Treatment of Confidential Information by the Mechanical Licensing Collective and the Digital Licensee Coordinator, 9003-9021 [2021-02913]

Download as PDF Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations may be appropriate to make other incremental changes going forward, it is important that we affirm the established regulatory program for SEFs to maintain these benefits and facilitate further expansion of this framework. I thank the staff of the Division of Market Oversight for their work on these two rules and their helpful engagement with my office. [FR Doc. 2020–28943 Filed 2–10–21; 8:45 am] BILLING CODE 6351–01–P LIBRARY OF CONGRESS Copyright Office 37 CFR Part 210 [Docket No. 2020–7] Treatment of Confidential Information by the Mechanical Licensing Collective and the Digital Licensee Coordinator U.S. Copyright Office, Library of Congress. ACTION: Interim rule. AGENCY: The U.S. Copyright Office is issuing an interim rule regarding the protection of confidential information by the mechanical licensing collective and the digital licensee coordinator under title I of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act. After soliciting public comments through a notification of inquiry and a notice of proposed rulemaking, the Office is now issuing interim regulations identifying appropriate procedures to ensure that confidential, private, proprietary, or privileged information contained in the records of the mechanical licensing collective and the digital licensee coordinator is not improperly disclosed or used. DATES: Effective March 15, 2021. FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and Associate Register of Copyrights, by email at regans@copyright.gov or Anna B. Chauvet, Associate General Counsel, by email at achau@copyright.gov. Each can be contacted by telephone at (202) 707–8350. SUPPLEMENTARY INFORMATION: SUMMARY: khammond on DSKJM1Z7X2PROD with RULES I. Background Law 115–264, 132 Stat. 3676 (2018). VerDate Sep<11>2014 15:43 Feb 10, 2021 A. Regulatory Authority Granted to the Office The MMA specifically directs the Office to ‘‘adopt regulations to provide for the appropriate procedures to ensure that confidential, private, proprietary, or privileged information contained in the records of the mechanical licensing collective and digital licensee coordinator is not improperly disclosed or used, including through any disclosure or use by the board of directors or personnel of either entity, and specifically including the unclaimed royalties oversight committee and the dispute resolution committee of the mechanical licensing collective.’’ 6 The MMA additionally makes several explicit references to the Office’s regulations governing the treatment of confidential and other sensitive information, including with respect to: (1) ‘‘all material records of the operations of the [MLC]’’; 7 (2) steps 2 84 On October 11, 2018, the president signed into law the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (‘‘MMA’’) which, among other things, substantially modifies the compulsory ‘‘mechanical’’ license for making and distributing phonorecords of nondramatic musical works under 17 U.S.C. 115.1 It does so by switching 1 Public from a song-by-song licensing system to a blanket licensing regime administered by a mechanical licensing collective (‘‘MLC’’), which became available on January 1, 2021 (the ‘‘license availability date’’). In July 2019, the Copyright Office (the ‘‘Office’’) designated an entity to serve as the MLC, as required by the MMA.2 Among other things, the MLC is responsible for collecting and distributing royalties under the blanket license, engaging in efforts to identify musical works embodied in particular sound recordings and to identify and locate the copyright owners of such musical works, and administering a process by which copyright owners can claim ownership of musical works (or shares of such works).3 It also must ‘‘maintain the musical works database and other information relevant to the administration of licensing activities under [section 115].’’ 4 The Office has also designated a digital licensee coordinator (‘‘DLC’’) to represent licensees in proceedings before the Copyright Royalty Judges (‘‘CRJs’’) and the Office, to serve as a non-voting member of the MLC, and to carry out other functions.5 Jkt 253001 FR 32274 (July 8, 2019). U.S.C. 115(d)(3)(C)(i)(V). 4 Id. at 115(d)(3)(C)(i)(IV). 5 Id. at 115(d)(5)(B); 84 FR 32274 (July 8, 2019); see also 17 U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C). 6 17 U.S.C. 115(d)(12)(C). 7 Id. at 115(d)(3)(M)(i) (‘‘The mechanical licensing collective shall ensure that all material records . . . are preserved and maintained in a secure and reliable manner, with appropriate commercially reasonable safeguards against unauthorized access, copying, and disclosure, and subject to the confidentiality requirements prescribed by the Register of Copyrights under paragraph (12)(C) for 3 17 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 9003 the MLC must take to ‘‘safeguard the confidentiality and security of usage, financial, and other sensitive data used to compute market shares’’ when distributing unclaimed accrued royalties; 8 (3) steps the MLC and DLC must take to ‘‘safeguard the confidentiality and security of financial and other sensitive data shared’’ by the MLC with the DLC about significant nonblanket licensees; 9 (4) voluntary licenses administered by the MLC; 10 (5) examination of the MLC’s ‘‘books, records, and data’’ pursuant to audits by copyright owners; 11 and (6) examination of digital music providers’ ‘‘books, records, and data’’ pursuant to audits by the MLC.12 Beyond these specific directives, Congress invested the Office with ‘‘broad regulatory authority’’ 13 to ‘‘conduct such proceedings and adopt such regulations as may be necessary or appropriate to effectuate the provisions of [the MMA pertaining to the blanket license].’’ 14 The legislative history contemplates that the Office will ‘‘thoroughly review[ ]’’ 15 policies and procedures established by the MLC and its three committees, which the MLC is statutorily bound to ensure are ‘‘transparent and accountable,’’ 16 and promulgate regulations that ‘‘balance[ ] the need to protect the public’s interest with the need to let the new collective operate without over-regulation.’’ 17 Congress acknowledged that ‘‘[a]lthough the legislation provides specific criteria for the collective to operate, it is to be expected that situations will arise that were not contemplated by the legislation,’’ and that ‘‘[t]he Office is expected to use its best judgement in determining the a period of not less than 7 years after the date of creation or receipt, whichever occurs later.’’). 8 Id. at 115(d)(3)(J)(i)(II)(bb). 9 Id. at 115(d)(6)(B)(ii). 10 Id. at 115(d)(11)(C)(iii). 11 Id. at 115(d)(3)(L)(i)(II). 12 Id. at 115(d)(4)(D)(i)(II). 13 H.R. Rep. No. 115–651, at 5–6 (2018); S. Rep. No. 115–339, at 5 (2018); Report and Section-bySection Analysis of H.R. 1551 by the Chairmen and Ranking Members of Senate and House Judiciary Committees, at 4 (2018), https://www.copyright.gov/ legislation/mma_conference_report.pdf (‘‘Conf. Rep.’’). 14 17 U.S.C. 115(d)(12)(A). 15 H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. No. 115–339, at 5, 15; Conf. Rep. at 4, 12. The Conference Report further contemplates that the Office’s review will be important because the MLC must operate in a manner that can gain the trust of the entire music community, but can only be held liable under a standard of gross negligence when carrying out certain of the policies and procedures adopted by its board. Conf. Rep. at 4. 16 17 U.S.C. 115(d)(3)(D)(ix)(I)(aa). 17 H.R. Rep. No. 115–651, at 5–6, 14; S. Rep. No. 115–339, at 5, 15; Conf. Rep. at 4, 12. E:\FR\FM\11FER1.SGM 11FER1 9004 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations appropriate steps in those situations.’’ 18 Legislative history further states that ‘‘[t]he Copyright Office has the knowledge and expertise regarding music licensing through its past rulemakings and recent assistance to the Committee[s] during the drafting of this legislation.’’ 19 Accordingly, in designating the MLC as the entity to administer the section 115 license, the Office stated that it ‘‘expects ongoing regulatory and other implementation efforts to . . . extenuate the risk of selfinterest,’’ and that ‘‘the Register intends to exercise her oversight role as it pertains to matters of governance.’’ 20 khammond on DSKJM1Z7X2PROD with RULES B. Rulemaking Background On September 24, 2019, the Office issued a notification of inquiry (‘‘NOI’’) seeking, among other things, public input on any issues that should be considered regarding the treatment of confidential and other sensitive information under the blanket license regime.21 In response, the Office received suggested regulatory language from both the DLC and the MLC, and a few comments about confidentiality more generally from other stakeholders. The MLC’s approach generally proposed requiring the MLC and the DLC to implement confidentiality policies to prevent improper or unauthorized use of various categories of confidential information, but lacked specific requirements for those policies or a proposed definition of ‘‘confidential information.’’ 22 By contrast, the DLC contended that the MLC’s proposal, by investing the MLC and DLC with broad discretion to implement policies regarding confidentiality, ‘‘would inappropriately redelegate that authority [granted to the Register] to itself and 18 H.R. Rep. No. 115–651, at 14; S. Rep. No. 115– 339, at 15; Conf. Rep. at 12. 19 H.R. Rep. No. 115–651, at 14; S. Rep. No. 115– 339, at 15; Conf. Rep. at 12. 20 84 FR at 32280. 21 84 FR 49966, 49973 (Sept. 24, 2019). All rulemaking activity, including public comments, as well as educational material regarding the Music Modernization Act, can currently be accessed via navigation from https://www.copyright.gov/musicmodernization/. Specifically, comments received in response to the NOI are available at https:// beta.regulations.gov/document/COLC-2019-00020001 and comments received in response to the notice of proposed rulemaking are available at https://beta.regulations.gov/document/COLC-20200004-0001. Guidelines for ex parte communications, along with records of such communications, are available at https:// www.copyright.gov/rulemaking/mmaimplementation/ex-parte-communications.html. References to these comments are by party name (abbreviated where appropriate), followed by ‘‘Initial NOI Comment,’’ ‘‘Reply NOI Comment,’’ ‘‘NPRM Comment,’’ ‘‘Letter,’’ or ‘‘Ex Parte Letter,’’ as appropriate. 22 See MLC Initial NOI Comment at 29–30, App. H. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 DLC.’’ 23 The DLC maintained that the Office’s regulations should provide necessary guidance, not merely give the MLC and DLC discretion to create their own policies.24 On April 22, 2020, the Office issued a notice of proposed rulemaking (‘‘NPRM’’) regarding the treatment of confidential and other sensitive information under the blanket license regime, and solicited public comments on the proposed rule, including comments about the use of confidentiality designations and nondisclosure agreements.25 Overall, the Office proposed to adopt specific confidentiality regulations in order to assure those providing confidential and commercially sensitive information to the MLC that this information will be protected, as well as ‘‘provide the ground rules for the relationship between DLC, the MLC, and its respective members.’’ 26 In response to the proposed rule, the DLC found its ‘‘basic framework’’ to be ‘‘sound.’’ 27 The MLC noted that ‘‘it is critical that confidential information be maintained with appropriate safeguards,’’ and offered proposed adjustments to certain provisions.28 Another commenter expressed appreciation for the Office’s approach ‘‘in distinguishing what is commonly thought of as generic ‘confidential information’ and what ought to be confidential information for the DLC, [t]he MLC, their respective vendors and in particular the MLC’s three Statutory Committees.’’ 29 Having carefully considered the comments and other record materials in this proceeding, the Office is now issuing an interim rule. The Office has determined that it is prudent to promulgate this rule on an interim basis in order to retain added flexibility for responding to unforeseen circumstances. In some cases, the Office has adopted certain provisions in light of conflicting approaches suggested by various stakeholders. At times, the Office has opted for the more conservative approach to new issues presented in this rulemaking to ward against inappropriate disclosure or use of sensitive business information in the first instance, concluding that subsequent adjustment of an overly cautious rule is preferable to later addressing types of information that have already been shared. The Office 23 DLC Reply NOI Comment at 27. id. at 28. 25 85 FR 22559 (Apr. 22, 2020). 26 Id. at 22561 (quoting DLC Initial NOI Comment at 3). 27 DLC NPRM Comment at 1. 28 MLC NPRM Comment at 2. 29 Castle NPRM Comment at 1. 24 See PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 will consider modifications as needed in response to new evidence, unforeseen issues, or where something is otherwise not functioning as intended as the MLC starts receiving confidential information from digital music providers and copyright owners for purposes of administering the section 115 license. In issuing this interim rule, the Office is mindful of Congress’s overall goals for the MMA to enhance transparency, accountability, and public access to musical work ownership information.30 The Office thus intends for its interim confidentiality rule to complement separate regulations regarding transparency, accountability, and public accessibility, which were adopted to prescribe the categories of information to be included in the public musical works database and rules related to the usability, interoperability, and usage restrictions of the database, as well as require the MLC to disclose certain categories of information in its statutorily-required annual reports and one-time written public update in December 2021 regarding its operations.31 II. Interim Rule The interim rule adopts certain provisions of the proposed rule and makes a number of adjustments in response to public comments regarding the definition of ‘‘confidential information’’ and the use and disclosure of such information. Because the MMA does not define the term ‘‘confidential,’’ the interim rule defines ‘‘confidential information’’— both by what it is and what it is not. The definition of ‘‘confidential information’’ is adjusted to mean sensitive financial or business information disclosed by DMPs, significant non-blanket licensees, or copyright owners (or any of their authorized agents or vendors) to the 30 See, e.g., 17 U.S.C. 115(d)(3)(E), (e)(20); id. at 115(d)(3)(E)(v) (stating the database must ‘‘be made available to members of the public in a searchable, online format, free of charge’’); 164 Cong. Rec. S501, 504 (daily ed. Jan. 24, 2018) (statement of Sen. Chris Coons) (‘‘This important piece of legislation will bring much-needed transparency and efficiency to the music marketplace.’’). 31 See 37 CFR 210.31, 210.32, 210.33; DLC Ex Parte Letter Feb. 24, 2020 (‘‘DLC Ex Parte Letter #2’’) at 5 (acknowledging that the ‘‘MLC will be under certain legal transparency requirements,’’ and that confidentiality regulations should ‘‘not stand in the way of that transparency’’); The International Confederation of Societies of Authors and Composers (‘‘CISAC’’) & The International Organisation representing Mechanical Rights Societies (‘‘BIEM’’) Reply NOI Comment at 2 (stating that ‘‘musical works information populated in the database can include confidential, personal and/or sensitive data, and as such, the Regulations should ensure the required balance between the public interest in having transparent access to such information and the protection of commercially sensitive information and personal data’’). E:\FR\FM\11FER1.SGM 11FER1 khammond on DSKJM1Z7X2PROD with RULES Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations MLC or DLC, as opposed to information provided to the MLC and DLC more generally (e.g., supply contracts). The definition is also adjusted to generally refer to ‘‘information’’ (as opposed to ‘‘documents and information’’) to clarify that a document containing both confidential and non-confidential information should be extended protection, though the rule retains provisions identifying specific documents that the Office’s regulations require to be disclosed (e.g., notices of license) to clarify that they are not subject to the interim rule’s restrictions on disclosure and use. As proposed by the MLC, ‘‘confidential information’’ does not include any top-level compilation data presented in anonymized format that does not allow identification of such data as belonging to any particular digital music provider, significant nonblanket licensee, or copyright owner. At the DLC’s suggestion, the rule creates categories of ‘‘MLC Internal Information’’ and ‘‘DLC Internal Information,’’ to separately address the use and disclosure of sensitive financial or business information about the MLC’s and DLC’s internal operations (as opposed to confidential information disclosed to the MLC and DLC by third parties). The interim rule creates various restrictions on the disclosure and use of confidential information by the MLC and DLC, as well as their employees, agents, consultants, vendors, and independent contractors, and members of their boards of directors and committees. In response to concerns about competitive harm that could result from the improper disclosure of confidential information from DMPs and copyright owners, the interim rule states that the MLC and DLC must limit disclosure of confidential information to their employees, agents, consultants, vendors, and independent contractors who are engaged in the entities’ respective authorized functions and who require access to confidential information for the purpose of performing their duties during the ordinary course of their work. The MLC and DLC are prohibited from disclosing confidential information to members of their boards of directors and committees, and from using confidential information for any purpose other than their authorized functions under section 115. Consistent with the proposed rule, the MLC and DLC may disclose confidential information to qualified auditors or outside counsel under the statutorily-permitted audits, and to the Office, Copyright Royalty Board, and federal courts, or when such disclosure VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 is required by court order or subpoena, subject to an appropriate protective order. Notwithstanding any restrictions, the rule states that the MLC may fulfill its disclosure obligations under section 115 (e.g., delivering royalty statements to copyright owners or communicating with the DLC). In keeping with the Office’s preexisting rule governing comparable royalty statement reporting requirements under the song-by-song section 115 license, the interim rule does not place any confidentiality restrictions on copyright owners once they receive royalty statements from the MLC. The rule clarifies, however, that royalty statements to copyright owners should not include confidential information that does not relate to the recipient copyright owner or relevant songwriter in addition to the minimum information required by the Office’s regulations. Because ‘‘MLC Internal Information’’ and ‘‘DLC Internal Information’’ do not relate to sensitive business information disclosed by DMPs, significant nonblanket licensees, or copyright owners, the rule does not impose strict disclosure requirements as it does with ‘‘confidential information.’’ Instead, it creates categories of individuals to whom the MLC and DLC may disclose ‘‘MLC Internal Information’’ and/or ‘‘DLC Internal Information’’ (subject to a confidentiality agreement), giving the MLC and DLC some flexibility if they decide additional disclosure is necessary. For example, the interim rule states that the MLC may disclose MLC Internal Information to members of the MLC’s board of directors and committees, including representatives of the DLC who serve on the board or committees. Should the MLC decide to disclose MLC Internal Information to a contractor, the rule does not prohibit the MLC from doing so; it states that the MLC may disclose MLC Internal Information to other individuals in its discretion, subject to the adoption of reasonable confidentiality policies. The rule contains a parallel provision for the DLC and DLC Internal Information. It also permits representatives of the DLC who serve on the MLC’s board of directors or committees and who receive MLC Internal Information to share such information (subject to a confidentiality agreement) with employees, agents, consultants, vendors, and independent contractors of the DLC who require access to MLC Internal Information for the purpose of performing their duties.32 32 In a parallel rulemaking regarding notices of license, notices of nonblanket activity, and reports of usage and payment, the Office expressed an intention to adjust those regulations to directly PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 9005 These issues are discussed in turn below. A. Defining ‘‘Confidential Information’’ 1. ‘‘Confidential Information’’ as Defined Under the Proposed Rule The MMA does not define the term ‘‘confidential.’’ 33 The proposed rule defined ‘‘confidential information’’ as including ‘‘sensitive financial or business information, including information relating to financial or business terms that could be used for commercial advantage’’ and ‘‘trade secrets,’’ and enumerated categories of information and documents expressly intended by the statute to be covered by the Office’s regulations governing the treatment of confidential and other sensitive information,34 including with respect to‘‘the confidentiality and security of usage, financial, and other sensitive data used to compute market shares,’’ 35 ‘‘financial and other sensitive data shared’’ by the MLC to the DLC about significant nonblanket licensees,36 and voluntary licenses.37 The proposed rule also defined ‘‘confidential information’’ as including ‘‘sensitive personal information, including but not limited to, an individual’s Social Security number, taxpayer identification number, financial account number(s), or date of birth (other than year).’’ 38 As these are potentially broad categories, the proposed rule also refined the definition of ‘‘confidential information’’ by excluding information that is not confidential. Borrowing from current regulations governing SoundExchange in connection with the section 114 license, and as recommended by the DLC, the proposed reference the Office’s confidentiality regulations once they had taken effect. 85 FR 58114, 58140 n.365 (Sept. 17, 2020). The Office has now determined that such adjustment is not necessary. 33 See 17 U.S.C. 115(d)(12)(C), (e). 34 85 FR at 22562. 35 17 U.S.C. 115(d)(3)(J)(i)(II)(bb); see H.R. Rep. No. 115–651, at 27 (‘‘Unclaimed royalties are to be distributed based upon market share data that is confidentially provided to the collective by copyright owners.’’); S. Rep. No. 115–339, at 24 (same); Conf. Rep. at 20 (same). CISAC & BIEM contend that creators’ percentage share should not be made publicly accessible in the database. CISAC & BIEM NPRM Comment at 2. The statute, however, contemplates such information being made publicly available in the database. 17 U.S.C. 115(d)(3)(E)(ii)– (iii). 36 17 U.S.C. 115(d)(6)(B)(ii). 37 Id. at 115(d)(11)(C)(iii). Music Artists Coalition (‘‘MAC’’) contends that ‘‘data relating to market share determinations and voluntary licenses’’ should be publicly shared. MAC Reply NOI Comment at 2–3. The statute, however, specifically contemplates such information being treated as confidential information. Id. at 115(d)(3)(J)(i)(II)(bb), (d)(11)(C)(iii). 38 85 FR at 22562. E:\FR\FM\11FER1.SGM 11FER1 9006 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations rule stated that ‘‘confidential information’’ excludes ‘‘documents or information that may be made public by law’’ or ‘‘that at the time of delivery to the [MLC] or [DLC] is public knowledge,’’ and that ‘‘[t]he party seeking information from the [MLC] or [DLC] based on a claim that the information sought is a matter of public knowledge shall have the burden of proving that fact.’’ 39 Because documents and information may be subsequently disclosed by the party to whom the information would otherwise be considered confidential, or by the MLC or DLC pursuant to participation in proceedings before the Office or Copyright Royalty Judges (including proceedings to redesignate the MLC or DLC), the proposed rule also excluded such information and documents from the definition of ‘‘confidential information.’’ 40 Recognizing that important restrictions on the disclosure of information are cabined by equally significant countervailing considerations of transparency in reporting certain types of information, the proposed rule also excluded the following from the definition of ‘‘confidential information’’: Information made publicly available through notices of license,41 notices of nonblanket activity, the MLC’s online database, and information disclosable through the MLC bylaws, annual report, audit report, or the MLC’s adherence to transparency and accountability with respect to the collective’s policies or practices, including its anticommingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii), (vii), and (ix).42 In addition, adopting a suggestion from the MLC, the proposed rule excluded from the meaning of ‘‘confidential information’’ any top-level compilation data presented in anonymized format that does not allow identification of such data as belonging to any digital music provider, significant nonblanket licensee, or copyright owner.43 Finally, 39 Id.; DLC Reply Add. at A–20. FR at 22562. 41 Consistent with the Office’s then-proposed rule regarding notices of license, the definition of confidentiality excluded any addendum to general notices of license that provides a description of any applicable voluntary license or individual download license the digital music provider is, or expects to be, operating under concurrently with the blanket license that is sufficient for the mechanical licensing collective to fulfill its obligations under 17 U.S.C. 115(d)(3)(G)(i)(I)(bb). 85 FR at 22567; see 85 FR 22518 (Apr. 22, 2020). 42 85 FR at 22562. 43 Id.; see MLC Initial NOI Comment at 30 (proposing that ‘‘the MLC, when providing necessary data to its board or committee Members, will only share proprietary or confidential data as necessary, and in a format that is anonymized and khammond on DSKJM1Z7X2PROD with RULES 40 85 VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 the proposed rule clarified that documents or information created by a party will not be considered confidential with respect to usage of that information by the same party (e.g., documents created by the DLC should not be considered confidential with respect to the DLC).44 As discussed below, the interim rule adjusts the definition of ‘‘confidential information’’ based on public comments. 2. Royalty Statements Provided to Musical Work Copyright Owners by the MLC The DLC contends that the definition of ‘‘confidential information’’ should expressly include ‘‘any sensitive data provided by digital music providers related to royalty calculations (including, but not limited to, service revenues, subscriber counts, and performing rights organization fee information).’’ 45 The DLC states that ‘‘statements of account delivered to copyright owners contain highly sensitive information’’ such as ‘‘service revenues, subscriber counts, and amounts paid to performing rights organizations,’’ and ‘‘this information is competitively sensitive between digital music providers, in that it provides extremely granular detail about each digital music provider’s operations and performance.’’ 46 The DLC asserts that ‘‘[i]f the Office places no restrictions on copyright owners’ use of the sensitive digital music provider information they receive from the MLC on statements of account, the Office will have failed to comply with [the] unambiguous congressional direction’’ to ensure that confidential, private, proprietary, or privileged information contained in the records of the mechanical licensing collective is not improperly disclosed or used.47 While recognizing that ‘‘[c]opyright owners are entitled to know how their royalties have been calculated,’’ 48 the DLC proposes regulatory language that would require copyright owners’ access to be contingent upon ‘‘a written confidentiality agreement with the MLC that is enforceable by the licensee,’’ 49 as ‘‘this sensitive data [should] be used only to provide transparency into how mechanical royalties have been cannot be identified as belonging to any particular copyright owner, in order to prevent any disclosure to potential competitors’’); MLC Reply NOI Comment App. at 27. 44 85 FR at 22562. 45 DLC NPRM Comment at 5, Add. A–1. 46 Id. at 4. 47 Id. 48 Id. 49 Id. at 5. PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 calculated and paid,’’ and not ‘‘for other, unrelated purposes.’’ 50 By contrast, the MLC, the National Music Publishers’ Association (‘‘NMPA’’), the Songwriters of North America (‘‘SONA’’), and the Future of Music Coalition (‘‘FMC’’) maintain that receipt of statements of account should not impose confidentiality restrictions on copyright owners, with SONA ‘‘seek[ing] to ensure that the final confidentiality rule . . . does not become a basis to withhold records from copyright owners, self-published songwriters, and their authorized representatives.’’ 51 Likewise, the MLC expressed concern that the proposed rule ‘‘leaves unclear the right of copyright owners to receive the royalty pool calculation information that they have always received in royalty statements.’’ 52 The MLC would exclude from the definition of ‘‘confidential information,’’ ‘‘[i]nformation concerning the calculation of the payable royalty pool and the per-work royalty allocation under part 385 to be reported in royalty statements to copyright owners under 37 CFR 210.29(c)(1)(vi).’’ 53 The MLC also proposes that the ‘‘MLC and the DLC may disclose Confidential Information to’’ ‘‘[c]opyright owners, including their agents, whose works were used in covered activities, in connection with royalty payments and statements.’’ 54 50 Id. 51 SONA NPRM Comment at 4 (‘‘[R]oyalty recipients need to be able to use and share royalty information with attorneys, financial advisors, and others in order to carry on their business affairs.’’); see MLC NPRM Comment at 3 (‘‘[T]he Proposed Regulation on confidentiality should be modified to expressly state that information required to be reported by the MLC to copyright owners in . . . statements [of account] is not confidential information.’’); NMPA NPRM Comment at 5 (‘‘[T]he Office should revise the proposed rule to make clear that royalty pool information reported by DMPs to the MLC shall not be subject to confidentiality restrictions so that the MLC may report that information to copyright owners, and so that the copyright owners themselves shall not be burdened by restrictions on their use of such information, as is the current practice.’’). See also FMC NPRM Comment at 1; Alliance for Recorded Music (‘‘ARM’’) NPRM Comment at 2 n.1 (both in general accord). One commenter suggests that the MLC should publicly post ‘‘the basic elements of these rate sheets.’’ Castle NPRM Comment at 12. In a parallel rulemaking, the Office issued interim regulations setting forth the information that the MLC is required to report in statements to copyright owners. See 37 CFR 210.29. 52 MLC NPRM Comment at 8; see MLC NPRM Comment at 7, U.S. Copyright Office Dkt. No. 2020– 6, available at https://beta.regulations.gov/docket/ COLC-2020-0003 (‘‘[T]he proposed regulation being addressed in the Confidentiality Proceeding should be revised to provide that information required to be included in royalty statements does not fall under the definition of Confidential Information.’’). 53 MLC NPRM Comment App. at ii. 54 Id. at iv. E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations While the Office appreciates that DMPs understandably want to ensure that sensitive business information provided to the MLC is not unlawfully or inappropriately disclosed or used, the definition of ‘‘confidential information’’ is already inclusive of information that is competitively sensitive as between digital music providers. Indeed, the DLC itself states that this information ‘‘plainly falls within the definition of Confidential Information in the Proposed Rule.’’ 55 The Office believes that amending the language to define ‘‘confidential information’’ as including ‘‘any sensitive data provided by digital music providers related to royalty calculations’’ could be overly broad in light of various statutory transparency and disclosure obligations; the suggestion to include ‘‘subscriber counts’’ and ‘‘service revenues’’ may also overreach as some DMPs are public companies who already disclose this information in financial statements.56 The Office previously declined to adopt the DLC’s proposed definition that included ‘‘all the usage and royalty information’’ reported by DMPs for this reason.57 Nonetheless, for clarity, the interim rule includes ‘‘sensitive data provided by digital music providers related to royalty calculations’’ in the enumeration of types of confidential information. As explained further below, however, the interim rule also separately addresses the DLC’s concerns by imposing restrictions on disclosure of these types of information to MLC board members and others involved with the operation of the mechanical license. With respect to disclosure of information provided in royalty statements to copyright owners specifically, prior to the MMA, the Office previously considered and rejected the suggestion to place confidentiality requirements on copyright owners receiving statements of account under the section 115 statutory license due to the inclusion of ‘‘competitively sensitive’’ information, determining instead that ‘‘once the statements of account have been delivered to the copyright owners, there should be no restrictions on the copyright owners’ ability to use the khammond on DSKJM1Z7X2PROD with RULES 55 DLC NPRM at 4. e.g., Press Release, Spotify Technology S.A., Shareholder Letter Q4 2020 (Feb. 3, 2021), https://s22.q4cdn.com/540910603/files/doc_ financials/2020/q4/Shareholder-Letter-Q4-2020_ FINAL.pdf; Spotify Technology S.A, Form 6–K Report of Foreign Private Issuer (2020) https:// s22.q4cdn.com/540910603/files/doc_financials/ 2020/q3/69e72911-517a-47bb-ab3e1b1248654d1a.pdf. 57 85 FR at 22561. 56 See, VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 statements or disclose their contents.’’ 58 Royalty statements for the section 115 license have been provided to copyright owners for years without the confidentiality restrictions now requested by the DLC. No commenters provided examples of past harm caused by the existing regulations failing to impose such restrictions.59 Given that an animating goal of the MMA is to facilitate increased transparency and accuracy in reporting payments to copyright owners, the Office reiterates that it sees no compelling reason to deviate from this established policy.60 Further supporting the Office’s conclusion that it should not depart from the status quo, the Office’s adopted royalty payment and accounting information reporting requirements similarly ‘‘essentially retain the current rule governing non-blanket section 115 licenses.’’ 61 The Office is not persuaded by the DLC’s suggestion that the statutory directive to promulgate regulations to avoid information ‘‘in the records of the mechanical licensing collective’’ being ‘‘improperly disclosed or used’’ counsels differently.62 Royalty statements are records of, and designed to be provided to, recipient copyright owners, and the statute and legislative history do not suggest that maintaining status quo expectations with respect to copyright owners’ receipt of royalty information would fall under the category of improper use. Accordingly, the interim rule states that once a royalty statement has been delivered to a copyright owner, there are no restrictions on that copyright owner’s ability to use the statement or disclose its contents. The Office declines the MLC’s proposal to exclude from the definition of ‘‘confidential information,’’ ‘‘[i]nformation concerning the calculation of the payable royalty pool 58 Id.; 79 FR 56190, 56206 (Sept. 18, 2014); see SONA NPRM Comment at 3 (‘‘[S]trongly endors[ing] the Copyright Office’s rejection of any confidentiality restrictions on the use of royalty statements issued to copyright owners by the MLC.’’). The Office similarly declined to adopt the DLC’s proposal that copyright owners (and their designated agents) could receive confidential information, ‘‘so long as they sign an appropriate confidentiality agreement with the MLC.’’ 85 FR at 22561; see DLC Ex Parte Letter #2 at 5; see DLC Reply NOI Comment at 28; 37 CFR 380.5(c)(3). 59 Similarly, the administrative record contains no indicia that direct, voluntary licensing typically include restrictions on the uses of information in royalty statements by copyright owners. 60 See 85 FR at 22561. 61 See 85 FR at 22529; 85 FR 58160, 58162 (Sept. 17, 2020) (‘‘This information is provided to copyright owners under the song-by-song license. It will continue to be reported by DMPs to the MLC as part of their monthly reports of usage, and the MLC intends to pass along this information to copyright owner.’’). 62 DLC NPRM at 4 (citing 17 U.S.C. 115(d)(12)(C)). PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 9007 and the per-work royalty allocation under part 385 to be reported in royalty statements to copyright owners under 37 CFR 210.29(c)(1)(vi).’’ Instead, as discussed below, the rule states that the mechanical licensing collective shall be permitted to prepare and deliver royalty statements to musical work copyright owners (and the contents therein) in accordance with the Office’s regulations governing royalty statements, which require ‘‘[a] detailed and step-by-step accounting of the calculation of royalties under applicable provisions of part 385 of this title, sufficient to allow the copyright owner to assess the manner in which the royalty owed was determined and the accuracy of the royalty calculations, which shall include details on each of the components used in the calculation of the payable royalty pool.’’ 63 This language is meant to clarify that despite the rule’s general restrictions on disclosing confidential information, the MLC is not prevented from preparing and delivering royalty statements to copyright owners. The rule clarifies, however, that royalty statements to copyright owners should not include confidential information that does not relate to the recipient copyright owner or relevant songwriter in addition to the minimum information required by the Office’s regulations. As discussed more below, the Office believes the MLC’s proposed language that the MLC and DLC may disclose confidential information to ‘‘[c]opyright owners, including their agents, whose works were used in covered activities, in connection with royalty payments and statements’’ becomes unnecessary. 3. Information Disclosed by Digital Music Providers, Copyright Owners, and Third Parties The MLC and FMC suggest that the proposed rule’s definition of ‘‘confidential information’’ is too broad.64 Specifically, the MLC contends the definition ‘‘is not limited to information exchanged in connection with the MLC’s royalty processing functions, and thus on its face could be read to regulate every aspect of the MLC’s and DLC’s businesses.’’ 65 The MLC maintains that instead, the ‘‘definition should be limited to information disclosed by DMPs, copyright owners, the MLC, or the DLC, and that relate to the MLC’s statutory functions, so that it does not inadvertently sweep into its ambit 63 37 CFR 210.29(c)(4)(v). NPRM Comment at 2; FMC NPRM Comment at 1. 65 MLC NPRM Comment at 2. 64 MLC E:\FR\FM\11FER1.SGM 11FER1 khammond on DSKJM1Z7X2PROD with RULES 9008 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations information that the MLC or DLC receives in connection with leasing office space or equipment, requisitioning supplies, or making other contractual arrangements.’’ 66 FMC asserts that ‘‘ ‘[f]inancial or business terms that could be used for commercial advantage’ is an inherently problematic category definition when some DSPs and some copyright owners have seemed eager to use every piece of available data for their commercial advantage, if they can think of a possible way to do so.’’ 67 The Office agrees that cabining ‘‘confidential information’’ to include ‘‘sensitive financial or business information’’ disclosed by digital music providers, significant non-blanket licensees, or copyright owners (or any of their authorized agents or vendors) to the mechanical licensing collective or digital licensee coordinator would help reasonably ensure that the Office’s regulations apply in relation to the administration of the section 115 statutory license, as opposed to information provided to the MLC and DLC more generally (e.g., supply contracts). The interim rule accordingly adjusts the definition of ‘‘confidential information’’ to mean sensitive financial or business information disclosed by digital music providers, significant nonblanket licensees, and copyright owners (or any of their authorized agents or vendors) to the mechanical licensing collective or digital licensee coordinator. With respect to FMC’s position that the phrase ‘‘financial or business terms that could be used for competitive disadvantage or be used for commercial advantage’’ could apply to data generally—to even nonconfidential information—the Office notes that the phrase already modifies ‘‘sensitive financial or business information’’ to exclude broader types of information, and is also limited by the enumeration of non-confidential information articulated above. ARM, while asserting that the proposed ‘‘general definition is appropriate,’’ asks that the definition specifically include ‘‘information such as royalty rates and other provisions of agreements between recorded music companies and digital service providers.’’ 68 The MLC supports ARM’s position.69 In recognition of the need to protect sensitive data in agreements between recorded music companies and 66 Id. 67 FMC NPRM Comment at 1. NPRM Comment at 4; see id. at 12–14. 69 MLC NPRM Comment at 20 (‘‘[C]onfidential information for particular sound recording licensors shall not be disclosed to copyright owners, songwriters or digital music providers.’’). 68 ARM VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 DMPs, the interim rule amends the definition of ‘‘confidential information’’ to also mean sensitive data concerning agreements between sound recording companies and digital music providers. At the MLC’s suggestion, the proposed rule excluded from the definition of ‘‘confidential information,’’ top-level compilation data presented in anonymized format that does not allow identification of such data as belonging to any digital music provider, significant nonblanket licensee, or copyright owner.70 Both the MLC and DLC incorporated this language into their respective proposed regulatory language,71 and no commenters objected. Accordingly, the interim rule adopts this aspect of the proposed rule without modification. Commenters supported the definition of ‘‘confidential information’’ including ‘‘information submitted by a third party that is reasonably designated as confidential by the party submitting the information,’’ as well as ‘‘usage data and other sensitive data used to compute market shares when distributing unclaimed accrued royalties, sensitive data shared between the MLC and DLC regarding any significant nonblanket licensee, and sensitive data concerning voluntary licenses or individual download licenses administered by and/ or disclosed to the MLC.’’ 72 In their respective proposals, the MLC and DLC retained the Office’s proposed provisions stating that ‘‘confidential information’’ does not include ‘‘documents or information that are public or may be made public by law or regulation,’’ or ‘‘documents or information that may be made public by law or that at the time of delivery to the MLC or DLC is public knowledge.’’ 73 By contrast, ARM expresses concern with the phrase ‘‘information that may be made public by law,’’ saying it is ‘‘unclear,’’ and that ‘‘[w]hen inserted in an exception to the general definition of Confidential Information, that phrase could be read to say that any information the disclosure of which is not otherwise prohibited by law is excluded from the definition of Confidential Information, meaning that 70 85 FR at 22562; MLC Initial NOI Comment at 30; MLC Reply NOI Comment App. at 27. 71 MLC NPRM Comment App. at ii; DLC NPRM Comment Add. at A–2. 72 85 FR at 22567; see MLC NPRM Comment at 8 (stating that the phrase ‘‘information submitted by a third party that is reasonably designated as confidential by the party submitting the information’’ ‘‘can largely be integrated into this definition of Confidential Information’’); DLC NPRM Comment Add. at A–1; ARM NPRM Comment at 11. 73 MLC NPRM Comment App. at i–ii; DLC NPRM Comment Add. at A–1. PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 information only qualifies as Confidential Information when its disclosure is otherwise prohibited by law.’’ 74 The Office believes the language is reasonably clear, and notes that the phrase ‘‘information that may be made public by law’’ is meant to cover information for which the Office’s own regulations require certain disclosures from DMPs and significant nonblanket licensees that would not be considered confidential. This intention is made clear by subsequent subparagraphs enumerating these categories. After carefully considering these comments, the interim rule retains these aspects of the proposed definition. Finally, ARM contends that because this rule focuses on the protection of information, ‘‘referring to documents uniquely in the exclusions from the definition of Confidential Information creates interpretive issues,’’ as documents ‘‘embody information’’ and ‘‘a document that contains some Confidential Information should not be excluded from protection simply because it also includes some other information that is excluded from the definition of Confidential Information.’’ 75 ARM maintains that ‘‘the exceptions should apply only to information, and not to some potentially broader category of documents.’’ 76 The Office agrees that the regulation intends to prevent the improper use or disclosure of confidential information. The Office also agrees that a document containing both confidential and nonconfidential information should be extended protection, and did not suggest otherwise when issuing the proposed rule. Rather, the proposed rule identified specific documents (e.g., notices of nonblanket activity) and sources of information (e.g., the public musical works database) for which the Office’s regulations require disclosure and to which confidentiality restrictions would not apply. Accordingly, the Office has adjusted the phrase ‘‘documents or information that are public or may be made public by law or regulation’’ to refer solely to ‘‘information.’’ By focusing on ‘‘information’’ as opposed to ‘‘documents,’’ the rule clarifies that the MLC and DLC would be prohibited from disclosing documents containing ‘‘confidential information’’ disclosed by digital music providers, significant nonblanket licensees, and copyright owners (or any of their authorized agents or vendors) or third parties that reasonably designate information as confidential— 74 ARM NPRM Comment at 5. at 4–5. 76 Id. at 5. 75 Id. E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations even in cases where the MLC or DLC may have created the underlying documents.77 The Office is retaining, however, the provisions identifying specific documents that the Office’s regulations require to be disclosed (e.g., notices of license, the MLC’s annual report) to clarify that they do not embody confidential information, subject to any exceptions included in the relevant regulatory section (e.g., addendums to notices of license, to the extent they provide a description of any applicable voluntary license or individual download license the digital music provider is, or expects to be, operating under concurrently with the blanket license). 4. Personal Information khammond on DSKJM1Z7X2PROD with RULES In response to stakeholder concern about the disclosure of sensitive personal information, particularly relating to copyright owner information,78 the proposed rule included in the definition of ‘‘confidential information’’ ‘‘sensitive personal information, including but not limited to, an individual’s Social Security number, taxpayer identification number, financial account number(s), or date of birth (other than year).’’ 79 In response, SONA generally agrees with the proposed definition, but believes it ‘‘should explicitly include other instances of ‘personal information,’ including home address and home phone number.’’ 80 CISAC & BIEM maintain that date of birth should be confidential, noting that ‘‘creators often wish to keep [it] confidential in order to protect their image.’’ 81 77 See ARM NPRM Comment at 6 n.7 (stating that restrictions on ‘‘confidential information of a third party (such as a recorded music company)’’ should not be lifted ‘‘merely because the MLC or DLC wrote down the third-party confidential information in a new document’’). 78 CISAC & BIEM Reply NOI Comment at 8 (encouraging ‘‘the Office to adopt suitable regulations that aim to protect sensitive and/or private information from public disclosure’’); MAC Reply NOI Comment at 2–3 (noting that ‘‘certain information such as . . . personal addresses should obviously be kept out of public documents’’). 79 85 FR at 22562. 80 SONA NPRM Comment at 3. 81 CISAC & BIEM NPRM Comment at 1. CISAC & BIEM also maintain that ‘‘[e]xisting regulations, such as the GDPR, can be used as a reference for the protection of personal data.’’ CISAC & BIEM NPRM Comment at 3. While the Office does not disagree that the MLC may used GDPR as a reference, the interim rule does not incorporate GDPR. As noted previously by the Office, the MLC has committed to establishing an information security management system that is certified with ISO/IEC 27001 and meets the EU General Data Protection Regulation requirements, and other applicable laws. 84 FR at 32290 (citing Proposal of Mechanical Licensing Collective, Inc. Submitted in Response to U.S. Copyright Office’s December 21, 2018, Notice of Inquiry, at 50 (Mar. 21, 2019). The VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 Having carefully considered these issues, the Office has adjusted the interim rule to include birth year in the definition of confidential information.82 Because the statute requires the musical works database to make contact information for musical work copyright owners for matched works publicly available,83 the interim rule includes ‘‘home address or personal email’’ in the definition of ‘‘confidential information’’ to the extent they are ‘‘not musical work copyright owner contact information as required under 17 U.S.C. 115(d)(3)(E)(ii)(III).’’ 84 5. Information Made Publicly Available to the Office or Copyright Royalty Judges Under the proposed rule, ‘‘confidential information’’ excluded information made publicly available by the MLC or DLC pursuant to participation in proceedings before the Office or Copyright Royalty Judges (including proceedings to redesignate the MLC or DLC).85 In response, the DLC states that ‘‘if this provision is meant to only cover material that the DLC and MLC have voluntarily (and with appropriate authority) filed in a CRB or Copyright Office docket publicly and without any restrictions, the provision is unnecessary, because by definition such material is not confidential.’’ 86 The DLC also contends that the reference ‘‘will lead to considerable confusion,’’ as ‘‘[f]ilings in CRB proceedings are governed by comprehensive protective orders, and those orders should determine whether material is or is not confidential.’’ 87 ARM similarly asserts that this specific reference to Office and Copyright MLC has also expressed its ‘‘commit[ment] to maintaining robust security to protect confidential user data, and that it contractually requires vendors to maintain robust security to protect confidential information handled for the MLC.’’ MLC Ex Parte Letter Jan. 29, 2020 (‘‘MLC Ex Parte Letter #1’’) at 4. 82 The MLC does not intend to include date of birth in the public musical works database. MLC NOI Comment at 16, U.S. Copyright Office Dkt. No. 2020–8, available at https://beta.regulations.gov/ docket/COLC-2020-0006. In a parallel rulemaking, the Office issued regulations prohibiting the MLC from including data of birth in the database. See 37 CFR 210.31(g). 83 17 U.S.C. 115(d)(3)(E)(ii)(III). 84 In a parallel rulemaking, the Office issued a proposed rule prohibiting the mechanical licensing collective from ‘‘includ[ing] in the public musical works database any individual’s Social Security Number (SSN), taxpayer identification number, financial account number(s), date of birth (DOB), or home address or personal email to the extent it is not musical work copyright owner contact information required under 17 U.S.C. 115(d)(3)(E)(ii)(III).’’ 85 FR at 58189. 85 85 FR at 22562. 86 DLC NPRM Comment at 7. 87 Id. PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 9009 Royalty Board proceedings should be removed in the definition of ‘‘confidential information,’’ as ‘‘[t]he MLC and DLC should not have the power to make other entities’ confidential information nonconfidential by disclosing it publicly in a proceeding,’’ and that rather that an exception to the definition of ‘‘confidential information,’’ ‘‘it would be more consistent with protection of third-party confidential information . . . to treat disclosure in proceedings’’ through the proposed rule’s provision stating that the MLC and DLC may disclose confidential information to ‘‘[a]ttorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena, subject to an appropriate protective order or agreement.’’ 88 For its part, the MLC does not object to including this provision.89 After consideration, the Office has adjusted this aspect of the proposed rule by eliminating the reference to ‘‘information made publicly available by the mechanical licensing collective or digital licensee coordinator pursuant to participation in proceedings before the Office or Copyright Royalty Judges.’’ The Office agrees that this specific reference is not necessary because information is no longer confidential once it has been publicly disclosed voluntarily and without any restrictions (and with appropriate authority). The Office retains the provision that excludes ‘‘information that is public’’ from the definition of ‘‘confidential information’’ so as to cover authorized public filings by the MLC or DLC with the Office or Copyright Royalty Board. 6. Confidentiality as to a Party’s Own Information In the definition of ‘‘confidential information,’’ the proposed rule stated that documents or information created by a party will not be considered confidential with respect to usage of those documents or information by the same party (e.g., documents created by the DLC should not be considered confidential with respect to the DLC).90 ARM agrees that it ‘‘makes sense’’ to ‘‘avoid imposing on the MLC or DLC a duty to protect its own information,’’ but advises against implementing this principle as part of the definition of ‘‘confidential information.’’ 91 ARM 88 ARM NPRM Comment at 6; see 85 FR at 22568. MLC NPRM Comment App. at ii. 90 85 FR at 22562. 91 ARM NPRM Comment at 6. 89 See E:\FR\FM\11FER1.SGM 11FER1 9010 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES maintains that, for example, the provision of the proposed rule intending to prevent the MLC and DLC from imposing use and disclosure restrictions on their board members in addition to those contemplated by the regulations ‘‘may not achieve its intended effect’’ if the MLC’s own confidential information ‘‘is not included in the defined term Confidential Information as to the MLC.’’ 92 ARM contends that ‘‘[t]he principle of not restricting an entity’s use or disclosure of its own confidential information is typically accomplished in nondisclosure agreements by carefully drafting the substantive provisions so as to limit disclosure and use of other entities’ confidential information, rather than one’s own,’’ and ‘‘[t]hat seems like a preferable approach here.’’ 93 Though not expressly commenting on this issue, in its proposed regulatory language the DLC excludes the paragraph referencing use of a party’s own documents or information.94 For its part, the MLC suggests revising the paragraph to ‘‘documents or information concerning a party, to the extent such party authorizes the usage of such documents or information.’’ 95 The Office has adjusted the interim rule to remove the paragraph referencing ‘‘documents or information created by a party’’ from the definition of ‘‘confidential information.’’ Because the definition of ‘‘confidential information’’ has been revised to mean sensitive financial or business information disclosed by digital music providers, significant non-blanket licensees, or copyright owners (or any of their authorized agents or vendors) to the MLC or DLC, and because the rule clearly restricts use and disclosure of such information by the MLC and DLC (as discussed below), this paragraph is no longer necessary. As described below, the Office has also adopted provisions relating to the confidentiality of MLC and DLC internal information. Should the Office learn of instances where a party is prevented from using or disclosing its own confidential information under the regulations, the Office will consider any necessary adjustments. B. Disclosure and Use of Confidential Information 1. Proposed Rule’s Approach to Disclosure and Use of Confidential Information The proposed rule included various categories of permitted disclosure and use by MLC and DLC employees, board and committee members of the MLC and DLC (and their respective employers), and vendors and agents of the MLC and DLC. Given the somewhat divergent views from the MLC and DLC in response to the NOI, and the need for regulatory language to accommodate unforeseen issues, the proposed rule was intended to provide parity in access to confidential information, rather than hard and fast categories prohibiting disclosure of information relevant to, or accessed by, digital music providers or music publishers.96 The proposed rule permitted the following disclosures, while requiring all individuals receiving confidential information to execute a written confidentiality agreement: 97 • Employees of the MLC or DLC may receive confidential information. • Agents, consultants, vendors, and independent contractors of the MLC or DLC may receive confidential information, only when necessary to carry out their duties. • Other individuals authorized by the MLC may receive confidential information, but only to the extent necessary for such persons to know such information and only when necessary for the MLC to perform its duties. • Non-DLC members of the MLC’s board or statutory committees as well as DLC representatives on the MLC’s board or statutory committees may receive confidential information only on a needto-know basis and to the extent necessary to carry out their duties. • The MLC and DLC may disclose confidential information to qualified auditors or outside counsel under the statutorily-permitted audits.98 • The MLC and DLC may disclose confidential information to the Office, Copyright Royalty Board, and federal courts by parties to their proceedings, or when such disclosure is required by court order or subpoena, subject to an appropriate protective order. • DLC representatives who serve on the board of directors or committees of 96 See 85 FR at 22564. FR at 22567. 98 The MMA expressly permits audits by copyright owners of the MLC’s ‘‘books, records, and data,’’ 17 U.S.C. 115(d)(3)(L)(i)(II), and by the MLC of digital music providers’ ‘‘books, records, and data,’’ id. at 115(d)(4)(D)(i)(II). 97 85 92 Id. 93 Id. 94 DLC 95 MLC NPRM Comment Add. at A–2. NPRM Comment App. at ii. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 the MLC may share confidential information with individuals: Æ Serving on the board of directors and committees of the DLC, but only to the extent necessary for such persons to know such information and only when necessary to carry out their duties for the DLC. Æ Employed by DLC members, only to the extent necessary for such persons to know such information and for the DLC to perform its duties. The proposed rule included the following use restrictions for confidential information: 99 • The MLC, including its employees, agents, consultants, vendors, independent contractors, and non-DLC members of the MLC board of directors or committees, shall not use any confidential information for any purpose under than for section 115 activities for the MLC.100 • The DLC, including its employees, agents, consultants, vendors, independent contractors, members of the DLC board of directors or committees, and DLC representatives serving on the board of directors or committees of the MLC, shall not use any confidential information for any purpose other than section 115 activities for the DLC.101 • Individuals employed by DLC members who receive confidential information from DLC representatives would be prohibited from using confidential information for any purpose other than for work performed during the ordinary course of business for the DLC or MLC. 2. Interim Rule—Disclosure of Confidential Information Comments in response to disclosure requirements under the proposed rule were mixed. As discussed below, the DLC objected to this aspect of the proposed rule, maintaining that members of the MLC’s board of directors and committees should not have access to DMP-specific information relating to sensitive financial or business information. By contrast, the MLC 99 85 FR at 22567. specific provision stated that they ‘‘shall not use any Confidential Information for any purpose other than determining compliance with statutory license requirements, royalty calculation, collection, matching, and distribution, and activities related directly thereto, in performing their duties during the ordinary course of their work for the MLC.’’ Id. 101 The specific provision stated that they ‘‘shall not use any Confidential Information for any purpose other than determining compliance with statutory license requirements, royalty calculation, collection, matching, and distribution, and activities related directly thereto, in performing their duties during the ordinary course of their work for the DLC.’’ Id. 100 The E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES asserted that MLC governance requires seeing DMP-specific information, subject to appropriate written confidentiality agreements and the restriction that they not see information relating to specific, identified copyright owners. Other commenters supported either a more limited or a broader approach. These comments are discussed in turn below. The DLC contends that ‘‘it is absolutely critical that the Office maintain a strict firewall between the MLC Board and the sensitive information provided by digital music providers to the MLC,’’ 102 and that ‘‘[i]t would likewise be inappropriate for the MLC Board to gain information about the identity of digital music providers’ voluntary license partners, or the terms of those licenses.’’ 103 The DLC suggests that the MLC’s forty employees ‘‘are the ones who should be running the day-today operations of the MLC, and reporting high-level, anonymized, aggregate information to the Board, sufficient for the Board to engage in oversight.’’ 104 The DLC states that ‘‘the MMA requires the MLC’s officers to be independent of the Board, prohibiting anyone serving as an officer of the MLC to simultaneously ‘also be an employee or agent of any member of the board of directors of the collective or any entity represented by a member of the board of directors,’ ’’ and that ‘‘[i]t would be improper for MLC Board members to circumvent this restriction by becoming directly involved in the day-to-day operations of the MLC, especially if it means demanding special access to commercially sensitive information from digital music providers as a result.’’ 105 The DLC expresses concern about music publishers serving on the MLC Board and having access to sensitive financial and business information about DMPs, as they would ‘‘gain a special advantage in any commercial negotiations with [a] digital music provider,’’ which ‘‘harms both the digital music providers, and (crucially) publishers that do not serve on the Board, who will be at a competitive disadvantage.’’ 106 The DLC proposes that ‘‘[a]t most, members of MLC and DLC boards and committees should be given access only 102 DLC Ex Parte Letter Oct. 14, 2020 (‘‘DLC Ex Parte Letter #6’’) at 5; see id. (‘‘This is particularly so because, in addition to the regular usage and royalty reporting that digital music providers will provide to the MLC the Office’s interim rule gives the MLC access to a broad range of additional information through the records of use provision.’’). 103 Id. at 6. 104 Id. (citation omitted). 105 Id. (quoting 17 U.S.C. 115(d)(3)(D)(viii)). 106 Id. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 to aggregated and anonymized data—a category of information that the Proposed Rule already excludes from the definition of Confidential Information.’’ 107 The DLC also argues that ‘‘the final rule needs to address in some manner the confidentiality of information that the MLC and DLC themselves generate as part of their own operations, while maintaining the ability for DLC members to get and share information related to MLC operations.’’ 108 To achieve this, the DLC proposes creating categories of ‘‘MLC Internal Information’’ and ‘‘DLC Internal Information’’ that may be more widely shared amongst the MLC and DLC because these categories would encompass information that ‘‘may be confidential from the perspective of the MLC and DLC,’’ but do not include ‘‘information specific to a particular digital music provider or licensee,’’ and so are ‘‘less likely to create a risk that the Office expressed concern about—of ‘confidential information from being misused by competitors for commercial advantage.’ ’’ 109 The DLC’s proposal would also specify conditions under which DLC members of the MLC board and committees could ‘‘share information about MLC operations with its membership, and with appropriate personnel within DLC member companies,’’ as well as DLC activities.110 Under the DLC’s approach, the MLC could share MLC Internal Information with representatives of the DLC who serve on the board of directors or committees of the MLC, only to the extent necessary for such persons to know such information, only when necessary to carry out their duties for the DLC, and subject to an appropriate written confidentiality agreement.111 107 DLC NPRM Comment at 6. at 5. 109 Id. at 6–7 (quoting 85 FR at 22564). The DLC proposes defining ‘‘MLC Internal Information’’ as ‘‘sensitive financial or business information created or collected by the mechanical licensing collective for purposes of its internal operations, such as personnel, procurement, or technology information.’’ DLC Ex Parte Letter Dec. 11, 2020 (‘‘DLC Ex Parte Letter #8’’) at 5. The DLC also proposes that ‘‘MLC Internal Information’’ would be subject to certain exclusion provisions in the proposed rule so as not to include documents or information that are public or may be made public as well as top-level compilation data presented in anonymized format. DLC Ex Parte Letter #8 at 5. The DLC similarly proposes a category of information called ‘‘DLC Internal Information’’ to cover sensitive financial or business information created or collected by the digital licensee coordinator for purposes of its internal operations. DLC NPRM Comment at 6–7, Add. A–2–A–3; DLC Ex Parte Letter #8 at 5. 110 DLC NPRM Comment at 5. 111 Id. at Add. A–3. As discussed more below, the DLC proposes that confidentiality agreements 9011 The DLC proposes that DLC recipients of this information may further share such MLC Internal Information with (1) employees, agents, consultants, vendors, and independent contractors of the DLC, only to the extent necessary for the purpose of performing their duties during the ordinary course of their work for the DLC, only to the extent necessary for such persons to know such information, subject to an appropriate written confidentiality agreement; (2) individuals serving on the board of directors and committees of the DLC, only to the extent necessary for such persons to know such information and only when necessary to carry out their duties for the DLC, subject to an appropriate written confidentiality agreement; and (3) individuals otherwise employed by members of the DLC, only to the extent necessary for such persons to know such information and only when necessary for the DLC to perform its duties, subject to an appropriate written confidentiality agreement.112 DLC Internal Information could be shared with members of the DLC board of directors and committees, subject to an appropriate written confidentiality agreement.113 By contrast, the MLC contends that it would not ‘‘be appropriate to promulgate a regulation that prevents the MLC’s governance from seeing DMPspecific information, subject to appropriate written confidentiality agreements and the restriction that they not see information relating to specific, identified copyright owners.’’ 114 The MLC asserts that ‘‘because the MLC board oversees the blanket license administration and administrative assessment collection processes, [it] must be able to be informed as to compliance with these processes,’’ and that because ‘‘compliance is an individual DMP issue, not an industry 108 Id. PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 covering MLC Internal Information may be executed by the employers of the DLC representatives serving on the MLC board of directors or committees. DLC NPRM Comment at 3, Add. A–3. 112 DLC NPRM Comment Add. at A–3. 113 Id. In response to the NOI, the DLC initially proposed making a category of information called ‘‘MLC Confidential Information’’ available to DLC representatives serving on the boards or committees of the MLC, which the DLC defined as ‘‘any nonpublic financial or business information created by the mechanical licensing collective.’’ DLC Reply NOI Comment Add. at A–22 (emphasis added). In the NPRM, the Office noted that ‘‘without more background, the Office [was] not sure this approach [was] advisable. It was not immediately clear to the Office whether the MLC would be able to recreate information that would otherwise not be accessible to board and committee members, and so the Office tentatively conclude[d] that the proposed rule offer[ed] a reasonable alternative.’’ 85 FR at 22564 n.55. 114 MLC Ex Parte Letter Oct. 15, 2020 (‘‘MLC Ex Parte Letter #9’’) at 2. E:\FR\FM\11FER1.SGM 11FER1 9012 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES issue, it is critical that the MLC governance be informed at the DMP level, not just the industry-aggregate level.’’ 115 Regarding the MLC’s committees, the MLC ‘‘envisions that the Unclaimed Royalties Oversight Committee would review DMP-specific data’’ to ‘‘create policies and procedures to minimize the incidence of unclaimed accrued royalties,’’ such as ‘‘specific examples of potential matches to get a concrete understanding of what types of results fall into different confidence levels’’ when analyzing matching performance and confidence levels.116 Finally, regarding the DLC’s proposed categories of ‘‘MLC Internal Information’’ and ‘‘DLC Internal Information,’’ the MLC maintains they are ‘‘unnecessary’’ because the ‘‘MLC and DLC can control disclosures of their internal information through appropriate written confidentiality agreements.’’ 117 Instead, to ‘‘ensure that the MLC board and committee members shall not receive inappropriate confidential information,’’ the MLC proposes language to ‘‘clarif[y] . . . that no copyright owners or songwriters (which captures all of the MLC’s directors and committee members, except for those representing DMPs) will be shown confidential information of other copyright owners,’’ and that digital music providers should ‘‘not receiv[e] information concerning competitors.’’ 118 The MLC maintains that ‘‘neither DLC appointees, nor publisher or songwriter representatives should be permitted to share confidential information received in their roles as MLC board or committee members with their employers,’’ 119 and that allowing ‘‘disclosure[s] to 115 Id.; see also id. at 3 (stating that ‘‘it is appropriate and necessary for the MLC to be permitted to share’’ information about specific DMP interactions with the MLC regarding ‘‘certifications, efforts obligations, or other reporting or royalty payment obligations,’’ and that such information ‘‘can be essential context for substantial decisions as to compliance that the board is tasked in the MMA with overseeing, such as whether to audit, notice a default or take other action against a DMP’’). 116 Id. at 2. The MLC does not anticipate its Dispute Resolution Committee or the Operations Advisory Committee needing to view DMP-specific data. Id. at 3. 117 Id. at 4. 118 MLC NPRM Comment at 19; see id. at 16 (‘‘[J]ust as music publisher employees who sit on the MLC board or committees should not be permitted to share with their publisher employers confidential information provided to the MLC by competitors of such employer (which the Proposed Regulation does not allow), a DLC appointee employed by a DMP should not be permitted to share with their DMP employer confidential information provided to the MLC by a competitor of such DMP employer.’’). 119 Id. at 5. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 employers by any board or committee member, including DLC appointees, would raise significant competitive concerns and jeopardize the MLC’s ability to control, and ensure against, unfettered dissemination of confidential or competitively sensitive information.’’ 120 The MLC also contends that ‘‘MLC board and committee members, regardless of the identity of their employer (i.e., whether a DMP, a publisher, a songwriter or a trade organization) should be subject to the same, strict provisions concerning the confidential information received in connection with their board or committee engagement.’’ 121 The MLC contends that the proposed conditions limiting access to information only ‘‘where necessary to carry out their duties’’ and ‘‘during the ordinary course of their work’’ is ‘‘confusing and unnecessary,’’ and suggests that ‘‘[i]f use of the information is limited to the performance of the MLC’s statutory functions, that should be sufficient.’’ 122 The MLC says these phrases also ‘‘create[ ] the argument that MLC vendors or contractors would have to use an alternate procedure to perform work without using Confidential Information if such was possible, even where it would be highly inefficient and costly.’’ 123 Other comments regarding access of MLC and DLC board and committee members, and DLC member employers, to confidential information generally supported a more limited approach. CISAC & BIEM assert that ‘‘[w]hile there is certainly a need for the DLC to access certain Confidential Information to perform its duties, disclosure to individual employees of DLC members is not justified.’’ 124 Similarly, ARM argues that ‘‘it is not apparent that there is any need for board and committee members to share confidential information with their employers, except . . . to give them access to MLC 120 Id. at 15; see also id. at 16–17 (‘‘Each DLC appointee was specifically chosen for his or her knowledge and expertise in the relevant subject matter (e.g., individuals chosen to serve on the operations advisory committee have technological and operational expertise),’’ and ‘‘[i]t would be wholly inappropriate to grant these individuals discretion to share the confidential information of copyright owners and other DMPs with any of more than a million people.’’). 121 Id. at 19. 122 Id. at 12. 123 Id. 124 CISAC & BIEM NPRM Comment at 2; see also id. (‘‘[A]ny disclosure of Confidential Information should at all times (i) be justified by a ‘need-toknow’ basis, and (ii) be very strictly interpreted in connection to the performance of the relevant duties. Furthermore, (iii) any individual receiving the Confidential Information should always be obliged to execute a Non-Disclosure Agreement (‘NDA’).’’). PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 confidential information to obtain feedback concerning operational policies.’’ 125 To ARM, ‘‘[i]t is not apparent that the MLC board would ever need to discuss confidential information of particular third-party companies,’’ and ‘‘even in the context of considering whether to authorize an enforcement action by the MLC against a particular DMP, it would seem sufficient for the MLC board to understand that MLC management believes the DMP underpaid royalties by a certain aggregate amount.’’ 126 NMPA recommended that the Office’s regulations adopt the same standard for all board and committee members,127 and stated that ‘‘DLC representatives on the MLC board and [committees] may have access to a host of sensitive confidential information that, if provided to their employers, could put music publishers and DMPs that are not members of the DLC at a competitive disadvantage.’’ 128 Noting that the MLC’s statutorily-created Operations Advisory Committee ‘‘is made up of various operations technology experts at the DMPs and music publishers’’ who were ‘‘presumably selected for their roles precisely because they have the relevant subject matter expertise,’’ NMPA further stated that because ‘‘DLC representatives work for technology companies,’’ they ‘‘are far less likely to need to ‘solicit additional subject matter expertise’ on ‘technical considerations’ from another individual employed by his or her DMP employer than might a music publisher representative on the MLC board or a committee.’’ 129 In contrast, the Songwriters Guild of America, Inc. (‘‘SGA’’) and the Society of Composers & Lyricists (‘‘SCL’’) proposed a broader approach whereby ‘‘[n]on-DLC members on the MLC board of directors or committees may receive Confidential Information from the MLC subject to an appropriate written 125 ARM NPRM Comment at 7–8; see also ARM NPRM Comment at 7 (‘‘[T]he MLC simply should not have information about sound recording royalties to share with board and committee members and the like.’’); id. (‘‘If the MLC were to have access to such information, that kind of information should be protected either through an additional category of Highly Confidential Information that would include recorded music company deal terms and other third-party competitively sensitive information and could not be shared with such persons or through an equivalent mechanism (such as simply prohibiting disclosure of that type of Confidential Information to such persons).’’). 126 Id. at 7; see id. (noting that MLC committee members’ roles ‘‘seem directed to setting policy, rather than digging into the details of particular companies’ activities’’). 127 NMPA NPRM Comment at 3. 128 Id. at 2 (providing music publisher market share data as an example). 129 Id. at 3. E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations confidentiality agreement,’’ and ‘‘Confidential Information may be withheld from such members only in those instances in which it is demonstrably unnecessary for such persons to know such information in the course of carrying out their duties for the MLC.’’ 130 i. Disclosure of Confidential Information to Mechanical Licensing Collective and Digital Licensee Coordinator Persons and Entities After carefully considering these comments, the Office concludes that taking a more conservative approach to new issues presented in this rulemaking regarding the protection of sensitive financial or business information disclosed by digital music providers, significant non-blanket licensees, and copyright owners (or any of their authorized agents or vendors) to the mechanical licensing collective or digital licensee coordinator is appropriate. Although the MLC advocates for a generally more open approach than the DLC, both entities acknowledge that improper disclosure of confidential information could be harmful.131 It is not apparent that the MLC’s board of directors must access DMP-specific confidential information in order to generally supervise and ‘‘manage the business and affairs of the Collective;’’ 132 as also raised by the MLC, the Office is mindful of the need to ‘‘control, and ensure against, unfettered dissemination of confidential or competitively sensitive information.’’ 133 The Office is inclined to agree with the DLC that although the MLC’s officers should be overseen by the MLC’s board of directors, the officers should be able to operate generally independently on a day-to-day basis, including when considering information that would be competitively sensitive if disclosed to MLC directors.134 As noted above, the interim rule adopts the MLC’s proposal of excluding from the meaning of ‘‘confidential information’’ any top-level compilation data presented in anonymized format that does not allow khammond on DSKJM1Z7X2PROD with RULES 130 SGA & SCL NPRM Comment at 2. 131 See DLC Ex Parte Letter #6 at 6; MLC NPRM Comment at 5, 15. 132 See The MLC, The MLC Bylaws, https:// themlc.com/sites/default/files/2020-05/ Bylaws%20of%20The%20MLC.pdf (last visited Feb. 6, 2021). 133 MLC NPRM Comment at 15. 134 See 17 U.S.C. 115(d)(3)(D)(viii); Conf. Rep. at 4 (‘‘To ensure that the [MLC’s] officers are independent, individuals serving as officers of the collective may not, at the same time, also be an employee or agent of any member of the collective’s Board of Directors or any entity represented by a member of the collective’s Board of Directors.’’). VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 identification of such data as belonging to any digital music provider, significant nonblanket licensee, or copyright owner.135 Accordingly, members of the MLC’s board of directors (and committees) will still receive aggregated data to know how the blanket license is functioning and whether remedial actions may be necessary (e.g., the collective’s matching rates and distribution times, royalty collection and distribution, budgeting and expenditures, aggregated royalty receipts and payments). As to the MLC’s examples for which it proposes that access to DMP-specific confidential information would be necessary (i.e., whether to audit, notice a default, or take other action against a DMP), the Office expects that the collective would be able to notify the MLC’s board of directors of such situations without needing to disclose granular details regarding the DMP’s sensitive financial or business information. To the extent future developments challenge this assumption, the Office believes the more prudent approach is to consider whether easing of restrictions is appropriate, as opposed to tightening up disclosure rules after the fact. Once the MLC has progressed in its administration of the blanket license, if there are concrete, specific examples of situations where members of the MLC or DLC boards or committees find themselves requiring access to certain information to fulfill their duties but are prohibited such access under the interim rule, the Office will consider adjustment of its regulations. Against this backdrop, the interim rule takes the following approach. The mechanical licensing collective shall limit disclosure of confidential information to its employees, agents, consultants, vendors, and independent contractors who are engaged in the collective’s authorized functions under 17 U.S.C. 115(d) and activities related directly thereto and who require access to confidential information for the purpose of performing their duties during the ordinary course of their work for the mechanical licensing collective, subject to an appropriate written confidentiality agreement.136 In 135 See MLC Initial NOI Comment at 30. MLC Ex Parte Letter #9 at 5 (proposing general approach). The Office also adjusted some provisions of the interim rule to focus on disclosure rather than receipt of information, as the MLC requested. See MLC NPRM Comment at 3 (‘‘A regulation governing the treatment of confidential information, like a confidentiality or nondisclosure agreement, should regulate disclosure, not receipt, of such information, as the party disclosing the information is in the best position to control dissemination of, and to protect, confidential information . . . .’’). 136 See PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 9013 response to the MLC’s concern regarding the phrase ‘‘only when necessary to carry out their duties’’ being interpreted to require vendors or contractors to use an alternate procedure to perform work without using confidential information if possible (even where it would be highly inefficient and costly), the Office changed the language to read ‘‘require access to Confidential Information for the purpose of performing their duties.’’ 137 The interim rule includes this language because not all employees, agents, consultants, vendors, and independent contractors of the MLC and DLC will need access to confidential information (or the same types of confidential information) to perform their jobs (e.g., receptionists answering telephones for the MLC’s office).138 For the reasons discussed, the interim rule precludes the mechanical licensing collective from disclosing confidential information to members of its board of directors or committees, including the collective’s Unclaimed Royalties Oversight Committee, or the DLC’s board of directors or committees. Recipients of confidential information from the MLC shall not disclose such confidential information to anyone else except as expressly permitted in the Office’s regulations, with an exception for qualified auditors or outside counsel conducting statutorily-permitted audits, or attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena (discussed below). For parity, the interim rule states that the digital licensee coordinator shall limit disclosure of confidential information to its employees, agents, consultants, vendors, and independent contractors who are engaged in the digital licensee coordinator’s authorized functions under 17 U.S.C. 115(d)(5)(C) and activities related directly thereto, and require access to confidential information for the purpose of performing their duties during the 137 See 37 CFR 380.5(c)(1) (requiring SoundExchange to limit access to confidential information to ‘‘employees, agents, consultants, and independent contractors of the Collective, subject to an appropriate written confidentiality agreement, who are engaged in the collection and distribution of royalty payments hereunder and activities related directly thereto who require access to the Confidential Information for the purpose of performing their duties during the ordinary course of their work’’); id. at 380.24(d)(1) (similar); id. at 380.34(d)(1) (similar). 138 As discussed below, regarding disclosure of MLC Internal Information, the Office made similar adjustments with respect to receipt of such information by parties performing work for the DLC. E:\FR\FM\11FER1.SGM 11FER1 9014 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES ordinary course of their work for the digital licensee coordinator, subject to an appropriate written confidentiality agreement. The interim rule also states that the digital licensee coordinator shall not disclose confidential information to members of the digital licensee coordinator’s board of directors or committees, or the mechanical licensing collective’s board of directors or committees. Recipients of confidential information from the DLC shall not disclose such confidential information to anyone else except as expressly permitted in the Office’s regulations, with an exception for qualified auditors or outside counsel conducting statutorily-permitted audits, or attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena (discussed below). Notwithstanding the above restrictions, the interim rule clarifies that the mechanical licensing collective shall continue to fulfill its disclosure obligations under section 115 including, but not limited to, delivering royalty statements to copyright owners 139 and providing monthly reports to the digital licensee coordinator identifying any significant nonblanket licensees that are not in compliance with the Office’s regulations regarding notices of nonblanket activity and reports of usage for the making and distribution of phonorecords of nondramatic musical works.140 Because royalty statements could be confidential to copyright owners themselves, and given the MLC’s suggestion that regulations should prohibit disclosure of confidential information regarding a ‘‘particular, identified copyright owner to other copyright owners (including their agents or representatives) or songwriters,’’ 141 the interim rule states that members of the MLC’s board of directors or committees shall not have access to other musical work copyright owners’ royalty statements, except where a copyright owner discloses its own statement to such bodies.142 For parity, the digital licensee coordinator, including members of the digital licensee coordinator’s board of directors or committees, shall be similarly restricted. Under the rule, members of the mechanical licensing collective’s 139 See id. at 210.29(c). 17 U.S.C. 115(d)(6)(A); 37 CFR 210.25; id. at 210.28. 141 MLC NPRM Comment at 19. 142 See id., App. at iii (proposing that no copyright owners or songwriters should have access to confidential information of other copyright owners). 140 See VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 board and committees are not, however, restricted in accessing their own royalty statements from the mechanical licensing collective. Disclosure of MLC Internal Information and DLC Internal Information As proposed by the DLC, the interim rule also incorporates ‘‘MLC Internal Information’’ as a category of information that can be shared with the MLC board of directors and committees, including representatives of the DLC, subject to an appropriate written confidentiality agreement.143 To ensure that ‘‘MLC Internal Information’’ does not extend to sensitive business and financial information disclosed by DMPs, copyright owners, and significant nonblanket licensees to the MLC (i.e., ‘‘confidential information’’), the interim rule defines ‘‘MLC Internal Information’’ as sensitive financial or business information created by or collected by the mechanical licensing collective for purposes of its internal operations, such as personnel, procurement, or technology information.144 Under the interim rule, ‘‘MLC Internal Information’’ excludes information that is public or may be made public by various avenues, similar to the regulatory definition of ‘‘Confidential Information.’’ 145 In addition, the interim rule creates a corresponding category of ‘‘DLC Internal Information.’’ Because ‘‘MLC Internal Information’’ and ‘‘DLC Internal Information’’ do not relate to sensitive business information disclosed by DMPs, significant nonblanket licensees, or copyright owners, the rule does not impose strict disclosure requirements as it does with ‘‘confidential information’’ due to the less-sensitive nature of these information categories. Rather, the rule creates categories of individuals to whom the MLC and DLC may disclose ‘‘MLC Internal Information’’ and/or ‘‘DLC Internal Information’’ (subject to a confidentiality agreement), which gives the MLC and DLC some flexibility if 143 See DLC NOI Initial Comment at 23 (‘‘DLC representatives are thus meant to represent the entire digital licensee community, and should be able to share information among DLC membership.’’); see also id. at 28. 144 See DLC Ex Parte Letter #6 at 7 (including ‘‘disciplinary files for personnel, or competing vendor bids’’ as examples of ‘‘MLC Internal Information’’). 145 The definition of ‘‘MLC Internal Information’’ does not, as proposed by the DLC, exclude ‘‘top level, compilation data presented in anonymized format that does not allow identification of such data as belonging to any specific digital music provider, significant nonblanket licensee, or copyright owner.’’ See DLC Ex Parte Letter #8 at 5. By definition, ‘‘MLC Internal Information’’ is restricted to information regarding the MLC’s internal operations. PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 they decide additional disclosure is necessary. The rule also states that the MLC may disclose MLC Internal Information to other individuals in its discretion, subject to the adoption of reasonable confidentiality policies. The rule contains a parallel provision for the DLC and DLC Internal Information. Specifically, the interim rule states that the MLC may disclose MLC Internal Information to members of the MLC’s board of directors and committees, including representatives of the DLC who serve on the MLC’s board of directors or committees. The interim rule also states that representatives of the DLC who serve on the board of directors or committees of the mechanical licensing collective and receive MLC Internal Information may share such MLC Internal Information with the following persons, who require access to such information for the purpose of performing their duties during the ordinary course of their work for the DLC, subject to an appropriate written confidentiality agreement: • Employees, agents, consultants, vendors, and independent contractors of the DLC; • Individuals serving on the board of directors or committees of the DLC or MLC; and • Individuals otherwise employed by members of the DLC. Under the interim rule, the DLC may disclose DLC Internal Information to the following persons, subject to an appropriate written confidentiality agreement: • Members of the DLC’s board of directors and committees; and • Members of the MLC’s board of directors and committees. ii. Disclosure of Confidential Information to Non-Mechanical Licensing Collective and Non-Digital Licensee Coordinator Persons and Entities The proposed rule allowed disclosure of confidential information to attorneys and other authorized agents of parties to proceedings before federal courts, the Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena, subject to an appropriate protective order or agreement.146 The proposed rule also permitted disclosure to qualified auditors or outside counsel pursuant to the statutorily-permitted audits by the MLC of a digital music provider operating under the blanket license or audits by copyright owners of the MLC. No commenter objected to these provisions, and the MLC, DLC, and 146 85 E:\FR\FM\11FER1.SGM FR at 22568. 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations ARM retained them in their respective proposed statutory text.147 In light of these comments, the interim rule adopts this aspect of the proposed rule. As noted above, while the rule generally states that recipients of confidential information from the MLC or DLC shall not disclose such confidential information to anyone else except as expressly permitted in the Office’s regulations, it creates an exception for qualified auditors or outside counsel conducting statutorily-permitted audits, or attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena. khammond on DSKJM1Z7X2PROD with RULES 3. Interim Rule—Restrictions on Use of Confidential Information In response to multiple commenters expressing concern about MLC vendors using the confidential information they acquire while conducting work for the MLC for other purposes,148 the proposed rule restricted MLC vendors from using confidential information for purposes other than for duties performed during the ordinary course of work for the MLC, including the administration of voluntary bundled licensing of performance and mechanical uses that the MLC itself is prohibited from administering.149 The proposed rule similarly restricted DLC vendors.150 In issuing the proposed rule, the Office tentatively declined to adopt the MLC’s proposal to preferentially allow ‘‘users who submit confidential data to the MLC an ability to voluntarily ‘opt in’ to share that data for general use by its primary royalty processing vendor, the Harry Fox Agency’’ 147 See MLC NPRM Comment App. at v; DLC NPRM Comment Add. at A–4; ARM NPRM Comment at 14. 148 See, e.g., National Association of Independent Songwriters (‘‘NOIS’’) et al. Initial NOI Comment at 16 (‘‘The vendors for the MLC should not be . . . able to use information and data that the MLC will gather and control to their competitive advantage. If they are in competition with other entities considered to be similar in nature or can use the data to their own unique proprietary advantage, they should not be eligible to be selected as a vendor.’’); Lowery Reply NOI Comment at 12 (‘‘If the Copyright Office does not prohibit HFA from selling for other commercial purposes the data it acquires through its engagement by MLC to facilitate the compulsory blanket license, the Congress will have just handed HFA a near insurmountable advantage over its competitors.’’); see also DLC NPRM Comment at 2, U.S. Copyright Office Dkt. No. 2020–8, available at https:// beta.regulations.gov/docket/COLC-2020-0006. 149 85 FR at 22565; see also 37 CFR 380.5(b) (prohibiting SoundExchange from using ‘‘any Confidential Information for any purpose other than royalty collection and distribution and activities related directly thereto’’). 150 85 FR at 22565. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 (‘‘HFA’’), as the MLC did not detail what it meant by ‘‘general use.’’ 151 FMC and CISAC & BIEM support this aspect of the proposed rule, noting that vendors’ use of confidential information other than for duties performed during the ordinary course of work for the MLC or DLC has the potential to increase the risk of anti-competitive harm and conflicts of interest.152 In a parallel rulemaking, the DLC, FMC, and SoundExchange emphasized the importance of MLC vendors not receiving preferential treatment or market advantage by virtue of their association with the MLC, with FMC stating that ‘‘Congress intended to encourage a healthy competitive marketplace for other kinds of licensing businesses and intermediaries,’’ and ‘‘it’s important that MLC’s chosen vendors not be able to leverage their status with the MLC to advantage themselves in other business activities not covered under the MMA.’’ 153 SoundExchange asserted that Congress ‘‘intended to preserve a vibrant and competitive marketplace for intermediaries [besides the MLC] who provide other license administration services,’’ and this intent would be frustrated ‘‘[i]f the MLC’s vendors were to receive an unfair advantage in the music licensing marketplace through means such as preferred access to digital music providers or referrals by the MLC for extrastatutory business opportunities in a manner not available to their competitors.’’ 154 The DLC did not oppose this aspect of the proposed rule,155 and in a parallel rulemaking, 151 Id. (quoting MLC Ex Parte Letter #1 at 4) (citation omitted). 152 FMC NPRM Comment at 1 (‘‘There should be no provision for HFA to use confidential data for ‘general use’, even on an opt-in basis. The risk of anti-competitive harm is too great.’’); CISAC & BIEM NPRM Comment at 3 (‘‘Our organisations support this Proposed Rulemaking because some Vendors may obtain commercially valuable information, use it for their own activities and thus create conflicts of interest.’’). 153 FMC NRPM Comment at 1–2, U.S. Copyright Office Dkt. No. 2020–8, available at https:// beta.regulations.gov/docket/COLC-2020-0006; see also id. at 2 (‘‘The Office can require the MLC to disclose what it is doing to prevent any vendor from being too operationally enmeshed with the MLC that it either enjoys an unfair advantage through that relationship, or that it would be practically impossible for another vendor to step in.’’). 154 SoundExchange NRPM Comment at 8, U.S. Copyright Office Dkt. No. 2020–8, available at https://beta.regulations.gov/docket/COLC-20200006. 155 See DLC NPRM Comment Add. at A–2; DLC Ex Parte Letter #6 at 7. The DLC does propose an adjustment to the proposed rule to restrict its vendors from using confidential information to ‘‘duties that are made the responsibility of the DLC, under 17 U.S.C. 115(d)(5)(C), including efforts to enforce notice and payment obligations with respect to the administrative assessment.’’ DLC Ex Parte Letter #6 at 7. PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 9015 expressed concern as ‘‘to whether the MLC’s selected vendors will gain a special competitive advantage in related marketplaces—such as the administration of voluntary licenses— merely by dint of their association with the collective responsible for licensing all mechanical rights in the United States.’’ 156 For its part, the MLC contends that this aspect of the proposed rule ‘‘is overly prescriptive, imposes unnecessary burdens and costs on copyright owners, and is likely not within the scope of the Office’s authority.’’ 157 While the proposed rule would restrict only actions of the mechanical licensing collective, the MLC argues that the proposed rule ‘‘prevent[s] the MLC’s copyright owner members from voluntarily electing to share their own information with the MLC’s vendors,’’ 158 and that ‘‘[c]opyright owners that wish to use the MLC’s vendors for purposes other than the administration of the blanket license should not have to incur the time and expense to input duplicates of information that can be transferred voluntarily without any transaction costs.’’ 159 NMPA echoes the MLC’s position, maintaining that ‘‘[w]here a copyright owner provides to HFA its confidential information by virtue of HFA’s role as administrator of the blanket license, it may make the most business sense (and be most efficient) to authorize HFA to use that information for the copyright [owners’] other licenses.’’ 160 NMPA also asserts that ‘‘HFA gains no special advantage by receiving the same information one time rather than multiple times,’’ but that ‘‘copyright owners are decidedly disadvantaged in having to submit multiple but identical data sets.’’ 161 As noted above, the MMA expressly directs the Office to adopt regulations to, among other things, prevent the improper use of confidential information contained in the mechanical licensing collective’s records.162 The MMA also expressly restricts the mechanical licensing collective to administering the mechancial license,163 as the MLC 156 DLC NPRM Comment at 1, U.S. Copyright Office Dkt. No. 2020–8, available at https:// beta.regulations.gov/docket/COLC-2020-0006. 157 MLC NPRM Comment at 13. 158 Id. at 4. 159 Id. 160 Id. 161 Id. 162 17 U.S.C. 115(d)(12)(C). 163 Id. at 115(d)(3)(C)(iii) (limiting administration of voluntary licenses to ‘‘only [the] reproduction or distribution rights in musical works for covered activities’’). E:\FR\FM\11FER1.SGM 11FER1 9016 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES acknowledges,164 and the legislative history reflects Congress’s intention that this provision was critical to safeguard continued private competition outside of the MLC’s administration of the blanket mechanical license.165 Given Congress’s actions to preserve competition for music licensing vendors and the overwhelming concern from commenters that MLC vendors should not be able to gain commercial advantage due to its association with the MLC, the Office again declines to adopt the MLC’s proposal to allow ‘‘users who submit confidential data to the MLC an ability to voluntarily ‘opt in’ to share that data for general use by its primary royalty processing vendor, the Harry Fox Agency.’’ 166 If the Office were to adopt the MLC’s proposal, HFA would receive an advantage for non-mechanical business opportunities not granted to competitors (i.e., confidential information ‘‘for purposes other than the administration of the blanket license,’’ 167 such as the administration of copyright owners’ ‘‘other licenses’’ 168) and preferential access and treatment (i.e., data ‘‘by virtue of HFA’s role as administrator of 164 See MLC NOI Comment at 10, U.S. Copyright Office Dkt. No. 2020–8, available at https:// www.regulations.gov/docketBrowser ?rpp=25&so=DESC&sb=comment DueDate&po=0&dct=PS&D=COLC-2020-0006 (‘‘[B]ecause the MLC is prohibited from licensing rights other than mechanical rights, . . . the MLC agrees with the Office that . . . it is ‘unlikely to be prudent or frugal to require the MLC to expend resources to maintain [in the public database] PRO affiliations for rights it is not permitted to license.’ ’’) (citing 85 FR at 22576). 165 See also Senate Judiciary Comm., Executive Business Meeting, C–SPAN, at 53:24–53:59 (June 28. 2018), https://www.c-span.org/video/?447464-1/ judiciary (statement of Sen. Cruz) (‘‘The problem is that there is already right now a functioning marketplace that is doing that –there are many companies today that manage, collect, and distribute mechanical rights for digital music companies and this bill would put them all out of business. . . . The amendment that I filed, what it would do is open up blanket licenses to other entities—to promote competition at a lower price.’’); Id. at 50:41–50:55 (statement of Sen. Cornyn) (‘‘I did want to highlight one issue that’s been brought to my attention. The creation of this mechanical licensing collective in the Copyright Office—and precludes any private entity from perhaps providing that same service.’’); Shirley Halperin, Music Modernization Act Stares Down Potential Snag, Variety (July 23, 2018), https:// variety.com/2018/music/news/musicmodernization-act-blackstone-sesac-congresssenate-1202881536/ (describing issue as endangering prospects for MMA passage); Steve Brachmann, Compromise on Music Modernization Act Leads to Unconditional Support From Music Industry Organizations, IPWatchdog (Aug. 18, 2018), https://www.ipwatchdog.com/2018/08/18/ compromise-music-modernization-act-musicindustry-support/id=100162/ (reporting resolution through amendment limiting the MLC’s ability to administer voluntary licenses). 166 MLC Ex Parte Letter #1 at 4. 167 MLC NPRM Comment at 4. 168 NMPA NPRM Comment at 4. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 the blanket license,’’ 169 and ‘‘without any transaction costs’’ 170). Allowing HFA to benefit from its association with the MLC for business opportunities outside the administration of the blanket license is precisely the scenario multiple commenters have warned against, and is in tension with Congress’s deliberate decision to limit the scope of the mechanical licensing collective. Contrary to the MLC and NMPA’s position, the Office is not preventing copyright owners from sending their information to a particular vendor; rather, the Office is preventing the MLC from providing its vendor with confidential information in a manner that results in disparate and preferential treatment. The Office similarly rejects the MLC’s proposed language stating that ‘‘[n]othing herein shall preclude the party or parties to whom information is confidential from voluntarily transmitting such Confidential Information to a third party with lesser restrictions on use, and nothing herein shall preclude the MLC from assisting in any such voluntary transfer.’’ 171 To the extent this language is suggested to clarify the ability of those outside the MLC to exchange information, the Office finds it unnecessary, and to the extent the language is intended to allow the MLC to facilitate exchange of otherwise confidential information to preferred entities for private use, it would seem to create an end-run around the limitations of the rule. In the NPRM, the Office noticed a potential alternative to the MLC’s proposal. The Office had considered whether to propose language requiring the MLC to offer such information equally to third parties, perhaps restricted to those offering or administering music licensing services, for a reasonable cost, i.e., both the MLC’s preferred vendors and others similarly situated in the marketplace.172 The Office noted that this approach would have the potential benefit of leveraging the unique nature of the MLC database in other aspects of the music ecosystem, without potentially affecting the competitive landscape in ways unrelated to the section 115 license.173 The MLC and NMPA, however, did not respond regarding this proposed alternative. After careful consideration, the interim rule adopts this aspect of the proposed rule, with the following slight 169 Id. 170 MLC NPRM Comment at 4. NPRM Comment App. at iii. 172 85 FR at 22565. 173 Id. 171 MLC PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 modifications. The Office adjusted the interim rule so that instead of stating the MLC ‘‘shall not use any Confidential Information for any purpose other than determining compliance with statutory license requirements, royalty calculation, collection, matching, and distribution, and activities related directly thereto,’’ it states that the MLC ‘‘shall not use any Confidential Information for any purpose other than the collective’s authorized functions under 17 U.S.C. 115(d) and activities related directly thereto.’’ 174 Anyone to whom the MLC discloses confidential information as permitted under the regulations shall not use any confidential information for any purpose other than in performing their duties during the ordinary course of their work for the mechanical licensing collective, with an exception for qualified auditors or outside counsel conducting statutorily-permitted audits, or attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena. For parity, the interim rule adopts similar language with respect to the DLC and its authorized functions under 17 U.S.C. 115(d)(5)(C).175 C. Safeguarding Confidential Information Both the MLC and DLC proposed having the MLC and DLC implement policies and procedures to prevent unauthorized access and/or use of confidential information, an approach that seems necessary to effectuate the intent of the regulations.176 Accordingly, the proposed rule stated that the MLC, DLC, and recipients of confidential information from one of those entities must implement procedures to safeguard against 174 See MLC NPRM Comment at 10 (‘‘The MLC proposes, at a minimum, clarifying the Proposed Regulation to ensure that the MLC can conduct the statutory functions charged by Congress.’’). 175 The Office adjusted the interim rule to align with the DLC’s responsibilities under section 115. See DLC NPRM Comment at 7–8. 176 MLC Initial NOI Comment at 29 (stating ‘‘protection of such confidential, private, proprietary or privileged information may be accomplished through a regulation that requires the MLC and the DLC to implement confidentiality policies that prevent improper or unauthorized use of such material by their directors, committee members, and personnel’’); DLC Reply NOI Comment Add. at A–21–22 (proposing that the MLC and DLC (and any person authorized to receive confidential information) ‘‘must implement procedures to safeguard against unauthorized access to or dissemination of Confidential Information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own Confidential Information or similarly sensitive information’’). E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations khammond on DSKJM1Z7X2PROD with RULES unauthorized access to or dissemination of confidential information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own confidential information or similarly sensitive information.177 In addition, the proposed rule stated that the MLC and DLC shall each implement and enforce reasonable policies governing the confidentiality of its records.178 The MLC and DLC retained this aspect of the proposed rule in their suggested regulatory text.179 CISAC & BIEM maintain that the ‘‘reasonable standard of care’’ requirement is ‘‘vague and does not constitute a sufficient commitment.’’ 180 As the ‘‘reasonable standard of care’’ is commonly used in U.S. jurisprudence, and in light of a similar provision governing obligations of SoundExchange, the collective designated to administer the section 114 license, this aspect of the proposed rule is retained without modification.181 The NPRM also sought public comment on whether the regulations should address instances of inadvertent unauthorized disclosure.182 The MLC contends that ‘‘the circumstances of such inadvertent disclosures, and the consequences of such disclosure are fact-specific’’ and that it should be afforded flexibility to establish its own policies to ‘‘permit the MLC to assess the facts and circumstances giving rise to the inadvertent disclosure and determine the most appropriate way to address and remedy such disclosure.’’ 183 Similarly, the DLC maintains that instances of inadvertent disclosure should ‘‘be addressed on a case-by-case basis.’’ 184 In light of these 177 85 FR at 22565; see 37 CFR 380.5(d) (‘‘[SoundExchange] and any person authorized to receive Confidential Information from [SoundExchange] must implement procedures to safeguard against unauthorized access to or dissemination of Confidential Information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own Confidential Information or similarly sensitive information.’’). 178 85 FR at 22565. 179 See MLC NPRM Comment App. at v; DLC NPRM Comment Add. at A–4. 180 CISAC & BIEM NPRM Comment at 3. 181 See 37 CFR 380.5(d) (‘‘The Collective and any person authorized to receive Confidential Information from the Collective must implement procedures to safeguard against unauthorized access to or dissemination of Confidential Information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own Confidential Information or similarly sensitive information.’’); id. at 380.24(e) (similar); id. at 380.34(e) (similar). 182 85 FR at 22566. 183 MLC NPRM Comment at 21. 184 DLC NPRM Comment at 8. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 comments, the interim rule does not address inadvertent disclosures. D. Maintenance of Records The proposed rule also provided that any written confidentiality agreements relating to the use or disclosure of confidential information must be maintained and stored by the relevant parties for at least the same amount of time that certain digital music providers are required to maintain records of use pursuant to 17 U.S.C. 115(d)(4)(A)(iv). At the time of the NPRM, a separate rulemaking proposed a five-year retention period for such records; the Office subsequently adopted a sevenyear period in response to public comments in that proceeding.185 ARM generally supported this aspect of the proposed rule, but suggested an adjustment to require retention for a defined retention period of ‘‘five years after disclosures cease to be made pursuant to [the agreements].’’ 186 ARM suggests that any confidentiality agreements ‘‘should be retained until some years after disclosures cease to be made pursuant to it (such as when an employment relationship ends or the agreement is replaced by a new agreement).’’ 187 The Office has adopted ARM’s suggestion to tie retention requirements of confidentiality agreements to their dates of effectiveness in order to ensure they are retained for an appropriate period of time. The Office has also extended the retention period for two additional years, similar to records requirements imposed on digital music providers. Accordingly, the interim rule states that any written confidentiality agreements relating to the use or disclosure of confidential information must be maintained and stored by the relevant parties until at least seven years after disclosures cease to be made pursuant to them. E. Confidentiality Designations The proposed rule did not impose a requirement that confidential information must bear a designation of confidentiality, although the Office noted that the MLC or DLC could presumably impose such a requirement in their own policies.188 No commenters responded to this aspect of the proposed rule, and so the interim rule does not impose a designation of confidentiality requirement. 185 See 37 CFR 210.27(m) (generally requiring digital music providers to retain relevant records for seven years). 186 ARM NPRM Comment at 8–9, 14. 187 Id. at 9. 188 85 FR at 22565. PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 9017 Relatedly, the Office asked in the NPRM whether, in addition to a category of ‘‘Confidential Information,’’ the regulations should provide for a ‘‘Highly Confidential Information’’ category to provide an additional layer of protection for certain documents and information.189 Neither the MLC nor DLC believe a heightened category of ‘‘highly confidential’’ information is necessary,190 and ARM ‘‘does not have strong views’’ as long as the regulations prohibit MLC board and committee members and companies that employ MLC and DLC board members from accessing confidential information of third-party companies (including recorded music companies).191 Given these comments, and (as noted above) because the interim rule precludes the MLC from disclosing sensitive data concerning agreements between sound recording companies and digital music providers to members of the MLC’s board of directors or committees or the digital licensee coordinator’s board of directors or committees, the interim rule does not include a heightened category of ‘‘Highly Confidential Information.’’ F. Nondisclosure Agreements The MLC and DLC disagree as to whether DLC representatives on the MLC’s board of directors or committees should be required to sign nondisclosure agreements (‘‘NDAs’’) in their personal capacities. The DLC initially suggested that only the DLC as an organization should be bound, and not DLC representatives in their personal capacities or as representatives of their employers.192 Instead, the DLC maintained, confidentiality obligations for the MLC and DLC should operate at ‘‘an organization-to-organization level,’’ 193 as ‘‘some companies prohibit [DLC representatives from] taking on such personal liability for actions taken in the scope of employment.’’ 194 The MLC disagreed, stating that if only the DLC, which lacks assets relatively, is bound by a confidentiality agreement, there would be no recourse against the DLC for breach, and that such a proposal ‘‘disincentiv[izes] individuals on the MLC Board and committees from protecting confidential information, as 189 Id. at 22566. NPRM Comment at 21 (‘‘[T]he MLC does not believe further heightened restrictions are necessary.’’); DLC NPRM Comment at 8 (‘‘DLC believes it unnecessary to create an additional category of ‘highly’ confidential . . .’’). 191 ARM NPRM Comment at 8. 192 DLC Initial NOI Comment at 23. 193 Id. 194 DLC Ex Parte Letter #2 at 6. 190 MLC E:\FR\FM\11FER1.SGM 11FER1 khammond on DSKJM1Z7X2PROD with RULES 9018 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations there will be no penalty for unlawful disclosure.’’ 195 In the NPRM, the Office was disinclined to require that confidentiality obligations for the MLC and DLC operate at an organization-toorganization level. Instead, the proposed rule stated that the various categories of individuals to receive confidential information do so subject to an appropriate written confidentiality agreement. In response, the MLC ‘‘believes that the current Proposed Regulation, which provides that any DLC appointee to the MLC board or committees must sign a confidentiality agreement is the appropriate solution.’’ 196 The MLC maintains that ‘‘[i]f the DLC member company would like its employee to serve as an MLC board or committee member, then it can except the employee from such restriction and allow that individual to serve as a DLC appointee (and thus comply with the confidentiality obligations imposed on all board and committee members),’’ or else ‘‘identify an alternate appointee that can participate with full accountability to the MLC and its members.’’ 197 By contrast, the DLC asserts that because it proposes disclosing only MLC Internal Information to MLC and DLC board and committee members (as discussed above), the ‘‘[l]ess-sensitive nature of this internal MLC and DLC information diminishes to a substantial degree the rationale for imposing potential personal liability as a condition for board and committee membership.’’ 198 The DLC also notes that it has adopted a confidentiality policy that operates between itself and DLC member companies, which ‘‘allows the individual DLC representatives to share information and consult as needed within their companies, without the cumbersome process of requiring each person that is so consulted to first sign a confidentiality agreement with DLC.’’ 199 The Office recognizes that the DLC would prefer for DLC representatives to be able to easily share MLC Internal Information and consult as needed within their companies, but the Office is mindful that sensitive information regarding the MLC’s internal operations needs appropriate protections in place to prevent improper disclosure or use. As noted in the NPRM, binding individuals in their personal capacities provides an avenue of recourse and is a 195 MLC Reply NOI Comment at 41. 196 MLC NPRM Comment at 22. 197 Id. at 23. 198 DLC NPRM Comment at 9. 199 Id. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 common practice in model protective orders used in the analogous context of preventing confidential information produced through litigation discovery from being improperly disclosed or misused.200 Also, the DLC’s existing confidentiality policy with its members relates to information that would likely fall under the definition of ‘‘DLC Internal Information,’’ not information relating to the MLC’s operations.201 Accordingly, the Office again declines the DLC’s proposal that confidentiality obligations for the MLC and DLC operate at an organization-toorganization level for both ‘‘confidential information’’ and ‘‘MLC Internal Information.’’ 202 The Office does not, however, intend to interfere with the DLC and its members having agreements at an organization-to-organization level to allow sharing of ‘‘DLC Internal Information’’ and consulting as needed regarding such information within their organization companies without having each individual signing an agreement in his or her personal capacity. In response to commenters’ concern about the MLC requiring additionally restrictive NDAs for its board and committee members,203 the proposed rule prevented the MLC and DLC from imposing additional restrictions relating to the use or disclosure of confidential information, beyond those imposed by the Office’s regulations, as a condition for participation on a board or 200 85 FR at 22566. DLC NPRM Comment Ex. 1 (stating that information covered by the agreement ‘‘includes, but is not limited to personnel issues; information that is proprietary to, or the intellectual property of, the DLC or the other Member Companies; unpublished data and manuscripts; draft standards and policies; deliberations; and other information that has not been authorized for disclosure, has not become public and that is obtained through a Member Company’s or an individual’s relationship with the DLC’’). 202 One commenter suggests that the MLC make its form confidentiality agreement public. Castle NPRM Comment at 4. The MLC advised that it ‘‘does not know whether its confidentiality expectations for board and committee members will all be captured in a template agreement,’’ but that ‘‘as part of its ongoing and general informational activities, in addition to following the Office’s regulations as to confidential information, the MLC intends to provide information to the public as to any additional confidentiality expectations that it has for its board and advisory committee members, whether through posting template or exemplar agreements or otherwise identifying such confidentiality expectations.’’ MLC Ex Parte Letter #9 at 4. 203 The DLC maintained that Office’s regulations ‘‘should be the ceiling on any confidentiality requirements’’ by the MLC. DLC Reply NOI Comment at 28. NOIS, joined by individual stakeholders, contended that there ‘‘must be a rejection of any incremental NDA put forth by the MLC to its board and/or committee members that requires anything not mandated by the MMA.’’ NOIS et al. Initial NOI Comment at 16. 201 See PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 committee.204 The proposed rule stated that ‘‘[t]he use of confidentiality agreements by the MLC and DLC shall be subject to the other provisions’’ of the Office’s confidentiality regulations, and ‘‘shall not permit broader use or disclosure of Confidential Information than permitted under’’ the regulations.205 The proposed rule also stated that the MLC and DLC ‘‘may not impose additional restrictions relating to the use or disclosure of Confidential Information, beyond those imposed by this provision, as a condition for participation on a board or committee.’’206 The MLC objected to these provisions, contending that ‘‘[l]imiting the scope of the ‘appropriate written confidentiality agreements’ to agreements that provide for no more and no less than what is already specified in the regulation renders meaningless the added qualifier that the use or disclosure shall be made subject to an ‘appropriate written confidentiality agreement.’ ’’ 207 The MLC suggests that additional appropriate restrictions not addressed in the regulations—such as ‘‘provisions requiring that adequate notice be given prior to any disclosure in response to a subpoena or other legal process’’ or ‘‘provid[ing] for the return or destruction of confidential materials on demand or at the end of a service period’’—would be ‘‘imprudent’’ not to include in confidentiality agreements, but ‘‘could be considered additional restrictions on use’’ beyond those in the Office’s regulations.208 By contrast, FMC supports the proposed rule, expressing its ‘‘appreciat[ion] that the Office has made it clear that the MLC cannot create additional restrictions on the use and disclosure of confidential information beyond the Office’s regulations,’’ which ‘‘will help writers and composers have an extra degree of confidence about the healthy internal functioning of the MLC and know that board and committee members who have concerns would feel free to speak freely to impacted copyright owners and writers.’’ 209 The Office acknowledges that its regulations may not address all appropriate use restrictions and that confidentiality agreements may need to fill in some gaps (e.g., provisions regarding notice before disclosures in response to subpoenas or other legal processes, the return or destruction of confidential materials). The Office is 204 85 205 Id. FR at 22566. at 22568. 206 Id. 207 MLC NPRM Comment at 17. at 17–18. 209 FMC NPRM Comment at 2. 208 Id. E:\FR\FM\11FER1.SGM 11FER1 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations mindful, however, that the statute directs the Office to promulgate regulations to prevent the improper use or disclosure of confidential information and that any confidentiality agreements should not be inconsistent with the Office’s regulations.210 To accommodate the MLC’s concerns in the context of the regulatory framework, the interim rule is adjusted so that rather than requiring confidentiality agreements to be in compliance with the Office’s regulations, they must not be inconsistent with them. This should afford the MLC and DLC sufficient flexibility, while ensuring that any resulting confidentiality agreements do not circumvent the spirit of the Office’s regulations. Also, because the interim rule prohibits the MLC and DLC from sharing ‘‘confidential information’’ with members of their boards of directors and committees, the interim rule removes the provision prohibiting the MLC and DLC from imposing additional restrictions relating to the use or disclosure of confidential information, beyond those imposed by the regulations, as a condition for participation on a board or committee. Should the Office learn of the MLC or DLC inappropriately conditioning disclosure of MLC Internal Information or DLC Internal Information, the Office will consider whether further adjustment is necessary. List of Subjects in 37 CFR Part 210 Copyright, Phonorecords, Recordings. Interim Regulations For the reasons set forth in the preamble, the Copyright Office amends 37 CFR part 210 as follows: PART 210—COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING PHYSICAL AND DIGITAL PHONORECORDS OF NONDRAMATIC MUSICAL WORKS 1. The authority citation for part 210 continues to read as follows: ■ Authority: 17 U.S.C. 115, 702. khammond on DSKJM1Z7X2PROD with RULES Subpart B—Blanket Compulsory License for Digital Uses, Mechanical Licensing Collective, and Digital Licensee Coordinator ■ 2. Add § 210.34 to read as follows: 210 The Office declines to expressly adopt the MLC’s proposed language that ‘‘[a]nyone receiving Confidential Information under this subsection may not further disclose such Confidential Information except as expressly authorized in their written confidentiality agreement.’’ MLC NPRM Comment App. at iii. VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 § 210.34 Treatment of confidential and other sensitive information. (a) General. This section prescribes the rules under which the mechanical licensing collective and digital licensee coordinator shall ensure that confidential, private, proprietary, or privileged information received by the mechanical licensing collective or digital licensee coordinator or contained in their records is not improperly disclosed or used, in accordance with 17 U.S.C. 115(d)(12)(C), including with respect to disclosure or use by the board of directors, committee members, and personnel of the mechanical licensing collective or digital licensee coordinator. (b) Definitions. For purposes of this section: (1) ‘‘Confidential Information’’ means sensitive financial or business information, including trade secrets or information relating to financial or business terms that could cause competitive disadvantage or be used for commercial advantage, disclosed by digital music providers, significant nonblanket licensees, and copyright owners (or any of their authorized agents or vendors) to the mechanical licensing collective or digital licensee coordinator. ‘‘Confidential Information’’ also means sensitive personal information, including but not limited to, an individual’s Social Security number, taxpayer identification number, financial account number(s), or date of birth. (i) ‘‘Confidential Information’’ specifically includes usage data and other sensitive data used to compute market shares when distributing unclaimed accrued royalties, sensitive data provided by digital music providers related to royalty calculations, sensitive data shared between the mechanical licensing collective and digital licensee coordinator regarding any significant nonblanket licensee, sensitive data concerning voluntary licenses or individual download licenses administered by and/or disclosed to the mechanical licensing collective, and sensitive data concerning agreements between sound recording companies and digital music providers. ‘‘Confidential information’’ also includes sensitive financial or business information disclosed to the mechanical licensing collective or digital licensee coordinator by a third party that is reasonably designated as confidential by the party disclosing the information, subject to the other provisions of this section. (ii) ‘‘Confidential Information’’ does not include: PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 9019 (A) Information that is public or may be made public by law or regulation, including but not limited to information made publicly available through: (1) Notices of license, excluding any addendum that provides a description of any applicable voluntary license or individual download license the digital music provider is, or expects to be, operating under concurrently with the blanket license. (2) Notices of nonblanket activity, information in the public musical works database prescribed by 17 U.S.C. 115(d)(3)(E), and information disclosable through the mechanical licensing collective’s bylaws, annual report, audit report, or the mechanical licensing collective’s adherence to transparency and accountability with respect to the collective’s policies or practices, including its anticommingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii),(vii), and (ix). (B) Information that at the time of delivery to the mechanical licensing collective or digital licensee coordinator is public knowledge, or is subsequently publicly disclosed by the party to whom the information would otherwise be considered confidential. The party seeking information from the mechanical licensing collective or digital licensee coordinator based on a claim that the information sought is a matter of public knowledge shall have the burden of proving that fact. (C) Top-level compilation data presented in anonymized format that does not allow identification of such data as belonging to any specific digital music provider, significant nonblanket licensee, or copyright owner. (2) ‘‘MLC Internal Information’’ means sensitive financial or business information created by or collected by the mechanical licensing collective for purposes of its internal operations, such as personnel, procurement, or technology information. ‘‘MLC Internal Information’’ does not include: (i) Information that is public or may be made public by law or regulation, information in the public musical works database prescribed by 17 U.S.C. 115(d)(3)(E), and information in the mechanical licensing collective’s bylaws, annual report, audit report, or the mechanical licensing collective’s adherence to transparency and accountability with respect to the collective’s policies or practices, including its anti-commingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii), (vii), and (ix); or (ii) Information that at the time of delivery to the mechanical licensing collective is public knowledge, or is subsequently publicly disclosed by the E:\FR\FM\11FER1.SGM 11FER1 khammond on DSKJM1Z7X2PROD with RULES 9020 Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations party to whom the information would otherwise be considered confidential. The party seeking information from the mechanical licensing collective based on a claim that the information sought is a matter of public knowledge shall have the burden of proving that fact. (3) ‘‘DLC Internal Information’’ means sensitive financial or business information created by or collected by the digital licensee coordinator for purposes of its internal operations, such as personnel, procurement, or technology information. ‘‘DLC Internal Information’’ does not include: (i) Information that is public or may be made public by law or regulation, information in the public musical works database prescribed by 17 U.S.C. 115(d)(3)(E), and information disclosable through the digital licensee coordinator’s bylaws; or (ii) Information that at the time of delivery to the digital licensee coordinator is public knowledge, or is subsequently publicly disclosed by the party to whom the information would otherwise be considered confidential. The party seeking information from the digital licensee coordinator based on a claim that the information sought is a matter of public knowledge shall have the burden of proving that fact. (c) Disclosure of Confidential Information. (1) The mechanical licensing collective shall limit disclosure of Confidential Information to employees, agents, consultants, vendors, and independent contractors of the mechanical licensing collective who are engaged in the collective’s authorized functions under 17 U.S.C. 115(d) and activities related directly thereto and who require access to Confidential Information for the purpose of performing their duties during the ordinary course of their work for the mechanical licensing collective, subject to an appropriate written confidentiality agreement. The mechanical licensing collective shall not disclose Confidential Information to members of the mechanical licensing collective’s board of directors and committees, including the collective’s Unclaimed Royalties Oversight Committee, or the digital licensee coordinator’s board of directors or committees. (2) Notwithstanding paragraph (c)(1) of this section, the mechanical licensing collective shall be permitted to fulfill its disclosure obligations under section 115 including, but not limited to: (i) Providing monthly reports to the digital licensee coordinator setting forth any significant nonblanket licensees of which the collective is aware that have failed to comply with the Office’s VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 regulations regarding submission of a notice of nonblanket activity for purposes of notifying the mechanical licensing collective that the licensee has been engaging in covered activities, or regarding the delivery of reports of usage for the making and distribution of phonorecords of nondramatic musical works; and (ii) Preparing and delivering royalty statements to musical work copyright owners that include the minimum information required in accordance with 37 CFR 210.29(c), but without including additional Confidential Information that does not relate to the recipient copyright owner or relevant songwriter. Once a copyright owner receives a royalty statement from the mechanical licensing collective, there are no restrictions on the copyright owner’s ability to use the statement or disclose its contents. (A) Members of the mechanical licensing collective’s board of directors and committees shall not have access to musical work copyright owners’ royalty statements, except where a copyright owner discloses their own royalty statement to the members of the mechanical licensing collective’s board of directors or committees. Notwithstanding this paragraph, members of the mechanical licensing collective’s board and committees are not restricted in accessing their own royalty statements from the mechanical licensing collective. (B) The digital licensee coordinator, including members of the digital licensee coordinator’s board of directors and committees, shall not have access to musical work copyright owners’ royalty statements, except where a copyright owner discloses their own royalty statement to the mechanical licensing collective’s board of directors or committees. (3) The digital licensee coordinator shall limit disclosure of Confidential Information to employees, agents, consultants, vendors, and independent contractors of the digital licensee coordinator who are engaged in the digital licensee coordinator’s authorized functions under 17 U.S.C. 115(d)(5)(C) and activities related directly thereto and require access to Confidential Information for the purpose of performing their duties during the ordinary course of their work for the digital licensee coordinator, subject to an appropriate written confidentiality agreement. The digital licensee coordinator shall not disclose Confidential Information to members of the digital licensee coordinator’s board of directors and committees, or the mechanical licensing collective’s board of directors or committees. PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 (4) In addition to the permitted disclosure of Confidential Information in this paragraph (c), the mechanical licensing collective and digital licensee coordinator may disclose Confidential Information to: (i) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 115(d)(4)(D), who is authorized to act on behalf of the mechanical licensing collective with respect to verification of royalty payments by a digital music provider operating under the blanket license, subject to an appropriate written confidentiality agreement; (ii) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 115(d)(3)(L), who is authorized to act on behalf of a copyright owner or group of copyright owners with respect to verification of royalty payments by the mechanical licensing collective, subject to an appropriate written confidentiality agreement; and (iii) Attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena, subject to an appropriate protective order or agreement. (5) With the exception of persons receiving information pursuant to paragraph (c)(4) of this section, anyone to whom the mechanical licensing collective or digital licensee coordinator discloses Confidential Information as permitted in section shall not disclose such Confidential Information to anyone else except as expressly permitted in this section. (d) Use of Confidential Information. (1) The mechanical licensing collective shall not use any Confidential Information for any purpose other than the collective’s authorized functions under 17 U.S.C. 115(d) and activities related directly thereto. Anyone to whom the mechanical licensing collective discloses Confidential Information as permitted in this section shall not use any Confidential Information for any purpose other than in performing their duties during the ordinary course of their work for the mechanical licensing collective or as otherwise permitted under paragraph (c)(4) of this section. (2) The digital licensee coordinator shall not use any Confidential Information for any purpose other than its authorized functions under 17 U.S.C. 115(d)(5)(C) and activities related directly thereto. Anyone to whom the digital licensee coordinator discloses Confidential Information as permitted in this section shall not use any Confidential Information for any E:\FR\FM\11FER1.SGM 11FER1 khammond on DSKJM1Z7X2PROD with RULES Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations purpose other than in performing their duties during the ordinary course of their work for the digital licensee coordinator or as otherwise permitted under paragraph (c)(4) of this section. (e) Disclosure and Use of MLC Internal Information and DLC Internal Information. (1) The mechanical licensing collective may disclose MLC Internal Information to members of the mechanical licensing collective’s board of directors and committees, including representatives of the digital licensee coordinator who serve on the board of directors or committees of the mechanical licensing collective, subject to an appropriate written confidentiality agreement. The MLC may also disclose MLC Internal Information to other individuals in its discretion, subject to the adoption of reasonable confidentiality policies. (2) Representatives of the digital licensee coordinator who serve on the board of directors or committees of the mechanical licensing collective and receive MLC Internal Information may share such MLC Internal Information with the following persons: (i) Employees, agents, consultants, vendors, and independent contractors of the digital licensing coordinator who require access to MLC Internal Information for the purpose of performing their duties during the ordinary course of their work for the digital licensee coordinator, subject to an appropriate written confidentiality agreement; (ii) Individuals serving on the board of directors and committees of the digital licensee coordinator or mechanical licensing collective who require access to MLC Internal Information for the purpose of performing their duties during the ordinary course of their work for the digital licensee coordinator or mechanical licensing collective, subject to an appropriate written confidentiality agreement; (iii) Individuals otherwise employed by members of the digital licensee coordinator who require access to MLC Internal Information for the purpose of performing their duties during the ordinary course of their work for the digital licensee coordinator, subject to an appropriate written confidentiality agreement. (3) The digital licensee coordinator may disclose DLC Internal Information to the following persons: (i) Members of the digital licensee coordinator’s board of directors and committees, subject to an appropriate written confidentiality agreement; and (ii) Members of the mechanical licensing collective’s board of directors VerDate Sep<11>2014 15:43 Feb 10, 2021 Jkt 253001 and committees, including music publisher representatives, songwriters, and representatives of the digital licensee coordinator who serve on the board of directors or committees of the mechanical licensing collective, subject to an appropriate written confidentiality agreement. (iii) The DLC may also disclose DLC Internal Information to other individuals in its discretion, subject to the adoption of reasonable confidentiality policies. (f) Safeguarding Confidential Information. The mechanical licensing collective, digital licensee coordinator, and any person or entity authorized to access Confidential Information from either of those entities as permitted in this section, must implement procedures to safeguard against unauthorized access to or dissemination of Confidential Information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own Confidential Information or similarly sensitive information. The mechanical licensing collective and digital licensee coordinator shall each implement and enforce reasonable policies governing the confidentiality of their records, subject to the other provisions of this section. (g) Maintenance of records. Any written confidentiality agreements relating to the use or disclosure of Confidential Information must be maintained and stored by the relevant parties until at least seven years after disclosures cease to be made pursuant to them. (h) Confidentiality agreements. The use of confidentiality agreements by the mechanical licensing collective and digital licensee coordinator shall not be inconsistent with the other provisions of this section. Dated: February 8, 2021. Shira Perlmutter, Register of Copyrights and Director of the U.S. Copyright Office. Approved by: Carla D. Hayden, Librarian of Congress. [FR Doc. 2021–02913 Filed 2–9–21; 4:15 pm] BILLING CODE 1410–30–P PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 9021 ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 62 [EPA–R01–OAR–2020–0593; FRL–10017– 79–Region 1] Approval and Promulgation of State Plans (Negative Declarations) for Designated Facilities and Pollutants: Maine and Rhode Island Environmental Protection Agency (EPA). ACTION: Direct final rule. AGENCY: The Environmental Protection Agency (EPA) is taking a direct final action to approve negative declarations submitted in lieu of State plans to satisfy the requirements of the Emission Guidelines and Compliance Times for Municipal Solid Waste Landfills for the State of Maine and the State of Rhode Island. The negative declarations certify that there are no existing facilities in the States that must comply with this rule. DATES: This direct final rule will be effective April 12, 2021 without further notice, unless the EPA receives adverse comments by March 15, 2021. If the EPA receives adverse comments, we will publish a timely withdrawal of the direct final rule in the Federal Register informing the public that the rule will not take effect. ADDRESSES: Submit your comments, identified by Docket ID No. EPA–R01– OAR–2020–0593 at https:// www.regulations.gov, or via email to kilpatrick.jessica@epa.gov. For comments submitted at Regulations.gov, follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. For either manner of submission, the EPA may publish any comments received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (i.e., on the web, cloud, or other file sharing system). For additional submission methods, please contact the person identified in the FOR FURTHER INFORMATION CONTACT section. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on SUMMARY: E:\FR\FM\11FER1.SGM 11FER1

Agencies

[Federal Register Volume 86, Number 27 (Thursday, February 11, 2021)]
[Rules and Regulations]
[Pages 9003-9021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02913]


=======================================================================
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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 210

[Docket No. 2020-7]


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

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

ACTION: Interim rule.

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

DATES: Effective March 15, 2021.

FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and 
Associate Register of Copyrights, by email at [email protected] or 
Anna B. Chauvet, Associate General Counsel, by email at 
[email protected]. Each can be contacted by telephone at (202) 707-
8350.

SUPPLEMENTARY INFORMATION: 

I. Background

    On October 11, 2018, the president signed into law the Orrin G. 
Hatch-Bob Goodlatte Music Modernization Act (``MMA'') which, among 
other things, substantially modifies the compulsory ``mechanical'' 
license for making and distributing phonorecords of nondramatic musical 
works under 17 U.S.C. 115.\1\ It does so by switching from a song-by-
song licensing system to a blanket licensing regime administered by a 
mechanical licensing collective (``MLC''), which became available on 
January 1, 2021 (the ``license availability date''). In July 2019, the 
Copyright Office (the ``Office'') designated an entity to serve as the 
MLC, as required by the MMA.\2\ Among other things, the MLC is 
responsible for collecting and distributing royalties under the blanket 
license, engaging in efforts to identify musical works embodied in 
particular sound recordings and to identify and locate the copyright 
owners of such musical works, and administering a process by which 
copyright owners can claim ownership of musical works (or shares of 
such works).\3\ It also must ``maintain the musical works database and 
other information relevant to the administration of licensing 
activities under [section 115].'' \4\ The Office has also designated a 
digital licensee coordinator (``DLC'') to represent licensees in 
proceedings before the Copyright Royalty Judges (``CRJs'') and the 
Office, to serve as a non-voting member of the MLC, and to carry out 
other functions.\5\
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    \1\ Public Law 115-264, 132 Stat. 3676 (2018).
    \2\ 84 FR 32274 (July 8, 2019).
    \3\ 17 U.S.C. 115(d)(3)(C)(i)(V).
    \4\ Id. at 115(d)(3)(C)(i)(IV).
    \5\ Id. at 115(d)(5)(B); 84 FR 32274 (July 8, 2019); see also 17 
U.S.C. 115(d)(3)(D)(i)(IV), (d)(5)(C).
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A. Regulatory Authority Granted to the Office

    The MMA specifically directs the Office to ``adopt regulations to 
provide for the appropriate procedures to ensure that confidential, 
private, proprietary, or privileged information contained in the 
records of the mechanical licensing collective and digital licensee 
coordinator is not improperly disclosed or used, including through any 
disclosure or use by the board of directors or personnel of either 
entity, and specifically including the unclaimed royalties oversight 
committee and the dispute resolution committee of the mechanical 
licensing collective.'' \6\ The MMA additionally makes several explicit 
references to the Office's regulations governing the treatment of 
confidential and other sensitive information, including with respect 
to: (1) ``all material records of the operations of the [MLC]''; \7\ 
(2) steps the MLC must take to ``safeguard the confidentiality and 
security of usage, financial, and other sensitive data used to compute 
market shares'' when distributing unclaimed accrued royalties; \8\ (3) 
steps the MLC and DLC must take to ``safeguard the confidentiality and 
security of financial and other sensitive data shared'' by the MLC with 
the DLC about significant nonblanket licensees; \9\ (4) voluntary 
licenses administered by the MLC; \10\ (5) examination of the MLC's 
``books, records, and data'' pursuant to audits by copyright owners; 
\11\ and (6) examination of digital music providers' ``books, records, 
and data'' pursuant to audits by the MLC.\12\
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    \6\ 17 U.S.C. 115(d)(12)(C).
    \7\ Id. at 115(d)(3)(M)(i) (``The mechanical licensing 
collective shall ensure that all material records . . . are 
preserved and maintained in a secure and reliable manner, with 
appropriate commercially reasonable safeguards against unauthorized 
access, copying, and disclosure, and subject to the confidentiality 
requirements prescribed by the Register of Copyrights under 
paragraph (12)(C) for a period of not less than 7 years after the 
date of creation or receipt, whichever occurs later.'').
    \8\ Id. at 115(d)(3)(J)(i)(II)(bb).
    \9\ Id. at 115(d)(6)(B)(ii).
    \10\ Id. at 115(d)(11)(C)(iii).
    \11\ Id. at 115(d)(3)(L)(i)(II).
    \12\ Id. at 115(d)(4)(D)(i)(II).
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    Beyond these specific directives, Congress invested the Office with 
``broad regulatory authority'' \13\ to ``conduct such proceedings and 
adopt such regulations as may be necessary or appropriate to effectuate 
the provisions of [the MMA pertaining to the blanket license].'' \14\ 
The legislative history contemplates that the Office will ``thoroughly 
review[ ]'' \15\ policies and procedures established by the MLC and its 
three committees, which the MLC is statutorily bound to ensure are 
``transparent and accountable,'' \16\ and promulgate regulations that 
``balance[ ] the need to protect the public's interest with the need to 
let the new collective operate without over-regulation.'' \17\
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    \13\ H.R. Rep. No. 115-651, at 5-6 (2018); S. Rep. No. 115-339, 
at 5 (2018); Report and Section-by-Section Analysis of H.R. 1551 by 
the Chairmen and Ranking Members of Senate and House Judiciary 
Committees, at 4 (2018), https://www.copyright.gov/legislation/mma_conference_report.pdf (``Conf. Rep.'').
    \14\ 17 U.S.C. 115(d)(12)(A).
    \15\ H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, at 
5, 15; Conf. Rep. at 4, 12. The Conference Report further 
contemplates that the Office's review will be important because the 
MLC must operate in a manner that can gain the trust of the entire 
music community, but can only be held liable under a standard of 
gross negligence when carrying out certain of the policies and 
procedures adopted by its board. Conf. Rep. at 4.
    \16\ 17 U.S.C. 115(d)(3)(D)(ix)(I)(aa).
    \17\ H.R. Rep. No. 115-651, at 5-6, 14; S. Rep. No. 115-339, at 
5, 15; Conf. Rep. at 4, 12.
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    Congress acknowledged that ``[a]lthough the legislation provides 
specific criteria for the collective to operate, it is to be expected 
that situations will arise that were not contemplated by the 
legislation,'' and that ``[t]he Office is expected to use its best 
judgement in determining the

[[Page 9004]]

appropriate steps in those situations.'' \18\ Legislative history 
further states that ``[t]he Copyright Office has the knowledge and 
expertise regarding music licensing through its past rulemakings and 
recent assistance to the Committee[s] during the drafting of this 
legislation.'' \19\ Accordingly, in designating the MLC as the entity 
to administer the section 115 license, the Office stated that it 
``expects ongoing regulatory and other implementation efforts to . . . 
extenuate the risk of self-interest,'' and that ``the Register intends 
to exercise her oversight role as it pertains to matters of 
governance.'' \20\
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    \18\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15; 
Conf. Rep. at 12.
    \19\ H.R. Rep. No. 115-651, at 14; S. Rep. No. 115-339, at 15; 
Conf. Rep. at 12.
    \20\ 84 FR at 32280.
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B. Rulemaking Background

    On September 24, 2019, the Office issued a notification of inquiry 
(``NOI'') seeking, among other things, public input on any issues that 
should be considered regarding the treatment of confidential and other 
sensitive information under the blanket license regime.\21\ In 
response, the Office received suggested regulatory language from both 
the DLC and the MLC, and a few comments about confidentiality more 
generally from other stakeholders. The MLC's approach generally 
proposed requiring the MLC and the DLC to implement confidentiality 
policies to prevent improper or unauthorized use of various categories 
of confidential information, but lacked specific requirements for those 
policies or a proposed definition of ``confidential information.'' \22\ 
By contrast, the DLC contended that the MLC's proposal, by investing 
the MLC and DLC with broad discretion to implement policies regarding 
confidentiality, ``would inappropriately redelegate that authority 
[granted to the Register] to itself and DLC.'' \23\ The DLC maintained 
that the Office's regulations should provide necessary guidance, not 
merely give the MLC and DLC discretion to create their own 
policies.\24\
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    \21\ 84 FR 49966, 49973 (Sept. 24, 2019). All rulemaking 
activity, including public comments, as well as educational material 
regarding the Music Modernization Act, can currently be accessed via 
navigation from https://www.copyright.gov/music-modernization/. 
Specifically, comments received in response to the NOI are available 
at https://beta.regulations.gov/document/COLC-2019-0002-0001 and 
comments received in response to the notice of proposed rulemaking 
are available at https://beta.regulations.gov/document/COLC-2020-0004-0001. Guidelines for ex parte communications, along with 
records of such communications, are available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. References to these comments are by party name 
(abbreviated where appropriate), followed by ``Initial NOI 
Comment,'' ``Reply NOI Comment,'' ``NPRM Comment,'' ``Letter,'' or 
``Ex Parte Letter,'' as appropriate.
    \22\ See MLC Initial NOI Comment at 29-30, App. H.
    \23\ DLC Reply NOI Comment at 27.
    \24\ See id. at 28.
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    On April 22, 2020, the Office issued a notice of proposed 
rulemaking (``NPRM'') regarding the treatment of confidential and other 
sensitive information under the blanket license regime, and solicited 
public comments on the proposed rule, including comments about the use 
of confidentiality designations and nondisclosure agreements.\25\ 
Overall, the Office proposed to adopt specific confidentiality 
regulations in order to assure those providing confidential and 
commercially sensitive information to the MLC that this information 
will be protected, as well as ``provide the ground rules for the 
relationship between DLC, the MLC, and its respective members.'' \26\ 
In response to the proposed rule, the DLC found its ``basic framework'' 
to be ``sound.'' \27\ The MLC noted that ``it is critical that 
confidential information be maintained with appropriate safeguards,'' 
and offered proposed adjustments to certain provisions.\28\ Another 
commenter expressed appreciation for the Office's approach ``in 
distinguishing what is commonly thought of as generic `confidential 
information' and what ought to be confidential information for the DLC, 
[t]he MLC, their respective vendors and in particular the MLC's three 
Statutory Committees.'' \29\
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    \25\ 85 FR 22559 (Apr. 22, 2020).
    \26\ Id. at 22561 (quoting DLC Initial NOI Comment at 3).
    \27\ DLC NPRM Comment at 1.
    \28\ MLC NPRM Comment at 2.
    \29\ Castle NPRM Comment at 1.
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    Having carefully considered the comments and other record materials 
in this proceeding, the Office is now issuing an interim rule. The 
Office has determined that it is prudent to promulgate this rule on an 
interim basis in order to retain added flexibility for responding to 
unforeseen circumstances. In some cases, the Office has adopted certain 
provisions in light of conflicting approaches suggested by various 
stakeholders. At times, the Office has opted for the more conservative 
approach to new issues presented in this rulemaking to ward against 
inappropriate disclosure or use of sensitive business information in 
the first instance, concluding that subsequent adjustment of an overly 
cautious rule is preferable to later addressing types of information 
that have already been shared. The Office will consider modifications 
as needed in response to new evidence, unforeseen issues, or where 
something is otherwise not functioning as intended as the MLC starts 
receiving confidential information from digital music providers and 
copyright owners for purposes of administering the section 115 license.
    In issuing this interim rule, the Office is mindful of Congress's 
overall goals for the MMA to enhance transparency, accountability, and 
public access to musical work ownership information.\30\ The Office 
thus intends for its interim confidentiality rule to complement 
separate regulations regarding transparency, accountability, and public 
accessibility, which were adopted to prescribe the categories of 
information to be included in the public musical works database and 
rules related to the usability, interoperability, and usage 
restrictions of the database, as well as require the MLC to disclose 
certain categories of information in its statutorily-required annual 
reports and one-time written public update in December 2021 regarding 
its operations.\31\
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    \30\ See, e.g., 17 U.S.C. 115(d)(3)(E), (e)(20); id. at 
115(d)(3)(E)(v) (stating the database must ``be made available to 
members of the public in a searchable, online format, free of 
charge''); 164 Cong. Rec. S501, 504 (daily ed. Jan. 24, 2018) 
(statement of Sen. Chris Coons) (``This important piece of 
legislation will bring much-needed transparency and efficiency to 
the music marketplace.'').
    \31\ See 37 CFR 210.31, 210.32, 210.33; DLC Ex Parte Letter Feb. 
24, 2020 (``DLC Ex Parte Letter #2'') at 5 (acknowledging that the 
``MLC will be under certain legal transparency requirements,'' and 
that confidentiality regulations should ``not stand in the way of 
that transparency''); The International Confederation of Societies 
of Authors and Composers (``CISAC'') & The International 
Organisation representing Mechanical Rights Societies (``BIEM'') 
Reply NOI Comment at 2 (stating that ``musical works information 
populated in the database can include confidential, personal and/or 
sensitive data, and as such, the Regulations should ensure the 
required balance between the public interest in having transparent 
access to such information and the protection of commercially 
sensitive information and personal data'').
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II. Interim Rule

    The interim rule adopts certain provisions of the proposed rule and 
makes a number of adjustments in response to public comments regarding 
the definition of ``confidential information'' and the use and 
disclosure of such information.
    Because the MMA does not define the term ``confidential,'' the 
interim rule defines ``confidential information''--both by what it is 
and what it is not. The definition of ``confidential information'' is 
adjusted to mean sensitive financial or business information disclosed 
by DMPs, significant non-blanket licensees, or copyright owners (or any 
of their authorized agents or vendors) to the

[[Page 9005]]

MLC or DLC, as opposed to information provided to the MLC and DLC more 
generally (e.g., supply contracts). The definition is also adjusted to 
generally refer to ``information'' (as opposed to ``documents and 
information'') to clarify that a document containing both confidential 
and non-confidential information should be extended protection, though 
the rule retains provisions identifying specific documents that the 
Office's regulations require to be disclosed (e.g., notices of license) 
to clarify that they are not subject to the interim rule's restrictions 
on disclosure and use. As proposed by the MLC, ``confidential 
information'' does not include any top-level compilation data presented 
in anonymized format that does not allow identification of such data as 
belonging to any particular digital music provider, significant 
nonblanket licensee, or copyright owner. At the DLC's suggestion, the 
rule creates categories of ``MLC Internal Information'' and ``DLC 
Internal Information,'' to separately address the use and disclosure of 
sensitive financial or business information about the MLC's and DLC's 
internal operations (as opposed to confidential information disclosed 
to the MLC and DLC by third parties).
    The interim rule creates various restrictions on the disclosure and 
use of confidential information by the MLC and DLC, as well as their 
employees, agents, consultants, vendors, and independent contractors, 
and members of their boards of directors and committees. In response to 
concerns about competitive harm that could result from the improper 
disclosure of confidential information from DMPs and copyright owners, 
the interim rule states that the MLC and DLC must limit disclosure of 
confidential information to their employees, agents, consultants, 
vendors, and independent contractors who are engaged in the entities' 
respective authorized functions and who require access to confidential 
information for the purpose of performing their duties during the 
ordinary course of their work. The MLC and DLC are prohibited from 
disclosing confidential information to members of their boards of 
directors and committees, and from using confidential information for 
any purpose other than their authorized functions under section 115. 
Consistent with the proposed rule, the MLC and DLC may disclose 
confidential information to qualified auditors or outside counsel under 
the statutorily-permitted audits, and to the Office, Copyright Royalty 
Board, and federal courts, or when such disclosure is required by court 
order or subpoena, subject to an appropriate protective order. 
Notwithstanding any restrictions, the rule states that the MLC may 
fulfill its disclosure obligations under section 115 (e.g., delivering 
royalty statements to copyright owners or communicating with the DLC). 
In keeping with the Office's preexisting rule governing comparable 
royalty statement reporting requirements under the song-by-song section 
115 license, the interim rule does not place any confidentiality 
restrictions on copyright owners once they receive royalty statements 
from the MLC. The rule clarifies, however, that royalty statements to 
copyright owners should not include confidential information that does 
not relate to the recipient copyright owner or relevant songwriter in 
addition to the minimum information required by the Office's 
regulations.
    Because ``MLC Internal Information'' and ``DLC Internal 
Information'' do not relate to sensitive business information disclosed 
by DMPs, significant nonblanket licensees, or copyright owners, the 
rule does not impose strict disclosure requirements as it does with 
``confidential information.'' Instead, it creates categories of 
individuals to whom the MLC and DLC may disclose ``MLC Internal 
Information'' and/or ``DLC Internal Information'' (subject to a 
confidentiality agreement), giving the MLC and DLC some flexibility if 
they decide additional disclosure is necessary. For example, the 
interim rule states that the MLC may disclose MLC Internal Information 
to members of the MLC's board of directors and committees, including 
representatives of the DLC who serve on the board or committees. Should 
the MLC decide to disclose MLC Internal Information to a contractor, 
the rule does not prohibit the MLC from doing so; it states that the 
MLC may disclose MLC Internal Information to other individuals in its 
discretion, subject to the adoption of reasonable confidentiality 
policies. The rule contains a parallel provision for the DLC and DLC 
Internal Information. It also permits representatives of the DLC who 
serve on the MLC's board of directors or committees and who receive MLC 
Internal Information to share such information (subject to a 
confidentiality agreement) with employees, agents, consultants, 
vendors, and independent contractors of the DLC who require access to 
MLC Internal Information for the purpose of performing their 
duties.\32\
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    \32\ In a parallel rulemaking regarding notices of license, 
notices of nonblanket activity, and reports of usage and payment, 
the Office expressed an intention to adjust those regulations to 
directly reference the Office's confidentiality regulations once 
they had taken effect. 85 FR 58114, 58140 n.365 (Sept. 17, 2020). 
The Office has now determined that such adjustment is not necessary.
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    These issues are discussed in turn below.

A. Defining ``Confidential Information''

1. ``Confidential Information'' as Defined Under the Proposed Rule
    The MMA does not define the term ``confidential.'' \33\ The 
proposed rule defined ``confidential information'' as including 
``sensitive financial or business information, including information 
relating to financial or business terms that could be used for 
commercial advantage'' and ``trade secrets,'' and enumerated categories 
of information and documents expressly intended by the statute to be 
covered by the Office's regulations governing the treatment of 
confidential and other sensitive information,\34\ including with 
respect to``the confidentiality and security of usage, financial, and 
other sensitive data used to compute market shares,'' \35\ ``financial 
and other sensitive data shared'' by the MLC to the DLC about 
significant nonblanket licensees,\36\ and voluntary licenses.\37\ The 
proposed rule also defined ``confidential information'' as including 
``sensitive personal information, including but not limited to, an 
individual's Social Security number, taxpayer identification number, 
financial account number(s), or date of birth (other than year).'' \38\
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    \33\ See 17 U.S.C. 115(d)(12)(C), (e).
    \34\ 85 FR at 22562.
    \35\ 17 U.S.C. 115(d)(3)(J)(i)(II)(bb); see H.R. Rep. No. 115-
651, at 27 (``Unclaimed royalties are to be distributed based upon 
market share data that is confidentially provided to the collective 
by copyright owners.''); S. Rep. No. 115-339, at 24 (same); Conf. 
Rep. at 20 (same). CISAC & BIEM contend that creators' percentage 
share should not be made publicly accessible in the database. CISAC 
& BIEM NPRM Comment at 2. The statute, however, contemplates such 
information being made publicly available in the database. 17 U.S.C. 
115(d)(3)(E)(ii)-(iii).
    \36\ 17 U.S.C. 115(d)(6)(B)(ii).
    \37\ Id. at 115(d)(11)(C)(iii). Music Artists Coalition 
(``MAC'') contends that ``data relating to market share 
determinations and voluntary licenses'' should be publicly shared. 
MAC Reply NOI Comment at 2-3. The statute, however, specifically 
contemplates such information being treated as confidential 
information. Id. at 115(d)(3)(J)(i)(II)(bb), (d)(11)(C)(iii).
    \38\ 85 FR at 22562.
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    As these are potentially broad categories, the proposed rule also 
refined the definition of ``confidential information'' by excluding 
information that is not confidential. Borrowing from current 
regulations governing SoundExchange in connection with the section 114 
license, and as recommended by the DLC, the proposed

[[Page 9006]]

rule stated that ``confidential information'' excludes ``documents or 
information that may be made public by law'' or ``that at the time of 
delivery to the [MLC] or [DLC] is public knowledge,'' and that ``[t]he 
party seeking information from the [MLC] or [DLC] based on a claim that 
the information sought is a matter of public knowledge shall have the 
burden of proving that fact.'' \39\ Because documents and information 
may be subsequently disclosed by the party to whom the information 
would otherwise be considered confidential, or by the MLC or DLC 
pursuant to participation in proceedings before the Office or Copyright 
Royalty Judges (including proceedings to redesignate the MLC or DLC), 
the proposed rule also excluded such information and documents from the 
definition of ``confidential information.'' \40\
---------------------------------------------------------------------------

    \39\ Id.; DLC Reply Add. at A-20.
    \40\ 85 FR at 22562.
---------------------------------------------------------------------------

    Recognizing that important restrictions on the disclosure of 
information are cabined by equally significant countervailing 
considerations of transparency in reporting certain types of 
information, the proposed rule also excluded the following from the 
definition of ``confidential information'': Information made publicly 
available through notices of license,\41\ notices of nonblanket 
activity, the MLC's online database, and information disclosable 
through the MLC bylaws, annual report, audit report, or the MLC's 
adherence to transparency and accountability with respect to the 
collective's policies or practices, including its anti-commingling 
policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii), (vii), and (ix).\42\ In 
addition, adopting a suggestion from the MLC, the proposed rule 
excluded from the meaning of ``confidential information'' any top-level 
compilation data presented in anonymized format that does not allow 
identification of such data as belonging to any digital music provider, 
significant nonblanket licensee, or copyright owner.\43\ Finally, the 
proposed rule clarified that documents or information created by a 
party will not be considered confidential with respect to usage of that 
information by the same party (e.g., documents created by the DLC 
should not be considered confidential with respect to the DLC).\44\
---------------------------------------------------------------------------

    \41\ Consistent with the Office's then-proposed rule regarding 
notices of license, the definition of confidentiality excluded any 
addendum to general notices of license that provides a description 
of any applicable voluntary license or individual download license 
the digital music provider is, or expects to be, operating under 
concurrently with the blanket license that is sufficient for the 
mechanical licensing collective to fulfill its obligations under 17 
U.S.C. 115(d)(3)(G)(i)(I)(bb). 85 FR at 22567; see 85 FR 22518 (Apr. 
22, 2020).
    \42\ 85 FR at 22562.
    \43\ Id.; see MLC Initial NOI Comment at 30 (proposing that 
``the MLC, when providing necessary data to its board or committee 
Members, will only share proprietary or confidential data as 
necessary, and in a format that is anonymized and cannot be 
identified as belonging to any particular copyright owner, in order 
to prevent any disclosure to potential competitors''); MLC Reply NOI 
Comment App. at 27.
    \44\ 85 FR at 22562.
---------------------------------------------------------------------------

    As discussed below, the interim rule adjusts the definition of 
``confidential information'' based on public comments.
2. Royalty Statements Provided to Musical Work Copyright Owners by the 
MLC
    The DLC contends that the definition of ``confidential 
information'' should expressly include ``any sensitive data provided by 
digital music providers related to royalty calculations (including, but 
not limited to, service revenues, subscriber counts, and performing 
rights organization fee information).'' \45\ The DLC states that 
``statements of account delivered to copyright owners contain highly 
sensitive information'' such as ``service revenues, subscriber counts, 
and amounts paid to performing rights organizations,'' and ``this 
information is competitively sensitive between digital music providers, 
in that it provides extremely granular detail about each digital music 
provider's operations and performance.'' \46\ The DLC asserts that 
``[i]f the Office places no restrictions on copyright owners' use of 
the sensitive digital music provider information they receive from the 
MLC on statements of account, the Office will have failed to comply 
with [the] unambiguous congressional direction'' to ensure that 
confidential, private, proprietary, or privileged information contained 
in the records of the mechanical licensing collective is not improperly 
disclosed or used.\47\ While recognizing that ``[c]opyright owners are 
entitled to know how their royalties have been calculated,'' \48\ the 
DLC proposes regulatory language that would require copyright owners' 
access to be contingent upon ``a written confidentiality agreement with 
the MLC that is enforceable by the licensee,'' \49\ as ``this sensitive 
data [should] be used only to provide transparency into how mechanical 
royalties have been calculated and paid,'' and not ``for other, 
unrelated purposes.'' \50\
---------------------------------------------------------------------------

    \45\ DLC NPRM Comment at 5, Add. A-1.
    \46\ Id. at 4.
    \47\ Id.
    \48\ Id.
    \49\ Id. at 5.
    \50\ Id.
---------------------------------------------------------------------------

    By contrast, the MLC, the National Music Publishers' Association 
(``NMPA''), the Songwriters of North America (``SONA''), and the Future 
of Music Coalition (``FMC'') maintain that receipt of statements of 
account should not impose confidentiality restrictions on copyright 
owners, with SONA ``seek[ing] to ensure that the final confidentiality 
rule . . . does not become a basis to withhold records from copyright 
owners, self-published songwriters, and their authorized 
representatives.'' \51\ Likewise, the MLC expressed concern that the 
proposed rule ``leaves unclear the right of copyright owners to receive 
the royalty pool calculation information that they have always received 
in royalty statements.'' \52\ The MLC would exclude from the definition 
of ``confidential information,'' ``[i]nformation concerning the 
calculation of the payable royalty pool and the per-work royalty 
allocation under part 385 to be reported in royalty statements to 
copyright owners under 37 CFR 210.29(c)(1)(vi).'' \53\ The MLC also 
proposes that the ``MLC and the DLC may disclose Confidential 
Information to'' ``[c]opyright owners, including their agents, whose 
works were used in covered activities, in connection with royalty 
payments and statements.'' \54\
---------------------------------------------------------------------------

    \51\ SONA NPRM Comment at 4 (``[R]oyalty recipients need to be 
able to use and share royalty information with attorneys, financial 
advisors, and others in order to carry on their business 
affairs.''); see MLC NPRM Comment at 3 (``[T]he Proposed Regulation 
on confidentiality should be modified to expressly state that 
information required to be reported by the MLC to copyright owners 
in . . . statements [of account] is not confidential 
information.''); NMPA NPRM Comment at 5 (``[T]he Office should 
revise the proposed rule to make clear that royalty pool information 
reported by DMPs to the MLC shall not be subject to confidentiality 
restrictions so that the MLC may report that information to 
copyright owners, and so that the copyright owners themselves shall 
not be burdened by restrictions on their use of such information, as 
is the current practice.''). See also FMC NPRM Comment at 1; 
Alliance for Recorded Music (``ARM'') NPRM Comment at 2 n.1 (both in 
general accord). One commenter suggests that the MLC should publicly 
post ``the basic elements of these rate sheets.'' Castle NPRM 
Comment at 12. In a parallel rulemaking, the Office issued interim 
regulations setting forth the information that the MLC is required 
to report in statements to copyright owners. See 37 CFR 210.29.
    \52\ MLC NPRM Comment at 8; see MLC NPRM Comment at 7, U.S. 
Copyright Office Dkt. No. 2020-6, available at https://beta.regulations.gov/docket/COLC-2020-0003 (``[T]he proposed 
regulation being addressed in the Confidentiality Proceeding should 
be revised to provide that information required to be included in 
royalty statements does not fall under the definition of 
Confidential Information.'').
    \53\ MLC NPRM Comment App. at ii.
    \54\ Id. at iv.

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

[[Page 9007]]

    While the Office appreciates that DMPs understandably want to 
ensure that sensitive business information provided to the MLC is not 
unlawfully or inappropriately disclosed or used, the definition of 
``confidential information'' is already inclusive of information that 
is competitively sensitive as between digital music providers. Indeed, 
the DLC itself states that this information ``plainly falls within the 
definition of Confidential Information in the Proposed Rule.'' \55\ The 
Office believes that amending the language to define ``confidential 
information'' as including ``any sensitive data provided by digital 
music providers related to royalty calculations'' could be overly broad 
in light of various statutory transparency and disclosure obligations; 
the suggestion to include ``subscriber counts'' and ``service 
revenues'' may also overreach as some DMPs are public companies who 
already disclose this information in financial statements.\56\ The 
Office previously declined to adopt the DLC's proposed definition that 
included ``all the usage and royalty information'' reported by DMPs for 
this reason.\57\ Nonetheless, for clarity, the interim rule includes 
``sensitive data provided by digital music providers related to royalty 
calculations'' in the enumeration of types of confidential information. 
As explained further below, however, the interim rule also separately 
addresses the DLC's concerns by imposing restrictions on disclosure of 
these types of information to MLC board members and others involved 
with the operation of the mechanical license.
---------------------------------------------------------------------------

    \55\ DLC NPRM at 4.
    \56\ See, e.g., Press Release, Spotify Technology S.A., 
Shareholder Letter Q4 2020 (Feb. 3, 2021), https://s22.q4cdn.com/540910603/files/doc_financials/2020/q4/Shareholder-Letter-Q4-2020_FINAL.pdf; Spotify Technology S.A, Form 6-K Report of Foreign 
Private Issuer (2020) https://s22.q4cdn.com/540910603/files/doc_financials/2020/q3/69e72911-517a-47bb-ab3e-1b1248654d1a.pdf.
    \57\ 85 FR at 22561.
---------------------------------------------------------------------------

    With respect to disclosure of information provided in royalty 
statements to copyright owners specifically, prior to the MMA, the 
Office previously considered and rejected the suggestion to place 
confidentiality requirements on copyright owners receiving statements 
of account under the section 115 statutory license due to the inclusion 
of ``competitively sensitive'' information, determining instead that 
``once the statements of account have been delivered to the copyright 
owners, there should be no restrictions on the copyright owners' 
ability to use the statements or disclose their contents.'' \58\ 
Royalty statements for the section 115 license have been provided to 
copyright owners for years without the confidentiality restrictions now 
requested by the DLC. No commenters provided examples of past harm 
caused by the existing regulations failing to impose such 
restrictions.\59\ Given that an animating goal of the MMA is to 
facilitate increased transparency and accuracy in reporting payments to 
copyright owners, the Office reiterates that it sees no compelling 
reason to deviate from this established policy.\60\ Further supporting 
the Office's conclusion that it should not depart from the status quo, 
the Office's adopted royalty payment and accounting information 
reporting requirements similarly ``essentially retain the current rule 
governing non-blanket section 115 licenses.'' \61\ The Office is not 
persuaded by the DLC's suggestion that the statutory directive to 
promulgate regulations to avoid information ``in the records of the 
mechanical licensing collective'' being ``improperly disclosed or 
used'' counsels differently.\62\ Royalty statements are records of, and 
designed to be provided to, recipient copyright owners, and the statute 
and legislative history do not suggest that maintaining status quo 
expectations with respect to copyright owners' receipt of royalty 
information would fall under the category of improper use.
---------------------------------------------------------------------------

    \58\ Id.; 79 FR 56190, 56206 (Sept. 18, 2014); see SONA NPRM 
Comment at 3 (``[S]trongly endors[ing] the Copyright Office's 
rejection of any confidentiality restrictions on the use of royalty 
statements issued to copyright owners by the MLC.''). The Office 
similarly declined to adopt the DLC's proposal that copyright owners 
(and their designated agents) could receive confidential 
information, ``so long as they sign an appropriate confidentiality 
agreement with the MLC.'' 85 FR at 22561; see DLC Ex Parte Letter #2 
at 5; see DLC Reply NOI Comment at 28; 37 CFR 380.5(c)(3).
    \59\ Similarly, the administrative record contains no indicia 
that direct, voluntary licensing typically include restrictions on 
the uses of information in royalty statements by copyright owners.
    \60\ See 85 FR at 22561.
    \61\ See 85 FR at 22529; 85 FR 58160, 58162 (Sept. 17, 2020) 
(``This information is provided to copyright owners under the song-
by-song license. It will continue to be reported by DMPs to the MLC 
as part of their monthly reports of usage, and the MLC intends to 
pass along this information to copyright owner.'').
    \62\ DLC NPRM at 4 (citing 17 U.S.C. 115(d)(12)(C)).
---------------------------------------------------------------------------

    Accordingly, the interim rule states that once a royalty statement 
has been delivered to a copyright owner, there are no restrictions on 
that copyright owner's ability to use the statement or disclose its 
contents. The Office declines the MLC's proposal to exclude from the 
definition of ``confidential information,'' ``[i]nformation concerning 
the calculation of the payable royalty pool and the per-work royalty 
allocation under part 385 to be reported in royalty statements to 
copyright owners under 37 CFR 210.29(c)(1)(vi).'' Instead, as discussed 
below, the rule states that the mechanical licensing collective shall 
be permitted to prepare and deliver royalty statements to musical work 
copyright owners (and the contents therein) in accordance with the 
Office's regulations governing royalty statements, which require ``[a] 
detailed and step-by-step accounting of the calculation of royalties 
under applicable provisions of part 385 of this title, sufficient to 
allow the copyright owner to assess the manner in which the royalty 
owed was determined and the accuracy of the royalty calculations, which 
shall include details on each of the components used in the calculation 
of the payable royalty pool.'' \63\ This language is meant to clarify 
that despite the rule's general restrictions on disclosing confidential 
information, the MLC is not prevented from preparing and delivering 
royalty statements to copyright owners. The rule clarifies, however, 
that royalty statements to copyright owners should not include 
confidential information that does not relate to the recipient 
copyright owner or relevant songwriter in addition to the minimum 
information required by the Office's regulations. As discussed more 
below, the Office believes the MLC's proposed language that the MLC and 
DLC may disclose confidential information to ``[c]opyright owners, 
including their agents, whose works were used in covered activities, in 
connection with royalty payments and statements'' becomes unnecessary.
---------------------------------------------------------------------------

    \63\ 37 CFR 210.29(c)(4)(v).
---------------------------------------------------------------------------

3. Information Disclosed by Digital Music Providers, Copyright Owners, 
and Third Parties
    The MLC and FMC suggest that the proposed rule's definition of 
``confidential information'' is too broad.\64\ Specifically, the MLC 
contends the definition ``is not limited to information exchanged in 
connection with the MLC's royalty processing functions, and thus on its 
face could be read to regulate every aspect of the MLC's and DLC's 
businesses.'' \65\ The MLC maintains that instead, the ``definition 
should be limited to information disclosed by DMPs, copyright owners, 
the MLC, or the DLC, and that relate to the MLC's statutory functions, 
so that it does not inadvertently sweep into its ambit

[[Page 9008]]

information that the MLC or DLC receives in connection with leasing 
office space or equipment, requisitioning supplies, or making other 
contractual arrangements.'' \66\ FMC asserts that `` `[f]inancial or 
business terms that could be used for commercial advantage' is an 
inherently problematic category definition when some DSPs and some 
copyright owners have seemed eager to use every piece of available data 
for their commercial advantage, if they can think of a possible way to 
do so.'' \67\
---------------------------------------------------------------------------

    \64\ MLC NPRM Comment at 2; FMC NPRM Comment at 1.
    \65\ MLC NPRM Comment at 2.
    \66\ Id.
    \67\ FMC NPRM Comment at 1.
---------------------------------------------------------------------------

    The Office agrees that cabining ``confidential information'' to 
include ``sensitive financial or business information'' disclosed by 
digital music providers, significant non-blanket licensees, or 
copyright owners (or any of their authorized agents or vendors) to the 
mechanical licensing collective or digital licensee coordinator would 
help reasonably ensure that the Office's regulations apply in relation 
to the administration of the section 115 statutory license, as opposed 
to information provided to the MLC and DLC more generally (e.g., supply 
contracts). The interim rule accordingly adjusts the definition of 
``confidential information'' to mean sensitive financial or business 
information disclosed by digital music providers, significant non-
blanket licensees, and copyright owners (or any of their authorized 
agents or vendors) to the mechanical licensing collective or digital 
licensee coordinator. With respect to FMC's position that the phrase 
``financial or business terms that could be used for competitive 
disadvantage or be used for commercial advantage'' could apply to data 
generally--to even non-confidential information--the Office notes that 
the phrase already modifies ``sensitive financial or business 
information'' to exclude broader types of information, and is also 
limited by the enumeration of non-confidential information articulated 
above.
    ARM, while asserting that the proposed ``general definition is 
appropriate,'' asks that the definition specifically include 
``information such as royalty rates and other provisions of agreements 
between recorded music companies and digital service providers.'' \68\ 
The MLC supports ARM's position.\69\ In recognition of the need to 
protect sensitive data in agreements between recorded music companies 
and DMPs, the interim rule amends the definition of ``confidential 
information'' to also mean sensitive data concerning agreements between 
sound recording companies and digital music providers.
---------------------------------------------------------------------------

    \68\ ARM NPRM Comment at 4; see id. at 12-14.
    \69\ MLC NPRM Comment at 20 (``[C]onfidential information for 
particular sound recording licensors shall not be disclosed to 
copyright owners, songwriters or digital music providers.'').
---------------------------------------------------------------------------

    At the MLC's suggestion, the proposed rule excluded from the 
definition of ``confidential information,'' top-level compilation data 
presented in anonymized format that does not allow identification of 
such data as belonging to any digital music provider, significant 
nonblanket licensee, or copyright owner.\70\ Both the MLC and DLC 
incorporated this language into their respective proposed regulatory 
language,\71\ and no commenters objected. Accordingly, the interim rule 
adopts this aspect of the proposed rule without modification.
---------------------------------------------------------------------------

    \70\ 85 FR at 22562; MLC Initial NOI Comment at 30; MLC Reply 
NOI Comment App. at 27.
    \71\ MLC NPRM Comment App. at ii; DLC NPRM Comment Add. at A-2.
---------------------------------------------------------------------------

    Commenters supported the definition of ``confidential information'' 
including ``information submitted by a third party that is reasonably 
designated as confidential by the party submitting the information,'' 
as well as ``usage data and other sensitive data used to compute market 
shares when distributing unclaimed accrued royalties, sensitive data 
shared between the MLC and DLC regarding any significant nonblanket 
licensee, and sensitive data concerning voluntary licenses or 
individual download licenses administered by and/or disclosed to the 
MLC.'' \72\ In their respective proposals, the MLC and DLC retained the 
Office's proposed provisions stating that ``confidential information'' 
does not include ``documents or information that are public or may be 
made public by law or regulation,'' or ``documents or information that 
may be made public by law or that at the time of delivery to the MLC or 
DLC is public knowledge.'' \73\ By contrast, ARM expresses concern with 
the phrase ``information that may be made public by law,'' saying it is 
``unclear,'' and that ``[w]hen inserted in an exception to the general 
definition of Confidential Information, that phrase could be read to 
say that any information the disclosure of which is not otherwise 
prohibited by law is excluded from the definition of Confidential 
Information, meaning that information only qualifies as Confidential 
Information when its disclosure is otherwise prohibited by law.'' \74\ 
The Office believes the language is reasonably clear, and notes that 
the phrase ``information that may be made public by law'' is meant to 
cover information for which the Office's own regulations require 
certain disclosures from DMPs and significant nonblanket licensees that 
would not be considered confidential. This intention is made clear by 
subsequent subparagraphs enumerating these categories. After carefully 
considering these comments, the interim rule retains these aspects of 
the proposed definition.
---------------------------------------------------------------------------

    \72\ 85 FR at 22567; see MLC NPRM Comment at 8 (stating that the 
phrase ``information submitted by a third party that is reasonably 
designated as confidential by the party submitting the information'' 
``can largely be integrated into this definition of Confidential 
Information''); DLC NPRM Comment Add. at A-1; ARM NPRM Comment at 
11.
    \73\ MLC NPRM Comment App. at i-ii; DLC NPRM Comment Add. at A-
1.
    \74\ ARM NPRM Comment at 5.
---------------------------------------------------------------------------

    Finally, ARM contends that because this rule focuses on the 
protection of information, ``referring to documents uniquely in the 
exclusions from the definition of Confidential Information creates 
interpretive issues,'' as documents ``embody information'' and ``a 
document that contains some Confidential Information should not be 
excluded from protection simply because it also includes some other 
information that is excluded from the definition of Confidential 
Information.'' \75\ ARM maintains that ``the exceptions should apply 
only to information, and not to some potentially broader category of 
documents.'' \76\ The Office agrees that the regulation intends to 
prevent the improper use or disclosure of confidential information. The 
Office also agrees that a document containing both confidential and 
non-confidential information should be extended protection, and did not 
suggest otherwise when issuing the proposed rule. Rather, the proposed 
rule identified specific documents (e.g., notices of nonblanket 
activity) and sources of information (e.g., the public musical works 
database) for which the Office's regulations require disclosure and to 
which confidentiality restrictions would not apply.
---------------------------------------------------------------------------

    \75\ Id. at 4-5.
    \76\ Id. at 5.
---------------------------------------------------------------------------

    Accordingly, the Office has adjusted the phrase ``documents or 
information that are public or may be made public by law or 
regulation'' to refer solely to ``information.'' By focusing on 
``information'' as opposed to ``documents,'' the rule clarifies that 
the MLC and DLC would be prohibited from disclosing documents 
containing ``confidential information'' disclosed by digital music 
providers, significant non-blanket licensees, and copyright owners (or 
any of their authorized agents or vendors) or third parties that 
reasonably designate information as confidential--

[[Page 9009]]

even in cases where the MLC or DLC may have created the underlying 
documents.\77\ The Office is retaining, however, the provisions 
identifying specific documents that the Office's regulations require to 
be disclosed (e.g., notices of license, the MLC's annual report) to 
clarify that they do not embody confidential information, subject to 
any exceptions included in the relevant regulatory section (e.g., 
addendums to notices of license, to the extent they provide a 
description of any applicable voluntary license or individual download 
license the digital music provider is, or expects to be, operating 
under concurrently with the blanket license).
---------------------------------------------------------------------------

    \77\ See ARM NPRM Comment at 6 n.7 (stating that restrictions on 
``confidential information of a third party (such as a recorded 
music company)'' should not be lifted ``merely because the MLC or 
DLC wrote down the third-party confidential information in a new 
document'').
---------------------------------------------------------------------------

4. Personal Information
    In response to stakeholder concern about the disclosure of 
sensitive personal information, particularly relating to copyright 
owner information,\78\ the proposed rule included in the definition of 
``confidential information'' ``sensitive personal information, 
including but not limited to, an individual's Social Security number, 
taxpayer identification number, financial account number(s), or date of 
birth (other than year).'' \79\ In response, SONA generally agrees with 
the proposed definition, but believes it ``should explicitly include 
other instances of `personal information,' including home address and 
home phone number.'' \80\ CISAC & BIEM maintain that date of birth 
should be confidential, noting that ``creators often wish to keep [it] 
confidential in order to protect their image.'' \81\
---------------------------------------------------------------------------

    \78\ CISAC & BIEM Reply NOI Comment at 8 (encouraging ``the 
Office to adopt suitable regulations that aim to protect sensitive 
and/or private information from public disclosure''); MAC Reply NOI 
Comment at 2-3 (noting that ``certain information such as . . . 
personal addresses should obviously be kept out of public 
documents'').
    \79\ 85 FR at 22562.
    \80\ SONA NPRM Comment at 3.
    \81\ CISAC & BIEM NPRM Comment at 1. CISAC & BIEM also maintain 
that ``[e]xisting regulations, such as the GDPR, can be used as a 
reference for the protection of personal data.'' CISAC & BIEM NPRM 
Comment at 3. While the Office does not disagree that the MLC may 
used GDPR as a reference, the interim rule does not incorporate 
GDPR. As noted previously by the Office, the MLC has committed to 
establishing an information security management system that is 
certified with ISO/IEC 27001 and meets the EU General Data 
Protection Regulation requirements, and other applicable laws. 84 FR 
at 32290 (citing Proposal of Mechanical Licensing Collective, Inc. 
Submitted in Response to U.S. Copyright Office's December 21, 2018, 
Notice of Inquiry, at 50 (Mar. 21, 2019). The MLC has also expressed 
its ``commit[ment] to maintaining robust security to protect 
confidential user data, and that it contractually requires vendors 
to maintain robust security to protect confidential information 
handled for the MLC.'' MLC Ex Parte Letter Jan. 29, 2020 (``MLC Ex 
Parte Letter #1'') at 4.
---------------------------------------------------------------------------

    Having carefully considered these issues, the Office has adjusted 
the interim rule to include birth year in the definition of 
confidential information.\82\ Because the statute requires the musical 
works database to make contact information for musical work copyright 
owners for matched works publicly available,\83\ the interim rule 
includes ``home address or personal email'' in the definition of 
``confidential information'' to the extent they are ``not musical work 
copyright owner contact information as required under 17 U.S.C. 
115(d)(3)(E)(ii)(III).'' \84\
---------------------------------------------------------------------------

    \82\ The MLC does not intend to include date of birth in the 
public musical works database. MLC NOI Comment at 16, U.S. Copyright 
Office Dkt. No. 2020-8, available at https://beta.regulations.gov/docket/COLC-2020-0006. In a parallel rulemaking, the Office issued 
regulations prohibiting the MLC from including data of birth in the 
database. See 37 CFR 210.31(g).
    \83\ 17 U.S.C. 115(d)(3)(E)(ii)(III).
    \84\ In a parallel rulemaking, the Office issued a proposed rule 
prohibiting the mechanical licensing collective from ``includ[ing] 
in the public musical works database any individual's Social 
Security Number (SSN), taxpayer identification number, financial 
account number(s), date of birth (DOB), or home address or personal 
email to the extent it is not musical work copyright owner contact 
information required under 17 U.S.C. 115(d)(3)(E)(ii)(III).'' 85 FR 
at 58189.
---------------------------------------------------------------------------

5. Information Made Publicly Available to the Office or Copyright 
Royalty Judges
    Under the proposed rule, ``confidential information'' excluded 
information made publicly available by the MLC or DLC pursuant to 
participation in proceedings before the Office or Copyright Royalty 
Judges (including proceedings to redesignate the MLC or DLC).\85\ In 
response, the DLC states that ``if this provision is meant to only 
cover material that the DLC and MLC have voluntarily (and with 
appropriate authority) filed in a CRB or Copyright Office docket 
publicly and without any restrictions, the provision is unnecessary, 
because by definition such material is not confidential.'' \86\ The DLC 
also contends that the reference ``will lead to considerable 
confusion,'' as ``[f]ilings in CRB proceedings are governed by 
comprehensive protective orders, and those orders should determine 
whether material is or is not confidential.'' \87\ ARM similarly 
asserts that this specific reference to Office and Copyright Royalty 
Board proceedings should be removed in the definition of ``confidential 
information,'' as ``[t]he MLC and DLC should not have the power to make 
other entities' confidential information non-confidential by disclosing 
it publicly in a proceeding,'' and that rather that an exception to the 
definition of ``confidential information,'' ``it would be more 
consistent with protection of third-party confidential information . . 
. to treat disclosure in proceedings'' through the proposed rule's 
provision stating that the MLC and DLC may disclose confidential 
information to ``[a]ttorneys and other authorized agents of parties to 
proceedings before federal courts, the Copyright Office, or the 
Copyright Royalty Judges, or when such disclosure is required by court 
order or subpoena, subject to an appropriate protective order or 
agreement.'' \88\ For its part, the MLC does not object to including 
this provision.\89\
---------------------------------------------------------------------------

    \85\ 85 FR at 22562.
    \86\ DLC NPRM Comment at 7.
    \87\ Id.
    \88\ ARM NPRM Comment at 6; see 85 FR at 22568.
    \89\ See MLC NPRM Comment App. at ii.
---------------------------------------------------------------------------

    After consideration, the Office has adjusted this aspect of the 
proposed rule by eliminating the reference to ``information made 
publicly available by the mechanical licensing collective or digital 
licensee coordinator pursuant to participation in proceedings before 
the Office or Copyright Royalty Judges.'' The Office agrees that this 
specific reference is not necessary because information is no longer 
confidential once it has been publicly disclosed voluntarily and 
without any restrictions (and with appropriate authority). The Office 
retains the provision that excludes ``information that is public'' from 
the definition of ``confidential information'' so as to cover 
authorized public filings by the MLC or DLC with the Office or 
Copyright Royalty Board.
6. Confidentiality as to a Party's Own Information
    In the definition of ``confidential information,'' the proposed 
rule stated that documents or information created by a party will not 
be considered confidential with respect to usage of those documents or 
information by the same party (e.g., documents created by the DLC 
should not be considered confidential with respect to the DLC).\90\ ARM 
agrees that it ``makes sense'' to ``avoid imposing on the MLC or DLC a 
duty to protect its own information,'' but advises against implementing 
this principle as part of the definition of ``confidential 
information.'' \91\ ARM

[[Page 9010]]

maintains that, for example, the provision of the proposed rule 
intending to prevent the MLC and DLC from imposing use and disclosure 
restrictions on their board members in addition to those contemplated 
by the regulations ``may not achieve its intended effect'' if the MLC's 
own confidential information ``is not included in the defined term 
Confidential Information as to the MLC.'' \92\ ARM contends that 
``[t]he principle of not restricting an entity's use or disclosure of 
its own confidential information is typically accomplished in 
nondisclosure agreements by carefully drafting the substantive 
provisions so as to limit disclosure and use of other entities' 
confidential information, rather than one's own,'' and ``[t]hat seems 
like a preferable approach here.'' \93\ Though not expressly commenting 
on this issue, in its proposed regulatory language the DLC excludes the 
paragraph referencing use of a party's own documents or 
information.\94\ For its part, the MLC suggests revising the paragraph 
to ``documents or information concerning a party, to the extent such 
party authorizes the usage of such documents or information.'' \95\
---------------------------------------------------------------------------

    \90\ 85 FR at 22562.
    \91\ ARM NPRM Comment at 6.
    \92\ Id.
    \93\ Id.
    \94\ DLC NPRM Comment Add. at A-2.
    \95\ MLC NPRM Comment App. at ii.
---------------------------------------------------------------------------

    The Office has adjusted the interim rule to remove the paragraph 
referencing ``documents or information created by a party'' from the 
definition of ``confidential information.'' Because the definition of 
``confidential information'' has been revised to mean sensitive 
financial or business information disclosed by digital music providers, 
significant non-blanket licensees, or copyright owners (or any of their 
authorized agents or vendors) to the MLC or DLC, and because the rule 
clearly restricts use and disclosure of such information by the MLC and 
DLC (as discussed below), this paragraph is no longer necessary. As 
described below, the Office has also adopted provisions relating to the 
confidentiality of MLC and DLC internal information. Should the Office 
learn of instances where a party is prevented from using or disclosing 
its own confidential information under the regulations, the Office will 
consider any necessary adjustments.

B. Disclosure and Use of Confidential Information

1. Proposed Rule's Approach to Disclosure and Use of Confidential 
Information
    The proposed rule included various categories of permitted 
disclosure and use by MLC and DLC employees, board and committee 
members of the MLC and DLC (and their respective employers), and 
vendors and agents of the MLC and DLC. Given the somewhat divergent 
views from the MLC and DLC in response to the NOI, and the need for 
regulatory language to accommodate unforeseen issues, the proposed rule 
was intended to provide parity in access to confidential information, 
rather than hard and fast categories prohibiting disclosure of 
information relevant to, or accessed by, digital music providers or 
music publishers.\96\ The proposed rule permitted the following 
disclosures, while requiring all individuals receiving confidential 
information to execute a written confidentiality agreement: \97\
---------------------------------------------------------------------------

    \96\ See 85 FR at 22564.
    \97\ 85 FR at 22567.
---------------------------------------------------------------------------

     Employees of the MLC or DLC may receive confidential 
information.
     Agents, consultants, vendors, and independent contractors 
of the MLC or DLC may receive confidential information, only when 
necessary to carry out their duties.
     Other individuals authorized by the MLC may receive 
confidential information, but only to the extent necessary for such 
persons to know such information and only when necessary for the MLC to 
perform its duties.
     Non-DLC members of the MLC's board or statutory committees 
as well as DLC representatives on the MLC's board or statutory 
committees may receive confidential information only on a need-to-know 
basis and to the extent necessary to carry out their duties.
     The MLC and DLC may disclose confidential information to 
qualified auditors or outside counsel under the statutorily-permitted 
audits.\98\
---------------------------------------------------------------------------

    \98\ The MMA expressly permits audits by copyright owners of the 
MLC's ``books, records, and data,'' 17 U.S.C. 115(d)(3)(L)(i)(II), 
and by the MLC of digital music providers' ``books, records, and 
data,'' id. at 115(d)(4)(D)(i)(II).
---------------------------------------------------------------------------

     The MLC and DLC may disclose confidential information to 
the Office, Copyright Royalty Board, and federal courts by parties to 
their proceedings, or when such disclosure is required by court order 
or subpoena, subject to an appropriate protective order.
     DLC representatives who serve on the board of directors or 
committees of the MLC may share confidential information with 
individuals:
    [cir] Serving on the board of directors and committees of the DLC, 
but only to the extent necessary for such persons to know such 
information and only when necessary to carry out their duties for the 
DLC.
    [cir] Employed by DLC members, only to the extent necessary for 
such persons to know such information and for the DLC to perform its 
duties.
    The proposed rule included the following use restrictions for 
confidential information: \99\
---------------------------------------------------------------------------

    \99\ 85 FR at 22567.
---------------------------------------------------------------------------

     The MLC, including its employees, agents, consultants, 
vendors, independent contractors, and non-DLC members of the MLC board 
of directors or committees, shall not use any confidential information 
for any purpose under than for section 115 activities for the MLC.\100\
---------------------------------------------------------------------------

    \100\ The specific provision stated that they ``shall not use 
any Confidential Information for any purpose other than determining 
compliance with statutory license requirements, royalty calculation, 
collection, matching, and distribution, and activities related 
directly thereto, in performing their duties during the ordinary 
course of their work for the MLC.'' Id.
---------------------------------------------------------------------------

     The DLC, including its employees, agents, consultants, 
vendors, independent contractors, members of the DLC board of directors 
or committees, and DLC representatives serving on the board of 
directors or committees of the MLC, shall not use any confidential 
information for any purpose other than section 115 activities for the 
DLC.\101\
---------------------------------------------------------------------------

    \101\ The specific provision stated that they ``shall not use 
any Confidential Information for any purpose other than determining 
compliance with statutory license requirements, royalty calculation, 
collection, matching, and distribution, and activities related 
directly thereto, in performing their duties during the ordinary 
course of their work for the DLC.'' Id.
---------------------------------------------------------------------------

     Individuals employed by DLC members who receive 
confidential information from DLC representatives would be prohibited 
from using confidential information for any purpose other than for work 
performed during the ordinary course of business for the DLC or MLC.
2. Interim Rule--Disclosure of Confidential Information
    Comments in response to disclosure requirements under the proposed 
rule were mixed. As discussed below, the DLC objected to this aspect of 
the proposed rule, maintaining that members of the MLC's board of 
directors and committees should not have access to DMP-specific 
information relating to sensitive financial or business information. By 
contrast, the MLC

[[Page 9011]]

asserted that MLC governance requires seeing DMP-specific information, 
subject to appropriate written confidentiality agreements and the 
restriction that they not see information relating to specific, 
identified copyright owners. Other commenters supported either a more 
limited or a broader approach. These comments are discussed in turn 
below.
    The DLC contends that ``it is absolutely critical that the Office 
maintain a strict firewall between the MLC Board and the sensitive 
information provided by digital music providers to the MLC,'' \102\ and 
that ``[i]t would likewise be inappropriate for the MLC Board to gain 
information about the identity of digital music providers' voluntary 
license partners, or the terms of those licenses.'' \103\ The DLC 
suggests that the MLC's forty employees ``are the ones who should be 
running the day-to-day operations of the MLC, and reporting high-level, 
anonymized, aggregate information to the Board, sufficient for the 
Board to engage in oversight.'' \104\ The DLC states that ``the MMA 
requires the MLC's officers to be independent of the Board, prohibiting 
anyone serving as an officer of the MLC to simultaneously `also be an 
employee or agent of any member of the board of directors of the 
collective or any entity represented by a member of the board of 
directors,' '' and that ``[i]t would be improper for MLC Board members 
to circumvent this restriction by becoming directly involved in the 
day-to-day operations of the MLC, especially if it means demanding 
special access to commercially sensitive information from digital music 
providers as a result.'' \105\ The DLC expresses concern about music 
publishers serving on the MLC Board and having access to sensitive 
financial and business information about DMPs, as they would ``gain a 
special advantage in any commercial negotiations with [a] digital music 
provider,'' which ``harms both the digital music providers, and 
(crucially) publishers that do not serve on the Board, who will be at a 
competitive disadvantage.'' \106\
---------------------------------------------------------------------------

    \102\ DLC Ex Parte Letter Oct. 14, 2020 (``DLC Ex Parte Letter 
#6'') at 5; see id. (``This is particularly so because, in addition 
to the regular usage and royalty reporting that digital music 
providers will provide to the MLC the Office's interim rule gives 
the MLC access to a broad range of additional information through 
the records of use provision.'').
    \103\ Id. at 6.
    \104\ Id. (citation omitted).
    \105\ Id. (quoting 17 U.S.C. 115(d)(3)(D)(viii)).
    \106\ Id.
---------------------------------------------------------------------------

    The DLC proposes that ``[a]t most, members of MLC and DLC boards 
and committees should be given access only to aggregated and anonymized 
data--a category of information that the Proposed Rule already excludes 
from the definition of Confidential Information.'' \107\ The DLC also 
argues that ``the final rule needs to address in some manner the 
confidentiality of information that the MLC and DLC themselves generate 
as part of their own operations, while maintaining the ability for DLC 
members to get and share information related to MLC operations.'' \108\ 
To achieve this, the DLC proposes creating categories of ``MLC Internal 
Information'' and ``DLC Internal Information'' that may be more widely 
shared amongst the MLC and DLC because these categories would encompass 
information that ``may be confidential from the perspective of the MLC 
and DLC,'' but do not include ``information specific to a particular 
digital music provider or licensee,'' and so are ``less likely to 
create a risk that the Office expressed concern about--of `confidential 
information from being misused by competitors for commercial 
advantage.' '' \109\
---------------------------------------------------------------------------

    \107\ DLC NPRM Comment at 6.
    \108\ Id. at 5.
    \109\ Id. at 6-7 (quoting 85 FR at 22564). The DLC proposes 
defining ``MLC Internal Information'' as ``sensitive financial or 
business information created or collected by the mechanical 
licensing collective for purposes of its internal operations, such 
as personnel, procurement, or technology information.'' DLC Ex Parte 
Letter Dec. 11, 2020 (``DLC Ex Parte Letter #8'') at 5. The DLC also 
proposes that ``MLC Internal Information'' would be subject to 
certain exclusion provisions in the proposed rule so as not to 
include documents or information that are public or may be made 
public as well as top-level compilation data presented in anonymized 
format. DLC Ex Parte Letter #8 at 5. The DLC similarly proposes a 
category of information called ``DLC Internal Information'' to cover 
sensitive financial or business information created or collected by 
the digital licensee coordinator for purposes of its internal 
operations. DLC NPRM Comment at 6-7, Add. A-2-A-3; DLC Ex Parte 
Letter #8 at 5.
---------------------------------------------------------------------------

    The DLC's proposal would also specify conditions under which DLC 
members of the MLC board and committees could ``share information about 
MLC operations with its membership, and with appropriate personnel 
within DLC member companies,'' as well as DLC activities.\110\ Under 
the DLC's approach, the MLC could share MLC Internal Information with 
representatives of the DLC who serve on the board of directors or 
committees of the MLC, only to the extent necessary for such persons to 
know such information, only when necessary to carry out their duties 
for the DLC, and subject to an appropriate written confidentiality 
agreement.\111\ The DLC proposes that DLC recipients of this 
information may further share such MLC Internal Information with (1) 
employees, agents, consultants, vendors, and independent contractors of 
the DLC, only to the extent necessary for the purpose of performing 
their duties during the ordinary course of their work for the DLC, only 
to the extent necessary for such persons to know such information, 
subject to an appropriate written confidentiality agreement; (2) 
individuals serving on the board of directors and committees of the 
DLC, only to the extent necessary for such persons to know such 
information and only when necessary to carry out their duties for the 
DLC, subject to an appropriate written confidentiality agreement; and 
(3) individuals otherwise employed by members of the DLC, only to the 
extent necessary for such persons to know such information and only 
when necessary for the DLC to perform its duties, subject to an 
appropriate written confidentiality agreement.\112\ DLC Internal 
Information could be shared with members of the DLC board of directors 
and committees, subject to an appropriate written confidentiality 
agreement.\113\
---------------------------------------------------------------------------

    \110\ DLC NPRM Comment at 5.
    \111\ Id. at Add. A-3. As discussed more below, the DLC proposes 
that confidentiality agreements covering MLC Internal Information 
may be executed by the employers of the DLC representatives serving 
on the MLC board of directors or committees. DLC NPRM Comment at 3, 
Add. A-3.
    \112\ DLC NPRM Comment Add. at A-3.
    \113\ Id. In response to the NOI, the DLC initially proposed 
making a category of information called ``MLC Confidential 
Information'' available to DLC representatives serving on the boards 
or committees of the MLC, which the DLC defined as ``any non-public 
financial or business information created by the mechanical 
licensing collective.'' DLC Reply NOI Comment Add. at A-22 (emphasis 
added). In the NPRM, the Office noted that ``without more 
background, the Office [was] not sure this approach [was] advisable. 
It was not immediately clear to the Office whether the MLC would be 
able to recreate information that would otherwise not be accessible 
to board and committee members, and so the Office tentatively 
conclude[d] that the proposed rule offer[ed] a reasonable 
alternative.'' 85 FR at 22564 n.55.
---------------------------------------------------------------------------

    By contrast, the MLC contends that it would not ``be appropriate to 
promulgate a regulation that prevents the MLC's governance from seeing 
DMP-specific information, subject to appropriate written 
confidentiality agreements and the restriction that they not see 
information relating to specific, identified copyright owners.'' \114\ 
The MLC asserts that ``because the MLC board oversees the blanket 
license administration and administrative assessment collection 
processes, [it] must be able to be informed as to compliance with these 
processes,'' and that because ``compliance is an individual DMP issue, 
not an industry

[[Page 9012]]

issue, it is critical that the MLC governance be informed at the DMP 
level, not just the industry-aggregate level.'' \115\ Regarding the 
MLC's committees, the MLC ``envisions that the Unclaimed Royalties 
Oversight Committee would review DMP-specific data'' to ``create 
policies and procedures to minimize the incidence of unclaimed accrued 
royalties,'' such as ``specific examples of potential matches to get a 
concrete understanding of what types of results fall into different 
confidence levels'' when analyzing matching performance and confidence 
levels.\116\ Finally, regarding the DLC's proposed categories of ``MLC 
Internal Information'' and ``DLC Internal Information,'' the MLC 
maintains they are ``unnecessary'' because the ``MLC and DLC can 
control disclosures of their internal information through appropriate 
written confidentiality agreements.'' \117\
---------------------------------------------------------------------------

    \114\ MLC Ex Parte Letter Oct. 15, 2020 (``MLC Ex Parte Letter 
#9'') at 2.
    \115\ Id.; see also id. at 3 (stating that ``it is appropriate 
and necessary for the MLC to be permitted to share'' information 
about specific DMP interactions with the MLC regarding 
``certifications, efforts obligations, or other reporting or royalty 
payment obligations,'' and that such information ``can be essential 
context for substantial decisions as to compliance that the board is 
tasked in the MMA with overseeing, such as whether to audit, notice 
a default or take other action against a DMP'').
    \116\ Id. at 2. The MLC does not anticipate its Dispute 
Resolution Committee or the Operations Advisory Committee needing to 
view DMP-specific data. Id. at 3.
    \117\ Id. at 4.
---------------------------------------------------------------------------

    Instead, to ``ensure that the MLC board and committee members shall 
not receive inappropriate confidential information,'' the MLC proposes 
language to ``clarif[y] . . . that no copyright owners or songwriters 
(which captures all of the MLC's directors and committee members, 
except for those representing DMPs) will be shown confidential 
information of other copyright owners,'' and that digital music 
providers should ``not receiv[e] information concerning competitors.'' 
\118\ The MLC maintains that ``neither DLC appointees, nor publisher or 
songwriter representatives should be permitted to share confidential 
information received in their roles as MLC board or committee members 
with their employers,'' \119\ and that allowing ``disclosure[s] to 
employers by any board or committee member, including DLC appointees, 
would raise significant competitive concerns and jeopardize the MLC's 
ability to control, and ensure against, unfettered dissemination of 
confidential or competitively sensitive information.'' \120\ The MLC 
also contends that ``MLC board and committee members, regardless of the 
identity of their employer (i.e., whether a DMP, a publisher, a 
songwriter or a trade organization) should be subject to the same, 
strict provisions concerning the confidential information received in 
connection with their board or committee engagement.'' \121\ The MLC 
contends that the proposed conditions limiting access to information 
only ``where necessary to carry out their duties'' and ``during the 
ordinary course of their work'' is ``confusing and unnecessary,'' and 
suggests that ``[i]f use of the information is limited to the 
performance of the MLC's statutory functions, that should be 
sufficient.'' \122\ The MLC says these phrases also ``create[ ] the 
argument that MLC vendors or contractors would have to use an alternate 
procedure to perform work without using Confidential Information if 
such was possible, even where it would be highly inefficient and 
costly.'' \123\
---------------------------------------------------------------------------

    \118\ MLC NPRM Comment at 19; see id. at 16 (``[J]ust as music 
publisher employees who sit on the MLC board or committees should 
not be permitted to share with their publisher employers 
confidential information provided to the MLC by competitors of such 
employer (which the Proposed Regulation does not allow), a DLC 
appointee employed by a DMP should not be permitted to share with 
their DMP employer confidential information provided to the MLC by a 
competitor of such DMP employer.'').
    \119\ Id. at 5.
    \120\ Id. at 15; see also id. at 16-17 (``Each DLC appointee was 
specifically chosen for his or her knowledge and expertise in the 
relevant subject matter (e.g., individuals chosen to serve on the 
operations advisory committee have technological and operational 
expertise),'' and ``[i]t would be wholly inappropriate to grant 
these individuals discretion to share the confidential information 
of copyright owners and other DMPs with any of more than a million 
people.'').
    \121\ Id. at 19.
    \122\ Id. at 12.
    \123\ Id.
---------------------------------------------------------------------------

    Other comments regarding access of MLC and DLC board and committee 
members, and DLC member employers, to confidential information 
generally supported a more limited approach. CISAC & BIEM assert that 
``[w]hile there is certainly a need for the DLC to access certain 
Confidential Information to perform its duties, disclosure to 
individual employees of DLC members is not justified.'' \124\ 
Similarly, ARM argues that ``it is not apparent that there is any need 
for board and committee members to share confidential information with 
their employers, except . . . to give them access to MLC confidential 
information to obtain feedback concerning operational policies.'' \125\ 
To ARM, ``[i]t is not apparent that the MLC board would ever need to 
discuss confidential information of particular third-party companies,'' 
and ``even in the context of considering whether to authorize an 
enforcement action by the MLC against a particular DMP, it would seem 
sufficient for the MLC board to understand that MLC management believes 
the DMP underpaid royalties by a certain aggregate amount.'' \126\ NMPA 
recommended that the Office's regulations adopt the same standard for 
all board and committee members,\127\ and stated that ``DLC 
representatives on the MLC board and [committees] may have access to a 
host of sensitive confidential information that, if provided to their 
employers, could put music publishers and DMPs that are not members of 
the DLC at a competitive disadvantage.'' \128\ Noting that the MLC's 
statutorily-created Operations Advisory Committee ``is made up of 
various operations technology experts at the DMPs and music 
publishers'' who were ``presumably selected for their roles precisely 
because they have the relevant subject matter expertise,'' NMPA further 
stated that because ``DLC representatives work for technology 
companies,'' they ``are far less likely to need to `solicit additional 
subject matter expertise' on `technical considerations' from another 
individual employed by his or her DMP employer than might a music 
publisher representative on the MLC board or a committee.'' \129\
---------------------------------------------------------------------------

    \124\ CISAC & BIEM NPRM Comment at 2; see also id. (``[A]ny 
disclosure of Confidential Information should at all times (i) be 
justified by a `need-to-know' basis, and (ii) be very strictly 
interpreted in connection to the performance of the relevant duties. 
Furthermore, (iii) any individual receiving the Confidential 
Information should always be obliged to execute a Non-Disclosure 
Agreement (`NDA').'').
    \125\ ARM NPRM Comment at 7-8; see also ARM NPRM Comment at 7 
(``[T]he MLC simply should not have information about sound 
recording royalties to share with board and committee members and 
the like.''); id. (``If the MLC were to have access to such 
information, that kind of information should be protected either 
through an additional category of Highly Confidential Information 
that would include recorded music company deal terms and other 
third-party competitively sensitive information and could not be 
shared with such persons or through an equivalent mechanism (such as 
simply prohibiting disclosure of that type of Confidential 
Information to such persons).'').
    \126\ Id. at 7; see id. (noting that MLC committee members' 
roles ``seem directed to setting policy, rather than digging into 
the details of particular companies' activities'').
    \127\ NMPA NPRM Comment at 3.
    \128\ Id. at 2 (providing music publisher market share data as 
an example).
    \129\ Id. at 3.
---------------------------------------------------------------------------

    In contrast, the Songwriters Guild of America, Inc. (``SGA'') and 
the Society of Composers & Lyricists (``SCL'') proposed a broader 
approach whereby ``[n]on-DLC members on the MLC board of directors or 
committees may receive Confidential Information from the MLC subject to 
an appropriate written

[[Page 9013]]

confidentiality agreement,'' and ``Confidential Information may be 
withheld from such members only in those instances in which it is 
demonstrably unnecessary for such persons to know such information in 
the course of carrying out their duties for the MLC.'' \130\
---------------------------------------------------------------------------

    \130\ SGA & SCL NPRM Comment at 2.
---------------------------------------------------------------------------

i. Disclosure of Confidential Information to Mechanical Licensing 
Collective and Digital Licensee Coordinator Persons and Entities
    After carefully considering these comments, the Office concludes 
that taking a more conservative approach to new issues presented in 
this rulemaking regarding the protection of sensitive financial or 
business information disclosed by digital music providers, significant 
non-blanket licensees, and copyright owners (or any of their authorized 
agents or vendors) to the mechanical licensing collective or digital 
licensee coordinator is appropriate. Although the MLC advocates for a 
generally more open approach than the DLC, both entities acknowledge 
that improper disclosure of confidential information could be 
harmful.\131\ It is not apparent that the MLC's board of directors must 
access DMP-specific confidential information in order to generally 
supervise and ``manage the business and affairs of the Collective;'' 
\132\ as also raised by the MLC, the Office is mindful of the need to 
``control, and ensure against, unfettered dissemination of confidential 
or competitively sensitive information.'' \133\ The Office is inclined 
to agree with the DLC that although the MLC's officers should be 
overseen by the MLC's board of directors, the officers should be able 
to operate generally independently on a day-to-day basis, including 
when considering information that would be competitively sensitive if 
disclosed to MLC directors.\134\ As noted above, the interim rule 
adopts the MLC's proposal of excluding from the meaning of 
``confidential information'' any top-level compilation data presented 
in anonymized format that does not allow identification of such data as 
belonging to any digital music provider, significant nonblanket 
licensee, or copyright owner.\135\ Accordingly, members of the MLC's 
board of directors (and committees) will still receive aggregated data 
to know how the blanket license is functioning and whether remedial 
actions may be necessary (e.g., the collective's matching rates and 
distribution times, royalty collection and distribution, budgeting and 
expenditures, aggregated royalty receipts and payments). As to the 
MLC's examples for which it proposes that access to DMP-specific 
confidential information would be necessary (i.e., whether to audit, 
notice a default, or take other action against a DMP), the Office 
expects that the collective would be able to notify the MLC's board of 
directors of such situations without needing to disclose granular 
details regarding the DMP's sensitive financial or business 
information. To the extent future developments challenge this 
assumption, the Office believes the more prudent approach is to 
consider whether easing of restrictions is appropriate, as opposed to 
tightening up disclosure rules after the fact. Once the MLC has 
progressed in its administration of the blanket license, if there are 
concrete, specific examples of situations where members of the MLC or 
DLC boards or committees find themselves requiring access to certain 
information to fulfill their duties but are prohibited such access 
under the interim rule, the Office will consider adjustment of its 
regulations.
---------------------------------------------------------------------------

    \131\ See DLC Ex Parte Letter #6 at 6; MLC NPRM Comment at 5, 
15.
    \132\ See The MLC, The MLC Bylaws, https://themlc.com/sites/default/files/2020-05/Bylaws%20of%20The%20MLC.pdf (last visited Feb. 
6, 2021).
    \133\ MLC NPRM Comment at 15.
    \134\ See 17 U.S.C. 115(d)(3)(D)(viii); Conf. Rep. at 4 (``To 
ensure that the [MLC's] officers are independent, individuals 
serving as officers of the collective may not, at the same time, 
also be an employee or agent of any member of the collective's Board 
of Directors or any entity represented by a member of the 
collective's Board of Directors.'').
    \135\ See MLC Initial NOI Comment at 30.
---------------------------------------------------------------------------

    Against this backdrop, the interim rule takes the following 
approach. The mechanical licensing collective shall limit disclosure of 
confidential information to its employees, agents, consultants, 
vendors, and independent contractors who are engaged in the 
collective's authorized functions under 17 U.S.C. 115(d) and activities 
related directly thereto and who require access to confidential 
information for the purpose of performing their duties during the 
ordinary course of their work for the mechanical licensing collective, 
subject to an appropriate written confidentiality agreement.\136\ In 
response to the MLC's concern regarding the phrase ``only when 
necessary to carry out their duties'' being interpreted to require 
vendors or contractors to use an alternate procedure to perform work 
without using confidential information if possible (even where it would 
be highly inefficient and costly), the Office changed the language to 
read ``require access to Confidential Information for the purpose of 
performing their duties.'' \137\ The interim rule includes this 
language because not all employees, agents, consultants, vendors, and 
independent contractors of the MLC and DLC will need access to 
confidential information (or the same types of confidential 
information) to perform their jobs (e.g., receptionists answering 
telephones for the MLC's office).\138\
---------------------------------------------------------------------------

    \136\ See MLC Ex Parte Letter #9 at 5 (proposing general 
approach). The Office also adjusted some provisions of the interim 
rule to focus on disclosure rather than receipt of information, as 
the MLC requested. See MLC NPRM Comment at 3 (``A regulation 
governing the treatment of confidential information, like a 
confidentiality or nondisclosure agreement, should regulate 
disclosure, not receipt, of such information, as the party 
disclosing the information is in the best position to control 
dissemination of, and to protect, confidential information . . . 
.'').
    \137\ See 37 CFR 380.5(c)(1) (requiring SoundExchange to limit 
access to confidential information to ``employees, agents, 
consultants, and independent contractors of the Collective, subject 
to an appropriate written confidentiality agreement, who are engaged 
in the collection and distribution of royalty payments hereunder and 
activities related directly thereto who require access to the 
Confidential Information for the purpose of performing their duties 
during the ordinary course of their work''); id. at 380.24(d)(1) 
(similar); id. at 380.34(d)(1) (similar).
    \138\ As discussed below, regarding disclosure of MLC Internal 
Information, the Office made similar adjustments with respect to 
receipt of such information by parties performing work for the DLC.
---------------------------------------------------------------------------

    For the reasons discussed, the interim rule precludes the 
mechanical licensing collective from disclosing confidential 
information to members of its board of directors or committees, 
including the collective's Unclaimed Royalties Oversight Committee, or 
the DLC's board of directors or committees. Recipients of confidential 
information from the MLC shall not disclose such confidential 
information to anyone else except as expressly permitted in the 
Office's regulations, with an exception for qualified auditors or 
outside counsel conducting statutorily-permitted audits, or attorneys 
and other authorized agents of parties to proceedings before federal 
courts, the Copyright Office, or the Copyright Royalty Judges, or when 
such disclosure is required by court order or subpoena (discussed 
below).
    For parity, the interim rule states that the digital licensee 
coordinator shall limit disclosure of confidential information to its 
employees, agents, consultants, vendors, and independent contractors 
who are engaged in the digital licensee coordinator's authorized 
functions under 17 U.S.C. 115(d)(5)(C) and activities related directly 
thereto, and require access to confidential information for the purpose 
of performing their duties during the

[[Page 9014]]

ordinary course of their work for the digital licensee coordinator, 
subject to an appropriate written confidentiality agreement. The 
interim rule also states that the digital licensee coordinator shall 
not disclose confidential information to members of the digital 
licensee coordinator's board of directors or committees, or the 
mechanical licensing collective's board of directors or committees. 
Recipients of confidential information from the DLC shall not disclose 
such confidential information to anyone else except as expressly 
permitted in the Office's regulations, with an exception for qualified 
auditors or outside counsel conducting statutorily-permitted audits, or 
attorneys and other authorized agents of parties to proceedings before 
federal courts, the Copyright Office, or the Copyright Royalty Judges, 
or when such disclosure is required by court order or subpoena 
(discussed below).
    Notwithstanding the above restrictions, the interim rule clarifies 
that the mechanical licensing collective shall continue to fulfill its 
disclosure obligations under section 115 including, but not limited to, 
delivering royalty statements to copyright owners \139\ and providing 
monthly reports to the digital licensee coordinator identifying any 
significant nonblanket licensees that are not in compliance with the 
Office's regulations regarding notices of nonblanket activity and 
reports of usage for the making and distribution of phonorecords of 
nondramatic musical works.\140\ Because royalty statements could be 
confidential to copyright owners themselves, and given the MLC's 
suggestion that regulations should prohibit disclosure of confidential 
information regarding a ``particular, identified copyright owner to 
other copyright owners (including their agents or representatives) or 
songwriters,'' \141\ the interim rule states that members of the MLC's 
board of directors or committees shall not have access to other musical 
work copyright owners' royalty statements, except where a copyright 
owner discloses its own statement to such bodies.\142\ For parity, the 
digital licensee coordinator, including members of the digital licensee 
coordinator's board of directors or committees, shall be similarly 
restricted. Under the rule, members of the mechanical licensing 
collective's board and committees are not, however, restricted in 
accessing their own royalty statements from the mechanical licensing 
collective.
---------------------------------------------------------------------------

    \139\ See id. at 210.29(c).
    \140\ See 17 U.S.C. 115(d)(6)(A); 37 CFR 210.25; id. at 210.28.
    \141\ MLC NPRM Comment at 19.
    \142\ See id., App. at iii (proposing that no copyright owners 
or songwriters should have access to confidential information of 
other copyright owners).
---------------------------------------------------------------------------

Disclosure of MLC Internal Information and DLC Internal Information
    As proposed by the DLC, the interim rule also incorporates ``MLC 
Internal Information'' as a category of information that can be shared 
with the MLC board of directors and committees, including 
representatives of the DLC, subject to an appropriate written 
confidentiality agreement.\143\ To ensure that ``MLC Internal 
Information'' does not extend to sensitive business and financial 
information disclosed by DMPs, copyright owners, and significant 
nonblanket licensees to the MLC (i.e., ``confidential information''), 
the interim rule defines ``MLC Internal Information'' as sensitive 
financial or business information created by or collected by the 
mechanical licensing collective for purposes of its internal 
operations, such as personnel, procurement, or technology 
information.\144\ Under the interim rule, ``MLC Internal Information'' 
excludes information that is public or may be made public by various 
avenues, similar to the regulatory definition of ``Confidential 
Information.'' \145\ In addition, the interim rule creates a 
corresponding category of ``DLC Internal Information.''
---------------------------------------------------------------------------

    \143\ See DLC NOI Initial Comment at 23 (``DLC representatives 
are thus meant to represent the entire digital licensee community, 
and should be able to share information among DLC membership.''); 
see also id. at 28.
    \144\ See DLC Ex Parte Letter #6 at 7 (including ``disciplinary 
files for personnel, or competing vendor bids'' as examples of ``MLC 
Internal Information'').
    \145\ The definition of ``MLC Internal Information'' does not, 
as proposed by the DLC, exclude ``top level, compilation data 
presented in anonymized format that does not allow identification of 
such data as belonging to any specific digital music provider, 
significant nonblanket licensee, or copyright owner.'' See DLC Ex 
Parte Letter #8 at 5. By definition, ``MLC Internal Information'' is 
restricted to information regarding the MLC's internal operations.
---------------------------------------------------------------------------

    Because ``MLC Internal Information'' and ``DLC Internal 
Information'' do not relate to sensitive business information disclosed 
by DMPs, significant nonblanket licensees, or copyright owners, the 
rule does not impose strict disclosure requirements as it does with 
``confidential information'' due to the less-sensitive nature of these 
information categories. Rather, the rule creates categories of 
individuals to whom the MLC and DLC may disclose ``MLC Internal 
Information'' and/or ``DLC Internal Information'' (subject to a 
confidentiality agreement), which gives the MLC and DLC some 
flexibility if they decide additional disclosure is necessary. The rule 
also states that the MLC may disclose MLC Internal Information to other 
individuals in its discretion, subject to the adoption of reasonable 
confidentiality policies. The rule contains a parallel provision for 
the DLC and DLC Internal Information. Specifically, the interim rule 
states that the MLC may disclose MLC Internal Information to members of 
the MLC's board of directors and committees, including representatives 
of the DLC who serve on the MLC's board of directors or committees. The 
interim rule also states that representatives of the DLC who serve on 
the board of directors or committees of the mechanical licensing 
collective and receive MLC Internal Information may share such MLC 
Internal Information with the following persons, who require access to 
such information for the purpose of performing their duties during the 
ordinary course of their work for the DLC, subject to an appropriate 
written confidentiality agreement:
     Employees, agents, consultants, vendors, and independent 
contractors of the DLC;
     Individuals serving on the board of directors or 
committees of the DLC or MLC; and
     Individuals otherwise employed by members of the DLC.
    Under the interim rule, the DLC may disclose DLC Internal 
Information to the following persons, subject to an appropriate written 
confidentiality agreement:
     Members of the DLC's board of directors and committees; 
and
     Members of the MLC's board of directors and committees.
ii. Disclosure of Confidential Information to Non-Mechanical Licensing 
Collective and Non-Digital Licensee Coordinator Persons and Entities
    The proposed rule allowed disclosure of confidential information to 
attorneys and other authorized agents of parties to proceedings before 
federal courts, the Office, or the Copyright Royalty Judges, or when 
such disclosure is required by court order or subpoena, subject to an 
appropriate protective order or agreement.\146\ The proposed rule also 
permitted disclosure to qualified auditors or outside counsel pursuant 
to the statutorily-permitted audits by the MLC of a digital music 
provider operating under the blanket license or audits by copyright 
owners of the MLC. No commenter objected to these provisions, and the 
MLC, DLC, and

[[Page 9015]]

ARM retained them in their respective proposed statutory text.\147\ In 
light of these comments, the interim rule adopts this aspect of the 
proposed rule. As noted above, while the rule generally states that 
recipients of confidential information from the MLC or DLC shall not 
disclose such confidential information to anyone else except as 
expressly permitted in the Office's regulations, it creates an 
exception for qualified auditors or outside counsel conducting 
statutorily-permitted audits, or attorneys and other authorized agents 
of parties to proceedings before federal courts, the Copyright Office, 
or the Copyright Royalty Judges, or when such disclosure is required by 
court order or subpoena.
---------------------------------------------------------------------------

    \146\ 85 FR at 22568.
    \147\ See MLC NPRM Comment App. at v; DLC NPRM Comment Add. at 
A-4; ARM NPRM Comment at 14.
---------------------------------------------------------------------------

3. Interim Rule--Restrictions on Use of Confidential Information
    In response to multiple commenters expressing concern about MLC 
vendors using the confidential information they acquire while 
conducting work for the MLC for other purposes,\148\ the proposed rule 
restricted MLC vendors from using confidential information for purposes 
other than for duties performed during the ordinary course of work for 
the MLC, including the administration of voluntary bundled licensing of 
performance and mechanical uses that the MLC itself is prohibited from 
administering.\149\ The proposed rule similarly restricted DLC 
vendors.\150\ In issuing the proposed rule, the Office tentatively 
declined to adopt the MLC's proposal to preferentially allow ``users 
who submit confidential data to the MLC an ability to voluntarily `opt 
in' to share that data for general use by its primary royalty 
processing vendor, the Harry Fox Agency'' (``HFA''), as the MLC did not 
detail what it meant by ``general use.'' \151\
---------------------------------------------------------------------------

    \148\ See, e.g., National Association of Independent Songwriters 
(``NOIS'') et al. Initial NOI Comment at 16 (``The vendors for the 
MLC should not be . . . able to use information and data that the 
MLC will gather and control to their competitive advantage. If they 
are in competition with other entities considered to be similar in 
nature or can use the data to their own unique proprietary 
advantage, they should not be eligible to be selected as a 
vendor.''); Lowery Reply NOI Comment at 12 (``If the Copyright 
Office does not prohibit HFA from selling for other commercial 
purposes the data it acquires through its engagement by MLC to 
facilitate the compulsory blanket license, the Congress will have 
just handed HFA a near insurmountable advantage over its 
competitors.''); see also DLC NPRM Comment at 2, U.S. Copyright 
Office Dkt. No. 2020-8, available at https://beta.regulations.gov/docket/COLC-2020-0006.
    \149\ 85 FR at 22565; see also 37 CFR 380.5(b) (prohibiting 
SoundExchange from using ``any Confidential Information for any 
purpose other than royalty collection and distribution and 
activities related directly thereto'').
    \150\ 85 FR at 22565.
    \151\ Id. (quoting MLC Ex Parte Letter #1 at 4) (citation 
omitted).
---------------------------------------------------------------------------

    FMC and CISAC & BIEM support this aspect of the proposed rule, 
noting that vendors' use of confidential information other than for 
duties performed during the ordinary course of work for the MLC or DLC 
has the potential to increase the risk of anti-competitive harm and 
conflicts of interest.\152\ In a parallel rulemaking, the DLC, FMC, and 
SoundExchange emphasized the importance of MLC vendors not receiving 
preferential treatment or market advantage by virtue of their 
association with the MLC, with FMC stating that ``Congress intended to 
encourage a healthy competitive marketplace for other kinds of 
licensing businesses and intermediaries,'' and ``it's important that 
MLC's chosen vendors not be able to leverage their status with the MLC 
to advantage themselves in other business activities not covered under 
the MMA.'' \153\ SoundExchange asserted that Congress ``intended to 
preserve a vibrant and competitive marketplace for intermediaries 
[besides the MLC] who provide other license administration services,'' 
and this intent would be frustrated ``[i]f the MLC's vendors were to 
receive an unfair advantage in the music licensing marketplace through 
means such as preferred access to digital music providers or referrals 
by the MLC for extrastatutory business opportunities in a manner not 
available to their competitors.'' \154\ The DLC did not oppose this 
aspect of the proposed rule,\155\ and in a parallel rulemaking, 
expressed concern as ``to whether the MLC's selected vendors will gain 
a special competitive advantage in related marketplaces--such as the 
administration of voluntary licenses--merely by dint of their 
association with the collective responsible for licensing all 
mechanical rights in the United States.'' \156\
---------------------------------------------------------------------------

    \152\ FMC NPRM Comment at 1 (``There should be no provision for 
HFA to use confidential data for `general use', even on an opt-in 
basis. The risk of anti-competitive harm is too great.''); CISAC & 
BIEM NPRM Comment at 3 (``Our organisations support this Proposed 
Rulemaking because some Vendors may obtain commercially valuable 
information, use it for their own activities and thus create 
conflicts of interest.'').
    \153\ FMC NRPM Comment at 1-2, U.S. Copyright Office Dkt. No. 
2020-8, available at https://beta.regulations.gov/docket/COLC-2020-0006; see also id. at 2 (``The Office can require the MLC to 
disclose what it is doing to prevent any vendor from being too 
operationally enmeshed with the MLC that it either enjoys an unfair 
advantage through that relationship, or that it would be practically 
impossible for another vendor to step in.'').
    \154\ SoundExchange NRPM Comment at 8, U.S. Copyright Office 
Dkt. No. 2020-8, available at https://beta.regulations.gov/docket/COLC-2020-0006.
    \155\ See DLC NPRM Comment Add. at A-2; DLC Ex Parte Letter #6 
at 7. The DLC does propose an adjustment to the proposed rule to 
restrict its vendors from using confidential information to ``duties 
that are made the responsibility of the DLC, under 17 U.S.C. 
115(d)(5)(C), including efforts to enforce notice and payment 
obligations with respect to the administrative assessment.'' DLC Ex 
Parte Letter #6 at 7.
    \156\ DLC NPRM Comment at 1, U.S. Copyright Office Dkt. No. 
2020-8, available at https://beta.regulations.gov/docket/COLC-2020-0006.
---------------------------------------------------------------------------

    For its part, the MLC contends that this aspect of the proposed 
rule ``is overly prescriptive, imposes unnecessary burdens and costs on 
copyright owners, and is likely not within the scope of the Office's 
authority.'' \157\ While the proposed rule would restrict only actions 
of the mechanical licensing collective, the MLC argues that the 
proposed rule ``prevent[s] the MLC's copyright owner members from 
voluntarily electing to share their own information with the MLC's 
vendors,'' \158\ and that ``[c]opyright owners that wish to use the 
MLC's vendors for purposes other than the administration of the blanket 
license should not have to incur the time and expense to input 
duplicates of information that can be transferred voluntarily without 
any transaction costs.'' \159\ NMPA echoes the MLC's position, 
maintaining that ``[w]here a copyright owner provides to HFA its 
confidential information by virtue of HFA's role as administrator of 
the blanket license, it may make the most business sense (and be most 
efficient) to authorize HFA to use that information for the copyright 
[owners'] other licenses.'' \160\ NMPA also asserts that ``HFA gains no 
special advantage by receiving the same information one time rather 
than multiple times,'' but that ``copyright owners are decidedly 
disadvantaged in having to submit multiple but identical data sets.'' 
\161\
---------------------------------------------------------------------------

    \157\ MLC NPRM Comment at 13.
    \158\ Id. at 4.
    \159\ Id.
    \160\ Id.
    \161\ Id.
---------------------------------------------------------------------------

    As noted above, the MMA expressly directs the Office to adopt 
regulations to, among other things, prevent the improper use of 
confidential information contained in the mechanical licensing 
collective's records.\162\ The MMA also expressly restricts the 
mechanical licensing collective to administering the mechancial 
license,\163\ as the MLC

[[Page 9016]]

acknowledges,\164\ and the legislative history reflects Congress's 
intention that this provision was critical to safeguard continued 
private competition outside of the MLC's administration of the blanket 
mechanical license.\165\ Given Congress's actions to preserve 
competition for music licensing vendors and the overwhelming concern 
from commenters that MLC vendors should not be able to gain commercial 
advantage due to its association with the MLC, the Office again 
declines to adopt the MLC's proposal to allow ``users who submit 
confidential data to the MLC an ability to voluntarily `opt in' to 
share that data for general use by its primary royalty processing 
vendor, the Harry Fox Agency.'' \166\
---------------------------------------------------------------------------

    \162\ 17 U.S.C. 115(d)(12)(C).
    \163\ Id. at 115(d)(3)(C)(iii) (limiting administration of 
voluntary licenses to ``only [the] reproduction or distribution 
rights in musical works for covered activities'').
    \164\ See MLC NOI Comment at 10, U.S. Copyright Office Dkt. No. 
2020-8, available at https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&dct=PS&D=COLC-2020-0006 (``[B]ecause the MLC is prohibited from licensing rights 
other than mechanical rights, . . . the MLC agrees with the Office 
that . . . it is `unlikely to be prudent or frugal to require the 
MLC to expend resources to maintain [in the public database] PRO 
affiliations for rights it is not permitted to license.' '') (citing 
85 FR at 22576).
    \165\ See also Senate Judiciary Comm., Executive Business 
Meeting, C-SPAN, at 53:24-53:59 (June 28. 2018), https://www.c-span.org/video/?447464-1/judiciary (statement of Sen. Cruz) (``The 
problem is that there is already right now a functioning marketplace 
that is doing that -there are many companies today that manage, 
collect, and distribute mechanical rights for digital music 
companies and this bill would put them all out of business. . . . 
The amendment that I filed, what it would do is open up blanket 
licenses to other entities--to promote competition at a lower 
price.''); Id. at 50:41-50:55 (statement of Sen. Cornyn) (``I did 
want to highlight one issue that's been brought to my attention. The 
creation of this mechanical licensing collective in the Copyright 
Office--and precludes any private entity from perhaps providing that 
same service.''); Shirley Halperin, Music Modernization Act Stares 
Down Potential Snag, Variety (July 23, 2018), https://variety.com/2018/music/news/music-modernization-act-blackstone-sesac-congress-senate-1202881536/ (describing issue as endangering prospects for 
MMA passage); Steve Brachmann, Compromise on Music Modernization Act 
Leads to Unconditional Support From Music Industry Organizations, 
IPWatchdog (Aug. 18, 2018), https://www.ipwatchdog.com/2018/08/18/compromise-music-modernization-act-music-industry-support/id=100162/ 
(reporting resolution through amendment limiting the MLC's ability 
to administer voluntary licenses).
    \166\ MLC Ex Parte Letter #1 at 4.
---------------------------------------------------------------------------

    If the Office were to adopt the MLC's proposal, HFA would receive 
an advantage for non-mechanical business opportunities not granted to 
competitors (i.e., confidential information ``for purposes other than 
the administration of the blanket license,'' \167\ such as the 
administration of copyright owners' ``other licenses'' \168\) and 
preferential access and treatment (i.e., data ``by virtue of HFA's role 
as administrator of the blanket license,'' \169\ and ``without any 
transaction costs'' \170\). Allowing HFA to benefit from its 
association with the MLC for business opportunities outside the 
administration of the blanket license is precisely the scenario 
multiple commenters have warned against, and is in tension with 
Congress's deliberate decision to limit the scope of the mechanical 
licensing collective. Contrary to the MLC and NMPA's position, the 
Office is not preventing copyright owners from sending their 
information to a particular vendor; rather, the Office is preventing 
the MLC from providing its vendor with confidential information in a 
manner that results in disparate and preferential treatment.
---------------------------------------------------------------------------

    \167\ MLC NPRM Comment at 4.
    \168\ NMPA NPRM Comment at 4.
    \169\ Id.
    \170\ MLC NPRM Comment at 4.
---------------------------------------------------------------------------

    The Office similarly rejects the MLC's proposed language stating 
that ``[n]othing herein shall preclude the party or parties to whom 
information is confidential from voluntarily transmitting such 
Confidential Information to a third party with lesser restrictions on 
use, and nothing herein shall preclude the MLC from assisting in any 
such voluntary transfer.'' \171\ To the extent this language is 
suggested to clarify the ability of those outside the MLC to exchange 
information, the Office finds it unnecessary, and to the extent the 
language is intended to allow the MLC to facilitate exchange of 
otherwise confidential information to preferred entities for private 
use, it would seem to create an end-run around the limitations of the 
rule.
---------------------------------------------------------------------------

    \171\ MLC NPRM Comment App. at iii.
---------------------------------------------------------------------------

    In the NPRM, the Office noticed a potential alternative to the 
MLC's proposal. The Office had considered whether to propose language 
requiring the MLC to offer such information equally to third parties, 
perhaps restricted to those offering or administering music licensing 
services, for a reasonable cost, i.e., both the MLC's preferred vendors 
and others similarly situated in the marketplace.\172\ The Office noted 
that this approach would have the potential benefit of leveraging the 
unique nature of the MLC database in other aspects of the music 
ecosystem, without potentially affecting the competitive landscape in 
ways unrelated to the section 115 license.\173\ The MLC and NMPA, 
however, did not respond regarding this proposed alternative.
---------------------------------------------------------------------------

    \172\ 85 FR at 22565.
    \173\ Id.
---------------------------------------------------------------------------

    After careful consideration, the interim rule adopts this aspect of 
the proposed rule, with the following slight modifications. The Office 
adjusted the interim rule so that instead of stating the MLC ``shall 
not use any Confidential Information for any purpose other than 
determining compliance with statutory license requirements, royalty 
calculation, collection, matching, and distribution, and activities 
related directly thereto,'' it states that the MLC ``shall not use any 
Confidential Information for any purpose other than the collective's 
authorized functions under 17 U.S.C. 115(d) and activities related 
directly thereto.'' \174\ Anyone to whom the MLC discloses confidential 
information as permitted under the regulations shall not use any 
confidential information for any purpose other than in performing their 
duties during the ordinary course of their work for the mechanical 
licensing collective, with an exception for qualified auditors or 
outside counsel conducting statutorily-permitted audits, or attorneys 
and other authorized agents of parties to proceedings before federal 
courts, the Copyright Office, or the Copyright Royalty Judges, or when 
such disclosure is required by court order or subpoena. For parity, the 
interim rule adopts similar language with respect to the DLC and its 
authorized functions under 17 U.S.C. 115(d)(5)(C).\175\
---------------------------------------------------------------------------

    \174\ See MLC NPRM Comment at 10 (``The MLC proposes, at a 
minimum, clarifying the Proposed Regulation to ensure that the MLC 
can conduct the statutory functions charged by Congress.'').
    \175\ The Office adjusted the interim rule to align with the 
DLC's responsibilities under section 115. See DLC NPRM Comment at 7-
8.
---------------------------------------------------------------------------

C. Safeguarding Confidential Information

    Both the MLC and DLC proposed having the MLC and DLC implement 
policies and procedures to prevent unauthorized access and/or use of 
confidential information, an approach that seems necessary to 
effectuate the intent of the regulations.\176\ Accordingly, the 
proposed rule stated that the MLC, DLC, and recipients of confidential 
information from one of those entities must implement procedures to 
safeguard against

[[Page 9017]]

unauthorized access to or dissemination of confidential information 
using a reasonable standard of care, but no less than the same degree 
of security that the recipient uses to protect its own confidential 
information or similarly sensitive information.\177\ In addition, the 
proposed rule stated that the MLC and DLC shall each implement and 
enforce reasonable policies governing the confidentiality of its 
records.\178\
---------------------------------------------------------------------------

    \176\ MLC Initial NOI Comment at 29 (stating ``protection of 
such confidential, private, proprietary or privileged information 
may be accomplished through a regulation that requires the MLC and 
the DLC to implement confidentiality policies that prevent improper 
or unauthorized use of such material by their directors, committee 
members, and personnel''); DLC Reply NOI Comment Add. at A-21-22 
(proposing that the MLC and DLC (and any person authorized to 
receive confidential information) ``must implement procedures to 
safeguard against unauthorized access to or dissemination of 
Confidential Information using a reasonable standard of care, but no 
less than the same degree of security that the recipient uses to 
protect its own Confidential Information or similarly sensitive 
information'').
    \177\ 85 FR at 22565; see 37 CFR 380.5(d) (``[SoundExchange] and 
any person authorized to receive Confidential Information from 
[SoundExchange] must implement procedures to safeguard against 
unauthorized access to or dissemination of Confidential Information 
using a reasonable standard of care, but no less than the same 
degree of security that the recipient uses to protect its own 
Confidential Information or similarly sensitive information.'').
    \178\ 85 FR at 22565.
---------------------------------------------------------------------------

    The MLC and DLC retained this aspect of the proposed rule in their 
suggested regulatory text.\179\ CISAC & BIEM maintain that the 
``reasonable standard of care'' requirement is ``vague and does not 
constitute a sufficient commitment.'' \180\ As the ``reasonable 
standard of care'' is commonly used in U.S. jurisprudence, and in light 
of a similar provision governing obligations of SoundExchange, the 
collective designated to administer the section 114 license, this 
aspect of the proposed rule is retained without modification.\181\
---------------------------------------------------------------------------

    \179\ See MLC NPRM Comment App. at v; DLC NPRM Comment Add. at 
A-4.
    \180\ CISAC & BIEM NPRM Comment at 3.
    \181\ See 37 CFR 380.5(d) (``The Collective and any person 
authorized to receive Confidential Information from the Collective 
must implement procedures to safeguard against unauthorized access 
to or dissemination of Confidential Information using a reasonable 
standard of care, but no less than the same degree of security that 
the recipient uses to protect its own Confidential Information or 
similarly sensitive information.''); id. at 380.24(e) (similar); id. 
at 380.34(e) (similar).
---------------------------------------------------------------------------

    The NPRM also sought public comment on whether the regulations 
should address instances of inadvertent unauthorized disclosure.\182\ 
The MLC contends that ``the circumstances of such inadvertent 
disclosures, and the consequences of such disclosure are fact-
specific'' and that it should be afforded flexibility to establish its 
own policies to ``permit the MLC to assess the facts and circumstances 
giving rise to the inadvertent disclosure and determine the most 
appropriate way to address and remedy such disclosure.'' \183\ 
Similarly, the DLC maintains that instances of inadvertent disclosure 
should ``be addressed on a case-by-case basis.'' \184\ In light of 
these comments, the interim rule does not address inadvertent 
disclosures.
---------------------------------------------------------------------------

    \182\ 85 FR at 22566.
    \183\ MLC NPRM Comment at 21.
    \184\ DLC NPRM Comment at 8.
---------------------------------------------------------------------------

D. Maintenance of Records

    The proposed rule also provided that any written confidentiality 
agreements relating to the use or disclosure of confidential 
information must be maintained and stored by the relevant parties for 
at least the same amount of time that certain digital music providers 
are required to maintain records of use pursuant to 17 U.S.C. 
115(d)(4)(A)(iv). At the time of the NPRM, a separate rulemaking 
proposed a five-year retention period for such records; the Office 
subsequently adopted a seven-year period in response to public comments 
in that proceeding.\185\
---------------------------------------------------------------------------

    \185\ See 37 CFR 210.27(m) (generally requiring digital music 
providers to retain relevant records for seven years).
---------------------------------------------------------------------------

    ARM generally supported this aspect of the proposed rule, but 
suggested an adjustment to require retention for a defined retention 
period of ``five years after disclosures cease to be made pursuant to 
[the agreements].'' \186\ ARM suggests that any confidentiality 
agreements ``should be retained until some years after disclosures 
cease to be made pursuant to it (such as when an employment 
relationship ends or the agreement is replaced by a new agreement).'' 
\187\ The Office has adopted ARM's suggestion to tie retention 
requirements of confidentiality agreements to their dates of 
effectiveness in order to ensure they are retained for an appropriate 
period of time. The Office has also extended the retention period for 
two additional years, similar to records requirements imposed on 
digital music providers. Accordingly, the interim rule states that any 
written confidentiality agreements relating to the use or disclosure of 
confidential information must be maintained and stored by the relevant 
parties until at least seven years after disclosures cease to be made 
pursuant to them.
---------------------------------------------------------------------------

    \186\ ARM NPRM Comment at 8-9, 14.
    \187\ Id. at 9.
---------------------------------------------------------------------------

E. Confidentiality Designations

    The proposed rule did not impose a requirement that confidential 
information must bear a designation of confidentiality, although the 
Office noted that the MLC or DLC could presumably impose such a 
requirement in their own policies.\188\ No commenters responded to this 
aspect of the proposed rule, and so the interim rule does not impose a 
designation of confidentiality requirement.
---------------------------------------------------------------------------

    \188\ 85 FR at 22565.
---------------------------------------------------------------------------

    Relatedly, the Office asked in the NPRM whether, in addition to a 
category of ``Confidential Information,'' the regulations should 
provide for a ``Highly Confidential Information'' category to provide 
an additional layer of protection for certain documents and 
information.\189\ Neither the MLC nor DLC believe a heightened category 
of ``highly confidential'' information is necessary,\190\ and ARM 
``does not have strong views'' as long as the regulations prohibit MLC 
board and committee members and companies that employ MLC and DLC board 
members from accessing confidential information of third-party 
companies (including recorded music companies).\191\ Given these 
comments, and (as noted above) because the interim rule precludes the 
MLC from disclosing sensitive data concerning agreements between sound 
recording companies and digital music providers to members of the MLC's 
board of directors or committees or the digital licensee coordinator's 
board of directors or committees, the interim rule does not include a 
heightened category of ``Highly Confidential Information.''
---------------------------------------------------------------------------

    \189\ Id. at 22566.
    \190\ MLC NPRM Comment at 21 (``[T]he MLC does not believe 
further heightened restrictions are necessary.''); DLC NPRM Comment 
at 8 (``DLC believes it unnecessary to create an additional category 
of `highly' confidential . . .'').
    \191\ ARM NPRM Comment at 8.
---------------------------------------------------------------------------

F. Nondisclosure Agreements

    The MLC and DLC disagree as to whether DLC representatives on the 
MLC's board of directors or committees should be required to sign 
nondisclosure agreements (``NDAs'') in their personal capacities. The 
DLC initially suggested that only the DLC as an organization should be 
bound, and not DLC representatives in their personal capacities or as 
representatives of their employers.\192\ Instead, the DLC maintained, 
confidentiality obligations for the MLC and DLC should operate at ``an 
organization-to-organization level,'' \193\ as ``some companies 
prohibit [DLC representatives from] taking on such personal liability 
for actions taken in the scope of employment.'' \194\ The MLC 
disagreed, stating that if only the DLC, which lacks assets relatively, 
is bound by a confidentiality agreement, there would be no recourse 
against the DLC for breach, and that such a proposal 
``disincentiv[izes] individuals on the MLC Board and committees from 
protecting confidential information, as

[[Page 9018]]

there will be no penalty for unlawful disclosure.'' \195\
---------------------------------------------------------------------------

    \192\ DLC Initial NOI Comment at 23.
    \193\ Id.
    \194\ DLC Ex Parte Letter #2 at 6.
    \195\ MLC Reply NOI Comment at 41.
---------------------------------------------------------------------------

    In the NPRM, the Office was disinclined to require that 
confidentiality obligations for the MLC and DLC operate at an 
organization-to-organization level. Instead, the proposed rule stated 
that the various categories of individuals to receive confidential 
information do so subject to an appropriate written confidentiality 
agreement. In response, the MLC ``believes that the current Proposed 
Regulation, which provides that any DLC appointee to the MLC board or 
committees must sign a confidentiality agreement is the appropriate 
solution.'' \196\ The MLC maintains that ``[i]f the DLC member company 
would like its employee to serve as an MLC board or committee member, 
then it can except the employee from such restriction and allow that 
individual to serve as a DLC appointee (and thus comply with the 
confidentiality obligations imposed on all board and committee 
members),'' or else ``identify an alternate appointee that can 
participate with full accountability to the MLC and its members.'' 
\197\ By contrast, the DLC asserts that because it proposes disclosing 
only MLC Internal Information to MLC and DLC board and committee 
members (as discussed above), the ``[l]ess-sensitive nature of this 
internal MLC and DLC information diminishes to a substantial degree the 
rationale for imposing potential personal liability as a condition for 
board and committee membership.'' \198\ The DLC also notes that it has 
adopted a confidentiality policy that operates between itself and DLC 
member companies, which ``allows the individual DLC representatives to 
share information and consult as needed within their companies, without 
the cumbersome process of requiring each person that is so consulted to 
first sign a confidentiality agreement with DLC.'' \199\
---------------------------------------------------------------------------

    \196\ MLC NPRM Comment at 22.
    \197\ Id. at 23.
    \198\ DLC NPRM Comment at 9.
    \199\ Id.
---------------------------------------------------------------------------

    The Office recognizes that the DLC would prefer for DLC 
representatives to be able to easily share MLC Internal Information and 
consult as needed within their companies, but the Office is mindful 
that sensitive information regarding the MLC's internal operations 
needs appropriate protections in place to prevent improper disclosure 
or use. As noted in the NPRM, binding individuals in their personal 
capacities provides an avenue of recourse and is a common practice in 
model protective orders used in the analogous context of preventing 
confidential information produced through litigation discovery from 
being improperly disclosed or misused.\200\ Also, the DLC's existing 
confidentiality policy with its members relates to information that 
would likely fall under the definition of ``DLC Internal Information,'' 
not information relating to the MLC's operations.\201\ Accordingly, the 
Office again declines the DLC's proposal that confidentiality 
obligations for the MLC and DLC operate at an organization-to-
organization level for both ``confidential information'' and ``MLC 
Internal Information.'' \202\ The Office does not, however, intend to 
interfere with the DLC and its members having agreements at an 
organization-to-organization level to allow sharing of ``DLC Internal 
Information'' and consulting as needed regarding such information 
within their organization companies without having each individual 
signing an agreement in his or her personal capacity.
---------------------------------------------------------------------------

    \200\ 85 FR at 22566.
    \201\ See DLC NPRM Comment Ex. 1 (stating that information 
covered by the agreement ``includes, but is not limited to personnel 
issues; information that is proprietary to, or the intellectual 
property of, the DLC or the other Member Companies; unpublished data 
and manuscripts; draft standards and policies; deliberations; and 
other information that has not been authorized for disclosure, has 
not become public and that is obtained through a Member Company's or 
an individual's relationship with the DLC'').
    \202\ One commenter suggests that the MLC make its form 
confidentiality agreement public. Castle NPRM Comment at 4. The MLC 
advised that it ``does not know whether its confidentiality 
expectations for board and committee members will all be captured in 
a template agreement,'' but that ``as part of its ongoing and 
general informational activities, in addition to following the 
Office's regulations as to confidential information, the MLC intends 
to provide information to the public as to any additional 
confidentiality expectations that it has for its board and advisory 
committee members, whether through posting template or exemplar 
agreements or otherwise identifying such confidentiality 
expectations.'' MLC Ex Parte Letter #9 at 4.
---------------------------------------------------------------------------

    In response to commenters' concern about the MLC requiring 
additionally restrictive NDAs for its board and committee members,\203\ 
the proposed rule prevented the MLC and DLC from imposing additional 
restrictions relating to the use or disclosure of confidential 
information, beyond those imposed by the Office's regulations, as a 
condition for participation on a board or committee.\204\ The proposed 
rule stated that ``[t]he use of confidentiality agreements by the MLC 
and DLC shall be subject to the other provisions'' of the Office's 
confidentiality regulations, and ``shall not permit broader use or 
disclosure of Confidential Information than permitted under'' the 
regulations.\205\ The proposed rule also stated that the MLC and DLC 
``may not impose additional restrictions relating to the use or 
disclosure of Confidential Information, beyond those imposed by this 
provision, as a condition for participation on a board or 
committee.''\206\
---------------------------------------------------------------------------

    \203\ The DLC maintained that Office's regulations ``should be 
the ceiling on any confidentiality requirements'' by the MLC. DLC 
Reply NOI Comment at 28. NOIS, joined by individual stakeholders, 
contended that there ``must be a rejection of any incremental NDA 
put forth by the MLC to its board and/or committee members that 
requires anything not mandated by the MMA.'' NOIS et al. Initial NOI 
Comment at 16.
    \204\ 85 FR at 22566.
    \205\ Id. at 22568.
    \206\ Id.
---------------------------------------------------------------------------

    The MLC objected to these provisions, contending that ``[l]imiting 
the scope of the `appropriate written confidentiality agreements' to 
agreements that provide for no more and no less than what is already 
specified in the regulation renders meaningless the added qualifier 
that the use or disclosure shall be made subject to an `appropriate 
written confidentiality agreement.' '' \207\ The MLC suggests that 
additional appropriate restrictions not addressed in the regulations--
such as ``provisions requiring that adequate notice be given prior to 
any disclosure in response to a subpoena or other legal process'' or 
``provid[ing] for the return or destruction of confidential materials 
on demand or at the end of a service period''--would be ``imprudent'' 
not to include in confidentiality agreements, but ``could be considered 
additional restrictions on use'' beyond those in the Office's 
regulations.\208\ By contrast, FMC supports the proposed rule, 
expressing its ``appreciat[ion] that the Office has made it clear that 
the MLC cannot create additional restrictions on the use and disclosure 
of confidential information beyond the Office's regulations,'' which 
``will help writers and composers have an extra degree of confidence 
about the healthy internal functioning of the MLC and know that board 
and committee members who have concerns would feel free to speak freely 
to impacted copyright owners and writers.'' \209\
---------------------------------------------------------------------------

    \207\ MLC NPRM Comment at 17.
    \208\ Id. at 17-18.
    \209\ FMC NPRM Comment at 2.
---------------------------------------------------------------------------

    The Office acknowledges that its regulations may not address all 
appropriate use restrictions and that confidentiality agreements may 
need to fill in some gaps (e.g., provisions regarding notice before 
disclosures in response to subpoenas or other legal processes, the 
return or destruction of confidential materials). The Office is

[[Page 9019]]

mindful, however, that the statute directs the Office to promulgate 
regulations to prevent the improper use or disclosure of confidential 
information and that any confidentiality agreements should not be 
inconsistent with the Office's regulations.\210\ To accommodate the 
MLC's concerns in the context of the regulatory framework, the interim 
rule is adjusted so that rather than requiring confidentiality 
agreements to be in compliance with the Office's regulations, they must 
not be inconsistent with them. This should afford the MLC and DLC 
sufficient flexibility, while ensuring that any resulting 
confidentiality agreements do not circumvent the spirit of the Office's 
regulations. Also, because the interim rule prohibits the MLC and DLC 
from sharing ``confidential information'' with members of their boards 
of directors and committees, the interim rule removes the provision 
prohibiting the MLC and DLC from imposing additional restrictions 
relating to the use or disclosure of confidential information, beyond 
those imposed by the regulations, as a condition for participation on a 
board or committee. Should the Office learn of the MLC or DLC 
inappropriately conditioning disclosure of MLC Internal Information or 
DLC Internal Information, the Office will consider whether further 
adjustment is necessary.
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    \210\ The Office declines to expressly adopt the MLC's proposed 
language that ``[a]nyone receiving Confidential Information under 
this subsection may not further disclose such Confidential 
Information except as expressly authorized in their written 
confidentiality agreement.'' MLC NPRM Comment App. at iii.
---------------------------------------------------------------------------

List of Subjects in 37 CFR Part 210

    Copyright, Phonorecords, Recordings.

Interim Regulations

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

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

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

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

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

0
2. Add Sec.  210.34 to read as follows:


Sec.  210.34  Treatment of confidential and other sensitive 
information.

    (a) General. This section prescribes the rules under which the 
mechanical licensing collective and digital licensee coordinator shall 
ensure that confidential, private, proprietary, or privileged 
information received by the mechanical licensing collective or digital 
licensee coordinator or contained in their records is not improperly 
disclosed or used, in accordance with 17 U.S.C. 115(d)(12)(C), 
including with respect to disclosure or use by the board of directors, 
committee members, and personnel of the mechanical licensing collective 
or digital licensee coordinator.
    (b) Definitions. For purposes of this section:
    (1) ``Confidential Information'' means sensitive financial or 
business information, including trade secrets or information relating 
to financial or business terms that could cause competitive 
disadvantage or be used for commercial advantage, disclosed by digital 
music providers, significant non-blanket licensees, and copyright 
owners (or any of their authorized agents or vendors) to the mechanical 
licensing collective or digital licensee coordinator. ``Confidential 
Information'' also means sensitive personal information, including but 
not limited to, an individual's Social Security number, taxpayer 
identification number, financial account number(s), or date of birth.
    (i) ``Confidential Information'' specifically includes usage data 
and other sensitive data used to compute market shares when 
distributing unclaimed accrued royalties, sensitive data provided by 
digital music providers related to royalty calculations, sensitive data 
shared between the mechanical licensing collective and digital licensee 
coordinator regarding any significant nonblanket licensee, sensitive 
data concerning voluntary licenses or individual download licenses 
administered by and/or disclosed to the mechanical licensing 
collective, and sensitive data concerning agreements between sound 
recording companies and digital music providers. ``Confidential 
information'' also includes sensitive financial or business information 
disclosed to the mechanical licensing collective or digital licensee 
coordinator by a third party that is reasonably designated as 
confidential by the party disclosing the information, subject to the 
other provisions of this section.
    (ii) ``Confidential Information'' does not include:
    (A) Information that is public or may be made public by law or 
regulation, including but not limited to information made publicly 
available through:
    (1) Notices of license, excluding any addendum that provides a 
description of any applicable voluntary license or individual download 
license the digital music provider is, or expects to be, operating 
under concurrently with the blanket license.
    (2) Notices of nonblanket activity, information in the public 
musical works database prescribed by 17 U.S.C. 115(d)(3)(E), and 
information disclosable through the mechanical licensing collective's 
bylaws, annual report, audit report, or the mechanical licensing 
collective's adherence to transparency and accountability with respect 
to the collective's policies or practices, including its anti-
commingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii),(vii), and 
(ix).
    (B) Information that at the time of delivery to the mechanical 
licensing collective or digital licensee coordinator is public 
knowledge, or is subsequently publicly disclosed by the party to whom 
the information would otherwise be considered confidential. The party 
seeking information from the mechanical licensing collective or digital 
licensee coordinator based on a claim that the information sought is a 
matter of public knowledge shall have the burden of proving that fact.
    (C) Top-level compilation data presented in anonymized format that 
does not allow identification of such data as belonging to any specific 
digital music provider, significant nonblanket licensee, or copyright 
owner.
    (2) ``MLC Internal Information'' means sensitive financial or 
business information created by or collected by the mechanical 
licensing collective for purposes of its internal operations, such as 
personnel, procurement, or technology information. ``MLC Internal 
Information'' does not include:
    (i) Information that is public or may be made public by law or 
regulation, information in the public musical works database prescribed 
by 17 U.S.C. 115(d)(3)(E), and information in the mechanical licensing 
collective's bylaws, annual report, audit report, or the mechanical 
licensing collective's adherence to transparency and accountability 
with respect to the collective's policies or practices, including its 
anti-commingling policy, pursuant to 17 U.S.C. 115(d)(3)(D)(ii), (vii), 
and (ix); or
    (ii) Information that at the time of delivery to the mechanical 
licensing collective is public knowledge, or is subsequently publicly 
disclosed by the

[[Page 9020]]

party to whom the information would otherwise be considered 
confidential. The party seeking information from the mechanical 
licensing collective based on a claim that the information sought is a 
matter of public knowledge shall have the burden of proving that fact.
    (3) ``DLC Internal Information'' means sensitive financial or 
business information created by or collected by the digital licensee 
coordinator for purposes of its internal operations, such as personnel, 
procurement, or technology information. ``DLC Internal Information'' 
does not include:
    (i) Information that is public or may be made public by law or 
regulation, information in the public musical works database prescribed 
by 17 U.S.C. 115(d)(3)(E), and information disclosable through the 
digital licensee coordinator's bylaws; or
    (ii) Information that at the time of delivery to the digital 
licensee coordinator is public knowledge, or is subsequently publicly 
disclosed by the party to whom the information would otherwise be 
considered confidential. The party seeking information from the digital 
licensee coordinator based on a claim that the information sought is a 
matter of public knowledge shall have the burden of proving that fact.
    (c) Disclosure of Confidential Information. (1) The mechanical 
licensing collective shall limit disclosure of Confidential Information 
to employees, agents, consultants, vendors, and independent contractors 
of the mechanical licensing collective who are engaged in the 
collective's authorized functions under 17 U.S.C. 115(d) and activities 
related directly thereto and who require access to Confidential 
Information for the purpose of performing their duties during the 
ordinary course of their work for the mechanical licensing collective, 
subject to an appropriate written confidentiality agreement. The 
mechanical licensing collective shall not disclose Confidential 
Information to members of the mechanical licensing collective's board 
of directors and committees, including the collective's Unclaimed 
Royalties Oversight Committee, or the digital licensee coordinator's 
board of directors or committees.
    (2) Notwithstanding paragraph (c)(1) of this section, the 
mechanical licensing collective shall be permitted to fulfill its 
disclosure obligations under section 115 including, but not limited to:
    (i) Providing monthly reports to the digital licensee coordinator 
setting forth any significant nonblanket licensees of which the 
collective is aware that have failed to comply with the Office's 
regulations regarding submission of a notice of nonblanket activity for 
purposes of notifying the mechanical licensing collective that the 
licensee has been engaging in covered activities, or regarding the 
delivery of reports of usage for the making and distribution of 
phonorecords of nondramatic musical works; and
    (ii) Preparing and delivering royalty statements to musical work 
copyright owners that include the minimum information required in 
accordance with 37 CFR 210.29(c), but without including additional 
Confidential Information that does not relate to the recipient 
copyright owner or relevant songwriter. Once a copyright owner receives 
a royalty statement from the mechanical licensing collective, there are 
no restrictions on the copyright owner's ability to use the statement 
or disclose its contents.
    (A) Members of the mechanical licensing collective's board of 
directors and committees shall not have access to musical work 
copyright owners' royalty statements, except where a copyright owner 
discloses their own royalty statement to the members of the mechanical 
licensing collective's board of directors or committees. 
Notwithstanding this paragraph, members of the mechanical licensing 
collective's board and committees are not restricted in accessing their 
own royalty statements from the mechanical licensing collective.
    (B) The digital licensee coordinator, including members of the 
digital licensee coordinator's board of directors and committees, shall 
not have access to musical work copyright owners' royalty statements, 
except where a copyright owner discloses their own royalty statement to 
the mechanical licensing collective's board of directors or committees.
    (3) The digital licensee coordinator shall limit disclosure of 
Confidential Information to employees, agents, consultants, vendors, 
and independent contractors of the digital licensee coordinator who are 
engaged in the digital licensee coordinator's authorized functions 
under 17 U.S.C. 115(d)(5)(C) and activities related directly thereto 
and require access to Confidential Information for the purpose of 
performing their duties during the ordinary course of their work for 
the digital licensee coordinator, subject to an appropriate written 
confidentiality agreement. The digital licensee coordinator shall not 
disclose Confidential Information to members of the digital licensee 
coordinator's board of directors and committees, or the mechanical 
licensing collective's board of directors or committees.
    (4) In addition to the permitted disclosure of Confidential 
Information in this paragraph (c), the mechanical licensing collective 
and digital licensee coordinator may disclose Confidential Information 
to:
    (i) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 
115(d)(4)(D), who is authorized to act on behalf of the mechanical 
licensing collective with respect to verification of royalty payments 
by a digital music provider operating under the blanket license, 
subject to an appropriate written confidentiality agreement;
    (ii) A qualified auditor or outside counsel, pursuant to 17 U.S.C. 
115(d)(3)(L), who is authorized to act on behalf of a copyright owner 
or group of copyright owners with respect to verification of royalty 
payments by the mechanical licensing collective, subject to an 
appropriate written confidentiality agreement; and
    (iii) Attorneys and other authorized agents of parties to 
proceedings before federal courts, the Copyright Office, or the 
Copyright Royalty Judges, or when such disclosure is required by court 
order or subpoena, subject to an appropriate protective order or 
agreement.
    (5) With the exception of persons receiving information pursuant to 
paragraph (c)(4) of this section, anyone to whom the mechanical 
licensing collective or digital licensee coordinator discloses 
Confidential Information as permitted in section shall not disclose 
such Confidential Information to anyone else except as expressly 
permitted in this section.
    (d) Use of Confidential Information. (1) The mechanical licensing 
collective shall not use any Confidential Information for any purpose 
other than the collective's authorized functions under 17 U.S.C. 115(d) 
and activities related directly thereto. Anyone to whom the mechanical 
licensing collective discloses Confidential Information as permitted in 
this section shall not use any Confidential Information for any purpose 
other than in performing their duties during the ordinary course of 
their work for the mechanical licensing collective or as otherwise 
permitted under paragraph (c)(4) of this section.
    (2) The digital licensee coordinator shall not use any Confidential 
Information for any purpose other than its authorized functions under 
17 U.S.C. 115(d)(5)(C) and activities related directly thereto. Anyone 
to whom the digital licensee coordinator discloses Confidential 
Information as permitted in this section shall not use any Confidential 
Information for any

[[Page 9021]]

purpose other than in performing their duties during the ordinary 
course of their work for the digital licensee coordinator or as 
otherwise permitted under paragraph (c)(4) of this section.
    (e) Disclosure and Use of MLC Internal Information and DLC Internal 
Information. (1) The mechanical licensing collective may disclose MLC 
Internal Information to members of the mechanical licensing 
collective's board of directors and committees, including 
representatives of the digital licensee coordinator who serve on the 
board of directors or committees of the mechanical licensing 
collective, subject to an appropriate written confidentiality 
agreement. The MLC may also disclose MLC Internal Information to other 
individuals in its discretion, subject to the adoption of reasonable 
confidentiality policies.
    (2) Representatives of the digital licensee coordinator who serve 
on the board of directors or committees of the mechanical licensing 
collective and receive MLC Internal Information may share such MLC 
Internal Information with the following persons:
    (i) Employees, agents, consultants, vendors, and independent 
contractors of the digital licensing coordinator who require access to 
MLC Internal Information for the purpose of performing their duties 
during the ordinary course of their work for the digital licensee 
coordinator, subject to an appropriate written confidentiality 
agreement;
    (ii) Individuals serving on the board of directors and committees 
of the digital licensee coordinator or mechanical licensing collective 
who require access to MLC Internal Information for the purpose of 
performing their duties during the ordinary course of their work for 
the digital licensee coordinator or mechanical licensing collective, 
subject to an appropriate written confidentiality agreement;
    (iii) Individuals otherwise employed by members of the digital 
licensee coordinator who require access to MLC Internal Information for 
the purpose of performing their duties during the ordinary course of 
their work for the digital licensee coordinator, subject to an 
appropriate written confidentiality agreement.
    (3) The digital licensee coordinator may disclose DLC Internal 
Information to the following persons:
    (i) Members of the digital licensee coordinator's board of 
directors and committees, subject to an appropriate written 
confidentiality agreement; and
    (ii) Members of the mechanical licensing collective's board of 
directors and committees, including music publisher representatives, 
songwriters, and representatives of the digital licensee coordinator 
who serve on the board of directors or committees of the mechanical 
licensing collective, subject to an appropriate written confidentiality 
agreement.
    (iii) The DLC may also disclose DLC Internal Information to other 
individuals in its discretion, subject to the adoption of reasonable 
confidentiality policies.
    (f) Safeguarding Confidential Information. The mechanical licensing 
collective, digital licensee coordinator, and any person or entity 
authorized to access Confidential Information from either of those 
entities as permitted in this section, must implement procedures to 
safeguard against unauthorized access to or dissemination of 
Confidential Information using a reasonable standard of care, but no 
less than the same degree of security that the recipient uses to 
protect its own Confidential Information or similarly sensitive 
information. The mechanical licensing collective and digital licensee 
coordinator shall each implement and enforce reasonable policies 
governing the confidentiality of their records, subject to the other 
provisions of this section.
    (g) Maintenance of records. Any written confidentiality agreements 
relating to the use or disclosure of Confidential Information must be 
maintained and stored by the relevant parties until at least seven 
years after disclosures cease to be made pursuant to them.
    (h) Confidentiality agreements. The use of confidentiality 
agreements by the mechanical licensing collective and digital licensee 
coordinator shall not be inconsistent with the other provisions of this 
section.

    Dated: February 8, 2021.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.

    Approved by:

Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2021-02913 Filed 2-9-21; 4:15 pm]
 BILLING CODE 1410-30-P