Music Modernization Act Transition Period Transfer and Reporting of Royalties to the Mechanical Licensing Collective: Request for Additional Comments, 70544-70551 [2020-24528]

Download as PDF 70544 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules Dated: October 22, 2020. Vanessa A. Countryman, Secretary. Issued in Washington, DC, on October 23, 2020, by the Commodity Futures Trading Commission. Christopher Kirkpatrick, Secretary of the Commission. Note: The following appendices will not appear in the Code of Federal Regulations. Appendices to Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants—CFTC Voting Summary and Commissioner’s Statement On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative. Appendix 2—Supporting Statement of CFTC Commissioner Brian Quintenz khammond on DSKJM1Z7X2PROD with PROPOSALS I am proud to support today’s request for comment, which marks the beginning of the agencies’ consideration of ways to implement a portfolio margining regime for uncleared swaps and non-cleared security-based swaps. Portfolio margining can lead to efficiencies in margin calculation by appropriately accounting for the impact offsetting positions have on a portfolio’s actual risk profile. This, in turn, gives firms and customers additional capital that can be deployed elsewhere. However, given the differences between the regulatory regimes for swaps and securitybased swaps, it also implicates incredibly important legal and policy considerations. This request for comment solicits critical feedback from market participants on how portfolio margining could impact the safety and soundness of firms, result in competitive advantages for certain types of registrants, and raise questions about how collateral would be treated in the event of bankruptcy. In order to make an informed decision about if, and how, portfolio margining should be implemented for uncleared swaps and noncleared security-based swaps, we need thoughtful feedback on these complex questions. I encourage all interested parties to provide written comments, including data wherever possible, in order to further the agencies’ understanding of the various options presented in the request for comment. BILLING CODE 6351–01–P VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 U.S. Copyright Office 37 CFR Part 210 [Docket No. 2020–12] Music Modernization Act Transition Period Transfer and Reporting of Royalties to the Mechanical Licensing Collective: Request for Additional Comments U.S. Copyright Office, Library of Congress. ACTION: Supplemental notice of proposed rulemaking. AGENCY: This supplemental notice of proposed rulemaking (‘‘SNPRM’’) updates the Copyright Office’s July 17, 2020 proposed rule concerning the Music Modernization Act transition period transfer and reporting of royalties to the mechanical licensing collective. Specifically, this SNPRM provides an alternate approach to requirements concerning the content of cumulative statements of account to be submitted by digital music providers to the mechanical licensing collective at the conclusion of the statutory transition period and proposes estimate and adjustment provisions with respect to payment of accrued royalties to the mechanical licensing collective in connection with this reporting. DATES: Written comments must be received no later than 11:59 p.m. Eastern Time on November 25, 2020. ADDRESSES: For reasons of government efficiency, the Copyright Office is using the regulations.gov system for the submission and posting of public comments in this proceeding. All comments are therefore to be submitted electronically through regulations.gov. Specific instructions for submitting comments are available on the Copyright Office’s website at https:// www.copyright.gov/rulemaking/mmatransition-reporting. If electronic submission of comments is not feasible due to lack of access to a computer and/ or the internet, please contact the Office using the contact information below for special instructions. FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and Associate Register of Copyrights, by email at regans@copyright.gov, John R. Riley, Assistant General Counsel, by email at jril@copyright.gov, or Jason E. Sloan, Assistant General Counsel, by email at jslo@copyright.gov. Each can be contacted by telephone by calling (202) 707–8350. SUPPLEMENTARY INFORMATION: SUMMARY: Appendix 1—CFTC Voting Summary [FR Doc. 2020–23928 Filed 11–4–20; 8:45 am] LIBRARY OF CONGRESS PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 I. Background This SNPRM is issued subsequent to a notification of inquiry published in the Federal Register on September 24, 2019 and a notice of proposed rulemaking (‘‘NPRM’’) published on July 17, 2020 relating to implementation of the Music Modernization Act (‘‘MMA’’).1 In its NPRM, the Office proposed regulations pertaining to cumulative statements of account, which digital music providers (‘‘DMPs’’) are required to provide to the mechanical licensing collective (‘‘MLC’’) for such DMPs to be eligible for the statutory limitation on liability for unlicensed uses of musical works prior to the license availability date.2 This SNPRM generally assumes familiarity with the prior NPRM and notification of inquiry, as well as the public comments and summaries of ex parte meetings received in response to those documents, all of which are publicly accessible from the Copyright Office’s website.3 As relevant here, the NPRM considered whether to propose regulations with respect to the ability of DMPs to rely upon estimates and subsequently adjust their cumulative statements of account. The NPRM tentatively declined to propose broad language given the ‘‘one-time nature’’ of cumulative statements of account, but did propose that DMPs could estimate applicable performance royalties, and that ‘‘any overpayment (whether resulting from an estimate or otherwise) should be credited to the DMP’s account, or refunded upon request.’’ 4 1 85 FR 43517 (July 17, 2020); 84 FR 49966 (Sept. 24, 2019). All rulemaking activity, including public comments, as well as legislative history and educational material regarding the Music Modernization Act, can currently be accessed via navigation from https://www.copyright.gov/musicmodernization/. Comments received in response to the September 2019 notification of inquiry are available at https://www.regulations.gov/ docketBrowser?rpp=25&po=0&dct=PS&D=COLC2019-0002&refD=COLC-2019-0002-0001. Comments received in response to the July 2020 notice of proposed rulemaking are available at https:// beta.regulations.gov/document/COLC-2020-00110001/comment. Related ex parte letters are available at https://www.copyright.gov/rulemaking/ mma-implementation/ex-partecommunications.html. References to these comments and letters are by party name (abbreviated where appropriate), followed by ‘‘Initial Comment,’’ ‘‘Reply Comment,’’ ‘‘NPRM Comment,’’ or ‘‘Ex Parte Letter’’ as appropriate. 2 See 17 U.S.C. 115(d)(10). 3 Guidelines for ex parte communications, along with records of such communications, are available at https://www.copyright.gov/rulemaking/mmaimplementation/ex-parte-communications.html. As stated in the guidelines, ex parte meetings with the Office are intended to provide an opportunity for participants to clarify evidence and/or arguments made in prior written submissions, and to respond to questions from the Office on those matters. 4 85 FR at 43520. E:\FR\FM\05NOP1.SGM 05NOP1 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS The NPRM also considered comments from the Digital Licensee Coordinator (‘‘DLC’’) asking for regulatory language to clarify the relationship between this reporting obligation and pre-existing private agreements between a large number of music publishers and certain digital services that the DLC characterized as providing for the liquidation of accrued royalties for unmatched works through payments based on market share to publishers signing releases.5 At the time, the Office tentatively declined to propose regulatory language. Instead, the Office provided initial guidance regarding the statutory obligation to transfer and report information related to accrued royalties for unlicensed uses under the MMA and noted that it remained available to dialogue further.6 In response to a request from the MLC, the NPRM also proposed expanding the present cumulative statement of account regulations, which require providing ‘‘all of the information that would have been provided to the copyright owner had the digital music provider been serving Monthly Statements of Account,’’ 7 to requirements for reporting information that would ‘‘largely mirror the requirements proposed for reports of usage.’’ 8 While the DLC initially contended that such a proposal was ‘‘impractical,’’ 9 it now describes such a requirement as ‘‘impossible’’ given the business practicalities of how this information was or was not compiled and stored over time.10 Similarly, the Digital Media Association (‘‘DiMA’’) stated that the NPRM’s expanded reporting requirements would create ‘‘massive operational hurdles’’ and would ‘‘jeopardize[ ] every [DMP’s] 5 Id. at 43522–23; see also DLC Ex Parte Letter at 1 (Aug. 11, 2020); NMPA Ex Parte Letter at 5 (Aug. 25, 2020). 6 85 FR at 43523 (noting that because ‘‘voluntary licenses’’ ‘‘remain in effect’’ by law, ‘‘by implication, DMPs would not retain accrued royalties (as defined in the MMA) for works licensed under private agreements’’). 7 37 CFR 210.10(b)(3)(i); see also 17 U.S.C. 115(d)(10)(B)(iv)(III)(aa). 8 85 FR at 43519. 9 DLC Reply Comment at 24. 10 DLC NPRM Comment at 2, 8–9 (explaining that some of the additional information was not collected by DMPs in the past and cannot be collected in time to include in cumulative statements of account); DLC Ex Parte Letter at 2 (Aug. 11, 2020) (‘‘[S]ervices have been compiling reporting under the regulatory regime that the Office put in place shortly after the enactment of the MMA. We explained the impossibility—mere months before license availability date—of completely revamping royalty accounting systems to accommodate the Office’s new proposed rules.’’). VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 70545 eligibility for the limitation on liability.’’ 11 copyright owners by market share, stating: II. Supplemental Proposed Regulatory Provisions Since the intent of the MMA was to provide legal certainty for past, present, and future usage, it is critical that this issue be resolved in a manner that protects copyright owner interests while ensuring that songwriters are paid their splits and services are not burdened with double payments. . . . If the parties are unable to address this current dispute on their own in the immediate future, I urge the Copyright Office to bring them together in order to prevent a return to the inefficient litigation that featured prominently in the prior licensing regime.15 As discussed further below, while the Copyright Office continues to consider the proposed rule described in the NPRM, it is now also providing alternative regulatory language for public comment. As with other MMA rulemakings to date, the Office has received robust engagement from interested parties in this proceeding, as reflected in the administrative record.12 Since issuing its NPRM, the Office has reviewed many written comments and conducted several ex parte meetings with various parties on these matters, which have further informed its thinking.13 In addition, the D.C. Circuit partially vacated and remanded the Copyright Royalty Judges’ ‘‘Phonorecords III’’ determination, which was intended to set rates and terms for the section 115 mechanical license for the period from January 1, 2018 through December 31, 2022,14 which provides an additional ground for the Office to establish a mechanism for DMPs to estimate the amount of royalties due and subsequently adjust payments (since the ultimate rates for this time period have not yet been finalized). The Office also received guidance from Senate Judiciary Chairman Graham regarding the issue of certain industry agreements between publishers and DMPs that predate the MMA’s enactment and required the payment of unmatched accrued royalties to 11 DiMA NPRM Comment at 6–7 (‘‘digital music providers have maintained usage information . . . with the existing statement of account regulations in mind’’). 12 See 85 FR at 43523 (‘‘The Office . . . remains available to dialogue further, in accordance with the public process for written comments and/or ex parte meetings.’’); 84 FR at 49968 (noting that the Office is willing to ‘‘utilize informal meetings to gather additional information . . . [and would] establish[ ] guidelines for ex parte communications’’ to be issued on its website). 13 See, e.g., DiMA NPRM Comment at 2–5; DLC NPRM Comment at 3–6, 11–18; MLC NPRM Comment at 8–9; Songwriters Guild of America & Society of Composers and Lyricists NPRM Comment at 3–8; Artist Rights Alliance Ex Parte Letter at 2–3 (Sept. 22, 2020); DLC Ex Parte Letter at 1 (Aug. 11, 2020); DLC Ex Parte Letter at 1–3 (Oct. 14, 2020); NMPA Ex Parte Letter at 1–2 (Aug. 25, 2020); MediaNet Ex Parte Letter at 2 (Oct. 28, 2020); MLC Ex Parte Letter at 2–6 (Oct. 5, 2020); MLC Ex Parte Letter at 2–5 (Oct. 16, 2020); Songwriters Guild of America et al. Ex Parte Letter at 1–2 (Sept. 14, 2020); Sony/ATV Music Pub. Ex Parte Letter at 1–2 (Oct. 28, 2020); Spotify Ex Parte Letter at 1 (Sept. 1, 2020); Spotify Ex Parte Letter at 1–5 (Oct. 9, 2020); Warner Music Grp. Ex Parte Letter at 1 (Oct. 21, 2020). 14 Johnson v. Copyright Royalty Bd., 969 F.3d 363, 381 (D.C. Cir. 2020). PO 00000 Frm 00044 Fmt 4702 Sfmt 4702 Since receiving the letter, the Office understands that the parties have continued to communicate on other aspects of the proposed rule, but have not on their own resolved their disagreement over the proper interpretation of the relevant statutory provisions. Indeed, subsequent information provided to the Office in this proceeding confirms that the underlying dispute remains. Specifically, the DLC has clarified that its reference to prior negotiated agreements centers around agreements between four specific DMPs and the National Music Publishers’ Association (‘‘NMPA’’) (and subsequent agreements with participating publishers), and both the DLC and individual DMPs have provided additional views regarding those agreements.16 The Office also heard from multiple songwriter groups, all of which stressed the importance of royalties for uses of works being paid over by DMPs in a manner that results in payments to songwriters, and expressed uncertainty over whether payments under such agreements had indeed been passed through to songwriters.17 The MLC confirmed that it believes its role to be a ‘‘trusted party to receive unmatched royalties and ensure that they are paid to the right parties, with interest (for the period that 15 Letter from Senator Lindsey O. Graham, Chairman, Senate Committee on the Judiciary, to U.S. Copyright Office 1 (Sept. 30, 2020). 16 DLC NPRM Comment at 12–14; DLC Initial Comment at 3–4 n.11, U.S. Copyright Office Dkt. No. 2019–6, https://beta.regulations.gov/comment/ COLC-2020-0007-0012 (citing Paul Resnikoff, Exclusive: This Is the Contract Songwriters Are Signing With Spotify, Digital Music News (Apr. 27, 2016), https://www.digitalmusicnews.com/2016/04/ 27/exclusive-spotify-establishing-direct-publishercontracts-to-solve-mechanicals-issues/); DLC Ex Parte Letter at 1–2 (Oct. 14, 2020); Google Ex Parte Letter at 1–3 (Oct. 23, 2020); MediaNet Ex Parte Letter at 2 (Oct. 28, 2020); Spotify Ex Parte Letter at 1–3, 5 (Oct. 9, 2020); see also NMPA Ex Parte Letter at 1–2 (Aug. 25, 2020). 17 See Artist Rights Alliance et al. Ex Parte Letter (Sept. 22, 2020); Songwriters Guild of America et al. Ex Parte Letter (Sept. 15, 2020). E:\FR\FM\05NOP1.SGM 05NOP1 70546 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules the MLC held such royalties).’’ 18 The MLC also offered its view that the proper statutory read would require DMPs to transfer payment for all unmatched uses, regardless of whether a valid agreement previously resulted in the liquidation of a portion of associated royalties or whether there have been related voluntary releases.19 The Office has also heard from the NMPA as well as individual publishers on this issue, with the NMPA urging the Office to avoid a regulation that might interfere with private agreements.20 While publisher perspectives varied, significantly, some noted that they consider claims settled pursuant to these agreements to be closed, and to date, all publishers the Office has heard from confirmed that their associated songwriters have already participated in unclaimed royalties received by those publishers pursuant to the agreements at issue.21 Overall, the comments, in particular as between the MLC on the one hand, and the DLC or individual services, on the other, reveal competing statutory interpretations regarding the provision requiring DMPs to transfer over accrued royalties that have been maintained in accordance with generally accepted accounting principles.22 For its part, the Office is carefully analyzing the statutory text and will give appropriate weight to the legislative history and consideration of these public comments when promulgating a final rule. At this point, however, the Office has determined that the public process would benefit from providing supplemental, alternative regulatory language, to ensure that further stakeholder views can be duly considered as the Office evaluates these important issues. Although the Office has not made any final conclusions on these matters, this SNPRM is being issued so that interested parties have adequate notice and an opportunity to comment specifically on these potential alternatives sufficiently in advance of 18 MLC Ex Parte Letter at 5 (Oct. 5, 2020). NPRM Comment at 8; MLC Ex Parte Letter at 5 (Oct. 5, 2020); MLC Ex Parte Letter at 2–4 (Oct. 16, 2020). 20 See NMPA Ex Parte Letter (Aug. 25, 2020). 21 Sony/ATV Music Pub. Ex Parte Letter at 1–2 (Oct. 28, 2020) (noting that ‘‘distribution of unmatched funds, whether title bound or not, are always paid through to [Sony/ATV’s] songwriters’’); Warner Music Grp. Ex Parte Letter at 1 (Oct. 21, 2020) (noting that songwriters were paid portions of royalties received by publishers pursuant to preenactment agreements with certain DMPs that liquidated unclaimed royalties). 22 See DLC NPRM Comment at 16–18; MLC Reply Comment at 28–30; Spotify Ex Parte Letter at 3–4 (Oct. 9, 2020); MLC Ex Parte Letter at 2–4 (Oct. 5, 2020); MLC Ex Parte Letter at 2–4 (Oct. 16, 2020); see also 17 U.S.C. 115(d)(10)(B)(iv). khammond on DSKJM1Z7X2PROD with PROPOSALS 19 MLC VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 the February 2021 deadline to submit cumulative statements of account to the MLC. While the NPRM outlined in detail several considerations with respect to these and other issues, and while the Office continues to seriously consider the insightful comments it has received to date, in light of those comments, Chairman Graham’s letter, and the Phonorecords III remand, the Office now provides regulatory language regarding the following topics.23 This regulatory language is largely additive to the language proposed in the NPRM, and also includes potential substitutes for certain provisions included in the NPRM. Interested commenters may wish to review that earlier NPRM and the public comments received to date offering varying perspectives on factual and legal issues underlying this proposal. Estimates and adjustments, including previously released claims. The Office is providing proposed provisions that would allow DMPs to rely upon certain estimates and subsequently submit adjustments to cumulative statements of account where the computation of accrued royalties depends upon an input that is unable to be finally determined at the time the cumulative statement of account is due. One set of estimate and adjustment provisions would address situations where a DMP cannot calculate a necessary input in a royalty calculation (e.g., performance royalties, sound recording-related consideration) or needs to make a future adjustment under other specified circumstances (e.g., in response to a change in the statutory royalty rates or terms). Statements of adjustment adjusting cumulative statements of account would be required to detail the changes to facilitate accurate reporting. The Office understands that both the DLC and MLC now generally support this type of rule.24 Related provisions would address situations where a DMP has accrued and maintained royalties in reasonable goodfaith belief as to the impact of negotiated agreements upon the 23 See 17 U.S.C. 115(d)(12)(A), 702. The Copyright Office considers this additional proposed regulatory language to be a logical outgrowth of the NPRM, including comments received from a wide variety of ex parte meeting participants. Nevertheless, to ensure that all interested parties have fair notice and an opportunity to participate in the rulemaking with respect to these issues in a meaningful and informed manner, the Office is inviting further written comments on these issues. See 5 U.S.C. 553(b)(3); Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 174 (2007). 24 DLC NPRM Comment at 5–6; MLC Ex Parte Letter at 2 (Oct. 5, 2020). PO 00000 Frm 00045 Fmt 4702 Sfmt 4702 computation of accrued royalties required to be transferred to the MLC and it is necessary to estimate such amount at the time the cumulative statement of account is delivered to the MLC because of the unmatched status of the relevant musical works. They would clarify that the statutory obligation to maintain accrued royalties in accordance with generally accepted accounting principles includes maintenance in accordance with such principles concerning derecognition of liabilities.25 They would accordingly accommodate situations where a DMP has made good-faith estimates where the DMP has used unmatched works in covered activities prior to the license availability date and the DMP has determined that accrued liability for an amount of otherwise attributable royalties has been extinguished due to negotiated agreements (whether considered a voluntary agreement, liquidation agreement, settlement, or release, etc.) executed on a catalog or participating party basis, rather than a matched-work basis.26 In such a circumstance, the DMP could report based upon its good-faith estimate of accrued royalties for unmatched uses when reporting to the MLC, and would be required to make an adjustment to retain the limitation on liability if that estimate ends up being incorrect. Under no circumstances could this provision be used to shortchange payment of accrued royalties for musical work copyright owners who did not 25 See Accounting Standards Codification 405– 20–40–1 (stating a debtor ‘‘shall derecognize a liability if and only if it has been extinguished. A liability has been extinguished if either of the following conditions is met: a. The debtor pays the creditor and is relieved of its obligation for the liability[, or] b. The debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor.’’); see also Black’s Law Dictionary (11th ed. 2019) (defining ‘‘accrued liability’’ as ‘‘[a] debt or obligation that is properly chargeable in a given accounting period but that is not yet paid’’). 26 Again, it has been represented to the Office that for certain DMPs, for certain periods of time, the overwhelming majority of the music publishing industry participated in such agreements and has settled relevant claims for those periods. This proposed mechanism is intended to allow DMPs who believe that these agreements impact the calculation of their accrued royalties to transfer over their reasonable estimation of accrued royalties remaining, including royalties accrued for nonparticipating publishers during the relevant periods, subject to a later true-up to maintain eligibility for the limitation on liability. In this regard and without opining on the substance of these private agreements, the proposal is intended to further congressional intent to ‘‘protect[ ] copyright owner interests’’ without burdening services with ‘‘double payments,’’ and avoid incentivizing inefficient litigation. Letter from Senator Lindsey O. Graham, Chairman, Senate Committee on the Judiciary, to U.S. Copyright Office 1 (Sept. 30, 2020). E:\FR\FM\05NOP1.SGM 05NOP1 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules participate in such agreements. A DMP relying upon such an estimate would be required to provide a list of such agreements to the MLC to use in connection with matching against musical work information provided by copyright owners and to provide an avenue for copyright owners to dispute the fact or effect of such agreements. As the DLC has requested, the proposal includes a requirement for such a DMP to cover any deficit through prompt payment of an invoice issued by the MLC.27 Under the proposed rule, unreasonable or bad-faith withholding of accrued royalties by a DMP may result in loss of the limitation on liability. Sound Recording and Musical Work Information and Format. In addition to continuing to consider the requirements proposed in the NPRM, the Copyright Office is now considering whether to instead potentially adopt language closer to existing regulations for reporting sound recording and musical work information,28 to reflect the DLC’s comments and incentivize optional participation in this transition period reporting for cumulative statements of account.29 To ensure the MLC receives additional information potentially valuable to reduce the amount of unmatched uses, the Office, however, also proposes adding a requirement that DMPs report information referenced in 17 U.S.C. 115(d)(10)(B)(i)(I)(aa) or (bb) that was acquired by the DMP in connection with its efforts to obtain such information under 17 U.S.C. 115(d)(10)(B)(i)(I), or a DMP-assigned identifier, if such information is requested by the MLC. The Office proposes that the requirement to provide a DMP identifier, at a separate time from the February 2021 deadline to submit a cumulative statement of account, may aid the MLC by providing a unique identifier that can easily link up with the robust usage data the MLC will be receiving on an ongoing basis in monthly reporting for blanket uses. The Office requests comments on the feasibility and adequacy of this proposal, including whether there are additional categories of information that DMPs should be required to provide, khammond on DSKJM1Z7X2PROD with PROPOSALS 27 See DLC NPRM Comment at 16. The Office understands the DMPs believe that their estimates err on the side of overpayment. Nonetheless, to ensure prompt payment, the Office notices a rule requiring ‘‘true-up’’ of underpayments within 14 business days of being invoiced, rather than the 45 days proposed by the DLC. Cf. 17 U.S.C. 512(g)(2)(C) (setting out 14-day deadline for copyright owners to institute court action). 28 See Long Island Care at Home, Ltd., 551 U.S. at 175 (suggesting that it is ‘‘reasonably foreseeable’’ that an agency may withdraw a proposed rule). 29 See DLC NPRM Comment at 2, 7–10. VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 and whether establishing set time periods by which a DMP is obligated to submit such supplementary information may be preferable to the request-based format of the proposed provision. The Office further seeks comment on other methods to facilitate supplemental reporting, such as bifurcating the timing required for reporting each of the fields proposed in the July NPRM but otherwise retaining that proposed structure; parties advocating an alternate approach are encouraged to submit proposed regulatory language to that effect in their comments. In providing such language to ensure ample opportunity for public input, the Office does not wish to discourage continued dialogue between the MLC and DLC as to this aspect of the reporting regulations, as well as submission of any joint proposals that may result from discussions. Additionally, MediaNet recently voiced its concern with being able to report its pre-2013 royalty and usage data in cumulative statements of account, stating that such data is not in its possession and may not have been maintained by its former vendors.30 Noting that it is one of the oldest digital services, it asked for a regulatory exemption to address these concerns.31 Given the timing of MediaNet’s request, the Office is not proposing its own regulatory language, but requests comments on MediaNet’s proposal. The SNPRM also proposes imposing a records of use provision on DMPs, and allowing the MLC and a DMP flexibility to agree to alter non-substantive procedures, for example reporting formats, provided that any such alteration does not materially prejudice copyright owners owed royalties required to be transferred to the MLC or for the DMP’s eligibility for the 17 U.S.C. 115(d)(10) limitation on liability. The SNPRM further proposes a modified version of the provision concerning partially matched works. In addition, at the DLC’s request, the SNPRM proposes that if a DMP is unable to report cumulative statements of account in the MLC’s preferred 30 MediaNet Ex Parte Letter at 2–3 (Oct. 28, 2020). MediaNet proposes a new 37 CFR 210.20(c)(4)(iii) of the proposed rule: ‘‘The digital music provider shall be excused from providing the information set forth in paragraphs (i) and (ii) where the usage is from a period of time more than five years prior to license availability date, and the digital music provider certifies the following: that the information was solely held by a vendor with whom the digital music provider no longer has a business relationship, the digital music provider has requested that information from such vendor, and the vendor has informed the digital music provider that it cannot or will not provide that information.’’ Id. at 3 (Oct. 28, 2020). 31 Id. PO 00000 Frm 00046 Fmt 4702 Sfmt 4702 70547 formats, a DMP may report in an alternative format, but must always report in a flat-file or other machinereadable format (e.g., Excel, commaseparated values (CSV)) if the data exists in such format.32 The Office invites comments on this subject, including joint comments as appropriate. Finally, the Office invites comments on whether to adopt a harmless error provision, similar to the provision adopted for reporting by significant nonblanket licensees.33 III. Additional Comments and Timing While the Copyright Office is interested in comments regarding the above issues, it welcomes public comment on all aspects of the NPRM and submitted comments, including comments contained in ex parte meeting summary letters. In light of the statutory deadline related to the submission of cumulative statements of account, the Office is providing twenty days’ notice for comment on this issue, and will continue to be available for ex parte meetings with attendant disclosures concurrently with the comment submission period. List of Subjects in 37 CFR Part 210 Copyright, Phonorecords, Recordings. Proposed Regulations For the reasons set forth in the preamble, the Copyright Office proposes amending 37 CFR part 210 as follows: PART 210—COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS 1. The authority citation for part 210 continues to read as follows: ■ Authority: 17 U.S.C. 115, 702. 2. Amend § 210.2 by revising paragraph (k) and removing paragraphs (l) through (o) to read as follows: ■ § 210.2 Definitions. * * * * * (k) Any terms not otherwise defined in this section shall have the meanings set forth in 17 U.S.C. 115(e). ■ 3. Amend § 210.10 by revising paragraphs (b) introductory text, (b)(1), (b)(2) introductory text, and (b)(3)(i) and 32 Id. at 10, 23; DLC Ex Parte Letter at 3 (Aug. 27, 2020). 33 See 37 CFR 210.28(k); see also id. at § 210.9 (pre-MMA harmless error rule pertaining to Monthly and Annual Statements of Account). No harmless error provision was adopted for blanket licensee reports of usage in light of the statutory default provision, which requires reporting to be ‘‘materially deficient.’’ See 17 U.S.C. 115(d)(4)(E)(i)(III). E:\FR\FM\05NOP1.SGM 05NOP1 70548 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules adding paragraphs (c) through (m) to read as follows: § 210.10 Statements required for limitation on liability for digital music providers for the transition period prior to the license availability date. khammond on DSKJM1Z7X2PROD with PROPOSALS * * * * * (b) If the copyright owner is not identified or located by the end of the calendar month in which the digital music provider first makes use of the work, the digital music provider shall accrue and hold royalties calculated under the applicable statutory rate in accordance with usage of the work, from initial use of the work until the accrued royalties can be paid to the copyright owner or are required to be transferred to the mechanical licensing collective, as follows: (1) Accrued royalties shall be maintained by the digital music provider in accordance with generally accepted accounting principles, including those concerning derecognition of liabilities. Accrued royalties can cease being accrued royalties within the meaning of 17 U.S.C. 115(e)(2) if the digital music provider’s payment obligation is extinguished, such as pursuant to a voluntary license or other agreement whereby the digital music provider is legally released from the liability by the relevant creditor copyright owner. (2) If a copyright owner of an unmatched musical work (or share thereof) is identified and located by or to the digital music provider before the license availability date, the digital music provider shall, unless a voluntary license or other relevant agreement entered into prior to the time period specified in paragraph (b)(2)(i) of this section applies to such musical work (or share thereof)— * * * * * (3) * * * (i) Not later than 45 calendar days after the license availability date, transfer accrued royalties to the mechanical licensing collective (as required by paragraph (i)(2) of this section), such payment to be accompanied by a cumulative statement of account that: (A) Includes all of the information required by paragraphs (c) through (e) of this section covering the period starting from initial use of the work; (B) Is delivered to the mechanical licensing collective as required by paragraph (i)(1) of this section; and (C) Is certified as required by paragraph (j) of this section; and * * * * * (c) Each cumulative statement of account delivered to the mechanical VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 licensing collective under paragraph (b)(3)(i) of this section shall be clearly and prominently identified as a ‘‘Cumulative Statement of Account for Making and Distributing Phonorecords,’’ and shall include a clear statement of the following information: (1) The period (months and years) covered by the cumulative statement of account. (2) 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 engages, or has engaged at any time during the period identified in paragraph (c)(1) of this section, in covered activities. If the digital music provider 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 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. (4) For each sound recording embodying a musical work that is used by the digital music provider in covered activities during the period identified in paragraph (c)(1) of this section and for which a copyright owner of such musical work (or share thereof) is not identified and located by the license availability date, a detailed cumulative statement, from which the mechanical licensing collective may separate reported information for each month and year 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) The total accrued royalty payable by the digital music provider for the period identified in paragraph (c)(1) of this section, 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 accrued royalty payable broken down by month and year and by each applicable activity or offering including as may be defined in part 385 of this title. (i) Where a digital music provider has a reasonable good-faith belief that the total accrued royalties payable are less than the total of the amounts reported under paragraph (c)(4)(i) of this section, and the precise amount of such accrued royalties cannot be calculated at the PO 00000 Frm 00047 Fmt 4702 Sfmt 4702 time the cumulative statement of account is delivered to the mechanical licensing collective because of the unmatched status of relevant musical works embodied in sound recordings reported under paragraph (c)(4)(ii) of this section, a reasonable estimation of the total accrued royalties may be reported and transferred, determined in accordance with GAAP and broken down by month and year and by each applicable activity or offering including as may be defined in part 385 of this title. Any such estimate shall be made in good faith and on the basis of the best knowledge, information, and belief of the digital music provider at the time the cumulative statement of account is delivered to the mechanical licensing collective, and subject to any additional accounting and certification requirements under 17 U.S.C. 115 and this section. In no case shall the failure to match a musical work by the license availability date be construed as prohibiting or limiting a digital music provider’s entitlement to use such an estimate if the digital music provider has satisfied its obligations under 17 U.S.C. 115(d)(10)(B) to engage in required matching efforts. (ii) A digital music provider reporting and transferring estimated accrued royalties must provide a description of any voluntary license or other agreement containing an appropriate release of royalty claims relied upon by the digital music provider in making its estimation that is sufficient for the mechanical licensing collective to engage in efforts to confirm uses of musical works subject to any such agreement. Such description shall be sufficient if it includes at least the following information: (A) 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, relevant to any such agreement. If such an agreement pertains to all of the digital music provider’s applicable services, it may state so without identifying each service. (B) The start and end dates of each covered period of time. (C) Each applicable musical work copyright owner, identified by name and any known and appropriate unique identifiers, and appropriate contact information for each such musical work copyright owner or for an administrator or other representative who has entered into an applicable agreement on behalf of the relevant copyright owner. (D) A satisfactory identification of any applicable catalog exclusions. E:\FR\FM\05NOP1.SGM 05NOP1 khammond on DSKJM1Z7X2PROD with PROPOSALS Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules (E) At the digital music provider’s option, and in lieu of providing the information listed in paragraph (c)(5)(ii)(D) of this section, a list of all covered musical works, identified by appropriate unique identifiers. (F) A unique identifier for each such agreement. (iii) After receiving the information required by paragraph (c)(5)(ii) of this section, the mechanical licensing collective shall, among any other actions required of it, engage in efforts to confirm uses of musical works embodied in sound recordings reported under paragraph (c)(4)(ii) of this section that are subject to any identified agreement, and may notify relevant copyright owners of the digital music provider’s reliance on such identified agreement(s). Where the mechanical licensing collective confirms a reported use of a musical work to be subject to an identified agreement, the mechanical licensing collective shall presume that the digital music provider has appropriately relied upon the agreement, including during the pendency of a dispute between a digital music provider and copyright owner over the digital music provider’s reliance on an identified agreement. During the pendency of such a dispute, the mechanical licensing collective shall not make a corresponding distribution to the relevant copyright owner(s) or treat the amount at issue as an overpayment unless it is directed to do so pursuant to the mutual agreement of the relevant parties or by order of an adjudicative body with appropriate authority. (iv) Subject to paragraph (c)(5)(iii) of this section, if the amount transferred to the mechanical licensing collective is insufficient to cover any required distributions to copyright owners, the mechanical licensing collective shall deliver an invoice and/or response file to the digital music provider consistent with paragraph (h) of this section that includes the amount outstanding (which shall include the interest that would have accrued on such amount had it been held by the mechanical licensing collective pursuant to 17 U.S.C. 115(d)(3)(H)(ii) from the original date of transfer) and the basis for the mechanical licensing collective’s conclusion that such amount is due. No later than 14 business days after receipt of such notice, the digital music provider must either pay the invoiced amount or notify the mechanical licensing collective that it is disputing that additional amounts are owed (whether in whole or in part). If disputed, the mechanical licensing collective shall notify the relevant VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 copyright owner(s) and shall act in accordance with paragraph (c)(5)(iii) of this section. In the event a digital music provider is found by an adjudicative body with appropriate authority to have erroneously, but not unreasonably or in bad faith, withheld accrued royalties, the digital music provider may remain in compliance with this section for purposes of retaining its limitation on liability if the digital music provider has otherwise satisfied the requirements for the limitation on liability described in 17 U.S.C. 115(d)(10) and if the additional amount due is paid in accordance with a relevant order. (v) Any overpayment of royalties based upon an estimate permitted by paragraph (c)(5)(i) of this section shall be handled in accordance with paragraph (k)(5) of this section. (vi) Any underpayment of royalties shall be remedied by a digital music provider without regard for the adjusted statute of limitations described in 17 U.S.C. 115(d)(10)(C). By using an estimate permitted by either paragraph (c)(5)(i) or (d)(2) of this section, a digital music provider agrees to waive any statute-of-limitations-based defenses with respect to any asserted underpayment of royalties connected to the use of such an estimate. (6) If the total accrued royalty reported under paragraph (c)(5) of this section does not reconcile with the royalties actually transferred to the mechanical licensing collective, or if the royalties reported include use of an estimate as permitted under paragraph (c)(5)(i) of this section, a clear and detailed explanation of the difference and the basis for it. (d) The royalty payment and accounting information called for by paragraph (c)(4)(i) of this section shall consist of the following: (1) A detailed and step-by-step accounting of the calculation of attributable royalties 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 digital music provider determined the royalty 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. (2) Where computation of the attributable royalties depends on an input that is unable to be finally determined at the time the cumulative statement of account is delivered to the mechanical licensing collective and where the reason the input cannot be finally determined is outside of the PO 00000 Frm 00048 Fmt 4702 Sfmt 4702 70549 digital music provider’s control (e.g., 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 digital music provider. Royalty payments based on such estimates shall be adjusted pursuant to paragraph (k) of this section after being finally determined. A cumulative statement of account containing an estimate permitted by this paragraph (d)(2) 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). (3) 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 digital music provider at the time the cumulative statement of account is delivered to the mechanical licensing collective, and subject to any additional accounting and certification requirements under 17 U.S.C. 115 and this section. (e)(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) The information referenced in § 210.6(c)(3) that would have been provided to the copyright owner had the digital music provider been serving Monthly Statements of Account as a compulsory licensee in accordance with this subpart on the copyright owner from initial use of the work. (ii) Any additional information requested in writing by the mechanical licensing collective that either is referenced in 17 U.S.C. 115(d)(10)(B)(i)(I)(aa) or (bb) and that was acquired by the digital music provider in connection with its efforts to obtain such information under 17 U.S.C. 115(d)(10)(B)(i)(I), or, if available, is a unique identifier assigned by the digital music provider to a reported sound recording. The digital music provider must respond to such a request within a reasonable period of time and may deliver any such requested supplemental information to the mechanical licensing collective outside of its cumulative statement of account in a commercially reasonable manner of the digital music provider’s choosing. Providing such supplemental information shall not be construed as an adjustment to a cumulative statement of account under paragraph (k) of this section. E:\FR\FM\05NOP1.SGM 05NOP1 khammond on DSKJM1Z7X2PROD with PROPOSALS 70550 Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules (2) For each track for which a share of a musical work has been matched and for which accrued royalties for such share have been paid, but for which one or more shares of the musical work remains unmatched and unpaid, the digital music provider must provide a clear identification of the total aggregate percentage share that has been matched and paid and the owner(s) of the aggregate matched and paid share (including any unique party identifiers for such owner(s) that are known by the digital music provider), provided that, in the event such information is maintained by a third-party vendor, that information is made available to the digital music provider on commercially reasonable terms. (f) The information required by paragraphs (c), (d), (e), and (k) of this section requires intelligible, legible, and unambiguous statements in the cumulative statements of account, without incorporation of facts or information contained in other documents or records. (g) References to part 385 of this title, as used in paragraphs (c), (d), and (k) of this section, refer to the rates and terms of royalty payments as in effect as to each particular reported use based on when the use occurred. (h) If requested by a digital music provider, the mechanical licensing collective shall deliver an invoice and/ or a response file to the digital music provider within a reasonable period of time after the cumulative statement of account and related royalties are received. 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. (i)(1) To the extent practicable, each cumulative statement of account delivered to the mechanical licensing collective under paragraph (b)(3)(i) of this section shall be delivered 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 digital music providers. The mechanical licensing collective must offer at least two options, where one is dedicated to smaller digital music providers 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 VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 for larger digital music providers 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. If it is not practicable for a digital music provider to deliver its cumulative statement of account in the manner specified by the mechanical licensing collective, such digital music provider must deliver its cumulative statement of account in a flat-file or other machinereadable format (e.g., Excel, commaseparated values (CSV)) to the extent such digital music provider’s applicable data exists in such a format. (2) To the extent practicable, 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 cumulative statement of account 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 cumulative statement of account to the payment. (j) Each cumulative statement of account delivered to the mechanical licensing collective under paragraph (b)(3)(i) of this section shall be accompanied by: (1) The name of the person who is signing and certifying the cumulative statement of account. (2) A signature, which in the case of a digital music provider 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 digital music provider 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 cumulative statement of account. (5) One of the following statements: (i) Statement one: I certify that (1) I am duly authorized to sign this cumulative statement of account on behalf of the digital music provider, (2) I have examined this cumulative statement of account, 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 cumulative statement of account on behalf of the digital music provider, (2) I have prepared or PO 00000 Frm 00049 Fmt 4702 Sfmt 4702 supervised the preparation of the data used by the digital music provider and/ or its agent to generate this cumulative statement of account, (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 cumulative statement of account was prepared by the digital music provider and/or its agent using processes and internal controls that were subject to an examination, during the past year, by a licensed certified public accountant in accordance with the attestation standards established by the American Institute of Certified Public Accountants, the opinion of whom was that the processes and internal controls were suitably designed to generate monthly statements that accurately reflect, in all material respects, the digital music provider’s usage of musical works, the statutory royalties applicable thereto, and any other data that is necessary for the proper calculation of the statutory royalties in accordance with 17 U.S.C. 115 and applicable regulations. (6) A certification by a duly authorized officer of the digital music provider that the digital music provider has fulfilled the requirements of 17 U.S.C. 115(d)(10)(B)(i) and (ii) but has not been successful in locating or identifying the copyright owner. (k)(1) A digital music provider may adjust its previously delivered cumulative statement of account, including related royalty payments, by delivering to the mechanical licensing collective a statement of adjustment. (2) A statement of adjustment shall be clearly and prominently identified as a ‘‘Statement of Adjustment of a Cumulative Statement of Account.’’ (3) A statement of adjustment shall include a clear statement of the following information: (i) The previously delivered cumulative statement of account, including related royalty payments, to which the adjustment applies. (ii) The specific change(s) to the previously delivered cumulative statement of account, including a detailed description of any changes to any of the inputs upon which computation of the royalties payable by the digital music provider depends. Such description shall include the adjusted royalties payable and all information used to compute the adjusted royalties payable, in accordance with the requirements of this section and part 385 of this title, such that the mechanical licensing collective can provide a detailed and step-by-step accounting of the calculation of the adjustment under E:\FR\FM\05NOP1.SGM 05NOP1 khammond on DSKJM1Z7X2PROD with PROPOSALS Federal Register / Vol. 85, No. 215 / Thursday, November 5, 2020 / Proposed Rules 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 digital music provider determined the adjustment and the accuracy of the adjustment. As appropriate, an adjustment may be calculated using estimates permitted under paragraph (d)(2) 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 digital music provider shall pay the difference to the mechanical licensing collective contemporaneously with delivery of the statement of adjustment or promptly after being notified by the mechanical licensing collective of the amount due. A statement 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 statement of adjustment to the payment. (5) In the case of an overpayment of royalties, the mechanical licensing collective shall appropriately credit or offset the excess payment amount and apply it to the digital music provider’s account, or upon request, issue a refund within a reasonable period of time. (6)(i) A statement of adjustment 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)(ii) of this section, where such an event necessitates an adjustment. Where more than one scenario applies to the same cumulative statement of account at different points in time, a separate 6month period runs for each such triggering event. (ii) A statement of adjustment may only be made: (A) Except as otherwise provided for by paragraph (c)(5) of this section, where the digital music provider discovers, or is notified of by 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 a relevant sound recording or musical work that is embodied in such a sound recording, an inaccuracy in the cumulative statement of account, or in the amounts of royalties owed, based on information that was not previously known to the digital music provider despite its good-faith efforts; VerDate Sep<11>2014 18:49 Nov 04, 2020 Jkt 253001 (B) When making an adjustment to a previously estimated input under paragraph (d)(2) of this section; (C) Following an audit of a digital music provider that concludes after the cumulative statement of account is delivered and that has the result of affecting the computation of the royalties payable by the digital music provider (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 (D) In response to a change in applicable rates or terms under part 385 of this title. (7) A statement of adjustment must be certified in the same manner as a cumulative statement of account under paragraph (j) of this section. (l)(1) Subject to the provisions of 17 U.S.C. 115, a digital music provider 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 required to be transferred to the mechanical licensing collective for the digital music provider to be eligible for the limitation on liability described in 17 U.S.C. 115(d)(10). The procedures surrounding the certification requirements of paragraph (j) 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 digital music provider (and, if different, the trade or consumer-facing brand name(s) of the services(s), including any specific offering(s), through which the digital music provider engages, or has engaged at any time during the period identified in paragraph (c)(1) of this section, 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 PO 00000 Frm 00050 Fmt 4702 Sfmt 4702 70551 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. (m) Each digital music provider shall, for a period of at least seven years from the date of delivery of a cumulative statement of account or statement of adjustment 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 statement (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 statement containing the final adjustment of such input). Dated: October 30, 2020. Regan A. Smith, General Counsel and Associate Register of Copyrights. [FR Doc. 2020–24528 Filed 11–4–20; 8:45 am] BILLING CODE 1410–30–P DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 70 RIN 2900–AP89 Change in Rates VA Pays for Special Modes of Transportation Department of Veterans Affairs. Proposed rule. AGENCY: ACTION: The Department of Veterans Affairs (VA) proposes to amend its regulations concerning beneficiary travel. The revisions would amend the Veterans Health Administration’s (VHA) beneficiary travel regulations to establish a new payment methodology for special modes of transportation. The new payment methodology would apply in the absence of a contract between VA and a vendor of the special mode of transportation. For transport by ambulance, VA proposes to pay the lesser of the actual charge or the amount determined by the Medicare Part B Ambulance Fee Schedule (AFS) established by the Centers for Medicare & Medicaid Services (CMS). For travel by modes other than ambulance, VA proposes to establish a payment methodology based on states’ posted rates or the actual charge. VA would replace this payment methodology for travel by modes other than ambulance at SUMMARY: E:\FR\FM\05NOP1.SGM 05NOP1

Agencies

[Federal Register Volume 85, Number 215 (Thursday, November 5, 2020)]
[Proposed Rules]
[Pages 70544-70551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24528]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 210

[Docket No. 2020-12]


Music Modernization Act Transition Period Transfer and Reporting 
of Royalties to the Mechanical Licensing Collective: Request for 
Additional Comments

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

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: This supplemental notice of proposed rulemaking (``SNPRM'') 
updates the Copyright Office's July 17, 2020 proposed rule concerning 
the Music Modernization Act transition period transfer and reporting of 
royalties to the mechanical licensing collective. Specifically, this 
SNPRM provides an alternate approach to requirements concerning the 
content of cumulative statements of account to be submitted by digital 
music providers to the mechanical licensing collective at the 
conclusion of the statutory transition period and proposes estimate and 
adjustment provisions with respect to payment of accrued royalties to 
the mechanical licensing collective in connection with this reporting.

DATES: Written comments must be received no later than 11:59 p.m. 
Eastern Time on November 25, 2020.

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

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

SUPPLEMENTARY INFORMATION:

I. Background

    This SNPRM is issued subsequent to a notification of inquiry 
published in the Federal Register on September 24, 2019 and a notice of 
proposed rulemaking (``NPRM'') published on July 17, 2020 relating to 
implementation of the Music Modernization Act (``MMA'').\1\ In its 
NPRM, the Office proposed regulations pertaining to cumulative 
statements of account, which digital music providers (``DMPs'') are 
required to provide to the mechanical licensing collective (``MLC'') 
for such DMPs to be eligible for the statutory limitation on liability 
for unlicensed uses of musical works prior to the license availability 
date.\2\ This SNPRM generally assumes familiarity with the prior NPRM 
and notification of inquiry, as well as the public comments and 
summaries of ex parte meetings received in response to those documents, 
all of which are publicly accessible from the Copyright Office's 
website.\3\
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    \1\ 85 FR 43517 (July 17, 2020); 84 FR 49966 (Sept. 24, 2019). 
All rulemaking activity, including public comments, as well as 
legislative history and educational material regarding the Music 
Modernization Act, can currently be accessed via navigation from 
https://www.copyright.gov/music-modernization/. Comments received in 
response to the September 2019 notification of inquiry are available 
at https://www.regulations.gov/docketBrowser?rpp=25&po=0&dct=PS&D=COLC-2019-0002&refD=COLC-2019-0002-0001. Comments received in response to the July 2020 notice of 
proposed rulemaking are available at https://beta.regulations.gov/document/COLC-2020-0011-0001/comment. Related ex parte letters are 
available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. References to these 
comments and letters are by party name (abbreviated where 
appropriate), followed by ``Initial Comment,'' ``Reply Comment,'' 
``NPRM Comment,'' or ``Ex Parte Letter'' as appropriate.
    \2\ See 17 U.S.C. 115(d)(10).
    \3\ 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. As 
stated in the guidelines, ex parte meetings with the Office are 
intended to provide an opportunity for participants to clarify 
evidence and/or arguments made in prior written submissions, and to 
respond to questions from the Office on those matters.
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    As relevant here, the NPRM considered whether to propose 
regulations with respect to the ability of DMPs to rely upon estimates 
and subsequently adjust their cumulative statements of account. The 
NPRM tentatively declined to propose broad language given the ``one-
time nature'' of cumulative statements of account, but did propose that 
DMPs could estimate applicable performance royalties, and that ``any 
overpayment (whether resulting from an estimate or otherwise) should be 
credited to the DMP's account, or refunded upon request.'' \4\
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    \4\ 85 FR at 43520.

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[[Page 70545]]

    The NPRM also considered comments from the Digital Licensee 
Coordinator (``DLC'') asking for regulatory language to clarify the 
relationship between this reporting obligation and pre-existing private 
agreements between a large number of music publishers and certain 
digital services that the DLC characterized as providing for the 
liquidation of accrued royalties for unmatched works through payments 
based on market share to publishers signing releases.\5\ At the time, 
the Office tentatively declined to propose regulatory language. 
Instead, the Office provided initial guidance regarding the statutory 
obligation to transfer and report information related to accrued 
royalties for unlicensed uses under the MMA and noted that it remained 
available to dialogue further.\6\
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    \5\ Id. at 43522-23; see also DLC Ex Parte Letter at 1 (Aug. 11, 
2020); NMPA Ex Parte Letter at 5 (Aug. 25, 2020).
    \6\ 85 FR at 43523 (noting that because ``voluntary licenses'' 
``remain in effect'' by law, ``by implication, DMPs would not retain 
accrued royalties (as defined in the MMA) for works licensed under 
private agreements'').
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    In response to a request from the MLC, the NPRM also proposed 
expanding the present cumulative statement of account regulations, 
which require providing ``all of the information that would have been 
provided to the copyright owner had the digital music provider been 
serving Monthly Statements of Account,'' \7\ to requirements for 
reporting information that would ``largely mirror the requirements 
proposed for reports of usage.'' \8\ While the DLC initially contended 
that such a proposal was ``impractical,'' \9\ it now describes such a 
requirement as ``impossible'' given the business practicalities of how 
this information was or was not compiled and stored over time.\10\ 
Similarly, the Digital Media Association (``DiMA'') stated that the 
NPRM's expanded reporting requirements would create ``massive 
operational hurdles'' and would ``jeopardize[ ] every [DMP's] 
eligibility for the limitation on liability.'' \11\
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    \7\ 37 CFR 210.10(b)(3)(i); see also 17 U.S.C. 
115(d)(10)(B)(iv)(III)(aa).
    \8\ 85 FR at 43519.
    \9\ DLC Reply Comment at 24.
    \10\ DLC NPRM Comment at 2, 8-9 (explaining that some of the 
additional information was not collected by DMPs in the past and 
cannot be collected in time to include in cumulative statements of 
account); DLC Ex Parte Letter at 2 (Aug. 11, 2020) (``[S]ervices 
have been compiling reporting under the regulatory regime that the 
Office put in place shortly after the enactment of the MMA. We 
explained the impossibility--mere months before license availability 
date--of completely revamping royalty accounting systems to 
accommodate the Office's new proposed rules.'').
    \11\ DiMA NPRM Comment at 6-7 (``digital music providers have 
maintained usage information . . . with the existing statement of 
account regulations in mind'').
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II. Supplemental Proposed Regulatory Provisions

    As discussed further below, while the Copyright Office continues to 
consider the proposed rule described in the NPRM, it is now also 
providing alternative regulatory language for public comment. As with 
other MMA rulemakings to date, the Office has received robust 
engagement from interested parties in this proceeding, as reflected in 
the administrative record.\12\ Since issuing its NPRM, the Office has 
reviewed many written comments and conducted several ex parte meetings 
with various parties on these matters, which have further informed its 
thinking.\13\ In addition, the D.C. Circuit partially vacated and 
remanded the Copyright Royalty Judges' ``Phonorecords III'' 
determination, which was intended to set rates and terms for the 
section 115 mechanical license for the period from January 1, 2018 
through December 31, 2022,\14\ which provides an additional ground for 
the Office to establish a mechanism for DMPs to estimate the amount of 
royalties due and subsequently adjust payments (since the ultimate 
rates for this time period have not yet been finalized).
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    \12\ See 85 FR at 43523 (``The Office . . . remains available to 
dialogue further, in accordance with the public process for written 
comments and/or ex parte meetings.''); 84 FR at 49968 (noting that 
the Office is willing to ``utilize informal meetings to gather 
additional information . . . [and would] establish[ ] guidelines for 
ex parte communications'' to be issued on its website).
    \13\ See, e.g., DiMA NPRM Comment at 2-5; DLC NPRM Comment at 3-
6, 11-18; MLC NPRM Comment at 8-9; Songwriters Guild of America & 
Society of Composers and Lyricists NPRM Comment at 3-8; Artist 
Rights Alliance Ex Parte Letter at 2-3 (Sept. 22, 2020); DLC Ex 
Parte Letter at 1 (Aug. 11, 2020); DLC Ex Parte Letter at 1-3 (Oct. 
14, 2020); NMPA Ex Parte Letter at 1-2 (Aug. 25, 2020); MediaNet Ex 
Parte Letter at 2 (Oct. 28, 2020); MLC Ex Parte Letter at 2-6 (Oct. 
5, 2020); MLC Ex Parte Letter at 2-5 (Oct. 16, 2020); Songwriters 
Guild of America et al. Ex Parte Letter at 1-2 (Sept. 14, 2020); 
Sony/ATV Music Pub. Ex Parte Letter at 1-2 (Oct. 28, 2020); Spotify 
Ex Parte Letter at 1 (Sept. 1, 2020); Spotify Ex Parte Letter at 1-5 
(Oct. 9, 2020); Warner Music Grp. Ex Parte Letter at 1 (Oct. 21, 
2020).
    \14\ Johnson v. Copyright Royalty Bd., 969 F.3d 363, 381 (D.C. 
Cir. 2020).
---------------------------------------------------------------------------

    The Office also received guidance from Senate Judiciary Chairman 
Graham regarding the issue of certain industry agreements between 
publishers and DMPs that predate the MMA's enactment and required the 
payment of unmatched accrued royalties to copyright owners by market 
share, stating:

    Since the intent of the MMA was to provide legal certainty for 
past, present, and future usage, it is critical that this issue be 
resolved in a manner that protects copyright owner interests while 
ensuring that songwriters are paid their splits and services are not 
burdened with double payments. . . . If the parties are unable to 
address this current dispute on their own in the immediate future, I 
urge the Copyright Office to bring them together in order to prevent 
a return to the inefficient litigation that featured prominently in 
the prior licensing regime.\15\
---------------------------------------------------------------------------

    \15\ Letter from Senator Lindsey O. Graham, Chairman, Senate 
Committee on the Judiciary, to U.S. Copyright Office 1 (Sept. 30, 
2020).

    Since receiving the letter, the Office understands that the parties 
have continued to communicate on other aspects of the proposed rule, 
but have not on their own resolved their disagreement over the proper 
interpretation of the relevant statutory provisions.
    Indeed, subsequent information provided to the Office in this 
proceeding confirms that the underlying dispute remains. Specifically, 
the DLC has clarified that its reference to prior negotiated agreements 
centers around agreements between four specific DMPs and the National 
Music Publishers' Association (``NMPA'') (and subsequent agreements 
with participating publishers), and both the DLC and individual DMPs 
have provided additional views regarding those agreements.\16\ The 
Office also heard from multiple songwriter groups, all of which 
stressed the importance of royalties for uses of works being paid over 
by DMPs in a manner that results in payments to songwriters, and 
expressed uncertainty over whether payments under such agreements had 
indeed been passed through to songwriters.\17\ The MLC confirmed that 
it believes its role to be a ``trusted party to receive unmatched 
royalties and ensure that they are paid to the right parties, with 
interest (for the period that

[[Page 70546]]

the MLC held such royalties).'' \18\ The MLC also offered its view that 
the proper statutory read would require DMPs to transfer payment for 
all unmatched uses, regardless of whether a valid agreement previously 
resulted in the liquidation of a portion of associated royalties or 
whether there have been related voluntary releases.\19\ The Office has 
also heard from the NMPA as well as individual publishers on this 
issue, with the NMPA urging the Office to avoid a regulation that might 
interfere with private agreements.\20\ While publisher perspectives 
varied, significantly, some noted that they consider claims settled 
pursuant to these agreements to be closed, and to date, all publishers 
the Office has heard from confirmed that their associated songwriters 
have already participated in unclaimed royalties received by those 
publishers pursuant to the agreements at issue.\21\ Overall, the 
comments, in particular as between the MLC on the one hand, and the DLC 
or individual services, on the other, reveal competing statutory 
interpretations regarding the provision requiring DMPs to transfer over 
accrued royalties that have been maintained in accordance with 
generally accepted accounting principles.\22\
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    \16\ DLC NPRM Comment at 12-14; DLC Initial Comment at 3-4 n.11, 
U.S. Copyright Office Dkt. No. 2019-6, https://beta.regulations.gov/comment/COLC-2020-0007-0012 (citing Paul Resnikoff, Exclusive: This 
Is the Contract Songwriters Are Signing With Spotify, Digital Music 
News (Apr. 27, 2016), https://www.digitalmusicnews.com/2016/04/27/exclusive-spotify-establishing-direct-publisher-contracts-to-solve-mechanicals-issues/); DLC Ex Parte Letter at 1-2 (Oct. 14, 2020); 
Google Ex Parte Letter at 1-3 (Oct. 23, 2020); MediaNet Ex Parte 
Letter at 2 (Oct. 28, 2020); Spotify Ex Parte Letter at 1-3, 5 (Oct. 
9, 2020); see also NMPA Ex Parte Letter at 1-2 (Aug. 25, 2020).
    \17\ See Artist Rights Alliance et al. Ex Parte Letter (Sept. 
22, 2020); Songwriters Guild of America et al. Ex Parte Letter 
(Sept. 15, 2020).
    \18\ MLC Ex Parte Letter at 5 (Oct. 5, 2020).
    \19\ MLC NPRM Comment at 8; MLC Ex Parte Letter at 5 (Oct. 5, 
2020); MLC Ex Parte Letter at 2-4 (Oct. 16, 2020).
    \20\ See NMPA Ex Parte Letter (Aug. 25, 2020).
    \21\ Sony/ATV Music Pub. Ex Parte Letter at 1-2 (Oct. 28, 2020) 
(noting that ``distribution of unmatched funds, whether title bound 
or not, are always paid through to [Sony/ATV's] songwriters''); 
Warner Music Grp. Ex Parte Letter at 1 (Oct. 21, 2020) (noting that 
songwriters were paid portions of royalties received by publishers 
pursuant to pre-enactment agreements with certain DMPs that 
liquidated unclaimed royalties).
    \22\ See DLC NPRM Comment at 16-18; MLC Reply Comment at 28-30; 
Spotify Ex Parte Letter at 3-4 (Oct. 9, 2020); MLC Ex Parte Letter 
at 2-4 (Oct. 5, 2020); MLC Ex Parte Letter at 2-4 (Oct. 16, 2020); 
see also 17 U.S.C. 115(d)(10)(B)(iv).
---------------------------------------------------------------------------

    For its part, the Office is carefully analyzing the statutory text 
and will give appropriate weight to the legislative history and 
consideration of these public comments when promulgating a final rule. 
At this point, however, the Office has determined that the public 
process would benefit from providing supplemental, alternative 
regulatory language, to ensure that further stakeholder views can be 
duly considered as the Office evaluates these important issues. 
Although the Office has not made any final conclusions on these 
matters, this SNPRM is being issued so that interested parties have 
adequate notice and an opportunity to comment specifically on these 
potential alternatives sufficiently in advance of the February 2021 
deadline to submit cumulative statements of account to the MLC.
    While the NPRM outlined in detail several considerations with 
respect to these and other issues, and while the Office continues to 
seriously consider the insightful comments it has received to date, in 
light of those comments, Chairman Graham's letter, and the Phonorecords 
III remand, the Office now provides regulatory language regarding the 
following topics.\23\ This regulatory language is largely additive to 
the language proposed in the NPRM, and also includes potential 
substitutes for certain provisions included in the NPRM. Interested 
commenters may wish to review that earlier NPRM and the public comments 
received to date offering varying perspectives on factual and legal 
issues underlying this proposal.
---------------------------------------------------------------------------

    \23\ See 17 U.S.C. 115(d)(12)(A), 702. The Copyright Office 
considers this additional proposed regulatory language to be a 
logical outgrowth of the NPRM, including comments received from a 
wide variety of ex parte meeting participants. Nevertheless, to 
ensure that all interested parties have fair notice and an 
opportunity to participate in the rulemaking with respect to these 
issues in a meaningful and informed manner, the Office is inviting 
further written comments on these issues. See 5 U.S.C. 553(b)(3); 
Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 174 (2007).
---------------------------------------------------------------------------

    Estimates and adjustments, including previously released claims. 
The Office is providing proposed provisions that would allow DMPs to 
rely upon certain estimates and subsequently submit adjustments to 
cumulative statements of account where the computation of accrued 
royalties depends upon an input that is unable to be finally determined 
at the time the cumulative statement of account is due.
    One set of estimate and adjustment provisions would address 
situations where a DMP cannot calculate a necessary input in a royalty 
calculation (e.g., performance royalties, sound recording-related 
consideration) or needs to make a future adjustment under other 
specified circumstances (e.g., in response to a change in the statutory 
royalty rates or terms). Statements of adjustment adjusting cumulative 
statements of account would be required to detail the changes to 
facilitate accurate reporting. The Office understands that both the DLC 
and MLC now generally support this type of rule.\24\
---------------------------------------------------------------------------

    \24\ DLC NPRM Comment at 5-6; MLC Ex Parte Letter at 2 (Oct. 5, 
2020).
---------------------------------------------------------------------------

    Related provisions would address situations where a DMP has accrued 
and maintained royalties in reasonable good-faith belief as to the 
impact of negotiated agreements upon the computation of accrued 
royalties required to be transferred to the MLC and it is necessary to 
estimate such amount at the time the cumulative statement of account is 
delivered to the MLC because of the unmatched status of the relevant 
musical works. They would clarify that the statutory obligation to 
maintain accrued royalties in accordance with generally accepted 
accounting principles includes maintenance in accordance with such 
principles concerning derecognition of liabilities.\25\ They would 
accordingly accommodate situations where a DMP has made good-faith 
estimates where the DMP has used unmatched works in covered activities 
prior to the license availability date and the DMP has determined that 
accrued liability for an amount of otherwise attributable royalties has 
been extinguished due to negotiated agreements (whether considered a 
voluntary agreement, liquidation agreement, settlement, or release, 
etc.) executed on a catalog or participating party basis, rather than a 
matched-work basis.\26\ In such a circumstance, the DMP could report 
based upon its good-faith estimate of accrued royalties for unmatched 
uses when reporting to the MLC, and would be required to make an 
adjustment to retain the limitation on liability if that estimate ends 
up being incorrect. Under no circumstances could this provision be used 
to shortchange payment of accrued royalties for musical work copyright 
owners who did not

[[Page 70547]]

participate in such agreements. A DMP relying upon such an estimate 
would be required to provide a list of such agreements to the MLC to 
use in connection with matching against musical work information 
provided by copyright owners and to provide an avenue for copyright 
owners to dispute the fact or effect of such agreements. As the DLC has 
requested, the proposal includes a requirement for such a DMP to cover 
any deficit through prompt payment of an invoice issued by the MLC.\27\ 
Under the proposed rule, unreasonable or bad-faith withholding of 
accrued royalties by a DMP may result in loss of the limitation on 
liability.
---------------------------------------------------------------------------

    \25\ See Accounting Standards Codification 405-20-40-1 (stating 
a debtor ``shall derecognize a liability if and only if it has been 
extinguished. A liability has been extinguished if either of the 
following conditions is met: a. The debtor pays the creditor and is 
relieved of its obligation for the liability[, or] b. The debtor is 
legally released from being the primary obligor under the liability, 
either judicially or by the creditor.''); see also Black's Law 
Dictionary (11th ed. 2019) (defining ``accrued liability'' as ``[a] 
debt or obligation that is properly chargeable in a given accounting 
period but that is not yet paid'').
    \26\ Again, it has been represented to the Office that for 
certain DMPs, for certain periods of time, the overwhelming majority 
of the music publishing industry participated in such agreements and 
has settled relevant claims for those periods. This proposed 
mechanism is intended to allow DMPs who believe that these 
agreements impact the calculation of their accrued royalties to 
transfer over their reasonable estimation of accrued royalties 
remaining, including royalties accrued for non-participating 
publishers during the relevant periods, subject to a later true-up 
to maintain eligibility for the limitation on liability. In this 
regard and without opining on the substance of these private 
agreements, the proposal is intended to further congressional intent 
to ``protect[ ] copyright owner interests'' without burdening 
services with ``double payments,'' and avoid incentivizing 
inefficient litigation. Letter from Senator Lindsey O. Graham, 
Chairman, Senate Committee on the Judiciary, to U.S. Copyright 
Office 1 (Sept. 30, 2020).
    \27\ See DLC NPRM Comment at 16. The Office understands the DMPs 
believe that their estimates err on the side of overpayment. 
Nonetheless, to ensure prompt payment, the Office notices a rule 
requiring ``true-up'' of underpayments within 14 business days of 
being invoiced, rather than the 45 days proposed by the DLC. Cf. 17 
U.S.C. 512(g)(2)(C) (setting out 14-day deadline for copyright 
owners to institute court action).
---------------------------------------------------------------------------

    Sound Recording and Musical Work Information and Format. In 
addition to continuing to consider the requirements proposed in the 
NPRM, the Copyright Office is now considering whether to instead 
potentially adopt language closer to existing regulations for reporting 
sound recording and musical work information,\28\ to reflect the DLC's 
comments and incentivize optional participation in this transition 
period reporting for cumulative statements of account.\29\ To ensure 
the MLC receives additional information potentially valuable to reduce 
the amount of unmatched uses, the Office, however, also proposes adding 
a requirement that DMPs report information referenced in 17 U.S.C. 
115(d)(10)(B)(i)(I)(aa) or (bb) that was acquired by the DMP in 
connection with its efforts to obtain such information under 17 U.S.C. 
115(d)(10)(B)(i)(I), or a DMP-assigned identifier, if such information 
is requested by the MLC. The Office proposes that the requirement to 
provide a DMP identifier, at a separate time from the February 2021 
deadline to submit a cumulative statement of account, may aid the MLC 
by providing a unique identifier that can easily link up with the 
robust usage data the MLC will be receiving on an ongoing basis in 
monthly reporting for blanket uses. The Office requests comments on the 
feasibility and adequacy of this proposal, including whether there are 
additional categories of information that DMPs should be required to 
provide, and whether establishing set time periods by which a DMP is 
obligated to submit such supplementary information may be preferable to 
the request-based format of the proposed provision. The Office further 
seeks comment on other methods to facilitate supplemental reporting, 
such as bifurcating the timing required for reporting each of the 
fields proposed in the July NPRM but otherwise retaining that proposed 
structure; parties advocating an alternate approach are encouraged to 
submit proposed regulatory language to that effect in their comments. 
In providing such language to ensure ample opportunity for public 
input, the Office does not wish to discourage continued dialogue 
between the MLC and DLC as to this aspect of the reporting regulations, 
as well as submission of any joint proposals that may result from 
discussions.
---------------------------------------------------------------------------

    \28\ See Long Island Care at Home, Ltd., 551 U.S. at 175 
(suggesting that it is ``reasonably foreseeable'' that an agency may 
withdraw a proposed rule).
    \29\ See DLC NPRM Comment at 2, 7-10.
---------------------------------------------------------------------------

    Additionally, MediaNet recently voiced its concern with being able 
to report its pre-2013 royalty and usage data in cumulative statements 
of account, stating that such data is not in its possession and may not 
have been maintained by its former vendors.\30\ Noting that it is one 
of the oldest digital services, it asked for a regulatory exemption to 
address these concerns.\31\ Given the timing of MediaNet's request, the 
Office is not proposing its own regulatory language, but requests 
comments on MediaNet's proposal.
---------------------------------------------------------------------------

    \30\ MediaNet Ex Parte Letter at 2-3 (Oct. 28, 2020).
    \31\ Id. MediaNet proposes a new 37 CFR 210.20(c)(4)(iii) of the 
proposed rule: ``The digital music provider shall be excused from 
providing the information set forth in paragraphs (i) and (ii) where 
the usage is from a period of time more than five years prior to 
license availability date, and the digital music provider certifies 
the following: that the information was solely held by a vendor with 
whom the digital music provider no longer has a business 
relationship, the digital music provider has requested that 
information from such vendor, and the vendor has informed the 
digital music provider that it cannot or will not provide that 
information.'' Id. at 3 (Oct. 28, 2020).
---------------------------------------------------------------------------

    The SNPRM also proposes imposing a records of use provision on 
DMPs, and allowing the MLC and a DMP flexibility to agree to alter non-
substantive procedures, for example reporting formats, provided that 
any such alteration does not materially prejudice copyright owners owed 
royalties required to be transferred to the MLC or for the DMP's 
eligibility for the 17 U.S.C. 115(d)(10) limitation on liability. The 
SNPRM further proposes a modified version of the provision concerning 
partially matched works.
    In addition, at the DLC's request, the SNPRM proposes that if a DMP 
is unable to report cumulative statements of account in the MLC's 
preferred formats, a DMP may report in an alternative format, but must 
always report in a flat-file or other machine-readable format (e.g., 
Excel, comma-separated values (CSV)) if the data exists in such 
format.\32\ The Office invites comments on this subject, including 
joint comments as appropriate. Finally, the Office invites comments on 
whether to adopt a harmless error provision, similar to the provision 
adopted for reporting by significant nonblanket licensees.\33\
---------------------------------------------------------------------------

    \32\ Id. at 10, 23; DLC Ex Parte Letter at 3 (Aug. 27, 2020).
    \33\ See 37 CFR 210.28(k); see also id. at Sec.  210.9 (pre-MMA 
harmless error rule pertaining to Monthly and Annual Statements of 
Account). No harmless error provision was adopted for blanket 
licensee reports of usage in light of the statutory default 
provision, which requires reporting to be ``materially deficient.'' 
See 17 U.S.C. 115(d)(4)(E)(i)(III).
---------------------------------------------------------------------------

III. Additional Comments and Timing

    While the Copyright Office is interested in comments regarding the 
above issues, it welcomes public comment on all aspects of the NPRM and 
submitted comments, including comments contained in ex parte meeting 
summary letters. In light of the statutory deadline related to the 
submission of cumulative statements of account, the Office is providing 
twenty days' notice for comment on this issue, and will continue to be 
available for ex parte meetings with attendant disclosures concurrently 
with the comment submission period.

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Proposed Regulations

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

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

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

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

0
2. Amend Sec.  210.2 by revising paragraph (k) and removing paragraphs 
(l) through (o) to read as follows:


Sec.  210.2  Definitions.

* * * * *
    (k) Any terms not otherwise defined in this section shall have the 
meanings set forth in 17 U.S.C. 115(e).
0
3. Amend Sec.  210.10 by revising paragraphs (b) introductory text, 
(b)(1), (b)(2) introductory text, and (b)(3)(i) and

[[Page 70548]]

adding paragraphs (c) through (m) to read as follows:


Sec.  210.10  Statements required for limitation on liability for 
digital music providers for the transition period prior to the license 
availability date.

* * * * *
    (b) If the copyright owner is not identified or located by the end 
of the calendar month in which the digital music provider first makes 
use of the work, the digital music provider shall accrue and hold 
royalties calculated under the applicable statutory rate in accordance 
with usage of the work, from initial use of the work until the accrued 
royalties can be paid to the copyright owner or are required to be 
transferred to the mechanical licensing collective, as follows:
    (1) Accrued royalties shall be maintained by the digital music 
provider in accordance with generally accepted accounting principles, 
including those concerning derecognition of liabilities. Accrued 
royalties can cease being accrued royalties within the meaning of 17 
U.S.C. 115(e)(2) if the digital music provider's payment obligation is 
extinguished, such as pursuant to a voluntary license or other 
agreement whereby the digital music provider is legally released from 
the liability by the relevant creditor copyright owner.
    (2) If a copyright owner of an unmatched musical work (or share 
thereof) is identified and located by or to the digital music provider 
before the license availability date, the digital music provider shall, 
unless a voluntary license or other relevant agreement entered into 
prior to the time period specified in paragraph (b)(2)(i) of this 
section applies to such musical work (or share thereof)--
* * * * *
    (3) * * *
    (i) Not later than 45 calendar days after the license availability 
date, transfer accrued royalties to the mechanical licensing collective 
(as required by paragraph (i)(2) of this section), such payment to be 
accompanied by a cumulative statement of account that:
    (A) Includes all of the information required by paragraphs (c) 
through (e) of this section covering the period starting from initial 
use of the work;
    (B) Is delivered to the mechanical licensing collective as required 
by paragraph (i)(1) of this section; and
    (C) Is certified as required by paragraph (j) of this section; and
* * * * *
    (c) Each cumulative statement of account delivered to the 
mechanical licensing collective under paragraph (b)(3)(i) of this 
section shall be clearly and prominently identified as a ``Cumulative 
Statement of Account for Making and Distributing Phonorecords,'' and 
shall include a clear statement of the following information:
    (1) The period (months and years) covered by the cumulative 
statement of account.
    (2) 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 engages, or has engaged at any time during the 
period identified in paragraph (c)(1) of this section, in covered 
activities. If the digital music provider 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 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.
    (4) For each sound recording embodying a musical work that is used 
by the digital music provider in covered activities during the period 
identified in paragraph (c)(1) of this section and for which a 
copyright owner of such musical work (or share thereof) is not 
identified and located by the license availability date, a detailed 
cumulative statement, from which the mechanical licensing collective 
may separate reported information for each month and year 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) The total accrued royalty payable by the digital music provider 
for the period identified in paragraph (c)(1) of this section, 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 accrued royalty payable broken 
down by month and year and by each applicable activity or offering 
including as may be defined in part 385 of this title.
    (i) Where a digital music provider has a reasonable good-faith 
belief that the total accrued royalties payable are less than the total 
of the amounts reported under paragraph (c)(4)(i) of this section, and 
the precise amount of such accrued royalties cannot be calculated at 
the time the cumulative statement of account is delivered to the 
mechanical licensing collective because of the unmatched status of 
relevant musical works embodied in sound recordings reported under 
paragraph (c)(4)(ii) of this section, a reasonable estimation of the 
total accrued royalties may be reported and transferred, determined in 
accordance with GAAP and broken down by month and year and by each 
applicable activity or offering including as may be defined in part 385 
of this title. Any such estimate shall be made in good faith and on the 
basis of the best knowledge, information, and belief of the digital 
music provider at the time the cumulative statement of account is 
delivered to the mechanical licensing collective, and subject to any 
additional accounting and certification requirements under 17 U.S.C. 
115 and this section. In no case shall the failure to match a musical 
work by the license availability date be construed as prohibiting or 
limiting a digital music provider's entitlement to use such an estimate 
if the digital music provider has satisfied its obligations under 17 
U.S.C. 115(d)(10)(B) to engage in required matching efforts.
    (ii) A digital music provider reporting and transferring estimated 
accrued royalties must provide a description of any voluntary license 
or other agreement containing an appropriate release of royalty claims 
relied upon by the digital music provider in making its estimation that 
is sufficient for the mechanical licensing collective to engage in 
efforts to confirm uses of musical works subject to any such agreement. 
Such description shall be sufficient if it includes at least the 
following information:
    (A) 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, relevant to 
any such agreement. If such an agreement pertains to all of the digital 
music provider's applicable services, it may state so without 
identifying each service.
    (B) The start and end dates of each covered period of time.
    (C) Each applicable musical work copyright owner, identified by 
name and any known and appropriate unique identifiers, and appropriate 
contact information for each such musical work copyright owner or for 
an administrator or other representative who has entered into an 
applicable agreement on behalf of the relevant copyright owner.
    (D) A satisfactory identification of any applicable catalog 
exclusions.

[[Page 70549]]

    (E) At the digital music provider's option, and in lieu of 
providing the information listed in paragraph (c)(5)(ii)(D) of this 
section, a list of all covered musical works, identified by appropriate 
unique identifiers.
    (F) A unique identifier for each such agreement.
    (iii) After receiving the information required by paragraph 
(c)(5)(ii) of this section, the mechanical licensing collective shall, 
among any other actions required of it, engage in efforts to confirm 
uses of musical works embodied in sound recordings reported under 
paragraph (c)(4)(ii) of this section that are subject to any identified 
agreement, and may notify relevant copyright owners of the digital 
music provider's reliance on such identified agreement(s). Where the 
mechanical licensing collective confirms a reported use of a musical 
work to be subject to an identified agreement, the mechanical licensing 
collective shall presume that the digital music provider has 
appropriately relied upon the agreement, including during the pendency 
of a dispute between a digital music provider and copyright owner over 
the digital music provider's reliance on an identified agreement. 
During the pendency of such a dispute, the mechanical licensing 
collective shall not make a corresponding distribution to the relevant 
copyright owner(s) or treat the amount at issue as an overpayment 
unless it is directed to do so pursuant to the mutual agreement of the 
relevant parties or by order of an adjudicative body with appropriate 
authority.
    (iv) Subject to paragraph (c)(5)(iii) of this section, if the 
amount transferred to the mechanical licensing collective is 
insufficient to cover any required distributions to copyright owners, 
the mechanical licensing collective shall deliver an invoice and/or 
response file to the digital music provider consistent with paragraph 
(h) of this section that includes the amount outstanding (which shall 
include the interest that would have accrued on such amount had it been 
held by the mechanical licensing collective pursuant to 17 U.S.C. 
115(d)(3)(H)(ii) from the original date of transfer) and the basis for 
the mechanical licensing collective's conclusion that such amount is 
due. No later than 14 business days after receipt of such notice, the 
digital music provider must either pay the invoiced amount or notify 
the mechanical licensing collective that it is disputing that 
additional amounts are owed (whether in whole or in part). If disputed, 
the mechanical licensing collective shall notify the relevant copyright 
owner(s) and shall act in accordance with paragraph (c)(5)(iii) of this 
section. In the event a digital music provider is found by an 
adjudicative body with appropriate authority to have erroneously, but 
not unreasonably or in bad faith, withheld accrued royalties, the 
digital music provider may remain in compliance with this section for 
purposes of retaining its limitation on liability if the digital music 
provider has otherwise satisfied the requirements for the limitation on 
liability described in 17 U.S.C. 115(d)(10) and if the additional 
amount due is paid in accordance with a relevant order.
    (v) Any overpayment of royalties based upon an estimate permitted 
by paragraph (c)(5)(i) of this section shall be handled in accordance 
with paragraph (k)(5) of this section.
    (vi) Any underpayment of royalties shall be remedied by a digital 
music provider without regard for the adjusted statute of limitations 
described in 17 U.S.C. 115(d)(10)(C). By using an estimate permitted by 
either paragraph (c)(5)(i) or (d)(2) of this section, a digital music 
provider agrees to waive any statute-of-limitations-based defenses with 
respect to any asserted underpayment of royalties connected to the use 
of such an estimate.
    (6) If the total accrued royalty reported under paragraph (c)(5) of 
this section does not reconcile with the royalties actually transferred 
to the mechanical licensing collective, or if the royalties reported 
include use of an estimate as permitted under paragraph (c)(5)(i) of 
this section, a clear and detailed explanation of the difference and 
the basis for it.
    (d) The royalty payment and accounting information called for by 
paragraph (c)(4)(i) of this section shall consist of the following:
    (1) A detailed and step-by-step accounting of the calculation of 
attributable royalties 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 digital music provider 
determined the royalty 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.
    (2) Where computation of the attributable royalties depends on an 
input that is unable to be finally determined at the time the 
cumulative statement of account is delivered to the mechanical 
licensing collective and where the reason the input cannot be finally 
determined is outside of the digital music provider's control (e.g., 
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 digital music provider. Royalty 
payments based on such estimates shall be adjusted pursuant to 
paragraph (k) of this section after being finally determined. A 
cumulative statement of account containing an estimate permitted by 
this paragraph (d)(2) 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).
    (3) 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 digital music provider 
at the time the cumulative statement of account is delivered to the 
mechanical licensing collective, and subject to any additional 
accounting and certification requirements under 17 U.S.C. 115 and this 
section.
    (e)(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) The information referenced in Sec.  210.6(c)(3) that would have 
been provided to the copyright owner had the digital music provider 
been serving Monthly Statements of Account as a compulsory licensee in 
accordance with this subpart on the copyright owner from initial use of 
the work.
    (ii) Any additional information requested in writing by the 
mechanical licensing collective that either is referenced in 17 U.S.C. 
115(d)(10)(B)(i)(I)(aa) or (bb) and that was acquired by the digital 
music provider in connection with its efforts to obtain such 
information under 17 U.S.C. 115(d)(10)(B)(i)(I), or, if available, is a 
unique identifier assigned by the digital music provider to a reported 
sound recording. The digital music provider must respond to such a 
request within a reasonable period of time and may deliver any such 
requested supplemental information to the mechanical licensing 
collective outside of its cumulative statement of account in a 
commercially reasonable manner of the digital music provider's 
choosing. Providing such supplemental information shall not be 
construed as an adjustment to a cumulative statement of account under 
paragraph (k) of this section.

[[Page 70550]]

    (2) For each track for which a share of a musical work has been 
matched and for which accrued royalties for such share have been paid, 
but for which one or more shares of the musical work remains unmatched 
and unpaid, the digital music provider must provide a clear 
identification of the total aggregate percentage share that has been 
matched and paid and the owner(s) of the aggregate matched and paid 
share (including any unique party identifiers for such owner(s) that 
are known by the digital music provider), provided that, in the event 
such information is maintained by a third-party vendor, that 
information is made available to the digital music provider on 
commercially reasonable terms.
    (f) The information required by paragraphs (c), (d), (e), and (k) 
of this section requires intelligible, legible, and unambiguous 
statements in the cumulative statements of account, without 
incorporation of facts or information contained in other documents or 
records.
    (g) References to part 385 of this title, as used in paragraphs 
(c), (d), and (k) of this section, refer to the rates and terms of 
royalty payments as in effect as to each particular reported use based 
on when the use occurred.
    (h) If requested by a digital music provider, the mechanical 
licensing collective shall deliver an invoice and/or a response file to 
the digital music provider within a reasonable period of time after the 
cumulative statement of account and related royalties are received. 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.
    (i)(1) To the extent practicable, each cumulative statement of 
account delivered to the mechanical licensing collective under 
paragraph (b)(3)(i) of this section shall be delivered 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 digital music providers. 
The mechanical licensing collective must offer at least two options, 
where one is dedicated to smaller digital music providers 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 digital music providers 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. If it is not practicable 
for a digital music provider to deliver its cumulative statement of 
account in the manner specified by the mechanical licensing collective, 
such digital music provider must deliver its cumulative statement of 
account in a flat-file or other machine-readable format (e.g., Excel, 
comma-separated values (CSV)) to the extent such digital music 
provider's applicable data exists in such a format.
    (2) To the extent practicable, 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 cumulative statement of account 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 
cumulative statement of account to the payment.
    (j) Each cumulative statement of account delivered to the 
mechanical licensing collective under paragraph (b)(3)(i) of this 
section shall be accompanied by:
    (1) The name of the person who is signing and certifying the 
cumulative statement of account.
    (2) A signature, which in the case of a digital music provider 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 digital music provider 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 cumulative statement of 
account.
    (5) One of the following statements:
    (i) Statement one:
    I certify that (1) I am duly authorized to sign this cumulative 
statement of account on behalf of the digital music provider, (2) I 
have examined this cumulative statement of account, 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 cumulative 
statement of account on behalf of the digital music provider, (2) I 
have prepared or supervised the preparation of the data used by the 
digital music provider and/or its agent to generate this cumulative 
statement of account, (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 cumulative statement of account was prepared 
by the digital music provider and/or its agent using processes and 
internal controls that were subject to an examination, during the past 
year, by a licensed certified public accountant in accordance with the 
attestation standards established by the American Institute of 
Certified Public Accountants, the opinion of whom was that the 
processes and internal controls were suitably designed to generate 
monthly statements that accurately reflect, in all material respects, 
the digital music provider's usage of musical works, the statutory 
royalties applicable thereto, and any other data that is necessary for 
the proper calculation of the statutory royalties in accordance with 17 
U.S.C. 115 and applicable regulations.
    (6) A certification by a duly authorized officer of the digital 
music provider that the digital music provider has fulfilled the 
requirements of 17 U.S.C. 115(d)(10)(B)(i) and (ii) but has not been 
successful in locating or identifying the copyright owner.
    (k)(1) A digital music provider may adjust its previously delivered 
cumulative statement of account, including related royalty payments, by 
delivering to the mechanical licensing collective a statement of 
adjustment.
    (2) A statement of adjustment shall be clearly and prominently 
identified as a ``Statement of Adjustment of a Cumulative Statement of 
Account.''
    (3) A statement of adjustment shall include a clear statement of 
the following information:
    (i) The previously delivered cumulative statement of account, 
including related royalty payments, to which the adjustment applies.
    (ii) The specific change(s) to the previously delivered cumulative 
statement of account, including a detailed description of any changes 
to any of the inputs upon which computation of the royalties payable by 
the digital music provider depends. Such description shall include the 
adjusted royalties payable and all information used to compute the 
adjusted royalties payable, in accordance with the requirements of this 
section and part 385 of this title, such that the mechanical licensing 
collective can provide a detailed and step-by-step accounting of the 
calculation of the adjustment under

[[Page 70551]]

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 digital music provider determined the adjustment 
and the accuracy of the adjustment. As appropriate, an adjustment may 
be calculated using estimates permitted under paragraph (d)(2) 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 digital music 
provider shall pay the difference to the mechanical licensing 
collective contemporaneously with delivery of the statement of 
adjustment or promptly after being notified by the mechanical licensing 
collective of the amount due. A statement 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 
statement of adjustment to the payment.
    (5) In the case of an overpayment of royalties, the mechanical 
licensing collective shall appropriately credit or offset the excess 
payment amount and apply it to the digital music provider's account, or 
upon request, issue a refund within a reasonable period of time.
    (6)(i) A statement of adjustment 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)(ii) of 
this section, where such an event necessitates an adjustment. Where 
more than one scenario applies to the same cumulative statement of 
account at different points in time, a separate 6-month period runs for 
each such triggering event.
    (ii) A statement of adjustment may only be made:
    (A) Except as otherwise provided for by paragraph (c)(5) of this 
section, where the digital music provider discovers, or is notified of 
by 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 a relevant 
sound recording or musical work that is embodied in such a sound 
recording, an inaccuracy in the cumulative statement of account, or in 
the amounts of royalties owed, based on information that was not 
previously known to the digital music provider despite its good-faith 
efforts;
    (B) When making an adjustment to a previously estimated input under 
paragraph (d)(2) of this section;
    (C) Following an audit of a digital music provider that concludes 
after the cumulative statement of account is delivered and that has the 
result of affecting the computation of the royalties payable by the 
digital music provider (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
    (D) In response to a change in applicable rates or terms under part 
385 of this title.
    (7) A statement of adjustment must be certified in the same manner 
as a cumulative statement of account under paragraph (j) of this 
section.
    (l)(1) Subject to the provisions of 17 U.S.C. 115, a digital music 
provider 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 required to be transferred to 
the mechanical licensing collective for the digital music provider to 
be eligible for the limitation on liability described in 17 U.S.C. 
115(d)(10). The procedures surrounding the certification requirements 
of paragraph (j) 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 digital music provider (and, if different, the trade or consumer-
facing brand name(s) of the services(s), including any specific 
offering(s), through which the digital music provider engages, or has 
engaged at any time during the period identified in paragraph (c)(1) of 
this section, 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.
    (m) Each digital music provider shall, for a period of at least 
seven years from the date of delivery of a cumulative statement of 
account or statement of adjustment 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 statement (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 statement containing the final adjustment of 
such input).

    Dated: October 30, 2020.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2020-24528 Filed 11-4-20; 8:45 am]
BILLING CODE 1410-30-P