``white-label'' 
services be excluded from being able to use a simplified format for 
reports of usage.\344\ The DLC recommended amending the proposed rule 
in the opposite direction and permit all DMPs, regardless of size or 
level of sophistication, to elect to use a simplified report of usage 
format.\345\ The Office declines to make either change. As noted in the 
NPRM, ``[i]n 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.'' \346\ The NPRM proposed to ``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.'' \347\ The DLC's proposal runs 
contrary to the logic for requiring a simplified format. And the MLC's 
proposal would seem unnecessary given the flexibility afforded by the 
rule; the MLC retains the discretion to include limitations in its 
format requirements that address its concerns, and its ability to work 
with DMPs to develop such requirements would likely produce more 
optimal results on this issue than bright-line regulations developed by 
the Office.
---------------------------------------------------------------------------

    \344\ MLC NPRM Comment at 42.
    \345\ DLC NPRM Comment at 10.
    \346\ 85 FR at 22534.
    \347\ Id. Separately, the Office notes the reply comments from 
Music Librarians, Archivists, and Library Copyright Specialists in 
response to the NOI, which encouraged ``the Office to include 
options in the new blanket licensing structure appropriate for 
libraries, archives, museums, and other educational and cultural 
institutions.'' Quilter, et al. Reply NOI Comment at 1. Although 
those comments spoke broadly about flexible licensing options, and 
the Office cannot expand the statutory contours of the section 115 
compulsory license, the requirement for the MLC to provide a 
simplified report of usage format can be seen as one specific way 
for ensuring the blanket license is a workable option for the types 
of nonprofit and educational institutions identified in the comment.
---------------------------------------------------------------------------

    The Office has adopted the DLC's proposal to include a requirement 
that the MLC provide DMPs with confirmation of receipt of both reports 
of usage and payment.\348\ The Office additionally has determined that 
such confirmation should be provided within a specified time period and 
believes that two business days is reasonable, given that this process 
will likely be automated.
---------------------------------------------------------------------------

    \348\ DLC NPRM Comment at 13.
---------------------------------------------------------------------------

i. Modification of Report of Usage Format Requirements
    The DLC raised concerns about what it describes as the ``unfettered 
authority'' for the MLC to modify format and payment method 
requirements and proposed the addition of procedural guardrails in the 
rule, specifically, ``that the MLC cannot impose new requirements under 
Section 210.27(h) except after a thorough and good-faith consultation 
with the Operations Advisory Committee established by the MMA, with due 
consideration to the technological and cost burdens that would result, 
and the proportionality of those burdens to any expected benefits.'' 
\349\ Although the Office assumes that the MLC and DLC will regularly 
consult on these and other operational issues, particularly through the 
operations advisory committee, it has added the suggested language to 
the interim rule.
---------------------------------------------------------------------------

    \349\ Id. at 11.
---------------------------------------------------------------------------

    The DLC raised a related concern that this provision ``could be 
used [by the MLC] to override the Office's determinations about the 
appropriate content of the reports of usage.'' \350\ The Office adopts 
the DLC's proposed language prohibiting the MLC from imposing reporting 
requirements otherwise inconsistent with this section.
---------------------------------------------------------------------------

    \350\ Id. at 10.
---------------------------------------------------------------------------

    Next, the DLC proposed increasing the time period in which DMPs 
must implement modifications made by the MLC to reporting or data 
formats or standards from six months to one year, noting the 
operational challenges for services to ``implement new data fields and 
protocols on a platform-wide basis.'' \351\ The Office is persuaded by 
the DLC's explanation and incorporates the proposal in the interim 
rule.
---------------------------------------------------------------------------

    \351\ Id. at 11.
---------------------------------------------------------------------------

    Finally, the DLC also expressed concern that a proposed provision 
which addressed instances of IT outages by the MLC did not encompass 
instances where the DMP is unaware of the outage resulting in a usage 
report or royalty payment not being received by the MLC.\352\ It 
stated, ``[l]icensees should not be held to a strict 2- or 5-day 
deadline to rectify problems of which they are not immediately aware,'' 
and proposed regulatory language to address this scenario.\353\ The 
Office has adopted this proposal in the interim rule.
---------------------------------------------------------------------------

    \352\ Id. at 17.
    \353\ Id.
---------------------------------------------------------------------------

ii. Certification of Monthly and Annual Reports of Usage
    The NPRM included rules regarding certification by DMPs of both 
monthly and annual reports of usage, which generated a number of 
comments. SGA supported the annual certification requirement, saying, 
``[t]his tool of oversight is essential to the smooth functioning of 
the MLC, and will assist in the fulfillment of three of the most 
important mandates of the Act: efficiency, openness and 
accountability.'' \354\ SONA supported the certification requirements 
in general and specifically called the annual certification requirement 
``imperative,'' saying, ``[t]his level of certification is a 
fundamental element of promoting accuracy and transparency in royalty 
reporting and payments to copyright owners whose musical works are 
being used by these DMPs.'' \355\ As noted above, the MLC proposed an 
amendment to the certification requirement with respect to data 
collection efforts.\356\ Finally, the DLC proposed two amendments, 
discussed in turn below.
---------------------------------------------------------------------------

    \354\ SGA NPRM Comment at 2.
    \355\ SONA NPRM Comment at 5; see id. at 4 (``SONA and MAC are 
pleased that the Copyright Office has confirmed the importance of 
robust certification requirements for usage reports provided under 
blanket licenses by DMPs.'').
    \356\ MLC NPRM Comment at 10-11; see also Peermusic NPRM Comment 
at 4 (agreeing with MLC's recommendation for ``robust certification 
of compliance'').
---------------------------------------------------------------------------

    First, the DLC proposed language to address its concern that the 
proposed rule would require DMPs to certify royalty calculations they 
do not make,

[[Page 58140]]

since it is the MLC that generally bears responsibility for applying 
and calculating the statutory royalties based on the DMPs' reported 
usage.\357\ The Office has adopted the majority of the DLC's proposed 
language, with some changes. First, the interim rule uses the language 
``to the extent reported'' in place of the DLC's proposed ``only if the 
blanket licensee chose to include a calculation of such royalties.'' 
The Office believes this more accurately clarifies that, under the 
blanket license, DMPs are no longer solely responsible for making all 
royalty calculations.\358\ Notwithstanding this clarification, the 
Office draws attention to the interim rule's further requirement that 
DMPs must still certify to any underlying data necessary for such 
calculations.
---------------------------------------------------------------------------

    \357\ DLC NPRM Comment at 18.
    \358\ The Office notes that under the blanket license, while 
DMPs are never making the actual ultimate royalty calculation for a 
particular musical work, they are doing varying degrees of relevant 
and important calculations along the way, the extent to which 
depends on whether or not they will receive an invoice under 
paragraph (g)(1)--if a DMP does not, then it must calculate the 
total royalty pool; if it does, then it must calculate or provide 
the underlying inputs or components that the MLC will use to 
calculate the pool, and then the amount per work from there.
---------------------------------------------------------------------------

    Second, the DLC commented that ``there are inconsistencies in the 
regulatory text's description of the accountant's certifications. After 
consulting with the auditor for one of the DLC member companies, we 
have proposed changes that use more consistent language throughout and 
are in better alignment with the relevant accounting standards and 
practices.'' \359\ No party raised objections to these proposed 
technical changes. The Office believes it is reasonable to largely 
accept the representation that this language better conforms to and 
reflects standard accounting practices and has largely adopted the 
DLC's proposed language.\360\
---------------------------------------------------------------------------

    \359\ DLC NPRM Comment at 19.
    \360\ Among the changes the Office declines to make is 
substituting ``presents fairly'' for ``accurately represents.'' 
While the Office appreciates the DLC's representation of its 
proposed changes as increasing consistency and alignment with 
relevant accounting standards and practices, this particular change 
strikes the Office as perhaps more meaningful, and the Office is 
hesitant to adopt it without further elaboration. See 85 FR at 22534 
(``The current certification requirements were adopted in 2014 after 
careful consideration by the Office, 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.'').
---------------------------------------------------------------------------

iii. Voluntary Agreements to Alter Process
    The NPRM ``permit[ted] 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,'' with two caveats to safeguard copyright 
owner interests.\361\ ``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.'' \362\ Two commenters raised concerns with this proposal. FMC 
appreciated the proposal but asked the Office to consider ``language to 
stipulate how any voluntary agreements between the MLC and DLC would be 
disclosed and/or announced publicly, for the sake of additional 
transparency.'' \363\ SONA said that the caveats were insufficient 
because they would not prevent the MLC from entering into an agreement 
with a DMP that disregards statutory or regulatory terms, and SONA 
``oppose[s] the adoption of any rule that would permit a blanket 
licensee to provide less robust reporting that what the MMA and 
reporting regulations require.\364\
---------------------------------------------------------------------------

    \361\ Id.
    \362\ Id.
    \363\ FMC NPRM Comment at 3.
    \364\ SONA NPRM Comment at 13.
---------------------------------------------------------------------------

    The interim rule addresses both these concerns. It requires the MLC 
to maintain a publicly accessible list of voluntary agreements and 
specifies that such agreements are considered records that a copyright 
owner is entitled to access and inspect under 17 U.S.C. 
115(d)(3)(M)(ii).\365\ It also clarifies that voluntary agreements are 
limited to modifying only procedures for usage reporting and royalty 
payment, not substantive requirements such as sound recording and 
musical work information DMPs are required to report.
---------------------------------------------------------------------------

    \365\ Under the statute, such records are ``subject to the 
confidentiality requirements prescribed by the Register of 
Copyrights.'' 17 U.S.C. 115(d)(3)(M)(i). The Office is addressing 
confidentiality considerations in a parallel rulemaking. 85 FR at 
22559. While the interim rule refers to confidential information in 
a few provisions, it does not directly reference the Office's 
forthcoming confidentiality regulations. The Office intends to 
adjust the interim rule to directly reference the Office's 
confidentiality regulations once they take effect.
---------------------------------------------------------------------------

4. Documentation of Records of Use
    Pursuant to its statutory authority, the Office proposed 
``regulations setting forth requirements under which records of use 
shall be maintained and made available to the mechanical licensing 
collective by digital music providers engaged in covered activities 
under a blanket license.'' \366\ The proposed rule adopted the same 
general approach regarding records of use under the MMA that was 
previously taken with regards to the nonblanket section 115 license, 
obligating DMPs to retain documents and records that are ``necessary 
and appropriate'' to support the information provided in their reports 
of usage. Some records may be relevant to a DMP's calculations of an 
input in its report of usage without being necessary and appropriate to 
support the calculation, and thus outside the scope of the 
documentation requirement. The NPRM further clarified this language by 
``enumerating several nonexclusive examples of the types of records 
DMPs are obligated to retain and make available to the MLC.'' \367\ 
These examples are meant to be illustrative of the types of ``necessary 
and appropriate'' documents and records required to be retained under 
this provision,\368\ rather than materially increasing the types of 
records DMPs currently retain.
---------------------------------------------------------------------------

    \366\ 17 U.S.C. 115(d)(4)(A)(iii), (iv)(I).
    \367\ 85 FR at 22535.
    \368\ For example, the proposed rule requires DMPs to retain 
``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'' and ``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.'' Id. at 
22546. Under the current 37 CFR 385.22, certain royalty floors are 
calculated based on the number of DMP subscribers, and the Office 
understands reports of usage to typically only provide the total 
number of subscribers. But DMPs may offer different types of 
subscription plans, such as a family plan or a student plan, and 
under 37 CFR 385.22(b), such subscribers are weighted when 
calculating total subscribers (a family plan is treated as 1.5 
subscribers, while a student plan is treated as 0.5 subscribers 
under the regulation). This provision would permit the MLC to access 
documentation that discloses those underlying numbers if necessary 
to support the reported total subscriber number.
---------------------------------------------------------------------------

    The MLC and NSAI supported the proposed records of use provisions, 
with both proposing the addition of a deadline for DMP compliance with 
reasonable requests by the MLC for access to records of use.\369\ By 
contrast, the DLC expressed ``significant concerns about these 
provisions.'' \370\ The DLC's overall concern is that the documentation 
requirements are ``significantly more extensive than DLC proposed in 
its comments,'' and raised

[[Page 58141]]

questions about the interplay between this provision and the MLC's 
statutory triennial audit right, allowing for a more thorough 
examination of royalty calculation records.\371\ While the Office has 
adjusted the proposed rule, as addressed below in response to other 
specific DLC suggestions, it believes these general objections were 
essentially already considered and appropriately addressed by the 
NPRM.\372\ As noted, the proposed rule was intended as a compromise 
between the need for transparency and the ability of the MLC to 
``engage in efforts to . . . confirm proper payment of royalties due'' 
\373\ on the one hand, with a desire to ensure that the blanket license 
remains a workable tool and the accounting procedures are not so 
complicated that they make the license impractical on the other.\374\ 
The provisions are meant to allow the MLC to spot-check royalty 
provisions; \375\ but not to provide the MLC with unfettered access to 
DMP records and documentation. And setting aside MLC access, general 
obligations relating to retention of records have been a feature of the 
section 115 regulations since at least implementation of the Copyright 
Act of 1976.\376\ As an interim rule, the Office can subsequently 
expand or limit the recordkeeping provisions, if necessary.\377\
---------------------------------------------------------------------------

    \369\ MLC NPRM Comment at 44-45; NSAI NPRM Comment at 2.
    \370\ DLC NPRM Comment at 19-20.
    \371\ Id. at 19. See 17 U.S.C. 115(d)(4)(D)(i).
    \372\ See, e.g., 85 FR at 22529-30 (rejecting the MLC's proposal 
for monthly reporting of certain types of information but explaining 
they would be included in recordkeeping requirements, addressing 
interplay with the triennial audit right); id. at 22535 (proposing 
recordkeeping retention and access requirements, including declining 
to adopt some of the MLC's more expansive proposals).
    \373\ See 17 U.S.C. 115(d)(3)(G)(i)(I)(cc).
    \374\ 85 FR at 22526.
    \375\ See NSAI NPRM Comment at 2 (``[W]hile the MLC's ability to 
audit a digital service once every three years is an important tool 
for license administration, it is no substitute for a trusted 
administrator like the MLC having ongoing visibility into royalty 
accounting practices.'').
    \376\ See 42 FR 64889, 64894 (Dec. 29, 1977). See also 43 FR 
44511, 44515 (Sept. 28, 1978) (discussing records of use retention 
period provision in connection with statute of limitations for 
potential claims).
    \377\ The Office can also update this rule if the relevant 
provisions of 37 CFR part 385 change.
---------------------------------------------------------------------------

iv. Retention Period
    The NPRM proposed requiring DMPs operating under the blanket 
license to ``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'' for a period of five years from the 
date of delivery of a report of usage to the MLC. The Office noted it 
``may consider extending the retention period to seven years to align 
with the statutory recordkeeping requirements the MMA places on the 
MLC.'' \378\ FMC supported this extension, saying, it ``would help 
engender necessary trust in the system from songwriters--if there are 
questions or problems, parties would be able to go back and look at the 
data.'' \379\ The MLC also proposed extending the retention period from 
five to seven years.\380\ No commenter opposed the proposed extension. 
Therefore, the Office is adopting a seven-year retention period in the 
interim rule to afford greater transparency and harmonize the record 
retention period for DMPs with the statutory retention period for the 
MLC.\381\ Additionally, the Office is adopting the MLC's proposed 
amendment clarifying that the retention period for records relating to 
an estimate accrues from receipt of the report containing the final 
adjustment. This rule is roughly analogous to the current documentation 
rule in 37 CFR 210.18, which bases the retention period for licensees 
from the date of service of an annual or amended annual statement.
---------------------------------------------------------------------------

    \378\ 85 FR at 22534.
    \379\ FMC NPRM Comment at 3.
    \380\ MLC NPRM Comment App. at xxvii.
    \381\ 17 U.S.C. 115(d)(3)(M)(i).
---------------------------------------------------------------------------

v. Non-Royalty Bearing DPDs
    Another concern raised by the DLC relates to the proposed 
requirement to retain records and documents accounting for DPDs that do 
not constitute plays, constructive plays, or other payable units. 
Although the DLC says this provision is ``unnecessary because these are 
not relevant to the information set forth in a report of usage,'' \382\ 
the Office disagrees; this provision is relevant to confirming reported 
royalty-bearing uses. ``Play'' is a defined term under the current 
section 385, and retention of these records may facilitate transparency 
in understanding adherence to this regulatory definition.
---------------------------------------------------------------------------

    \382\ DLC NPRM Comment at 19 (internal quotation marks and 
brackets omitted).
---------------------------------------------------------------------------

    The DLC further argues that the CRJs have already ``issued 
regulations related to recordkeeping of a narrower set of uses that do 
not affect royalties--promotional and free trial uses--after an 
extensive ratesetting proceeding, pursuant to its separate authority to 
issue recordkeeping requirements,'' and that ``[r]ather than dividing 
responsibility for establishing recordkeeping rules for these closely 
related categories of uses between the Copyright Office and the CRB, it 
would be far more appropriate for the CRB to address any need to retain 
an expanded universe of non-royalty-related information, in the context 
of the next ratemaking proceeding.'' \383\ The DLC misconstrues the 
division of authority between the Office and the CRJs. The Office has 
previously opined on the division of authority between it and the CRJs 
over the pre-MMA section 115 license and concluded that ``the scope of 
the CRJs' authority in the areas of notice and recordkeeping for the 
section 115 license must be construed in light of Congress's more 
specific delegation of responsibility to the Register of Copyrights.'' 
\384\ The CRJs have also previously stated that they can adopt notice 
and recordkeeping rules ``to the extent the Judges find it necessary to 
augment the Register's reporting rules.'' \385\ Finally, 
notwithstanding the CRJs' authority to ``specify notice and 
recordkeeping requirements of users of the copyrights at issue,'' in 
their determinations,\386\ the MMA eliminated the section 115 provision 
regarding CRJ recordkeeping authority \387\ and specifically assigned 
that authority, for the blanket license, to the Copyright Office.\388\ 
The Office concludes that it is the appropriate body to promulgate 
these recordkeeping provisions under the MMA.
---------------------------------------------------------------------------

    \383\ Id.
    \384\ 73 FR 48396, 48397-98 (Aug. 19, 2008).
    \385\ 84 FR 1918, 1962 (Feb. 5, 2019).
    \386\ 17 U.S.C. 803(c)(3).
    \387\ See id. at 115(c)(3)(D) (2017).
    \388\ Id. at 115(d)(4)(A)(iii), (iv)(I); see also 73 FR at 
48397-98 (discussing Congress's more specific delegation to the 
Copyright Office).
---------------------------------------------------------------------------

vi. Royalty Floors
    The DLC raised some concern that the requirement for keeping 
``records and documents regarding whether and how any royalty floor is 
established [ ] is redundant of the other provisions, particularly 
paragraph (m)(1)(vi), which already requires retention of all 
information needed to support royalty calculations, including the 
various inputs into royalty floors.'' \389\ The Office notes that there 
is conceivably some distinction between records about whether and how 
floors apply and records about the various inputs that go into the 
determination of applying the floors, meaning the two provisions are 
not superfluous. And to the extent there is any redundancy between 
recordkeeping provisions, such overlap would seem to be harmless, and 
so the Office has not removed the provision identified by the DLC.
---------------------------------------------------------------------------

    \389\ DLC NPRM Comment at 19.
---------------------------------------------------------------------------

vii. Access By the MLC
    The NPRM also limited access to records of use by the MLC. The 
interim rule is amended to require a DMP to make arrangements for 
access to records

[[Page 58142]]

within 30 days of a request from the MLC, as suggested by the MLC and 
endorsed by NSAI.\390\ The interim rule also limits the frequency that 
the MLC can request records of use to address concerns raised by the 
DLC, but with a less expansive limit than the DLC suggested.\391\ 
Factoring into account the MLC's countervailing comments, the Office 
believes a more frequent period may be appropriate, and the interim 
rule thus limits the MLC to one request to a particular DMP per 
quarter, covering a period of one quarter in the aggregate. Finally, 
the Office clarifies its understanding that the requirement to retain 
``[a]ny other records or documents that may be appropriately examined 
pursuant to an audit under 17 U.S.C. 115(d)(4)(D)'' should not be read 
as giving the MLC access to documents held pursuant to this category 
outside of such an audit.\392\
---------------------------------------------------------------------------

    \390\ See MLC NPRM Comment at 44-45 (``The MLC retains a concern 
about the absence of a prescribed time frame for DMP compliance with 
reasonable requests by the MLC for access to records of use, which 
could delay the MLC's access to information that the MLC may require 
on a timely basis. The MLC therefore requests that DMPs be required 
to provide access to requested information within 30 days of the 
MLC's request.''); NSAI NPRM Comment at 2 (``NSAI agrees with the 
MLC that the digital services' obligation to provide reasonable 
access to records of use on request should have a prompt deadline in 
the regulations. This will prevent stonewalling and avoid 
disagreement over such timing.'').
    \391\ DLC NPRM Comment at 20 (stating ``since the MMA limits 
audits both in their frequency and their scope, similar limits 
should apply to the MLC's access to documentation and records of 
use. DLC therefore proposes that the MLC's access be limited in 
frequency to once per 12-month period, and limited in scope to no 
more than two months (in the aggregate) of records.'').
    \392\ See id. at 21, Add. at A-29-30.
---------------------------------------------------------------------------

viii. Total Cost of Content
    Because the total cost of content (``TCC'') is a fundamental 
component of the current royalty rates under the blanket license, the 
NPRM included language permitting the MLC access to ``[r]ecords and 
documents with information sufficient to reasonably demonstrate . . . 
whether . . . total cost of content . . . [is] properly calculated.'' 
ARM voiced strong opposition to this provision.\393\ It contended that 
such access would interfere with highly commercially sensitive 
agreements between its member record labels and DMPs, and that 
confidentiality regulations proposed by the Office lacked sufficient 
enforcement mechanisms to remedy any breach that might occur.\394\ The 
RIAA reiterated its concern in an ex parte meeting that access to 
underlying records and inputs used to calculate the TCC could undermine 
``the confidentiality of commercial agreements negotiated between 
individual record companies and digital music providers (``DMPs'') in a 
competitive marketplace.'' \395\
---------------------------------------------------------------------------

    \393\ ARM NPRM Comment at 4.
    \394\ Id. at 4-5.
    \395\ RIAA Ex Parte Letter June 16, 2020 at 1. The RIAA 
elaborated, ``[c]ommercial agreements between record companies and 
DMPs are so highly competitively sensitive they amount to trade 
secrets and must be treated as such. Because these agreements 
typically have short terms, they are renegotiated frequently and any 
leakage of their terms and conditions could have a significant 
detrimental impact on the streaming marketplace. There are several 
important considerations: (1) Individual MLC board members may be 
employees of companies owned by a music group competitor; (2) It is 
possible to derive the percentage of revenue equivalent of a DMP's 
payment to each record company once it is known (a) the amount the 
DMP paid to each record company that month and (b) the DMP's monthly 
Service Provider Revenue(which is a required part of its monthly 
mechanical royalty calculation, see 37 CFR 385.21); and (3) There is 
no clear remedy for violating proposed confidentiality regulations, 
especially given the damage that could ensue.'' Id. at 1-2.
---------------------------------------------------------------------------

    The RIAA recognized that the MLC may have a need to confirm that 
the usage reports were calculated in accordance with the total 
aggregated TCC figure reflected in DMP financial records (as opposed to 
terms of agreements with individual record labels or other 
distributors), and that there may be separate needs for document 
retention beyond access by the MLC for routine administration 
functions.\396\ Accordingly, it suggested that with respect to TCC, 
access by the MLC to DMP records ``should be limited to confirming that 
the DMP accurately reported to the MLC the aggregated TCC figure kept 
on its books.'' \397\ The interim rule has thus retained an obligation 
on the part of DMPs to keep records sufficient to reasonably support 
and confirm the accuracy of the TCC figure, while amending the access 
provision to limit the MLC to only the aggregated figure.
---------------------------------------------------------------------------

    \396\ See, e.g., supra note 376.
    \397\ RIAA Ex Parte Letter Aug. 24, 2020 at 2.
---------------------------------------------------------------------------

D. Reports of Usage--Significant Nonblanket Licensees

    As discussed in the NOI and NPRM, SNBLs are also required to 
deliver reports of usage to the MLC.\398\ Based on the ``fairly 
sparse'' comments received in response to the notification and the 
Office's observation that ``[t]he statutory requirements for blanket 
licensees and SNBLs differ in a number of material ways,'' the Office 
concluded that it seemed ``reasonable to fashion the proposed rule for 
SNBL reports of usage as an abbreviated version of the reporting 
provided by blanket licensees.'' \399\ In light of the ``particularly 
thin record on SNBLs,'' the Office particularly encouraged further 
comment on this issue.\400\
---------------------------------------------------------------------------

    \398\ 84 FR at 49971; 85 FR at 22535.
    \399\ 85 FR at 22535.
    \400\ Id. at 22535-36.
---------------------------------------------------------------------------

    The Office received little more in response. Only the MLC, DLC, and 
FMC comments discuss SNBLs, all in brief.\401\ FMC says it ``agree[s] 
that SNBL reporting can serve an array of aims, including distribution 
of unclaimed royalties and administrative assessment calculations, and 
general matching support,'' and also ``transparency aims.'' \402\ FMC 
further states that it thus ``tend[s] to favor more robust reporting 
requirements'' and that ``[r]ecords of use, in particular, should be 
included.'' \403\ FMC does not propose specific regulatory language. 
The MLC says that ``it seems possible that the MLC may have good reason 
to include [SNBL] data in the public database to the extent such data 
is not otherwise available,'' that it plans to ``use usage reporting 
from SNBLs . . . as part of the determination of administrative 
assessment allocations,'' and that ``[t]he rule does not provide 
excessive information, as use in connection with any market share 
calculation for any distribution of unclaimed accrued royalties would 
require a full processing and matching of the usage reporting data.'' 
\404\ The MLC does not propose any changes to the NPRM's regulatory 
language that do not align with changes it also proposed with respect 
to blanket licensee reporting.\405\ The DLC's proposed regulatory 
language also largely mirrors, to the extent applicable, its proposal 
for blanket licensee reporting.\406\ The DLC further requests a 
modification to one of the certification provisions specifically for 
SNBL reporting because it says that it ``incorrectly assumes that such 
licensees engage in a CPA certification process.'' \407\
---------------------------------------------------------------------------

    \401\ See MLC NPRM Comment at 46, App. at xxx-xxxvii; DLC NPRM 
Comment at 18, Add. at A-30-38; FMC NPRM Comment at 3.
    \402\ FMC NPRM Comment at 3.
    \403\ Id.
    \404\ MLC NPRM Comment at 46.
    \405\ See MLC NPRM Comment App. at xxx-xxxvii.
    \406\ See DLC NPRM Comment Add. at A-30-38.
    \407\ DLC NPRM Comment at 18, Add. at A-37.
---------------------------------------------------------------------------

    Having considered these comments, the record does not indicate to 
the Office that it should change its overall proposed approach to SNBL 
reporting requirements. Therefore, the Office is essentially adopting 
the proposed rule as an interim rule, but with appropriate updates to 
incorporate and apply the relevant decisions detailed above that the 
Office has made with respect to blanket licensee reporting 
requirements. The Office has not carried over the

[[Page 58143]]

interim rule's expanded audio access and unaltered data requirements 
because it does not seem necessary to impose those additional 
obligations on SNBLs given the purpose their reporting serves as 
compared to blanket licensee reporting.
    Similarly, regarding FMC's request to add a records of use 
provision and generally require more robust reporting, the Office 
declines to do so at this time, at least based upon the thin current 
record. The Office believes the interim rule strikes an appropriate 
balance with respect to SNBLs given the material differences between 
them and blanket licensees--most notably that SNBLs do not operate 
under the blanket license and do not pay statutory royalties to the 
MLC.\408\
---------------------------------------------------------------------------

    \408\ As noted in the NPRM, the statutory records of use 
requirement for blanket licensees does not expressly apply to SNBLs. 
85 FR at 22535.
---------------------------------------------------------------------------

    As to the DLC's proposal concerning the certification language, the 
Office declines this request at this time. At least based on the 
limited record, the Office is not persuaded that the certification 
requirement for SNBLs should materially differ from the requirement for 
blanket licensees. The fact that SNBLs may not have traditionally 
engaged in a CPA certification process in connection with their 
voluntary licenses does not move the Office to eliminate this component 
of the certification in the different context of their new statutory 
obligation to report to the MLC for purposes that go beyond their 
private agreements--especially considering that the rule does not 
impose a records of use requirement on SNBLs. To the extent an SNBL 
does not wish to engage in a CPA certification process, the alternative 
certification option provided for in the regulations remains available 
to them.

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Interim Regulations

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

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

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

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

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(g)(3)(i),'' ``Sec.  210.12(g)(3)(ii),'' 
``Sec.  210.12(g)(3),'' ``Sec.  210.12(g),'' ``Sec.  210.12(h),'' and 
``Sec.  210.12(i)'' and add in their places ``Sec.  210.2(g)(3)(i),'' 
``Sec.  210.2(g)(3)(ii),'' ``Sec.  210.2(g)(3),'' ``Sec.  210.2(g),'' 
``Sec.  210.2(h),'' and ``Sec.  210.2(i),'' respectively;
0
b. Remove ``Sec.  210.15'' and add in its place ``Sec.  210.5'';
0
c. Remove ``Sec.  210.16(d)(2),'' ``Sec.  210.16,'' ``Sec.  
210.16(g),'' and ``Sec.  210.16(g)(3)'' and add in their places ``Sec.  
210.6(d)(2),'' ``Sec.  210.6,'' ``Sec.  210.6(g),'' and ``Sec.  
210.6(g)(3),'' respectively;
0
d. Remove ``Sec.  210.17(d)(2)(iii)'' and ``Sec.  210.17 of this 
subpart'' and add in their places ``Sec.  210.7(d)(2)(iii)'' and 
``Sec.  210.7,'' respectively;
0
e. Remove ``Sec.  210.18'' and add in its place ``Sec.  210.8''; and
0
f. 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) The term blanket licensee means 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, incorporated in Delaware on 
March 5,

[[Page 58144]]

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) Services available through discounted pricing plans, such as 
for families or students.
    (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 to which it may be entitled. With 
respect to any applicable voluntary license or individual download 
license executed and in effect before March 31, 2021, the description 
required by this paragraph (b)(8) must be delivered to the mechanical 
licensing collective either no later than 10 business days after such 
license is executed, or at least 90 calendar days before delivering a 
report of usage covering the first reporting period during which such 
license is in effect, whichever is later. For any reporting period 
ending on or before March 31, 2021, the mechanical licensing collective 
shall not be required to undertake any obligations otherwise imposed on 
it by this subpart with respect to any voluntary license or individual 
download license for which the collective has not received the 
description required by this paragraph (b)(8) at least 90 calendar days 
prior to the delivery of a report of usage for such period, but such 
obligations attach and are ongoing with respect to such license for 
subsequent periods. The rest of the notice of license may be delivered 
separately from such description. The description required by this 
paragraph (b)(8) 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.
    (vi) A unique identifier for each such license.
    (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

[[Page 58145]]

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 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, including the failure to timely submit an amended 
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 either 
no later than 10 business days after such license is executed, or at 
least 30 calendar days before delivering a report of usage covering the 
first reporting period during which such license is in effect, 
whichever is later. Except as otherwise provided for by paragraph 
(b)(8) of this section, the mechanical licensing collective shall not 
be required to undertake any obligations otherwise imposed on it by 
this subpart with respect to any voluntary license or individual 
download license for which the collective has not received the 
description required by paragraph (b)(8) of this section at least 30 
calendar days prior to the delivery of a report of usage for such 
period, but such obligations attach and are ongoing with respect to 
such license for subsequent periods.
    (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 
and the mechanical licensing collective shall begin accepting such 
notices at least 30 calendar days before the license availability date, 
provided, however, that any description required by paragraph (b)(8) of 
this section must be delivered within the time period described in 
paragraph (b)(8). In such cases, the blanket license shall be effective 
as of the license availability date, rather than the date on which the 
notice is submitted to the collective. Failure to comply with this 
paragraph (g), including by failing to timely submit the required 
notice or cure a rejected notice, shall not affect an applicable 
digital music provider's blanket license, except that such blanket 
license may become subject to default and termination under 17 U.S.C. 
115(d)(4)(E). The mechanical licensing collective shall not take any 
action pursuant to 17 U.S.C. 115(d)(4)(E) before the conclusion of any 
proceedings under 17 U.S.C. 115(d)(2)(A)(iv) or (v), provided that the 
digital music provider meets the blanket license's other required terms 
and conditions.
    (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 confidentiality to 
which they may be entitled, 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

[[Page 58146]]

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.
    (D) Services available through discounted pricing plans, such as 
for families or students.
    (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, including the failure to timely submit 
an amended 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 
confidentiality to which they may be entitled, 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.

[[Page 58147]]

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)(i) 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 information 
belonging to the categories identified in Sec.  210.27(e)(1)(i)(E) and 
(e)(1)(ii), without regard to any limitations that may apply to the 
reporting of such information in reports of usage. Such efforts must be 
undertaken periodically, and be specific and targeted to obtaining 
information not previously obtained from the applicable owner or other 
licensor for the specific sound recordings and musical works embodied 
therein for which the digital music provider lacks such information. 
Such efforts must also solicit updates for any previously obtained 
information if reasonably requested by the mechanical licensing 
collective. The digital music provider shall keep the mechanical 
licensing collective reasonably informed of the efforts it undertakes 
pursuant to this section.
    (ii) Any information required by paragraph (b)(1)(i) 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).
    (2)(i) Notwithstanding paragraph (b)(1) 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 required by paragraph (b)(1)(i) 
of this section from an authoritative source of sound recording 
information, 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:
    (A) Such arrangement requires such source to inform, including 
through periodic updates, the digital music provider and mechanical 
licensing collective about any relevant gaps in its repertoire coverage 
known to such source, including but not limited to particular 
categories of information identified in Sec.  210.27(e)(1)(i)(E) and 
(e)(1)(ii), sound recording copyright owners and/or other licensors of 
sound recordings (e.g., labels, distributors), genres, and/or countries 
of origin, that are either not covered or materially underrepresented 
as compared to overall market representation; and
    (B) Such digital music provider does not have actual knowledge or 
has not been notified by the source, the mechanical licensing 
collective, or a copyright owner, licensor, or author (or their 
respective representatives, including by an administrator or a 
collective management organization) of the relevant sound recording or 
musical work that is embodied in such sound recording, that the source 
lacks such information for the relevant sound recording or a set of 
sound recordings encompassing such sound recording.
    (ii) Satisfying the requirements of 17 U.S.C. 115(d)(4)(B) in the 
manner set out in paragraph (b)(2)(i) of this section does not excuse a 
digital music provider from having to report sound recording and 
musical work information in accordance with Sec.  210.27(e).
    (3) 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, by providing, to the 
extent a musical work copyright owner becomes aware that such 
information is not then available in the database and to the extent the 
musical work copyright owner has such missing information, 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).


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

[[Page 58148]]

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.
    (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 will not receive an invoice prior to 
delivering its royalty payment 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 will not receive 
an invoice prior to delivering its royalty payment 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 will receive an invoice prior to 
delivering its royalty payment 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. A report of usage containing an estimate permitted by this 
paragraph (d)(2)(i) should identify each input that has been estimated, 
and provide the reason(s) why such input(s) needed to be estimated and 
an explanation as to the basis for the estimate(s).
    (ii) Where the blanket licensee will not receive an invoice prior 
to delivering its royalty payment 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 within 5 
calendar days after the mechanical licensing collective confirms such 
amount to be deducted and notifies the blanket licensee under paragraph 
(g)(2) of this section. Any overpayment of royalties shall be handled 
in accordance with paragraph (k)(5) of this section. Where the blanket 
licensee will receive an invoice prior to delivering its royalty 
payment 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

[[Page 58149]]

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 all known alternative and 
parenthetical titles for the sound recording;
    (B) Featured artist(s);
    (C) Unique identifier(s) assigned by the blanket licensee, 
including unique identifier(s) (such as, if applicable, Uniform 
Resource Locators (URLs)) that can be used to locate and listen to the 
sound recording, accompanied by clear instructions describing how to do 
so (such audio access may be limited to a preview or sample of the 
sound recording lasting at least 30 seconds), subject to paragraph 
(e)(3) of this section;
    (D) Actual playing time measured from the sound recording audio 
file; 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):
    (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 
sound recordings of musical works to engage in covered activities, 
including pursuant to 17 U.S.C. 115(d)(4)(B):
    (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, 
subsidiary, or affiliate of the blanket licensee, is a copyright owner 
of the musical work embodied in the sound recording.
    (2) Where any of the information called for by paragraph (e)(1) of 
this section, except for playing time, 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 modifies such information (which, for 
avoidance of doubt, does not include the act of filling in or 
supplementing empty or blank data fields, to the extent such 
information is known to the licensee), the blanket licensee shall 
report as follows:
    (i) It shall be sufficient for the blanket licensee to report 
either the licensor-provided version or the modified version of such 
information to satisfy its obligations under paragraph (e)(1) of this 
section, except for the reporting of any information belonging to a 
category of information that was not periodically modified by that 
blanket licensee prior to the license availability date, any unique 
identifier (including but not limited to ISRC and ISWC), or any release 
date. On and after September 17, 2021, it additionally shall not be 
sufficient for the blanket licensee to report a modified version of any 
sound recording name, featured artist, version, or album title.
    (ii) Where the blanket licensee must otherwise report the licensor-
provided version of such information under paragraph (e)(2)(i) of this 
section, but to the best of its knowledge, information, and belief no 
longer has possession, custody, or control of the licensor-provided 
version, reporting the modified version of such information will 
satisfy its obligations under paragraph (e)(1) of this section if the 
blanket licensee certifies to the mechanical licensing collective that 
to the best of the blanket licensee's knowledge, information, and 
belief: The information at issue belongs to a category of information 
called for by paragraph (e)(1) of this section (each of which must be 
identified) that was periodically modified by the particular blanket 
licensee prior to October 19, 2020; and that despite engaging in good-
faith, commercially reasonable efforts, the blanket licensee has not 
located the licensor-provided version in its records. A certification 
need not identify specific sound recordings or musical works, and a 
single certification may encompass all licensor-provided information 
satisfying the conditions of the preceding sentence. The blanket 
licensee should deliver this certification prior to or 
contemporaneously with the first-delivered report of usage containing 
information to which this paragraph (e)(2)(ii) is applicable and need 
not provide the same certification to the mechanical licensing 
collective more than once.
    (3) With respect to the obligation under paragraph (e)(1) of this 
section for blanket licensees to report unique identifiers that can be 
used to locate and listen to sound recordings accompanied by clear 
instructions describing how to do so:
    (i) On and after the license availability date, blanket licensees 
providing such unique identifiers may not impose conditions that 
materially diminish the degree of access to sound recordings in 
connection with their potential use by the mechanical licensing 
collective or its registered users in connection with their use of the 
collective's claiming portal (e.g., if a paid subscription is not 
required to listen to a sound recording as of the license availability 
date, the blanket licensee should not later impose a subscription fee 
for users to access the recording through the portal). Nothing in this 
paragraph (e)(3)(i) shall be construed as restricting a blanket 
licensee from otherwise imposing conditions or diminishing access to 
sound recordings: With respect to other users or methods of access to 
its service(s), including the general public; if required by a relevant 
agreement with a sound recording copyright owner or other licensor of 
sound recordings; or where such sound recordings are no longer made 
available through its service(s).
    (ii) Blanket licensees who do not assign such unique identifiers as 
of September 17, 2020, may make use of a transition period ending 
September 17, 2021, during which the requirement to

[[Page 58150]]

report such unique identifiers accompanied by instructions shall be 
waived upon notification, including a description of any implementation 
obstacles, to the mechanical licensing collective.
    (iii)(A) By no later than December 16, 2020, and on a quarterly 
basis for the succeeding year, or as otherwise directed by the 
Copyright Office, the mechanical licensing collective and digital 
licensee coordinator shall report to the Copyright Office regarding the 
ability of users to listen to sound recordings for identification 
purposes through the collective's claiming portal. In addition to any 
other information requested, each report shall:
    (1) Identify any implementation obstacles preventing the audio of 
any reported sound recording from being accessed directly or indirectly 
through the portal without cost to portal users (including any 
obstacles described by any blanket licensee pursuant to paragraph 
(e)(3)(ii) of this section, along with such licensee's identity), and 
any other obstacles to improving the experience of portal users seeking 
to identify musical works and their owners;
    (2) Identify an implementation strategy for addressing any 
identified obstacles, and, as applicable, what progress has been made 
in addressing such obstacles; and
    (3) Identify any agreements between the mechanical licensing 
collective and blanket licensee(s) to provide for access to the 
relevant sound recordings for portal users seeking to identify musical 
works and their owners through an alternate method rather than by 
reporting unique identifiers through reports of usage (e.g., separately 
licensed solutions). If such an alternate method is implemented 
pursuant to any such agreement, the requirement to report unique 
identifiers that can be used to locate and listen to sound recordings 
accompanied by clear instructions describing how to do so is lifted for 
the relevant blanket licensee(s) for the duration of the agreement.
    (B) The mechanical licensing collective and digital licensee 
coordinator shall cooperate in good faith to produce the reports 
required under paragraph (e)(3)(iii)(A) of this section, and shall 
submit joint reports with respect to areas on which they can reach 
substantial agreement, but which may contain separate report sections 
on areas where they are unable to reach substantial agreement. Such 
cooperation may include work through the operations advisory committee.
    (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: 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 should be reported.
    (5) A blanket licensee may make use of a transition period ending 
September 17, 2021, during which the blanket licensee need not report 
information that would otherwise be required by paragraph (e)(1)(i)(E) 
or (e)(1)(ii) of this section, unless:
    (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) 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
    (iii) 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.
    (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 mechanical licensing collective shall deliver an invoice to the 
blanket licensee no later than 40 calendar days after the end of the 
applicable monthly reporting period that sets 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

[[Page 58151]]

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 will not receive an invoice prior 
to delivering its royalty payment 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 will receive an invoice prior to 
delivering its royalty payment 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) The mechanical licensing collective shall deliver a response 
file to the blanket licensee if requested by the blanket licensee, and 
the blanket licensee may request an invoice even if not entitled to an 
invoice prior to delivering its royalty payment under paragraph (g)(1) 
of this section. Such requests may be made in connection with a 
particular monthly report of usage or via a one-time request that 
applies to future reporting periods. Where the blanket licensee will 
receive an invoice prior to delivering its royalty payment under 
paragraph (g)(1) of this section, the mechanical licensing collective 
shall deliver the response file to the blanket licensee 
contemporaneously with such invoice. The mechanical licensing 
collective shall otherwise deliver the response file and/or invoice, as 
applicable, to the blanket licensee in a reasonably timely manner, but 
no later than 70 calendar days after the end of the applicable monthly 
reporting period if the blanket licensee has delivered its monthly 
report of usage and related royalty payment no later than 45 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. Response files shall 
include the following minimum information: song title, mechanical 
licensing collective-assigned song code, composer(s), publisher name, 
including top publisher, original publisher, and admin publisher, 
publisher split, mechanical licensing collective-assigned publisher 
number, publisher/license status (whether each work share is subject to 
the blanket license or a voluntary license or individual download 
license), royalties per work share, effective per-play rate, time-
adjusted plays, and the unique identifier for each applicable voluntary 
license or individual download license provided to the mechanical 
licensing collective pursuant to Sec.  210.24(b)(8)(vi).
    (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, 
after good-faith consultation with the operations advisory committee 
and taking into consideration any technological and cost burdens that 
may reasonably be expected to result and the proportionality of those 
burdens to any reasonably expected benefits, 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

[[Page 58152]]

significant change, in which case, compliance shall not be required 
before the first reporting period ending at least one year after 
delivery of such notice. For purposes of this paragraph (h)(3), a 
significant change occurs where the mechanical licensing collective 
changes any policy requiring information to be provided under 
particular reporting or data standards or formats. 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. Nothing in this paragraph (h)(3) empowers the mechanical 
licensing collective to impose reporting requirements that are 
otherwise inconsistent with the regulations prescribed by this section.
    (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)(i) 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) the occurrence of which the 
blanket licensee knew or should have known at the time, 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:
    (A) 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.
    (B) 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.
    (ii) In the event of a good-faith dispute regarding whether a 
blanket licensee knew or should have known of the occurrence of an 
error, outage, disruption, or other issue with any of the mechanical 
licensing collective's applicable information technology systems, a 
blanket licensee that complies with the requirements of paragraph 
(h)(6)(i) of this section within a reasonable period of time shall 
receive the protections of paragraphs (h)(6)(i)(A) and (B) of this 
section.
    (7) The mechanical licensing collective shall provide a blanket 
licensee with written confirmation of receipt no later than 2 business 
days after receiving a report of usage and no later than 2 business 
days after receiving any payment.
    (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 (A) the 
processes generated monthly reports of usage that accurately 
reflect, in all material respects, the blanket licensee's usage of 
musical works, the statutory royalties applicable thereto (to the 
extent reported), 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, and (B) the internal controls 
relevant to the processes used by or on behalf of the blanket 
licensee to generate monthly reports of usage were suitably designed 
and operated effectively during the period covered by the monthly 
reports of usage.

    (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

[[Page 58153]]

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 
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 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, 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 generated 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 musical works in covered activities during 
the period covered by the annual report of usage, the statutory 
royalties applicable thereto (to the extent reported), 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 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 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 adjusted 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 the adjustment 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 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 
or promptly after being notified by the mechanical licensing collective 
of the amount due. 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.

[[Page 58154]]

    (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, or upon 
request, issue a refund within a reasonable period of time.
    (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);
    (iv) Following any other audit of a blanket licensee that concludes 
after the annual report of usage is delivered and that has the result 
of affecting the computation of the royalties payable by the blanket 
licensee under the blanket license (e.g., as applicable, an audit by a 
sound recording copyright owner concerning the amount of applicable 
consideration paid for sound recording copyright rights); or
    (v) 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 of facts or information 
contained in other documents or records.
    (m) Documentation and records of use. (1) Each blanket licensee 
shall, for a period of at least seven 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 (except that such records and documents that relate to an 
estimated input permitted under paragraph (d)(2) of this section must 
be kept and retained for a period of at least seven years from the date 
of delivery of the report of usage containing the final adjustment of 
such input), 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 
(including of any inputs provided to the mechanical licensing 
collective to enable further 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) The mechanical licensing collective or its agent shall be 
entitled to reasonable access to records and documents described in 
paragraph (m)(1) of this section, which shall be provided promptly and 
arranged for no later than 30 calendar days after the mechanical 
licensing collective's reasonable request, subject to any 
confidentiality to which they may be entitled. The mechanical licensing 
collective shall be entitled to make one request per quarter covering a 
period of up to one quarter in the aggregate. With respect to the total 
cost of content, as that term may be defined in part 385 of this title, 
the access permitted by this paragraph (m)(2) shall be limited to 
accessing the aggregated figure kept by the blanket licensee on its 
books for the relevant reporting period(s). Neither the mechanical 
licensing collective nor its agent shall be entitled to access any 
records or documents retained solely pursuant to paragraph (m)(1)(vii) 
of this section outside of an applicable audit. Each report of usage 
must include clear instructions on how to request access to records and 
documents under this paragraph (m).
    (3) Each blanket licensee shall, in accordance with paragraph 
(m)(4) of this section, keep and retain in its possession and report 
the following information:
    (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 on or after the effective date of its blanket license:
    (A) Each of the following dates to the extent reasonably available:
    (1) The date on which the sound recording was first reproduced by 
the blanket licensee on its server (``server fixation date'').
    (2) The date on which the sound recording was first released on the 
blanket licensee's service (``street date'').
    (B) If neither of the dates specified in paragraph (m)(3)(i)(A) of 
this section is reasonably available, the date that, in the assessment 
of the blanket licensee, provides a reasonable estimate of the date the 
sound recording was first distributed on its service within the United 
States (``estimated first distribution date'').
    (ii) A record of materially all sound recordings embodying musical 
works in its database or similar electronic system as of a time 
reasonably approximate to the effective date of its blanket license. 
For each recording, the record shall include the sound recording 
name(s), featured artist(s), unique identifier(s) assigned by the 
blanket licensee, actual playing time, and, to the extent acquired by 
the blanket licensee in connection with its use of sound recordings of 
musical works to engage in covered activities, ISRC(s). The blanket 
licensee shall use commercially reasonable efforts to make this record 
as accurate and complete as reasonably possible in

[[Page 58155]]

representing the blanket licensee's repertoire as of immediately prior 
to the effective date of its blanket license.
    (4)(i) Each blanket licensee must deliver the information described 
in paragraph (m)(3)(i) of this section to the mechanical licensing 
collective at least annually and keep and retain this information until 
delivered. Such reporting must include the following:
    (A) For each sound recording, the same categories of information 
described in paragraph (m)(3)(ii) of this section.
    (B) For each date, an identification of which type of date it is 
(i.e., server fixation date, street date, or estimated first 
distribution date).
    (ii) A blanket licensee must deliver the information described in 
paragraph (m)(3)(ii) of this section to the mechanical licensing 
collective as soon as commercially reasonable, and no later than 
contemporaneously with its first reporting under paragraph (m)(4)(i) of 
this section.
    (iii) Prior to being delivered to the mechanical licensing 
collective, the collective or its agent shall be entitled to reasonable 
access to the information kept and retained pursuant to paragraphs 
(m)(4)(i) and (ii) of this section if needed in connection with 
applicable directions, instructions, or orders concerning the 
distribution of royalties.
    (5) Nothing in paragraph (m)(3) or (4) of this section, nor the 
collection, maintenance, or delivery of information under paragraphs 
(m)(3) and (4) of this section, nor the information itself, shall be 
interpreted or construed:
    (i) To alter, limit, or diminish in any way the ability of an 
author or any other person entitled to exercise rights of termination 
under section 203 or 304 of title 17 of the United States Code from 
fully exercising or benefiting from such rights;
    (ii) As determinative of the date of the license grant with respect 
to works as it pertains to sections 203 and 304 of title 17 of the 
United States Code; or
    (iii) To affect in any way the scope or effectiveness of the 
exercise of termination rights, including as pertaining to derivative 
works, under section 203 or 304 of title 17 of the United States Code.
    (n) Voluntary agreements with mechanical licensing collective to 
alter process. (1) Subject to the provisions of 17 U.S.C. 115, a 
blanket licensee and the mechanical licensing collective may agree in 
writing 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. This 
paragraph (n)(1) does not empower the mechanical licensing collective 
to agree to alter any substantive requirements described in this 
section, including but not limited to the required royalty payment and 
accounting information and sound recording and musical work 
information.
    (2) The mechanical licensing collective shall maintain a current, 
free, and publicly accessible online list of all agreements made 
pursuant to paragraph (n)(1) of this section that includes the name of 
the blanket licensee (and, if different, the trade or consumer-facing 
brand name(s) of the services(s), including any specific offering(s), 
through which the blanket licensee engages in covered activities) and 
the start and end dates of the agreement. Any such agreement shall be 
considered a record that a copyright owner may access in accordance 
with 17 U.S.C. 115(d)(3)(M)(ii). Where an agreement made pursuant to 
paragraph (n)(1) of this section is made pursuant to an agreement to 
administer a voluntary license or any other agreement, only those 
portions that vary or supplement the procedures described in this 
section and that pertain to the administration of a requesting 
copyright owner's musical works must be made available to that 
copyright owner.


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 
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

[[Page 58156]]

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 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) Actual playing time measured from the sound recording audio 
file; 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:
    (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:
    (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, subsidiary, or affiliate of the significant nonblanket 
licensee, is a copyright owner of the musical work embodied in the 
sound recording.
    (2) Where any of the information called for by paragraph (e)(1) of 
this section, except for playing time, 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 
modifies such information (which, for avoidance of doubt, does not 
include the act of filling in or supplementing empty or blank data 
fields, to the extent such information is known to the licensee), the 
significant nonblanket licensee shall report as follows:
    (i) It shall be sufficient for the significant nonblanket licensee 
to report either the licensor-provided version or the modified version 
of such information to satisfy its obligations under paragraph (e)(1) 
of this section, except that it shall not be sufficient for the 
significant nonblanket licensee to report a modified version of any 
information belonging to a category of information that was not 
periodically modified by that significant nonblanket licensee prior to 
the license availability date, any unique identifier (including but not 
limited to ISRC and ISWC), or any release date.
    (ii) Where the significant nonblanket licensee must otherwise 
report the licensor-provided version of such information under 
paragraph (e)(2)(i) of this section, but to the best of its knowledge, 
information, and belief no longer has possession, custody, or control 
of the licensor-provided version, reporting the modified version of 
such information will satisfy its obligations under paragraph (e)(1) of 
this section if the significant nonblanket licensee certifies to the 
mechanical licensing collective that to the best of the significant 
nonblanket licensee's knowledge, information, and belief: The 
information at issue belongs to a category of information called for by 
paragraph (e)(1) of this section (each of which must be identified) 
that was periodically modified by the particular significant nonblanket 
licensee prior to October 19, 2020; and that despite engaging in good-
faith, commercially reasonable efforts, the significant nonblanket 
licensee has not located the licensor-provided version in its records. 
A certification need not identify specific sound recordings or musical 
works, and a single certification may encompass all licensor-provided 
information satisfying the conditions of the preceding sentence. The 
significant nonblanket licensee should deliver this certification prior 
to or contemporaneously with the first-delivered report of usage 
containing information to which this paragraph (e)(2)(ii) is applicable 
and need not provide the same certification to the mechanical licensing 
collective more than once.
    (3) 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: 
LabelName and PLine. Where a significant nonblanket licensee acquires 
this information in addition to other information identifying a 
relevant sound recording copyright owner, all such information should 
be reported.
    (4) A significant nonblanket licensee may make use of a transition 
period ending September 17, 2021, during which the significant 
nonblanket licensee need not report information that would otherwise be 
required by paragraph (e)(1)(i)(E) or (e)(1)(ii) of this section, 
unless:

[[Page 58157]]

    (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) 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
    (iii) 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, the mechanical 
licensing collective shall follow the consultation process as under 
Sec.  210.27(h), and 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. Nothing in this paragraph (g)(1) empowers the mechanical 
licensing collective to impose reporting requirements that are 
otherwise inconsistent with the regulations prescribed by this section.
    (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) the occurrence of which the significant 
nonblanket licensee knew or should have known at the time, 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). In 
the event of a good-faith dispute regarding whether a significant 
nonblanket licensee knew or should have known of the occurrence of an 
error, outage, disruption, or other issue with any of the mechanical 
licensing collective's applicable information technology systems, 
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) as long as the significant nonblanket licensee complies 
with the requirements of this paragraph (g)(3) within a reasonable 
period of time.
    (4) The mechanical licensing collective shall provide a significant 
nonblanket licensee with written confirmation of receipt no later than 
2 business days after receiving a report of usage.
    (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 (A) the processes generated 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, and (B) the internal controls relevant 
to the processes used by or on behalf of the significant nonblanket 
licensee to generate monthly reports of usage were suitably designed 
and operated effectively during the period covered by the monthly 
reports of usage.

    (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.

[[Page 58158]]

    (j) Clear statements. The information required by this section 
requires intelligible, legible, and unambiguous statements in the 
reports of usage, without incorporation 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.
    (l) Voluntary agreements with mechanical licensing collective to 
alter process. (1) Subject to the provisions of 17 U.S.C. 115, a 
significant nonblanket licensee and the mechanical licensing collective 
may agree in writing 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. This paragraph (l)(1) does not empower the mechanical 
licensing collective to agree to alter any substantive requirements 
described in this section, including but not limited to the required 
royalty payment and accounting information and sound recording and 
musical work information.
    (2) The mechanical licensing collective shall maintain a current, 
free, and publicly accessible online list of all agreements made 
pursuant to paragraph (l)(1) of this section that includes the name of 
the significant nonblanket licensee (and, if different, the trade or 
consumer-facing brand name(s) of the services(s), including any 
specific offering(s), through which the significant nonblanket licensee 
engages in covered activities) and the start and end dates of the 
agreement. Any such agreement shall be considered a record that a 
copyright owner may access in accordance with 17 U.S.C. 
115(d)(3)(M)(ii). Where an agreement made pursuant to paragraph (l)(1) 
of this section is made pursuant to an agreement to administer a 
voluntary license or any other agreement, only those portions that vary 
or supplement the procedures described in this section and that pertain 
to the administration of a requesting copyright owner's musical works 
must be made available to that copyright owner.

    Dated: September 3, 2020.
Maria Strong,
Acting Register of Copyrights and Director of the U.S. Copyright 
Office.

    Approved by:

Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2020-20077 Filed 9-16-20; 8:45 am]
BILLING CODE 1410-30-P