Determination and Allocation of Initial Administrative Assessment To Fund Mechanical Licensing Collective, 6568-6571 [2020-29194]

Agencies

• Copyright Royalty Board, Library of Congress
• Library of Congress

[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Rules and Regulations]
[Pages 6568-6571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29194]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 390

[Docket No. 19-CRB-0009 AA]


Determination and Allocation of Initial Administrative Assessment 
To Fund Mechanical Licensing Collective

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Final rule; amended determination.

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SUMMARY: The Copyright Royalty Judges are amending regulations to 
revise the allocation of the initial administrative assessment To fund 
the mechanical licensing collective.

DATES: Effective: January 22, 2021.

ADDRESSES: Docket: For access to the docket to read submitted 
documents, go to eCRB, the Copyright Royalty Board's electronic filing 
and case management system at https://app.crb.gov/ and search for 
docket number 19-CRB-0009 AA.

FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist, 
by telephone at (202) 707-7658 or by email at [email protected].

SUPPLEMENTARY INFORMATION: On July 8, 2019, the Copyright Royalty Board 
initiated the Determination and Allocation of Initial Administrative 
Assessment to Fund Mechanical Licensing Collective proceeding by notice 
published in the Federal Register at 84 FR 32475, pursuant to the Orrin 
G. Hatch-Bob Goodlatte Music Modernization Act, Public Law 115-264, 132 
Stat. 3676 (Oct. 11, 2018), 17 U.S.C. 115(d)(7)(D)(vi) and 801(b)(8) 
(2018). The purpose of this proceeding was to determine the initial 
administrative assessment that digital music providers and any 
significant nonblanket licensees must pay to fund the collective total 
costs of the mechanical licensing collective. Pursuant to a settlement 
of that proceeding, the Copyright Royalty Judges (``Judges'') adopted a 
negotiated agreement that had been agreed to by the mechanical 
licensing collective (MLC) and the digital licensee coordinator (DLC) 
as to both the amount of the assessment and the method of allocation of 
that assessment among digital music providers and significant 
nonblanket licensees and published final regulations implementing that 
settlement. See 85 FR 832 (Jan. 8, 2020); see also 37 CFR 390.
    On December 18, 2020, the DLC and the MLC jointly filed a motion 
with the Judges to modify the terms of implementation of the initial 
administrative assessment, invoking the Judges' authority under 17 
U.S.C. 115(d)(7)(D)(vi) which gives the Judges ``continuing authority 
to amend a determination of an administrative assessment . . . to 
modify the terms of implementation, for good cause.'' In particular, 
the motion sought modification of the existing regulations to provide a 
revised method of allocation of the administrative assessment to 
provide flat fee rates for smaller licensees and services that 
exclusively operate download stores under pass-through licenses 
received from record labels. The motion also sought certain 
clarifications and technical changes in terms based upon the DLC and 
MLC's improved understanding of operational needs gained since the 
initial administrative assessment was adopted. The proposed amendments 
do not affect the amount of the assessments.
    Based on the representations that the current allocation 
methodology could have ``significant impacts on smaller Licensees'', 
that the revised allocation methodology ``is specifically calculated to 
address market participation by smaller Licensees and pass-through 
download stores in an equitable manner, and has support from a diverse 
cross-section of the Licensee industry'', and that the MLC also 
supports the amendments and has determined that they are administrable, 
the Judges find good cause to amend the regulations pursuant to their 
authority under 17 U.S.C. 115(d)(7)(D)(vi).

List of Subjects in 37 CFR Part 390

    Copyright, Licensing and registration, Music, Phonorecords, 
Recordings, Royalties.

Final Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges amend 37 CFR part 390 as follows:

PART 390--AMOUNTS AND TERMS FOR ADMINISTRATIVE ASSESSMENTS TO FUND 
MECHANICAL LICENSING COLLECTIVE

0
1. The authority citation for part 390 continues to read as follows:

    Authority: 17 U.S.C. 115, 801(b).


0
2. Revise Sec.  390.1 to read as follows:


Sec.  390.1  Definitions.

    Administrative assessment has the meaning set forth in 17 U.S.C. 
115(e)(3).
    Aggregate Sound Recordings Count means the sum of the Unique Sound 
Recordings Counts of each and every Allocated Licensee, calculated over 
the respective Quarterly Allocation calculation period.
    Allocated Licensees mean licensees as set forth in Sec.  390.3(a) 
who are allocated an additional share of assessments beyond the annual 
minimum fee.
    Allocated Licensee Assessment Pool means an amount equaling 50% of 
each Annual Assessment and Quarterly Allocation.

[[Page 6569]]

    Annual Assessment means the administrative assessment for each 
calendar year beginning with the calendar year 2021.
    Annual Calculation Period means the calculation period for annual 
minimum fees, as set forth in Sec.  390.3(b).
    Annual minimum fee means the minimum amount each Licensee shall pay 
for each Annual Assessment period, as set forth in Sec.  390.3.
    Blanket Licensee means a digital music provider that is engaged, in 
all or in part, in covered activities pursuant to a compulsory blanket 
license described in 17 U.S.C. 115(d).
    Certified Minimum Fee Disclosure means a Licensee's certified 
statement setting forth its Unique Sound Recordings Count for the 
respective calculation period.
    Covered activity has the meaning set forth in 17 U.S.C. 115(e)(7).
    Digital licensee coordinator or DLC has the meaning set forth in 17 
U.S.C. 115(e)(9).
    ECI means the Employment Cost Index for total compensation (not 
seasonally adjusted), all civilian workers, as published on the website 
of the United States Department of Labor, Bureau of Labor Statistics, 
for the most recent 12-month period for which data are available on the 
date that is 60 days prior to the start of the calendar year.
    Flat Fee Licensees mean licensees as set forth in Sec.  390.3(a) 
who are not allocated an additional share of assessments beyond the 
annual minimum fee.
    License availability date has the meaning set forth in 17 U.S.C. 
115(e)(15).
    Licensee means either a Blanket Licensee or a Significant 
Nonblanket Licensee.
    Mechanical licensing collective or MLC has the meaning set forth in 
17 U.S.C. 115(e)(18).
    New Licensee means a Licensee that begins engaging in covered 
activities on or after the license availability date.
    Notice of license has the meaning set forth in 17 U.S.C. 
115(e)(22).
    Notice of nonblanket activity has the meaning set forth in 17 
U.S.C. 115(e)(23).
    Quarterly Allocation means each of four equal parts of each Annual 
Assessment, to be paid on a calendar quarterly basis.
    Significant Nonblanket Licensee has the meaning set forth in 17 
U.S.C. 115(e)(31).
    Startup Assessment means the one-time administrative assessment for 
the startup phase of the MLC.
    Threshold Licensee means an Allocated Licensee that reports at 
least 7.5% of the Aggregate Sound Recordings Count of all Allocated 
Licensees.
    Threshold Licensee Assessment Pool means an amount equaling 50% of 
each Annual Assessment and Quarterly Allocation.
    Unique Sound Recordings Count means, for each Licensee, the number 
of unique sound recordings used and reported per month by such Licensee 
in Section 115 covered activities, such as would be reflected in the 
information required to be reported under 17 U.S.C. 115(d), calculated 
as a monthly average over the respective calculation period, except 
that a sound recording of a musical work that is in the public domain 
and designated as such in a monthly report of use shall not count 
towards the Licensee's Unique Sound Recordings Count. For example, a 
Licensee's Unique Sound Recordings Count for a Quarterly Allocation 
calculation period will be calculated by adding together the counts of 
unique sound recordings reported by such Licensee to the MLC during 
each month of that quarter and dividing that sum by three. A Licensee's 
Unique Sound Recordings Count for an Annual Calculation Period will be 
calculated by adding together the counts of unique sound recordings 
reported by such Licensee to the MLC during each month of that twelve-
month period and dividing that sum by twelve. In the case of a Licensee 
that was engaged in covered activities only for part of a Quarterly 
Allocation calculation period or Annual Calculation Period, the monthly 
average shall be calculated using only the calendar months that the 
Licensee was engaged in covered activities. In the case of a Licensee 
that was not engaged in covered activities during any part of a 
Quarterly Allocation calculation period or Annual Calculation Period, 
the monthly average shall be zero. Within each month's usage reports 
from a particular Licensee, a sound recording reported multiple times 
with the same metadata would be counted as a single sound recording, 
and a sound recording reported multiple times each with different 
metadata would be counted multiple times, once for each reporting with 
new or different metadata.

0
3. Revise Sec.  390.3 to read as follows:


Sec.  390.3   Annual minimum fees.

    (a) Amounts. Subject to paragraph (e) of this section, Licensees 
shall pay annual minimum fees as follows--
    (1) In general. Except as provided in paragraph (a)(2) of this 
section--
    (i) Licensees that have a Unique Sound Recordings Count of 10,000 
or less during the relevant Annual Calculation Period shall pay $2,500 
and shall be Flat Fee Licensees for the respective Annual Assessment;
    (ii) Licensees that have a Unique Sound Recordings Count of between 
10,001 and 25,000 during the relevant Annual Calculation Period shall 
pay $5,000 and shall be Flat Fee Licensees for the respective Annual 
Assessment;
    (iii) Licensees that have a Unique Sound Recordings Count of 
between 25,001 and 50,000 during the relevant Annual Calculation Period 
shall pay $10,000 and shall be Flat Fee Licensees for the respective 
Annual Assessment, where such Annual Calculation Period is for the 
Annual Assessment for the calendar year 2024 or earlier; otherwise such 
Licensees shall pay $60,000 and shall be Allocated Licensees for the 
respective Annual Assessment;
    (iv) Licensees that have a Unique Sound Recordings Count of between 
50,001 and 100,000 during the relevant Annual Calculation Period shall 
pay $20,000 and shall be Flat Fee Licensees for the respective Annual 
Assessment, where such Annual Calculation Period is for the Annual 
Assessment for the calendar year 2024 or earlier; otherwise such 
Licensees shall pay $60,000 and shall be Allocated Licensees; and
    (v) Licensees that have a Unique Sound Recordings Count greater 
than 100,000 during the relevant Annual Calculation Period shall pay an 
annual minimum fee of $60,000 and shall be Allocated Licensees for the 
respective Annual Assessment.
    (2) Download store annual fee. Licensees that engage in covered 
activities exclusively under authority obtained from licensors of sound 
recordings to make and distribute permanent downloads of musical works 
embodied in such sound recordings pursuant to individual download 
licenses or voluntary licenses shall be Flat Fee Licensees and pay the 
following amounts:
    (i) $2,500 if the Licensee has a Unique Sound Recordings Count of 
50,000 or less during the relevant Annual Calculation Period.
    (ii) $5,000 if the Licensee has a Unique Sound Recordings Count of 
between 50,001 to 100,000 during the prior Annual Calculation Period.
    (iii) $10,000 if the Licensee has a Unique Sound Recordings Count 
of between 100,001 to 250,000 during the prior Annual Calculation 
Period.
    (iv) $20,000 if the Licensee has a Unique Sound Recordings Count of 
between 250,001 to 500,000 during the prior Annual Calculation Period.
    (v) $60,000 if the Licensee has a Unique Sound Recordings Count of

[[Page 6570]]

greater than 500,000 during the prior Annual Calculation Period.
    (b) Annual Calculation Period. The calculation period for annual 
minimum fees shall be the 12-month period that ends on the September 
30th immediately preceding the start of the assessment period (e.g., 
the annual minimum fee calculation period for the 2021 Annual 
Assessment shall be October 1, 2019 to September 30, 2020).
    (c) Calculation by Licensee certification (2021 and 2022)--(1) 
2021. Each Licensee in operation on or before the license availability 
date shall submit to the MLC,--no later than February 15, 2021, its 
Certified Minimum Fee Disclosure for the 2021 annual minimum fee (i.e., 
for the period from October 1, 2019, to September 30, 2020). Each 
Licensee shall submit the appropriate annual minimum fee as calculated 
under paragraph (a) of this section for the 2021 Assessment 
simultaneously with its Certified Minimum Fee Disclosure.
    (2) 2022. Each Licensee shall submit to the MLC by November 1, 
2021, a Certified Minimum Fee Disclosure for the 2022 Assessment and 
shall pay by January 15, 2022, the appropriate annual minimum fee.
    (d) Calculation by the MLC (2023 and subsequent years). Beginning 
with the 2023 Assessment and continuing in subsequent years, the MLC 
will calculate each Licensee's annual minimum fee based on usage 
reporting received from Licensees pursuant to 17 U.S.C. 115(d)(4). The 
MLC shall send invoices for the appropriate annual minimum fee to each 
Licensee. Licensees shall pay the annual minimum fee invoices from the 
MLC by the later of:
    (1) 30 days from receipt of the invoice from the MLC; or
    (2) January 15th of the respective Annual Assessment year.
    (e) New licensees. (1) A New Licensee shall remit the lowest annual 
fee set forth in paragraph (a)(1) or (2) of this section, as 
applicable, along with its notice of license or notice of nonblanket 
activity to be attributable to the calendar year in which such Licensee 
begins engaging in covered activities.
    (2) A New Licensee shall initially be deemed a Flat Fee Licensee. 
When the MLC calculates the Quarterly Allocation with the first 
calculation period pursuant to Sec.  390.4(b) during which the New 
Licensee was engaged in covered activities, whether such activities 
were for all or part of the calculation period, the MLC shall calculate 
the New Licensee's Unique Sound Recording Count for that calculation 
period. In the event that such New Licensee has not provided timely 
reporting, the MLC may instead, in its discretion, use the most recent 
reporting from that New Licensee for such calculation. If such New 
Licensee is calculated to have a Unique Sound Recordings Count that 
exceeds the amount that would qualify it to be a Flat Fee Licensee 
under paragraph (a)(1) of this section, it shall be deemed an Allocated 
Licensee for that Quarterly Allocation and the remainder of the 
calendar year and shall be invoiced and pay the assessment as 
calculated in Sec.  390.4 for the respective quarters, with such New 
Licensee's Unique Sound Recordings Count to be included in the 
Aggregate Sound Recording Count for such quarters.
    (3) A New Licensee shall be subject to the provisions of paragraphs 
(a) through (d) of this section, as applicable, to determine the amount 
and timing of the annual minimum fees owed for the calendar year 
following the year when the Licensee begins engaging in covered 
activities, and for such purposes a New Licensee shall be treated as 
having a Unique Sound Recordings Count of zero for the Annual 
Calculation Period if it began engaging in covered activities after the 
end of the Annual Calculation Period. A New Licensee that has been 
deemed an Allocated Licensee pursuant to paragraph (e)(2) of this 
section shall be subject to the provisions of paragraphs (a) through 
(d) of this section, as applicable, to determine its status as a Flat 
Fee Licensee or Allocated Licensee, for calendar years following the 
calendar year in which it is first deemed an Allocated Licensee.

0
4. Revise Sec.  390.4 to read as follows:


Sec.  390.4  Annual Assessment allocation and payment.

    (a) Allocation formula. Each Annual Assessment shall be divided 
into four equal Quarterly Allocations, after first subtracting annual 
fees payable by Flat Fee Licensees. The MLC may adjust Quarterly 
Allocations to compensate for any adjustments to the Flat Fee Licensee 
annual fees that occur after the initial division of the Annual 
Assessment. Each Quarterly Allocation shall be allocated and paid on a 
calendar quarterly basis. Each Quarterly Allocation shall be divided 
into two equal parts, allocated among Licensees according to the 
following formula:
    (1) Allocated Licensee Assessment Pool. The Allocated Licensee 
Assessment Pool shall be allocated on a pro rata basis across all 
Allocated Licensees based on each Licensee's share of the Aggregate 
Sound Recordings Count.
    (2) Threshold Licensee Assessment Pool. The Threshold Licensee 
Assessment Pool shall be allocated on a pro rata basis across Threshold 
Licensees based on each Threshold Licensee's share of the aggregate 
Unique Sound Recordings Counts of all Threshold Licensees. In the event 
that no Threshold Licensees exist for a Quarterly Allocation, the 
Threshold Licensee Assessment Pool shall become payable by all 
Allocated Licensees in the same manner as the Allocated Licensee 
Assessment Pool.
    (b) Calculation periods and timing. The calculation period for each 
Quarterly Allocation shall be the three-month period that ends three 
months prior to the start of the respective quarter, except that the 
calculation period for the Quarterly Allocation for the first and 
second quarters of 2021 shall be the same as for the annual minimum fee 
for the 2021 Annual Assessment and shall be calculated based upon the 
information provided in the Certified Minimum Fee Disclosures, as 
required by this part. The MLC shall make all calculations for each 
respective period based upon the reporting for such period received 
from Licensees as of the time of calculation by the MLC, which 
calculation time shall not be earlier than the legal deadline for 
submission of reporting by Licensees for the respective period. In the 
event that a Licensee has not provided timely reporting for the 
respective calculation period at the time the MLC calculates a 
Quarterly Allocation, the MLC may instead use, in its discretion, the 
most recent reporting from that Licensee to determine that Licensee's 
Unique Sound Recordings Count, for the purposes of calculating the 
Quarterly Allocation.
    (c) Invoicing and payment of allocation--(1) Deadline for payment. 
(i) Invoices from the MLC for Quarterly Allocation shares shall be 
payable pursuant to the MLC invoice no later than 45 days after receipt 
of the invoice from the MLC.
    (ii) Invoices from the MLC to Licensees shall be deemed received on 
the business day after electronic transmission.
    (2) Format of invoices. (i) The quarterly invoices issued by the 
MLC shall include at least the following information, where applicable:
    (A) Invoice issuance date;
    (B) Invoice payment due date;
    (C) Amount owed, by share of Allocated Licensee Assessment Pool and 
Threshold Licensee Assessment Pool;
    (D) Allocation of Startup Assessment;
    (E) Offset of minimum fee payment against quarterly assessment; and
    (F) Amount of credit for un-recouped minimum fee.

[[Page 6571]]

    (ii) Invoices issued as a result of an allocation adjustment shall 
include all of the information set forth in paragraphs (c)(2)(i)(A) 
through (F) of this section that may be relevant, as well as an 
explanation of the change from the prior invoices that are affected, 
and the reason(s) for the adjustment.
    (d) Late reporting. The MLC shall promptly notify the DLC of any 
known Licensees who have not timely submitted reports of usage as 
required each month pursuant to 17 U.S.C. 115(d) and 37 CFR part 210.
    (e) Recalculation of Allocated Assessment invoices. The MLC may, in 
its discretion, recalculate allocations and adjust prior invoices, with 
the written consent of the DLC, within twelve months after the initial 
issuance of such invoices, in circumstances including, but not limited 
to, where new usage reporting is received or where a correction would 
alter one or more of any Licensee's Quarterly Allocation shares by at 
least 10%.
    (f) Recoupment of minimum-fee. Each Allocated Licensee's minimum 
fee will be offset against its Quarterly Allocation shares, if any, and 
additional payment will not be due from a Licensee unless and until its 
total Quarterly Allocation shares exceed its annual minimum fee 
payment. To the extent that an Allocated Licensee's minimum fee exceeds 
that Licensee's Quarterly Allocation shares for a given Assessment 
period, the excess amounts will be pooled and credited pro rata to all 
Allocated Licensees based on the Quarterly Allocation shares for the 
first quarter of the following year.
    (g) Reports to DLC. The MLC shall report to the DLC no later than 
75 days after the end of every quarter the Aggregate Sound Recordings 
Count for that quarter.
    (h) Startup Assessment allocation and payment. The Startup 
Assessment shall be allocated and paid in the same manner and on the 
same dates as the 2021 Annual Assessment, including as to each of the 
applicable provisions above, and shall be separately itemized in 
invoices from the MLC to Licensees. Pursuant to Sec.  390.3, a single 
annual minimum fee shall be assessed for the 2021 Annual Assessment, 
and no additional annual minimum fee shall be assessed for the Startup 
Assessment.

    Dated: December 29, 2020.
Jesse M. Feder,
Chief Copyright Royalty Judge.

    Approved by:

Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2020-29194 Filed 1-21-21; 8:45 am]
BILLING CODE 1410-72-P