Termination Rights, Royalty Distributions, Ownership Transfers, Disputes, and the Music Modernization Act, 56586-56617 [2024-14609]
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56586
Federal Register / Vol. 89, No. 131 / Tuesday, July 9, 2024 / Rules and Regulations
LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 210
[Docket No. 2022–5]
Termination Rights, Royalty
Distributions, Ownership Transfers,
Disputes, and the Music Modernization
Act
U.S. Copyright Office, Library
of Congress.
ACTION: Final rule.
AGENCY:
The U.S. Copyright Office is
issuing a final rule regarding how the
Copyright Act’s derivative works
exception to termination rights applies
to the statutory mechanical blanket
license established by the Music
Modernization Act. The final rule also
addresses other matters relevant to
identifying the proper payee to whom
the mechanical licensing collective
must distribute royalties. Among other
things, the Office is adopting regulations
addressing the mechanical licensing
collective’s distribution of matched
historical royalties and administration
of ownership transfers, other royalty
payee changes, and related disputes.
DATES: This rule is effective August 8,
2024. However, compliance by the
mechanical licensing collective, other
than with respect to
§§ 210.27(g)(2)(ii)(B)(1),
210.29(b)(4)(i)(C), 210.29(k), and
210.30(c)(1)(i)(B), is not required until
the first distribution of royalties based
on the first payee snapshot taken after
October 7, 2024. The Copyright Office
may, upon request, extend the
compliance deadlines in its discretion
by providing public notice through its
website.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Rhea Efthimiadis, Assistant to the
General Counsel, by email at meft@
copyright.gov or telephone at 202–707–
8350.
SUPPLEMENTARY INFORMATION:
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I. Background
The Copyright Office (‘‘Office’’) issues
this final rule subsequent to a
supplemental notice of proposed
rulemaking (‘‘SNPRM’’), published in
the Federal Register on September 26,
2023,1 and a notice of proposed
rulemaking (‘‘NPRM’’), published in the
Federal Register on October 25, 2022.2
This final rule assumes familiarity with
the NPRM and SNPRM, as well as the
1 88
2 87
FR 65908 (Sept. 26, 2023).
FR 64405 (Oct. 25, 2022).
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public comments received in response
to those notices.3
While the final rule retains many
elements from the SNPRM, it also
adopts a number of changes in response
to the public comments, including a
scaling back of certain proposals. We
have adopted a number of commenter
suggestions where reasonable, and have
striven to establish a fair and balanced
approach to the issues presented in this
proceeding. In particular, the Office has
endeavored to find solutions to the
practical and administrative concerns
that were raised by commenters. We are
thankful for their participation in this
process.
This document first summarizes the
Office’s earlier proposals and the public
comments. It next addresses questions
raised regarding our rulemaking
authority. Finally, it discusses the
different parts of the final rule:
termination and the derivative works
exception; the copyright owner entitled
to blanket license royalties; matched
historical royalties; ownership transfers
and royalty payee changes; disputes; the
corrective royalty adjustment; and the
rule’s effective date and compliance
deadline.
A. The NPRM
The Office commenced this
proceeding after the Mechanical
Licensing Collective (‘‘MLC’’) 4 adopted
a termination dispute policy
(‘‘Termination Policy’’) that conflicted
with prior Office guidance and was
based on an erroneous interpretation of
how the Copyright Act’s derivative
works exception (‘‘Exception’’) to
3 The NPRM stemmed from a previous
rulemaking, discussed in detail in the NPRM, that
involved multiple rounds of public comments
through a notification of inquiry, 84 FR 49966
(Sept. 24, 2019), a notice of proposed rulemaking,
85 FR 22518 (Apr. 22, 2020), and an ex parte
communications process. Guidelines for ex parte
communications, along with records of such
communications, including those referenced herein,
are available at https://www.copyright.gov/
rulemaking/mma-implementation/ex-partecommunications.html. All rulemaking activity,
including public comments, as well as educational
material regarding the MMA, can currently be
accessed via navigation from https://
www.copyright.gov/music-modernization.
Comments received in response to the NPRM and
SNPRM are available at https://copyright.gov/
rulemaking/mma-termination/. References to the
public comments are by party name (abbreviated
where appropriate), followed by ‘‘NPRM Initial
Comments,’’ ‘‘NPRM Reply Comments,’’ ‘‘SNPRM
Initial Comments,’’ ‘‘SNPRM Reply Comments,’’ or
‘‘Ex Parte Letter,’’ as appropriate.
4 The preamble uses the terms ‘‘Mechanical
Licensing Collective’’ or ‘‘MLC’’ to refer to the
currently designated mechanical licensing
collective. The regulatory text uses the lowercase
statutory term ‘‘mechanical licensing collective,’’ as
the regulations apply to any designated mechanical
licensing collective, including the current or any
future designee.
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termination rights applies to the
statutory mechanical blanket license
(‘‘blanket license’’) established by the
Orrin G. Hatch-Bob Goodlatte Music
Modernization Act (‘‘MMA’’).5 The
Office concluded it was necessary to
address the legal issues more directly,
including how termination law and the
Exception intersect with the blanket
license.6 In the NPRM, it explained that
clarifying the issues ‘‘would provide
much needed business certainty to
music publishers and songwriters’’ and
‘‘would enable the MLC to appropriately
operationalize the distribution of posttermination royalties in accordance with
existing law.’’ 7 The NPRM contained a
detailed discussion of the procedural
background leading to this rulemaking,8
the Office’s regulatory authority,9 and
legal background about the Copyright
Act’s termination provisions and the
Exception.10
The Office then analyzed the
application of the Exception in the
context of the blanket license and
preliminarily concluded that the MLC’s
Termination Policy was ‘‘inconsistent
with the law.’’ 11 We explained that
‘‘[w]hether or not the Exception applies
to a [digital music provider’s (‘‘DMP’s’’)]
blanket license (and the Office
concludes that the Exception does not),
the statute entitles the current copyright
owner to the royalties under the blanket
license, whether pre- or posttermination.’’ 12 This means that ‘‘the
post-termination copyright owner (i.e.,
the author, the author’s heirs, or their
successors, such as a subsequent
publisher grantee) is due the posttermination royalties paid by the DMP
to the MLC.’’ 13
The Office proposed a rule to
recognize the payee under the blanket
license who is legally entitled to
royalties following a statutory
termination.14 We also proposed to
require the MLC to immediately repeal
its Termination Policy in full after
concluding that it was ‘‘contrary to the
Office’s interpretation of current
law.’’ 15 We further proposed to require
the MLC to adjust any royalties
distributed under the policy within 90
5 87
FR 64405, 64407.
6 Id.
7 Id. (‘‘Moreover, without the uniformity in
application that a regulatory approach brings, the
Office is concerned that the MLC’s ability to
distribute post-termination royalties efficiently
would be negatively impacted.’’).
8 Id. at 64406–07.
9 Id. at 64407–08.
10 Id. at 64408–10.
11 Id. at 64410–11.
12 Id. at 64411.
13 Id.
14 Id. at 64411–12.
15 Id. at 64412.
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days to make copyright owners whole
for any distributions it made based on
‘‘an erroneous understanding and
application of current law.’’ 16
After the NPRM was published, the
MLC said that it voluntarily ‘‘suspended
[its Termination Policy] pending the
outcome of the [Office’s] rulemaking
proceeding’’ and will ‘‘hold[ ] all
royalties for uses of musical works that
are subject to statutory termination
claims beginning with the royalties for
the October 2022 usage period, which
would have been initially distributed in
January 2023.’’ 17 To the Office’s
knowledge, the MLC continues to hold
such royalties.
B. The NPRM Comments
The Office received over 40 public
comments in response to the NPRM.
These comments reflected the views of
hundreds of interested parties,
including songwriters, music publishers
and administrators, record companies,
public interest groups, academics, and
practitioners. Most commenters,
including multiple music publishers
and administrators, generally supported
the NPRM.18 While some commenters
raised concerns with certain aspects of
the NPRM,19 the National Music
Publishers’ Association (‘‘NMPA’’) was
the only commenter to oppose the
proposed rule more broadly, though it
supported the NPRM’s goal of ‘‘ensuring
that royalties for uses under the Section
115(d) blanket license . . . are paid to
the proper copyright owner.’’ 20
Several commenters, including the
MLC, sought additional guidance from
the Office on various related issues not
directly addressed by the NPRM.
Examples include the following:
16 Id.
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17 The
MLC, Policies, https://www.themlc.com/
dispute-policy (last visited June 14, 2024).
18 See, e.g., Authors All. et al. NPRM Initial
Comments at 1–3; BMG Rights Mgmt. NPRM Initial
Comments at 1–2; BMG Rights Mgmt. NPRM Reply
Comments at 1; ClearBox Rights NPRM Initial
Comments at 2, 6–8; Fishman & Garcia NPRM
Initial Comments at 1–4; Gates NPRM Reply
Comments; Howard NPRM Initial Comments at 1–
2; Howard NPRM Reply Comments at 2–3; King,
Holmes, Paterno & Soriano LLP NPRM Initial
Comments; Landmann NPRM Initial Comments;
Miller NPRM Initial Comments; North Music Grp.
NPRM Reply Comments at 2–3; NSAI NPRM Initial
Comments at 3; Promopub NPRM Initial Comments
at 1–2; Promopub NPRM Reply Comments at 1–2;
Recording Academy NPRM Reply Comments at 2–
3; Rights Recapture NPRM Initial Comments; SGA
et al. NPRM Initial Comments at 1–2, 5; SONA et
al. NPRM Initial Comments at 2–3; SONA et al.
NPRM Reply Comments at 3; Songwriters NPRM
Reply Comments at 1; Wixen Music Publ’g NPRM
Initial Comments at 1–2.
19 See, e.g., CMPA NPRM Initial Comments at 1–
2; A2IM & RIAA NPRM Reply Comments at 1–2;
MPA NPRM Reply Comments at 2–5.
20 See generally NMPA NPRM Initial Comments;
NMPA Ex Parte Letter (Feb. 6, 2023).
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• Application of the Exception to
other types of statutory mechanical
licenses; 21
• Application of the Exception to
voluntary licenses; 22
• Procedures for carrying out the
proposed corrective royalty adjustment
to remedy prior distributions by the
MLC based on an erroneous
understanding and application of the
Exception; 23
• Procedures concerning notice,
documentation, timing, and other
matters relating to the MLC’s
implementation of a termination
notification; 24 and
• Procedures concerning termination
disputes and related confidential
information.25
The MLC emphasized the importance
of the Office providing guidance
regarding its termination-related
procedures, explaining that rules
addressing these procedures are
‘‘essential to processing royalties in
connection with statutory termination
claims’’ and ‘‘would provide important
guidance to parties involved in
termination claims.’’ 26
C. The SNPRM
After considering the requests for
further guidance and other comments
received, the Office issued an SNPRM
modifying the NPRM, providing
additional detail, and expanding the
NPRM’s scope. In addition to addressing
the Exception, the SNPRM addressed
and sought comments on other matters
relevant to identifying the proper payee
to whom the MLC must distribute
royalties. Such matters included issues
related to the MLC’s distribution of
matched historical royalties and
21 See, e.g., MLC NPRM Initial Comments at 6;
MLC NPRM Reply Comments at 2; ClearBox Rights
NPRM Initial Comments at 6; ClearBox Rights
NPRM Reply Comments at 2; Howard NPRM Initial
Comments at 5; King, Holmes, Paterno & Soriano
LLP NPRM Initial Comments.
22 See, e.g., MLC NPRM Initial Comments at 4–
6; MLC NPRM Reply Comments at 2; ClearBox
Rights NPRM Initial Comments at 6; ClearBox
Rights NPRM Reply Comments at 2; Howard NPRM
Initial Comments at 5; Rights Recapture NPRM
Initial Comments.
23 See, e.g., MLC NPRM Initial Comments at 6–
8; ClearBox Rights NPRM Reply Comments at 3–4;
ClearBox Rights Ex Parte Letter at 2–4 (June 28,
2023); Howard NPRM Initial Comments at 6;
Promopub NPRM Initial Comments at 2; Promopub
NPRM Reply Comments at 3; North Music Grp.
NPRM Reply Comments at 2.
24 See, e.g., MLC NPRM Initial Comments at 10–
11; ClearBox Rights NPRM Initial Comments at 8;
ClearBox Rights NPRM Reply Comments at 5–6;
Howard NPRM Initial Comments at 3–5; Howard
NPRM Reply Comments at 2–3; SGA et al. NPRM
Initial Comments at 2, 6–8.
25 See, e.g., MLC NPRM Initial Comments at 11–
14; ClearBox Rights NPRM Reply Comments at 6.
26 MLC NPRM Initial Comments at 9–10; see also
MLC NPRM Reply Comments at 2.
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administration of ownership transfers,
other royalty payee changes, and related
disputes. While requests for additional
guidance largely pertained to
termination-related issues, those
requests and other comments suggested
that more comprehensive regulations
would be beneficial to the MLC,
publishers, songwriters, and the wider
music industry. As the SNPRM
explained, ‘‘[t]he accurate distribution
of royalties is a core objective of the
MLC’’ and ‘‘[a]dopting the
[supplemental proposed rule] would
establish standards and settle
expectations for all parties with respect
to such distributions.’’ 27 At a high level,
the SNPRM provided the following
views and proposals beyond those in
the NPRM:
• The Office’s preliminary views on
the application of the Exception to
matched historical royalties,28 pre-2021
statutory mechanical licenses,
individual download licenses, and
voluntary licenses.29
• Additional discussion relating to
the Office’s preliminary view in the
NPRM that the owner at the time of the
use is entitled to distributions of blanket
license royalties absent an agreement to
the contrary, and a related proposal to
accommodate and give effect to
contractual payment arrangements that
may require a different result.30
• A proposal that the MLC report and
distribute matched historical royalties
in the same manner and subject to the
same requirements that apply to the
reporting and distribution of blanket
license royalties.31
• A proposal regarding how the MLC
should be notified about an ownership
transfer or other royalty payee change,
with detailed provisions covering
different types of changes, such as those
relating to contractual assignments,
statutory terminations, and other
changes (e.g., when parties direct the
MLC to pay an alternative designated
payee).32
• A proposal regarding how the MLC
should implement and give effect to
such payee changes.33
• A proposal regarding the process
and documentation for termination27 88
FR 65908, 65909.
defined in the SNPRM—e.g.,
‘‘historical unmatched royalties,’’ ‘‘matched
historical royalties,’’ ‘‘the owner at the time of the
use,’’ and ‘‘the owner at the time of the payment’’—
have the same meaning here. See id. at 65909–10,
65912–13.
29 Id. at 65910–12.
30 Id. at 65912–14.
31 Id. at 65914.
32 Id. at 65914–65917.
33 Id. at 65917–18.
28 Phrases
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related disputes initiated with the
MLC.34
• A proposal regarding the resolution
of all types of disputes initiated with the
MLC.35
• A proposal regarding certain
disclosures to be made by the MLC in
connection with disputes and other
royalty holds.36
• A proposal regarding how the MLC
should administer a corrective royalty
adjustment to cure any distributions it
previously made under its sincesuspended Termination Policy.37
also took issue with the Office’s
proposed expansion of the rule beyond
the NPRM, with some commenters
requesting that those new issues be
removed from consideration.40 The
MLC provided a regulatory proposal
that shared many similarities with the
SNPRM and was ‘‘aimed at
implementing certain proposals of the
Office concerning statutory
terminations, while omitting language
concerning’’ various other issues that, in
its view, ‘‘do not need further
regulation.’’ 41
D. The SNPRM Comments
The Office received over 50 public
comments in response to the SNPRM
from a wide variety of interested parties
across the music industry. Some parties
supported aspects of the SNPRM,38
while others were critical of certain
provisions. The primary criticism
addressed the question of whether the
owner at the time of the use or the
owner at the time of the payment should
receive distributions of blanket license
royalties from the MLC.39 Commenters
II. Rulemaking Authority
34 Id.
at 65919.
at 65919–20.
36 Id. at 65919.
37 Id. at 65920–21.
38 See, e.g., MAC et al. SNPRM Initial Comments
at 2, 4 (‘‘The Copyright Office’s proposed rules,
both initially and as altered here, accurately,
clearly, concisely, and properly addresses the
implementation of the MMA while maintaining and
supporting the significant advances made by the
MLC. We continue to enthusiastically support this
proposed rule and remain thankful to the Copyright
Office for addressing this area of great need by
utilizing its oversight and governance authority.’’);
Howard SNPRM Initial Comments at 1 (‘‘I support
the supplemental rulemaking and directives
proposed by the Office.’’).
39 See, e.g., MLC SNPRM Initial Comments at 1–
16; NMPA SNPRM Initial Comments at 2–13;
NMPA Ex Parte Letter at 1–2 (Jan. 24, 2024); AIMP
SNPRM Initial Comments at 1–4; Combustion
Music SNPRM Initial Comments; Endurance Music
Grp. SNPRM Initial Comments at 1–2; Farris, Self
& Moore, LLC SNPRM Initial Comments at 1–2;
Boom Music SNPRM Initial Comments; Jonas Grp.
Publ’g SNPRM Initial Comments; Kobalt Music
SNPRM Initial Comments at 2; Liz Rose Music
SNPRM Initial Comments at 1–2; Big Machine
Music SNPRM Initial Comments at 1–2;
Legacyworks SNPRM Initial Comments; Me Gusta
Music SNPRM Initial Comments at 1–2; Relative
Music Grp. SNPRM Initial Comments at 1–2;
Harding SNPRM Initial Comments; Moore SNPRM
Initial Comments; North Music Grp. SNPRM Initial
Comments at 2; NSAI SNPRM Initial Comments at
2–5; Big Yellow Dog SNPRM Initial Comments;
Reservoir Media Mgmt. SNPRM Initial Comments at
1–2; SMACKSongs SNPRM Initial Comments; Sony
Music Publ’g SNPRM Initial Comments at 1–5;
Spirit Music Grp. SNPRM Initial Comments at 1–
3; Turner SNPRM Initial Comments at 1–2; Wiatr
& Assocs. SNPRM Initial Comments; Jody Williams
Songs SNPRM Initial Comments at 1; Concord
Music Publ’g SNPRM Initial Comments at 1–3;
ClearBox Rights SNPRM Reply Comments at 4–5;
Creative Nation SNPRM Reply Comments at 1–2;
The Greenroom Resource SNPRM Reply Comments
at 1; MAC et al. SNPRM Reply Comments at 2;
Recording Academy SNPRM Reply Comments at 3;
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Having considered all relevant
comments, the Office concludes that we
have appropriate statutory authority to
adopt the final rule for the reasons
explained in the NPRM and SNPRM, as
well as the additional reasons discussed
below.42 As previously explained,
section 702 of the Copyright Act
specifically grants the Office the
authority to ‘‘establish regulations not
inconsistent with law for the
administration of the functions and
duties made the responsibility of the
Register under [title 17].’’ 43
Implementation of the MMA is one of
those ‘‘functions and duties’’ that
Congress made the Office’s
responsibility. Specifically, the Office
has been granted the authority 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.]’’ 44 Several commenters
explicitly supported the Office’s general
SONA SNPRM Reply Comments at 2–5; Universal
Music Publ’g Grp. SNPRM Reply Comments at 1–
5; Warner Chappell Music SNPRM Reply
Comments at 3–8; DLC SNPRM Reply Comments at
2–4.
40 See, e.g., MLC SNPRM Initial Comments at 17–
20; NMPA SNPRM Initial Comments at 3–4; NMPA
Ex Parte Letter at 2–3 (Jan. 24, 2024); Kobalt Music
SNPRM Initial Comments at 3; Big Machine Music
SNPRM Initial Comments at 2; NSAI SNPRM Initial
Comments at 1–2; North Music Grp. SNRPM Initial
Comments at 1, 3–4; MAC et al. SNPRM Reply
Comments at 2–3; MAC Ex Parte Letter at 1–2 (Dec.
29, 2023); Recording Academy SNPRM Reply
Comments at 1–2; Warner Chappell Music SNPRM
Reply Comments at 2–3; ClearBox Rights SNPRM
Reply Comments at 3, 10; SONA SNPRM Reply
Comments at 5; DLC SNPRM Reply Comments at
1.
41 MLC SNPRM Reply Comments at 2 & App. A;
MLC SNPRM Initial Comments at 17 (stating that
‘‘the Office’s procedural guidance on notice and
transfer procedures in the terminations context is
helpful’’ and that ‘‘much of the proposal with
respect to terminations generally addresses a
regulatory need’’); see also NMPA Ex Parte Letter
at 3 (Jan. 24, 2024) (conveying ‘‘its desire for the
Office to provide any guidance the MLC has
requested’’).
42 87 FR 64405, 64407–08; 88 FR 65908, 65910.
43 17 U.S.C. 702.
44 Id. at 115(d)(12)(A).
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rulemaking authority.45 The only
commenter to question the Office’s
authority was NMPA, which offered
various arguments for why the Office
lacks authority to issue this rule.46 None
are persuasive.
NMPA first argued that the Office has
no authority under section 702 of the
Copyright Act or the MMA to
promulgate rules that involve
substantive questions of copyright
law.47 This is clearly incorrect. The
Office ‘‘has statutory authority to issue
regulations necessary to administer the
Copyright Act’’ and ‘‘to interpret the
Copyright Act.’’ 48 As the NPRM
detailed, ‘‘[t]he Office’s authority to
interpret title 17 in the context of
statutory licenses in particular has long
been recognized.’’ 49
Indeed, as the Office has previously
explained, ‘‘[t]he Office exercises its
authority under section 702 when it is
necessary ‘to interpret the statute in
accordance with Congress’[s] intentions
and framework.’ ’’ 50 That is what the
Office is doing here, just as we have
done on numerous previous occasions,
for example to determine that satellite
carriers are not ‘‘cable systems’’ within
the meaning of section 111 and
therefore do not qualify for that
statutory license,51 to state the meaning
of ‘‘digital phonorecord delivery’’ under
45 See, e.g., ClearBox Rights NPRM Initial
Comments at 2; SONA et al. NPRM Initial
Comments at 2; SGA et al. NPRM Initial Comments
at 2; Howard NPRM Reply Comments at 3;
Recording Academy NPRM Reply Comments at 2;
Promopub NPRM Reply Comments at 2; MCNA et
al. Ex Parte Letter at 2 (Mar. 15, 2024).
46 NMPA NPRM Initial Comments at 7–10.
Despite its previous objections, NMPA’s SNPRM
comments appear to signal a change in its position
on the Office’s general rulemaking authority,
though this is not entirely clear. See NMPA SNPRM
Initial Comments at 2 & n.2 (stating that ‘‘[t]here is
clear industry consensus on the [proposed rule
requiring that all post-termination royalties under
the blanket license be paid to the post-termination
copyright owner], and the [Office] should adopt it
immediately,’’ but then also noting some of its
previous concerns).
47 See NMPA NPRM Initial Comments at 7–8.
48 Motion Picture Ass’n of Am., Inc. v. Oman, 750
F. Supp. 3, 6 (D.D.C. 1990), aff’d, 969 F.2d 1154
(D.C. Cir. 1992); see also, e.g., Fox Tel. Stations, Inc.
v. Aereokiller, LLC, 851 F.3d 1002, 1011 (9th Cir.
2017) (recognizing that ‘‘the Copyright Office has a
much more intimate relationship with Congress
[than the courts] and is institutionally better
equipped than we are to sift through and to make
sense of the vast and heterogeneous expanse that is
the Act’s legislative history’’); Satellite Broad. &
Commc’ns Ass’n of Am. v. Oman, 17 F.3d 344, 345,
347–48 (11th Cir. 1994), cert. denied, 513 U.S. 823
(1994) (recognizing the Copyright Office’s authority
to issue regulations and ‘‘statutory authority to
interpret the provisions of the compulsory licensing
scheme’’ found in 17 U.S.C. 111).
49 87 FR 64405, 64408.
50 73 FR 40802, 40806 (July 16, 2008) (quoting 57
FR 3284, 3292 (Jan. 29, 1992)).
51 57 FR 3284, 3290–92, 3296; see Satellite Broad.
& Commc’ns Ass’n of Am., 17 F.3d 344.
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the section 115 statutory license,52 and
to determine that internet streaming of
AM/FM broadcast signals are not
exempted ‘‘broadcast transmissions’’
within the meaning of section 114.53
The Office has done this in the
termination context as well, adopting a
rule addressing the meaning of
‘‘executed’’ under section 203 in the
context of gap grants.54
Regarding the Office’s specific
authority under the MMA, we have
issued several rules that required
analyzing substantive provisions of the
statute. For example, the Office
determined what constitutes ‘‘the due
date for payment’’ under section
115(d)(8)(B)(i),55 how the endorsement
criterion for designating the MLC is to
be evaluated under section
115(d)(3)(A)(ii),56 the meaning of
‘‘producer’’ under section
115(d)(4)(A)(ii)(I)(aa),57 and what
constitutes minimum ‘‘good-faith,
commercially reasonable efforts’’ under
section 115(d)(4)(B).58
NMPA also made a series of
arguments based on the premise that
any rulemaking authority the Office may
have with respect to section 115 or other
statutory licenses does not extend to
other areas of the Copyright Act, like
those dealing with termination.59 These
arguments, and their underlying
premise, are similarly unsupported by
52 73
FR 66173, 66174–75 (Nov. 7, 2008).
FR 77292, 77293–95 (Dec. 11, 2000); see
Bonneville Int’l Corp. v. Peters, 347 F.3d 485 (3d
Cir. 2003).
54 76 FR 32316, 32316–20 (June 6, 2011). While
the Office has express authority to regulate the
content of notices of termination, we also referred
to our authority under section 702 in adopting the
rule and stated that the focus of the rulemaking was
our recordation practices. Id. at 32319–20.
Moreover, the rulemaking required the Office to
opine on a substantive area of copyright law,
namely whether or how the statute’s termination
provisions apply to gap grants. Id. at 32316–17; see
U.S. Copyright Office, Analysis of Gap Grants under
the Termination Provisions of Title 17 (2010),
https://www.copyright.gov/reports/gap-grantanalysis.pdf. At least one court appears to have
followed the Office’s interpretation. See Mtume v.
Sony Music Ent., 408 F. Supp. 3d 471, 475–76
(S.D.N.Y. 2019).
55 88 FR 60587, 60590–91 (Sept. 5, 2023).
56 84 FR 32274, 32280–84 (July 8, 2019).
57 85 FR 22518, 22532.
58 85 FR 58114, 58119 (Sept. 17, 2020). We also
note that, in addition to the specific authority
granted in section 115 and general authority granted
in section 702, Congress gave the Office the
responsibility to interpret title 17 when questions
of law arise in proceedings before the Copyright
Royalty Judges. 17 U.S.C. 802(f)(1)(B)(i), (f)(1)(D)
(granting the Office the ability to ‘‘resolve’’ any
‘‘novel material question of substantive law
concerning an interpretation of those provisions of
[title 17] that are the subject of [a] proceeding’’
before the Copyright Royalty Judges and to review
the Judges’ final determinations for ‘‘legal error . . .
of a material question of substantive law under [title
17]’’).
59 NMPA NPRM Initial Comments at 8–10.
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title 17. The MMA and section 702
provide the Office with ample authority
to interpret sections 203 and 304, as
well as other provisions of the
Copyright Act, in the context of the
blanket license and the MLC’s
operations.60
As explained in the NPRM, despite its
focus on termination issues, ‘‘this
rulemaking ultimately reflects the
Office’s oversight and governance of the
MLC’s reporting and payment
obligations to copyright owners.’’ 61 The
Office has exercised its authority in this
area before. As discussed in the NPRM,
the Office previously issued regulations
regarding the MLC’s reporting and
distribution of royalties to copyright
owners with ‘‘no dispute regarding the
propriety or authority of the Office to
promulgate [them].’’ 62 In that prior
proceeding, we concluded that we have
‘‘the authority to promulgate these rules
under the general rulemaking authority
in the MMA.’’ 63
The final rule in this proceeding is no
different. It governs how the MLC is to
report and distribute royalties to
copyright owners, including with
respect to identifying the proper royalty
payee. The fact that the final rule
addresses that core MLC function in a
context that raises substantive questions
of copyright law (like termination)—and
thus requires analysis of various points
of substantive copyright law (such as
termination and the Exception)—does
not deprive the Office of its authority to
regulate how the MLC reports and pays
royalties. Nor does the fact that parts of
the Office’s analysis or reasoning could
potentially be applied by others in
contexts outside the scope of this
proceeding.64
60 See 17 U.S.C. 115(d)(12)(A), 702; see also, e.g.,
Motion Picture Ass’n of Am., Inc., 750 F. Supp. at
6; Aereokiller, LLC, 851 F.3d at 1011; Satellite
Broad. & Commc’ns Ass’n of Am., 17 F.3d at 345,
347–48.
61 87 FR 64405, 64408.
62 Id. at 64408 & n.39 (quoting 85 FR 22549,
22550–52 (Apr. 22, 2020)).
63 85 FR 22549, 22551 (quoting 17 U.S.C.
115(d)(12)) (observing that ‘‘Congress provided
general authority to the Register of Copyrights to
‘conduct such proceedings and adopt such
regulations as may be necessary or appropriate to
effectuate the provisions of this subsection’ ’’).
64 At a minimum, this proceeding has
demonstrated that it is ‘‘necessary or appropriate’’
to ‘‘adopt . . . regulations’’ ‘‘to effectuate’’ section
115(d)(3)(G)(i)(II), requiring the MLC to ‘‘distribute
royalties to copyright owners in accordance with
. . . the ownership and other information
contained in the records of the [MLC].’’ 17 U.S.C.
115(d)(3)(G)(i)(II), (12)(A); see also, e.g., 87 FR
64405, 64407 (discussing need to revisit the
termination issue more directly, including ‘‘how
termination law intersects with the blanket
license’’); 88 FR 65908, 65909–10 (explaining that
the MLC sought additional regulatory guidance
‘‘necessary’’ and ‘‘essential’’ to its operations).
Thus, the current rulemaking ‘‘is consistent with
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The flaw in NMPA’s argument is
highlighted by considering its
consequences. If the Office’s authority is
as limited as NMPA suggested, it would
mean that the MLC would be the one (in
the absence of a lawsuit) to determine
the meaning of any questioned statutory
provisions. The Office’s oversight of the
MLC through regulatory action cannot
be frustrated when such oversight may
involve addressing substantive issues of
copyright law. Concluding otherwise
would be contrary to the statute’s logic
and Congress’s intent. Congress
intentionally invested the Office with
‘‘broad regulatory authority’’ under the
MMA, in part to oversee the MLC, such
as by ‘‘thoroughly review[ing]’’ MLC
policies ‘‘to ensure the fair treatment of
interested parties.’’ 65
NMPA also specifically challenged
the Office’s authority to adopt the
corrective royalty adjustment, arguing
that it is an impermissible retroactive
rule and an unconstitutional taking.66
We disagree with this characterization
and address this topic in Part III.F.,
below.
III. Final Rule
Having reviewed and considered all
comments, the Office has weighed the
relevant legal, business, and practical
implications and equities raised, and
pursuant to its authority under 17
U.S.C. 115 and 702 is adopting a final
rule regarding MLC royalty
distributions. The Office finds it
reasonable to adopt much of the SNPRM
as final regulations, but with some
significant modifications. As discussed
in more detail below, the Office is
adopting a final rule that is a scaleddown version of the SNPRM and applies
a different solution to the issue of
identifying the payee to whom the MLC
must distribute royalties.
Specifically, in response to the
comments that the SNPRM was too
broad 67 and the MLC’s own regulatory
the Office’s practice of promulgating regulations to
construe statutory terms that are critical to the
administration of a statutory license administered
by the Office.’’ 73 FR 66173, 66175.
65 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 4 (2018) (‘‘Conf. Rep.’’), https://
www.copyright.gov/legislation/mma_conference_
report.pdf.
66 NMPA NPRM Initial Comments at 4–6, 12–13;
NMPA Ex Parte Letter at 2 (Feb. 6, 2023); NMPA
SNPRM Initial Comments at 2 n.2; see also CMPA
NPRM Initial Comments at 1–2 (arguing against
retroactivity); Warner Chappell Music SNPRM
Reply Comments at 2–3 (same).
67 See, e.g., Kobalt Music SNPRM Initial
Comments at 3; Big Machine Music SNPRM Initial
Comments at 2; NSAI SNPRM Initial Comments at
1–2; North Music Grp. SNRPM Initial Comments at
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proposal,68 the Office has narrowed the
scope of the rule to provide the
guidance the MLC sought without
expanding the rule to other areas that do
not appear to need regulation at this
time based on the current record.69
While some commenters would prefer
that the Office not address any issues
beyond those raised in the original
NPRM, the Office disagrees. As
discussed above, the MLC and several
other commenters had requested
additional guidance from the Office on
various related topics. Consequently,
the Office issued the SNPRM seeking
public comments on a supplemental
proposed rule focused on providing
such guidance. When the MLC requests
guidance from the Office, we will
generally provide it given the oversight
role we play under the MMA. The
Office finds that it is reasonable and
appropriate to provide such guidance
here.
To the extent some commenters
suggested that the Office is moving too
quickly on some of these issues or has
not engaged in a sufficient
administrative process, the Office
disagrees.70 The Office issued the
SNPRM precisely to solicit substantive
comments from interested parties about
these expanded topics. In doing so, the
Office provided for both initial and
reply comment periods as well as
deadline extensions, ultimately
providing parties with over two months
to submit written comments. The Office
also made itself available for ex parte
meetings for several months after the
period for written comments ended.
Given this ample opportunity to engage
with the Office on these issues, we see
no reason to delay providing the MLC
with the guidance it needs to operate.
As always, the Office will continue to
monitor the effect of the rule, and if
there are any unforeseen consequences
or should anything not operate as
intended, we can consider amending the
rule in the future.
Where parties have objected to certain
aspects of the SNPRM, the Office has
considered those comments and
addressed these issues, as discussed
1, 3–4; MAC et al. SNPRM Reply Comments at 2–
3; MAC Ex Parte Letter at 1–2 (Dec. 29, 2023);
Recording Academy SNPRM Reply Comments at 1–
2; Warner Chappell Music SNPRM Reply
Comments at 2–3; ClearBox Rights SNPRM Reply
Comments at 3, 10; SONA SNPRM Reply Comments
at 5.
68 MLC SNPRM Reply Comments at App. A.
69 To be clear, the Office reserves the right to
regulate these other areas in the future should it
become necessary or appropriate to do so.
70 See, e.g., North Music Grp. SNRPM Initial
Comments at 1, 3–4; Recording Academy SNPRM
Reply Comments at 1–2; ClearBox Rights SNPRM
Reply Comments at 3, 10.
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below. If not otherwise discussed, the
Office has concluded that the relevant
proposed provision should be adopted
for the reasons stated in the NPRM or
SNPRM.
A. Termination and the Exception
In the NPRM, the Office engaged in an
extensive preliminary analysis that
concluded that ‘‘[w]hether or not the
Exception applies to a DMP’s blanket
license (and the Office concludes that
the Exception does not), the statute
entitles the current copyright owner to
the royalties under the blanket license,
whether pre- or post-termination.’’ 71
We explained that this means that ‘‘the
post-termination copyright owner (i.e.,
the author, the author’s heirs, or their
successors, such as a subsequent
publisher grantee) is due the posttermination royalties paid by the DMP
to the MLC.’’ 72
Based on the MLC’s and other
commenters’ requests for additional
guidance,73 the SNPRM contained
additional analysis and made further
preliminary conclusions, including that:
(1) the Exception does not apply to
matched historical royalties; 74 (2) with
respect to covered activities, record
companies’ pre-2021 individual
download licenses and the authority
obtained from them by DMPs are the
only pre-2021 statutory mechanical
licenses to have continued in effect after
the license availability date; 75 (3) the
Exception does not apply to individual
download licenses; 76 and (4) the
Exception may apply to some voluntary
licenses, but not others.77
Most comments addressing the
Office’s termination analysis were in
response to the NPRM, as parties largely
did not comment on the additional
analysis from the SNPRM. While many
commenters agreed with the Office’s
analysis,78 others raised some
concerns.79 Several commenters, even
FR 64405, 64410–11.
at 64411.
73 88 FR 65908, 65909–10.
74 Id. at 65910–11.
75 Id. at 65911.
76 Id.
77 Id. at 65911–12.
78 See, e.g., A2IM & RIAA NPRM Reply
Comments at 2; Authors All. et al. NPRM Initial
Comments at 2–3; BMG Rights Mgmt. NPRM Initial
Comments at 2; ClearBox Rights NPRM Initial
Comments at 6–7; Fishman & Garcia NPRM Initial
Comments at 1–4; King, Holmes, Paterno & Soriano
LLP NPRM Initial Comments; North Music Grp.
NPRM Reply Comments at 2; Recording Academy
NPRM Reply Comments at 2; SGA et al. NPRM
Initial Comments at 2, 5; SONA et al. NPRM Initial
Comments at 2–3; King, Holmes, Paterno & Soriano
LLP SNPRM Reply Comments.
79 See NMPA NPRM Initial Comments at 2–3;
NMPA Ex Parte Letter at 2–3 (Feb. 6, 2023); MPA
NPRM Reply Comments at 2–5; see also A2IM &
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72 Id.
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some who raised concerns with the
Office’s analysis, supported its end
result that the post-termination
copyright owner is entitled to posttermination royalties under the blanket
license.80
Having considered all relevant
comments, the Office is adopting the
termination-related aspects of the
SNPRM’s proposal as final for the
reasons discussed below, as well as the
reasoning in the NPRM and SNPRM in
relevant part.
1. Blanket Licenses
i. Background
In the NPRM, the Office thoroughly
analyzed the Exception in the context of
the blanket license. In that analysis, the
Office made two overarching
conclusions that: (1) the Exception does
not apply to blanket licenses; and (2)
even if the Exception did apply, under
the terms of the blanket license (i.e., the
applicable text of section 115 and
related regulations), a terminated
publisher still would not be entitled to
post-termination blanket license
royalties.81
In concluding that the Exception does
not apply, the Office made three further
overall conclusions. First, the Office
concluded that ‘‘[t]o be subject to
termination, a grant must be executed
by the author or the author’s heirs,’’ and
that, ‘‘[a]s a type of statutory license, the
blanket license is ‘self-executing,’ such
that it cannot be terminated’’ under
section 203 or 304.82 The Office
explained that ‘‘[i]f a blanket license
cannot be terminated, then it cannot be
subject to an exception to termination;
the license simply continues in effect
according to its terms.’’ 83
Second, the Office concluded that
‘‘[s]ection 115’s blanket licensing regime
is premised on the assumption that
DMPs are not preparing derivative
works pursuant to their blanket
licenses,’’ and that ‘‘where no sound
recording derivative is prepared
pursuant to a DMP’s blanket license,
RIAA NPRM Reply Comments at 2; A2IM & RIAA
SNPRM Initial Comments at 1–4; Fishman & Garcia
NPRM Initial Comments at 4; NMPA SNPRM Initial
Comments at 2 n.2.
80 See, e.g., NMPA SNPRM Initial Comments at 1–
2 (‘‘NMPA supported and continues to support the
bright-line rule that the [Office] proposed to
establish in the NPRM, requiring that all posttermination royalties under the Blanket License be
paid to the post-termination copyright owner.’’);
Universal Music Publ’g Grp. SNPRM Reply
Comments at 5 n.4; Warner Chappell Music SNPRM
Reply Comments at 2; Kobalt Music SNPRM Initial
Comments at 1; NSAI SNPRM Initial Comments at
2; Promopub SNPRM Initial Comments at 2.
81 87 FR 64405, 64410–11.
82 Id. at 64410.
83 Id.
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that blanket license is not part of any
preserved grants that make the
Exception applicable.’’ 84 The Office
explained that ‘‘[i]f no derivative work
is prepared ‘under authority of the
grant,’ then the Exception cannot
apply,’’ but recognized that
‘‘[p]roponents of the Exception’s
application to the blanket license might
argue that the blanket license should be
construed as being included within a socalled ‘panoply’ of grants pursuant to
which a pre-termination derivative work
of the musical work was prepared.’’ 85
The Office observed that the ‘‘only
panoply to which the blanket license
could theoretically belong would be the
grant (or chain of successive grants)
emanating from the songwriter and
extending to the record company (or
other person) who prepared the sound
recording derivative licensed to the
DMP.’’ 86 After analyzing that
possibility, the Office concluded that
‘‘[t]he Exception, as interpreted by [the
Supreme Court in Mills Music, Inc. v.
Snyder],87 should not be read as
freezing other grants related to, but
outside of, the direct chain of successive
grants providing authority to utilize the
sound recording derivative, such as the
musical work licenses obtained by
DMPs,’’ and the Office discussed several
reasons explaining why.88
Third, the Office concluded that
applying the Exception to the blanket
license in the manner the MLC had
done previously, whereby the payee
would be frozen in time, would lead to
an ‘‘extreme result’’ because it would
also freeze all other aspects of the
license in time.89 For example, ‘‘it
would freeze in time everything from
DMP reporting requirements and MLC
royalty statement requirements to the
rates and terms of royalty payments for
using the license set by the [Copyright
Royalty Judges].’’ 90
The SNPRM addressed this analysis
as well.91 There, the Office described
the NPRM’s conclusions about the
Exception as ‘‘preliminary,’’ making
clear that we ‘‘welcome[d] further
comments and legal discussion.’’ 92 The
Office has considered all comments,
including those raising concerns with
aspects of this analysis. For the reasons
discussed below, we find those
concerns unpersuasive. Therefore, the
Office is adopting the termination
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84 Id.
at 64410–11.
analysis from the NPRM and SNPRM as
final for the reasons discussed in the
NPRM and SNPRM, subject to the
further discussion below.
ii. Comments and Discussion
The principal critics of the NPRM’s
analysis were NMPA and the Motion
Picture Association (‘‘MPA’’). NMPA
asserted that ‘‘[t]he Exception has
historically been interpreted by many
industry stakeholders to permit the pretermination musical composition
copyright owner to continue to receive
mechanical royalties post-termination
for uses of those compositions in
derivative sound recordings, including
in interactive streaming, provided that
the mechanical license was issued pretermination and the recording was
prepared pre-termination.’’ 93 NMPA
said that ‘‘[t]his interpretation was
based on, inter alia, the Supreme
Court’s decision in Mills Music, Inc. v.
Snyder, and the Second Circuit’s
decision in Woods v. Bourne Co.,’’ 94
and that ‘‘[b]ased on this interpretation,
before the MMA was enacted, [DMPs],
along with other Section 115 statutory
licensees, continued to pay mechanical
royalties to the pre-termination rights
owner for uses of recordings prepared
pre-termination pursuant to pretermination mechanical licenses.’’ 95
NMPA stated that it ‘‘never understood
the MMA to change or resolve the law
of statutory termination or to provide a
new or different rule applicable to
Blanket Licenses.’’ 96 It explained its
view that ‘‘the MMA addresses the
termination issue in Section
115(d)(9)(A),’’ which was intended to
‘‘preserve the status quo.’’ 97
After a full review and analysis, the
Office is not persuaded by NMPA’s
argument. We do not dispute NMPA’s
assertion that certain publishers may
have adopted a different approach to
termination, but this approach is not
supported by the law in the context of
the blanket license. As discussed further
below in Part III.F., the Office is not
adopting a new position, or changing
the law as it relates to termination or the
Exception. Nor are we contending that
the MMA or blanket license altered the
law as it relates to the Exception. The
Office is merely stating what the law is
and has always been.
In support of its approach, NMPA
suggested that its view of the Exception
was universally relied on as the status
85 Id.
86 Id.
93 NMPA NPRM Initial Comments at 2–3; see also
NMPA Ex Parte Letter at 2 (Feb. 6, 2023).
94 60 F.3d 978 (2d Cir. 1995).
95 NMPA NPRM Initial Comments at 3; see also
NMPA Ex Parte Letter at 2 (Feb. 6, 2023).
96 NMPA NPRM Initial Comments at 3.
97 Id. at 3 n.5.
87 469
U.S. 153 (1985).
88 87 FR 64405, 64410–11.
89 Id. at 64411.
90 Id.
91 88 FR 65908, 65910.
92 Id. at 65912 n.69.
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quo. The comments, however, reveal
otherwise. For example, ClearBox Rights
said that ‘‘there has not been
consistency in the history of how these
royalties have been paid [with respect to
the Exception], so such past practices
should not be interpreted as any kind of
precedent or guidance into how they
should be paid in the future, or adjusted
for any given period of time.’’ 98 NMPA
even described its views with qualifying
language, stating that its interpretation
of Mills Music has been followed by
‘‘some’’ copyright owners and that
‘‘legal interpretations of this holding
and views as to the applicability of the
[Exception] to the [blanket license] may
differ.’’ 99
Further, NMPA’s claim that section
115(d)(9)(A) supports its position is
misplaced. That provision does not
speak to the Exception or the
preservation of any pre-MMA status quo
(outside the narrow context of
individual download licenses). As
explained in the SNPRM, that provision,
read together with section 115(d)(9)(B),
provides, with respect to covered
activities, that ‘‘only record companies’
pre-2021 individual download licenses
and the authority obtained from them by
DMPs survived the license availability
date.’’ 100 The Office explained that
‘‘[b]ecause all other pre-2021 statutory
mechanical licenses to engage in
covered activities are no longer in effect
pursuant to their own terms (i.e., the
statutory text), any application the
Exception may or may not have had
while they were in force seems to have
no bearing on the MLC’s distribution of
royalties for post-2021 usage.’’ 101
The statute plainly states that the
blanket license was ‘‘automatically
substituted for and supersede[d] any
existing compulsory license previously
obtained under [section 115].’’ 102 The
98 ClearBox Rights NPRM Reply Comments at 1–
2 (further stating that performing rights
organizations ‘‘fairly consistently pass through to
the post-termination rights holder the performance
side of these very same [DMP] interactive streams’’);
see also, e.g., King, Holmes, Paterno & Soriano LLP
NPRM Initial Comments at 1 (‘‘We have been
concerned for years about some music publishers’
claims that the [Exception] entitles the original
publisher of a composition to continue to collect
indefinitely on mechanical licenses issued pursuant
to the compulsory license provisions of the U.S.
Copyright Act. Such claims do not comport with
the language of the [Exception] itself or the
legislative history surrounding it.’’); McAnally &
North Ex Parte Letter at 2 (Mar. 14, 2023) (asserting
that views like NMPA’s are ‘‘inconsistent with our
understanding of how terminations have been
treated in the industry regarding payments of
mechanical royalties under Section 115’’).
99 NMPA Ex Parte Letter at 2 (Feb. 6, 2023).
100 88 FR 65908, 65911.
101 Id.
102 See 17 U.S.C. 115(d)(9)(A).
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language NMPA highlighted—that this
substitution happened ‘‘without any
interruption in license authority
enjoyed by [a DMP]’’—simply means
that the substitution did not cause there
to be any gap in a DMP’s licensing
authority, between the old pre-2021
statutory license and the new blanket
license, that could potentially subject
the DMP to an infringement claim.103 If
this language meant that all previous
licensing authority remains intact
indefinitely after the license availability
date, then it would render the rest of the
provision superfluous. There would be
no need to have the blanket license
substitute for and supersede the pre2021 license because the authority
provided by the pre-2021 license would
continue in effect. It would also directly
contradict section 115(d)(9)(B), which
states that ‘‘licenses other than
individual download licenses obtained
under [section 115] for covered
activities prior to the license availability
date shall no longer continue in
effect.’’ 104 Thus, the Office disagrees
with NMPA’s reading of the statute.105
NMPA next argued that ‘‘the phrase
‘terminated grant’ in the statutory text
appears to refer to the original grant
from the author to the publisher that is
being terminated, and not to subsequent
grants made by the publisher under the
authority of that original grant.’’ 106 It
asserted that ‘‘[s]ubsequent grants of the
right to prepare and use derivative
works made by the publisher are not the
terminated grant under Sections 203
and 304 and are instead part of the
‘panoply’ of licenses preserved by the
[Exception].’’ 107 Thus, in NMPA’s view,
‘‘the terminable grant that must be
executed by the author is the original
license from author to publisher;
therefore, whether Section 115 licenses
are ‘self-executing’ would be inapposite
to the relevant analysis’’ because ‘‘[t]he
subsequent grants of the right to prepare
derivative works are in virtually all
cases not ‘executed by the author or the
author’s heirs.’ ’’ 108
The Office disagrees. The phrase
‘‘terminated grant’’ in the statutory text
is not limited solely to the original grant
from the songwriter to the publisher. In
Mills Music, the Supreme Court
103 See
id.
id. at 115(d)(9)(B).
105 See also 85 FR 58114, 58118 (discussing how
‘‘the statutory provisions regarding notices of
[blanket] license and the transition to the blanket
license must be read together, such that DMPs
transitioning to the blanket license must still submit
notices of license to the MLC’’).
106 NMPA Ex Parte Letter at 3 (Feb. 6, 2023); see
also NMPA NPRM Initial Comments at 11 n.27.
107 NMPA Ex Parte Letter at 3 (Feb. 6, 2023); see
also NMPA NPRM Initial Comments at 11 n.27.
108 NMPA NPRM Initial Comments at 11 n.27.
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concluded that all three references to
the word ‘‘grant’’ in the text of the
Exception should be given a ‘‘consistent
meaning,’’ and that each reference
encompasses both the original grant and
subsequent grants.109 That lack of
distinction between the original grant
and subsequent grants was central to the
Court’s holding that the Exception
preserved ‘‘the total contractual
relationship.’’ 110 The cornerstone of the
Court’s opinion was its conclusion that
the successive grants were connected to
each other in such a way that they both
needed to be preserved under the
Exception in the context at issue.111
In asserting that the NPRM’s
conclusions about the application of the
Exception to the blanket license must be
wrong because the subsequent grants of
the right to prepare derivative works are
almost always not executed by the
author or the author’s heirs, NMPA
misapprehends how the subsequent
grants are connected to the original
grant. Outside the context of a statutory
license, where a songwriter makes a
grant to a publisher and the publisher
then makes subsequent grants to third
parties (e.g., to a record company to
prepare a sound recording derivative, to
a DMP to make and distribute
phonorecords, or an assignment of the
full copyright to a different publisher),
each of those subsequent grants, despite
109 Mills Music, 469 U.S. at 164–67 (concluding
that the phrase ‘‘under the terms of the grant after
its termination’’ ‘‘as applied to any particular
licensee would necessarily encompass both the
1940 grant [from the songwriter to the publisher]
and the individual license [from the publisher to
the record company to prepare a sound recording
derivative] executed pursuant thereto’’); see id. at
164 (explaining that the Exception is ‘‘defined by
reference to the scope of the privilege that had been
authorized under the terminated grant and by
reference to the time the derivative works were
prepared’’) (emphasis added); id. at 173 (explaining
that ‘‘[p]retermination derivative works—those
prepared under the authority of the terminated
grant—may continue to be utilized under the terms
of the terminated grant’’) (emphasis added); see also
Howard B. Abrams & Tyler T. Ochoa, 2 The Law
of Copyright sec. 12:44 (2023) (‘‘[T]he term ‘‘grant’’
is read to include the entire chain of authority for
the preparation of a derivative work.’’).
110 Mills Music, 469 U.S. at 163–69 (‘‘We are not
persuaded that Congress intended to draw a
distinction between authorizations to prepare
derivative works that are based on a single direct
grant and those that are based on successive
grants.’’).
111 Id. at 166–69 (explaining that, with respect to
the particular facts in the case, defining the relevant
‘‘terms of the grant’’ as ‘‘the entire set of documents
that created and defined each licensee’s right to
prepare and distribute derivative works’’ meant
preserving not only the record companies’ right to
prepare and distribute the derivative works, but
also their corresponding duty to pay the publisher
any due royalties and the publisher’s duty to pay
the songwriter’s heirs any due royalties, and that if
it were otherwise, then there would be no
contractual or statutory obligation on the publisher
or record companies to pay the songwriter’s heirs
any royalties).
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not being executed by the songwriter or
the songwriter’s heirs, can still be
terminated. This is because the
authority for each of those subsequent
grants derives from and is dependent
upon the authority conveyed by the
original grant from the songwriter to the
publisher. Thus, when the original grant
is terminated, it also terminates the
subsequent grants (subject to the
possible preservation of certain
contractual terms governing the
utilization of pre-termination derivative
works under the Exception).112 It is a
foundational legal principle that one
cannot give what one does not have.113
In this context, what the publisher
possesses with respect to the original
grant, and can therefore subsequently
convey to third parties, is encumbered
by the songwriter’s termination
rights.114 This concept is plainly
embodied in the statute, which makes
reference not only to ‘‘the grantee,’’ but
also ‘‘the grantee’s successor in
title.’’ 115
The blanket license, however,
operates differently. Unlike voluntary
licenses, the authority a DMP has to
make and distribute phonorecords of
musical works under a blanket license
does not derive from and is not
dependent upon any authority granted
by a songwriter or publisher. The
blanket license is self-executing,116 and
a DMP’s authority under it is
established by Congress.117 Therefore, if
the original grant from the songwriter to
the publisher is terminated, it has no
effect on the DMP’s blanket license
112 Melville B. Nimmer & David Nimmer, 3
Nimmer on Copyright sec. 11.02[C][2] (2023)
(‘‘When A terminates the original grant to B, it
follows that B’s license to C will also terminate.’’).
113 Legal Maxims, Black’s Law Dictionary (11th
ed. 2019) (‘‘Nemo dat quod non habet. No one gives
what he does not have; no one transfers (a right)
that he does not possess.’’).
114 Melville B. Nimmer & David Nimmer, 3
Nimmer on Copyright sec. 11.02[A][4][b] (2023) (‘‘If
the original grant from A to B had by its terms
provided for a reversion to A thirty-five years after
execution, B would lack the power to convey rights
to C beyond such thirty-five-year period. The fact
that reversion from B to A occurs by operation of
law rather than by the express terms of the grant
to B does not enlarge the rights that B can convey
to C.’’); see also Int’l Ribbon Mills, Ltd. v. Arjan
Ribbons, Inc., 325 NE2d 137, 139 (N.Y. 1975) (‘‘It
is elementary ancient law that an assignee never
stands in any better position than his assignor. He
is subject to all the equities and burdens which
attach to the property assigned because he receives
no more and can do no more than his assignor.’’).
115 See 17 U.S.C. 203(a)(4), (b)(4); id at 304(c)(4),
(6)(D).
116 Mills Music, 469 U.S. at 168 n.36; see Melville
B. Nimmer & David Nimmer, 3 Nimmer on
Copyright sec. 11.02 n.121 (2023); Paul Goldstein,
Goldstein on Copyright sec. 5.4.1.1.a (3d ed. 2023).
117 See also Mills Music, 469 U.S. at 168 n.36
(referring to section 115 statutory licenses as ‘‘a
statutory right’’ belonging to the licensee) (emphasis
added).
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(other than the transfer of copyright
ownership causing the royalty payee to
change). Unlike a voluntary license, the
grant of authority provided to the DMP
under its blanket license was never
encumbered by the songwriter’s
termination rights, so exercising those
rights has no impact on the continuation
of the DMP’s authority. As a blanket
license cannot be terminated under
section 203 or 304, whether directly or
indirectly, ‘‘it cannot be subject to an
exception to termination; the license
simply continues in effect according to
its terms.’’ 118
MPA’s criticism of the NPRM focused
on a different issue, namely its concerns
that the Office’s legal analysis ‘‘could be
read as narrowing the holdings [of Mills
Music and Woods] by injecting a ‘direct
chain’ limitation on the pre-termination
grants preserved under the
[Exception].’’ 119 MPA argued that:
To the extent that the Office’s discussion
of Mills [Music] could be read to limit the
[Exception] solely to a ‘‘direct chain’’ of
grants, such a reading would appear to be in
tension not only with the [Exception]—
which provides that a derivative work
prepared under authority of a grant ‘‘may
continue to be used under the terms of the
grant,’’ . . .—but also the Supreme Court’s
interpretation of that language in Mills
[Music], as well as the Second Circuit’s
further explication of the [Exception] in
Woods v. Bourne. Mills [Music] held that, as
used in the [Exception], ‘‘the terms of the
grant’’ means the ‘‘entire set of documents
that created and defined each licensee’s right
to prepare and distribute derivative works.’’
469 U.S. at 167. The [Exception] thus
encompasses the original grant from author
to publisher, as well as the succeeding grants
derived therefrom, potentially involving
multiple licensees. See id. at 165–67
(emphasis added).120
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MPA further said that ‘‘[i]n some
cases, an initial grant by an author to a
movie studio or music publisher, and
that entity’s subsequent grants to third
parties to for the use and distribution of
derivative works, will generate
‘branches’ of licensing authority rather
than a simple linear chain.’’ 121
According to MPA, ‘‘[t]here is nothing
in the [Exception] or Mills [Music] . . .
to suggest that a pre-termination
publisher is entitled to royalties only if
the pre-termination license falls within
a single ‘direct chain’ to the party that
prepared the derivative.’’ 122
118 87 FR 64405, 64410. As noted in the NPRM,
this ‘‘does not mean that entitlement to royalties is
fixed. It travels with ownership of the copyright.’’
Id. at 64410 n.70.
119 MPA NPRM Reply Comments at 2.
120 Id. at 4 (citing 17 U.S.C. 203(b)(1),
304(c)(6)(A)).
121 Id.
122 Id.
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MPA then pointed to Woods for
confirmation that ‘‘Mills [Music] is not
so limited.’’ 123 It stated that ‘‘[a]s
further explicated in Woods, the
Supreme Court’s holding in Mills
[Music] established that ‘where multiple
levels of licenses govern use of a
derivative work, the ‘‘terms of the grant’’
encompass the original grant from
author to publisher and each
subsequent grant necessary to enable
the particular use at issue,’ ’’ and that
‘‘[t]he effect of Mills [Music] is to
preserve during the post-termination
period the panoply of contractual
obligations that governed pretermination uses of derivative works by
derivative work owners or their
licensees.’’ 124 MPA asserted that
‘‘[c]onsistent with its understanding of
Mills [Music], the Woods court upheld
the pre-termination publisher’s right to
collect public performance royalties
from [the performing rights
organization,] ASCAP for posttermination performances in movies and
television programs even though
ASCAP’s licensing relationship was
outside of the ‘direct chain’ of authority
by which the original publisher had
granted synch rights to the producers of
those shows.’’ 125 MPA highlighted that
the Second Circuit said that ‘‘the ‘terms
of the grant’ included ‘the provisions of
the grants from [the publisher] to
ASCAP and from ASCAP to the
television stations’ in place at the time
of termination,’’ and that ‘‘ ‘[t]he fact
that the performance right in the Song
[was] conveyed separately through
ASCAP [was] simply an
accommodation’ that did not negate the
applicability of the [Exception].’’ 126 It
concluded that ‘‘[n]either the
[Exception], nor Mills [Music] or Woods,
limits post-termination utilization of a
derivative based on the particular
configuration of the relevant pretermination grants’’ and that ‘‘[i]n
considering the applicability of the
[Exception], the correct question is not
whether the user prepared the
derivative pursuant to some ‘direct
chain’ of authority, but whether the use
is permitted under the entire ‘set’ or
‘panoply’ of grants emanating from the
original grant by the author.’’ 127
The Office disagrees with these
assertions to the extent they relate to the
blanket license. The blanket license is
not part of any so-called ‘‘panoply,’’
regardless of whether a panoply is
at 4–5.
(quoting Woods, 60 F.3d at 987).
125 Id. at 5 (citing Woods, 60 F.3d at 984).
126 Id. (all alterations, except the last one, in
original) (quoting Woods, 60 F.3d at 987–88).
127 Id.
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124 Id.
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limited to a ‘‘direct chain’’ of successive
grants or can include ‘‘branches’’ of
related grants outside of that chain. As
discussed above, the blanket license, as
a type of statutory license, is
fundamentally different from voluntary
licenses. Because the authority provided
by a blanket license is supplied by law
and is divorced from any authority
deriving from an author or any
terminated grant, it is an intervening
grant. It sits outside of any potential
panoply of grants authorized by the
author and the author’s successors,
assignees, licensees, and the like that
form the overall transaction involving
the relevant derivative work and which
is subject to termination and possibly
the Exception. The blanket license
simply is not part of that contractual
transaction.128
Neither Mills Music nor Woods holds
otherwise, as neither involved a
statutory license. In both cases, all of the
grants at issue were contractual and
emanated from a songwriter’s copyright
and the authority initially conveyed by
the original grant from the songwriter to
a publisher.129 Thus, neither case’s
holding is directly applicable to the
operation of the Exception to a noncontractual intervening grant, like the
blanket license. The Supreme Court, in
Mills Music, noted that statutory
licenses are different and were not at
issue in the case.130 And key language
in Woods specifically refers to ‘‘the
panoply of contractual obligations.’’ 131
The Office’s conclusions about the
Exception are fully consistent with Mills
Music, both as described here and in the
NPRM. Neither MPA nor any other
commenter addressed the specific
points made in the NPRM regarding
how the Exception operates with respect
to panoplies of grants,132 other than to
assert that the overall conclusion was at
odds with Mills Music and Woods.
Relying on a single out-of-context
quote, MPA argued that, because Mills
Music said that ‘‘ ‘the terms of the grant’
means the ‘entire set of documents that
created and defined each licensee’s right
to prepare and distribute derivative
works,’ ’’ it must mean that the
128 See also 17 U.S.C. 115(d)(2) (explaining how
a DMP may obtain a blanket license based on its
unilateral actions).
129 Mills Music, 469 U.S. at 154–58; Woods, 60
F.3d at 981–84, 987–88.
130 Mills Music, 469 U.S. at 168 n.36; see also id.
at 185 n.12 (White, J. dissenting).
131 Woods, 60 F.3d at 987 (emphasis added).
132 See 87 FR 64405, 64410 (‘‘The Exception, as
interpreted by Mills Music, should not be read as
freezing other grants related to, but outside of, the
direct chain of successive grants providing
authority to utilize the sound recording derivative,
such as the musical work licenses obtained by
DMPs.’’).
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Exception ‘‘thus encompasses the
original grant from author to publisher,
as well as the succeeding grants derived
therefrom, potentially involving
multiple licensees.’’ 133 The Office is not
persuaded. Read in its proper context,
the Court’s reference to ‘‘each licensee’’
is not referring to multiple licensees
across different branches of grants
involved in the preparation and
utilization of a single derivative work.
Rather, it is plainly referring to a single
licensee for each derivative work;
specifically, each record company that
prepared one of the sound recording
derivatives at issue in the case (which
involved over 400 voluntary mechanical
licenses and the preparation of over 400
sound recording derivatives).134 This
conclusion is apparent not only from
reading the opinion as a whole, but from
the sentence immediately preceding the
one quoted by MPA, which states that
‘‘a fair construction of the phrase ‘under
the terms of the grant’ as applied to any
particular licensee would necessarily
encompass both the 1940 grant [from
the songwriter to the publisher] and the
individual [voluntary mechanical]
license [from the publisher to the record
company] executed pursuant
thereto.’’ 135
Other language in the Court’s opinion
similarly reflects that it was only
addressing direct chains of successive
grants providing authority to prepare
derivative works.136 For example, the
Court was ‘‘not persuaded that Congress
intended to draw a distinction between
authorizations to prepare derivative
works that are based on a single direct
grant and those that are based on
successive grants.’’ 137 The Court found
it to be ‘‘a matter of indifference . . .
whether the authority to prepare the
work had been received in a direct
license from an author, or in a series of
licenses and sublicenses.’’ 138 According
to the Court, ‘‘Congress saw no reason
to draw a distinction between a direct
grant by an author to a party that
produces derivative works itself and a
situation in which a middleman is given
authority to make subsequent grants to
133 MPA NPRM Reply Comments at 4 (quoting
Mills Music, 469 U.S. at 165–67).
134 See Mills Music, 469 U.S. at 158, 167, 168
n.36.
135 See id. at 166–67 (emphasis added).
136 See Howard B. Abrams & Tyler T. Ochoa, 2
The Law of Copyright sec. 12:44 (2023) (explaining
that ‘‘the Supreme Court seemed to be using the
concept that the series of documents running from
the author to the ultimate preparer of the derivative
work should best be treated as a single transaction
although it was spread over several documents
executed at different times’’).
137 Mills Music, 469 U.S. at 163–64 (emphasis
added).
138 Id. at 173–74 (emphasis added).
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such producers.’’ 139 It makes sense that
the Court’s opinion was limited to
discussing a direct chain of successive
grants because that is what was at issue
in the case. We continue to believe that
our reading of the statute and Mills
Music, as well as our analysis and
conclusions regarding panoplies and
direct chains of successive grants, are
correct.140
With respect to Woods, even if the
discussion in that case could be read in
the broad manner that MPA suggested,
it is not clear that the court’s reasoning
was correct or involved the same
circumstances at issue here. Among
other concerns, Woods did not speak to
all the issues identified in the NPRM.141
For example, nothing in Woods appears
to address the fact that if the word
‘‘grant’’ is given a consistent meaning
within the text of the Exception—
which, according to Mills Music, it
should—it cannot be referring to a grant
that did not provide authority to prepare
the derivative work at issue.142
The Woods court did not engage in
this level of textual analysis. Instead, it
reviewed Mills Music and cited a law
review article for the proposition that
the Exception applies to ‘‘each
subsequent grant necessary to enable
the particular use at issue.’’ 143 As
discussed above, the Office does not
believe Mills Music is so expansive. Nor
does the cited law review article appear
to support such a broad reading.144 In
any event, we emphasize that because
Woods is distinguishable with respect to
section 115 statutory licenses, it is not
necessary for the Office to resolve these
disagreements to adopt the final rule.
Lastly, Professors Fishman and
Garcia, while supportive of most of the
Office’s analysis, believed that the
NPRM overestimated what would
at 172 (emphasis added).
87 FR 64405, 64410–11; see also, e.g.,
Fishman & Garcia NPRM Initial Comments at 1–4
(agreeing with the Office’s analysis and
conclusions); SONA et al. NPRM Initial Comments
at 2–3 (same).
141 See 87 FR 64405, 64410–11.
142 See id. at 64411 (explaining that because
‘‘[t]he Exception’s first use of ‘grant’ is to a
‘derivative work prepared under authority of the
grant,’ ’’ it ‘‘cannot be referring to the DMP’s
musical work licenses pursuant to which no
derivative work was prepared’’).
143 See Woods, 60 F.3d at 986–88 (emphasis
added).
144 Woods quotes from a law review article
‘‘describing [the] holding in Mills Music as
‘preserving the entire paper chain that defines the
entire transaction.’ ’’ Woods, 60 F.3d at 987 (quoting
Howard B. Abrams, Who’s Sorry Now? Termination
Rights and the Derivative Works Exception, 62 U.
Det. L. Rev. 181, 234–35 (1985) (‘‘Abrams’’)). But a
few sentences earlier, that article explained that the
‘‘transaction’’ being referred to was the ‘‘set of
transfers and licenses that ran from the author to
a record company.’’ Abrams at 234.
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139 Id.
140 See
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happen if the Exception did apply to
blanket licenses.145 They said that the
NPRM’s suggestion that all of the
blanket license’s terms ‘‘would be
frozen indefinitely’’ under the
Exception, such as ‘‘the royalty rate to
be paid,’’ ‘‘would contradict the plain
terms established in [section] 115,
which explicitly contemplate a variable
rate to be determined by the [Copyright
Royalty Judges].’’ 146 They explained
that ‘‘[t]hat variability is a term of the
grant,’’ and that to conclude otherwise
‘‘would read into the terms of the
blanket license a permanently fixed
royalty rate that does not exist.’’ 147 The
professors then noted that the NPRM
‘‘correctly rejected the possibility of
freezing the payee on the same
basis.’’ 148
Considering this comment, the Office
wishes to clarify this point from the
NPRM. We meant to illustrate the
problems with the MLC’s previous view
of how the Exception would apply—that
the Exception would freeze the royalty
payee.149 This portion of the NPRM was
intended to explain that if the MLC
were correct that the Exception applied
in such a manner as to freeze the royalty
payee, then the Exception would have
to freeze everything else too, which
would lead to the ‘‘extreme result.’’ 150
2. Individual Download Licenses
The Office received few comments
responding to the SNPRM’s analysis
regarding individual download licenses.
The American Association of
Independent Music and the Recording
Industry Association of America (‘‘A2IM
& RIAA’’) sought ‘‘to clarify ambiguity
in [the sections of the proposed rule
about individual download licenses and
voluntary licenses] and to ensure that
the proposed rule will not affect the
status quo as it applies to record
companies’ mechanical licensing and
payment practices.’’ 151 They stated that
‘‘the broadened scope of the current
SNPRM in fact could have unintended
consequences for record company
practices in ways that are contrary to
both the law and established industry
practice, and in a manner that is not
145 Fishman
& Garcia NPRM Initial Comments at
4.
146 Id.
147 Id.
148 Id.
149 See 87 FR 64405, 64411 (premising the
discussion on the observation that if the Exception
applies to the blanket license, ‘‘then it is not clear
why it would only apply to the payee, as the MLC’s
prior rulemaking comments seem to suggest’’)
(emphasis added).
150 See id.
151 A2IM & RIAA SNPRM Initial Comments at 1.
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necessary to the Office’s regulation of
the [MLC].’’ 152
Regarding individual download
licenses, A2IM & RIAA agreed with
parts of the Office’s legal analysis of the
Exception, but said that ‘‘in a regulation
about the MLC’s recognition of
deductions from royalties that would
otherwise be due under the blanket
license, [the] proposed language is
opaque and potentially confusing.’’ 153
They said that:
[T]he main point is that a termination
pursuant to Section 203 or 304 does not
affect an individual download license, so a
blanket license royalty deduction for usage
pursuant to an individual download license
that was appropriate prior to termination
remains so after termination. The regulations
should state that plainly, rather than the
language that is currently proposed. In any
event, it should be clear that [this provision]
does not mean that a record company that
relied on an individual download license for
the creation of a sound recording cannot
continue to rely on that license for
distribution of the recording (in download
form or otherwise) after termination of the
author’s publishing agreement.154
The Office disagrees that the language
is confusing. The provision clearly
provides that the Exception does not
apply to an individual download
license, and further states that, for
avoidance of doubt, no one may be
understood to be the copyright owner or
royalty payee of a work used under an
individual download license based on
an interpretation or application of the
Exception. A2IM & RIAA’s statement
that a termination ‘‘does not affect an
individual download license’’ is
accurate.155 But it is important to
recognize that, as explained in the
NPRM and SNPRM, even though ‘‘the
license simply continues in effect
according to its terms,’’ under those
terms, ‘‘entitlement to royalties . . .
travels with ownership of the
copyright.’’ 156 ‘‘[W]henever a change is
effectuated, whether via a contractual
assignment or by operation of a
statutory termination, the new owner
becomes the proper payee entitled to
royalties under the [individual
download] license.’’ 157 This provision
is meant to clarify the Exception’s
correct operation in light of the MLC’s
prior views.158
3. Voluntary Licenses
The Office also received few
comments regarding the SNPRM’s
discussion of voluntary licenses. A2IM
& RIAA agreed with the SNPRM’s
description of the complexities
involved, noting that ‘‘record companies
regularly obtain voluntary mechanical
licenses rather than compulsory
licenses, and generally pass through
download rights to DMPs.’’ 159 They
asserted that the ‘‘[r]ights that the record
company obtains from the pretermination copyright owner are clearly
preserved by the [Exception] when the
record company relies on its voluntary
mechanical license for the creation of
either a first use recording or a
cover.’’ 160 Based on this, A2IM & RIAA
‘‘question the treatment of voluntary
licenses in the proposed rule.’’ 161 They
said that ‘‘[n]either the pre-termination
nor post-termination copyright owner
would be motivated to provide the
required notice, when the effect of
failing to give notice is that the DMP
would in effect pay twice—once to the
pre-termination copyright owner
through the record company and once to
the post-termination copyright owner
through the MLC.’’ 162 They believed
that ‘‘[r]oyalty payments would more
often be handled appropriately if the
default assumption were that the
[Exception] will apply to rights obtained
by a record company under a voluntary
license and passed through to a
DMP.’’ 163
The Digital Licensee Coordinator
(‘‘DLC’’) raised similar concerns about
potentially paying twice, stating that ‘‘in
no event can DMPs be in the position of
double-paying the royalties at issue,
potentially being subject to late fees as
a result of any delay in payment to the
correct rightsholder.’’ 164 In the DLC’s
view, ‘‘the most sensible approach’’ to
dealing with disputes over the
application of the Exception to
voluntary licenses ‘‘would be to not
require any payment from the DMP to
the MLC until the dispute is
resolved.’’ 165
In subsequent comments, the DLC
clarified that its ‘‘concern arises with
respect to the MLC’s ability to demand
payment when there is a dispute related
to termination that involves one or more
voluntary licensors.’’ 166 It explained
that ‘‘the circumstances where a
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152 Id.
153 Id.
159 A2IM
154 Id.
160 Id.
at 2–3.
at 3.
155 See id.
156 87 FR 64405, 64410–11 & n.70; 88 FR 65908,
65911 & n.67.
157 87 FR 64405, 64411; 88 FR 65908, 65911 &
n.67.
158 See 87 FR 64405, 64406–07.
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voluntary license partner has a right to
demand royalties notwithstanding who
the MLC’s records show is entitled to
payment is ultimately a matter of
private contract between the parties,
and there is no industry standard
approach to that issue.’’ 167 The DLC
also said that it did not believe the
statute requires the MLC to hold
royalties pending the resolution of
disputes over the application of the
Exception to voluntary licenses because
such disputes are not ownership
disputes within the meaning of the
statute.168 Based on these comments,
the DLC does not appear to take issue
with the possibility of double payments
under the proposed rule where no
dispute is initiated with the MLC.
The Office does not believe that these
comments warrant any substantive
changes to the provision governing
voluntary licenses. First, this provision
does not embody a presumption or a
default rule about the Exception as
A2IM & RIAA suggested. Rather, it is a
regulatory application of legal precedent
establishing that the pre-termination
copyright owner bears the burden of
proving that the Exception applies.169
The Office continues to believe that ‘‘it
would not be prudent to attempt to craft
a rule trying to account for how the
Exception may or may not apply in
every possible situation’’ and that ‘‘the
MLC should not exercise independent
judgment regarding the application of
the Exception to a voluntary license or
its underlying grant of authority.’’ 170
If the Office were to adopt the default
assumption A2IM & RIAA requested, it
would open the door to default
assumptions in other voluntary license
contexts. Moreover, doing so would
require the MLC to determine, at
minimum, whether the licenses at issue
were indeed relied upon ‘‘for the
creation of either a first use recording or
a cover.’’ 171 That is precisely the type
of fact-finding and independent
judgment the Office does not believe the
MLC should be required to undertake in
this context.
Second, given that the DLC does not
appear to share A2IM & RIAA’s concern
about DMPs potentially double paying,
the Office does not believe that any
change to this aspect of the rule is
warranted. The DLC made clear that this
issue is one of private contract between
the relevant parties.172 Even if that were
& RIAA SNPRM Initial Comments at 3.
167 Id.
161 Id.
162 Id.
56595
168 Id.
at 4.
169 88
163 Id.
170 Id.
164 DLC
SNPRM Initial Comments at 3–4.
165 Id. at 4.
166 DLC Ex Parte Letter at 2 (Mar. 4, 2024).
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at 2–3.
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171 See A2IM & RIAA SNPRM Initial Comments
at 3–4.
172 DLC Ex Parte Letter at 2 (Mar. 4, 2024).
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not the case, the possibility of making
double payments in this context does
not appear to be any different than in
other contexts where a DMP may be
caught in the middle of a dispute
between purported copyright owners.
Any time someone claims to be the
owner of a copyright purportedly
licensed to a DMP by someone else, it
will need to decide which party to pay.
Depending on the relevant contract’s
terms, the DMP may well decide to pay
both parties to limit its potential
liability for failing to pay the party who
ultimately prevails in the dispute. Thus,
the situation that could arise under the
rule does not appear to be a special one
necessitating a regulatory solution.
With respect to the DLC’s request that
DMPs not be required to pay royalties to
the MLC to be held pending the
resolution of a dispute initiated with the
MLC, the Office disagrees. As the Office
explained in the SNPRM, even though
‘‘a dispute as to the application of the
Exception is not a dispute over
ownership,’’ ‘‘a pre-termination
copyright owner [should] be able to
initiate a dispute with the MLC over the
application of the Exception to a
particular voluntary license or its
underlying grant of authority, and . . .
the MLC should hold applicable
royalties pending resolution of such a
dispute.’’ 173
Even if such a royalty hold is not
required by the statute, the Office
nevertheless finds it to be a reasonable
and prudent approach to the
administration of such disputes, as it
ensures that the relevant funds will be
available upon the resolution of the
dispute. As between allowing a DMP to
hold the relevant royalties versus the
MLC, the more appropriate approach is
for them to be held by the MLC, rather
than a DMP with whom the purported
copyright owner may have no
relationship. Moreover, even if the
Office did not require this, a DMP
would risk late fees, or even default and
termination of its blanket license, if it
declined to pay the applicable royalties
to the MLC and the voluntary licensor
does not prevail in the dispute. Thus,
the final rule has been clarified to state
that the MLC shall invoice the relevant
DMP for the applicable royalties.
The DLC asked that if the Office
adopts this approach, we ‘‘provide
guidance on how any interest accrued
by the MLC during the pendency of a
termination dispute is handled.’’ 174
Specifically, it requested that ‘‘where
resolution of the dispute results in a
service paying the voluntary licensor,
the interest should be paid back to the
service (with any requirement to pay
that interest onto the voluntary licensor
dictated by the terms of the voluntary
license).’’ 175 The DLC further said that
‘‘where resolution of the dispute results
in payment being made by the MLC to
a blanket licensor, then any interest
earned should be used to offset the
MLC’s administrative costs.’’ 176
The Office had proposed that royalties
held in connection with these kinds of
disputes accrue interest, but did not
elaborate further.177 Our intent was for
the MLC to hold royalties in the same
manner as any other held royalties
under section 115(d)(3)(H)(ii).178
The final rule makes three
clarifications regarding the funds held
due to a termination-related dispute
involving a voluntary license. First, the
applicable funds shall be held by the
MLC in the same manner and at the
same interest rate as any other held
funds. Second, where the resolution of
the dispute results in payment being
made by the MLC pursuant to a blanket
license, that payment must include
accrued interest. In that situation, the
Office sees no reason why the MLC or
DMPs (through an offsetting of the
MLC’s costs) should profit from the fact
that there was a dispute. Third, where
the resolution of the dispute results in
a DMP paying royalties to a voluntary
licensor, the MLC must promptly return
the held funds, including accrued
interest, to the DMP, who then may or
may not be required to pass that interest
on to the voluntary licensor depending
on the terms of their agreement.
The Office disagrees with the MLC
that ‘‘under the explicit language of
[section 115(d)(3)(H)], interest earned
. . . can only be for the benefit of
copyright owners,’’ such that ‘‘such
accrued interest cannot be transmitted
to [DMPs] for their own benefit (or to be
disposed of in their discretion), even
where royalties are ultimately refunded
to [DMPs] as associated with voluntary
licenses.’’ 179 Section 115(d)(3)(H) does
not apply in the context of funds held
during disputes over the application of
the Exception to voluntary licenses.
First, section 115(d)(3)(H) provides
requirements for the holding of royalties
and accrual of interest with respect to
‘‘unmatched’’ works.180 As discussed
above, disputes over the application of
the Exception are not ownership
175 Id.
at 3 n.10.
176 Id.
177 88
FR 65908, 65926.
U.S.C. 115(d)(3)(H)(ii)(I).
179 MLC Ex Parte Letter at 5–6 (Mar. 22, 2024).
180 See 17 U.S.C. 115(d)(3)(H).
178 17
173 88
FR 65908, 65919.
Ex Parte Letter at 3 (Mar. 4, 2024).
174 DLC
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disputes.181 Since ownership is not in
question, and the owner would need to
already be registered with the MLC for
there to even be a dispute of this kind,
the works at issue in such a dispute
would not be ‘‘unmatched’’ within the
meaning of the statute.182
Second, section 115(d)(3)(H) does not
apply through section
115(d)(3)(G)(i)(III)(bb), which provides
that the MLC shall ‘‘deposit into an
interest-bearing account, as provided in
subparagraph (H)(ii), royalties that
cannot be distributed due to . . . a
pending dispute before the dispute
resolution committee of the [MLC].’’ 183
Such disputes are described in section
115(d)(3)(K)(i) as ‘‘disputes relating to
ownership interests in musical works
licensed under this section.’’ 184 The
Office reiterates that a dispute over the
application of the Exception is not an
ownership dispute. It is a dispute over
the legal effect of a valid termination.185
For these reasons, the Office is
regulating how the MLC should handle
these types of disputes and the
associated royalties and interest. With
respect to the interest issue, we believe
the most equitable approach is for the
MLC to pay the interest along with the
royalties, regardless of to whom such
royalties are paid. The reason for
requiring the accrual of interest is to
make the applicable party whole for the
time-value of money while the dispute
is pending resolution. The Office is
requiring the interest rate to be the same
as for funds held under section
115(d)(3)(H)(ii) because that is a rate
that Congress, by enacting it as part of
the MMA, has found to be reasonable.
Where there is a voluntary license at
issue, whether the DMP or the voluntary
licensor is to be made whole is up to the
relevant agreement. Therefore,
depending on the terms of the
agreement, either the DMP will be
permitted to retain the interest for itself
or will be required to pay it through to
the voluntary licensor. A voluntary
licensor should not gain a benefit
beyond the terms of its agreement
simply because the Office is requiring
the disputed funds to be held at the
MLC rather than at the DMP.
181 88
FR 65908, 65919.
17 U.S.C. 115(e)(35) (‘‘The term
‘unmatched’, as applied to a musical work (or share
thereof), means that the copyright owner of such
work (or share thereof) has not been identified or
located.’’).
183 See id. at 115(d)(3)(G)(i)(III)(bb).
184 Id. at 115(d)(3)(K)(i).
185 88 FR 65908, 65919.
182 See
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B. The Copyright Owner at the Time of
the Use Versus the Copyright Owner at
the Time of the Payment
In both the NPRM and SNPRM, the
Office proposed that the copyright
owner at the time of the use is legally
entitled to royalty distributions from the
MLC unless the MLC is directed
otherwise. In response to the SNPRM,
the Office received numerous comments
from publishers, songwriters, and other
industry stakeholders expressing
concern with that approach. As
discussed below, their concerns related
to whether the Office’s understanding of
the law conflicted with current music
industry royalty administration
practices or would cause administrative
challenges for the MLC. In this final
rule, the Office is adopting our earlier
proposal with some modifications to
address these operational concerns.
1. Background
In addressing whether the owner at
the time of the use or the owner at the
time of the payment is entitled to
blanket license royalties, the NPRM
stated that a copyright owner is entitled
to blanket license royalties at the
moment in time when the use of the
relevant musical work by a DMP
occurs.186 The Office refers to this
understanding as the ‘‘owner at the time
of the use’’ approach.
The SNPRM provided further analysis
of this approach, concluding that ‘‘it
appears that, absent an agreement to the
contrary, the copyright owner who can
sue a DMP for infringement due to nonpayment of royalties under the blanket
license is the copyright owner at the
time the infringement was committed—
i.e., at the time of the use. It, therefore,
seems reasonable to the Office for that
owner to be the one to whom such
royalties are paid by the MLC.’’ 187 The
Office’s conclusion that the owner at the
time of the use is entitled to the royalty
distribution was based on both the
MMA and broader copyright law
principles.188 The SNPRM proposed
regulatory text identifying the owner at
the time of the use as the legally entitled
party.
The Office, recognizing the
importance of giving effect to private
contracts that may call for different
payment arrangements, also proposed
that the rule ‘‘would only establish the
owner at the time of the use as the
default payee—i.e., the proper payee to
whom the MLC must distribute royalties
and any other related amounts under
186 87
FR 64405, 64412.
FR 65908, 65913.
188 See id. at 65912 (reflecting the Office’s
statutory analysis).
187 88
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the blanket license in the absence of an
agreement to the contrary.’’ 189 We then
proposed additional provisions to
govern notification of the MLC about
alternative payee designations, such as
through letters of direction, ‘‘to
accommodate and give effect to
contractual payment arrangements that
deviate from this default rule.’’ 190
Finally, the NPRM also proposed that
the MLC should use the last day of the
relevant monthly reporting period to
identify the proper copyright owner for
that month’s royalty distribution. The
Office suggested that doing so would be
in line with the monthly reporting and
royalty distribution process created by
the MMA and our regulations and
would make the rule reasonably
administrable for the MLC, compared to
requiring the MLC to identify the
copyright owner entitled to royalties on
a day-to-day basis.191 The Office sought
comments on this proposed approach,
including whether some other point in
time might be appropriate.192
2. Comments
Comments from publishers,
songwriters, and other industry
stakeholders expressed concern with the
owner at the time of the use
approach.193 Many of these parties
favored an approach where royalties
at 65913.
at 65913–14, 65916–17.
191 87 FR 64405, 64412.
192 Id.
193 See, e.g., MLC SNPRM Initial Comments at 1–
16; NMPA SNPRM Initial Comments at 2–13;
NMPA Ex Parte Letter at 1–2 (Jan. 24, 2024); AIMP
SNPRM Initial Comments at 1–4; Combustion
Music SNPRM Initial Comments; Endurance Music
Grp. SNPRM Initial Comments at 1–2; Farris, Self
& Moore, LLC SNPRM Initial Comments at 1–2;
Boom Music SNPRM Initial Comments; Jonas Grp.
Publ’g SNPRM Initial Comments; Kobalt Music
SNPRM Initial Comments at 2; Liz Rose Music
SNPRM Initial Comments at 1–2; Big Machine
Music SNPRM Initial Comments at 1–2;
Legacyworks SNPRM Initial Comments; Me Gusta
Music SNPRM Initial Comments at 1–2; Relative
Music Grp. SNPRM Initial Comments at 1–2;
Harding SNPRM Initial Comments; Moore SNPRM
Initial Comments; North Music Grp. SNPRM Initial
Comments at 2; NSAI SNPRM Initial Comments at
2–5; Big Yellow Dog SNPRM Initial Comments;
Reservoir Media Mgmt. SNPRM Initial Comments at
1–2; SMACKSongs SNPRM Initial Comments; Sony
Music Publ’g SNPRM Initial Comments at 1–5;
Spirit Music Grp. SNPRM Initial Comments at 1–
3; Turner SNPRM Initial Comments at 1–2; Wiatr
& Assocs. SNPRM Initial Comments; Jody Williams
Songs SNPRM Initial Comments at 1–2; Concord
Music Publ’g SNPRM Initial Comments at 1–3;
ClearBox Rights SNPRM Reply Comments at 4–5;
Creative Nation SNPRM Reply Comments at 1–2;
The Greenroom Resource SNPRM Reply Comments
at 1; MAC et al. SNPRM Reply Comments at 2;
Recording Academy SNPRM Reply Comments at 3;
SONA SNPRM Reply Comments at 2–5; Universal
Music Publ’g Grp. SNPRM Reply Comments at 1–
5; Warner Chappell Music SNPRM Reply
Comments at 3–8; DLC SNPRM Reply Comments at
2–4.
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189 Id.
190 Id.
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56597
would be distributed to the copyright
owner identified in the MLC’s records
as of the date of each monthly royalty
distribution. The Office refers to this as
‘‘the owner at the time of the payment’’
approach.
At a high level, commenters’ primary
concerns with the owner at the time of
the use approach were practical ones.
Specifically, they asserted that this
approach is not a standard practice in
the music industry and is contrary to
how industry contracts generally work,
that it will be burdensome and
disruptive across the industry
(including to the MLC), and that it will
result in inaccurate and delayed
payments (including to songwriters).194
A few commenters supported the
Office’s legal conclusions regarding the
proper copyright owner who is entitled
to blanket license royalties.195 Others
suggested a bifurcated approach to
addressing the issue. For example, the
Music Artists Coalition (‘‘MAC’’) said
that, in the termination context, the
payee should be the owner at the time
of the use, but for everything else, it
should be the owner at the time of the
payment.196 Similarly, NMPA, as a
‘‘compromise,’’ proposed regulatory text
based on the NPRM that ‘‘applies a time
of use rule solely in the termination
context.’’ 197 It argued, however, ‘‘that a
rule providing for payment to the owner
at the time of distribution in all contexts
is the more appropriate one.’’ 198
3. Legal Entitlement to Blanket License
Royalties
Despite the lack of support from
commenters, few addressed the
194 Examples of other issues raised by the
comments include that: it may upset commercial
expectations and cause problems with financial
modeling and reporting; it may lead to an increase
in fraudulent claims; implementation would require
the development of new data and processing
systems and new reporting formats and standards
across the entire industry that will be costly and
time-consuming to create; once a publisher’s or
administrator’s rights period expires, they should
not be burdened with the expense and liability of
needing to ensure that any future income they
receive flows through to the current owner to whom
rights have been transferred; former publishers and
administrators are not set up to distribute royalties
to former songwriter partners, and practically
would not have current contact or banking
information available to make such distributions to
their former songwriters; the choice of songwriters
to change publishers or administrators should be
honored, and they should not be forced to continue
a relationship with their former representative with
respect to these royalties that may be inefficient or
lack transparency and accountability; it will lead to
lower match rates and more unmatched royalties at
the MLC, especially for pre-2021 periods.
195 See, e.g., Howard SNPRM Initial Comments at
1–2; King, Holmes, Paterno & Soriano LLP SNPRM
Reply Comments.
196 MAC Ex Parte Letter at 2 (Dec. 29, 2023).
197 NMPA Ex Parte Letter at 2 (Jan. 24, 2024).
198 Id.
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statutory text or the Office’s legal
analysis. Only NMPA and the MLC
provided substantive arguments that the
MMA’s statutory language and
legislative history support the MLC
distributing royalties to the owner at the
time of the payment.199
NMPA conceded that the Office’s
proposal ‘‘is not based on an
unreasonable legal interpretation.’’ At
the same time, it asserted that ‘‘unless
the statute is clear, a legal interpretation
of relevant statutory provisions should
not cause disruption in a private,
functioning market.’’ 200 It also
disagreed with the Office’s statutory
analysis and proposed a different
reading. NMPA’s statutory arguments
referred to sections 115(d)(3)(G)(i)(II)
and 115(d)(3)(J)(i) (provisions governing
royalty distributions), stating that they
must be read together with sections
115(d)(3)(E)(i) and 115(d)(3)(E)(ii)(II)–
(III) (provisions governing the MLC’s
ownership database). Relying on those
provisions, NMPA stated:
The MLC is . . . not directed by statute to
maintain . . . historical copyright ownership
or chain of title information within its
musical works database. Because the MLC
does not maintain in the musical works
database records that would enable it to
identify the ‘‘copyright owner’’ at the precise
time of use, and the ‘‘copyright owner’’ as
identified in the musical works database is
always the then-current copyright owner
(and not the owner at the time of use or at
some other prior time), the direction to pay
‘‘copyright owners in accordance with . . .
the ownership and other information
contained in the records of [the MLC]’’
should be read as a direction to pay the
owner at the time of payment.201
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NMPA then referred to section
115(d)(3)(I), asserting that ‘‘once a
match is made, all the accrued royalties
with respect to such previously
unmatched work are paid to the thencurrent copyright owner to which the
work has been matched. There is no
requirement for the MLC to determine
which portion of those royalties may
relate to uses made at a time when a
199 NMPA SNPRM Initial Comments at 11–13;
MLC SNPRM Initial Comments at 4–11. NMPA also
made an argument based on language used by the
Office in the NPRM’s analysis of the Exception
which stated that the ‘‘current copyright owner’’ is
entitled to blanket license royalties, that owner
‘‘can change over time’’ and, after such a change,
‘‘the new owner becomes the proper payee.’’ NMPA
SNPRM Initial Comments at 11 (citing 87 FR 64405,
64411; 88 FR 65908, 65912). To clarify, the Office’s
use of the term ‘‘current’’ was intended to identify
that the proper payee is the copyright owner
concurrent with the time the work was used. While
the last copyright owner in time may be the proper
payee, we were not suggesting that this is
necessarily always the case.
200 NMPA SNPRM Initial Comments at 11.
201 Id. at 12 (second and third alterations in
original).
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different (potentially not yet identified)
copyright owner owned the work.’’ 202
NMPA concluded by stating that it
‘‘does not believe that the sections
referred to by the [Office] support a
different conclusion,’’ as those
provisions ‘‘do not address the issue of
who has the statutory right to receive
Blanket License royalty payments.’’ 203
The MLC made similar statutory
arguments, referencing some of the
MMA’s same sections,204 as well as its
legislative history.205 Similar to NMPA,
the MLC asserted that ‘‘[t]he MMA
directive to distribute royalties based on
the ‘information in [its] records’ is most
appropriately read to mean that The
MLC is to distribute royalties to the
copyright owners’ current registered
payee.’’ 206
The Office acknowledges the practical
consequences of our analysis in the
SNPRM. However, those practicalities
do not create legal entitlements or
change the terms of title 17, absent
contractual or other arrangements.
While sections 115(d)(3)(G)(i)(II) and
115(d)(3)(I) provide the ‘‘copyright
owner’’ with legal entitlement to the
royalties, neither they nor the other
cited provisions speak to which
copyright owner possesses such
entitlement between the owner at the
time of the use or the owner at the time
of the payment.207 That is why the
Office engaged in the analysis it did in
the NPRM and SNPRM.208
at 12–13.
at 13.
204 MLC SNPRM Initial Comments at 4–7
(referencing 17 U.S.C. 115(d)(3)(G)(i)(II),
115(d)(3)(J)(i), 115(d)(3)(E)(i)–(ii), and 115(d)(3)(I)).
205 Id. at 4–11. Regarding legislative history, the
MLC primarily pointed to there being ‘‘no mention
or contemplation of the creation of a database that
includes temporal histories of past ownership’’ and
that a description of the provisions concerning
market share-based distributions of unclaimed
royalties ‘‘conveys an understanding that royalties
would be paid to the entities that currently
represent songwriters, not to an entity that may
have represented the songwriter in the past but is
no longer authorized to do so.’’ Id. at 8–9 (citing
H.R. Rep. No. 115–651, at 7–9, 13 and S. Rep. No.
115–339, at 8–9, 14).
206 Id. at 5–6.
207 Nor do these provisions necessarily require
that there be only a single payee contained in the
MLC’s records for each work (or share). At best,
these provisions are silent on that issue. The MLC’s
reliance on legislative history is similarly
misplaced, as their cited references also do not
appear to directly speak to this issue. In particular,
market share-based distributions of unclaimed
royalties are a unique feature of the MMA, and
whatever the meaning of the specific provisions
governing that special type of distribution—which
is a matter beyond the scope of this proceeding—
they do not speak to the legal entitlement to or
distribution requirements for blanket license
royalties that have not yet become ‘‘unclaimed’’
within the meaning of the statute. See 17 U.S.C.
115(d)(3)(J), (e)(34).
208 88 FR 65908, 65912 (explaining that the
analysis regarding the owner at the time of the use
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202 Id.
203 Id.
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The MMA’s references to the MLC’s
records do not resolve this issue. They
merely provide instructions as to how
the MLC shall distribute royalties to
legally entitled copyright owners. Such
distributions must be made to such
copyright owners ‘‘in accordance with
. . . the ownership and other
information contained in the records of
the [MLC].’’ 209 Those records contain
important information about how to
make the distribution, including
contact, banking, and other information
about the owner, as well as whether
payment is to be made to an
administrator or other representative or
designee.210
Of course, the statute’s direction to
the MLC to make distributions based on
the information in its records does not
resolve any underlying dispute
regarding who is entitled to the royalty
distribution. Clearly, the MLC can only
distribute royalties based on known
information. But what the MLC
‘‘knows,’’ based on its records, could
turn out to be wrong, for example, if an
imposter managed to successfully
register a fraudulent ownership claim,
or a legitimate copyright owner
accidentally but erroneously claimed a
work in good faith. If the statute is
understood to confer entitlement to the
royalties on whomever is identified in
the MLC’s records, it creates a conflict
with the rest of the statutory text that
confers this entitlement on the
copyright owner. Moreover, such a
reading would provide perverse
incentives for parties to race to submit
as many fraudulent claims to the MLC
as possible in the hope of gaining such
legal entitlement. Congress did not
intend to create such an absurd scheme,
whereby claimants who may be
intentionally lying can obtain legal
entitlement to royalties for uses of
copyrighted works instead of the actual
copyright owners.
Thus, while the individual or entity
legally entitled to the royalties and the
individual or entity actually receiving
the distribution from the MLC will, in
most cases, be the same, this will not
always be the case. If they are not the
same, being identified in the MLC’s
records alone will not alter or prejudice
the true copyright owner’s legal
entitlement to those royalties. The
Office concludes that this is the only
reasonable way to read the MMA’s
versus the owner at the time of the payment issue
concerned the Office’s proposal ‘‘[t]o codify its
preliminary conclusion that the statute entitles the
‘current copyright owner’ to the royalties under the
blanket license’’).
209 See 17 U.S.C. 115(d)(3)(G)(i)(II).
210 See, e.g., 37 CFR 210.31(b)(1)(iii), (b)(1)(v)(D).
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instructions to the MLC regarding
distributions.
With respect to the Office’s further
analysis contained in the NPRM and
SNPRM, to the extent NMPA or the
MLC is suggesting that Congress meant
to establish a special exception
regarding copyright ownership or
royalty entitlement in connection with
the blanket license, the Office disagrees.
As explained in the SNPRM, reading
section 501(b) in conjunction with
section 115(d)(4)(E)(ii)(II) (which
directly references section 501), ‘‘it
appears that, absent an agreement to the
contrary, the copyright owner who can
sue a DMP for infringement due to nonpayment of royalties under the blanket
license is the copyright owner at the
time the infringement was committed—
i.e., at the time of the use.’’ 211 This is
the best reading of the statute: that
Congress expected the party who is
legally entitled to the royalties and the
party who is legally permitted to sue a
DMP for infringement for the
nonpayment of such royalties to be one
and the same. That understanding is
best reflected in section
115(d)(4)(E)(ii)(II)’s cross reference to
section 501. If Congress had intended an
exception to the operation of section
501(b) for infringement cases related to
the blanket license, it would have
articulated one. The Office recognizes
that legal entitlements can be varied by
contract, but that variation is not
relevant to understanding how the
statute works absent any such
agreement’s terms.
Some commenters suggested to the
Office that potential concerns over the
time of use approach are addressed
through contract.212 But contract terms
stating that acquiring publishers will be
paid royalties for pre-acquisition uses of
musical works imply agreement with
the Office’s conclusions about default
royalty entitlement in the absence of a
relevant agreement. Additionally, most
of the comments addressing the time of
use approach focused on concerns
related to business practices (e.g.,
paperwork, royalty processing, data
tracking) rather than the law. While
such concerns are relevant to the
practical administrability of the rule,
and support certain changes the Office
ultimately made to the final rule (which
211 88
FR 65908, 65913.
e.g., MLC SNPRM Initial Comments at 11;
NMPA SNPRM Initial Comments at 4–5 & n.4, 10;
Kobalt Music SNPRM Initial Comments at 2;
Reservoir Media Mgmt. SNPRM Initial Comments at
1; Sony Music Publ’g SNPRM Initial Comments at
1–2; Spirit Music Grp. SNPRM Initial Comments at
1; Concord Music Publ’g SNPRM Initial Comments
at 2; Universal Music Publ’g Grp. SNPRM Reply
Comments at 2.
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are discussed below), they have no
bearing on the statutory analysis
discussed above or in the NPRM or
SNPRM.
Based on the foregoing, as well as the
relevant discussion in the NPRM and
SNPRM, the Office is adopting the
owner at the time of the use rule as
final, but only with respect to
identifying who is legally entitled to
blanket license royalties under the
statute as a default matter. Unlike the
SNPRM, the final rule does not mandate
that the MLC may only make
distributions to either the owner at the
time of the use or an alternative payee
specifically designated by such
owner.213 Rather, it contains a new
provision (detailed in the section below)
governing how the MLC is to make
royalty distributions based on the
information in its records.
As discussed above, the MLC’s
records are not determinative with
respect to who is legally entitled to
royalties. At the same time, the Office
agrees with NMPA and the MLC that
section 115(d)(3)(G)(i)(II) directs the
MLC to make distributions in
accordance with the information in its
records.214 The Office has therefore
decided to adopt two provisions—one
that describes who is legally entitled to
the royalties and another that directs to
whom the MLC shall distribute
royalties. The two provisions avoid
confusion, making clear that the MLC’s
distribution does not mean that the
recipient is legally entitled to those
royalties, but instructing the MLC
regarding the distributions that it should
make. Adopting regulations directing
the MLC to act, unaccompanied by
regulations identifying who is legally
entitled to the royalties, could create a
misunderstanding regarding proper
application of the law. But, as discussed
below, aligning the legal entitlement
with the directive to the MLC in all
cases would be administratively
infeasible. The new distribution
provision instead enables the MLC to
make royalty distributions to the owner
at the time of the payment in
accordance with the standard industry
213 Despite this change, the final rule still
provides that the relevant owner is the owner as of
the last day of the monthly reporting period in
which the work is used pursuant to a blanket
license. While the Office’s original reasoning for
that was partially based on concerns about
requiring the MLC to manage day-to-day ownership
changes occurring mid-month, it also rested on the
fact that the MMA established a monthly-based
reporting scheme for DMPs. 87 FR 64405, 64412.
The Office relies on the latter in adopting the final
rule. See 17 U.S.C. 115(d)(4)(A).
214 17 U.S.C. 115(d)(3)(G)(i)(II).
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practice for which commenters
expressed virtually universal support.
Some commenters continued to voice
concerns with the Office articulating
who is legally entitled to the royalties as
a default matter, even when coupled
with the new distribution provision
discussed below.215 The Office has
considered these concerns, but declines
to remove the entitlement provision
from the final rule. Especially
considering the new distribution
provision discussed below, the Office
believes it is important to provide a
clear statement of the party who is
legally entitled to blanket license
royalties as a default matter.
First, the Office is always mindful of
potential unintended consequences that
may stem from its rules. To the extent
the Office’s legal conclusions may differ
from the practices of certain industry
participants, those differences seem to
be based on expectations arising out of
contracts or business norms, not title 17.
Moreover, failure to explain that
entitlement to royalties is based on the
time of the use could lead to confusion
and the mistaken impression that the
MLC’s royalty distributions, which are
based on information in its records at
the time of the payment—principally for
administrative convenience—reflects a
determination of entitlement. On
balance, the best way to minimize
confusion is for the Office to articulate
our interpretation of the statute.
Second, the Office disagrees with the
argument that the rule is unnecessary
because private agreements will govern
anyway. That argument presupposes
that every private agreement will speak
to this issue. Nothing in the record
indicates that this is universally true,
indicating there is at least some subset
of contracts as to which this provision
will be applicable.216 Moreover, this
argument presupposes that all transfers
are contractual, which is incorrect.
Finally, the Office disagrees that the
existence of non-contractual transfers,
like intestate succession or bankruptcy,
weigh against this rule, as their
existence does not change the statutory
analysis discussed above and in the
SNPRM. The Office has, however,
clarified in the final rule that the
entitlement to royalties can be
215 See NMPA Ex Parte Letter at 1–2 (Jan. 24,
2024); MLC Ex Parte Letter at 3 (Feb. 5, 2024); MAC
& NSAI Ex Parte Letter at 1 (Feb. 12, 2024).
216 The Office, of course, does not mean to suggest
that this provision should in any way override the
intent of contracting parties if an agreement is
ambiguous. If the parties disagree as to whether an
agreement conveyed the entitlement to the
applicable royalties, the usual standards under
applicable state law for construing private contracts
would still apply. The MLC should treat any such
disagreement like an ownership dispute.
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transferred and that the default royalty
entitlement provided for is subject to
any such transfer.
4. The MLC’s Distribution of Royalties
Based on Its Records
As mentioned above, the final rule
includes a new provision to address the
MLC’s royalty distributions based on the
information in its records, as required
by section 115(d)(3)(G)(i)(II). The new
regulation has four main parts
summarized here.
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i. Default Royalty Distribution Practices
Regarding Ownership and the MLC’s
Records
The first part of the regulation
provides that, when making a
distribution, the MLC shall treat the
individual or entity identified in its
records as of the date of the payee
snapshot used for the applicable
distribution as legally authorized to
receive the distribution (e.g., meaning
that such party is the owner at the time
of the use (or such owner’s
representative or designee) or a
successor in interest to such owner’s
entitlement to the royalties (or such
successor’s representative or designee)).
In other words, the MLC is to distribute
royalties based on its records and to
assume that whoever is in its records is
legally entitled to the distribution,
subject to the additional provisions
below. By making royalty distributions
to the owner reflected in the MLC’s
records on the date of the payee
snapshot (i.e., at the time of the
payment), the MLC will be acting in
accordance with widespread industry
practice without contravening the
statute. One commenter called it ‘‘an
elegant solution.’’ 217
This default distribution provision is
both consistent with the language of the
statute and responsive to the MLC’s
request for the ‘‘inclusion of a provision
confirming that [it] can distribute
royalties for a musical work to the
current payee registered in its
database.’’ 218 The Office concludes that
217 MAC & NSAI Ex Parte Letter at 1 (Feb. 12,
2024); see also MCNA et al. Ex Parte Letter at 1–
2 (Mar. 15, 2024) (articulating qualified support for
this solution in the termination context and subject
to other various caveats, calling it ‘‘a reasonable and
practical solution that accounts for both business
considerations and the protection of creators’ rights
under the law in termination rights situations’’).
218 MLC Ex Parte Letter at 3–4 (Feb. 5, 2024); see
also MLC Ex Parte Letter at 1 (Feb. 21, 2024); MLC
Ex Parte Letter at 1 (Mar. 22, 2024); Warner
Chappell Music SNPRM Reply Comments at 5–6
(‘‘[I]n light of the undisputed comments to the
SNPRM detailing how and why the U.S. and
international music publishing industry is
universally built on maintaining current
information for—and paying—the then-current
owner or administrator, Warner Chappell advocates
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the new provision is a reasonable and
appropriate approach which facilitates
the MLC’s administration of royalty
distributions. Moreover, this result was
overwhelmingly supported by
commenters. The comments made clear
that the party identified in the MLC’s
records at the time of the payee
snapshot (or its representative or
designee) will be the party who is
legally entitled to the distribution in the
vast majority of cases.219 Permitting the
for adopting that as a default rule.’’); NMPA SNPRM
Initial Comments at 10 (‘‘[A] ‘default rule’ should
be the rule that applies in the vast majority of cases,
and should not be the rule that applies only in
exceptional cases.’’).
219 See, e.g., MLC SNPRM Initial Comments at 11
(‘‘[I]n most industry agreements the current payee
typically has the right to receive royalties for all
periods (both prospective and historical). Thus, a
default rule that provides for payments to be made
to the current payee (a result that is consistent with
most industry agreements) would produce more
accurate results than a default rule that provides for
payments to be made to a historical payee (a result
that does not align with most industry
agreements.’’); NMPA SNPRM Initial Comments at
4–5 (‘‘[T]he custom and practice in the music
industry is for royalties to be paid to the owner of
the copyright at the time of payment rather than at
the time of use, unless a different arrangement is
agreed to between that copyright owner and a
different payee, e.g., the prior owner/assignor of the
copyright. This custom and practice is
memorialized in industry contracts and the royalty
and administration systems of publishers,
administrators, and CMOs are built around that
custom and practice. In other words, the industry
‘default rule’ is the opposite of the ‘default rule’
proposed in the SNPRM.’’); Kobalt Music SNPRM
Initial Comments at 2 (‘‘The administrator who is
registered at the time of a distribution is nearly
always the entity that all royalties should be paid
to, and this is how industry contracts and CMOs
generally operate. Any exceptions to this practice
would be the distinct minority.’’); Sony Music
Publ’g SNPRM Initial Comments at 1–2 (‘‘The Prior
Owner Rule is inconsistent with the contracts
around which the music publishing industry is
built. . . . When music catalogues are bought and
sold, the terms of the acquisition documents
generally provide that the acquiring party has the
right to collect all income after the date of sale.’’);
Universal Music Publ’g Grp. SNPRM Reply
Comments at 2 (‘‘Under industry contracts, where
rights are transferred or revert, the right to receive
royalties (including those previously earned but not
yet paid) generally follows the rights. . . . The
Time of Use Rule will therefore . . . usually result
in payment to the wrong party under the relevant
contractual arrangements.’’); Warner Chappell
Music SNPRM Reply Comments at 5 (‘‘[A]ny rule
that would establish the ‘default payee’ as anyone
other than the current rightsholder at the time of the
payment will, by definition, carry a real and
inherent risk of compelling payment to someone
not entitled to received it. . . . [T]he U.S. and
international music publishing industry is
universally built on maintaining current
information for—and paying—the then-current
owner or administrator.’’); Big Machine Music
SNPRM Initial Comments at 2 (‘‘I have never seen
a copyright transfer that doesn’t include a letter of
direction to effectively set out the process for the
new owner to receive all future income.’’);
Reservoir Media Mgmt. SNPRM Initial Comments at
2 (‘‘There is nothing to gain from some of these
changes beyond a mirage of accuracy that is not in
alignment with actual collection rights.’’); SONA
SNPRM Reply Comments at 3 (‘‘Songwriters,
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MLC to act on the information in its
records will lead to accurate payments
without overburdening copyright
owners and the MLC with new,
potentially significant, data, reporting,
and payment requirements, which could
result in a delay in royalty
distributions.220
publishers, and other third parties acquiring and/
or licensing publishing rights in the music industry
transfer rights, including the right to administer and
collect royalty income, as of a specific date of
transfer so that the party that is newly entitled to
administer, collect and receive income in
connection with the particular works will do so as
of that specific effective date regardless of when
those monies were earned.’’). Other commenters
also noted that this practice is not completely
universal, and that there may be exceptions. See,
e.g., MLC SNPRM Initial Comments at 11; NMPA
SNPRM Initial Comments at 4–5; Kobalt Music
SNPRM Initial Comments at 2; Sony Music Publ’g
SNPRM Initial Comments at 1–2; Universal Music
Publ’g Grp. SNPRM Reply Comments at 2; Warner
Chappell Music SNPRM Reply Comments at 6 (‘‘In
the rare instance where parties actually intend for
someone other than the current owner or
administrator to receive an MLC distribution, those
parties are best positioned to so notify the MLC.’’).
220 The Office acknowledges that this default
distribution provision could lead to the ‘‘wrong’’
result with respect to the narrow category of posttermination royalties paid for pre-termination uses.
In such cases, the pre-termination copyright owner
remains entitled to those royalties absent a contrary
agreement because the reversion of the copyright by
operation of law does not encompass the additional
entitlement to those royalties. The Office
nevertheless finds the default distribution provision
to be reasonable in these cases in light of the
reduced burden it places on the MLC, the various
exceptions to the default distribution provision
discussed below, as well as comments from
publishers suggesting agreement with the end-result
of having the MLC distribute post-termination
royalties for pre-termination uses to the posttermination owner. See, e.g., NMPA NPRM Initial
Comments at 6; CMPA NPRM Initial Comments at
2 (‘‘Although it may not be in the financial interest
of the pre-termination owner, . . . it would be
CMPA’s recommendation that any and all
adjustments of this nature be paid to the current
copyright owner (that being the post-termination
owner) at the time of the payment, and not at the
time when the usage was made.’’); see also NMPA
SNPRM Initial Comments at 5 (‘‘[I]t is the custom
and practice in the industry for the new owner or
the songwriter to whom rights have been assigned
or reverted to be paid all unpaid royalties regardless
of when they were earned.’’).
Additionally, the comments suggested that at
least some publishers do not wish to receive such
royalties due to the administrative burdens
involved in sharing those royalties with former
songwriter partners. See, e.g., NMPA SNPRM Initial
Comments at 8; Kobalt Music SNPRM Initial
Comments at 3 (‘‘In our experience, former
administrators in general are not set up to distribute
royalties to their former songwriters, and almost no
one—not even the former administrators
themselves—wants them to continue to receive
those royalties once all rights periods expire.’’); Big
Machine Music SNPRM Initial Comments at 1–2
(‘‘The collection and re-distribution of this income
to the new owner creates an additional
administrative burden for our company, taxes the
human resources of my team and creates an
unwanted liability for us without any benefit.’’); Me
Gusta Music SNPRM Initial Comments at 2;
Relative Music Grp. SNPRM Initial Comments at 1.
By including these royalties within the MLC’s
default distribution provision, it allows publishers
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However, the Office recognizes that
there may be instances where the MLC’s
distribution of royalties to the owner at
the time of the payment under the
default distribution provision would
result in an improper party being paid.
Therefore, the Office has included
clarifications and limitations. First, any
distribution made by the MLC is not a
determination of a party’s legal
entitlement to the royalties and does not
prejudice any such party’s legal claim.
The purpose of the default distribution
provision is to reduce burdens, gain
efficiencies, and enhance accuracy by
applying industry practice to the MLC’s
distributions. It does not alter anyone’s
underlying legal rights—especially if the
MLC, in relying on this provision, ends
up distributing royalties to an
individual or entity who is not legally
entitled to them. The MLC specifically
supported the inclusion of such a
provision.221
Second, the default distribution
provision does not apply where there is
a dispute between parties or an
investigation by the MLC covering the
applicable works (or shares) or payees.
The reference to an investigation is
meant to include situations where the
MLC may be looking into, for example,
a potentially fraudulent registration or
claim. The purpose is to make clear that
where the MLC has knowledge that
there is a cloud over the ownership of
the relevant work (or share), it must
continue holding royalties until that
cloud has cleared.
Third, the default distribution
provision does not apply if the MLC has
been ‘‘notified otherwise.’’ This
language is meant to cover
circumstances where the MLC receives
information that would indicate to a
reasonable person that the payee
identified in its records is not in fact
entitled to the royalty distribution. In
enacting the statutory requirement for
the MLC to distribute royalties pursuant
to its records, Congress did not intend
for the MLC to knowingly make
inaccurate payments after being
expressly informed otherwise.222
Whether particular information received
is sufficient, or whether any such
information is adequately substantiated,
to choose for themselves how they would like to
handle these situations. They can do nothing, and
the royalties will be distributed to the posttermination owner. Or, if they wish to assert their
entitlement to the royalties, they can defeat the
default distribution provision and obtain them by
simply notifying the MLC, as discussed below.
221 MLC Ex Parte Letter at 2 (Feb. 21, 2024).
222 See H.R. Rep. No. 115–651, at 9 (referring to
‘‘the efficient and accurate collection and
distribution of royalties’’ as the MLC’s ‘‘highest
responsibility’’); S. Rep. No. 115–339, at 9 (same);
Conf. Rep. at 7 (same).
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for the MLC to actually be ‘‘notified’’ is
a matter the Office leaves to the MLC’s
reasonable discretion based on its
experience, practices, and policies,
subject to the Office’s guidance.223
ii. The Default Distribution Provision
Does Not Change the MLC’s Duty To
Verify the Accuracy of Royalty
Distributions
The next part of the provision states
that despite the default distribution
provision, the MLC must continue to
engage in reasonable efforts to verify the
information provided to it and to
combat against fraudulent registrations
and claims. This provision is not
intended to require the MLC to engage
in additional efforts beyond those it
currently undertakes, but rather to
ensure that it continues to engage in
such efforts after the rule is enacted.224
An examination of the MLC’s current
such efforts and their sufficiency is
beyond the scope of this proceeding.
iii. The MLC Must Still Correct Its Own
Errors
The final part of the provision is
meant to codify and clarify a point made
in the SNPRM that ‘‘[w]here the MLC
distributes royalties to the wrong payee
due to an error on the MLC’s part . . . ,
the MLC must correct its error in a
timely fashion.’’ 225 The regulation
makes clear that the applicable type of
error is one caused by the MLC’s
actions, as opposed to where the MLC
acts in accordance with the default
distribution provision or otherwise
reasonably relies on information
provided to it by others that turns out
to be inaccurate.226 The reference to the
MLC’s actions encompasses the actions
of its employees, but the Office also
223 While the MLC suggested that such
notifications will always take the form of disputes,
the Office cautions that this might not always be the
case. See MLC Ex Parte Letter at 1–2 (Mar. 22,
2024). That is why the final rule provides separate
explicit provisions for both disputes and where the
MLC is notified otherwise. The notification
provision is meant to be broader to encompass other
possible scenarios outside of a formal dispute.
While the degree of overlap between the two
provisions may be substantial, it is not necessarily
total.
224 See MLC Ex Parte Letter at 5 (Feb. 21, 2024)
(explaining that the MLC ‘‘has substantial review
processes in place to prevent fraudulent or
improper claiming and diversion of royalties’’); see
also U.S. Copyright Office, Unclaimed Royalties:
Best Practice Recommendations for the Mechanical
Licensing Collective iii, 60 (2021), https://
copyright.gov/policy/unclaimed-royalties/
unclaimed-royalties-final-report.pdf (‘‘[T]he MLC
should have mechanisms in place to help review,
verify, and quality-check information, and
recognize problems like conflicts, inconsistencies,
inaccuracies, and potential fraud.’’).
225 88 FR 65908, 65918 n.137.
226 See MLC Ex Parte Letter at 2 (Mar. 22, 2024).
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intends for it to cover actions of others
acting on its behalf.
C. Matched Historical Royalties
Outside the context of the owner at
the time of the use versus the owner at
the time of the payment issue, the Office
received few comments regarding our
proposal that the MLC report and
distribute matched historical royalties
in the same manner and subject to the
same requirements that apply to the
reporting and distribution of blanket
license royalties.227 Notably, the MLC
supported this proposal by including it
in its own regulatory proposal and no
commenters appear to have objected.228
The Office is, therefore, adopting this
portion of the SNPRM as final for the
reasons stated in the SNPRM.229
D. Ownership Transfers and Royalty
Payee Changes
The final rule retains the overall
framework and structure from the
SNPRM with respect to the provisions
governing notice to and implementation
by the MLC of ownership transfers and
other royalty payee changes.230 The
Office, however, has made several
changes from the SNPRM.
1. Notice of a Change to the MLC
The SNPRM contained detailed and
tailored notice requirements based on
the type of payee change at issue. It
proposed such requirements for the
following circumstances: (1) transfers of
copyright ownership other than by will
or operation of law; (2) transfers of
copyright ownership by statutory
termination; (3) other transfers of
copyright ownership; and (4)
designations of alternative royalty
payees.231
In response to the SNPRM, several
commenters criticized the nontermination-related notice requirements,
including on the ground that the Office
does not need to regulate standard
operational processes, like those
concerning contractual transfers and
letters of direction, for which the MLC
has well-functioning systems in
place.232 Commenters also contended
227 See
228 See
88 FR 65908, 65914.
MLC SNPRM Reply Comments, App. A.
at iii–iv.
229 88 FR 65908, 65914.
230 See id.
231 Id. at 65914–17.
232 See e.g., Kobalt Music SNPRM Initial
Comments at 3; Spirit Music Grp. SNPRM Initial
Comments at 2; Reservoir Media Mgmt. SNPRM
Initial Comments at 2; ClearBox Rights SNPRM
Reply Comments at 10.
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that the SNPRM’s requirements were
unworkable or unduly burdensome.233
The MLC echoed these comments and
submitted a regulatory proposal that
largely retained the Office’s proposed
requirements for termination-related
transfers, but replaced the other notice
requirements with a catch-all provision
providing that such notice be made in
accordance with requirements
established by the MLC.234 Few
commenters supported the Office’s
proposal with respect to nontermination-related notices.235
Based on these comments, the Office
has scaled back the notice requirements,
generally in line with the MLC’s
proposal. Outside of the termination
context, it does not appear that
regulation is currently necessary.
Instead, the Office is issuing a rule
directing the MLC to adopt a written
policy reflecting its practices and
requirements for non-terminationrelated notices. The Office will monitor
this area and will consider potentially
adopting regulations in the future if
presented with a record reflecting a
need to intervene.
i. Non-Termination-Related Transfers of
Copyright Ownership and Royalty Payee
Changes
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As discussed above, the final rule
omits the previously proposed
requirements for non-terminationrelated notices and replaces them with
a directive for the MLC to adopt and
publish requirements for such notices.
More specifically, the final rule
provides that parties seeking to make
payee changes outside the context of a
termination must notify the MLC
pursuant to such reasonable
requirements as it establishes and makes
publicly available on its website. To the
extent the MLC does not already have
such a policy on its website as of the
date this final rule is published in the
Federal Register, the MLC will have 60
days to adopt one and make it public,
unless the Office permits an extension.
233 See e.g., NMPA SNPRM Initial Comments at
4, 14–15; Spirit Music Grp. SNPRM Initial
Comments at 2; Farris, Self & Moore, LLC SNPRM
Initial Comments at 1; Warner Chappell Music
SNPRM Reply Comments at 7–8; Universal Music
Publ’g Grp. SNPRM Reply Comments at 2 n.1;
Reservoir Media Mgmt. SNPRM Initial Comments at
2.
234 MLC SNPRM Reply Comments at 3–5, App. A
at iv–xii; MLC SNPRM Initial Comments at 18–20;
MLC Ex Parte Letter at 2 (Mar. 22, 2024) (explaining
‘‘the need for flexibility to incorporate evolving
industry practices into processes to effectuate the
various types of transfers and payee changes that
occur in the normal course of business for
rightsholders’’).
235 See, e.g., Promopub SNPRM Initial Comments
at 5.
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Additionally, there is one aspect of
the SNPRM regarding non-terminationrelated notices that the final rule retains.
In response to the NPRM, the
Songwriters Guild of America et al.
(‘‘SGA et al.’’) proposed specific
requirements to apply where the MLC is
asked by the terminating party to
implement an agreement directing it to
pay post-termination royalties to the
pre-termination copyright owner.236
SGA et al. was concerned about
contractual overreach by publishers
requiring the execution of anticipatory
letters of direction as part of publishing
deals.237 The Office included the
proposal as part of the SNPRM,
explaining that ‘‘[b]ased on the current
record, the proposal seems to be a
reasonable safeguard, even if there is no
such overreach at present.’’ 238 No
commenter specifically opposed this
proposal, and the MLC included it in its
regulatory proposal.239 The Office has,
thus, retained most of the proposal in
the final rule with some minor
conforming edits.240
ii. Transfers of Copyright Ownership by
Statutory Termination
In contrast to the Office’s proposal on
non-termination-related notices,
commenters generally did not oppose
the Office’s proposal on notices to the
MLC about payee changes resulting
from statutory terminations. Indeed,
multiple commenters affirmatively
supported it.241 For example, MAC et al.
said that they ‘‘fully support the Office’s
proposal,’’ calling it ‘‘simple, practical
236 88
FR 65908, 65917.
237 Id.
238 Id.
239 MLC
SNPRM Reply Comments, App. A. at vi–
vii.
240 The final rule does not include the
requirement that such a notice must include ‘‘a
clear statement stipulating that neither the notice
nor the distribution of royalties by the mechanical
licensing collective in accordance with the notice
prejudices the rights of either party’’ as such a
requirement would be unnecessary, considering
that the regulations also require the notice to be
signed after the effective date of termination.
241 See, e.g., MLC SNPRM Initial Comments at 20;
MLC SNPRM Reply Comments at 3; MAC et al.
SNPRM Initial Comments at 2–3; Promopub
SNPRM Initial Comments at 5. Despite its general
support, Promopub also expressed concern that ‘‘[i]f
the terminating party has already been subjected to
a dispute process at the MLC, the pre-termination
copyright owner/prior payee should not have
another opportunity to add salt to the wound by
way of the proposed Rule creating another
notification and dispute cycle.’’ Promopub SNPRM
Initial Comments at 5. To clarify, these notice
requirements and the dispute mechanism contained
within them are only effective prospectively. This
means that if a terminating party previously
notified the MLC about an effective termination and
the MLC acknowledged the sufficiency of that
notice, then nothing in the final rule would require
the terminating party to submit a new notice to the
MLC.
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and efficient.’’ 242 The MLC
‘‘welcome[d] regulatory clarity from the
Office’’ on this topic 243 and said that
‘‘[m]uch of the provisions concerning
termination procedure are consistent
with MLC practice, or could be
implemented.’’ 244 The MLC and other
commenters, however, proposed
modifications to the Office’s proposal to
address discrete concerns.
Based on the comments and the
discussion in the SNPRM, the Office is
adopting as final the proposed notice
requirements regarding payee changes
resulting from statutory terminations
with the modifications discussed below.
a. Whether the Notice Requirements
Should Be a Floor
The Office disagrees with the MLC’s
proposal to turn the notice requirements
into a floor.245 While the Office
acknowledged in the SNPRM that the
proposed information that must be
submitted to the MLC might not provide
sufficient information to process and
implement the ownership change in
some cases, the Office also proposed a
means by which the MLC could obtain
the minimum necessary information to
implement the change.246 In doing so,
the Office explained that ‘‘[t]his may be
a better approach than requiring
terminating parties to provide
additional information to the MLC at the
outset that they may not readily have
and which may not be needed to
implement the change.’’ 247
The Office continues to believe that
this is the most appropriate approach.
Turning the requirements into a floor
would allow the MLC to request
additional and potentially unnecessary
information that may be challenging to
produce up front, which was precisely
the concern that led to the Office’s
proposal.248 As further discussed below,
if the initial submission to the MLC
lacks what it needs, the MLC can
request additional information at that
point.
b. Treatment of Notices Containing
Multiple Works
The Office agrees with Linda Edell
Howard that the rule should be clarified
to recognize that a single notice—
whether a change notice to the MLC or
a statutory notice of termination
submitted to the Office for recordation—
may identify more than one musical
242 MAC
et al. SNPRM Initial Comments at 2–3.
SNPRM Reply Comments at 3.
244 MLC SNPRM Initial Comments at 20.
245 See MLC SNPRM Reply Comments, App. A at
243 MLC
v.
246 88
FR 65908, 65915–16.
at 65916.
248 Id. at 65915–16.
247 Id.
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work, and that the relevant statuses of
those works may be different.249 The
final rule makes clear that, in such
cases, any implication as to one work
does not affect another listed in the
same notice. Each work must be treated
independently. This is clarified
throughout the final rule, including in
the notice, implementation, and dispute
provisions.
For example, if there is a dispute as
to one work, but not another in the same
change notice submitted to the MLC, the
MLC must still implement and give
effect to the change with respect to the
work that is not in dispute (assuming
that there are no other issues). The same
is true where the MLC has sufficient
information to implement the change as
to one work, but not for another from
the same notice. As another example, if
a notice of termination identifying
multiple musical works is timely
recorded in the Office as to some works
but not others, assuming that there are
no other issues, the MLC should
implement the termination of those as to
which the notice is timely recorded,
even though the works with untimely
recorded notices cannot be terminated.
c. Requirement To Provide the Statutory
Notice of Termination
Linda Edell Howard asserted that it
can sometimes be difficult or expensive
to obtain a copy of the notice of
termination submitted to the Office for
recordation.250 She did not, however,
make any alternative suggestions. The
Office continues to believe that
providing a copy of the actual notice of
termination is reasonable and not
unduly burdensome.
d. Requirement To Provide Proof of
Recordation or Proof of Submission to
the Office for Recordation
The Office agrees with the MLC’s
proposal to clarify that the proof of
submission of the statutory notice of
termination to the Office must reflect
that it was submitted before the effective
date of termination.251 For a notice of
termination to be timely recorded, it
must be received by the Office before
the effective date.252
The Office disagrees with ClearBox
Rights that the proof of recordation
requirement should be dropped because
it is ‘‘cumbersome and potentially not
necessary.’’ 253 ClearBox Rights made
three arguments to support its position.
First, it contended that it ‘‘would prove
to be an administrative burden on the
MLC to maintain a schedule of such
notices to be delivered.’’ 254 This
argument is unpersuasive given that the
MLC did not object to this requirement
and included it in its regulatory
proposal.255 Moreover, the rule does not
require the MLC to maintain any such
schedule.
Second, ClearBox Rights asserted that
‘‘there may be instances where the
Copyright Office has not yet recorded
such documents for various reasons,
including that perhaps one copyright
out of many on the notice is under
review or possibly not valid.’’ 256 It
argued that the ‘‘lack of recordation or
delay of recordation of one document
with many copyrights because one or
more copyrights is in question for
further review should not negatively
impact the other copyrights on that
document.’’ 257 The Office does not
believe that these concerns are grounds
for eliminating the proof of recordation
requirement. While the Office agrees, as
discussed above, that the rule should
accommodate notices identifying
multiple works and that each work
should be handled individually, timely
recordation is still required by the
statute ‘‘as a condition to [the
termination] taking effect.’’ 258 Thus, the
MLC should not implement a change as
to a particular work until proof of
recordation of the relevant notice of
termination for that work is delivered.
Third, ClearBox Rights noted that
‘‘recordation of the termination at the
Office may never happen.’’ 259 It said
that it has ‘‘seen instances where a
notice of termination was filed, and the
pre-termination owner acknowledges
the termination to be effective even
though there was an issue in the notice
filing or recordation.’’ 260 ClearBox
Rights explained that ‘‘[s]ometimes the
pre-termination owner will simply
overlook the technical issues of the
termination process and grant the rights
back to the post-termination party.’’ 261
Linda Edell Howard made similar
statements, noting that sometimes the
pre-termination copyright owner
254 Id.
at 9.
MLC SNPRM Reply Comments, App. A at
255 See
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v.
249 See
256 ClearBox
Howard SNPRM Initial Comments at 4, 6,
Rights SNPRM Reply Comments at
10.
8.
250 Id.
257 Id.
at 4.
MLC SNPRM Reply Comments, App. A at
258 See
251 See
17 U.S.C. 203(a)(4)(A), 304(c)(4)(A).
Rights SNPRM Reply Comments at
259 ClearBox
v.
252 See
37 CFR 201.10(f)(1)(ii)(A), (f)(3).
253 See ClearBox Rights SNPRM Reply Comments
at 9–10.
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‘‘waives the recordation
requirement.’’ 262
The Office does not believe that these
possible problems provide any basis to
not require proof of recordation. As
noted above, timely recordation is a
statutory condition for the termination
to be effective.263 If the termination is
not effective, no rights change hands
pursuant to section 203 or 304. To the
extent the pre-termination copyright
owner nevertheless acquiesces to the
attempted termination, that may simply
result in an ordinary transfer of
copyright ownership from the pretermination copyright owner to the
terminating party. As such, it would be
subject to the requirements for notifying
the MLC about a non-terminationrelated change, rather than a
termination-related change.
Based on the foregoing discussion,
however, the Office concludes that the
final rule should clarify that a
termination-related payee change notice
submitted to the MLC can be withdrawn
or converted into a non-terminationrelated payee change notice pursuant to
such reasonable requirements as the
MLC establishes and makes publicly
available on its website. The scenarios
raised by the commenters demonstrate a
need for flexibility.
Regarding Ms. Howard’s question
about what proof will qualify if notices
of termination are recorded with the
Office though electronic means,264 the
Office reiterates that ‘‘[a]dequate proof
of timely recordation could be
demonstrated by either providing the
MLC with a copy of the certificate of
recordation or the record as reflected in
the Office’s online public catalog,’’ and
that ‘‘[a]dequate proof of submission to
the Office for recordation could take the
form of courier tracking or a delivery
confirmation, a return receipt from the
Office, or some other communication
from the Office confirming receipt.’’ 265
The eventual ability to submit notices of
termination through the Office’s online
Recordation System will not impair the
availability of adequate proof. For
example, while courier tracking or
delivery confirmation would not be
available, the remitter would instead
have such proof in the form of an
electronic communication from the
Office confirming receipt.
e. Requirement To Identify the Relevant
Works
The Office declines the MLC’s
proposal to add a requirement to
262 Howard
SNPRM Initial Comments at 4.
U.S.C. 203(a)(4)(A), 304(c)(4)(A).
264 Howard SNPRM Initial Comments at 4.
265 88 FR 65908, 65915.
263 17
10.
260 Id.
261 Id.
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provide ‘‘[a] satisfactory identification
of all musical works subject to the
notice of termination identified by
appropriate unique identifiers.’’ 266 The
MLC said that this is needed because it
‘‘cannot implement a change in
ownership of musical works without
knowing which musical works are
subject to the change in ownership.’’ 267
As the Office previously explained in
the SNPRM, the regulations governing
the content of statutory notices of
termination (which must be submitted
to the MLC as part of the change notice)
already provide for an identification of
each work.268 While the Office
acknowledged in the SNPRM that such
identification might not provide the
MLC with sufficient information to
process and implement the ownership
change in some cases, the Office also
proposed a means, further discussed
below, by which the MLC could obtain
the minimum necessary information.269
The Office agrees with other
commenters ‘‘that the default position
should be to make it as easy as possible
for a terminating songwriter to comply
with processes to effect their right.’’ 270
Thus, we decline to include a
requirement that unique identifiers for
all musical works must be provided up
front. As further discussed below, if the
MLC ultimately needs them for certain
works, it can request them after
attempting to implement the change
based on the information in the notice.
f. The MLC’s Duty To Request
Additional Necessary Information
In the SNPRM, the Office proposed
that where a compliant terminationrelated change notice does not provide
the MLC with sufficient information to
process and implement the ownership
change, the MLC should engage in best
efforts to identify the minimum
necessary information, including
through correspondence with both the
terminating party and pre-termination
copyright owner (or their respective
representatives).271 The MLC expressed
concern with this proposal, stating that
it is ‘‘not clear if this reference to ‘best
efforts’ is meant to imply a
responsibility to make findings as to
what works are subject to
termination.’’ 272 The MLC said that the
requirement to correspond with the
relevant parties ‘‘is a reasonable step’’
lotter on DSK11XQN23PROD with RULES3
266 MLC
SNPRM Reply Comments, App. A at v.
at 3.
268 88 FR 65908, 65915 & n.112 (citing 37 CFR
201.10(b)(1)(iii), (b)(2)(iv)).
269 Id. at 65915–16.
270 MAC & NSAI Ex Parte Letter at 1 (Feb. 12,
2024).
271 88 FR 65908, 65915–16.
272 MLC SNPRM Initial Comments at 20.
267 Id.
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and that it ‘‘does not object to making
reasonable efforts to reach out to parties
where paperwork is incomplete.’’ 273 It
said, however, that it ‘‘cannot itself
identify the ‘relevant musical works,’
make decisions itself about what is
contained in private contracts that may
be subject to termination, or determine
what works are, or are not, subject to
termination in any particular disputed
case.’’ 274
The Office is clarifying this portion of
the rule in light of the MLC’s comments.
To eliminate any confusion, the ‘‘best
efforts’’ language has been eliminated in
the final rule, while the requirement to
correspond has been retained. In doing
so, the Office emphasizes that the final
rule’s reference to information that is
‘‘insufficient to enable the [MLC] to
implement and give effect to the
termination’’ is meant to be interpreted
narrowly. In some cases, submitted
information can be sufficient to enable
the MLC to act, even if it must
undertake certain reasonable efforts. For
example, even if the identification of the
works in the notice of termination does
not appear sufficient on its face, perhaps
lacking unique identifiers, the
information is nevertheless considered
sufficient if the MLC can act on the
information after undertaking
reasonable efforts to attempt to match
the works identified in the notice of
termination with the corresponding
works in its records. The Office is not
mandating that the MLC engage in
exhaustive efforts or do this in all cases,
but in the termination context, it should
provide assistance within reason.
Additionally, Promopub noted that
there is no time limit on the MLC in this
provision and said that ‘‘delay should
be assiduously avoided.’’ 275 It proposed
that ‘‘the MLC give notice of receipt of
an appropriately documented claim
within 15 calendar days of receipt’’ and
that, ‘‘[i]f more information is required
to process the claim, that explanatory
notice should be given within 30
calendar days of receipt.’’ 276 It also
wanted the MLC to establish a ‘‘hot
line’’ and dedicated web pages that
terminating parties can access for
assistance.277 The Office agrees that the
MLC should have dedicated web pages
and other member support for
terminating parties, and strongly
encourages it to provide such support as
soon as reasonably possible. The final
rule adds the word ‘‘promptly’’ to signal
that the MLC should move
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273 Id.
at 20–21.
at 21.
275 Promopub SNPRM Initial Comments at 5–6.
276 Id. at 6.
277 Id.
274 Id.
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expeditiously, since, as discussed
above, the Office expects the MLC to
undertake some reasonable efforts in
addition to correspondence. Should the
Office become aware of widespread
unreasonable delays, we can reconsider
a specific timing requirement at a later
date.
Lastly, the Office understands that
this approach may lead to longer lead
times before the MLC ends up
implementing a change than if
additional information were required to
be submitted at the outset. As discussed
above and in the SNPRM,278 the Office
continues to believe that this is the
better approach. However, we wish to
encourage terminating parties to
voluntarily provide additional useful
information to the MLC, such as unique
identifiers, as part of their initial notice
submission if it is possible to do so. To
that end, in amending its form for
submitting termination-related payee
change notices based on the final rule,
the MLC could include fields for
additional information it believes would
be helpful in implementing the change,
provided that the form clearly identifies
those non-required fields as being
optional.
g. The Meaning of ‘‘Terminating Party’’
The final rule clarifies the definition
of ‘‘terminating party.’’ Throughout the
rule, this term is used to refer to parties
entitled to royalties from the MLC based
on an effective termination and who
may notify the MLC of such entitlement.
This term is not defined by reference to
who singed and served the statutory
notice of termination.
The SNPRM defined the term as ‘‘the
new musical work copyright owner.’’ 279
That language did not, however,
account for the fact that the termination
may not yet be effective at the time the
payee change notice is submitted to the
MLC, meaning that the relevant party is
not the new owner at that point in time.
The SNPRM’s definition also did not
clearly provide that a successor in
interest to a terminating author or heir
(e.g., their new publisher or
administrator) can also be a
‘‘terminating party’’ within the meaning
of the rule. Including successors in
interest is necessary because there may
be times where the termination becomes
effective and reverted rights are regranted before the MLC is notified. The
final rule makes these clarifications.
The Office disagrees with Linda Edell
Howard that the term ‘‘terminating
party’’ ‘‘should include only those who
signed the notice of termination, not
278 88
279 Id.
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those non-signatory heirs or authors,’’
because ‘‘[t]he non-signatory statutory
heirs or authors are represented by those
who signed and served the notice of
termination.’’ 280 As noted above, this
misunderstands the way the term
‘‘terminating party’’ is used throughout
the rule.
The Office also disagrees that
‘‘[i]nformation concerning nonsignatories should not be required to
implement a change in copyright
ownership and payee status, or reduce
the percentage to be paid out.’’ 281 Each
terminating party must be treated
independently, just like any other
copyright owner when there is more
than one. That is why the MLC is only
required to implement a change as to
those terminating parties whose
information is provided in the notice of
change. That being said, to the extent a
particular terminating party is in fact
represented by another terminating
party, as Ms. Howard suggested, or by
someone else, then the information
provided to the MLC would be for that
representative.282
h. Verification Obligations
In the SNPRM, the Office proposed
that where the MLC has good reason to
doubt the authenticity of the
information submitted, such as the
statutory notice of termination or proof
of recordation, it should seek
verification from the Office.283 The MLC
proposed instead to require the
submitter to seek verification from the
Office and deliver documentation of
such verification to the MLC.284 The
MLC asserted that ‘‘it would be
inappropriate to shift to The MLC the
role of monitoring and obtaining
ownership documentation,’’ and that
‘‘[m]embers must remain primarily
responsible for the completeness and
accuracy of their works registrations and
claims, and it would be inefficient to
shift this task to The MLC.’’ 285
lotter on DSK11XQN23PROD with RULES3
280 See
Howard SNPRM Initial Comments at 6.
281 See id.
282 The Office further declines Ms. Howard’s
proposal to make the identification of the
terminating party plural throughout the rule
because ‘‘[r]arely is the terminating party one
individual.’’ Howard SNPRM Initial Comments at 4.
There are already specific provisions in the rule
speaking to the case of multiple terminating parties
(e.g., 37 CFR 210.30(c)(2)(v)), which means that the
rest of the rule contemplates the possibility of there
being more than one. Moreover, ‘‘[i]n determining
the meaning of any Act of Congress, unless the
context indicates otherwise,’’ ‘‘words importing the
singular include and apply to several persons,
parties, or things.’’ 1 U.S.C. 1.
283 88 FR 65908, 65915.
284 MLC SNPRM Reply Comments at 3–4, App. A
at v.
285 Id. at 4.
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The Office agrees with the MLC’s
position. While we have endeavored to
minimize the burden on a terminating
party to have their termination
implemented by the MLC, on reflection,
it is more appropriate for the submitter
to obtain whatever verification may be
necessary. Therefore, the final rule
provides that where authenticity is in
doubt, the MLC shall either seek
verification from the Office or request
that the submitter provide such
verification.
i. Dispute-Related Issues
In the SNPRM, the Office proposed
that where the MLC receives a payee
change notice from the terminating
party, it must inform the pretermination copyright owner within 15
days of receiving either the notice or the
last piece of information necessary to
implement the change, whichever is
later.286 After being so notified, a pretermination copyright owner who
disputes the termination would have 30
days to initiate its dispute with the MLC
before the MLC must implement the
change.287 The Office agrees with Linda
Edell Howard that the terminating party
should be contemporaneously alerted
when the MLC informs the pretermination copyright owner.288 This
way, the terminating party will know
when the 30-day dispute period
commences. We disagree, however, with
Ms. Howard’s proposal to shorten the
30-day period to 15 days.289 While the
pre-termination copyright owner should
already be on notice about the
termination generally, the Office
believes that 30 days is a reasonable
amount of time after being notified that
a change is being sought at the MLC, in
case they wish to initiate a dispute,
which requires providing specific
documentation to the MLC that may
take time to assemble.
2. Implementation of a Change by the
MLC
The SNPRM proposed various
requirements to govern how the MLC
implements and gives effect to a payee
change, both in termination and nontermination contexts.290 Commenters
generally did not oppose these
requirements, though some raised
discrete questions.291 The MLC
generally supported the proposed
requirements, including those for non286 88
FR 65908, 65916.
287 Id.
Howard SNPRM Initial Comments at 5.
id.
290 88 FR 65908, 65917–18.
291 See, e.g., MAC et al. SNPRM Initial Comments
at 3; Howard SNPRM Initial Comments at 8–9.
PO 00000
288 See
289 See
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56605
termination-related changes.292 Based
on the comments and the discussion in
the SNPRM, the Office is adopting the
proposed implementation requirements
as final with the modifications
discussed below.
i. Prospective Versus Retroactive
Implementation
In the SNPRM, the Office proposed
that, where a relevant change is effective
prior to the MLC’s implementation, the
MLC should be permitted, but not
required, to implement it going back to
its effective date, if requested in the
notice to the MLC.293 In response, MAC
et al. said that ‘‘the MLC can and should
implement payee changes going back to
the date of the change, regardless of
when implemented,’’ and disagreed that
it is too burdensome for the MLC to do
so.294 Linda Edell Howard raised
concerns about lag times in notifying
the MLC in the termination context.295
The MLC ‘‘welcome[d]’’ the Office’s
proposal.296
The Office is not persuaded to alter
the rule. In the SNPRM, the Office
considered similar comments and
weighed them against the MLC’s
concerns about such a requirement
being overly burdensome.297 We were
‘‘inclined to agree with the MLC that
retroactive implementation may be too
administratively burdensome to require
for every payee change,’’ and noted that
our regulations require only prospective
implementation by the MLC in
processing DMP voluntary licenses.298
The Office also ‘‘welcome[d] further
comments on this issue,’’ including on
‘‘what is standard in the industry.’’ 299
The minimal comments received in
response to the SNPRM do not
meaningfully grow the record in a way
that persuades the Office to impose this
requirement on the MLC at this time.
ii. Timing
In its regulatory proposal, the MLC
proposed to soften the implementation
deadlines the Office proposed, by
replacing requirements to implement a
change within a specified period of time
with language requiring only
‘‘reasonable efforts to’’ do so.300 While
the MLC’s comments do not explain
why they requested this change,
292 MLC SNPRM Reply Comments at 5, App. A
at vii–ix, xi–xii; MLC SNPRM Initial Comments at
18 n.25.
293 88 FR 65908, 65918.
294 MAC et al. SNPRM Initial Comments at 3.
295 Howard SNPRM Initial Comments at 9.
296 MLC SNPRM Reply Comments at 5.
297 88 FR 65908, 65918.
298 Id.
299 Id.
300 MLC SNPRM Reply Comments, App. A at vii.
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presumably it is to avoid technical
violations of the regulations, such as
due to circumstances beyond its control
or where it inadvertently makes a
mistake without realizing it (e.g., where
an employee accidentally fails to enter
the change into the system).301
The Office declines to adopt the
MLC’s proposal, but has modified the
final rule to address this issue. The
provision’s purpose is to set
expectations for how the MLC will act,
and that entails meaningful deadlines
that parties to a payee change can rely
on in conducting their business. The
Office has imposed deadlines on the
MLC’s actions in other contexts and sees
no reason not to do so here. We are not
opposed, however, to providing the
MLC with some leeway if an
implementation deadline is accidentally
missed.
Under the final rule, in such a
situation, the MLC must implement the
change as soon as reasonably
practicable, but no later than the next
regular monthly royalty distribution that
occurs either: (1) after the original
implementation deadline; or (2) at least
30 days after the date that the MLC
learns that the change was not
implemented on time—whichever is
later. The Office believes that this
solution gives the MLC reasonable
flexibility without being so open-ended
that the parties to a change have no idea
when their change will be implemented.
Importantly, the rule further provides
that if the MLC is late in implementing
the change, it must do so retroactively
to the date of the original
implementation deadline. The rule does
not provide a separate deadline for
making any corrective royalty
adjustment. Rather, the Office expects
the MLC to make any such adjustments
in accordance with its regular practices.
Regardless of any associated burdens,
we believe this is a fair burden to place
on the MLC when it fails to meet the
rule’s deadlines, even if that failure is
accidental.
iii. Additional Provisions for
Termination-Related Changes
In the SNPRM, the Office proposed
that where a compliant notice is
accompanied by proof that the statutory
notice of termination was submitted to
the Office for recordation, but not proof
that it was timely recorded, the MLC
should hold applicable royalties
pending receipt of proof of timely
recordation.302 After the MLC receives
proof of timely recordation, it would
need to implement the change, which
would include distributing the held
funds to the terminating party.303 If, on
the other hand, the Office refuses to
record the notice or it is recorded on or
after the effective date of termination,
the MLC would need to release the
funds to the pre-termination copyright
owner.304 The Office further proposed
that if proof of timely recordation is not
received within 6 months, the MLC
should contact the Office to confirm the
status of the relevant recordation
submission.305
No commenter objected to this
proposal, but the MLC took exception to
the part requiring it to contact the Office
to confirm the status of the recordation
submission.306 For the same reasons
discussed above in Part III.D.1.ii.h., it
proposed instead that the submitter be
required to check the status with the
Office and provide the MLC with
documentation of the confirmed
status.307 The MLC proposed that if the
submission still remains pending, the
submitter should provide monthly
updates to the MLC.308 It further
proposed that if the submitter fails to
provide a monthly status confirmation,
the MLC must then act in accordance
with the other implementation
provisions.309
On reflection, as with the provision
discussed above in Part III.D.1.ii.h., the
Office agrees with the MLC’s general
position that the obligation to confirm
the status of the submission is more
appropriately placed on the submitter.
The Office, however, disagrees with the
MLC’s specific proposal. It would be
unnecessary and overly burdensome for
the terminating party to be required to
contact the Office and provide the MLC
with monthly updates. Instead, the final
rule provides that the MLC may request
periodic updates at its discretion.
Additionally, the Office disagrees that
if the terminating party fails to provide
an update, the MLC should simply act
in accordance with the rest of the
implementation regulations. That would
result in the funds being released to the
pre-termination copyright owner. The
Office does not believe the MLC should
release the funds while the recordation
status remains pending. Instead, the
final rule provides that the MLC must
hold the funds until it is informed of the
notice of termination’s final recordation
status and then act accordingly. The
rule purposefully does not specify who
must provide that final status to the
MLC. Where the result is a timely
recordation, the terminating party will
be incentivized to provide confirmation
of the final status, but in other situations
(e.g., where recordation is refused), the
pre-termination copyright owner would
be incentivized to provide it so that the
royalties do not remain on hold.
Additionally, nothing prevents the MLC
from contacting the Office directly, if it
chooses to.
Though not raised by commenters, the
final rule also clarifies that the royalty
hold should be lifted where the
recordation submission to the Office is
withdrawn by the remitter. There is no
reason to hold royalties pending
recordation where the recordation
submission has been resolved. The
omission of that scenario from the
SNPRM was an unintentional oversight.
E. Disputes
1. Process and Documentation for
Termination-Related Disputes
The Office received few comments on
our proposal for the handling of
termination-related disputes. The MLC
generally supported this aspect of the
SNPRM.310 Another commenter, Linda
Edell Howard took issue with the idea
that the MLC could substantiate a
dispute claim without hearing from the
terminating party, and raised concerns
about the power imbalance between the
pre-termination copyright owner and
terminating party in this context.311
While the Office appreciates these
concerns, we decline to address these
broader issues in the current proceeding
for the reasons discussed in Part III.E.2.
below. Moreover, some of Ms. Howard’s
concerns are connected to a subject of
inquiry in a separate, open proceeding
reviewing the MLC’s statutory
designation.312
Based on the comments and the
discussion in the SNPRM, the Office is
adopting the proposed requirements
310 Id.
at 5, App. A at ix–x.
SNPRM Initial Comments at 5–6 &
n.3, 8 (discussing, among other things, how there
is a one-sided ability to hold up royalties in a
dispute to give the pre-termination copyright owner
leverage over the terminating party).
312 See 89 FR 5940, 5943 (Jan. 30, 2024)
(requesting ‘‘information regarding: (1) any steps
that the [MLC] is taking to protect against the
incidence of fraudulent ownership claims and
frivolous ownership disputes; and (2) whether these
steps have been successful’’).
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311 Howard
301 If the MLC wanted more time for all
implementations, the Office believes it would have
made that request more specifically. Notably, the
SNPRM proposed to give the MLC at least 30 days
to implement all changes, which was in line with
an earlier request from the MLC. See MLC NPRM
Initial Comments at 10–11. The proposal was also
in line with the Office’s rules governing the MLC’s
processing of DMP voluntary licenses. See 37 CFR
210.24(f).
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302 88
303 Id.
FR 65908, 65917–18.
at 65918.
304 Id.
305 Id.
306 MLC SNPRM Reply Comments at 3–4, App. A.
at viii–ix.
307 Id.
308 Id. at App. A at viii–ix.
309 Id.
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pertaining to termination-related
disputes as final. In doing so, and as
discussed above in Part III.A.3., we have
added language to clarify the operation
of the provision in the context of
disputes concerning the application of
the Exception to voluntary licenses.
In adopting the final rule, the Office
requests that the MLC’s dispute
resolution committee, which the MMA
tasks with establishing the MLC’s
dispute policies, promptly establish a
new policy for termination-related
disputes that adheres to the
requirements adopted in this final rule.
The final rule sets certain key
requirements based on the issues raised
by commenters, but it is not a substitute
for a comprehensive dispute policy.
2. Dispute Resolution
The Office has decided to omit the
proposed provisions about how disputes
should be resolved from the final
rule.313 Instead, unless and until the
Office regulates in this area, disputes are
to be resolved pursuant to the MLC’s
dispute policies. No one specifically
supported the SNPRM proposal, and
some commenters raised concerns with
it.314 Other commenters raised other
concerns and sought various regulations
to address them. For example, North
Music Group asked for the MLC to ‘‘be
prohibited from creating disputes on its
own motion,’’ or for there to at least be
‘‘some process and constraints
applicable to its actions.’’ 315 The record
on these issues, however, is thin.
We do not take these dispute-related
concerns lightly, but given the record of
the proceeding, we decline to take up
these issues at this time. The Office
may, however, consider addressing
them in a future proceeding where they
can be more fully explored to determine
whether any regulatory action may be
needed. In the meantime, the Office
requests that the MLC’s dispute
resolution committee consider the
concerns raised by commenters, as well
as the SNPRM’s proposal to require
ongoing active dispute resolution. In
doing so, the Office asks the committee
to: (1) examine whether such issues are
arising in connection with disputes
initiated with the MLC; (2) evaluate how
these issues are addressed elsewhere in
313 See
88 FR 65908, 65919–20.
e.g., MLC Ex Parte Letter at 5 (Feb. 5,
2024); Kobalt Music SNPRM Initial Comments at 3;
Spirit Music Grp. SNPRM Initial Comments at 2;
MAC et al. SNPRM Initial Comments at 3; Howard
SNPRM Initial Comments at 8–9.
315 North Music Grp. SNPRM Initial Comments at
3; see also, e.g., Howard SNPRM Initial Comments
at 6, 8–9 (discussing concerns with power
imbalances and how disputes could affect litigation
with respect to ripeness and the statute of
limitations).
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314 See,
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the industry; and (3) determine whether
the MLC’s dispute policies should be
amended to address any of them.
3. Disclosure and Confidentiality
In responding to the NPRM, the MLC
asked for guidance about whether it
‘‘should be required to disclose
information about the royalties being
held to the parties involved’’ and stated
that it ‘‘typically does not disclose the
amount of royalties on hold to the
parties in a dispute pending agreement
or resolution of a dispute.’’ 316 ClearBox
Rights stated that the MLC should
disclose the royalties on hold to parties
involved in a dispute.317
Based on these comments, the
SNPRM proposed amending the Office’s
confidentiality regulations to require
that the MLC ‘‘disclose the amount
being held and reason for the hold to
any individual or entity with a bona fide
legal claim to such funds or a portion
thereof.’’ 318 The Office reasoned that
this requirement would put the parties
‘‘on equal footing in developing a
strategy for resolving the dispute,
including the negotiation of a
settlement.’’ 319 The Office also
proposed that the MLC ‘‘provide the
equivalent of monthly royalty
statements for the amounts held along
with monthly updates concerning the
status of the hold.’’ 320 These proposed
disclosure requirements were not
exclusive to termination-related
disputes.
Commenters on this provision
generally supported it, recognizing the
value of disclosing the amount of
royalties on hold to parties involved in
the dispute.321 The MLC, however,
voiced concerns over administrability
and potential misuse.
The MLC stated that the proposed
rule would be burdensome, involve
significant manual processing, and
divert resources from other duties.322
NPRM Initial Comments at 13–14.
Rights NPRM Reply Comments at 6.
318 88 FR 65908, 65919, 65927.
319 Id. at 65919.
320 Id.
321 See Spirit Music Grp. SNPRM Initial
Comments at 2 (‘‘We do agree with the [Office’s]
position to disclose earnings and to provide royalty
statements that are in suspense due to conflicts and
disputes. We also agree the MLC portal should
make this information visible.’’); Promopub SNPRM
Initial Comments at 7 (‘‘In the context of a dispute,
we agree with the Office that if royalties are being
held, the MLC should disclose the held amounts to
the parties and provide updates as necessary during
the pendency of the dispute. This information may
be valuable to the parties for purposes of resolving
the dispute.’’).
322 MLC SNPRM Reply Comments at 8; MLC Ex
Parte Letter at 4 (Feb. 21, 2024). But see MLC Ex
Parte Letter at 4–5 (Feb. 21, 2024) (suggesting that
the MLC regularly discloses total amounts of
royalties on hold to interested parties).
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317 ClearBox
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The MLC also stated that providing
‘‘every party to a dispute’’ with
‘‘confidential information could . . .
result in disclosure of confidential
information to improper parties in some
situations, and would be ripe for
abuse,’’ 323 and that it had not received
member complaints ‘‘around such
disclosures in the context of disputes or
holds.’’ 324 Further, the MLC was
concerned that the proposed
regulation’s use of the term ‘‘bona fide
legal claim’’ was not a clear enough
standard to administer, and that passing
judgment on what is ‘‘bona fide’’ could
expose it to liability.325 Finally, the
MLC shared a general preference for
prioritizing confidentiality and claimed
that parties could obtain confidential
information by agreement or via the
legal process.326
The MLC later stated that, in the
context of a termination-related dispute,
it could ‘‘provide summary-level
information to both the pre- and posttermination copyright owners’’ at ‘‘the
outset of a dispute.’’ 327 This
information would ‘‘identify the
approximate amount of royalties to be
distributed to a work in the first
distribution occurring after the hold is
requested and will be based upon
information in the monthly reports of
usage that The MLC received and
processed at the time of the request.’’ 328
The MLC noted its preference that the
Office not include provisions governing
periodic (or initial) updates, including
until it ‘‘has time to scope and develop
a workable, systematic way to provide
this information.’’ 329 If the Office were
to retain such a requirement, those
updates ‘‘should be limited to where a
disclosure has been affirmatively
requested and should not be more
frequently than quarterly, to limit the
burden and diversion of resources from
critical path activities.’’ 330
Based on the foregoing, the Office is
retaining a version of this rule, while
323 MLC
SNPRM Reply Comments at 7.
Ex Parte Letter at 3 (Mar. 22, 2024).
325 MLC SNPRM Reply Comments at 7–8.
326 Id. at 6–7.
327 MLC Ex Parte Letter at 2 (Mar. 22, 2024). The
MLC previously stated that it could ‘‘provide the
total amount of royalties being held in connection
with disputed works’’ in certain ‘‘discrete and lowvolume’’ circumstances, namely ‘‘situations of
agreement or legal process.’’ MLC SNPRM Reply
Comments at 8.
328 MLC Ex Parte Letter at 2 (Mar. 22, 2024); see
also MLC Ex Parte Letter at 4–5 (Feb. 21, 2024).
Notwithstanding this offer, the MLC reiterated its
concern that providing this information to parties
for all disputes—i.e., not limited to parties in a
termination-related dispute—would be
burdensome. MLC Ex Parte Letter at 5 (Feb. 21,
2024).
329 MLC Ex Parte Letter at 2 (Mar. 22, 2024).
330 Id.
324 MLC
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narrowing its scope to make it easier for
the MLC to administer. The final rule
only applies to termination-related
disputes, and limits disclosure
requirements to the total amount of
royalties being held and not the more
granular information that would be
contained in a royalty statement. It also
reduces the periodic update
requirement to apply only when
requested by either party and only once
a quarter. As the final rule applies to
royalties being held pursuant to a
termination-related dispute, the phrase
‘‘bona fide legal claim’’ was eliminated
from the regulatory text.
F. Corrective Royalty Adjustment
1. Background
In the NPRM, the Office proposed a
corrective royalty adjustment that
would have ‘‘require[d] the MLC to
adjust any royalties distributed under
[its now-suspended Termination
Policy], or distributed in a similar
manner if not technically distributed
pursuant to the [Termination Policy],
within 90 days.’’ 331 At the outset, the
Office notes that the MLC estimates the
corrective adjustment to involve ‘‘less
than $2 million’’ and the ‘‘total amounts
that would likely change hands’’ to
terminating songwriters ‘‘would be less
than $1 million.’’ 332
The NPRM explained that the
adjustment provision was intended ‘‘to
make copyright owners whole for any
distributions the MLC made based on an
erroneous understanding and
application of current law.’’ 333
Responding to the NPRM, parties asked
the Office for further guidance regarding
‘‘how the proposed corrective royalty
adjustment should work’’ in practice.334
The SNPRM subsequently proposed ‘‘a
more detailed [regulation] that would
lay out the operational procedures for
the corrective royalty adjustment.’’ 335
The SNPRM proposed that ‘‘the
corrective adjustment would apply
where the MLC’s prior erroneous
application of the Exception, whether or
not through its [Termination Policy],
affected: (1) the distribution of blanket
license royalties or matched historical
royalties; (2) the holding of such
royalties; or (3) the deduction from a
DMP’s payable blanket license royalties
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331 87
FR 64405, 64412.
332 MLC Ex Parte Letter at 4 (Feb. 21, 2024).
333 87 FR 64405, 64412.
334 88 FR 65908, 65920 (citing MLC NPRM Initial
Comments at 6–8; ClearBox Rights NPRM Reply
Comments at 3–4; ClearBox Rights Ex Parte Letter
at 2–4 (June 28, 2023); Howard NPRM Initial
Comments at 6; Promopub NPRM Initial Comments
at 2; Promopub NPRM Reply Comments at 3; North
Music Grp. NPRM Reply Comments at 2).
335 88 FR 65908, 65920.
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made by matching usage to voluntary
licenses or individual download
licenses.’’ 336 For previously distributed
overpayments made pursuant to the
Termination Policy, the MLC would be
required to notify the prior payee of the
overpayment within thirty days, the
prior payee would have thirty days to
return the overpayment, and then the
MLC would distribute those royalties to
the proper payee with the next regular
monthly royalty distribution. If the prior
payee failed to repay the MLC, then the
MLC would debit the prior payee’s
future royalties—up to 50% of payable
royalties each month—until it recovered
the overpayment.337 The SNPRM also
proposed that the royalty recovery and
distribution instructions would apply
where the MLC matched usage to a
voluntary licensee or individual
download licensee who was not the
proper payee under the rule.338 For
royalties that were held by the MLC
following the suspension of its
Termination Policy, the SNPRM
proposed that they would be paid to the
proper payee no later than thirty days
after the final rule’s effective date.339
Finally, the SNPRM included a savings
clause that would preserve the proper
payee’s right to recover the overpayment
outside of the corrective adjustment
process.340
The SNPRM did not propose ‘‘any
specific procedures’’ addressing
circumstances where ‘‘a publisher [e.g.,
a prior payee] has already distributed a
portion of the applicable royalties to its
songwriters’’ because that ‘‘is a
possibility with any type of adjustment
for an overpayment.’’ 341 The Office,
however, expressly sought further
comments on that issue, including on a
commenter’s proposal that the MLC
only recoup the publisher’s share of
those royalties.342
2. Comments
Several commenters, including
songwriters, publishers, and others,
favored a rule that includes a corrective
adjustment.343 Promopub suggested a
336 Id.
at 65921.
337 Id.
338 Id.
at 65923.
339 Id.
340 Id.
at 65921.
(citing ClearBox Rights Ex Parte Letter at
3–4 (June 28, 2023); ClearBox Rights NPRM Reply
Comments at 3–4).
343 See, e.g., BMG NPRM Initial Comments at 2
(‘‘BMG fully supports . . . the requirement[] that
. . . the MLC must pay post-termination royalties
to those parties who own the U.S. copyrights in the
works at issue and adjust these parties’ accounts in
order that they may receive every dollar previously
paid in error to terminated publishers.’’); BMG
NPRM Reply Comments at 1; Christian Castle
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342 Id.
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relatively more aggressive approach to
the corrective adjustment. First, where
‘‘a prior payee’s accrued royalties for a
month exceed the full amount owed to
the proper payee by at least twenty-five
[percent],’’ it would require the MLC ‘‘to
deduct the full amount owed to the
proper payee from such monthly
accrued royalties.’’ 344 It also proposed
that, if the proper payee was not paid
back in full within six months of the
MLC’s initial corrective adjustment
payment, the Office ‘‘should require the
terminated publisher to repay the
balance to the MLC within 30 calendar
days for the MLC to, in-turn, distribute
to the proper payee within 30 calendar
days of receipt.’’ 345
Other commenters, however,
disagreed that there should be a
corrective adjustment, even though
some of them supported posttermination copyright owners receiving
post-termination royalties going
forward.346 These commenters’
concerns focused on the burdens
associated with administering a
corrective adjustment and the Office’s
authority to require such an adjustment.
Regarding the Office’s authority, NMPA
had concerns that the corrective
NPRM Reply Comments at 4–5 (‘‘Any curative
action required by the Office should, of course, be
retroactive.’’); Promopub NPRM Reply Comments at
1–2 (noting that it ‘‘fully supports the proposed
repeal of the [MLC’s Termination] Policy and the
corresponding proposed royalties adjustments’’ and
that ‘‘other collecting organizations regularly
employ retroactive royalty adjustments when music
publishing royalties have been paid erroneously’’);
North Music Grp. NPRM Reply Comments at 2
(supporting the rule’s corrective adjustment); Miller
NPRM Initial Comments at 1 (supporting 90-day
adjustment period for the MLC); NSAI SNPRM
Initial Comments at 2 (supporting corrective
adjustments made ‘‘retroactively’’); SONA et al.
NPRM Reply Comments at 3 (supporting the rule’s
corrective adjustment); ClearBox Rights NPRM
Reply Comments at 3–4 (supporting the rule’s
corrective adjustment provision and noting
disagreement with NMPA and CMPA); McAnally &
North Ex Parte Letter at 3–4 (Mar. 14, 2023) (voicing
that these parties ‘‘categorically disagree’’ that the
rule should not be ‘‘retroactive’’); MAC et al.
SNPRM Initial Comments at 3–4; Howard SNPRM
Initial Comments at 2; ClearBox Rights SNPRM
Reply Comments at 8–9.
344 Promopub SNPRM Initial Comments at 3.
Promopub suggested these amendments, based on
its concern that publishers may not return
overpayments immediately and would ‘‘instead rely
on the piecemeal monthly process offered.’’ Id.
345 Id.; see also Spirit Music Grp. SNPRM Initial
Comments at 3 (‘‘[A]pplying 50% of the debt to the
erroneous party, who may be earning only a few
dollars, will result in never ending debt for the
erroneously paid party. We realize the USCO is
concerned with the financial impact to the incorrect
party, but it is at the expense of the entitled
party.’’).
346 See, e.g., CMPA NPRM Initial Comments at 1–
2; NMPA NPRM Initial Comments at 4–6; NMPA Ex
Parte Letter at 2 (Feb. 6, 2023); NMPA SNPRM
Initial Comments at 1–2 & n.2; NMPA Ex Parte
Letter at 2 (Jan. 24, 2024); Warner Chappell Music
SNPRM Reply Comments at 2–3.
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adjustment would be an impermissible
‘‘retroactive’’ rule and may also be an
unconstitutional ‘‘taking.’’ 347
Regarding songwriters’ and
publishers’ ability to engage in a
corrective adjustment, commenters
stated that portions of these royalties
would have already been distributed to
songwriters and would be difficult to
recover.348 Warner Chappell added that
‘‘retroactive debits would wreak havoc
where songwriter contracts are royaltyor recoupment-based, as when
recoupment has triggered the end of a
contract’s term, or when a publisher has
paid a contractually-due advance or
bonus because the writer received a
certain sum of royalties,’’ and that
‘‘[p]ublishers, songwriters, and others
who’d received such payments would
also bear tax and accounting obligations
on income ‘wrongly’ received and
already spent.’’ 349
Commenters further suggested that it
would also be administratively
burdensome for the MLC to carry out a
corrective adjustment.350 The MLC
requested that the Office ‘‘take into
consideration the impact of its rule on
[its] regular royalty processing
operations and timelines,’’ which are
‘‘orders of magnitude larger than the
total sums that would be involved in
corrective adjustments for statutory
terminations.’’ 351 The MLC suggested a
‘‘more efficient’’ solution that ‘‘would
avoid the problems associated with
clawing back royalties from
songwriters.’’ 352 This ‘‘alternative
approach’’ would involve the MLC
providing information to the prior payee
and proper payee regarding the royalties
distributed to the prior payee for posttermination periods.353 The parties
would then voluntarily be able to make
any corrective royalty adjustments
themselves (a ‘‘voluntary
347 NMPA NPRM Initial Comments at 2, 4–6; see
also NMPA Ex Parte Letter at 2 (Feb. 6, 2023);
NMPA SNPRM Initial Comments at 2 n.2.
348 CMPA NPRM Initial Comments at 2; Warner
Chappell Music SNPRM Reply Comments at 2–3;
see also NMPA NPRM Initial Comments at 5; MLC
Ex Parte Letter at 3 (Mar. 22, 2024).
349 Warner Chappell Music SNPRM Reply
Comments at 2–3.
350 NMPA NPRM Initial Comments at 5 (noting
that a corrective adjustment ‘‘would create a
significant administrative and financial burden on
the MLC, as well as on publishers or other
recipients of these royalty payments who likely
already distributed some portion of those amounts
pursuant to their contractual obligations with their
songwriters’’); CMPA NPRM Initial Comments at 2
(explaining that ‘‘retroactive accounting might
cause an undue hardship on The MLC as it would
be well above its normal workload’’); see also MLC
Ex Parte Letter at 3–4 (Feb. 21, 2024); MLC Ex Parte
Letter at 3–5 (Mar. 22, 2024).
351 MLC SNPRM Reply Comments at 2–3.
352 MLC Ex Parte Letter at 4 (Feb. 21, 2024).
353 Id.
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adjustment’’).354 The MLC also said that
a ‘‘claw-back and redistribution
approach’’ could be used in
combination with its proposal to
incentivize compliance ‘‘if a significant
period elapsed without resolution by
the parties.’’ 355
3. The Final Rule’s Approach
Having considered all comments on
this issue, the Office is adopting a final
rule with an approach to corrective
royalty adjustments that is similar to the
SNPRM’s proposal for the reasons stated
in the NPRM and SNPRM, but with
certain modifications, as discussed
below. Other corrective adjustment
provisions proposed in the SNPRM are
included in the final rule, with minor
conforming adjustments.
While the Office appreciates concerns
regarding potential administrative
burdens associated with a corrective
adjustment, we continue to ‘‘disagree
with commenters suggesting that there
should not be any corrective adjustment
because of the potential burdens
involved.’’ 356 As the Office previously
explained, ‘‘[c]orrective royalty
adjustments are common in the music
industry and explicitly contemplated by
the statute and the Office’s existing
regulations.’’ 357
The Office notes that the MLC already
has guidelines to address the
circumstances when it needs to make
royalty distribution adjustments,
including, for example:
• when there was ‘‘an incorrect match
of a sound recording to a [musical work]
registration’’;
• where there was an under- or
overpayment ‘‘attributable to a clerical
or administrative error’’; or
• in ‘‘other situations that The MLC
may determine from time to time in its
discretion.’’ 358
These guidelines allow the MLC to
adjust royalty distributions for uses
going back to the first date the blanket
license was available (i.e., January 1,
2021).359
Moreover, the Office must consider
not only the burdens to the MLC and
publishers, but also fairness to
terminating songwriters, and the
comparative efficiency associated with
the corrective adjustment. Without a
at 4–5.
at 5.
356 88 FR 65908, 65920–21.
357 Id. at 65921; see MAC et al. SNPRM Initial
Comments at 3–4; Howard SNPRM Initial
Comments at 2 (agreeing with Office’s position).
358 The MLC, Guidelines for Adjustments secs.
2.1, 3.4 (Jan. 2022), https://
f.hubspotusercontent40.net/hubfs/8718396/files/
2022-02/
MLC%20Guidelines%20for%20Adjustments.pdf.
359 Id. at sec. 3.4.
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355 Id.
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56609
corrective adjustment, proper payees
could be forced to bring their terminated
publishers to court to unwind the MLC’s
erroneous payments. This would lead to
a multiplicity of lawsuits and associated
unnecessary costs incurred by
songwriters and publishers. It may also
be illusory, as songwriters who were
proper payees are less likely to sue to
recover royalties that, in total, may be
less than the cost of hiring an attorney
to litigate the matter.360
i. Voluntary Adjustments
The first modification adopts the
MLC’s suggestion to build in a voluntary
process to reduce potential burdens on
the parties or the MLC associated with
any corrective adjustment. The initial
step in this process is for the MLC to
notify the relevant parties (i.e., the prior
payee, proper payee, and any successors
in interest) of the overpayment within
30 days of the final rule’s effective date.
Such notice must include: (1) a
summary of the Office’s conclusions
regarding the Exception; (2) a
description of the corrective adjustment
process laid out in the final rule,
including the option for the parties to
engage in a voluntary adjustment in lieu
of an MLC-administered adjustment; (3)
for each musical work at issue, the
amounts that were erroneously paid to
the prior payee that are subject to being
adjusted; and (4) the respective contact
information for the parties contained in
the MLC’s records. With this
information, the parties will have the
opportunity to make the corrective
adjustment themselves.
The parties would notify the MLC
within another 30 days regarding
whether the parties are engaging in a
voluntary adjustment, were unable to
reach such an agreement, or are still
attempting to do so. If the parties
engaged in a voluntary adjustment, the
MLC will not make any adjustments in
connection with the overpayment, but
will retain records related to the
voluntary adjustment. If the parties do
not elect the voluntary adjustment
option or if the MLC does not receive
the required notice from the parties, the
MLC will commence implementing the
adjustment process within 30 days of
360 See U.S. Copyright Office, Copyright Small
Claims 1 (2013) (noting that ‘‘federal litigation is
expensive and time-consuming, and therefore out of
reach for many copyright owners’’ and that the
problems of enforcement of modest claims ‘‘appears
to be especially acute for individual creators’’); id.
at 118 (noting that songwriters would benefit from
an alternative to Federal court to enforce the
Copyright Act’s termination provisions (citing
statement of Charles Sanders, SGA)); see also, e.g.,
Howard SNPRM Initial Comments at 6 (noting
perceived power and sophistication imbalances
between authors and publishers).
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the end of the voluntary adjustment
period. If the parties notify the MLC that
they are continuing efforts to reach an
agreement, the MLC will not commence
the corrective adjustment process unless
and until it receives a subsequent notice
that the parties were unable to reach an
agreement. If such a subsequent notice
is received more than 18 months after
the effective date of the rule, the MLC
may, but is not required to, adjust the
overpayment.
The Office believes that it is
reasonable to give the prior and proper
payees an opportunity to engage in the
adjustment process themselves, but that
option would be ineffective without also
requiring the MLC to implement a
corrective adjustment as an alternative.
Further, even if one party was willing to
engage in a voluntary adjustment, the
other party may wish to have the MLC
implement the corrective adjustment for
tax or accounting purposes.361
While parties should jointly be able to
determine the method they want to
pursue to complete the adjustment, the
Office does not believe that decision
should be unbounded in time. Parties
must decide whether the MLC is going
to engage in a corrective adjustment
(and notify the MLC of that decision)
within 18 months of this rule’s effective
date. After that time, the MLC will not
be required to initiate the corrective
adjustment process.362 The Office
believes that the MLC should not be
required to undertake the corrective
adjustment indefinitely.
Finally, the Office is not adopting
Promopub’s repayment proposals for the
corrective adjustment, as it wishes to
first monitor how the adjustment
process is working in practice, before
making any significant amendments. We
are, however, incorporating in the final
rule Promopub’s requested clarification
that the MLC must provide royalty
statements to proper payees when it
makes a corrective adjustment.363
ii. Limiting Recovery of the
Overpayment to the Publisher’s Share
The Office did not receive significant
comments directly responding to
ClearBox Rights’ proposal that the MLC
may only recover the publisher’s share
of the overpayment to make the
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361 See
Warner Chappell Music SNPRM Reply
Comments at 2–3.
362 As the final rule makes clear, the MLC will
discontinue any recovery efforts if it is notified that
the overpayment was recovered outside of the
corrective adjustment process (e.g., where there was
a subsequent agreement or settlement) or a legal
proceeding was commenced seeking recovery of the
overpayment.
363 Promopub SNPRM Initial Comments at 3.
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corrective adjustment.364 Consequently,
that provision is not included as a
requirement in the final rule. The Office,
however, sees no reason why
songwriters, publishers, and the MLC
could not agree to this type of agreement
as a type of voluntary solution. Nothing
in this rule prohibits the prior payee,
proper payee, and MLC from all
agreeing to engage in a corrective
adjustment that only recovers and
distributes the publisher’s share of the
overpayment.
The Office notes that the MLC stated
that the rule envisioned a process that
‘‘requires a songwriter to pay back
royalties to the pre-termination
publisher’’ before that publisher returns
funds to the MLC.365 The MLC claimed
that this could be problematic for
songwriters as ‘‘the process could lead
to songwriters having to use funds to
temporarily pay back royalties paid to
them years ago, and then wait several
months or more to get those funds
back.’’ 366 It also noted that it does not
‘‘know the terms of the private contracts
between the parties or how much was
paid to the songwriter out of the total
initial distribution,’’ 367 making it
problematic to recover only the
publisher’s share in any corrective
adjustment procedure.
The MLC’s comments imply that the
rule requires songwriters (or other
downstream royalty payees) to repay the
prior payee before that prior payee
would need to remit royalties to the
MLC for further processing and
distribution to the proper payee. Such
an initial songwriter-repayment
procedure, however, was not a
requirement of the proposed rule and is
not included in the final rule.
iii. Voluntary Licenses
The final rule does not require the
MLC to make a corrective adjustment
with respect to any amounts deducted,
or held pending deduction, in
connection with voluntary licenses. As
discussed in Part III.A.3. above, the
Office believes that voluntary licenses
should be treated differently than
section 115 statutory licenses.
364 88 FR 65908, 65921. But see MAC et al.
SNPRM Initial at 3–4 (stating that ‘‘ ‘where a
publisher has already distributed a portion of the
applicable royalties to its songwriters,’ we believe
the Office’s proposal regarding recovery of
overpayment by the MLC is the proper course’’
(quoting 88 FR 65908, 65921)).
365 MLC Ex Parte Letter at 4 (Feb. 21, 2024).
366 Id.
367 Id.
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3. The Final Rule Is Not an
Impermissible Retroactive Rule or an
Unconstitutional Taking
As an initial matter, the Office
recognizes the unusual circumstances
that led to this rule, namely that a
government-designated collective
adopted and distributed royalties
pursuant to a policy that embodied a
legal interpretation of the Exception, in
conflict with the Office’s prior guidance.
While the MLC may have intended to
ensure ‘‘prompt and uninterrupted
royalty payments’’ with its actions,368 it
is the Office (and not the MLC) that has
authority to interpret the Copyright Act,
including with respect to the Act’s
termination provisions in the context of
the blanket license.369 As discussed at
length above, the Office finds that the
MLC’s Termination Policy was based on
an unreasonable reading of the Act,
specifically regarding its understanding
of the Exception. The final rule’s
corrective adjustment fixes that legal
error.370
With that background, the Office now
turns to the NMPA’s objection that
promulgating the proposed corrective
adjustment provision is outside the
Office’s authority. First, NMPA
suggested that this provision ‘‘may
arguably be an unconstitutional taking
in violation of the Fifth Amendment,’’
as ‘‘it effectively takes property interests
that pre-termination copyright owners
may have had and transfers them to the
post-termination copyright owner.’’ 371
Second, it stated that a rule that
required the MLC to make an
368 87 FR 64405, 64407 (noting that ‘‘[i]n meetings
with the Office, the MLC described its policy as a
middle ground and explained that the policy was
intended, in part, to avoid circumstances where
parties’ disputes could cause blanket license royalty
payments to be held, pending resolution of the
dispute, to the disadvantage of both songwriters and
publishers’’).
369 While the Office acknowledges that, in the
notice of proposed rulemaking in the earlier
rulemaking proceeding about DMP reporting
obligations, we suggested that the ‘‘MLC’s
interpretation of the [Exception] seems at least
colorable,’’ the Office’s intention was to ‘‘give
interested persons an opportunity to participate in
the rule making through submission of written data,
views, or arguments,’’ 5 U.S.C. 553(c), without
prejudging the rulemaking’s outcome, especially as
termination was ‘‘one of the more complicated
[topics] in [that earlier] proceeding’’ and parties had
not provided much commentary on the MLC’s
theory. 85 FR 22518, 22532 n.210, 22533.
370 See, e.g., Farmers Tel. Co. v. FCC, 184 F.3d
1241, 1250 (10th Cir. 1999) (holding that when the
FCC established an organization to prepare and file
access tariffs, whose board was comprised of
industry participants, and that organization issued
an interpretation of a regulation which was later
overruled by the agency, the agency’s interpretation
did not implicate the prohibition on retroactive
rulemaking, including because the organization had
‘‘no authority to perform any adjudicatory or
governmental functions’’).
371 NMPA NPRM Initial Comments at 12.
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adjustment to previously distributed
royalties would be an impermissibly
‘‘retroactive’’ rule because it would
‘‘expressly undo royalty payments
already made under the Blanket License
pursuant to the MLC’s [then-]current
[Termination Policy].’’ 372
i. ‘‘Takings’’ Concerns
The Constitution’s Takings Clause
prohibits the government from
‘‘depriving private persons of vested
property rights except for a ‘public use’
and upon payment of ‘just
compensation.’ ’’ 373 It is self-evident
that, for there to be a taking, a party
must possess (and then be deprived of)
a vested property right.
That is not what the corrective
adjustment does. It merely applies the
law as it existed at the time the MLC
made the royalty distributions at issue.
As the Office’s legal analysis in the
NPRM, SNPRM, and Part III.A.1. above
make clear, prior payees never had a
vested property right to the posttermination royalties the MLC
distributed to them. These royalties
always belonged to the post-termination
copyright owner. Because prior payees
have no vested property right in the
erroneous overpayments they received,
recovering those amounts so they can be
properly distributed in accordance with
the law is not a ‘‘taking’’ within the
meaning of the Takings Clause.374
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ii. ‘‘Retroactivity’’ Concerns
The Office disagrees that the final
rule’s corrective adjustment process to
remedy improper prior MLC
distributions constitutes an
impermissible retroactive rule. NMPA is
correct that, generally, a ‘‘statutory grant
of legislative rulemaking authority will
not . . . be understood to encompass
the power to promulgate retroactive
rules unless that power is conveyed by
Congress in express terms.’’ 375 The
Office is not, however, adopting a new
retroactive rule regarding the effect of
termination on section 115 statutory
licenses. Instead, we are adopting a rule
372 Id. at 5. NMPA also argued that directing the
MLC to pay the copyright owner at the time of the
use would ‘‘impact all subsequent adjustments and
accrued interest payments made based on usage not
only prior to a valid termination, but also prior to
any other type of ownership transfer.’’ Id. This
second point is discussed in depth in Part III.B.
above.
373 Landgraf v. USI Film Prods., 511 U.S. 244, 266
(1994) (referencing U.S. Const. Amend. V).
374 See Lucas v. South Carolina Coastal Council,
505 U.S. 1003, 1027 (1992) (observing that, under
a takings claim, compensation is not owed where
the government is depriving a person of something
that they were not entitled to in the first place).
375 NMPA NPRM Initial Comments at 5, n.8
(quoting Bowen v. Georgetown Univ. Hosp., 488
U.S. 204, 208 (1988)).
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applying the law as it existed at the time
that the improper royalty distributions
were made, and implementing the law
by requiring parties to act in accordance
with their legal obligations.
Promulgating the corrective
adjustment process is the most efficient,
reasonable, and least burdensome,
means of fixing the MLC’s legal error.
Far from establishing new obligations,
the Office is merely enforcing
preexisting obligations to ensure that
parties who should have received the
applicable payments from the start can
obtain them.376
In promulgating this rule, the Office
has considered any reasonable reliance
interests and expectations of the prior
payee and proper payee. We conclude
that any disruption caused by the
corrective adjustment process adopted
in this rule is likely to be modest, and
that any reliance interests or
expectations are minimized by several
factors. First, the MLC’s interpretation
of the law was in doubt no later than
September 2020, when the Office
warned that parties viewed its
interpretation as being ‘‘legally
erroneous.’’ 377 Second, as the SNPRM
noted, ‘‘[c]orrective royalty adjustments
are common in the music industry and
explicitly contemplated by the statute[,]
the Office’s existing regulations,’’ and
the MLC’s own guidelines.378 Third, the
MLC only started distributing royalties
in 2021, its Termination Policy reflects
a September 2021 date,379 and it was
suspended in November 2022.380 To the
extent that the corrective adjustment is
potentially burdensome to prior payees,
as discussed in Part III.F.2. above, the
Office has both weighed that burden
against the proper payees’ interests and
G. Effective Date and Compliance
Deadline
As is typical for many rules enacted
by the Office, this final rule is effective
30 days after being published in the
Federal Register. However, because the
Office agrees with the MLC that it will
need more than 30 days to update its
processes and systems before it can
reasonably be expected to implement
most of the final rule,381 its compliance
deadline is extended to the first
distribution of royalties based on its first
payee snapshot after the date that is 90
days after the rule is published in the
Federal Register. This deadline is based
on the timing requested by the MLC 382
and is consistent with the Office’s
practice of providing reasonable
transition periods where MMA-related
rules necessitate significant process
changes and system updates and
development.383
This later compliance deadline does
not apply to four sections of the final
rule: (1) the provision embodying the
Office’s legal conclusions about how the
Exception operates in connection with
blanket licenses; (2) the provision
embodying the Office’s legal
conclusions about how the Exception
operates in connection with individual
download licenses; (3) the corrective
royalty adjustment remedying the
MLC’s previous misapplication of the
376 Moreover, this rule does not alter any party’s
royalty entitlements. Although the Copyright Office
is directing the MLC to adjust the amounts
distributed to various entities, the MLC’s
distributions do not constitute a final determination
of the amounts to which any entity is entitled.
377 87 FR 64405, 64407.
378 88 FR 65908, 65921.
379 The original version of the MLC’s Termination
Policy has a September 2021 date, The MLC, Notice
and Dispute Policy: Statutory Terminations (Sept.
2021), https://www.themlc.com/hubfs/Marketing/
website/Original.pdf, while the current version has
an August 2022 date, The MLC, Notice and Dispute
Policy: Statutory Terminations (Aug. 2022), https://
www.themlc.com/hubfs/Marketing/website/
MLC%20Statutory%20Terminations%20Policy%20
v1.2.pdf. The Office is not aware when the MLC
started making distributions based on an erroneous
view of the Exception.
380 The MLC, October Member Updates (Nov. 1,
2022) (on file with the Office) (noting that ‘‘The
MLC is immediately suspending its [Termination]
Policy pending the outcome of the rulemaking
proceeding initiated by the U.S. Copyright Office’’
and that it would be placing all royalties associated
with work shares previously subject to that policy
on hold ‘‘effective with the first distribution of
blanket license royalties related to October 2022’’).
381 See MLC Ex Parte Letter at 3–4 (Mar. 22, 2024)
(‘‘This estimated timeframe accounts for basic code
development, testing phases, and the general
integration of new processes into The MLC’s endto-end overlapping distribution cycle process. This
estimate also recognizes that, particularly regarding
the distribution of royalties from periods after the
effective date, the rule as currently proposed
requires The MLC to operationalize nuanced
practices and processes including requirements that
must be met before implementing a change,
requirements for confirming receipt of appropriate
notice of a change, and timelines for implementing
a change (among others).’’).
382 Id. The Office does not believe the MLC needs
the longer transition period it requested ‘‘[i]f the
final rule directs The MLC to distribute royalties to
a pre-termination owner and/or a post-termination
owner, depending on when corresponding usage
occurred, regardless of which party is the current
payee registered in The MLC database.’’ See id. at
4. While that might be a possibility under the final
rule going forward, it would appear to only arise
in the context of adjustments, which the MLC is
only required to make once annually. See 37 CFR
210.29(b)(2). Thus, the MLC has ample time to
complete those particular updates.
383 See, e.g., 37 CFR 210.27(e)(2)(i), (e)(3)(ii),
(e)(5).
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taken steps to alleviate those burdens by
adjusting the rule’s regulatory language.
We believe that the final rule’s
corrective adjustment provision
embodies the most reasonable course of
action, as it implements the law as it
already existed, while accounting for
various administrability concerns.
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Exception; and (4) the provision
requiring the MLC to adopt notice
requirements for non-terminationrelated payee changes.
The first two provisions are carved
out because they state the accurate
interpretation of the law with respect to
the Exception and section 115 statutory
licenses. Because the MLC has already
suspended its Termination Policy and,
to the best of the Office’s knowledge, is
not currently making distributions in a
manner inconsistent with these
provisions, it should not need any
additional time to comply with the
prohibitions they contain.
The second two provisions are carved
out because those provisions have their
own separate timing requirements
written into the regulatory text. With
respect to the corrective adjustment, the
MLC is required to send and receive
certain notices sooner than the general
compliance deadline, which the Office
believes is reasonable to require given
the relatively low burden involved.
Additionally, the rule requires the MLC
to distribute amounts currently on hold
sooner than the general compliance
deadline because it did not explain why
it needed more time for that particular
action and the equities weigh in favor of
terminating parties obtaining their
royalties in a timely manner.
The Copyright Office may, upon the
MLC’s request, extend the compliance
deadlines in our discretion by providing
public notice through our website.384
List of Subjects in 37 CFR Part 210
Copyright, Phonorecords, Recordings.
Final Regulations
For the reasons set forth in the
preamble, the U.S. 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.
2. Amend § 210.22 as follows:
a. Redesignate paragraphs (d), (e), (f),
(g), (h), (i), and (j) as paragraphs (e), (g),
(h), (i), (j), (n), and (p), respectively; and
■ b. Add new paragraphs (d) and (f) and
paragraphs (k), (l), (m) and (o).
The additions read as follows:
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■
■
§ 210.22
*
*
Definitions.
*
*
*
384 Any extensions will be reflected on the
Copyright Office’s website at https://copyright.gov/
rulemaking/mma-termination/.
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(d) The term derivative works
exception means the limitations
contained in 17 U.S.C. 203(b)(1) and
304(c)(6)(A).
*
*
*
*
*
(f) The term historical unmatched
royalties means the accrued royalties
transferred to the mechanical licensing
collective by digital music providers
pursuant to 17 U.S.C. 115(d)(10) and
§ 210.10.
*
*
*
*
*
(k) The term matched historical
royalties means historical unmatched
royalties attributable to a musical work
(or share thereof) matched after being
transferred to the mechanical licensing
collective.
(l) The term payee snapshot means
the royalty payee information in the
mechanical licensing collective’s
records as of a particular date used for
a particular monthly royalty
distribution.
(m) The term pre-termination
copyright owner means the owner of the
relevant copyright immediately prior to:
(1) The effective date of termination
for an effective termination under 17
U.S.C. 203 or 304; or
(2) The purported effective date of
termination for a claimed, disputed, or
invalid termination under 17 U.S.C. 203
or 304.
*
*
*
*
*
(o) The term terminating party means:
(1) A party entitled under 17 U.S.C.
203 or 304 to terminate a grant, who is
seeking to terminate such a grant under
such provisions;
(2) A party who has effectuated
termination of a grant under 17 U.S.C.
203 or 304;
(3) A party to whom rights have
reverted or are expected to revert
pursuant to the effective termination of
a grant under 17 U.S.C. 203 or 304; or
(4) A successor in interest to a party
identified in paragraph (o)(1), (2), or (3)
of this section (e.g., a subsequent
publisher or administrator).
*
*
*
*
*
■ 3. Amend § 210.27 by redesignating
paragraph (g)(2)(ii) as paragraph
(g)(2)(ii)(A) and adding paragraph
(g)(2)(ii)(B).
The addition reads as follows:
§ 210.27 Reports of usage and payment for
blanket licensees.
*
*
*
*
*
(g) * * *
(2) * * *
(ii)(A) * * *
(B) To the extent applicable to the
mechanical licensing collective’s efforts
under paragraph (g)(2)(ii)(A) of this
section:
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(1) The derivative works exception
does not apply to any individual
download license and no individual or
entity may be construed as the copyright
owner or royalty payee of a musical
work (or share thereof) used pursuant to
any such license based on the derivative
works exception.
(2) The derivative works exception
does not apply to any voluntary license
and no individual or entity may be
construed as the copyright owner or
royalty payee of a musical work (or
share thereof) used pursuant to any such
license based on the derivative works
exception, unless and only to the extent
that the mechanical licensing collective
is directed otherwise pursuant to:
(i) The resolution of a dispute
regarding the application of the
derivative works exception to a
particular voluntary license or its
underlying grant of authority; or
(ii) A notice submitted under
§ 210.30(c)(1).
*
*
*
*
*
■ 4. Amend § 210.29 as follows:
■ a. In paragraph (a), remove ‘‘reporting
obligations’’ and add in its place
‘‘reporting and payment obligations’’
and add two sentences at the end; and
■ b. Add paragraphs (b)(4), (j), and (k).
The additions read as follows:
§ 210.29 Reporting and distribution of
royalties to copyright owners by the
mechanical licensing collective.
(a) * * * This section also prescribes
reporting and payment obligations of
the mechanical licensing collective to
copyright owners for the distribution of
matched historical royalties. This
section does not apply to distributions
of unclaimed accrued royalties under 17
U.S.C. 115(d)(3)(J).
(b) * * *
(4)(i)(A) The copyright owner of a
musical work (or share thereof) as of the
last day of a monthly reporting period
in which such musical work is used
pursuant to a blanket license is entitled
to all royalty payments and other
distributable amounts (e.g., accrued
interest), including any subsequent
adjustments, for the uses of that musical
work occurring during that monthly
reporting period, unless such
entitlement has been transferred to
another individual or entity. As used in
the previous sentence, the term uses
means all covered activities engaged in
under blanket licenses as reported by
blanket licensees to the mechanical
licensing collective.
(B)(1) For the purpose of making any
distribution of royalties or other
amounts (e.g., accrued interest), as a
matter of reasonable administrability,
the mechanical licensing collective, in
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the absence of a dispute or
investigation, shall treat the individual
or entity identified in its records as of
the date of the payee snapshot used by
the mechanical licensing collective for
the applicable distribution as legally
authorized to receive such distribution,
unless the mechanical licensing
collective is notified otherwise.
(2) Nothing in paragraph (b)(4)(i)(B)(1)
of this section shall be construed as
absolving the mechanical licensing
collective of its responsibility to engage
in reasonable verification and antifraud
efforts in connection with the
registration and claiming of musical
works (or shares thereof).
(3) No distribution made by the
mechanical licensing collective shall
alter or prejudice any party’s legal
entitlement to any of the distributed
funds or such party’s ability to collect
such funds from someone other than the
mechanical licensing collective if such
funds were not distributed to such party
by the mechanical licensing collective.
(4) Notwithstanding any other
provision of this section, where the
mechanical licensing collective
distributes royalties to the wrong party
and that error is caused by the actions
of the mechanical licensing collective,
the mechanical licensing collective shall
promptly correct its error upon learning
of it. For purposes of this paragraph
(b)(4)(i)(B)(4), an error is not caused by
the mechanical licensing collective
where it acts in accordance with
paragraph (b)(4)(i)(B)(1) of this section
or otherwise reasonably relies on
information provided to it by others that
turns out to be inaccurate.
(C) The derivative works exception
does not apply to any blanket license
and no individual or entity may be
construed as the copyright owner or
royalty payee of a musical work (or
share thereof) used pursuant to a
blanket license based on the derivative
works exception.
(ii) Subject to the requirements of and
except to the extent permitted by
§ 210.30, the mechanical licensing
collective shall not distribute royalties
in a manner inconsistent with paragraph
(b)(4)(i) of this section.
*
*
*
*
*
(j) Matched historical royalties. The
mechanical licensing collective shall
report and distribute matched historical
royalties and related accrued interest
and adjustments in the same manner
and subject to the same requirements
that apply to the reporting and
distribution of royalties for musical
works licensed under the blanket
license, as if such matched historical
royalties were royalties payable for
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musical works licensed under the
blanket license, but subject to the
following clarifications:
(1) Matched historical royalties shall
be treated as accrued royalties
distributable under paragraph (b)(1)(ii)
of this section and shall be separately
identified in applicable royalty
statements.
(2) With respect to the requirements
of paragraph (b)(2) of this section,
royalty distributions based on
adjustments to matched historical
royalties reflected in cumulative
statements of account delivered to the
mechanical licensing collective by
digital music providers pursuant to
§ 210.10(b)(3)(i) shall be made by the
mechanical licensing collective at least
once annually, upon submission of one
or more statements of adjustment
delivered to the mechanical licensing
collective by digital music providers
pursuant to § 210.10(k), to the extent
any such statement of adjustment is
delivered to the mechanical licensing
collective during such annual period.
(k) Corrective royalty adjustment. Any
distribution under paragraph (b) of this
section (including any distribution of
matched historical royalties, or related
accrued interest or adjustments) or
deduction under § 210.27(g)(2)(ii) (other
than a deduction related to a voluntary
license) made by the mechanical
licensing collective before August 8,
2024 and based on an application of the
derivative works exception that is
inconsistent with paragraph (b)(4)(i)(C)
of this section (including as such
paragraph applies to matched historical
royalties through paragraph (j) of this
section) or § 210.27(g)(2)(ii)(B)(1), as
each of those provisions exist on August
8, 2024, shall be subject to adjustment
by the mechanical licensing collective.
Any amounts held by the mechanical
licensing collective in connection with
such application of the derivative works
exception as of August 8, 2024 shall also
be subject to adjustment. The
adjustment process shall be as follows:
(1)(i) To the extent required by this
paragraph (k), where a royalty payee
(the prior payee) received amounts from
the mechanical licensing collective that
such prior payee would not have
received had the distribution been made
in a manner consistent with the
application of the derivative works
exception embodied in paragraph
(b)(4)(i)(C) of this section, the
mechanical licensing collective shall,
except as otherwise provided for by this
paragraph (k), recover such
overpayment from such prior payee and
shall distribute it to the royalty payee
(the proper payee) who is entitled to
such funds under the application of the
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56613
derivative works exception embodied in
paragraph (b)(4)(i)(C) of this section.
(ii) The mechanical licensing
collective shall notify each prior payee
and proper payee (collectively, the
parties) of the overpayment no later
than August 8, 2024. Such notice shall
contain at least the following
information:
(A) A summary of the Copyright
Office’s conclusions embodied in
paragraph (b)(4)(i)(C) of this section and
§ 210.27(g)(2)(ii)(B);
(B) A description of the adjustment
process detailed in this paragraph (k),
including the option for the parties to
reach a voluntary agreement concerning
the overpayment;
(C) For each musical work (or share
thereof) at issue, the amount of the
overpayment; and
(D) The respective contact
information for each of the parties
contained in the mechanical licensing
collective’s records.
(iii) After receiving such notice, the
parties may attempt to reach a voluntary
agreement with respect to the
overpayment. Before September 9, 2024,
the parties shall notify the mechanical
licensing collective that:
(A) The parties reached a voluntary
agreement with respect to the
overpayment;
(B) The parties are in the process of
attempting to reach a voluntary
agreement with respect to the
overpayment; or
(C) The parties did not reach a
voluntary agreement with respect to the
overpayment.
(iv) The mechanical licensing
collective shall act as follows in
connection with such notice:
(A) If the mechanical licensing
collective receives notice that the
parties reached a voluntary agreement
with respect to the overpayment, it shall
not make any adjustment in connection
with the overpayment.
(B) If the mechanical licensing
collective receives notice that the
parties are in the process of attempting
to reach a voluntary agreement with
respect to the overpayment, it shall not
take any action unless and until it
receives a subsequent notice. If the
subsequent notice states that the parties
reached a voluntary agreement with
respect to the overpayment, the
mechanical licensing collective shall
not make any adjustment in connection
with the overpayment. If the subsequent
notice states that the parties did not
reach a voluntary agreement with
respect to the overpayment, the
mechanical licensing collective shall
commence the adjustment process
described in paragraph (k)(1)(v) of this
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section. If such a subsequent notice is
received after August 8, 2024, the
mechanical licensing collective shall
not be required to make any adjustment
in connection with the overpayment.
(C) If the mechanical licensing
collective receives notice that the
parties did not reach a voluntary
agreement with respect to the
overpayment, it shall commence the
adjustment process described in
paragraph (k)(1)(v) of this section.
(D) If the mechanical licensing
collective does not receive a timely
notice under paragraph (k)(1)(iii) of this
section, it shall commence the
adjustment process described in
paragraph (k)(1)(v) of this section.
(v) Where, pursuant to paragraph
(k)(1)(iv) of this section, the mechanical
licensing collective is required to
commence an adjustment process with
respect to the overpayment, the
following requirements shall apply:
(A) Not later than October 7, 2024 or
30 calendar days after receiving an
applicable subsequent notice under
paragraph (k)(1)(iv)(B) of this section,
whichever is later, the mechanical
licensing collective shall notify the prior
payee that the adjustment process has
commenced and request that the prior
payee return the overpayment no later
than November 6, 2024 or 30 calendar
days after receiving the notice,
whichever is later. Any returned
amounts shall be distributed,
accompanied by an appropriate royalty
statement, to the proper payee with the
next regular monthly royalty
distribution to occur at least 30 calendar
days after any such amounts are
returned.
(B) If such overpayment is not
returned in full in accordance with
paragraph (k)(1)(v)(A) of this section,
then beginning with the first
distribution of royalties to occur at least
30 calendar days after the deadline
specified in that paragraph, 50 percent
of any and all accrued royalties and
other distributable amounts (e.g.,
accrued interest) that would otherwise
be payable to the prior payee from the
mechanical licensing collective each
month, regardless of the associated work
(or share), shall instead be distributed,
accompanied by an appropriate royalty
statement, to the proper payee until
such time as the full amount of the
overpayment is recovered. Where the
amount to be recovered under this
paragraph during a monthly royalty
distribution constitutes less than 50
percent of the applicable accrued
royalties and other distributable
amounts, the mechanical licensing
collective shall recover the full amount
of the overpayment. Where more than
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one proper payee is entitled to a
corrective royalty adjustment from the
same prior payee for different musical
works, any amounts recovered and
distributed under this paragraph
(k)(1)(v)(B) shall be apportioned equally
among such proper payees.
(2) Where, as of August 8, 2024, the
mechanical licensing collective is
holding amounts that would constitute
an overpayment under paragraph (k)(1)
of this section if such amounts had been
distributed to the prior payee, such
amounts shall be distributed,
accompanied by an appropriate royalty
statement, to the proper payee no later
than the first distribution of royalties
based on the first payee snapshot taken
by the mechanical licensing collective at
least 30 calendar days after August 8,
2024.
(3) The recovery and distribution
processes described in paragraphs (k)(1)
and (2) of this section shall also apply,
as applicable, to amounts deducted, or
held pending deduction, by the
mechanical licensing collective under
§ 210.27(g)(2)(ii), other than with
respect to amounts relating to voluntary
licenses, where the proper payee is not
the payee to whom the relevant usage
was originally matched. For purposes of
this paragraph (k)(3), the payee to whom
the relevant usage was originally
matched shall constitute the prior payee
as that term is used elsewhere in this
paragraph (k).
(4) Nothing in this paragraph (k) shall
be construed as prejudicing the proper
payee’s right or ability to otherwise
recover such overpayment from the
prior payee outside of the adjustment
process detailed in this paragraph (k).
Where the overpayment is recovered
outside of such adjustment process or a
legal proceeding is commenced seeking
recovery of the overpayment, the
mechanical licensing collective must be
notified. Upon receipt of such notice,
the mechanical licensing collective shall
discontinue any recovery efforts
engaged in under this paragraph (k).
(5) Notwithstanding the adjustment
process detailed in this paragraph (k),
the parties and the mechanical licensing
collective may voluntarily agree to an
alternative adjustment process.
■ 5. Revise § 210.30 to read as follows:
§ 210.30 Transfers of copyright ownership,
royalty payee changes, and related
disputes.
(a) General. This section prescribes
rules governing the mechanical
licensing collective’s administration of
transfers of copyright ownership, other
royalty payee changes, and related
disputes.
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(b) Requirements for the mechanical
licensing collective to implement a
change. The mechanical licensing
collective shall not take any action to
implement or give effect to any transfer
of copyright ownership (including a
transfer resulting from an effective
termination under 17 U.S.C. 203 or 304)
or other change to a royalty payee,
unless the requirements of paragraph (c)
of this section are satisfied or the
mechanical licensing collective is acting
in connection with the resolution of a
dispute. Where the requirements of
paragraph (c) of this section are
satisfied, the mechanical licensing
collective shall implement and give
effect to such transfer or other change in
accordance with paragraph (d) of this
section.
(c) Notices of change. The mechanical
licensing collective must be
appropriately notified in writing with
respect to any transfer or other change
described in paragraph (b) of this
section. Subject to the further
requirements of this paragraph (c), such
notice must comply with any reasonable
formatting and submission requirements
that the mechanical licensing collective
establishes and makes publicly available
on its website. No fee may be charged
for submitting such a notice. Upon
submitting such a notice, or any
additional information related to such
notice, the submitter shall be provided
with a prompt response from the
mechanical licensing collective
confirming receipt of the notice, or any
additional information related to such
notice, and the date of receipt.
(1)(i)(A) Subject to paragraph (c)(1)(ii)
of this section, for any transfer or other
payee change not addressed by
paragraph (c)(2) of this section, the
mechanical licensing collective shall be
notified of such transfer or payee change
in accordance with any reasonable
requirements that the mechanical
licensing collective establishes and
makes publicly available on its website.
(B) If such requirements are not
publicly available on the mechanical
licensing collective’s website as of July
9, 2024, the mechanical licensing
collective shall adopt such requirements
and make them available as soon as
reasonably practicable, but no later than
September 9, 2024, unless the Copyright
Office allows for an extension in its
discretion. The mechanical licensing
collective shall make such requirements
publicly available on its website at least
30 calendar days before such
requirements become effective.
(C) The mechanical licensing
collective shall make any amendment to
such requirements publicly available on
its website at least 30 calendar days
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before such amendment becomes
effective, unless the mechanical
licensing collective can articulate good
cause for not providing such advanced
notice. In no case shall an amendment
be effective before being published on
the mechanical licensing collective’s
website.
(ii) Notwithstanding paragraph
(c)(1)(i) of this section, any notice
seeking to change the royalty payee
from a terminating party (or its
designee) to a corresponding pretermination copyright owner (or its
designee) is subject to the following
additional requirements:
(A) The notice must be signed after
the effective date of termination.
(B) The notice must set forth in plain
language an acknowledgement that the
requested action alters the royalty payee
from that established by
§ 210.29(b)(4)(i).
(2) Specific requirements for notices
about transfers of copyright ownership
resulting from an effective termination
under 17 U.S.C. 203 or 304 are as
follows:
(i) The required notice shall include
all of the following information:
(A) A true, correct, complete, and
legible copy of the signed and as-served
notice of termination submitted to the
Copyright Office for recordation
pursuant to § 201.10.
(B) A true, correct, complete, and
legible copy of the statement of service
submitted to the Copyright Office for
recordation pursuant to § 201.10, if one
was submitted.
(C) Either:
(1) Proof, as to a particular musical
work, that the notice of termination was
recorded in the Copyright Office before
the effective date of termination. Where
the notice of termination identifies more
than one musical work, each musical
work shall be treated independently; or
(2) If the Copyright Office has not yet
recorded the notice of termination,
proof, as to a particular musical work,
that the notice of termination was
submitted to the Copyright Office for
recordation before the effective date of
termination, provided that proof, as to
such musical work, that the notice of
termination was recorded in the
Copyright Office before the effective
date of termination is delivered to the
mechanical licensing collective at a later
date. Where the notice of termination
identifies more than one musical work,
each musical work shall be treated
independently.
(D) The terminating party, identified
by name and any known and
appropriate unique identifiers,
appropriate contact information for the
terminating party or their administrator
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or other representative, and, if the
terminating party is not already
receiving royalty distributions from the
mechanical licensing collective, any
additional information that is necessary
for the terminating party to receive
royalty distributions from the
mechanical licensing collective.
(ii) With respect to the information
required by paragraphs (c)(2)(i)(A)
through (C) of this section, providing an
official Copyright Office certification for
any such information shall not be
required. If the mechanical licensing
collective has good cause to doubt the
authenticity of any such information,
the mechanical licensing collective shall
either seek verification from the
Copyright Office or request that such
verification be provided to the
mechanical licensing collective by the
submitter.
(iii) Where the information required
by paragraph (c)(2)(i) of this section is
insufficient to enable the mechanical
licensing collective to implement and
give effect to the termination with
respect to a particular musical work, the
mechanical licensing collective shall
promptly correspond with the
terminating party and the pretermination copyright owner (or their
respective representatives) to attempt to
obtain the minimum necessary
information.
(iv) The required notice shall be
submitted and signed by either the
terminating party or the pre-termination
copyright owner (or their respective
duly authorized representatives). Such
signature shall be accompanied by the
name and title of the person signing the
notice and the date of the signature. The
notice may be signed electronically. The
person signing the notice shall certify
that they have appropriate authority to
submit the notice to the mechanical
licensing collective and that all
information submitted as part of the
notice is true, accurate, and complete to
the best of the signer’s knowledge,
information, and belief, and is provided
in good faith. If the notice is submitted
by the terminating party, the following
additional steps shall be required:
(A) The mechanical licensing
collective shall notify the pretermination copyright owner about the
terminating party’s notice within 15
calendar days of receiving either the
notice or the last piece of information
necessary for the mechanical licensing
collective to implement the change as to
a particular musical work, whichever is
later, and shall contemporaneously alert
the terminating party that such notice
was sent to the pre-termination
copyright owner.
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56615
(B) If the pre-termination copyright
owner does not initiate a dispute with
the mechanical licensing collective
regarding the termination, in accordance
with paragraph (e) of this section,
within 30 calendar days of receiving
such notice, the mechanical licensing
collective shall implement and give
effect to the transfer of copyright
ownership resulting from the
termination, in accordance with
paragraph (d) of this section. Nothing in
this paragraph (c)(2)(iv)(B) shall prevent
the pre-termination copyright owner
from disputing the termination with the
mechanical licensing collective at a later
date or challenging the termination in a
legal proceeding.
(v) Where there is more than one
terminating party or pre-termination
copyright owner, the required notice
shall include a satisfactory
identification of any applicable
ownership shares for each musical work
subject to the termination. Where there
is more than one terminating party, the
notice shall be effective only as to those
terminating parties whose information
is provided in accordance with
paragraph (c)(2)(i)(D) of this section.
Where there is more than one
terminating party, a notice that is signed
and certified by any one terminating
party in accordance with paragraph
(c)(2)(iv) of this section is sufficient as
to all terminating parties.
(vi)(A) A notice submitted to the
mechanical licensing collective
pursuant to this paragraph (c)(2) may be
withdrawn in accordance with any
reasonable requirements that the
mechanical licensing collective
establishes and makes publicly available
on its website.
(B) A notice submitted to the
mechanical licensing collective
pursuant to this paragraph (c)(2) may be
converted into a notice under paragraph
(c)(1) of this section in accordance with
any reasonable requirements that the
mechanical licensing collective
establishes and makes publicly available
on its website.
(C) Such requirements shall comply
with the requirements of paragraphs
(c)(1)(i)(B) and (C) of this section.
(d) Implementation of a change. Upon
receiving a notice that complies with
the requirements of paragraph (c) of this
section, the mechanical licensing
collective shall implement and give
effect to the identified transfer or other
payee change on a per work basis as
follows:
(1)(i) Except as provided by paragraph
(d)(1)(ii) of this section, where the
mechanical licensing collective receives
the notice before the first day of the first
monthly reporting period to commence
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after the change is effective, the
mechanical licensing collective shall
implement and give effect to the change,
on a prospective basis, beginning no
later than the first distribution of
royalties for such reporting period.
(ii) Where the notice concerns a
transfer of copyright ownership
resulting from an effective termination
under 17 U.S.C. 203 or 304 submitted by
the terminating party under paragraph
(c)(2) of this section, and the pretermination copyright owner does not
initiate a dispute as described in
paragraph (c)(2)(iv)(B) of this section,
where the mechanical licensing
collective receives the notice at least 45
calendar days before the first day of the
first monthly reporting period to
commence after the change is effective,
the mechanical licensing collective shall
implement and give effect to the change,
on a prospective basis, beginning no
later than the first distribution of
royalties for such reporting period.
(2)(i) Except as provided by paragraph
(d)(2)(ii) of this section, where the
mechanical licensing collective receives
the notice on or after the first day of the
first monthly reporting period to
commence after the change is effective,
the mechanical licensing collective shall
implement and give effect to the change,
on a prospective basis, beginning no
later than the first distribution of
royalties based on the first payee
snapshot taken by the mechanical
licensing collective at least 30 calendar
days after the mechanical licensing
collective receives the notice.
(ii) Where the notice concerns a
transfer of copyright ownership
resulting from an effective termination
under 17 U.S.C. 203 or 304 submitted by
the terminating party under paragraph
(c)(2) of this section, and the pretermination copyright owner does not
initiate a dispute as described in
paragraph (c)(2)(iv)(B) of this section,
where the mechanical licensing
collective receives the notice less than
45 calendar days before the first day of
the first monthly reporting period to
commence after the change is effective,
the mechanical licensing collective shall
implement and give effect to the change,
on a prospective basis, beginning no
later than the first distribution of
royalties based on the first payee
snapshot taken by the mechanical
licensing collective at least 30 calendar
days after the pre-termination copyright
owner’s deadline to dispute under
paragraph (c)(2)(iv)(B) of this section.
(3) Where additional information
related to the notice is required to
enable the mechanical licensing
collective to implement and give effect
to the change, and such information is
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received after receipt of the notice, the
timing requirements described in
paragraphs (d)(1) and (2) of this section
shall be based on the date that the last
piece of necessary information is
received by the mechanical licensing
collective.
(4) Where the change is effective as to
one or more monthly reporting periods
for which the mechanical licensing
collective distributed royalties before
implementing and giving effect to the
change, the mechanical licensing
collective may, but is not required to,
make a corrective royalty adjustment if
the notice requests one.
(5) If the mechanical licensing
collective does not implement and give
effect to the change in accordance with
the deadlines prescribed by paragraphs
(d)(1) through (3) of this section, the
mechanical licensing collective shall
implement and give effect to the change
as soon as reasonably practicable,
provided that the change is
implemented and given effect by the
mechanical licensing collective no later
than the next regular monthly royalty
distribution to occur either after the
implementation deadline that originally
applied under paragraphs (d)(1) through
(3) of this section, as applicable, or at
least 30 calendar days after the date that
the mechanical licensing collective
learns that the change was not
implemented on time, whichever is
later. In such cases, the mechanical
licensing collective shall implement and
give effect to the change as of the
implementation deadline that originally
applied under paragraphs (d)(1) through
(3) of this section, as applicable,
including by making any necessary
corrective royalty adjustments.
(6) No action or inaction by the
mechanical licensing collective with
respect to implementing and giving
effect to a transfer or other payee change
shall alter or prejudice any party’s rights
to royalties pursuant to such change or
such party’s right to collect such
royalties from someone other than the
mechanical licensing collective if such
royalties were not distributed to such
party by the mechanical licensing
collective.
(7) Where the notice concerns a
transfer of copyright ownership
resulting from an effective termination
under 17 U.S.C. 203 or 304 submitted
under paragraph (c)(2) of this section,
and the notice is accompanied by proof
that the notice of termination was
submitted to the Copyright Office for
recordation, but the notice is not
accompanied by proof that it was
recorded in the Copyright Office before
the effective date of termination, the
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mechanical licensing collective shall act
as follows:
(i) Upon subsequent receipt of proof
that the notice of termination was
recorded in the Copyright Office before
the effective date of termination, the
mechanical licensing collective shall
treat the proof of recordation as a type
of additional information under
paragraph (d)(3) of this section. The
mechanical licensing collective shall
not implement or give effect to any such
termination unless and until such proof
is received.
(ii) Until receipt of the proof
described in paragraph (d)(7)(ii)(B) or
(C) of this section, as the case may be,
and subject to paragraph (d)(7)(ii)(D) of
this section the mechanical licensing
collective shall hold applicable accrued
royalties and accrued interest pending
receipt of proof that the notice of
termination was recorded in the
Copyright Office before the effective
date of termination as follows:
(A) The mechanical licensing
collective shall commence holding such
amount no later than the
implementation deadline that would
apply under paragraphs (d)(1) through
(3) of this section, as applicable, if proof
of recordation had been provided with
the notice.
(B) After receiving proof that the
notice of termination was recorded in
the Copyright Office before the effective
date of termination is received, the
mechanical licensing collective shall
implement and give effect to the
termination as provided by paragraphs
(d)(1) through (5) and (d)(7)(i) of this
section, as applicable.
(C) After receiving proof that the
Copyright Office refused to record the
notice of termination, the recordation
submission was withdrawn, or the
notice of termination was recorded on
or after the effective date of termination,
the mechanical licensing collective shall
release the held funds to the pretermination copyright owner.
(D) If the mechanical licensing
collective does not receive the proof
described in either paragraph
(d)(7)(ii)(B) or (C) of this section within
6 months after the mechanical licensing
collective commences holding
applicable accrued royalties and
accrued interest, the mechanical
licensing collective shall request that
the terminating party provide an update
about the status of the relevant
recordation submission. If the
submission remains pending at that
time, the mechanical licensing
collective may continue to request
periodic updates from the terminating
party in its discretion. Upon receiving
the proof described in either paragraph
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(d)(7)(ii)(B) or (C), the mechanical
licensing collective shall act in
accordance with paragraph (d)(7)(ii)(B)
or (C), as the case may be.
(iii) Where a notice of termination
identifies more than one musical work,
whether the notice is timely recorded in
the Copyright Office shall be
determined on a per work basis with
respect to each musical work identified
in the notice.
(e) Termination disputes. The
following requirements shall apply to
any dispute initiated with the
mechanical licensing collective
regarding a termination under 17 U.S.C.
203 or 304:
(1) Such a dispute must be with
regard to the validity of the termination
or the application of the derivative
works exception to a particular
voluntary license or its underlying grant
of authority.
(2) Only a pre-termination copyright
owner (or its representative) may
initiate such a dispute.
(3)(i) If a pre-termination copyright
owner (or its representative) initiates
such a dispute and delivers the
information required to substantiate the
dispute to the mechanical licensing
collective under paragraph (e)(4) of this
section, the mechanical licensing
collective shall hold applicable accrued
royalties and accrued interest pending
resolution of the dispute.
(ii) With respect to any dispute
concerning the application of the
derivative works exception to a
particular voluntary license or its
underlying grant of authority:
(A) The mechanical licensing
collective shall, as needed and on an
ongoing basis, invoice any applicable
digital music provider for the royalties
associated with the dispute.
(B) The mechanical licensing
collective shall hold such royalties in
the same manner and at the same
interest rate as any other funds held
pursuant to 17 U.S.C. 115(d)(3)(H)(ii).
(C) Where the resolution of the
dispute results in payment being made
by the mechanical licensing collective
pursuant to a blanket license, the
payment must include any accrued
interest. Where the resolution of the
dispute results in a digital music
provider paying a voluntary licensor,
the mechanical licensing collective
must promptly return the held amount,
including any accrued interest, to the
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digital music provider accompanied by
notice that the dispute has been
resolved in such manner.
(4) The minimum information that
must be delivered to the mechanical
licensing collective to substantiate a
termination-related dispute shall consist
of the following:
(i) A cognizable explanation of the
grounds for the dispute, articulated with
specificity.
(ii) Documentation sufficient to
support the grounds for the dispute,
which shall consist of the following:
(A) A true, correct, complete, and
legible copy of each grant in dispute.
(B) A true, correct, complete, and
legible copy of any other agreement or
document necessary to support the
grounds for the dispute.
(C) Such other documentation or
substantiating information as the
mechanical licensing collective may
reasonably require pursuant to a dispute
policy adopted under 17 U.S.C.
115(d)(3)(K).
(iii) A satisfactory identification of
each musical work in dispute.
(iv) A certification that the submitter
has appropriate authority to initiate the
dispute with the mechanical licensing
collective and that all information
submitted in connection with the
dispute is true, accurate, and complete
to the best of the submitter’s knowledge,
information, and belief, and is provided
in good faith.
(v) The following additional
information if the dispute concerns the
application of the derivative works
exception to a particular voluntary
license or its underlying grant of
authority:
(A) A true, correct, complete, and
legible copy of each voluntary license at
issue.
(B) A satisfactory identification of
each relevant sound recording that
constitutes a derivative work within the
meaning of 17 U.S.C. 101 that was
prepared pursuant to appropriate
authority.
(C) The date of preparation for each
such sound recording, which must be
before the effective date of termination.
(5) Notwithstanding anything to the
contrary that may be contained in
§ 210.34, any and all documentation
provided to the mechanical licensing
collective pursuant to paragraph (e)(4)
of this section shall be disclosed to all
parties to the dispute. If a party to the
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56617
dispute is not a party or successor to a
party to an otherwise confidential
document, such disclosure shall be
subject to an appropriate written
confidentiality agreement.
(6) Any dispute initiated with the
mechanical licensing collective under
this paragraph (e) shall be limited to
those musical works identified pursuant
to paragraph (e)(4)(iii) of this section.
The existence of such a dispute shall
not affect the implementation of a
change with respect to any other
musical work identified in the same
notice of change and that is not subject
to a dispute.
■ 6. Amend § 210.34 as follows:
■ a. In paragraph (c)(5), remove ‘‘to
paragraph (c)(4) of’’ and add in its place
‘‘to paragraph (c)(4) or (6) of’’; and
■ b. Add paragraph (c)(6).
The addition reads as follows:
§ 210.34 Treatment of confidential and
other sensitive information.
*
*
*
*
*
(c) * * *
(6) Notwithstanding paragraph (c)(1)
of this section, where the mechanical
licensing collective places any amount
on hold pursuant to a dispute initiated
under § 210.30(e), the mechanical
licensing collective shall promptly
disclose the total amount held for each
disputed work (or share thereof) to the
parties to the dispute, which shall
include an identification of the
approximate amount of royalties
expected to have been distributed for
each disputed work (or share thereof) in
the first monthly distribution to occur
after the initiation of the hold. Upon the
written request of any party to the
dispute, the mechanical licensing
collective shall provide an update about
the amount held to all parties to the
dispute within a reasonable period of
time, except that the mechanical
licensing collective is not required to
provide such an update more frequently
than once every three months.
*
*
*
*
*
Dated: June 25, 2024.
Suzanne Wilson,
General Counsel and Associate Register of
Copyrights.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2024–14609 Filed 7–8–24; 8:45 am]
BILLING CODE 1410–30–P
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Agencies
[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Rules and Regulations]
[Pages 56586-56617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14609]
[[Page 56585]]
Vol. 89
Tuesday,
No. 131
July 9, 2024
Part III
Library of Congress
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Copyright Office
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37 CFR Part 210
Termination Rights, Royalty Distributions, Ownership Transfers,
Disputes, and the Music Modernization Act; Final Rule
Federal Register / Vol. 89 , No. 131 / Tuesday, July 9, 2024 / Rules
and Regulations
[[Page 56586]]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 210
[Docket No. 2022-5]
Termination Rights, Royalty Distributions, Ownership Transfers,
Disputes, and the Music Modernization Act
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Final rule.
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SUMMARY: The U.S. Copyright Office is issuing a final rule regarding
how the Copyright Act's derivative works exception to termination
rights applies to the statutory mechanical blanket license established
by the Music Modernization Act. The final rule also addresses other
matters relevant to identifying the proper payee to whom the mechanical
licensing collective must distribute royalties. Among other things, the
Office is adopting regulations addressing the mechanical licensing
collective's distribution of matched historical royalties and
administration of ownership transfers, other royalty payee changes, and
related disputes.
DATES: This rule is effective August 8, 2024. However, compliance by
the mechanical licensing collective, other than with respect to
Sec. Sec. 210.27(g)(2)(ii)(B)(1), 210.29(b)(4)(i)(C), 210.29(k), and
210.30(c)(1)(i)(B), is not required until the first distribution of
royalties based on the first payee snapshot taken after October 7,
2024. The Copyright Office may, upon request, extend the compliance
deadlines in its discretion by providing public notice through its
website.
FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the
General Counsel, by email at [email protected] or telephone at 202-
707-8350.
SUPPLEMENTARY INFORMATION:
I. Background
The Copyright Office (``Office'') issues this final rule subsequent
to a supplemental notice of proposed rulemaking (``SNPRM''), published
in the Federal Register on September 26, 2023,\1\ and a notice of
proposed rulemaking (``NPRM''), published in the Federal Register on
October 25, 2022.\2\ This final rule assumes familiarity with the NPRM
and SNPRM, as well as the public comments received in response to those
notices.\3\
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\1\ 88 FR 65908 (Sept. 26, 2023).
\2\ 87 FR 64405 (Oct. 25, 2022).
\3\ The NPRM stemmed from a previous rulemaking, discussed in
detail in the NPRM, that involved multiple rounds of public comments
through a notification of inquiry, 84 FR 49966 (Sept. 24, 2019), a
notice of proposed rulemaking, 85 FR 22518 (Apr. 22, 2020), and an
ex parte communications process. Guidelines for ex parte
communications, along with records of such communications, including
those referenced herein, are available at https://www.copyright.gov/rulemaking/mma-implementation/ex-parte-communications.html. All
rulemaking activity, including public comments, as well as
educational material regarding the MMA, can currently be accessed
via navigation from https://www.copyright.gov/music-modernization.
Comments received in response to the NPRM and SNPRM are available at
https://copyright.gov/rulemaking/mma-termination/. References to the
public comments are by party name (abbreviated where appropriate),
followed by ``NPRM Initial Comments,'' ``NPRM Reply Comments,''
``SNPRM Initial Comments,'' ``SNPRM Reply Comments,'' or ``Ex Parte
Letter,'' as appropriate.
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While the final rule retains many elements from the SNPRM, it also
adopts a number of changes in response to the public comments,
including a scaling back of certain proposals. We have adopted a number
of commenter suggestions where reasonable, and have striven to
establish a fair and balanced approach to the issues presented in this
proceeding. In particular, the Office has endeavored to find solutions
to the practical and administrative concerns that were raised by
commenters. We are thankful for their participation in this process.
This document first summarizes the Office's earlier proposals and
the public comments. It next addresses questions raised regarding our
rulemaking authority. Finally, it discusses the different parts of the
final rule: termination and the derivative works exception; the
copyright owner entitled to blanket license royalties; matched
historical royalties; ownership transfers and royalty payee changes;
disputes; the corrective royalty adjustment; and the rule's effective
date and compliance deadline.
A. The NPRM
The Office commenced this proceeding after the Mechanical Licensing
Collective (``MLC'') \4\ adopted a termination dispute policy
(``Termination Policy'') that conflicted with prior Office guidance and
was based on an erroneous interpretation of how the Copyright Act's
derivative works exception (``Exception'') to termination rights
applies to the statutory mechanical blanket license (``blanket
license'') established by the Orrin G. Hatch-Bob Goodlatte Music
Modernization Act (``MMA'').\5\ The Office concluded it was necessary
to address the legal issues more directly, including how termination
law and the Exception intersect with the blanket license.\6\ In the
NPRM, it explained that clarifying the issues ``would provide much
needed business certainty to music publishers and songwriters'' and
``would enable the MLC to appropriately operationalize the distribution
of post-termination royalties in accordance with existing law.'' \7\
The NPRM contained a detailed discussion of the procedural background
leading to this rulemaking,\8\ the Office's regulatory authority,\9\
and legal background about the Copyright Act's termination provisions
and the Exception.\10\
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\4\ The preamble uses the terms ``Mechanical Licensing
Collective'' or ``MLC'' to refer to the currently designated
mechanical licensing collective. The regulatory text uses the
lowercase statutory term ``mechanical licensing collective,'' as the
regulations apply to any designated mechanical licensing collective,
including the current or any future designee.
\5\ 87 FR 64405, 64407.
\6\ Id.
\7\ Id. (``Moreover, without the uniformity in application that
a regulatory approach brings, the Office is concerned that the MLC's
ability to distribute post-termination royalties efficiently would
be negatively impacted.'').
\8\ Id. at 64406-07.
\9\ Id. at 64407-08.
\10\ Id. at 64408-10.
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The Office then analyzed the application of the Exception in the
context of the blanket license and preliminarily concluded that the
MLC's Termination Policy was ``inconsistent with the law.'' \11\ We
explained that ``[w]hether or not the Exception applies to a [digital
music provider's (``DMP's'')] blanket license (and the Office concludes
that the Exception does not), the statute entitles the current
copyright owner to the royalties under the blanket license, whether
pre- or post-termination.'' \12\ This means that ``the post-termination
copyright owner (i.e., the author, the author's heirs, or their
successors, such as a subsequent publisher grantee) is due the post-
termination royalties paid by the DMP to the MLC.'' \13\
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\11\ Id. at 64410-11.
\12\ Id. at 64411.
\13\ Id.
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The Office proposed a rule to recognize the payee under the blanket
license who is legally entitled to royalties following a statutory
termination.\14\ We also proposed to require the MLC to immediately
repeal its Termination Policy in full after concluding that it was
``contrary to the Office's interpretation of current law.'' \15\ We
further proposed to require the MLC to adjust any royalties distributed
under the policy within 90
[[Page 56587]]
days to make copyright owners whole for any distributions it made based
on ``an erroneous understanding and application of current law.'' \16\
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\14\ Id. at 64411-12.
\15\ Id. at 64412.
\16\ Id.
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After the NPRM was published, the MLC said that it voluntarily
``suspended [its Termination Policy] pending the outcome of the
[Office's] rulemaking proceeding'' and will ``hold[ ] all royalties for
uses of musical works that are subject to statutory termination claims
beginning with the royalties for the October 2022 usage period, which
would have been initially distributed in January 2023.'' \17\ To the
Office's knowledge, the MLC continues to hold such royalties.
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\17\ The MLC, Policies, https://www.themlc.com/dispute-policy
(last visited June 14, 2024).
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B. The NPRM Comments
The Office received over 40 public comments in response to the
NPRM. These comments reflected the views of hundreds of interested
parties, including songwriters, music publishers and administrators,
record companies, public interest groups, academics, and practitioners.
Most commenters, including multiple music publishers and
administrators, generally supported the NPRM.\18\ While some commenters
raised concerns with certain aspects of the NPRM,\19\ the National
Music Publishers' Association (``NMPA'') was the only commenter to
oppose the proposed rule more broadly, though it supported the NPRM's
goal of ``ensuring that royalties for uses under the Section 115(d)
blanket license . . . are paid to the proper copyright owner.'' \20\
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\18\ See, e.g., Authors All. et al. NPRM Initial Comments at 1-
3; BMG Rights Mgmt. NPRM Initial Comments at 1-2; BMG Rights Mgmt.
NPRM Reply Comments at 1; ClearBox Rights NPRM Initial Comments at
2, 6-8; Fishman & Garcia NPRM Initial Comments at 1-4; Gates NPRM
Reply Comments; Howard NPRM Initial Comments at 1-2; Howard NPRM
Reply Comments at 2-3; King, Holmes, Paterno & Soriano LLP NPRM
Initial Comments; Landmann NPRM Initial Comments; Miller NPRM
Initial Comments; North Music Grp. NPRM Reply Comments at 2-3; NSAI
NPRM Initial Comments at 3; Promopub NPRM Initial Comments at 1-2;
Promopub NPRM Reply Comments at 1-2; Recording Academy NPRM Reply
Comments at 2-3; Rights Recapture NPRM Initial Comments; SGA et al.
NPRM Initial Comments at 1-2, 5; SONA et al. NPRM Initial Comments
at 2-3; SONA et al. NPRM Reply Comments at 3; Songwriters NPRM Reply
Comments at 1; Wixen Music Publ'g NPRM Initial Comments at 1-2.
\19\ See, e.g., CMPA NPRM Initial Comments at 1-2; A2IM & RIAA
NPRM Reply Comments at 1-2; MPA NPRM Reply Comments at 2-5.
\20\ See generally NMPA NPRM Initial Comments; NMPA Ex Parte
Letter (Feb. 6, 2023).
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Several commenters, including the MLC, sought additional guidance
from the Office on various related issues not directly addressed by the
NPRM. Examples include the following:
Application of the Exception to other types of statutory
mechanical licenses; \21\
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\21\ See, e.g., MLC NPRM Initial Comments at 6; MLC NPRM Reply
Comments at 2; ClearBox Rights NPRM Initial Comments at 6; ClearBox
Rights NPRM Reply Comments at 2; Howard NPRM Initial Comments at 5;
King, Holmes, Paterno & Soriano LLP NPRM Initial Comments.
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Application of the Exception to voluntary licenses; \22\
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\22\ See, e.g., MLC NPRM Initial Comments at 4-6; MLC NPRM Reply
Comments at 2; ClearBox Rights NPRM Initial Comments at 6; ClearBox
Rights NPRM Reply Comments at 2; Howard NPRM Initial Comments at 5;
Rights Recapture NPRM Initial Comments.
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Procedures for carrying out the proposed corrective
royalty adjustment to remedy prior distributions by the MLC based on an
erroneous understanding and application of the Exception; \23\
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\23\ See, e.g., MLC NPRM Initial Comments at 6-8; ClearBox
Rights NPRM Reply Comments at 3-4; ClearBox Rights Ex Parte Letter
at 2-4 (June 28, 2023); Howard NPRM Initial Comments at 6; Promopub
NPRM Initial Comments at 2; Promopub NPRM Reply Comments at 3; North
Music Grp. NPRM Reply Comments at 2.
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Procedures concerning notice, documentation, timing, and
other matters relating to the MLC's implementation of a termination
notification; \24\ and
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\24\ See, e.g., MLC NPRM Initial Comments at 10-11; ClearBox
Rights NPRM Initial Comments at 8; ClearBox Rights NPRM Reply
Comments at 5-6; Howard NPRM Initial Comments at 3-5; Howard NPRM
Reply Comments at 2-3; SGA et al. NPRM Initial Comments at 2, 6-8.
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Procedures concerning termination disputes and related
confidential information.\25\
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\25\ See, e.g., MLC NPRM Initial Comments at 11-14; ClearBox
Rights NPRM Reply Comments at 6.
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The MLC emphasized the importance of the Office providing guidance
regarding its termination-related procedures, explaining that rules
addressing these procedures are ``essential to processing royalties in
connection with statutory termination claims'' and ``would provide
important guidance to parties involved in termination claims.'' \26\
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\26\ MLC NPRM Initial Comments at 9-10; see also MLC NPRM Reply
Comments at 2.
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C. The SNPRM
After considering the requests for further guidance and other
comments received, the Office issued an SNPRM modifying the NPRM,
providing additional detail, and expanding the NPRM's scope. In
addition to addressing the Exception, the SNPRM addressed and sought
comments on other matters relevant to identifying the proper payee to
whom the MLC must distribute royalties. Such matters included issues
related to the MLC's distribution of matched historical royalties and
administration of ownership transfers, other royalty payee changes, and
related disputes. While requests for additional guidance largely
pertained to termination-related issues, those requests and other
comments suggested that more comprehensive regulations would be
beneficial to the MLC, publishers, songwriters, and the wider music
industry. As the SNPRM explained, ``[t]he accurate distribution of
royalties is a core objective of the MLC'' and ``[a]dopting the
[supplemental proposed rule] would establish standards and settle
expectations for all parties with respect to such distributions.'' \27\
At a high level, the SNPRM provided the following views and proposals
beyond those in the NPRM:
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\27\ 88 FR 65908, 65909.
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The Office's preliminary views on the application of the
Exception to matched historical royalties,\28\ pre-2021 statutory
mechanical licenses, individual download licenses, and voluntary
licenses.\29\
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\28\ Phrases defined in the SNPRM--e.g., ``historical unmatched
royalties,'' ``matched historical royalties,'' ``the owner at the
time of the use,'' and ``the owner at the time of the payment''--
have the same meaning here. See id. at 65909-10, 65912-13.
\29\ Id. at 65910-12.
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Additional discussion relating to the Office's preliminary
view in the NPRM that the owner at the time of the use is entitled to
distributions of blanket license royalties absent an agreement to the
contrary, and a related proposal to accommodate and give effect to
contractual payment arrangements that may require a different
result.\30\
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\30\ Id. at 65912-14.
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A proposal that the MLC report and distribute matched
historical royalties in the same manner and subject to the same
requirements that apply to the reporting and distribution of blanket
license royalties.\31\
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\31\ Id. at 65914.
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A proposal regarding how the MLC should be notified about
an ownership transfer or other royalty payee change, with detailed
provisions covering different types of changes, such as those relating
to contractual assignments, statutory terminations, and other changes
(e.g., when parties direct the MLC to pay an alternative designated
payee).\32\
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\32\ Id. at 65914-65917.
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A proposal regarding how the MLC should implement and give
effect to such payee changes.\33\
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\33\ Id. at 65917-18.
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A proposal regarding the process and documentation for
termination-
[[Page 56588]]
related disputes initiated with the MLC.\34\
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\34\ Id. at 65919.
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A proposal regarding the resolution of all types of
disputes initiated with the MLC.\35\
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\35\ Id. at 65919-20.
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A proposal regarding certain disclosures to be made by the
MLC in connection with disputes and other royalty holds.\36\
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\36\ Id. at 65919.
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A proposal regarding how the MLC should administer a
corrective royalty adjustment to cure any distributions it previously
made under its since-suspended Termination Policy.\37\
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\37\ Id. at 65920-21.
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D. The SNPRM Comments
The Office received over 50 public comments in response to the
SNPRM from a wide variety of interested parties across the music
industry. Some parties supported aspects of the SNPRM,\38\ while others
were critical of certain provisions. The primary criticism addressed
the question of whether the owner at the time of the use or the owner
at the time of the payment should receive distributions of blanket
license royalties from the MLC.\39\ Commenters also took issue with the
Office's proposed expansion of the rule beyond the NPRM, with some
commenters requesting that those new issues be removed from
consideration.\40\ The MLC provided a regulatory proposal that shared
many similarities with the SNPRM and was ``aimed at implementing
certain proposals of the Office concerning statutory terminations,
while omitting language concerning'' various other issues that, in its
view, ``do not need further regulation.'' \41\
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\38\ See, e.g., MAC et al. SNPRM Initial Comments at 2, 4 (``The
Copyright Office's proposed rules, both initially and as altered
here, accurately, clearly, concisely, and properly addresses the
implementation of the MMA while maintaining and supporting the
significant advances made by the MLC. We continue to
enthusiastically support this proposed rule and remain thankful to
the Copyright Office for addressing this area of great need by
utilizing its oversight and governance authority.''); Howard SNPRM
Initial Comments at 1 (``I support the supplemental rulemaking and
directives proposed by the Office.'').
\39\ See, e.g., MLC SNPRM Initial Comments at 1-16; NMPA SNPRM
Initial Comments at 2-13; NMPA Ex Parte Letter at 1-2 (Jan. 24,
2024); AIMP SNPRM Initial Comments at 1-4; Combustion Music SNPRM
Initial Comments; Endurance Music Grp. SNPRM Initial Comments at 1-
2; Farris, Self & Moore, LLC SNPRM Initial Comments at 1-2; Boom
Music SNPRM Initial Comments; Jonas Grp. Publ'g SNPRM Initial
Comments; Kobalt Music SNPRM Initial Comments at 2; Liz Rose Music
SNPRM Initial Comments at 1-2; Big Machine Music SNPRM Initial
Comments at 1-2; Legacyworks SNPRM Initial Comments; Me Gusta Music
SNPRM Initial Comments at 1-2; Relative Music Grp. SNPRM Initial
Comments at 1-2; Harding SNPRM Initial Comments; Moore SNPRM Initial
Comments; North Music Grp. SNPRM Initial Comments at 2; NSAI SNPRM
Initial Comments at 2-5; Big Yellow Dog SNPRM Initial Comments;
Reservoir Media Mgmt. SNPRM Initial Comments at 1-2; SMACKSongs
SNPRM Initial Comments; Sony Music Publ'g SNPRM Initial Comments at
1-5; Spirit Music Grp. SNPRM Initial Comments at 1-3; Turner SNPRM
Initial Comments at 1-2; Wiatr & Assocs. SNPRM Initial Comments;
Jody Williams Songs SNPRM Initial Comments at 1; Concord Music
Publ'g SNPRM Initial Comments at 1-3; ClearBox Rights SNPRM Reply
Comments at 4-5; Creative Nation SNPRM Reply Comments at 1-2; The
Greenroom Resource SNPRM Reply Comments at 1; MAC et al. SNPRM Reply
Comments at 2; Recording Academy SNPRM Reply Comments at 3; SONA
SNPRM Reply Comments at 2-5; Universal Music Publ'g Grp. SNPRM Reply
Comments at 1-5; Warner Chappell Music SNPRM Reply Comments at 3-8;
DLC SNPRM Reply Comments at 2-4.
\40\ See, e.g., MLC SNPRM Initial Comments at 17-20; NMPA SNPRM
Initial Comments at 3-4; NMPA Ex Parte Letter at 2-3 (Jan. 24,
2024); Kobalt Music SNPRM Initial Comments at 3; Big Machine Music
SNPRM Initial Comments at 2; NSAI SNPRM Initial Comments at 1-2;
North Music Grp. SNRPM Initial Comments at 1, 3-4; MAC et al. SNPRM
Reply Comments at 2-3; MAC Ex Parte Letter at 1-2 (Dec. 29, 2023);
Recording Academy SNPRM Reply Comments at 1-2; Warner Chappell Music
SNPRM Reply Comments at 2-3; ClearBox Rights SNPRM Reply Comments at
3, 10; SONA SNPRM Reply Comments at 5; DLC SNPRM Reply Comments at
1.
\41\ MLC SNPRM Reply Comments at 2 & App. A; MLC SNPRM Initial
Comments at 17 (stating that ``the Office's procedural guidance on
notice and transfer procedures in the terminations context is
helpful'' and that ``much of the proposal with respect to
terminations generally addresses a regulatory need''); see also NMPA
Ex Parte Letter at 3 (Jan. 24, 2024) (conveying ``its desire for the
Office to provide any guidance the MLC has requested'').
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II. Rulemaking Authority
Having considered all relevant comments, the Office concludes that
we have appropriate statutory authority to adopt the final rule for the
reasons explained in the NPRM and SNPRM, as well as the additional
reasons discussed below.\42\ As previously explained, section 702 of
the Copyright Act specifically grants the Office the authority to
``establish regulations not inconsistent with law for the
administration of the functions and duties made the responsibility of
the Register under [title 17].'' \43\ Implementation of the MMA is one
of those ``functions and duties'' that Congress made the Office's
responsibility. Specifically, the Office has been granted the authority
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.]'' \44\ Several commenters
explicitly supported the Office's general rulemaking authority.\45\ The
only commenter to question the Office's authority was NMPA, which
offered various arguments for why the Office lacks authority to issue
this rule.\46\ None are persuasive.
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\42\ 87 FR 64405, 64407-08; 88 FR 65908, 65910.
\43\ 17 U.S.C. 702.
\44\ Id. at 115(d)(12)(A).
\45\ See, e.g., ClearBox Rights NPRM Initial Comments at 2; SONA
et al. NPRM Initial Comments at 2; SGA et al. NPRM Initial Comments
at 2; Howard NPRM Reply Comments at 3; Recording Academy NPRM Reply
Comments at 2; Promopub NPRM Reply Comments at 2; MCNA et al. Ex
Parte Letter at 2 (Mar. 15, 2024).
\46\ NMPA NPRM Initial Comments at 7-10. Despite its previous
objections, NMPA's SNPRM comments appear to signal a change in its
position on the Office's general rulemaking authority, though this
is not entirely clear. See NMPA SNPRM Initial Comments at 2 & n.2
(stating that ``[t]here is clear industry consensus on the [proposed
rule requiring that all post-termination royalties under the blanket
license be paid to the post-termination copyright owner], and the
[Office] should adopt it immediately,'' but then also noting some of
its previous concerns).
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NMPA first argued that the Office has no authority under section
702 of the Copyright Act or the MMA to promulgate rules that involve
substantive questions of copyright law.\47\ This is clearly incorrect.
The Office ``has statutory authority to issue regulations necessary to
administer the Copyright Act'' and ``to interpret the Copyright Act.''
\48\ As the NPRM detailed, ``[t]he Office's authority to interpret
title 17 in the context of statutory licenses in particular has long
been recognized.'' \49\
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\47\ See NMPA NPRM Initial Comments at 7-8.
\48\ Motion Picture Ass'n of Am., Inc. v. Oman, 750 F. Supp. 3,
6 (D.D.C. 1990), aff'd, 969 F.2d 1154 (D.C. Cir. 1992); see also,
e.g., Fox Tel. Stations, Inc. v. Aereokiller, LLC, 851 F.3d 1002,
1011 (9th Cir. 2017) (recognizing that ``the Copyright Office has a
much more intimate relationship with Congress [than the courts] and
is institutionally better equipped than we are to sift through and
to make sense of the vast and heterogeneous expanse that is the
Act's legislative history''); Satellite Broad. & Commc'ns Ass'n of
Am. v. Oman, 17 F.3d 344, 345, 347-48 (11th Cir. 1994), cert.
denied, 513 U.S. 823 (1994) (recognizing the Copyright Office's
authority to issue regulations and ``statutory authority to
interpret the provisions of the compulsory licensing scheme'' found
in 17 U.S.C. 111).
\49\ 87 FR 64405, 64408.
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Indeed, as the Office has previously explained, ``[t]he Office
exercises its authority under section 702 when it is necessary `to
interpret the statute in accordance with Congress'[s] intentions and
framework.' '' \50\ That is what the Office is doing here, just as we
have done on numerous previous occasions, for example to determine that
satellite carriers are not ``cable systems'' within the meaning of
section 111 and therefore do not qualify for that statutory
license,\51\ to state the meaning of ``digital phonorecord delivery''
under
[[Page 56589]]
the section 115 statutory license,\52\ and to determine that internet
streaming of AM/FM broadcast signals are not exempted ``broadcast
transmissions'' within the meaning of section 114.\53\ The Office has
done this in the termination context as well, adopting a rule
addressing the meaning of ``executed'' under section 203 in the context
of gap grants.\54\
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\50\ 73 FR 40802, 40806 (July 16, 2008) (quoting 57 FR 3284,
3292 (Jan. 29, 1992)).
\51\ 57 FR 3284, 3290-92, 3296; see Satellite Broad. & Commc'ns
Ass'n of Am., 17 F.3d 344.
\52\ 73 FR 66173, 66174-75 (Nov. 7, 2008).
\53\ 65 FR 77292, 77293-95 (Dec. 11, 2000); see Bonneville Int'l
Corp. v. Peters, 347 F.3d 485 (3d Cir. 2003).
\54\ 76 FR 32316, 32316-20 (June 6, 2011). While the Office has
express authority to regulate the content of notices of termination,
we also referred to our authority under section 702 in adopting the
rule and stated that the focus of the rulemaking was our recordation
practices. Id. at 32319-20. Moreover, the rulemaking required the
Office to opine on a substantive area of copyright law, namely
whether or how the statute's termination provisions apply to gap
grants. Id. at 32316-17; see U.S. Copyright Office, Analysis of Gap
Grants under the Termination Provisions of Title 17 (2010), https://www.copyright.gov/reports/gap-grant-analysis.pdf. At least one court
appears to have followed the Office's interpretation. See Mtume v.
Sony Music Ent., 408 F. Supp. 3d 471, 475-76 (S.D.N.Y. 2019).
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Regarding the Office's specific authority under the MMA, we have
issued several rules that required analyzing substantive provisions of
the statute. For example, the Office determined what constitutes ``the
due date for payment'' under section 115(d)(8)(B)(i),\55\ how the
endorsement criterion for designating the MLC is to be evaluated under
section 115(d)(3)(A)(ii),\56\ the meaning of ``producer'' under section
115(d)(4)(A)(ii)(I)(aa),\57\ and what constitutes minimum ``good-faith,
commercially reasonable efforts'' under section 115(d)(4)(B).\58\
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\55\ 88 FR 60587, 60590-91 (Sept. 5, 2023).
\56\ 84 FR 32274, 32280-84 (July 8, 2019).
\57\ 85 FR 22518, 22532.
\58\ 85 FR 58114, 58119 (Sept. 17, 2020). We also note that, in
addition to the specific authority granted in section 115 and
general authority granted in section 702, Congress gave the Office
the responsibility to interpret title 17 when questions of law arise
in proceedings before the Copyright Royalty Judges. 17 U.S.C.
802(f)(1)(B)(i), (f)(1)(D) (granting the Office the ability to
``resolve'' any ``novel material question of substantive law
concerning an interpretation of those provisions of [title 17] that
are the subject of [a] proceeding'' before the Copyright Royalty
Judges and to review the Judges' final determinations for ``legal
error . . . of a material question of substantive law under [title
17]'').
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NMPA also made a series of arguments based on the premise that any
rulemaking authority the Office may have with respect to section 115 or
other statutory licenses does not extend to other areas of the
Copyright Act, like those dealing with termination.\59\ These
arguments, and their underlying premise, are similarly unsupported by
title 17. The MMA and section 702 provide the Office with ample
authority to interpret sections 203 and 304, as well as other
provisions of the Copyright Act, in the context of the blanket license
and the MLC's operations.\60\
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\59\ NMPA NPRM Initial Comments at 8-10.
\60\ See 17 U.S.C. 115(d)(12)(A), 702; see also, e.g., Motion
Picture Ass'n of Am., Inc., 750 F. Supp. at 6; Aereokiller, LLC, 851
F.3d at 1011; Satellite Broad. & Commc'ns Ass'n of Am., 17 F.3d at
345, 347-48.
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As explained in the NPRM, despite its focus on termination issues,
``this rulemaking ultimately reflects the Office's oversight and
governance of the MLC's reporting and payment obligations to copyright
owners.'' \61\ The Office has exercised its authority in this area
before. As discussed in the NPRM, the Office previously issued
regulations regarding the MLC's reporting and distribution of royalties
to copyright owners with ``no dispute regarding the propriety or
authority of the Office to promulgate [them].'' \62\ In that prior
proceeding, we concluded that we have ``the authority to promulgate
these rules under the general rulemaking authority in the MMA.'' \63\
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\61\ 87 FR 64405, 64408.
\62\ Id. at 64408 & n.39 (quoting 85 FR 22549, 22550-52 (Apr.
22, 2020)).
\63\ 85 FR 22549, 22551 (quoting 17 U.S.C. 115(d)(12))
(observing that ``Congress provided general authority to the
Register of Copyrights to `conduct such proceedings and adopt such
regulations as may be necessary or appropriate to effectuate the
provisions of this subsection' '').
---------------------------------------------------------------------------
The final rule in this proceeding is no different. It governs how
the MLC is to report and distribute royalties to copyright owners,
including with respect to identifying the proper royalty payee. The
fact that the final rule addresses that core MLC function in a context
that raises substantive questions of copyright law (like termination)--
and thus requires analysis of various points of substantive copyright
law (such as termination and the Exception)--does not deprive the
Office of its authority to regulate how the MLC reports and pays
royalties. Nor does the fact that parts of the Office's analysis or
reasoning could potentially be applied by others in contexts outside
the scope of this proceeding.\64\
---------------------------------------------------------------------------
\64\ At a minimum, this proceeding has demonstrated that it is
``necessary or appropriate'' to ``adopt . . . regulations'' ``to
effectuate'' section 115(d)(3)(G)(i)(II), requiring the MLC to
``distribute royalties to copyright owners in accordance with . . .
the ownership and other information contained in the records of the
[MLC].'' 17 U.S.C. 115(d)(3)(G)(i)(II), (12)(A); see also, e.g., 87
FR 64405, 64407 (discussing need to revisit the termination issue
more directly, including ``how termination law intersects with the
blanket license''); 88 FR 65908, 65909-10 (explaining that the MLC
sought additional regulatory guidance ``necessary'' and
``essential'' to its operations). Thus, the current rulemaking ``is
consistent with the Office's practice of promulgating regulations to
construe statutory terms that are critical to the administration of
a statutory license administered by the Office.'' 73 FR 66173,
66175.
---------------------------------------------------------------------------
The flaw in NMPA's argument is highlighted by considering its
consequences. If the Office's authority is as limited as NMPA
suggested, it would mean that the MLC would be the one (in the absence
of a lawsuit) to determine the meaning of any questioned statutory
provisions. The Office's oversight of the MLC through regulatory action
cannot be frustrated when such oversight may involve addressing
substantive issues of copyright law. Concluding otherwise would be
contrary to the statute's logic and Congress's intent. Congress
intentionally invested the Office with ``broad regulatory authority''
under the MMA, in part to oversee the MLC, such as by ``thoroughly
review[ing]'' MLC policies ``to ensure the fair treatment of interested
parties.'' \65\
---------------------------------------------------------------------------
\65\ 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 4 (2018) (``Conf. Rep.''), https://www.copyright.gov/legislation/mma_conference_report.pdf.
---------------------------------------------------------------------------
NMPA also specifically challenged the Office's authority to adopt
the corrective royalty adjustment, arguing that it is an impermissible
retroactive rule and an unconstitutional taking.\66\ We disagree with
this characterization and address this topic in Part III.F., below.
---------------------------------------------------------------------------
\66\ NMPA NPRM Initial Comments at 4-6, 12-13; NMPA Ex Parte
Letter at 2 (Feb. 6, 2023); NMPA SNPRM Initial Comments at 2 n.2;
see also CMPA NPRM Initial Comments at 1-2 (arguing against
retroactivity); Warner Chappell Music SNPRM Reply Comments at 2-3
(same).
---------------------------------------------------------------------------
III. Final Rule
Having reviewed and considered all comments, the Office has weighed
the relevant legal, business, and practical implications and equities
raised, and pursuant to its authority under 17 U.S.C. 115 and 702 is
adopting a final rule regarding MLC royalty distributions. The Office
finds it reasonable to adopt much of the SNPRM as final regulations,
but with some significant modifications. As discussed in more detail
below, the Office is adopting a final rule that is a scaled-down
version of the SNPRM and applies a different solution to the issue of
identifying the payee to whom the MLC must distribute royalties.
Specifically, in response to the comments that the SNPRM was too
broad \67\ and the MLC's own regulatory
[[Page 56590]]
proposal,\68\ the Office has narrowed the scope of the rule to provide
the guidance the MLC sought without expanding the rule to other areas
that do not appear to need regulation at this time based on the current
record.\69\ While some commenters would prefer that the Office not
address any issues beyond those raised in the original NPRM, the Office
disagrees. As discussed above, the MLC and several other commenters had
requested additional guidance from the Office on various related
topics. Consequently, the Office issued the SNPRM seeking public
comments on a supplemental proposed rule focused on providing such
guidance. When the MLC requests guidance from the Office, we will
generally provide it given the oversight role we play under the MMA.
The Office finds that it is reasonable and appropriate to provide such
guidance here.
---------------------------------------------------------------------------
\67\ See, e.g., Kobalt Music SNPRM Initial Comments at 3; Big
Machine Music SNPRM Initial Comments at 2; NSAI SNPRM Initial
Comments at 1-2; North Music Grp. SNRPM Initial Comments at 1, 3-4;
MAC et al. SNPRM Reply Comments at 2-3; MAC Ex Parte Letter at 1-2
(Dec. 29, 2023); Recording Academy SNPRM Reply Comments at 1-2;
Warner Chappell Music SNPRM Reply Comments at 2-3; ClearBox Rights
SNPRM Reply Comments at 3, 10; SONA SNPRM Reply Comments at 5.
\68\ MLC SNPRM Reply Comments at App. A.
\69\ To be clear, the Office reserves the right to regulate
these other areas in the future should it become necessary or
appropriate to do so.
---------------------------------------------------------------------------
To the extent some commenters suggested that the Office is moving
too quickly on some of these issues or has not engaged in a sufficient
administrative process, the Office disagrees.\70\ The Office issued the
SNPRM precisely to solicit substantive comments from interested parties
about these expanded topics. In doing so, the Office provided for both
initial and reply comment periods as well as deadline extensions,
ultimately providing parties with over two months to submit written
comments. The Office also made itself available for ex parte meetings
for several months after the period for written comments ended. Given
this ample opportunity to engage with the Office on these issues, we
see no reason to delay providing the MLC with the guidance it needs to
operate. As always, the Office will continue to monitor the effect of
the rule, and if there are any unforeseen consequences or should
anything not operate as intended, we can consider amending the rule in
the future.
---------------------------------------------------------------------------
\70\ See, e.g., North Music Grp. SNRPM Initial Comments at 1, 3-
4; Recording Academy SNPRM Reply Comments at 1-2; ClearBox Rights
SNPRM Reply Comments at 3, 10.
---------------------------------------------------------------------------
Where parties have objected to certain aspects of the SNPRM, the
Office has considered those comments and addressed these issues, as
discussed below. If not otherwise discussed, the Office has concluded
that the relevant proposed provision should be adopted for the reasons
stated in the NPRM or SNPRM.
A. Termination and the Exception
In the NPRM, the Office engaged in an extensive preliminary
analysis that concluded that ``[w]hether or not the Exception applies
to a DMP's blanket license (and the Office concludes that the Exception
does not), the statute entitles the current copyright owner to the
royalties under the blanket license, whether pre- or post-
termination.'' \71\ We explained that this means that ``the post-
termination copyright owner (i.e., the author, the author's heirs, or
their successors, such as a subsequent publisher grantee) is due the
post-termination royalties paid by the DMP to the MLC.'' \72\
---------------------------------------------------------------------------
\71\ 87 FR 64405, 64410-11.
\72\ Id. at 64411.
---------------------------------------------------------------------------
Based on the MLC's and other commenters' requests for additional
guidance,\73\ the SNPRM contained additional analysis and made further
preliminary conclusions, including that: (1) the Exception does not
apply to matched historical royalties; \74\ (2) with respect to covered
activities, record companies' pre-2021 individual download licenses and
the authority obtained from them by DMPs are the only pre-2021
statutory mechanical licenses to have continued in effect after the
license availability date; \75\ (3) the Exception does not apply to
individual download licenses; \76\ and (4) the Exception may apply to
some voluntary licenses, but not others.\77\
---------------------------------------------------------------------------
\73\ 88 FR 65908, 65909-10.
\74\ Id. at 65910-11.
\75\ Id. at 65911.
\76\ Id.
\77\ Id. at 65911-12.
---------------------------------------------------------------------------
Most comments addressing the Office's termination analysis were in
response to the NPRM, as parties largely did not comment on the
additional analysis from the SNPRM. While many commenters agreed with
the Office's analysis,\78\ others raised some concerns.\79\ Several
commenters, even some who raised concerns with the Office's analysis,
supported its end result that the post-termination copyright owner is
entitled to post-termination royalties under the blanket license.\80\
---------------------------------------------------------------------------
\78\ See, e.g., A2IM & RIAA NPRM Reply Comments at 2; Authors
All. et al. NPRM Initial Comments at 2-3; BMG Rights Mgmt. NPRM
Initial Comments at 2; ClearBox Rights NPRM Initial Comments at 6-7;
Fishman & Garcia NPRM Initial Comments at 1-4; King, Holmes, Paterno
& Soriano LLP NPRM Initial Comments; North Music Grp. NPRM Reply
Comments at 2; Recording Academy NPRM Reply Comments at 2; SGA et
al. NPRM Initial Comments at 2, 5; SONA et al. NPRM Initial Comments
at 2-3; King, Holmes, Paterno & Soriano LLP SNPRM Reply Comments.
\79\ See NMPA NPRM Initial Comments at 2-3; NMPA Ex Parte Letter
at 2-3 (Feb. 6, 2023); MPA NPRM Reply Comments at 2-5; see also A2IM
& RIAA NPRM Reply Comments at 2; A2IM & RIAA SNPRM Initial Comments
at 1-4; Fishman & Garcia NPRM Initial Comments at 4; NMPA SNPRM
Initial Comments at 2 n.2.
\80\ See, e.g., NMPA SNPRM Initial Comments at 1-2 (``NMPA
supported and continues to support the bright-line rule that the
[Office] proposed to establish in the NPRM, requiring that all post-
termination royalties under the Blanket License be paid to the post-
termination copyright owner.''); Universal Music Publ'g Grp. SNPRM
Reply Comments at 5 n.4; Warner Chappell Music SNPRM Reply Comments
at 2; Kobalt Music SNPRM Initial Comments at 1; NSAI SNPRM Initial
Comments at 2; Promopub SNPRM Initial Comments at 2.
---------------------------------------------------------------------------
Having considered all relevant comments, the Office is adopting the
termination-related aspects of the SNPRM's proposal as final for the
reasons discussed below, as well as the reasoning in the NPRM and SNPRM
in relevant part.
1. Blanket Licenses
i. Background
In the NPRM, the Office thoroughly analyzed the Exception in the
context of the blanket license. In that analysis, the Office made two
overarching conclusions that: (1) the Exception does not apply to
blanket licenses; and (2) even if the Exception did apply, under the
terms of the blanket license (i.e., the applicable text of section 115
and related regulations), a terminated publisher still would not be
entitled to post-termination blanket license royalties.\81\
---------------------------------------------------------------------------
\81\ 87 FR 64405, 64410-11.
---------------------------------------------------------------------------
In concluding that the Exception does not apply, the Office made
three further overall conclusions. First, the Office concluded that
``[t]o be subject to termination, a grant must be executed by the
author or the author's heirs,'' and that, ``[a]s a type of statutory
license, the blanket license is `self-executing,' such that it cannot
be terminated'' under section 203 or 304.\82\ The Office explained that
``[i]f a blanket license cannot be terminated, then it cannot be
subject to an exception to termination; the license simply continues in
effect according to its terms.'' \83\
---------------------------------------------------------------------------
\82\ Id. at 64410.
\83\ Id.
---------------------------------------------------------------------------
Second, the Office concluded that ``[s]ection 115's blanket
licensing regime is premised on the assumption that DMPs are not
preparing derivative works pursuant to their blanket licenses,'' and
that ``where no sound recording derivative is prepared pursuant to a
DMP's blanket license,
[[Page 56591]]
that blanket license is not part of any preserved grants that make the
Exception applicable.'' \84\ The Office explained that ``[i]f no
derivative work is prepared `under authority of the grant,' then the
Exception cannot apply,'' but recognized that ``[p]roponents of the
Exception's application to the blanket license might argue that the
blanket license should be construed as being included within a so-
called `panoply' of grants pursuant to which a pre-termination
derivative work of the musical work was prepared.'' \85\ The Office
observed that the ``only panoply to which the blanket license could
theoretically belong would be the grant (or chain of successive grants)
emanating from the songwriter and extending to the record company (or
other person) who prepared the sound recording derivative licensed to
the DMP.'' \86\ After analyzing that possibility, the Office concluded
that ``[t]he Exception, as interpreted by [the Supreme Court in Mills
Music, Inc. v. Snyder],\87\ should not be read as freezing other grants
related to, but outside of, the direct chain of successive grants
providing authority to utilize the sound recording derivative, such as
the musical work licenses obtained by DMPs,'' and the Office discussed
several reasons explaining why.\88\
---------------------------------------------------------------------------
\84\ Id. at 64410-11.
\85\ Id.
\86\ Id.
\87\ 469 U.S. 153 (1985).
\88\ 87 FR 64405, 64410-11.
---------------------------------------------------------------------------
Third, the Office concluded that applying the Exception to the
blanket license in the manner the MLC had done previously, whereby the
payee would be frozen in time, would lead to an ``extreme result''
because it would also freeze all other aspects of the license in
time.\89\ For example, ``it would freeze in time everything from DMP
reporting requirements and MLC royalty statement requirements to the
rates and terms of royalty payments for using the license set by the
[Copyright Royalty Judges].'' \90\
---------------------------------------------------------------------------
\89\ Id. at 64411.
\90\ Id.
---------------------------------------------------------------------------
The SNPRM addressed this analysis as well.\91\ There, the Office
described the NPRM's conclusions about the Exception as
``preliminary,'' making clear that we ``welcome[d] further comments and
legal discussion.'' \92\ The Office has considered all comments,
including those raising concerns with aspects of this analysis. For the
reasons discussed below, we find those concerns unpersuasive.
Therefore, the Office is adopting the termination analysis from the
NPRM and SNPRM as final for the reasons discussed in the NPRM and
SNPRM, subject to the further discussion below.
---------------------------------------------------------------------------
\91\ 88 FR 65908, 65910.
\92\ Id. at 65912 n.69.
---------------------------------------------------------------------------
ii. Comments and Discussion
The principal critics of the NPRM's analysis were NMPA and the
Motion Picture Association (``MPA''). NMPA asserted that ``[t]he
Exception has historically been interpreted by many industry
stakeholders to permit the pre-termination musical composition
copyright owner to continue to receive mechanical royalties post-
termination for uses of those compositions in derivative sound
recordings, including in interactive streaming, provided that the
mechanical license was issued pre-termination and the recording was
prepared pre-termination.'' \93\ NMPA said that ``[t]his interpretation
was based on, inter alia, the Supreme Court's decision in Mills Music,
Inc. v. Snyder, and the Second Circuit's decision in Woods v. Bourne
Co.,'' \94\ and that ``[b]ased on this interpretation, before the MMA
was enacted, [DMPs], along with other Section 115 statutory licensees,
continued to pay mechanical royalties to the pre-termination rights
owner for uses of recordings prepared pre-termination pursuant to pre-
termination mechanical licenses.'' \95\ NMPA stated that it ``never
understood the MMA to change or resolve the law of statutory
termination or to provide a new or different rule applicable to Blanket
Licenses.'' \96\ It explained its view that ``the MMA addresses the
termination issue in Section 115(d)(9)(A),'' which was intended to
``preserve the status quo.'' \97\
---------------------------------------------------------------------------
\93\ NMPA NPRM Initial Comments at 2-3; see also NMPA Ex Parte
Letter at 2 (Feb. 6, 2023).
\94\ 60 F.3d 978 (2d Cir. 1995).
\95\ NMPA NPRM Initial Comments at 3; see also NMPA Ex Parte
Letter at 2 (Feb. 6, 2023).
\96\ NMPA NPRM Initial Comments at 3.
\97\ Id. at 3 n.5.
---------------------------------------------------------------------------
After a full review and analysis, the Office is not persuaded by
NMPA's argument. We do not dispute NMPA's assertion that certain
publishers may have adopted a different approach to termination, but
this approach is not supported by the law in the context of the blanket
license. As discussed further below in Part III.F., the Office is not
adopting a new position, or changing the law as it relates to
termination or the Exception. Nor are we contending that the MMA or
blanket license altered the law as it relates to the Exception. The
Office is merely stating what the law is and has always been.
In support of its approach, NMPA suggested that its view of the
Exception was universally relied on as the status quo. The comments,
however, reveal otherwise. For example, ClearBox Rights said that
``there has not been consistency in the history of how these royalties
have been paid [with respect to the Exception], so such past practices
should not be interpreted as any kind of precedent or guidance into how
they should be paid in the future, or adjusted for any given period of
time.'' \98\ NMPA even described its views with qualifying language,
stating that its interpretation of Mills Music has been followed by
``some'' copyright owners and that ``legal interpretations of this
holding and views as to the applicability of the [Exception] to the
[blanket license] may differ.'' \99\
---------------------------------------------------------------------------
\98\ ClearBox Rights NPRM Reply Comments at 1-2 (further stating
that performing rights organizations ``fairly consistently pass
through to the post-termination rights holder the performance side
of these very same [DMP] interactive streams''); see also, e.g.,
King, Holmes, Paterno & Soriano LLP NPRM Initial Comments at 1 (``We
have been concerned for years about some music publishers' claims
that the [Exception] entitles the original publisher of a
composition to continue to collect indefinitely on mechanical
licenses issued pursuant to the compulsory license provisions of the
U.S. Copyright Act. Such claims do not comport with the language of
the [Exception] itself or the legislative history surrounding
it.''); McAnally & North Ex Parte Letter at 2 (Mar. 14, 2023)
(asserting that views like NMPA's are ``inconsistent with our
understanding of how terminations have been treated in the industry
regarding payments of mechanical royalties under Section 115'').
\99\ NMPA Ex Parte Letter at 2 (Feb. 6, 2023).
---------------------------------------------------------------------------
Further, NMPA's claim that section 115(d)(9)(A) supports its
position is misplaced. That provision does not speak to the Exception
or the preservation of any pre-MMA status quo (outside the narrow
context of individual download licenses). As explained in the SNPRM,
that provision, read together with section 115(d)(9)(B), provides, with
respect to covered activities, that ``only record companies' pre-2021
individual download licenses and the authority obtained from them by
DMPs survived the license availability date.'' \100\ The Office
explained that ``[b]ecause all other pre-2021 statutory mechanical
licenses to engage in covered activities are no longer in effect
pursuant to their own terms (i.e., the statutory text), any application
the Exception may or may not have had while they were in force seems to
have no bearing on the MLC's distribution of royalties for post-2021
usage.'' \101\
---------------------------------------------------------------------------
\100\ 88 FR 65908, 65911.
\101\ Id.
---------------------------------------------------------------------------
The statute plainly states that the blanket license was
``automatically substituted for and supersede[d] any existing
compulsory license previously obtained under [section 115].'' \102\ The
[[Page 56592]]
language NMPA highlighted--that this substitution happened ``without
any interruption in license authority enjoyed by [a DMP]''--simply
means that the substitution did not cause there to be any gap in a
DMP's licensing authority, between the old pre-2021 statutory license
and the new blanket license, that could potentially subject the DMP to
an infringement claim.\103\ If this language meant that all previous
licensing authority remains intact indefinitely after the license
availability date, then it would render the rest of the provision
superfluous. There would be no need to have the blanket license
substitute for and supersede the pre-2021 license because the authority
provided by the pre-2021 license would continue in effect. It would
also directly contradict section 115(d)(9)(B), which states that
``licenses other than individual download licenses obtained under
[section 115] for covered activities prior to the license availability
date shall no longer continue in effect.'' \104\ Thus, the Office
disagrees with NMPA's reading of the statute.\105\
---------------------------------------------------------------------------
\102\ See 17 U.S.C. 115(d)(9)(A).
\103\ See id.
\104\ See id. at 115(d)(9)(B).
\105\ See also 85 FR 58114, 58118 (discussing how ``the
statutory provisions regarding notices of [blanket] license and the
transition to the blanket license must be read together, such that
DMPs transitioning to the blanket license must still submit notices
of license to the MLC'').
---------------------------------------------------------------------------
NMPA next argued that ``the phrase `terminated grant' in the
statutory text appears to refer to the original grant from the author
to the publisher that is being terminated, and not to subsequent grants
made by the publisher under the authority of that original grant.''
\106\ It asserted that ``[s]ubsequent grants of the right to prepare
and use derivative works made by the publisher are not the terminated
grant under Sections 203 and 304 and are instead part of the `panoply'
of licenses preserved by the [Exception].'' \107\ Thus, in NMPA's view,
``the terminable grant that must be executed by the author is the
original license from author to publisher; therefore, whether Section
115 licenses are `self-executing' would be inapposite to the relevant
analysis'' because ``[t]he subsequent grants of the right to prepare
derivative works are in virtually all cases not `executed by the author
or the author's heirs.' '' \108\
---------------------------------------------------------------------------
\106\ NMPA Ex Parte Letter at 3 (Feb. 6, 2023); see also NMPA
NPRM Initial Comments at 11 n.27.
\107\ NMPA Ex Parte Letter at 3 (Feb. 6, 2023); see also NMPA
NPRM Initial Comments at 11 n.27.
\108\ NMPA NPRM Initial Comments at 11 n.27.
---------------------------------------------------------------------------
The Office disagrees. The phrase ``terminated grant'' in the
statutory text is not limited solely to the original grant from the
songwriter to the publisher. In Mills Music, the Supreme Court
concluded that all three references to the word ``grant'' in the text
of the Exception should be given a ``consistent meaning,'' and that
each reference encompasses both the original grant and subsequent
grants.\109\ That lack of distinction between the original grant and
subsequent grants was central to the Court's holding that the Exception
preserved ``the total contractual relationship.'' \110\ The cornerstone
of the Court's opinion was its conclusion that the successive grants
were connected to each other in such a way that they both needed to be
preserved under the Exception in the context at issue.\111\
---------------------------------------------------------------------------
\109\ Mills Music, 469 U.S. at 164-67 (concluding that the
phrase ``under the terms of the grant after its termination'' ``as
applied to any particular licensee would necessarily encompass both
the 1940 grant [from the songwriter to the publisher] and the
individual license [from the publisher to the record company to
prepare a sound recording derivative] executed pursuant thereto'');
see id. at 164 (explaining that the Exception is ``defined by
reference to the scope of the privilege that had been authorized
under the terminated grant and by reference to the time the
derivative works were prepared'') (emphasis added); id. at 173
(explaining that ``[p]retermination derivative works--those prepared
under the authority of the terminated grant--may continue to be
utilized under the terms of the terminated grant'') (emphasis
added); see also Howard B. Abrams & Tyler T. Ochoa, 2 The Law of
Copyright sec. 12:44 (2023) (``[T]he term ``grant'' is read to
include the entire chain of authority for the preparation of a
derivative work.'').
\110\ Mills Music, 469 U.S. at 163-69 (``We are not persuaded
that Congress intended to draw a distinction between authorizations
to prepare derivative works that are based on a single direct grant
and those that are based on successive grants.'').
\111\ Id. at 166-69 (explaining that, with respect to the
particular facts in the case, defining the relevant ``terms of the
grant'' as ``the entire set of documents that created and defined
each licensee's right to prepare and distribute derivative works''
meant preserving not only the record companies' right to prepare and
distribute the derivative works, but also their corresponding duty
to pay the publisher any due royalties and the publisher's duty to
pay the songwriter's heirs any due royalties, and that if it were
otherwise, then there would be no contractual or statutory
obligation on the publisher or record companies to pay the
songwriter's heirs any royalties).
---------------------------------------------------------------------------
In asserting that the NPRM's conclusions about the application of
the Exception to the blanket license must be wrong because the
subsequent grants of the right to prepare derivative works are almost
always not executed by the author or the author's heirs, NMPA
misapprehends how the subsequent grants are connected to the original
grant. Outside the context of a statutory license, where a songwriter
makes a grant to a publisher and the publisher then makes subsequent
grants to third parties (e.g., to a record company to prepare a sound
recording derivative, to a DMP to make and distribute phonorecords, or
an assignment of the full copyright to a different publisher), each of
those subsequent grants, despite not being executed by the songwriter
or the songwriter's heirs, can still be terminated. This is because the
authority for each of those subsequent grants derives from and is
dependent upon the authority conveyed by the original grant from the
songwriter to the publisher. Thus, when the original grant is
terminated, it also terminates the subsequent grants (subject to the
possible preservation of certain contractual terms governing the
utilization of pre-termination derivative works under the
Exception).\112\ It is a foundational legal principle that one cannot
give what one does not have.\113\ In this context, what the publisher
possesses with respect to the original grant, and can therefore
subsequently convey to third parties, is encumbered by the songwriter's
termination rights.\114\ This concept is plainly embodied in the
statute, which makes reference not only to ``the grantee,'' but also
``the grantee's successor in title.'' \115\
---------------------------------------------------------------------------
\112\ Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright
sec. 11.02[C][2] (2023) (``When A terminates the original grant to
B, it follows that B's license to C will also terminate.'').
\113\ Legal Maxims, Black's Law Dictionary (11th ed. 2019)
(``Nemo dat quod non habet. No one gives what he does not have; no
one transfers (a right) that he does not possess.'').
\114\ Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright
sec. 11.02[A][4][b] (2023) (``If the original grant from A to B had
by its terms provided for a reversion to A thirty-five years after
execution, B would lack the power to convey rights to C beyond such
thirty-five-year period. The fact that reversion from B to A occurs
by operation of law rather than by the express terms of the grant to
B does not enlarge the rights that B can convey to C.''); see also
Int'l Ribbon Mills, Ltd. v. Arjan Ribbons, Inc., 325 NE2d 137, 139
(N.Y. 1975) (``It is elementary ancient law that an assignee never
stands in any better position than his assignor. He is subject to
all the equities and burdens which attach to the property assigned
because he receives no more and can do no more than his
assignor.'').
\115\ See 17 U.S.C. 203(a)(4), (b)(4); id at 304(c)(4), (6)(D).
---------------------------------------------------------------------------
The blanket license, however, operates differently. Unlike
voluntary licenses, the authority a DMP has to make and distribute
phonorecords of musical works under a blanket license does not derive
from and is not dependent upon any authority granted by a songwriter or
publisher. The blanket license is self-executing,\116\ and a DMP's
authority under it is established by Congress.\117\ Therefore, if the
original grant from the songwriter to the publisher is terminated, it
has no effect on the DMP's blanket license
[[Page 56593]]
(other than the transfer of copyright ownership causing the royalty
payee to change). Unlike a voluntary license, the grant of authority
provided to the DMP under its blanket license was never encumbered by
the songwriter's termination rights, so exercising those rights has no
impact on the continuation of the DMP's authority. As a blanket license
cannot be terminated under section 203 or 304, whether directly or
indirectly, ``it cannot be subject to an exception to termination; the
license simply continues in effect according to its terms.'' \118\
---------------------------------------------------------------------------
\116\ Mills Music, 469 U.S. at 168 n.36; see Melville B. Nimmer
& David Nimmer, 3 Nimmer on Copyright sec. 11.02 n.121 (2023); Paul
Goldstein, Goldstein on Copyright sec. 5.4.1.1.a (3d ed. 2023).
\117\ See also Mills Music, 469 U.S. at 168 n.36 (referring to
section 115 statutory licenses as ``a statutory right'' belonging to
the licensee) (emphasis added).
\118\ 87 FR 64405, 64410. As noted in the NPRM, this ``does not
mean that entitlement to royalties is fixed. It travels with
ownership of the copyright.'' Id. at 64410 n.70.
---------------------------------------------------------------------------
MPA's criticism of the NPRM focused on a different issue, namely
its concerns that the Office's legal analysis ``could be read as
narrowing the holdings [of Mills Music and Woods] by injecting a
`direct chain' limitation on the pre-termination grants preserved under
the [Exception].'' \119\ MPA argued that:
---------------------------------------------------------------------------
\119\ MPA NPRM Reply Comments at 2.
To the extent that the Office's discussion of Mills [Music]
could be read to limit the [Exception] solely to a ``direct chain''
of grants, such a reading would appear to be in tension not only
with the [Exception]--which provides that a derivative work prepared
under authority of a grant ``may continue to be used under the terms
of the grant,'' . . .--but also the Supreme Court's interpretation
of that language in Mills [Music], as well as the Second Circuit's
further explication of the [Exception] in Woods v. Bourne. Mills
[Music] held that, as used in the [Exception], ``the terms of the
grant'' means the ``entire set of documents that created and defined
each licensee's right to prepare and distribute derivative works.''
469 U.S. at 167. The [Exception] thus encompasses the original grant
from author to publisher, as well as the succeeding grants derived
therefrom, potentially involving multiple licensees. See id. at 165-
67 (emphasis added).\120\
---------------------------------------------------------------------------
\120\ Id. at 4 (citing 17 U.S.C. 203(b)(1), 304(c)(6)(A)).
MPA further said that ``[i]n some cases, an initial grant by an
author to a movie studio or music publisher, and that entity's
subsequent grants to third parties to for the use and distribution of
derivative works, will generate `branches' of licensing authority
rather than a simple linear chain.'' \121\ According to MPA, ``[t]here
is nothing in the [Exception] or Mills [Music] . . . to suggest that a
pre-termination publisher is entitled to royalties only if the pre-
termination license falls within a single `direct chain' to the party
that prepared the derivative.'' \122\
---------------------------------------------------------------------------
\121\ Id.
\122\ Id.
---------------------------------------------------------------------------
MPA then pointed to Woods for confirmation that ``Mills [Music] is
not so limited.'' \123\ It stated that ``[a]s further explicated in
Woods, the Supreme Court's holding in Mills [Music] established that
`where multiple levels of licenses govern use of a derivative work, the
``terms of the grant'' encompass the original grant from author to
publisher and each subsequent grant necessary to enable the particular
use at issue,' '' and that ``[t]he effect of Mills [Music] is to
preserve during the post-termination period the panoply of contractual
obligations that governed pre-termination uses of derivative works by
derivative work owners or their licensees.'' \124\ MPA asserted that
``[c]onsistent with its understanding of Mills [Music], the Woods court
upheld the pre-termination publisher's right to collect public
performance royalties from [the performing rights organization,] ASCAP
for post-termination performances in movies and television programs
even though ASCAP's licensing relationship was outside of the `direct
chain' of authority by which the original publisher had granted synch
rights to the producers of those shows.'' \125\ MPA highlighted that
the Second Circuit said that ``the `terms of the grant' included `the
provisions of the grants from [the publisher] to ASCAP and from ASCAP
to the television stations' in place at the time of termination,'' and
that `` `[t]he fact that the performance right in the Song [was]
conveyed separately through ASCAP [was] simply an accommodation' that
did not negate the applicability of the [Exception].'' \126\ It
concluded that ``[n]either the [Exception], nor Mills [Music] or Woods,
limits post-termination utilization of a derivative based on the
particular configuration of the relevant pre-termination grants'' and
that ``[i]n considering the applicability of the [Exception], the
correct question is not whether the user prepared the derivative
pursuant to some `direct chain' of authority, but whether the use is
permitted under the entire `set' or `panoply' of grants emanating from
the original grant by the author.'' \127\
---------------------------------------------------------------------------
\123\ Id. at 4-5.
\124\ Id. (quoting Woods, 60 F.3d at 987).
\125\ Id. at 5 (citing Woods, 60 F.3d at 984).
\126\ Id. (all alterations, except the last one, in original)
(quoting Woods, 60 F.3d at 987-88).
\127\ Id.
---------------------------------------------------------------------------
The Office disagrees with these assertions to the extent they
relate to the blanket license. The blanket license is not part of any
so-called ``panoply,'' regardless of whether a panoply is limited to a
``direct chain'' of successive grants or can include ``branches'' of
related grants outside of that chain. As discussed above, the blanket
license, as a type of statutory license, is fundamentally different
from voluntary licenses. Because the authority provided by a blanket
license is supplied by law and is divorced from any authority deriving
from an author or any terminated grant, it is an intervening grant. It
sits outside of any potential panoply of grants authorized by the
author and the author's successors, assignees, licensees, and the like
that form the overall transaction involving the relevant derivative
work and which is subject to termination and possibly the Exception.
The blanket license simply is not part of that contractual
transaction.\128\
---------------------------------------------------------------------------
\128\ See also 17 U.S.C. 115(d)(2) (explaining how a DMP may
obtain a blanket license based on its unilateral actions).
---------------------------------------------------------------------------
Neither Mills Music nor Woods holds otherwise, as neither involved
a statutory license. In both cases, all of the grants at issue were
contractual and emanated from a songwriter's copyright and the
authority initially conveyed by the original grant from the songwriter
to a publisher.\129\ Thus, neither case's holding is directly
applicable to the operation of the Exception to a non-contractual
intervening grant, like the blanket license. The Supreme Court, in
Mills Music, noted that statutory licenses are different and were not
at issue in the case.\130\ And key language in Woods specifically
refers to ``the panoply of contractual obligations.'' \131\
---------------------------------------------------------------------------
\129\ Mills Music, 469 U.S. at 154-58; Woods, 60 F.3d at 981-84,
987-88.
\130\ Mills Music, 469 U.S. at 168 n.36; see also id. at 185
n.12 (White, J. dissenting).
\131\ Woods, 60 F.3d at 987 (emphasis added).
---------------------------------------------------------------------------
The Office's conclusions about the Exception are fully consistent
with Mills Music, both as described here and in the NPRM. Neither MPA
nor any other commenter addressed the specific points made in the NPRM
regarding how the Exception operates with respect to panoplies of
grants,\132\ other than to assert that the overall conclusion was at
odds with Mills Music and Woods.
---------------------------------------------------------------------------
\132\ See 87 FR 64405, 64410 (``The Exception, as interpreted by
Mills Music, should not be read as freezing other grants related to,
but outside of, the direct chain of successive grants providing
authority to utilize the sound recording derivative, such as the
musical work licenses obtained by DMPs.'').
---------------------------------------------------------------------------
Relying on a single out-of-context quote, MPA argued that, because
Mills Music said that `` `the terms of the grant' means the `entire set
of documents that created and defined each licensee's right to prepare
and distribute derivative works,' '' it must mean that the
[[Page 56594]]
Exception ``thus encompasses the original grant from author to
publisher, as well as the succeeding grants derived therefrom,
potentially involving multiple licensees.'' \133\ The Office is not
persuaded. Read in its proper context, the Court's reference to ``each
licensee'' is not referring to multiple licensees across different
branches of grants involved in the preparation and utilization of a
single derivative work. Rather, it is plainly referring to a single
licensee for each derivative work; specifically, each record company
that prepared one of the sound recording derivatives at issue in the
case (which involved over 400 voluntary mechanical licenses and the
preparation of over 400 sound recording derivatives).\134\ This
conclusion is apparent not only from reading the opinion as a whole,
but from the sentence immediately preceding the one quoted by MPA,
which states that ``a fair construction of the phrase `under the terms
of the grant' as applied to any particular licensee would necessarily
encompass both the 1940 grant [from the songwriter to the publisher]
and the individual [voluntary mechanical] license [from the publisher
to the record company] executed pursuant thereto.'' \135\
---------------------------------------------------------------------------
\133\ MPA NPRM Reply Comments at 4 (quoting Mills Music, 469
U.S. at 165-67).
\134\ See Mills Music, 469 U.S. at 158, 167, 168 n.36.
\135\ See id. at 166-67 (emphasis added).
---------------------------------------------------------------------------
Other language in the Court's opinion similarly reflects that it
was only addressing direct chains of successive grants providing
authority to prepare derivative works.\136\ For example, the Court was
``not persuaded that Congress intended to draw a distinction between
authorizations to prepare derivative works that are based on a single
direct grant and those that are based on successive grants.'' \137\ The
Court found it to be ``a matter of indifference . . . whether the
authority to prepare the work had been received in a direct license
from an author, or in a series of licenses and sublicenses.'' \138\
According to the Court, ``Congress saw no reason to draw a distinction
between a direct grant by an author to a party that produces derivative
works itself and a situation in which a middleman is given authority to
make subsequent grants to such producers.'' \139\ It makes sense that
the Court's opinion was limited to discussing a direct chain of
successive grants because that is what was at issue in the case. We
continue to believe that our reading of the statute and Mills Music, as
well as our analysis and conclusions regarding panoplies and direct
chains of successive grants, are correct.\140\
---------------------------------------------------------------------------
\136\ See Howard B. Abrams & Tyler T. Ochoa, 2 The Law of
Copyright sec. 12:44 (2023) (explaining that ``the Supreme Court
seemed to be using the concept that the series of documents running
from the author to the ultimate preparer of the derivative work
should best be treated as a single transaction although it was
spread over several documents executed at different times'').
\137\ Mills Music, 469 U.S. at 163-64 (emphasis added).
\138\ Id. at 173-74 (emphasis added).
\139\ Id. at 172 (emphasis added).
\140\ See 87 FR 64405, 64410-11; see also, e.g., Fishman &
Garcia NPRM Initial Comments at 1-4 (agreeing with the Office's
analysis and conclusions); SONA et al. NPRM Initial Comments at 2-3
(same).
---------------------------------------------------------------------------
With respect to Woods, even if the discussion in that case could be
read in the broad manner that MPA suggested, it is not clear that the
court's reasoning was correct or involved the same circumstances at
issue here. Among other concerns, Woods did not speak to all the issues
identified in the NPRM.\141\ For example, nothing in Woods appears to
address the fact that if the word ``grant'' is given a consistent
meaning within the text of the Exception--which, according to Mills
Music, it should--it cannot be referring to a grant that did not
provide authority to prepare the derivative work at issue.\142\
---------------------------------------------------------------------------
\141\ See 87 FR 64405, 64410-11.
\142\ See id. at 64411 (explaining that because ``[t]he
Exception's first use of `grant' is to a `derivative work prepared
under authority of the grant,' '' it ``cannot be referring to the
DMP's musical work licenses pursuant to which no derivative work was
prepared'').
---------------------------------------------------------------------------
The Woods court did not engage in this level of textual analysis.
Instead, it reviewed Mills Music and cited a law review article for the
proposition that the Exception applies to ``each subsequent grant
necessary to enable the particular use at issue.'' \143\ As discussed
above, the Office does not believe Mills Music is so expansive. Nor
does the cited law review article appear to support such a broad
reading.\144\ In any event, we emphasize that because Woods is
distinguishable with respect to section 115 statutory licenses, it is
not necessary for the Office to resolve these disagreements to adopt
the final rule.
---------------------------------------------------------------------------
\143\ See Woods, 60 F.3d at 986-88 (emphasis added).
\144\ Woods quotes from a law review article ``describing [the]
holding in Mills Music as `preserving the entire paper chain that
defines the entire transaction.' '' Woods, 60 F.3d at 987 (quoting
Howard B. Abrams, Who's Sorry Now? Termination Rights and the
Derivative Works Exception, 62 U. Det. L. Rev. 181, 234-35 (1985)
(``Abrams'')). But a few sentences earlier, that article explained
that the ``transaction'' being referred to was the ``set of
transfers and licenses that ran from the author to a record
company.'' Abrams at 234.
---------------------------------------------------------------------------
Lastly, Professors Fishman and Garcia, while supportive of most of
the Office's analysis, believed that the NPRM overestimated what would
happen if the Exception did apply to blanket licenses.\145\ They said
that the NPRM's suggestion that all of the blanket license's terms
``would be frozen indefinitely'' under the Exception, such as ``the
royalty rate to be paid,'' ``would contradict the plain terms
established in [section] 115, which explicitly contemplate a variable
rate to be determined by the [Copyright Royalty Judges].'' \146\ They
explained that ``[t]hat variability is a term of the grant,'' and that
to conclude otherwise ``would read into the terms of the blanket
license a permanently fixed royalty rate that does not exist.'' \147\
The professors then noted that the NPRM ``correctly rejected the
possibility of freezing the payee on the same basis.'' \148\
---------------------------------------------------------------------------
\145\ Fishman & Garcia NPRM Initial Comments at 4.
\146\ Id.
\147\ Id.
\148\ Id.
---------------------------------------------------------------------------
Considering this comment, the Office wishes to clarify this point
from the NPRM. We meant to illustrate the problems with the MLC's
previous view of how the Exception would apply--that the Exception
would freeze the royalty payee.\149\ This portion of the NPRM was
intended to explain that if the MLC were correct that the Exception
applied in such a manner as to freeze the royalty payee, then the
Exception would have to freeze everything else too, which would lead to
the ``extreme result.'' \150\
---------------------------------------------------------------------------
\149\ See 87 FR 64405, 64411 (premising the discussion on the
observation that if the Exception applies to the blanket license,
``then it is not clear why it would only apply to the payee, as the
MLC's prior rulemaking comments seem to suggest'') (emphasis added).
\150\ See id.
---------------------------------------------------------------------------
2. Individual Download Licenses
The Office received few comments responding to the SNPRM's analysis
regarding individual download licenses. The American Association of
Independent Music and the Recording Industry Association of America
(``A2IM & RIAA'') sought ``to clarify ambiguity in [the sections of the
proposed rule about individual download licenses and voluntary
licenses] and to ensure that the proposed rule will not affect the
status quo as it applies to record companies' mechanical licensing and
payment practices.'' \151\ They stated that ``the broadened scope of
the current SNPRM in fact could have unintended consequences for record
company practices in ways that are contrary to both the law and
established industry practice, and in a manner that is not
[[Page 56595]]
necessary to the Office's regulation of the [MLC].'' \152\
---------------------------------------------------------------------------
\151\ A2IM & RIAA SNPRM Initial Comments at 1.
\152\ Id.
---------------------------------------------------------------------------
Regarding individual download licenses, A2IM & RIAA agreed with
parts of the Office's legal analysis of the Exception, but said that
``in a regulation about the MLC's recognition of deductions from
royalties that would otherwise be due under the blanket license, [the]
proposed language is opaque and potentially confusing.'' \153\ They
said that:
---------------------------------------------------------------------------
\153\ Id. at 2-3.
[T]he main point is that a termination pursuant to Section 203
or 304 does not affect an individual download license, so a blanket
license royalty deduction for usage pursuant to an individual
download license that was appropriate prior to termination remains
so after termination. The regulations should state that plainly,
rather than the language that is currently proposed. In any event,
it should be clear that [this provision] does not mean that a record
company that relied on an individual download license for the
creation of a sound recording cannot continue to rely on that
license for distribution of the recording (in download form or
otherwise) after termination of the author's publishing
agreement.\154\
---------------------------------------------------------------------------
\154\ Id. at 3.
The Office disagrees that the language is confusing. The provision
clearly provides that the Exception does not apply to an individual
download license, and further states that, for avoidance of doubt, no
one may be understood to be the copyright owner or royalty payee of a
work used under an individual download license based on an
interpretation or application of the Exception. A2IM & RIAA's statement
that a termination ``does not affect an individual download license''
is accurate.\155\ But it is important to recognize that, as explained
in the NPRM and SNPRM, even though ``the license simply continues in
effect according to its terms,'' under those terms, ``entitlement to
royalties . . . travels with ownership of the copyright.'' \156\
``[W]henever a change is effectuated, whether via a contractual
assignment or by operation of a statutory termination, the new owner
becomes the proper payee entitled to royalties under the [individual
download] license.'' \157\ This provision is meant to clarify the
Exception's correct operation in light of the MLC's prior views.\158\
---------------------------------------------------------------------------
\155\ See id.
\156\ 87 FR 64405, 64410-11 & n.70; 88 FR 65908, 65911 & n.67.
\157\ 87 FR 64405, 64411; 88 FR 65908, 65911 & n.67.
\158\ See 87 FR 64405, 64406-07.
---------------------------------------------------------------------------
3. Voluntary Licenses
The Office also received few comments regarding the SNPRM's
discussion of voluntary licenses. A2IM & RIAA agreed with the SNPRM's
description of the complexities involved, noting that ``record
companies regularly obtain voluntary mechanical licenses rather than
compulsory licenses, and generally pass through download rights to
DMPs.'' \159\ They asserted that the ``[r]ights that the record company
obtains from the pre-termination copyright owner are clearly preserved
by the [Exception] when the record company relies on its voluntary
mechanical license for the creation of either a first use recording or
a cover.'' \160\ Based on this, A2IM & RIAA ``question the treatment of
voluntary licenses in the proposed rule.'' \161\ They said that
``[n]either the pre-termination nor post-termination copyright owner
would be motivated to provide the required notice, when the effect of
failing to give notice is that the DMP would in effect pay twice--once
to the pre-termination copyright owner through the record company and
once to the post-termination copyright owner through the MLC.'' \162\
They believed that ``[r]oyalty payments would more often be handled
appropriately if the default assumption were that the [Exception] will
apply to rights obtained by a record company under a voluntary license
and passed through to a DMP.'' \163\
---------------------------------------------------------------------------
\159\ A2IM & RIAA SNPRM Initial Comments at 3.
\160\ Id.
\161\ Id.
\162\ Id. at 4.
\163\ Id.
---------------------------------------------------------------------------
The Digital Licensee Coordinator (``DLC'') raised similar concerns
about potentially paying twice, stating that ``in no event can DMPs be
in the position of double-paying the royalties at issue, potentially
being subject to late fees as a result of any delay in payment to the
correct rightsholder.'' \164\ In the DLC's view, ``the most sensible
approach'' to dealing with disputes over the application of the
Exception to voluntary licenses ``would be to not require any payment
from the DMP to the MLC until the dispute is resolved.'' \165\
---------------------------------------------------------------------------
\164\ DLC SNPRM Initial Comments at 3-4.
\165\ Id. at 4.
---------------------------------------------------------------------------
In subsequent comments, the DLC clarified that its ``concern arises
with respect to the MLC's ability to demand payment when there is a
dispute related to termination that involves one or more voluntary
licensors.'' \166\ It explained that ``the circumstances where a
voluntary license partner has a right to demand royalties
notwithstanding who the MLC's records show is entitled to payment is
ultimately a matter of private contract between the parties, and there
is no industry standard approach to that issue.'' \167\ The DLC also
said that it did not believe the statute requires the MLC to hold
royalties pending the resolution of disputes over the application of
the Exception to voluntary licenses because such disputes are not
ownership disputes within the meaning of the statute.\168\ Based on
these comments, the DLC does not appear to take issue with the
possibility of double payments under the proposed rule where no dispute
is initiated with the MLC.
---------------------------------------------------------------------------
\166\ DLC Ex Parte Letter at 2 (Mar. 4, 2024).
\167\ Id.
\168\ Id. at 2-3.
---------------------------------------------------------------------------
The Office does not believe that these comments warrant any
substantive changes to the provision governing voluntary licenses.
First, this provision does not embody a presumption or a default rule
about the Exception as A2IM & RIAA suggested. Rather, it is a
regulatory application of legal precedent establishing that the pre-
termination copyright owner bears the burden of proving that the
Exception applies.\169\ The Office continues to believe that ``it would
not be prudent to attempt to craft a rule trying to account for how the
Exception may or may not apply in every possible situation'' and that
``the MLC should not exercise independent judgment regarding the
application of the Exception to a voluntary license or its underlying
grant of authority.'' \170\
---------------------------------------------------------------------------
\169\ 88 FR 65908, 65912.
\170\ Id.
---------------------------------------------------------------------------
If the Office were to adopt the default assumption A2IM & RIAA
requested, it would open the door to default assumptions in other
voluntary license contexts. Moreover, doing so would require the MLC to
determine, at minimum, whether the licenses at issue were indeed relied
upon ``for the creation of either a first use recording or a cover.''
\171\ That is precisely the type of fact-finding and independent
judgment the Office does not believe the MLC should be required to
undertake in this context.
---------------------------------------------------------------------------
\171\ See A2IM & RIAA SNPRM Initial Comments at 3-4.
---------------------------------------------------------------------------
Second, given that the DLC does not appear to share A2IM & RIAA's
concern about DMPs potentially double paying, the Office does not
believe that any change to this aspect of the rule is warranted. The
DLC made clear that this issue is one of private contract between the
relevant parties.\172\ Even if that were
[[Page 56596]]
not the case, the possibility of making double payments in this context
does not appear to be any different than in other contexts where a DMP
may be caught in the middle of a dispute between purported copyright
owners. Any time someone claims to be the owner of a copyright
purportedly licensed to a DMP by someone else, it will need to decide
which party to pay. Depending on the relevant contract's terms, the DMP
may well decide to pay both parties to limit its potential liability
for failing to pay the party who ultimately prevails in the dispute.
Thus, the situation that could arise under the rule does not appear to
be a special one necessitating a regulatory solution.
---------------------------------------------------------------------------
\172\ DLC Ex Parte Letter at 2 (Mar. 4, 2024).
---------------------------------------------------------------------------
With respect to the DLC's request that DMPs not be required to pay
royalties to the MLC to be held pending the resolution of a dispute
initiated with the MLC, the Office disagrees. As the Office explained
in the SNPRM, even though ``a dispute as to the application of the
Exception is not a dispute over ownership,'' ``a pre-termination
copyright owner [should] be able to initiate a dispute with the MLC
over the application of the Exception to a particular voluntary license
or its underlying grant of authority, and . . . the MLC should hold
applicable royalties pending resolution of such a dispute.'' \173\
---------------------------------------------------------------------------
\173\ 88 FR 65908, 65919.
---------------------------------------------------------------------------
Even if such a royalty hold is not required by the statute, the
Office nevertheless finds it to be a reasonable and prudent approach to
the administration of such disputes, as it ensures that the relevant
funds will be available upon the resolution of the dispute. As between
allowing a DMP to hold the relevant royalties versus the MLC, the more
appropriate approach is for them to be held by the MLC, rather than a
DMP with whom the purported copyright owner may have no relationship.
Moreover, even if the Office did not require this, a DMP would risk
late fees, or even default and termination of its blanket license, if
it declined to pay the applicable royalties to the MLC and the
voluntary licensor does not prevail in the dispute. Thus, the final
rule has been clarified to state that the MLC shall invoice the
relevant DMP for the applicable royalties.
The DLC asked that if the Office adopts this approach, we ``provide
guidance on how any interest accrued by the MLC during the pendency of
a termination dispute is handled.'' \174\ Specifically, it requested
that ``where resolution of the dispute results in a service paying the
voluntary licensor, the interest should be paid back to the service
(with any requirement to pay that interest onto the voluntary licensor
dictated by the terms of the voluntary license).'' \175\ The DLC
further said that ``where resolution of the dispute results in payment
being made by the MLC to a blanket licensor, then any interest earned
should be used to offset the MLC's administrative costs.'' \176\
---------------------------------------------------------------------------
\174\ DLC Ex Parte Letter at 3 (Mar. 4, 2024).
\175\ Id. at 3 n.10.
\176\ Id.
---------------------------------------------------------------------------
The Office had proposed that royalties held in connection with
these kinds of disputes accrue interest, but did not elaborate
further.\177\ Our intent was for the MLC to hold royalties in the same
manner as any other held royalties under section 115(d)(3)(H)(ii).\178\
---------------------------------------------------------------------------
\177\ 88 FR 65908, 65926.
\178\ 17 U.S.C. 115(d)(3)(H)(ii)(I).
---------------------------------------------------------------------------
The final rule makes three clarifications regarding the funds held
due to a termination-related dispute involving a voluntary license.
First, the applicable funds shall be held by the MLC in the same manner
and at the same interest rate as any other held funds. Second, where
the resolution of the dispute results in payment being made by the MLC
pursuant to a blanket license, that payment must include accrued
interest. In that situation, the Office sees no reason why the MLC or
DMPs (through an offsetting of the MLC's costs) should profit from the
fact that there was a dispute. Third, where the resolution of the
dispute results in a DMP paying royalties to a voluntary licensor, the
MLC must promptly return the held funds, including accrued interest, to
the DMP, who then may or may not be required to pass that interest on
to the voluntary licensor depending on the terms of their agreement.
The Office disagrees with the MLC that ``under the explicit
language of [section 115(d)(3)(H)], interest earned . . . can only be
for the benefit of copyright owners,'' such that ``such accrued
interest cannot be transmitted to [DMPs] for their own benefit (or to
be disposed of in their discretion), even where royalties are
ultimately refunded to [DMPs] as associated with voluntary licenses.''
\179\ Section 115(d)(3)(H) does not apply in the context of funds held
during disputes over the application of the Exception to voluntary
licenses.
---------------------------------------------------------------------------
\179\ MLC Ex Parte Letter at 5-6 (Mar. 22, 2024).
---------------------------------------------------------------------------
First, section 115(d)(3)(H) provides requirements for the holding
of royalties and accrual of interest with respect to ``unmatched''
works.\180\ As discussed above, disputes over the application of the
Exception are not ownership disputes.\181\ Since ownership is not in
question, and the owner would need to already be registered with the
MLC for there to even be a dispute of this kind, the works at issue in
such a dispute would not be ``unmatched'' within the meaning of the
statute.\182\
---------------------------------------------------------------------------
\180\ See 17 U.S.C. 115(d)(3)(H).
\181\ 88 FR 65908, 65919.
\182\ See 17 U.S.C. 115(e)(35) (``The term `unmatched', as
applied to a musical work (or share thereof), means that the
copyright owner of such work (or share thereof) has not been
identified or located.'').
---------------------------------------------------------------------------
Second, section 115(d)(3)(H) does not apply through section
115(d)(3)(G)(i)(III)(bb), which provides that the MLC shall ``deposit
into an interest-bearing account, as provided in subparagraph (H)(ii),
royalties that cannot be distributed due to . . . a pending dispute
before the dispute resolution committee of the [MLC].'' \183\ Such
disputes are described in section 115(d)(3)(K)(i) as ``disputes
relating to ownership interests in musical works licensed under this
section.'' \184\ The Office reiterates that a dispute over the
application of the Exception is not an ownership dispute. It is a
dispute over the legal effect of a valid termination.\185\
---------------------------------------------------------------------------
\183\ See id. at 115(d)(3)(G)(i)(III)(bb).
\184\ Id. at 115(d)(3)(K)(i).
\185\ 88 FR 65908, 65919.
---------------------------------------------------------------------------
For these reasons, the Office is regulating how the MLC should
handle these types of disputes and the associated royalties and
interest. With respect to the interest issue, we believe the most
equitable approach is for the MLC to pay the interest along with the
royalties, regardless of to whom such royalties are paid. The reason
for requiring the accrual of interest is to make the applicable party
whole for the time-value of money while the dispute is pending
resolution. The Office is requiring the interest rate to be the same as
for funds held under section 115(d)(3)(H)(ii) because that is a rate
that Congress, by enacting it as part of the MMA, has found to be
reasonable. Where there is a voluntary license at issue, whether the
DMP or the voluntary licensor is to be made whole is up to the relevant
agreement. Therefore, depending on the terms of the agreement, either
the DMP will be permitted to retain the interest for itself or will be
required to pay it through to the voluntary licensor. A voluntary
licensor should not gain a benefit beyond the terms of its agreement
simply because the Office is requiring the disputed funds to be held at
the MLC rather than at the DMP.
[[Page 56597]]
B. The Copyright Owner at the Time of the Use Versus the Copyright
Owner at the Time of the Payment
In both the NPRM and SNPRM, the Office proposed that the copyright
owner at the time of the use is legally entitled to royalty
distributions from the MLC unless the MLC is directed otherwise. In
response to the SNPRM, the Office received numerous comments from
publishers, songwriters, and other industry stakeholders expressing
concern with that approach. As discussed below, their concerns related
to whether the Office's understanding of the law conflicted with
current music industry royalty administration practices or would cause
administrative challenges for the MLC. In this final rule, the Office
is adopting our earlier proposal with some modifications to address
these operational concerns.
1. Background
In addressing whether the owner at the time of the use or the owner
at the time of the payment is entitled to blanket license royalties,
the NPRM stated that a copyright owner is entitled to blanket license
royalties at the moment in time when the use of the relevant musical
work by a DMP occurs.\186\ The Office refers to this understanding as
the ``owner at the time of the use'' approach.
---------------------------------------------------------------------------
\186\ 87 FR 64405, 64412.
---------------------------------------------------------------------------
The SNPRM provided further analysis of this approach, concluding
that ``it appears that, absent an agreement to the contrary, the
copyright owner who can sue a DMP for infringement due to non-payment
of royalties under the blanket license is the copyright owner at the
time the infringement was committed--i.e., at the time of the use. It,
therefore, seems reasonable to the Office for that owner to be the one
to whom such royalties are paid by the MLC.'' \187\ The Office's
conclusion that the owner at the time of the use is entitled to the
royalty distribution was based on both the MMA and broader copyright
law principles.\188\ The SNPRM proposed regulatory text identifying the
owner at the time of the use as the legally entitled party.
---------------------------------------------------------------------------
\187\ 88 FR 65908, 65913.
\188\ See id. at 65912 (reflecting the Office's statutory
analysis).
---------------------------------------------------------------------------
The Office, recognizing the importance of giving effect to private
contracts that may call for different payment arrangements, also
proposed that the rule ``would only establish the owner at the time of
the use as the default payee--i.e., the proper payee to whom the MLC
must distribute royalties and any other related amounts under the
blanket license in the absence of an agreement to the contrary.'' \189\
We then proposed additional provisions to govern notification of the
MLC about alternative payee designations, such as through letters of
direction, ``to accommodate and give effect to contractual payment
arrangements that deviate from this default rule.'' \190\
---------------------------------------------------------------------------
\189\ Id. at 65913.
\190\ Id. at 65913-14, 65916-17.
---------------------------------------------------------------------------
Finally, the NPRM also proposed that the MLC should use the last
day of the relevant monthly reporting period to identify the proper
copyright owner for that month's royalty distribution. The Office
suggested that doing so would be in line with the monthly reporting and
royalty distribution process created by the MMA and our regulations and
would make the rule reasonably administrable for the MLC, compared to
requiring the MLC to identify the copyright owner entitled to royalties
on a day-to-day basis.\191\ The Office sought comments on this proposed
approach, including whether some other point in time might be
appropriate.\192\
---------------------------------------------------------------------------
\191\ 87 FR 64405, 64412.
\192\ Id.
---------------------------------------------------------------------------
2. Comments
Comments from publishers, songwriters, and other industry
stakeholders expressed concern with the owner at the time of the use
approach.\193\ Many of these parties favored an approach where
royalties would be distributed to the copyright owner identified in the
MLC's records as of the date of each monthly royalty distribution. The
Office refers to this as ``the owner at the time of the payment''
approach.
---------------------------------------------------------------------------
\193\ See, e.g., MLC SNPRM Initial Comments at 1-16; NMPA SNPRM
Initial Comments at 2-13; NMPA Ex Parte Letter at 1-2 (Jan. 24,
2024); AIMP SNPRM Initial Comments at 1-4; Combustion Music SNPRM
Initial Comments; Endurance Music Grp. SNPRM Initial Comments at 1-
2; Farris, Self & Moore, LLC SNPRM Initial Comments at 1-2; Boom
Music SNPRM Initial Comments; Jonas Grp. Publ'g SNPRM Initial
Comments; Kobalt Music SNPRM Initial Comments at 2; Liz Rose Music
SNPRM Initial Comments at 1-2; Big Machine Music SNPRM Initial
Comments at 1-2; Legacyworks SNPRM Initial Comments; Me Gusta Music
SNPRM Initial Comments at 1-2; Relative Music Grp. SNPRM Initial
Comments at 1-2; Harding SNPRM Initial Comments; Moore SNPRM Initial
Comments; North Music Grp. SNPRM Initial Comments at 2; NSAI SNPRM
Initial Comments at 2-5; Big Yellow Dog SNPRM Initial Comments;
Reservoir Media Mgmt. SNPRM Initial Comments at 1-2; SMACKSongs
SNPRM Initial Comments; Sony Music Publ'g SNPRM Initial Comments at
1-5; Spirit Music Grp. SNPRM Initial Comments at 1-3; Turner SNPRM
Initial Comments at 1-2; Wiatr & Assocs. SNPRM Initial Comments;
Jody Williams Songs SNPRM Initial Comments at 1-2; Concord Music
Publ'g SNPRM Initial Comments at 1-3; ClearBox Rights SNPRM Reply
Comments at 4-5; Creative Nation SNPRM Reply Comments at 1-2; The
Greenroom Resource SNPRM Reply Comments at 1; MAC et al. SNPRM Reply
Comments at 2; Recording Academy SNPRM Reply Comments at 3; SONA
SNPRM Reply Comments at 2-5; Universal Music Publ'g Grp. SNPRM Reply
Comments at 1-5; Warner Chappell Music SNPRM Reply Comments at 3-8;
DLC SNPRM Reply Comments at 2-4.
---------------------------------------------------------------------------
At a high level, commenters' primary concerns with the owner at the
time of the use approach were practical ones. Specifically, they
asserted that this approach is not a standard practice in the music
industry and is contrary to how industry contracts generally work, that
it will be burdensome and disruptive across the industry (including to
the MLC), and that it will result in inaccurate and delayed payments
(including to songwriters).\194\
---------------------------------------------------------------------------
\194\ Examples of other issues raised by the comments include
that: it may upset commercial expectations and cause problems with
financial modeling and reporting; it may lead to an increase in
fraudulent claims; implementation would require the development of
new data and processing systems and new reporting formats and
standards across the entire industry that will be costly and time-
consuming to create; once a publisher's or administrator's rights
period expires, they should not be burdened with the expense and
liability of needing to ensure that any future income they receive
flows through to the current owner to whom rights have been
transferred; former publishers and administrators are not set up to
distribute royalties to former songwriter partners, and practically
would not have current contact or banking information available to
make such distributions to their former songwriters; the choice of
songwriters to change publishers or administrators should be
honored, and they should not be forced to continue a relationship
with their former representative with respect to these royalties
that may be inefficient or lack transparency and accountability; it
will lead to lower match rates and more unmatched royalties at the
MLC, especially for pre-2021 periods.
---------------------------------------------------------------------------
A few commenters supported the Office's legal conclusions regarding
the proper copyright owner who is entitled to blanket license
royalties.\195\ Others suggested a bifurcated approach to addressing
the issue. For example, the Music Artists Coalition (``MAC'') said
that, in the termination context, the payee should be the owner at the
time of the use, but for everything else, it should be the owner at the
time of the payment.\196\ Similarly, NMPA, as a ``compromise,''
proposed regulatory text based on the NPRM that ``applies a time of use
rule solely in the termination context.'' \197\ It argued, however,
``that a rule providing for payment to the owner at the time of
distribution in all contexts is the more appropriate one.'' \198\
---------------------------------------------------------------------------
\195\ See, e.g., Howard SNPRM Initial Comments at 1-2; King,
Holmes, Paterno & Soriano LLP SNPRM Reply Comments.
\196\ MAC Ex Parte Letter at 2 (Dec. 29, 2023).
\197\ NMPA Ex Parte Letter at 2 (Jan. 24, 2024).
\198\ Id.
---------------------------------------------------------------------------
3. Legal Entitlement to Blanket License Royalties
Despite the lack of support from commenters, few addressed the
[[Page 56598]]
statutory text or the Office's legal analysis. Only NMPA and the MLC
provided substantive arguments that the MMA's statutory language and
legislative history support the MLC distributing royalties to the owner
at the time of the payment.\199\
---------------------------------------------------------------------------
\199\ NMPA SNPRM Initial Comments at 11-13; MLC SNPRM Initial
Comments at 4-11. NMPA also made an argument based on language used
by the Office in the NPRM's analysis of the Exception which stated
that the ``current copyright owner'' is entitled to blanket license
royalties, that owner ``can change over time'' and, after such a
change, ``the new owner becomes the proper payee.'' NMPA SNPRM
Initial Comments at 11 (citing 87 FR 64405, 64411; 88 FR 65908,
65912). To clarify, the Office's use of the term ``current'' was
intended to identify that the proper payee is the copyright owner
concurrent with the time the work was used. While the last copyright
owner in time may be the proper payee, we were not suggesting that
this is necessarily always the case.
---------------------------------------------------------------------------
NMPA conceded that the Office's proposal ``is not based on an
unreasonable legal interpretation.'' At the same time, it asserted that
``unless the statute is clear, a legal interpretation of relevant
statutory provisions should not cause disruption in a private,
functioning market.'' \200\ It also disagreed with the Office's
statutory analysis and proposed a different reading. NMPA's statutory
arguments referred to sections 115(d)(3)(G)(i)(II) and 115(d)(3)(J)(i)
(provisions governing royalty distributions), stating that they must be
read together with sections 115(d)(3)(E)(i) and 115(d)(3)(E)(ii)(II)-
(III) (provisions governing the MLC's ownership database). Relying on
those provisions, NMPA stated:
---------------------------------------------------------------------------
\200\ NMPA SNPRM Initial Comments at 11.
The MLC is . . . not directed by statute to maintain . . .
historical copyright ownership or chain of title information within
its musical works database. Because the MLC does not maintain in the
musical works database records that would enable it to identify the
``copyright owner'' at the precise time of use, and the ``copyright
owner'' as identified in the musical works database is always the
then-current copyright owner (and not the owner at the time of use
or at some other prior time), the direction to pay ``copyright
owners in accordance with . . . the ownership and other information
contained in the records of [the MLC]'' should be read as a
direction to pay the owner at the time of payment.\201\
---------------------------------------------------------------------------
\201\ Id. at 12 (second and third alterations in original).
NMPA then referred to section 115(d)(3)(I), asserting that ``once a
match is made, all the accrued royalties with respect to such
previously unmatched work are paid to the then-current copyright owner
to which the work has been matched. There is no requirement for the MLC
to determine which portion of those royalties may relate to uses made
at a time when a different (potentially not yet identified) copyright
owner owned the work.'' \202\ NMPA concluded by stating that it ``does
not believe that the sections referred to by the [Office] support a
different conclusion,'' as those provisions ``do not address the issue
of who has the statutory right to receive Blanket License royalty
payments.'' \203\
---------------------------------------------------------------------------
\202\ Id. at 12-13.
\203\ Id. at 13.
---------------------------------------------------------------------------
The MLC made similar statutory arguments, referencing some of the
MMA's same sections,\204\ as well as its legislative history.\205\
Similar to NMPA, the MLC asserted that ``[t]he MMA directive to
distribute royalties based on the `information in [its] records' is
most appropriately read to mean that The MLC is to distribute royalties
to the copyright owners' current registered payee.'' \206\
---------------------------------------------------------------------------
\204\ MLC SNPRM Initial Comments at 4-7 (referencing 17 U.S.C.
115(d)(3)(G)(i)(II), 115(d)(3)(J)(i), 115(d)(3)(E)(i)-(ii), and
115(d)(3)(I)).
\205\ Id. at 4-11. Regarding legislative history, the MLC
primarily pointed to there being ``no mention or contemplation of
the creation of a database that includes temporal histories of past
ownership'' and that a description of the provisions concerning
market share-based distributions of unclaimed royalties ``conveys an
understanding that royalties would be paid to the entities that
currently represent songwriters, not to an entity that may have
represented the songwriter in the past but is no longer authorized
to do so.'' Id. at 8-9 (citing H.R. Rep. No. 115-651, at 7-9, 13 and
S. Rep. No. 115-339, at 8-9, 14).
\206\ Id. at 5-6.
---------------------------------------------------------------------------
The Office acknowledges the practical consequences of our analysis
in the SNPRM. However, those practicalities do not create legal
entitlements or change the terms of title 17, absent contractual or
other arrangements. While sections 115(d)(3)(G)(i)(II) and 115(d)(3)(I)
provide the ``copyright owner'' with legal entitlement to the
royalties, neither they nor the other cited provisions speak to which
copyright owner possesses such entitlement between the owner at the
time of the use or the owner at the time of the payment.\207\ That is
why the Office engaged in the analysis it did in the NPRM and
SNPRM.\208\
---------------------------------------------------------------------------
\207\ Nor do these provisions necessarily require that there be
only a single payee contained in the MLC's records for each work (or
share). At best, these provisions are silent on that issue. The
MLC's reliance on legislative history is similarly misplaced, as
their cited references also do not appear to directly speak to this
issue. In particular, market share-based distributions of unclaimed
royalties are a unique feature of the MMA, and whatever the meaning
of the specific provisions governing that special type of
distribution--which is a matter beyond the scope of this
proceeding--they do not speak to the legal entitlement to or
distribution requirements for blanket license royalties that have
not yet become ``unclaimed'' within the meaning of the statute. See
17 U.S.C. 115(d)(3)(J), (e)(34).
\208\ 88 FR 65908, 65912 (explaining that the analysis regarding
the owner at the time of the use versus the owner at the time of the
payment issue concerned the Office's proposal ``[t]o codify its
preliminary conclusion that the statute entitles the `current
copyright owner' to the royalties under the blanket license'').
---------------------------------------------------------------------------
The MMA's references to the MLC's records do not resolve this
issue. They merely provide instructions as to how the MLC shall
distribute royalties to legally entitled copyright owners. Such
distributions must be made to such copyright owners ``in accordance
with . . . the ownership and other information contained in the records
of the [MLC].'' \209\ Those records contain important information about
how to make the distribution, including contact, banking, and other
information about the owner, as well as whether payment is to be made
to an administrator or other representative or designee.\210\
---------------------------------------------------------------------------
\209\ See 17 U.S.C. 115(d)(3)(G)(i)(II).
\210\ See, e.g., 37 CFR 210.31(b)(1)(iii), (b)(1)(v)(D).
---------------------------------------------------------------------------
Of course, the statute's direction to the MLC to make distributions
based on the information in its records does not resolve any underlying
dispute regarding who is entitled to the royalty distribution. Clearly,
the MLC can only distribute royalties based on known information. But
what the MLC ``knows,'' based on its records, could turn out to be
wrong, for example, if an imposter managed to successfully register a
fraudulent ownership claim, or a legitimate copyright owner
accidentally but erroneously claimed a work in good faith. If the
statute is understood to confer entitlement to the royalties on
whomever is identified in the MLC's records, it creates a conflict with
the rest of the statutory text that confers this entitlement on the
copyright owner. Moreover, such a reading would provide perverse
incentives for parties to race to submit as many fraudulent claims to
the MLC as possible in the hope of gaining such legal entitlement.
Congress did not intend to create such an absurd scheme, whereby
claimants who may be intentionally lying can obtain legal entitlement
to royalties for uses of copyrighted works instead of the actual
copyright owners.
Thus, while the individual or entity legally entitled to the
royalties and the individual or entity actually receiving the
distribution from the MLC will, in most cases, be the same, this will
not always be the case. If they are not the same, being identified in
the MLC's records alone will not alter or prejudice the true copyright
owner's legal entitlement to those royalties. The Office concludes that
this is the only reasonable way to read the MMA's
[[Page 56599]]
instructions to the MLC regarding distributions.
With respect to the Office's further analysis contained in the NPRM
and SNPRM, to the extent NMPA or the MLC is suggesting that Congress
meant to establish a special exception regarding copyright ownership or
royalty entitlement in connection with the blanket license, the Office
disagrees. As explained in the SNPRM, reading section 501(b) in
conjunction with section 115(d)(4)(E)(ii)(II) (which directly
references section 501), ``it appears that, absent an agreement to the
contrary, the copyright owner who can sue a DMP for infringement due to
non-payment of royalties under the blanket license is the copyright
owner at the time the infringement was committed--i.e., at the time of
the use.'' \211\ This is the best reading of the statute: that Congress
expected the party who is legally entitled to the royalties and the
party who is legally permitted to sue a DMP for infringement for the
nonpayment of such royalties to be one and the same. That understanding
is best reflected in section 115(d)(4)(E)(ii)(II)'s cross reference to
section 501. If Congress had intended an exception to the operation of
section 501(b) for infringement cases related to the blanket license,
it would have articulated one. The Office recognizes that legal
entitlements can be varied by contract, but that variation is not
relevant to understanding how the statute works absent any such
agreement's terms.
---------------------------------------------------------------------------
\211\ 88 FR 65908, 65913.
---------------------------------------------------------------------------
Some commenters suggested to the Office that potential concerns
over the time of use approach are addressed through contract.\212\ But
contract terms stating that acquiring publishers will be paid royalties
for pre-acquisition uses of musical works imply agreement with the
Office's conclusions about default royalty entitlement in the absence
of a relevant agreement. Additionally, most of the comments addressing
the time of use approach focused on concerns related to business
practices (e.g., paperwork, royalty processing, data tracking) rather
than the law. While such concerns are relevant to the practical
administrability of the rule, and support certain changes the Office
ultimately made to the final rule (which are discussed below), they
have no bearing on the statutory analysis discussed above or in the
NPRM or SNPRM.
---------------------------------------------------------------------------
\212\ See, e.g., MLC SNPRM Initial Comments at 11; NMPA SNPRM
Initial Comments at 4-5 & n.4, 10; Kobalt Music SNPRM Initial
Comments at 2; Reservoir Media Mgmt. SNPRM Initial Comments at 1;
Sony Music Publ'g SNPRM Initial Comments at 1-2; Spirit Music Grp.
SNPRM Initial Comments at 1; Concord Music Publ'g SNPRM Initial
Comments at 2; Universal Music Publ'g Grp. SNPRM Reply Comments at
2.
---------------------------------------------------------------------------
Based on the foregoing, as well as the relevant discussion in the
NPRM and SNPRM, the Office is adopting the owner at the time of the use
rule as final, but only with respect to identifying who is legally
entitled to blanket license royalties under the statute as a default
matter. Unlike the SNPRM, the final rule does not mandate that the MLC
may only make distributions to either the owner at the time of the use
or an alternative payee specifically designated by such owner.\213\
Rather, it contains a new provision (detailed in the section below)
governing how the MLC is to make royalty distributions based on the
information in its records.
---------------------------------------------------------------------------
\213\ Despite this change, the final rule still provides that
the relevant owner is the owner as of the last day of the monthly
reporting period in which the work is used pursuant to a blanket
license. While the Office's original reasoning for that was
partially based on concerns about requiring the MLC to manage day-
to-day ownership changes occurring mid-month, it also rested on the
fact that the MMA established a monthly-based reporting scheme for
DMPs. 87 FR 64405, 64412. The Office relies on the latter in
adopting the final rule. See 17 U.S.C. 115(d)(4)(A).
---------------------------------------------------------------------------
As discussed above, the MLC's records are not determinative with
respect to who is legally entitled to royalties. At the same time, the
Office agrees with NMPA and the MLC that section 115(d)(3)(G)(i)(II)
directs the MLC to make distributions in accordance with the
information in its records.\214\ The Office has therefore decided to
adopt two provisions--one that describes who is legally entitled to the
royalties and another that directs to whom the MLC shall distribute
royalties. The two provisions avoid confusion, making clear that the
MLC's distribution does not mean that the recipient is legally entitled
to those royalties, but instructing the MLC regarding the distributions
that it should make. Adopting regulations directing the MLC to act,
unaccompanied by regulations identifying who is legally entitled to the
royalties, could create a misunderstanding regarding proper application
of the law. But, as discussed below, aligning the legal entitlement
with the directive to the MLC in all cases would be administratively
infeasible. The new distribution provision instead enables the MLC to
make royalty distributions to the owner at the time of the payment in
accordance with the standard industry practice for which commenters
expressed virtually universal support.
---------------------------------------------------------------------------
\214\ 17 U.S.C. 115(d)(3)(G)(i)(II).
---------------------------------------------------------------------------
Some commenters continued to voice concerns with the Office
articulating who is legally entitled to the royalties as a default
matter, even when coupled with the new distribution provision discussed
below.\215\ The Office has considered these concerns, but declines to
remove the entitlement provision from the final rule. Especially
considering the new distribution provision discussed below, the Office
believes it is important to provide a clear statement of the party who
is legally entitled to blanket license royalties as a default matter.
---------------------------------------------------------------------------
\215\ See NMPA Ex Parte Letter at 1-2 (Jan. 24, 2024); MLC Ex
Parte Letter at 3 (Feb. 5, 2024); MAC & NSAI Ex Parte Letter at 1
(Feb. 12, 2024).
---------------------------------------------------------------------------
First, the Office is always mindful of potential unintended
consequences that may stem from its rules. To the extent the Office's
legal conclusions may differ from the practices of certain industry
participants, those differences seem to be based on expectations
arising out of contracts or business norms, not title 17. Moreover,
failure to explain that entitlement to royalties is based on the time
of the use could lead to confusion and the mistaken impression that the
MLC's royalty distributions, which are based on information in its
records at the time of the payment--principally for administrative
convenience--reflects a determination of entitlement. On balance, the
best way to minimize confusion is for the Office to articulate our
interpretation of the statute.
Second, the Office disagrees with the argument that the rule is
unnecessary because private agreements will govern anyway. That
argument presupposes that every private agreement will speak to this
issue. Nothing in the record indicates that this is universally true,
indicating there is at least some subset of contracts as to which this
provision will be applicable.\216\ Moreover, this argument presupposes
that all transfers are contractual, which is incorrect.
---------------------------------------------------------------------------
\216\ The Office, of course, does not mean to suggest that this
provision should in any way override the intent of contracting
parties if an agreement is ambiguous. If the parties disagree as to
whether an agreement conveyed the entitlement to the applicable
royalties, the usual standards under applicable state law for
construing private contracts would still apply. The MLC should treat
any such disagreement like an ownership dispute.
---------------------------------------------------------------------------
Finally, the Office disagrees that the existence of non-contractual
transfers, like intestate succession or bankruptcy, weigh against this
rule, as their existence does not change the statutory analysis
discussed above and in the SNPRM. The Office has, however, clarified in
the final rule that the entitlement to royalties can be
[[Page 56600]]
transferred and that the default royalty entitlement provided for is
subject to any such transfer.
4. The MLC's Distribution of Royalties Based on Its Records
As mentioned above, the final rule includes a new provision to
address the MLC's royalty distributions based on the information in its
records, as required by section 115(d)(3)(G)(i)(II). The new regulation
has four main parts summarized here.
i. Default Royalty Distribution Practices Regarding Ownership and the
MLC's Records
The first part of the regulation provides that, when making a
distribution, the MLC shall treat the individual or entity identified
in its records as of the date of the payee snapshot used for the
applicable distribution as legally authorized to receive the
distribution (e.g., meaning that such party is the owner at the time of
the use (or such owner's representative or designee) or a successor in
interest to such owner's entitlement to the royalties (or such
successor's representative or designee)). In other words, the MLC is to
distribute royalties based on its records and to assume that whoever is
in its records is legally entitled to the distribution, subject to the
additional provisions below. By making royalty distributions to the
owner reflected in the MLC's records on the date of the payee snapshot
(i.e., at the time of the payment), the MLC will be acting in
accordance with widespread industry practice without contravening the
statute. One commenter called it ``an elegant solution.'' \217\
---------------------------------------------------------------------------
\217\ MAC & NSAI Ex Parte Letter at 1 (Feb. 12, 2024); see also
MCNA et al. Ex Parte Letter at 1-2 (Mar. 15, 2024) (articulating
qualified support for this solution in the termination context and
subject to other various caveats, calling it ``a reasonable and
practical solution that accounts for both business considerations
and the protection of creators' rights under the law in termination
rights situations'').
---------------------------------------------------------------------------
This default distribution provision is both consistent with the
language of the statute and responsive to the MLC's request for the
``inclusion of a provision confirming that [it] can distribute
royalties for a musical work to the current payee registered in its
database.'' \218\ The Office concludes that the new provision is a
reasonable and appropriate approach which facilitates the MLC's
administration of royalty distributions. Moreover, this result was
overwhelmingly supported by commenters. The comments made clear that
the party identified in the MLC's records at the time of the payee
snapshot (or its representative or designee) will be the party who is
legally entitled to the distribution in the vast majority of
cases.\219\ Permitting the MLC to act on the information in its records
will lead to accurate payments without overburdening copyright owners
and the MLC with new, potentially significant, data, reporting, and
payment requirements, which could result in a delay in royalty
distributions.\220\
---------------------------------------------------------------------------
\218\ MLC Ex Parte Letter at 3-4 (Feb. 5, 2024); see also MLC Ex
Parte Letter at 1 (Feb. 21, 2024); MLC Ex Parte Letter at 1 (Mar.
22, 2024); Warner Chappell Music SNPRM Reply Comments at 5-6 (``[I]n
light of the undisputed comments to the SNPRM detailing how and why
the U.S. and international music publishing industry is universally
built on maintaining current information for--and paying--the then-
current owner or administrator, Warner Chappell advocates for
adopting that as a default rule.''); NMPA SNPRM Initial Comments at
10 (``[A] `default rule' should be the rule that applies in the vast
majority of cases, and should not be the rule that applies only in
exceptional cases.'').
\219\ See, e.g., MLC SNPRM Initial Comments at 11 (``[I]n most
industry agreements the current payee typically has the right to
receive royalties for all periods (both prospective and historical).
Thus, a default rule that provides for payments to be made to the
current payee (a result that is consistent with most industry
agreements) would produce more accurate results than a default rule
that provides for payments to be made to a historical payee (a
result that does not align with most industry agreements.''); NMPA
SNPRM Initial Comments at 4-5 (``[T]he custom and practice in the
music industry is for royalties to be paid to the owner of the
copyright at the time of payment rather than at the time of use,
unless a different arrangement is agreed to between that copyright
owner and a different payee, e.g., the prior owner/assignor of the
copyright. This custom and practice is memorialized in industry
contracts and the royalty and administration systems of publishers,
administrators, and CMOs are built around that custom and practice.
In other words, the industry `default rule' is the opposite of the
`default rule' proposed in the SNPRM.''); Kobalt Music SNPRM Initial
Comments at 2 (``The administrator who is registered at the time of
a distribution is nearly always the entity that all royalties should
be paid to, and this is how industry contracts and CMOs generally
operate. Any exceptions to this practice would be the distinct
minority.''); Sony Music Publ'g SNPRM Initial Comments at 1-2 (``The
Prior Owner Rule is inconsistent with the contracts around which the
music publishing industry is built. . . . When music catalogues are
bought and sold, the terms of the acquisition documents generally
provide that the acquiring party has the right to collect all income
after the date of sale.''); Universal Music Publ'g Grp. SNPRM Reply
Comments at 2 (``Under industry contracts, where rights are
transferred or revert, the right to receive royalties (including
those previously earned but not yet paid) generally follows the
rights. . . . The Time of Use Rule will therefore . . . usually
result in payment to the wrong party under the relevant contractual
arrangements.''); Warner Chappell Music SNPRM Reply Comments at 5
(``[A]ny rule that would establish the `default payee' as anyone
other than the current rightsholder at the time of the payment will,
by definition, carry a real and inherent risk of compelling payment
to someone not entitled to received it. . . . [T]he U.S. and
international music publishing industry is universally built on
maintaining current information for--and paying--the then-current
owner or administrator.''); Big Machine Music SNPRM Initial Comments
at 2 (``I have never seen a copyright transfer that doesn't include
a letter of direction to effectively set out the process for the new
owner to receive all future income.''); Reservoir Media Mgmt. SNPRM
Initial Comments at 2 (``There is nothing to gain from some of these
changes beyond a mirage of accuracy that is not in alignment with
actual collection rights.''); SONA SNPRM Reply Comments at 3
(``Songwriters, publishers, and other third parties acquiring and/or
licensing publishing rights in the music industry transfer rights,
including the right to administer and collect royalty income, as of
a specific date of transfer so that the party that is newly entitled
to administer, collect and receive income in connection with the
particular works will do so as of that specific effective date
regardless of when those monies were earned.''). Other commenters
also noted that this practice is not completely universal, and that
there may be exceptions. See, e.g., MLC SNPRM Initial Comments at
11; NMPA SNPRM Initial Comments at 4-5; Kobalt Music SNPRM Initial
Comments at 2; Sony Music Publ'g SNPRM Initial Comments at 1-2;
Universal Music Publ'g Grp. SNPRM Reply Comments at 2; Warner
Chappell Music SNPRM Reply Comments at 6 (``In the rare instance
where parties actually intend for someone other than the current
owner or administrator to receive an MLC distribution, those parties
are best positioned to so notify the MLC.'').
\220\ The Office acknowledges that this default distribution
provision could lead to the ``wrong'' result with respect to the
narrow category of post-termination royalties paid for pre-
termination uses. In such cases, the pre-termination copyright owner
remains entitled to those royalties absent a contrary agreement
because the reversion of the copyright by operation of law does not
encompass the additional entitlement to those royalties. The Office
nevertheless finds the default distribution provision to be
reasonable in these cases in light of the reduced burden it places
on the MLC, the various exceptions to the default distribution
provision discussed below, as well as comments from publishers
suggesting agreement with the end-result of having the MLC
distribute post-termination royalties for pre-termination uses to
the post-termination owner. See, e.g., NMPA NPRM Initial Comments at
6; CMPA NPRM Initial Comments at 2 (``Although it may not be in the
financial interest of the pre-termination owner, . . . it would be
CMPA's recommendation that any and all adjustments of this nature be
paid to the current copyright owner (that being the post-termination
owner) at the time of the payment, and not at the time when the
usage was made.''); see also NMPA SNPRM Initial Comments at 5
(``[I]t is the custom and practice in the industry for the new owner
or the songwriter to whom rights have been assigned or reverted to
be paid all unpaid royalties regardless of when they were
earned.'').
Additionally, the comments suggested that at least some
publishers do not wish to receive such royalties due to the
administrative burdens involved in sharing those royalties with
former songwriter partners. See, e.g., NMPA SNPRM Initial Comments
at 8; Kobalt Music SNPRM Initial Comments at 3 (``In our experience,
former administrators in general are not set up to distribute
royalties to their former songwriters, and almost no one--not even
the former administrators themselves--wants them to continue to
receive those royalties once all rights periods expire.''); Big
Machine Music SNPRM Initial Comments at 1-2 (``The collection and
re-distribution of this income to the new owner creates an
additional administrative burden for our company, taxes the human
resources of my team and creates an unwanted liability for us
without any benefit.''); Me Gusta Music SNPRM Initial Comments at 2;
Relative Music Grp. SNPRM Initial Comments at 1. By including these
royalties within the MLC's default distribution provision, it allows
publishers to choose for themselves how they would like to handle
these situations. They can do nothing, and the royalties will be
distributed to the post-termination owner. Or, if they wish to
assert their entitlement to the royalties, they can defeat the
default distribution provision and obtain them by simply notifying
the MLC, as discussed below.
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[[Page 56601]]
However, the Office recognizes that there may be instances where
the MLC's distribution of royalties to the owner at the time of the
payment under the default distribution provision would result in an
improper party being paid. Therefore, the Office has included
clarifications and limitations. First, any distribution made by the MLC
is not a determination of a party's legal entitlement to the royalties
and does not prejudice any such party's legal claim. The purpose of the
default distribution provision is to reduce burdens, gain efficiencies,
and enhance accuracy by applying industry practice to the MLC's
distributions. It does not alter anyone's underlying legal rights--
especially if the MLC, in relying on this provision, ends up
distributing royalties to an individual or entity who is not legally
entitled to them. The MLC specifically supported the inclusion of such
a provision.\221\
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\221\ MLC Ex Parte Letter at 2 (Feb. 21, 2024).
---------------------------------------------------------------------------
Second, the default distribution provision does not apply where
there is a dispute between parties or an investigation by the MLC
covering the applicable works (or shares) or payees. The reference to
an investigation is meant to include situations where the MLC may be
looking into, for example, a potentially fraudulent registration or
claim. The purpose is to make clear that where the MLC has knowledge
that there is a cloud over the ownership of the relevant work (or
share), it must continue holding royalties until that cloud has
cleared.
Third, the default distribution provision does not apply if the MLC
has been ``notified otherwise.'' This language is meant to cover
circumstances where the MLC receives information that would indicate to
a reasonable person that the payee identified in its records is not in
fact entitled to the royalty distribution. In enacting the statutory
requirement for the MLC to distribute royalties pursuant to its
records, Congress did not intend for the MLC to knowingly make
inaccurate payments after being expressly informed otherwise.\222\
Whether particular information received is sufficient, or whether any
such information is adequately substantiated, for the MLC to actually
be ``notified'' is a matter the Office leaves to the MLC's reasonable
discretion based on its experience, practices, and policies, subject to
the Office's guidance.\223\
---------------------------------------------------------------------------
\222\ See H.R. Rep. No. 115-651, at 9 (referring to ``the
efficient and accurate collection and distribution of royalties'' as
the MLC's ``highest responsibility''); S. Rep. No. 115-339, at 9
(same); Conf. Rep. at 7 (same).
\223\ While the MLC suggested that such notifications will
always take the form of disputes, the Office cautions that this
might not always be the case. See MLC Ex Parte Letter at 1-2 (Mar.
22, 2024). That is why the final rule provides separate explicit
provisions for both disputes and where the MLC is notified
otherwise. The notification provision is meant to be broader to
encompass other possible scenarios outside of a formal dispute.
While the degree of overlap between the two provisions may be
substantial, it is not necessarily total.
---------------------------------------------------------------------------
ii. The Default Distribution Provision Does Not Change the MLC's Duty
To Verify the Accuracy of Royalty Distributions
The next part of the provision states that despite the default
distribution provision, the MLC must continue to engage in reasonable
efforts to verify the information provided to it and to combat against
fraudulent registrations and claims. This provision is not intended to
require the MLC to engage in additional efforts beyond those it
currently undertakes, but rather to ensure that it continues to engage
in such efforts after the rule is enacted.\224\ An examination of the
MLC's current such efforts and their sufficiency is beyond the scope of
this proceeding.
---------------------------------------------------------------------------
\224\ See MLC Ex Parte Letter at 5 (Feb. 21, 2024) (explaining
that the MLC ``has substantial review processes in place to prevent
fraudulent or improper claiming and diversion of royalties''); see
also U.S. Copyright Office, Unclaimed Royalties: Best Practice
Recommendations for the Mechanical Licensing Collective iii, 60
(2021), https://copyright.gov/policy/unclaimed-royalties/unclaimed-royalties-final-report.pdf (``[T]he MLC should have mechanisms in
place to help review, verify, and quality-check information, and
recognize problems like conflicts, inconsistencies, inaccuracies,
and potential fraud.'').
---------------------------------------------------------------------------
iii. The MLC Must Still Correct Its Own Errors
The final part of the provision is meant to codify and clarify a
point made in the SNPRM that ``[w]here the MLC distributes royalties to
the wrong payee due to an error on the MLC's part . . . , the MLC must
correct its error in a timely fashion.'' \225\ The regulation makes
clear that the applicable type of error is one caused by the MLC's
actions, as opposed to where the MLC acts in accordance with the
default distribution provision or otherwise reasonably relies on
information provided to it by others that turns out to be
inaccurate.\226\ The reference to the MLC's actions encompasses the
actions of its employees, but the Office also intends for it to cover
actions of others acting on its behalf.
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\225\ 88 FR 65908, 65918 n.137.
\226\ See MLC Ex Parte Letter at 2 (Mar. 22, 2024).
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C. Matched Historical Royalties
Outside the context of the owner at the time of the use versus the
owner at the time of the payment issue, the Office received few
comments regarding our proposal that the MLC report and distribute
matched historical royalties in the same manner and subject to the same
requirements that apply to the reporting and distribution of blanket
license royalties.\227\ Notably, the MLC supported this proposal by
including it in its own regulatory proposal and no commenters appear to
have objected.\228\ The Office is, therefore, adopting this portion of
the SNPRM as final for the reasons stated in the SNPRM.\229\
---------------------------------------------------------------------------
\227\ See 88 FR 65908, 65914.
\228\ See MLC SNPRM Reply Comments, App. A. at iii-iv.
\229\ 88 FR 65908, 65914.
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D. Ownership Transfers and Royalty Payee Changes
The final rule retains the overall framework and structure from the
SNPRM with respect to the provisions governing notice to and
implementation by the MLC of ownership transfers and other royalty
payee changes.\230\ The Office, however, has made several changes from
the SNPRM.
---------------------------------------------------------------------------
\230\ See id.
---------------------------------------------------------------------------
1. Notice of a Change to the MLC
The SNPRM contained detailed and tailored notice requirements based
on the type of payee change at issue. It proposed such requirements for
the following circumstances: (1) transfers of copyright ownership other
than by will or operation of law; (2) transfers of copyright ownership
by statutory termination; (3) other transfers of copyright ownership;
and (4) designations of alternative royalty payees.\231\
---------------------------------------------------------------------------
\231\ Id. at 65914-17.
---------------------------------------------------------------------------
In response to the SNPRM, several commenters criticized the non-
termination-related notice requirements, including on the ground that
the Office does not need to regulate standard operational processes,
like those concerning contractual transfers and letters of direction,
for which the MLC has well-functioning systems in place.\232\
Commenters also contended
[[Page 56602]]
that the SNPRM's requirements were unworkable or unduly
burdensome.\233\
---------------------------------------------------------------------------
\232\ See e.g., Kobalt Music SNPRM Initial Comments at 3; Spirit
Music Grp. SNPRM Initial Comments at 2; Reservoir Media Mgmt. SNPRM
Initial Comments at 2; ClearBox Rights SNPRM Reply Comments at 10.
\233\ See e.g., NMPA SNPRM Initial Comments at 4, 14-15; Spirit
Music Grp. SNPRM Initial Comments at 2; Farris, Self & Moore, LLC
SNPRM Initial Comments at 1; Warner Chappell Music SNPRM Reply
Comments at 7-8; Universal Music Publ'g Grp. SNPRM Reply Comments at
2 n.1; Reservoir Media Mgmt. SNPRM Initial Comments at 2.
---------------------------------------------------------------------------
The MLC echoed these comments and submitted a regulatory proposal
that largely retained the Office's proposed requirements for
termination-related transfers, but replaced the other notice
requirements with a catch-all provision providing that such notice be
made in accordance with requirements established by the MLC.\234\ Few
commenters supported the Office's proposal with respect to non-
termination-related notices.\235\
---------------------------------------------------------------------------
\234\ MLC SNPRM Reply Comments at 3-5, App. A at iv-xii; MLC
SNPRM Initial Comments at 18-20; MLC Ex Parte Letter at 2 (Mar. 22,
2024) (explaining ``the need for flexibility to incorporate evolving
industry practices into processes to effectuate the various types of
transfers and payee changes that occur in the normal course of
business for rightsholders'').
\235\ See, e.g., Promopub SNPRM Initial Comments at 5.
---------------------------------------------------------------------------
Based on these comments, the Office has scaled back the notice
requirements, generally in line with the MLC's proposal. Outside of the
termination context, it does not appear that regulation is currently
necessary. Instead, the Office is issuing a rule directing the MLC to
adopt a written policy reflecting its practices and requirements for
non-termination-related notices. The Office will monitor this area and
will consider potentially adopting regulations in the future if
presented with a record reflecting a need to intervene.
i. Non-Termination-Related Transfers of Copyright Ownership and Royalty
Payee Changes
As discussed above, the final rule omits the previously proposed
requirements for non-termination-related notices and replaces them with
a directive for the MLC to adopt and publish requirements for such
notices. More specifically, the final rule provides that parties
seeking to make payee changes outside the context of a termination must
notify the MLC pursuant to such reasonable requirements as it
establishes and makes publicly available on its website. To the extent
the MLC does not already have such a policy on its website as of the
date this final rule is published in the Federal Register, the MLC will
have 60 days to adopt one and make it public, unless the Office permits
an extension.
Additionally, there is one aspect of the SNPRM regarding non-
termination-related notices that the final rule retains. In response to
the NPRM, the Songwriters Guild of America et al. (``SGA et al.'')
proposed specific requirements to apply where the MLC is asked by the
terminating party to implement an agreement directing it to pay post-
termination royalties to the pre-termination copyright owner.\236\ SGA
et al. was concerned about contractual overreach by publishers
requiring the execution of anticipatory letters of direction as part of
publishing deals.\237\ The Office included the proposal as part of the
SNPRM, explaining that ``[b]ased on the current record, the proposal
seems to be a reasonable safeguard, even if there is no such overreach
at present.'' \238\ No commenter specifically opposed this proposal,
and the MLC included it in its regulatory proposal.\239\ The Office
has, thus, retained most of the proposal in the final rule with some
minor conforming edits.\240\
---------------------------------------------------------------------------
\236\ 88 FR 65908, 65917.
\237\ Id.
\238\ Id.
\239\ MLC SNPRM Reply Comments, App. A. at vi-vii.
\240\ The final rule does not include the requirement that such
a notice must include ``a clear statement stipulating that neither
the notice nor the distribution of royalties by the mechanical
licensing collective in accordance with the notice prejudices the
rights of either party'' as such a requirement would be unnecessary,
considering that the regulations also require the notice to be
signed after the effective date of termination.
---------------------------------------------------------------------------
ii. Transfers of Copyright Ownership by Statutory Termination
In contrast to the Office's proposal on non-termination-related
notices, commenters generally did not oppose the Office's proposal on
notices to the MLC about payee changes resulting from statutory
terminations. Indeed, multiple commenters affirmatively supported
it.\241\ For example, MAC et al. said that they ``fully support the
Office's proposal,'' calling it ``simple, practical and efficient.''
\242\ The MLC ``welcome[d] regulatory clarity from the Office'' on this
topic \243\ and said that ``[m]uch of the provisions concerning
termination procedure are consistent with MLC practice, or could be
implemented.'' \244\ The MLC and other commenters, however, proposed
modifications to the Office's proposal to address discrete concerns.
---------------------------------------------------------------------------
\241\ See, e.g., MLC SNPRM Initial Comments at 20; MLC SNPRM
Reply Comments at 3; MAC et al. SNPRM Initial Comments at 2-3;
Promopub SNPRM Initial Comments at 5. Despite its general support,
Promopub also expressed concern that ``[i]f the terminating party
has already been subjected to a dispute process at the MLC, the pre-
termination copyright owner/prior payee should not have another
opportunity to add salt to the wound by way of the proposed Rule
creating another notification and dispute cycle.'' Promopub SNPRM
Initial Comments at 5. To clarify, these notice requirements and the
dispute mechanism contained within them are only effective
prospectively. This means that if a terminating party previously
notified the MLC about an effective termination and the MLC
acknowledged the sufficiency of that notice, then nothing in the
final rule would require the terminating party to submit a new
notice to the MLC.
\242\ MAC et al. SNPRM Initial Comments at 2-3.
\243\ MLC SNPRM Reply Comments at 3.
\244\ MLC SNPRM Initial Comments at 20.
---------------------------------------------------------------------------
Based on the comments and the discussion in the SNPRM, the Office
is adopting as final the proposed notice requirements regarding payee
changes resulting from statutory terminations with the modifications
discussed below.
a. Whether the Notice Requirements Should Be a Floor
The Office disagrees with the MLC's proposal to turn the notice
requirements into a floor.\245\ While the Office acknowledged in the
SNPRM that the proposed information that must be submitted to the MLC
might not provide sufficient information to process and implement the
ownership change in some cases, the Office also proposed a means by
which the MLC could obtain the minimum necessary information to
implement the change.\246\ In doing so, the Office explained that
``[t]his may be a better approach than requiring terminating parties to
provide additional information to the MLC at the outset that they may
not readily have and which may not be needed to implement the change.''
\247\
---------------------------------------------------------------------------
\245\ See MLC SNPRM Reply Comments, App. A at v.
\246\ 88 FR 65908, 65915-16.
\247\ Id. at 65916.
---------------------------------------------------------------------------
The Office continues to believe that this is the most appropriate
approach. Turning the requirements into a floor would allow the MLC to
request additional and potentially unnecessary information that may be
challenging to produce up front, which was precisely the concern that
led to the Office's proposal.\248\ As further discussed below, if the
initial submission to the MLC lacks what it needs, the MLC can request
additional information at that point.
---------------------------------------------------------------------------
\248\ Id. at 65915-16.
---------------------------------------------------------------------------
b. Treatment of Notices Containing Multiple Works
The Office agrees with Linda Edell Howard that the rule should be
clarified to recognize that a single notice--whether a change notice to
the MLC or a statutory notice of termination submitted to the Office
for recordation--may identify more than one musical
[[Page 56603]]
work, and that the relevant statuses of those works may be
different.\249\ The final rule makes clear that, in such cases, any
implication as to one work does not affect another listed in the same
notice. Each work must be treated independently. This is clarified
throughout the final rule, including in the notice, implementation, and
dispute provisions.
---------------------------------------------------------------------------
\249\ See Howard SNPRM Initial Comments at 4, 6, 8.
---------------------------------------------------------------------------
For example, if there is a dispute as to one work, but not another
in the same change notice submitted to the MLC, the MLC must still
implement and give effect to the change with respect to the work that
is not in dispute (assuming that there are no other issues). The same
is true where the MLC has sufficient information to implement the
change as to one work, but not for another from the same notice. As
another example, if a notice of termination identifying multiple
musical works is timely recorded in the Office as to some works but not
others, assuming that there are no other issues, the MLC should
implement the termination of those as to which the notice is timely
recorded, even though the works with untimely recorded notices cannot
be terminated.
c. Requirement To Provide the Statutory Notice of Termination
Linda Edell Howard asserted that it can sometimes be difficult or
expensive to obtain a copy of the notice of termination submitted to
the Office for recordation.\250\ She did not, however, make any
alternative suggestions. The Office continues to believe that providing
a copy of the actual notice of termination is reasonable and not unduly
burdensome.
---------------------------------------------------------------------------
\250\ Id. at 4.
---------------------------------------------------------------------------
d. Requirement To Provide Proof of Recordation or Proof of Submission
to the Office for Recordation
The Office agrees with the MLC's proposal to clarify that the proof
of submission of the statutory notice of termination to the Office must
reflect that it was submitted before the effective date of
termination.\251\ For a notice of termination to be timely recorded, it
must be received by the Office before the effective date.\252\
---------------------------------------------------------------------------
\251\ See MLC SNPRM Reply Comments, App. A at v.
\252\ See 37 CFR 201.10(f)(1)(ii)(A), (f)(3).
---------------------------------------------------------------------------
The Office disagrees with ClearBox Rights that the proof of
recordation requirement should be dropped because it is ``cumbersome
and potentially not necessary.'' \253\ ClearBox Rights made three
arguments to support its position. First, it contended that it ``would
prove to be an administrative burden on the MLC to maintain a schedule
of such notices to be delivered.'' \254\ This argument is unpersuasive
given that the MLC did not object to this requirement and included it
in its regulatory proposal.\255\ Moreover, the rule does not require
the MLC to maintain any such schedule.
---------------------------------------------------------------------------
\253\ See ClearBox Rights SNPRM Reply Comments at 9-10.
\254\ Id. at 9.
\255\ See MLC SNPRM Reply Comments, App. A at v.
---------------------------------------------------------------------------
Second, ClearBox Rights asserted that ``there may be instances
where the Copyright Office has not yet recorded such documents for
various reasons, including that perhaps one copyright out of many on
the notice is under review or possibly not valid.'' \256\ It argued
that the ``lack of recordation or delay of recordation of one document
with many copyrights because one or more copyrights is in question for
further review should not negatively impact the other copyrights on
that document.'' \257\ The Office does not believe that these concerns
are grounds for eliminating the proof of recordation requirement. While
the Office agrees, as discussed above, that the rule should accommodate
notices identifying multiple works and that each work should be handled
individually, timely recordation is still required by the statute ``as
a condition to [the termination] taking effect.'' \258\ Thus, the MLC
should not implement a change as to a particular work until proof of
recordation of the relevant notice of termination for that work is
delivered.
---------------------------------------------------------------------------
\256\ ClearBox Rights SNPRM Reply Comments at 10.
\257\ Id.
\258\ See 17 U.S.C. 203(a)(4)(A), 304(c)(4)(A).
---------------------------------------------------------------------------
Third, ClearBox Rights noted that ``recordation of the termination
at the Office may never happen.'' \259\ It said that it has ``seen
instances where a notice of termination was filed, and the pre-
termination owner acknowledges the termination to be effective even
though there was an issue in the notice filing or recordation.'' \260\
ClearBox Rights explained that ``[s]ometimes the pre-termination owner
will simply overlook the technical issues of the termination process
and grant the rights back to the post-termination party.'' \261\ Linda
Edell Howard made similar statements, noting that sometimes the pre-
termination copyright owner ``waives the recordation requirement.''
\262\
---------------------------------------------------------------------------
\259\ ClearBox Rights SNPRM Reply Comments at 10.
\260\ Id.
\261\ Id.
\262\ Howard SNPRM Initial Comments at 4.
---------------------------------------------------------------------------
The Office does not believe that these possible problems provide
any basis to not require proof of recordation. As noted above, timely
recordation is a statutory condition for the termination to be
effective.\263\ If the termination is not effective, no rights change
hands pursuant to section 203 or 304. To the extent the pre-termination
copyright owner nevertheless acquiesces to the attempted termination,
that may simply result in an ordinary transfer of copyright ownership
from the pre-termination copyright owner to the terminating party. As
such, it would be subject to the requirements for notifying the MLC
about a non-termination-related change, rather than a termination-
related change.
---------------------------------------------------------------------------
\263\ 17 U.S.C. 203(a)(4)(A), 304(c)(4)(A).
---------------------------------------------------------------------------
Based on the foregoing discussion, however, the Office concludes
that the final rule should clarify that a termination-related payee
change notice submitted to the MLC can be withdrawn or converted into a
non-termination-related payee change notice pursuant to such reasonable
requirements as the MLC establishes and makes publicly available on its
website. The scenarios raised by the commenters demonstrate a need for
flexibility.
Regarding Ms. Howard's question about what proof will qualify if
notices of termination are recorded with the Office though electronic
means,\264\ the Office reiterates that ``[a]dequate proof of timely
recordation could be demonstrated by either providing the MLC with a
copy of the certificate of recordation or the record as reflected in
the Office's online public catalog,'' and that ``[a]dequate proof of
submission to the Office for recordation could take the form of courier
tracking or a delivery confirmation, a return receipt from the Office,
or some other communication from the Office confirming receipt.'' \265\
The eventual ability to submit notices of termination through the
Office's online Recordation System will not impair the availability of
adequate proof. For example, while courier tracking or delivery
confirmation would not be available, the remitter would instead have
such proof in the form of an electronic communication from the Office
confirming receipt.
---------------------------------------------------------------------------
\264\ Howard SNPRM Initial Comments at 4.
\265\ 88 FR 65908, 65915.
---------------------------------------------------------------------------
e. Requirement To Identify the Relevant Works
The Office declines the MLC's proposal to add a requirement to
[[Page 56604]]
provide ``[a] satisfactory identification of all musical works subject
to the notice of termination identified by appropriate unique
identifiers.'' \266\ The MLC said that this is needed because it
``cannot implement a change in ownership of musical works without
knowing which musical works are subject to the change in ownership.''
\267\ As the Office previously explained in the SNPRM, the regulations
governing the content of statutory notices of termination (which must
be submitted to the MLC as part of the change notice) already provide
for an identification of each work.\268\ While the Office acknowledged
in the SNPRM that such identification might not provide the MLC with
sufficient information to process and implement the ownership change in
some cases, the Office also proposed a means, further discussed below,
by which the MLC could obtain the minimum necessary information.\269\
The Office agrees with other commenters ``that the default position
should be to make it as easy as possible for a terminating songwriter
to comply with processes to effect their right.'' \270\ Thus, we
decline to include a requirement that unique identifiers for all
musical works must be provided up front. As further discussed below, if
the MLC ultimately needs them for certain works, it can request them
after attempting to implement the change based on the information in
the notice.
---------------------------------------------------------------------------
\266\ MLC SNPRM Reply Comments, App. A at v.
\267\ Id. at 3.
\268\ 88 FR 65908, 65915 & n.112 (citing 37 CFR
201.10(b)(1)(iii), (b)(2)(iv)).
\269\ Id. at 65915-16.
\270\ MAC & NSAI Ex Parte Letter at 1 (Feb. 12, 2024).
---------------------------------------------------------------------------
f. The MLC's Duty To Request Additional Necessary Information
In the SNPRM, the Office proposed that where a compliant
termination-related change notice does not provide the MLC with
sufficient information to process and implement the ownership change,
the MLC should engage in best efforts to identify the minimum necessary
information, including through correspondence with both the terminating
party and pre-termination copyright owner (or their respective
representatives).\271\ The MLC expressed concern with this proposal,
stating that it is ``not clear if this reference to `best efforts' is
meant to imply a responsibility to make findings as to what works are
subject to termination.'' \272\ The MLC said that the requirement to
correspond with the relevant parties ``is a reasonable step'' and that
it ``does not object to making reasonable efforts to reach out to
parties where paperwork is incomplete.'' \273\ It said, however, that
it ``cannot itself identify the `relevant musical works,' make
decisions itself about what is contained in private contracts that may
be subject to termination, or determine what works are, or are not,
subject to termination in any particular disputed case.'' \274\
---------------------------------------------------------------------------
\271\ 88 FR 65908, 65915-16.
\272\ MLC SNPRM Initial Comments at 20.
\273\ Id. at 20-21.
\274\ Id. at 21.
---------------------------------------------------------------------------
The Office is clarifying this portion of the rule in light of the
MLC's comments. To eliminate any confusion, the ``best efforts''
language has been eliminated in the final rule, while the requirement
to correspond has been retained. In doing so, the Office emphasizes
that the final rule's reference to information that is ``insufficient
to enable the [MLC] to implement and give effect to the termination''
is meant to be interpreted narrowly. In some cases, submitted
information can be sufficient to enable the MLC to act, even if it must
undertake certain reasonable efforts. For example, even if the
identification of the works in the notice of termination does not
appear sufficient on its face, perhaps lacking unique identifiers, the
information is nevertheless considered sufficient if the MLC can act on
the information after undertaking reasonable efforts to attempt to
match the works identified in the notice of termination with the
corresponding works in its records. The Office is not mandating that
the MLC engage in exhaustive efforts or do this in all cases, but in
the termination context, it should provide assistance within reason.
Additionally, Promopub noted that there is no time limit on the MLC
in this provision and said that ``delay should be assiduously
avoided.'' \275\ It proposed that ``the MLC give notice of receipt of
an appropriately documented claim within 15 calendar days of receipt''
and that, ``[i]f more information is required to process the claim,
that explanatory notice should be given within 30 calendar days of
receipt.'' \276\ It also wanted the MLC to establish a ``hot line'' and
dedicated web pages that terminating parties can access for
assistance.\277\ The Office agrees that the MLC should have dedicated
web pages and other member support for terminating parties, and
strongly encourages it to provide such support as soon as reasonably
possible. The final rule adds the word ``promptly'' to signal that the
MLC should move expeditiously, since, as discussed above, the Office
expects the MLC to undertake some reasonable efforts in addition to
correspondence. Should the Office become aware of widespread
unreasonable delays, we can reconsider a specific timing requirement at
a later date.
---------------------------------------------------------------------------
\275\ Promopub SNPRM Initial Comments at 5-6.
\276\ Id. at 6.
\277\ Id.
---------------------------------------------------------------------------
Lastly, the Office understands that this approach may lead to
longer lead times before the MLC ends up implementing a change than if
additional information were required to be submitted at the outset. As
discussed above and in the SNPRM,\278\ the Office continues to believe
that this is the better approach. However, we wish to encourage
terminating parties to voluntarily provide additional useful
information to the MLC, such as unique identifiers, as part of their
initial notice submission if it is possible to do so. To that end, in
amending its form for submitting termination-related payee change
notices based on the final rule, the MLC could include fields for
additional information it believes would be helpful in implementing the
change, provided that the form clearly identifies those non-required
fields as being optional.
---------------------------------------------------------------------------
\278\ 88 FR 65908, 65915-16.
---------------------------------------------------------------------------
g. The Meaning of ``Terminating Party''
The final rule clarifies the definition of ``terminating party.''
Throughout the rule, this term is used to refer to parties entitled to
royalties from the MLC based on an effective termination and who may
notify the MLC of such entitlement. This term is not defined by
reference to who singed and served the statutory notice of termination.
The SNPRM defined the term as ``the new musical work copyright
owner.'' \279\ That language did not, however, account for the fact
that the termination may not yet be effective at the time the payee
change notice is submitted to the MLC, meaning that the relevant party
is not the new owner at that point in time. The SNPRM's definition also
did not clearly provide that a successor in interest to a terminating
author or heir (e.g., their new publisher or administrator) can also be
a ``terminating party'' within the meaning of the rule. Including
successors in interest is necessary because there may be times where
the termination becomes effective and reverted rights are re-granted
before the MLC is notified. The final rule makes these clarifications.
---------------------------------------------------------------------------
\279\ Id. at 65924.
---------------------------------------------------------------------------
The Office disagrees with Linda Edell Howard that the term
``terminating party'' ``should include only those who signed the notice
of termination, not
[[Page 56605]]
those non-signatory heirs or authors,'' because ``[t]he non-signatory
statutory heirs or authors are represented by those who signed and
served the notice of termination.'' \280\ As noted above, this
misunderstands the way the term ``terminating party'' is used
throughout the rule.
---------------------------------------------------------------------------
\280\ See Howard SNPRM Initial Comments at 6.
---------------------------------------------------------------------------
The Office also disagrees that ``[i]nformation concerning non-
signatories should not be required to implement a change in copyright
ownership and payee status, or reduce the percentage to be paid out.''
\281\ Each terminating party must be treated independently, just like
any other copyright owner when there is more than one. That is why the
MLC is only required to implement a change as to those terminating
parties whose information is provided in the notice of change. That
being said, to the extent a particular terminating party is in fact
represented by another terminating party, as Ms. Howard suggested, or
by someone else, then the information provided to the MLC would be for
that representative.\282\
---------------------------------------------------------------------------
\281\ See id.
\282\ The Office further declines Ms. Howard's proposal to make
the identification of the terminating party plural throughout the
rule because ``[r]arely is the terminating party one individual.''
Howard SNPRM Initial Comments at 4. There are already specific
provisions in the rule speaking to the case of multiple terminating
parties (e.g., 37 CFR 210.30(c)(2)(v)), which means that the rest of
the rule contemplates the possibility of there being more than one.
Moreover, ``[i]n determining the meaning of any Act of Congress,
unless the context indicates otherwise,'' ``words importing the
singular include and apply to several persons, parties, or things.''
1 U.S.C. 1.
---------------------------------------------------------------------------
h. Verification Obligations
In the SNPRM, the Office proposed that where the MLC has good
reason to doubt the authenticity of the information submitted, such as
the statutory notice of termination or proof of recordation, it should
seek verification from the Office.\283\ The MLC proposed instead to
require the submitter to seek verification from the Office and deliver
documentation of such verification to the MLC.\284\ The MLC asserted
that ``it would be inappropriate to shift to The MLC the role of
monitoring and obtaining ownership documentation,'' and that
``[m]embers must remain primarily responsible for the completeness and
accuracy of their works registrations and claims, and it would be
inefficient to shift this task to The MLC.'' \285\
---------------------------------------------------------------------------
\283\ 88 FR 65908, 65915.
\284\ MLC SNPRM Reply Comments at 3-4, App. A at v.
\285\ Id. at 4.
---------------------------------------------------------------------------
The Office agrees with the MLC's position. While we have endeavored
to minimize the burden on a terminating party to have their termination
implemented by the MLC, on reflection, it is more appropriate for the
submitter to obtain whatever verification may be necessary. Therefore,
the final rule provides that where authenticity is in doubt, the MLC
shall either seek verification from the Office or request that the
submitter provide such verification.
i. Dispute-Related Issues
In the SNPRM, the Office proposed that where the MLC receives a
payee change notice from the terminating party, it must inform the pre-
termination copyright owner within 15 days of receiving either the
notice or the last piece of information necessary to implement the
change, whichever is later.\286\ After being so notified, a pre-
termination copyright owner who disputes the termination would have 30
days to initiate its dispute with the MLC before the MLC must implement
the change.\287\ The Office agrees with Linda Edell Howard that the
terminating party should be contemporaneously alerted when the MLC
informs the pre-termination copyright owner.\288\ This way, the
terminating party will know when the 30-day dispute period commences.
We disagree, however, with Ms. Howard's proposal to shorten the 30-day
period to 15 days.\289\ While the pre-termination copyright owner
should already be on notice about the termination generally, the Office
believes that 30 days is a reasonable amount of time after being
notified that a change is being sought at the MLC, in case they wish to
initiate a dispute, which requires providing specific documentation to
the MLC that may take time to assemble.
---------------------------------------------------------------------------
\286\ 88 FR 65908, 65916.
\287\ Id.
\288\ See Howard SNPRM Initial Comments at 5.
\289\ See id.
---------------------------------------------------------------------------
2. Implementation of a Change by the MLC
The SNPRM proposed various requirements to govern how the MLC
implements and gives effect to a payee change, both in termination and
non-termination contexts.\290\ Commenters generally did not oppose
these requirements, though some raised discrete questions.\291\ The MLC
generally supported the proposed requirements, including those for non-
termination-related changes.\292\ Based on the comments and the
discussion in the SNPRM, the Office is adopting the proposed
implementation requirements as final with the modifications discussed
below.
---------------------------------------------------------------------------
\290\ 88 FR 65908, 65917-18.
\291\ See, e.g., MAC et al. SNPRM Initial Comments at 3; Howard
SNPRM Initial Comments at 8-9.
\292\ MLC SNPRM Reply Comments at 5, App. A at vii-ix, xi-xii;
MLC SNPRM Initial Comments at 18 n.25.
---------------------------------------------------------------------------
i. Prospective Versus Retroactive Implementation
In the SNPRM, the Office proposed that, where a relevant change is
effective prior to the MLC's implementation, the MLC should be
permitted, but not required, to implement it going back to its
effective date, if requested in the notice to the MLC.\293\ In
response, MAC et al. said that ``the MLC can and should implement payee
changes going back to the date of the change, regardless of when
implemented,'' and disagreed that it is too burdensome for the MLC to
do so.\294\ Linda Edell Howard raised concerns about lag times in
notifying the MLC in the termination context.\295\ The MLC
``welcome[d]'' the Office's proposal.\296\
---------------------------------------------------------------------------
\293\ 88 FR 65908, 65918.
\294\ MAC et al. SNPRM Initial Comments at 3.
\295\ Howard SNPRM Initial Comments at 9.
\296\ MLC SNPRM Reply Comments at 5.
---------------------------------------------------------------------------
The Office is not persuaded to alter the rule. In the SNPRM, the
Office considered similar comments and weighed them against the MLC's
concerns about such a requirement being overly burdensome.\297\ We were
``inclined to agree with the MLC that retroactive implementation may be
too administratively burdensome to require for every payee change,''
and noted that our regulations require only prospective implementation
by the MLC in processing DMP voluntary licenses.\298\ The Office also
``welcome[d] further comments on this issue,'' including on ``what is
standard in the industry.'' \299\ The minimal comments received in
response to the SNPRM do not meaningfully grow the record in a way that
persuades the Office to impose this requirement on the MLC at this
time.
---------------------------------------------------------------------------
\297\ 88 FR 65908, 65918.
\298\ Id.
\299\ Id.
---------------------------------------------------------------------------
ii. Timing
In its regulatory proposal, the MLC proposed to soften the
implementation deadlines the Office proposed, by replacing requirements
to implement a change within a specified period of time with language
requiring only ``reasonable efforts to'' do so.\300\ While the MLC's
comments do not explain why they requested this change,
[[Page 56606]]
presumably it is to avoid technical violations of the regulations, such
as due to circumstances beyond its control or where it inadvertently
makes a mistake without realizing it (e.g., where an employee
accidentally fails to enter the change into the system).\301\
---------------------------------------------------------------------------
\300\ MLC SNPRM Reply Comments, App. A at vii.
\301\ If the MLC wanted more time for all implementations, the
Office believes it would have made that request more specifically.
Notably, the SNPRM proposed to give the MLC at least 30 days to
implement all changes, which was in line with an earlier request
from the MLC. See MLC NPRM Initial Comments at 10-11. The proposal
was also in line with the Office's rules governing the MLC's
processing of DMP voluntary licenses. See 37 CFR 210.24(f).
---------------------------------------------------------------------------
The Office declines to adopt the MLC's proposal, but has modified
the final rule to address this issue. The provision's purpose is to set
expectations for how the MLC will act, and that entails meaningful
deadlines that parties to a payee change can rely on in conducting
their business. The Office has imposed deadlines on the MLC's actions
in other contexts and sees no reason not to do so here. We are not
opposed, however, to providing the MLC with some leeway if an
implementation deadline is accidentally missed.
Under the final rule, in such a situation, the MLC must implement
the change as soon as reasonably practicable, but no later than the
next regular monthly royalty distribution that occurs either: (1) after
the original implementation deadline; or (2) at least 30 days after the
date that the MLC learns that the change was not implemented on time--
whichever is later. The Office believes that this solution gives the
MLC reasonable flexibility without being so open-ended that the parties
to a change have no idea when their change will be implemented.
Importantly, the rule further provides that if the MLC is late in
implementing the change, it must do so retroactively to the date of the
original implementation deadline. The rule does not provide a separate
deadline for making any corrective royalty adjustment. Rather, the
Office expects the MLC to make any such adjustments in accordance with
its regular practices. Regardless of any associated burdens, we believe
this is a fair burden to place on the MLC when it fails to meet the
rule's deadlines, even if that failure is accidental.
iii. Additional Provisions for Termination-Related Changes
In the SNPRM, the Office proposed that where a compliant notice is
accompanied by proof that the statutory notice of termination was
submitted to the Office for recordation, but not proof that it was
timely recorded, the MLC should hold applicable royalties pending
receipt of proof of timely recordation.\302\ After the MLC receives
proof of timely recordation, it would need to implement the change,
which would include distributing the held funds to the terminating
party.\303\ If, on the other hand, the Office refuses to record the
notice or it is recorded on or after the effective date of termination,
the MLC would need to release the funds to the pre-termination
copyright owner.\304\ The Office further proposed that if proof of
timely recordation is not received within 6 months, the MLC should
contact the Office to confirm the status of the relevant recordation
submission.\305\
---------------------------------------------------------------------------
\302\ 88 FR 65908, 65917-18.
\303\ Id. at 65918.
\304\ Id.
\305\ Id.
---------------------------------------------------------------------------
No commenter objected to this proposal, but the MLC took exception
to the part requiring it to contact the Office to confirm the status of
the recordation submission.\306\ For the same reasons discussed above
in Part III.D.1.ii.h., it proposed instead that the submitter be
required to check the status with the Office and provide the MLC with
documentation of the confirmed status.\307\ The MLC proposed that if
the submission still remains pending, the submitter should provide
monthly updates to the MLC.\308\ It further proposed that if the
submitter fails to provide a monthly status confirmation, the MLC must
then act in accordance with the other implementation provisions.\309\
---------------------------------------------------------------------------
\306\ MLC SNPRM Reply Comments at 3-4, App. A. at viii-ix.
\307\ Id.
\308\ Id. at App. A at viii-ix.
\309\ Id.
---------------------------------------------------------------------------
On reflection, as with the provision discussed above in Part
III.D.1.ii.h., the Office agrees with the MLC's general position that
the obligation to confirm the status of the submission is more
appropriately placed on the submitter. The Office, however, disagrees
with the MLC's specific proposal. It would be unnecessary and overly
burdensome for the terminating party to be required to contact the
Office and provide the MLC with monthly updates. Instead, the final
rule provides that the MLC may request periodic updates at its
discretion.
Additionally, the Office disagrees that if the terminating party
fails to provide an update, the MLC should simply act in accordance
with the rest of the implementation regulations. That would result in
the funds being released to the pre-termination copyright owner. The
Office does not believe the MLC should release the funds while the
recordation status remains pending. Instead, the final rule provides
that the MLC must hold the funds until it is informed of the notice of
termination's final recordation status and then act accordingly. The
rule purposefully does not specify who must provide that final status
to the MLC. Where the result is a timely recordation, the terminating
party will be incentivized to provide confirmation of the final status,
but in other situations (e.g., where recordation is refused), the pre-
termination copyright owner would be incentivized to provide it so that
the royalties do not remain on hold. Additionally, nothing prevents the
MLC from contacting the Office directly, if it chooses to.
Though not raised by commenters, the final rule also clarifies that
the royalty hold should be lifted where the recordation submission to
the Office is withdrawn by the remitter. There is no reason to hold
royalties pending recordation where the recordation submission has been
resolved. The omission of that scenario from the SNPRM was an
unintentional oversight.
E. Disputes
1. Process and Documentation for Termination-Related Disputes
The Office received few comments on our proposal for the handling
of termination-related disputes. The MLC generally supported this
aspect of the SNPRM.\310\ Another commenter, Linda Edell Howard took
issue with the idea that the MLC could substantiate a dispute claim
without hearing from the terminating party, and raised concerns about
the power imbalance between the pre-termination copyright owner and
terminating party in this context.\311\ While the Office appreciates
these concerns, we decline to address these broader issues in the
current proceeding for the reasons discussed in Part III.E.2. below.
Moreover, some of Ms. Howard's concerns are connected to a subject of
inquiry in a separate, open proceeding reviewing the MLC's statutory
designation.\312\
---------------------------------------------------------------------------
\310\ Id. at 5, App. A at ix-x.
\311\ Howard SNPRM Initial Comments at 5-6 & n.3, 8 (discussing,
among other things, how there is a one-sided ability to hold up
royalties in a dispute to give the pre-termination copyright owner
leverage over the terminating party).
\312\ See 89 FR 5940, 5943 (Jan. 30, 2024) (requesting
``information regarding: (1) any steps that the [MLC] is taking to
protect against the incidence of fraudulent ownership claims and
frivolous ownership disputes; and (2) whether these steps have been
successful'').
---------------------------------------------------------------------------
Based on the comments and the discussion in the SNPRM, the Office
is adopting the proposed requirements
[[Page 56607]]
pertaining to termination-related disputes as final. In doing so, and
as discussed above in Part III.A.3., we have added language to clarify
the operation of the provision in the context of disputes concerning
the application of the Exception to voluntary licenses.
In adopting the final rule, the Office requests that the MLC's
dispute resolution committee, which the MMA tasks with establishing the
MLC's dispute policies, promptly establish a new policy for
termination-related disputes that adheres to the requirements adopted
in this final rule. The final rule sets certain key requirements based
on the issues raised by commenters, but it is not a substitute for a
comprehensive dispute policy.
2. Dispute Resolution
The Office has decided to omit the proposed provisions about how
disputes should be resolved from the final rule.\313\ Instead, unless
and until the Office regulates in this area, disputes are to be
resolved pursuant to the MLC's dispute policies. No one specifically
supported the SNPRM proposal, and some commenters raised concerns with
it.\314\ Other commenters raised other concerns and sought various
regulations to address them. For example, North Music Group asked for
the MLC to ``be prohibited from creating disputes on its own motion,''
or for there to at least be ``some process and constraints applicable
to its actions.'' \315\ The record on these issues, however, is thin.
---------------------------------------------------------------------------
\313\ See 88 FR 65908, 65919-20.
\314\ See, e.g., MLC Ex Parte Letter at 5 (Feb. 5, 2024); Kobalt
Music SNPRM Initial Comments at 3; Spirit Music Grp. SNPRM Initial
Comments at 2; MAC et al. SNPRM Initial Comments at 3; Howard SNPRM
Initial Comments at 8-9.
\315\ North Music Grp. SNPRM Initial Comments at 3; see also,
e.g., Howard SNPRM Initial Comments at 6, 8-9 (discussing concerns
with power imbalances and how disputes could affect litigation with
respect to ripeness and the statute of limitations).
---------------------------------------------------------------------------
We do not take these dispute-related concerns lightly, but given
the record of the proceeding, we decline to take up these issues at
this time. The Office may, however, consider addressing them in a
future proceeding where they can be more fully explored to determine
whether any regulatory action may be needed. In the meantime, the
Office requests that the MLC's dispute resolution committee consider
the concerns raised by commenters, as well as the SNPRM's proposal to
require ongoing active dispute resolution. In doing so, the Office asks
the committee to: (1) examine whether such issues are arising in
connection with disputes initiated with the MLC; (2) evaluate how these
issues are addressed elsewhere in the industry; and (3) determine
whether the MLC's dispute policies should be amended to address any of
them.
3. Disclosure and Confidentiality
In responding to the NPRM, the MLC asked for guidance about whether
it ``should be required to disclose information about the royalties
being held to the parties involved'' and stated that it ``typically
does not disclose the amount of royalties on hold to the parties in a
dispute pending agreement or resolution of a dispute.'' \316\ ClearBox
Rights stated that the MLC should disclose the royalties on hold to
parties involved in a dispute.\317\
---------------------------------------------------------------------------
\316\ MLC NPRM Initial Comments at 13-14.
\317\ ClearBox Rights NPRM Reply Comments at 6.
---------------------------------------------------------------------------
Based on these comments, the SNPRM proposed amending the Office's
confidentiality regulations to require that the MLC ``disclose the
amount being held and reason for the hold to any individual or entity
with a bona fide legal claim to such funds or a portion thereof.''
\318\ The Office reasoned that this requirement would put the parties
``on equal footing in developing a strategy for resolving the dispute,
including the negotiation of a settlement.'' \319\ The Office also
proposed that the MLC ``provide the equivalent of monthly royalty
statements for the amounts held along with monthly updates concerning
the status of the hold.'' \320\ These proposed disclosure requirements
were not exclusive to termination-related disputes.
---------------------------------------------------------------------------
\318\ 88 FR 65908, 65919, 65927.
\319\ Id. at 65919.
\320\ Id.
---------------------------------------------------------------------------
Commenters on this provision generally supported it, recognizing
the value of disclosing the amount of royalties on hold to parties
involved in the dispute.\321\ The MLC, however, voiced concerns over
administrability and potential misuse.
---------------------------------------------------------------------------
\321\ See Spirit Music Grp. SNPRM Initial Comments at 2 (``We do
agree with the [Office's] position to disclose earnings and to
provide royalty statements that are in suspense due to conflicts and
disputes. We also agree the MLC portal should make this information
visible.''); Promopub SNPRM Initial Comments at 7 (``In the context
of a dispute, we agree with the Office that if royalties are being
held, the MLC should disclose the held amounts to the parties and
provide updates as necessary during the pendency of the dispute.
This information may be valuable to the parties for purposes of
resolving the dispute.'').
---------------------------------------------------------------------------
The MLC stated that the proposed rule would be burdensome, involve
significant manual processing, and divert resources from other
duties.\322\ The MLC also stated that providing ``every party to a
dispute'' with ``confidential information could . . . result in
disclosure of confidential information to improper parties in some
situations, and would be ripe for abuse,'' \323\ and that it had not
received member complaints ``around such disclosures in the context of
disputes or holds.'' \324\ Further, the MLC was concerned that the
proposed regulation's use of the term ``bona fide legal claim'' was not
a clear enough standard to administer, and that passing judgment on
what is ``bona fide'' could expose it to liability.\325\ Finally, the
MLC shared a general preference for prioritizing confidentiality and
claimed that parties could obtain confidential information by agreement
or via the legal process.\326\
---------------------------------------------------------------------------
\322\ MLC SNPRM Reply Comments at 8; MLC Ex Parte Letter at 4
(Feb. 21, 2024). But see MLC Ex Parte Letter at 4-5 (Feb. 21, 2024)
(suggesting that the MLC regularly discloses total amounts of
royalties on hold to interested parties).
\323\ MLC SNPRM Reply Comments at 7.
\324\ MLC Ex Parte Letter at 3 (Mar. 22, 2024).
\325\ MLC SNPRM Reply Comments at 7-8.
\326\ Id. at 6-7.
---------------------------------------------------------------------------
The MLC later stated that, in the context of a termination-related
dispute, it could ``provide summary-level information to both the pre-
and post-termination copyright owners'' at ``the outset of a dispute.''
\327\ This information would ``identify the approximate amount of
royalties to be distributed to a work in the first distribution
occurring after the hold is requested and will be based upon
information in the monthly reports of usage that The MLC received and
processed at the time of the request.'' \328\ The MLC noted its
preference that the Office not include provisions governing periodic
(or initial) updates, including until it ``has time to scope and
develop a workable, systematic way to provide this information.'' \329\
If the Office were to retain such a requirement, those updates ``should
be limited to where a disclosure has been affirmatively requested and
should not be more frequently than quarterly, to limit the burden and
diversion of resources from critical path activities.'' \330\
---------------------------------------------------------------------------
\327\ MLC Ex Parte Letter at 2 (Mar. 22, 2024). The MLC
previously stated that it could ``provide the total amount of
royalties being held in connection with disputed works'' in certain
``discrete and low-volume'' circumstances, namely ``situations of
agreement or legal process.'' MLC SNPRM Reply Comments at 8.
\328\ MLC Ex Parte Letter at 2 (Mar. 22, 2024); see also MLC Ex
Parte Letter at 4-5 (Feb. 21, 2024). Notwithstanding this offer, the
MLC reiterated its concern that providing this information to
parties for all disputes--i.e., not limited to parties in a
termination-related dispute--would be burdensome. MLC Ex Parte
Letter at 5 (Feb. 21, 2024).
\329\ MLC Ex Parte Letter at 2 (Mar. 22, 2024).
\330\ Id.
---------------------------------------------------------------------------
Based on the foregoing, the Office is retaining a version of this
rule, while
[[Page 56608]]
narrowing its scope to make it easier for the MLC to administer. The
final rule only applies to termination-related disputes, and limits
disclosure requirements to the total amount of royalties being held and
not the more granular information that would be contained in a royalty
statement. It also reduces the periodic update requirement to apply
only when requested by either party and only once a quarter. As the
final rule applies to royalties being held pursuant to a termination-
related dispute, the phrase ``bona fide legal claim'' was eliminated
from the regulatory text.
F. Corrective Royalty Adjustment
1. Background
In the NPRM, the Office proposed a corrective royalty adjustment
that would have ``require[d] the MLC to adjust any royalties
distributed under [its now-suspended Termination Policy], or
distributed in a similar manner if not technically distributed pursuant
to the [Termination Policy], within 90 days.'' \331\ At the outset, the
Office notes that the MLC estimates the corrective adjustment to
involve ``less than $2 million'' and the ``total amounts that would
likely change hands'' to terminating songwriters ``would be less than
$1 million.'' \332\
---------------------------------------------------------------------------
\331\ 87 FR 64405, 64412.
\332\ MLC Ex Parte Letter at 4 (Feb. 21, 2024).
---------------------------------------------------------------------------
The NPRM explained that the adjustment provision was intended ``to
make copyright owners whole for any distributions the MLC made based on
an erroneous understanding and application of current law.'' \333\
Responding to the NPRM, parties asked the Office for further guidance
regarding ``how the proposed corrective royalty adjustment should
work'' in practice.\334\ The SNPRM subsequently proposed ``a more
detailed [regulation] that would lay out the operational procedures for
the corrective royalty adjustment.'' \335\
---------------------------------------------------------------------------
\333\ 87 FR 64405, 64412.
\334\ 88 FR 65908, 65920 (citing MLC NPRM Initial Comments at 6-
8; ClearBox Rights NPRM Reply Comments at 3-4; ClearBox Rights Ex
Parte Letter at 2-4 (June 28, 2023); Howard NPRM Initial Comments at
6; Promopub NPRM Initial Comments at 2; Promopub NPRM Reply Comments
at 3; North Music Grp. NPRM Reply Comments at 2).
\335\ 88 FR 65908, 65920.
---------------------------------------------------------------------------
The SNPRM proposed that ``the corrective adjustment would apply
where the MLC's prior erroneous application of the Exception, whether
or not through its [Termination Policy], affected: (1) the distribution
of blanket license royalties or matched historical royalties; (2) the
holding of such royalties; or (3) the deduction from a DMP's payable
blanket license royalties made by matching usage to voluntary licenses
or individual download licenses.'' \336\ For previously distributed
overpayments made pursuant to the Termination Policy, the MLC would be
required to notify the prior payee of the overpayment within thirty
days, the prior payee would have thirty days to return the overpayment,
and then the MLC would distribute those royalties to the proper payee
with the next regular monthly royalty distribution. If the prior payee
failed to repay the MLC, then the MLC would debit the prior payee's
future royalties--up to 50% of payable royalties each month--until it
recovered the overpayment.\337\ The SNPRM also proposed that the
royalty recovery and distribution instructions would apply where the
MLC matched usage to a voluntary licensee or individual download
licensee who was not the proper payee under the rule.\338\ For
royalties that were held by the MLC following the suspension of its
Termination Policy, the SNPRM proposed that they would be paid to the
proper payee no later than thirty days after the final rule's effective
date.\339\ Finally, the SNPRM included a savings clause that would
preserve the proper payee's right to recover the overpayment outside of
the corrective adjustment process.\340\
---------------------------------------------------------------------------
\336\ Id. at 65921.
\337\ Id.
\338\ Id. at 65923.
\339\ Id.
\340\ Id.
---------------------------------------------------------------------------
The SNPRM did not propose ``any specific procedures'' addressing
circumstances where ``a publisher [e.g., a prior payee] has already
distributed a portion of the applicable royalties to its songwriters''
because that ``is a possibility with any type of adjustment for an
overpayment.'' \341\ The Office, however, expressly sought further
comments on that issue, including on a commenter's proposal that the
MLC only recoup the publisher's share of those royalties.\342\
---------------------------------------------------------------------------
\341\ Id. at 65921.
\342\ Id. (citing ClearBox Rights Ex Parte Letter at 3-4 (June
28, 2023); ClearBox Rights NPRM Reply Comments at 3-4).
---------------------------------------------------------------------------
2. Comments
Several commenters, including songwriters, publishers, and others,
favored a rule that includes a corrective adjustment.\343\ Promopub
suggested a relatively more aggressive approach to the corrective
adjustment. First, where ``a prior payee's accrued royalties for a
month exceed the full amount owed to the proper payee by at least
twenty-five [percent],'' it would require the MLC ``to deduct the full
amount owed to the proper payee from such monthly accrued royalties.''
\344\ It also proposed that, if the proper payee was not paid back in
full within six months of the MLC's initial corrective adjustment
payment, the Office ``should require the terminated publisher to repay
the balance to the MLC within 30 calendar days for the MLC to, in-turn,
distribute to the proper payee within 30 calendar days of receipt.''
\345\
---------------------------------------------------------------------------
\343\ See, e.g., BMG NPRM Initial Comments at 2 (``BMG fully
supports . . . the requirement[] that . . . the MLC must pay post-
termination royalties to those parties who own the U.S. copyrights
in the works at issue and adjust these parties' accounts in order
that they may receive every dollar previously paid in error to
terminated publishers.''); BMG NPRM Reply Comments at 1; Christian
Castle NPRM Reply Comments at 4-5 (``Any curative action required by
the Office should, of course, be retroactive.''); Promopub NPRM
Reply Comments at 1-2 (noting that it ``fully supports the proposed
repeal of the [MLC's Termination] Policy and the corresponding
proposed royalties adjustments'' and that ``other collecting
organizations regularly employ retroactive royalty adjustments when
music publishing royalties have been paid erroneously''); North
Music Grp. NPRM Reply Comments at 2 (supporting the rule's
corrective adjustment); Miller NPRM Initial Comments at 1
(supporting 90-day adjustment period for the MLC); NSAI SNPRM
Initial Comments at 2 (supporting corrective adjustments made
``retroactively''); SONA et al. NPRM Reply Comments at 3 (supporting
the rule's corrective adjustment); ClearBox Rights NPRM Reply
Comments at 3-4 (supporting the rule's corrective adjustment
provision and noting disagreement with NMPA and CMPA); McAnally &
North Ex Parte Letter at 3-4 (Mar. 14, 2023) (voicing that these
parties ``categorically disagree'' that the rule should not be
``retroactive''); MAC et al. SNPRM Initial Comments at 3-4; Howard
SNPRM Initial Comments at 2; ClearBox Rights SNPRM Reply Comments at
8-9.
\344\ Promopub SNPRM Initial Comments at 3. Promopub suggested
these amendments, based on its concern that publishers may not
return overpayments immediately and would ``instead rely on the
piecemeal monthly process offered.'' Id.
\345\ Id.; see also Spirit Music Grp. SNPRM Initial Comments at
3 (``[A]pplying 50% of the debt to the erroneous party, who may be
earning only a few dollars, will result in never ending debt for the
erroneously paid party. We realize the USCO is concerned with the
financial impact to the incorrect party, but it is at the expense of
the entitled party.'').
---------------------------------------------------------------------------
Other commenters, however, disagreed that there should be a
corrective adjustment, even though some of them supported post-
termination copyright owners receiving post-termination royalties going
forward.\346\ These commenters' concerns focused on the burdens
associated with administering a corrective adjustment and the Office's
authority to require such an adjustment. Regarding the Office's
authority, NMPA had concerns that the corrective
[[Page 56609]]
adjustment would be an impermissible ``retroactive'' rule and may also
be an unconstitutional ``taking.'' \347\
---------------------------------------------------------------------------
\346\ See, e.g., CMPA NPRM Initial Comments at 1-2; NMPA NPRM
Initial Comments at 4-6; NMPA Ex Parte Letter at 2 (Feb. 6, 2023);
NMPA SNPRM Initial Comments at 1-2 & n.2; NMPA Ex Parte Letter at 2
(Jan. 24, 2024); Warner Chappell Music SNPRM Reply Comments at 2-3.
\347\ NMPA NPRM Initial Comments at 2, 4-6; see also NMPA Ex
Parte Letter at 2 (Feb. 6, 2023); NMPA SNPRM Initial Comments at 2
n.2.
---------------------------------------------------------------------------
Regarding songwriters' and publishers' ability to engage in a
corrective adjustment, commenters stated that portions of these
royalties would have already been distributed to songwriters and would
be difficult to recover.\348\ Warner Chappell added that ``retroactive
debits would wreak havoc where songwriter contracts are royalty- or
recoupment-based, as when recoupment has triggered the end of a
contract's term, or when a publisher has paid a contractually-due
advance or bonus because the writer received a certain sum of
royalties,'' and that ``[p]ublishers, songwriters, and others who'd
received such payments would also bear tax and accounting obligations
on income `wrongly' received and already spent.'' \349\
---------------------------------------------------------------------------
\348\ CMPA NPRM Initial Comments at 2; Warner Chappell Music
SNPRM Reply Comments at 2-3; see also NMPA NPRM Initial Comments at
5; MLC Ex Parte Letter at 3 (Mar. 22, 2024).
\349\ Warner Chappell Music SNPRM Reply Comments at 2-3.
---------------------------------------------------------------------------
Commenters further suggested that it would also be administratively
burdensome for the MLC to carry out a corrective adjustment.\350\ The
MLC requested that the Office ``take into consideration the impact of
its rule on [its] regular royalty processing operations and
timelines,'' which are ``orders of magnitude larger than the total sums
that would be involved in corrective adjustments for statutory
terminations.'' \351\ The MLC suggested a ``more efficient'' solution
that ``would avoid the problems associated with clawing back royalties
from songwriters.'' \352\ This ``alternative approach'' would involve
the MLC providing information to the prior payee and proper payee
regarding the royalties distributed to the prior payee for post-
termination periods.\353\ The parties would then voluntarily be able to
make any corrective royalty adjustments themselves (a ``voluntary
adjustment'').\354\ The MLC also said that a ``claw-back and
redistribution approach'' could be used in combination with its
proposal to incentivize compliance ``if a significant period elapsed
without resolution by the parties.'' \355\
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\350\ NMPA NPRM Initial Comments at 5 (noting that a corrective
adjustment ``would create a significant administrative and financial
burden on the MLC, as well as on publishers or other recipients of
these royalty payments who likely already distributed some portion
of those amounts pursuant to their contractual obligations with
their songwriters''); CMPA NPRM Initial Comments at 2 (explaining
that ``retroactive accounting might cause an undue hardship on The
MLC as it would be well above its normal workload''); see also MLC
Ex Parte Letter at 3-4 (Feb. 21, 2024); MLC Ex Parte Letter at 3-5
(Mar. 22, 2024).
\351\ MLC SNPRM Reply Comments at 2-3.
\352\ MLC Ex Parte Letter at 4 (Feb. 21, 2024).
\353\ Id.
\354\ Id. at 4-5.
\355\ Id. at 5.
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3. The Final Rule's Approach
Having considered all comments on this issue, the Office is
adopting a final rule with an approach to corrective royalty
adjustments that is similar to the SNPRM's proposal for the reasons
stated in the NPRM and SNPRM, but with certain modifications, as
discussed below. Other corrective adjustment provisions proposed in the
SNPRM are included in the final rule, with minor conforming
adjustments.
While the Office appreciates concerns regarding potential
administrative burdens associated with a corrective adjustment, we
continue to ``disagree with commenters suggesting that there should not
be any corrective adjustment because of the potential burdens
involved.'' \356\ As the Office previously explained, ``[c]orrective
royalty adjustments are common in the music industry and explicitly
contemplated by the statute and the Office's existing regulations.''
\357\
---------------------------------------------------------------------------
\356\ 88 FR 65908, 65920-21.
\357\ Id. at 65921; see MAC et al. SNPRM Initial Comments at 3-
4; Howard SNPRM Initial Comments at 2 (agreeing with Office's
position).
---------------------------------------------------------------------------
The Office notes that the MLC already has guidelines to address the
circumstances when it needs to make royalty distribution adjustments,
including, for example:
when there was ``an incorrect match of a sound recording
to a [musical work] registration'';
where there was an under- or overpayment ``attributable to
a clerical or administrative error''; or
in ``other situations that The MLC may determine from time
to time in its discretion.'' \358\
---------------------------------------------------------------------------
\358\ The MLC, Guidelines for Adjustments secs. 2.1, 3.4 (Jan.
2022), https://f.hubspotusercontent40.net/hubfs/8718396/files/2022-02/MLC%20Guidelines%20for%20Adjustments.pdf.
---------------------------------------------------------------------------
These guidelines allow the MLC to adjust royalty distributions for
uses going back to the first date the blanket license was available
(i.e., January 1, 2021).\359\
---------------------------------------------------------------------------
\359\ Id. at sec. 3.4.
---------------------------------------------------------------------------
Moreover, the Office must consider not only the burdens to the MLC
and publishers, but also fairness to terminating songwriters, and the
comparative efficiency associated with the corrective adjustment.
Without a corrective adjustment, proper payees could be forced to bring
their terminated publishers to court to unwind the MLC's erroneous
payments. This would lead to a multiplicity of lawsuits and associated
unnecessary costs incurred by songwriters and publishers. It may also
be illusory, as songwriters who were proper payees are less likely to
sue to recover royalties that, in total, may be less than the cost of
hiring an attorney to litigate the matter.\360\
---------------------------------------------------------------------------
\360\ See U.S. Copyright Office, Copyright Small Claims 1 (2013)
(noting that ``federal litigation is expensive and time-consuming,
and therefore out of reach for many copyright owners'' and that the
problems of enforcement of modest claims ``appears to be especially
acute for individual creators''); id. at 118 (noting that
songwriters would benefit from an alternative to Federal court to
enforce the Copyright Act's termination provisions (citing statement
of Charles Sanders, SGA)); see also, e.g., Howard SNPRM Initial
Comments at 6 (noting perceived power and sophistication imbalances
between authors and publishers).
---------------------------------------------------------------------------
i. Voluntary Adjustments
The first modification adopts the MLC's suggestion to build in a
voluntary process to reduce potential burdens on the parties or the MLC
associated with any corrective adjustment. The initial step in this
process is for the MLC to notify the relevant parties (i.e., the prior
payee, proper payee, and any successors in interest) of the overpayment
within 30 days of the final rule's effective date. Such notice must
include: (1) a summary of the Office's conclusions regarding the
Exception; (2) a description of the corrective adjustment process laid
out in the final rule, including the option for the parties to engage
in a voluntary adjustment in lieu of an MLC-administered adjustment;
(3) for each musical work at issue, the amounts that were erroneously
paid to the prior payee that are subject to being adjusted; and (4) the
respective contact information for the parties contained in the MLC's
records. With this information, the parties will have the opportunity
to make the corrective adjustment themselves.
The parties would notify the MLC within another 30 days regarding
whether the parties are engaging in a voluntary adjustment, were unable
to reach such an agreement, or are still attempting to do so. If the
parties engaged in a voluntary adjustment, the MLC will not make any
adjustments in connection with the overpayment, but will retain records
related to the voluntary adjustment. If the parties do not elect the
voluntary adjustment option or if the MLC does not receive the required
notice from the parties, the MLC will commence implementing the
adjustment process within 30 days of
[[Page 56610]]
the end of the voluntary adjustment period. If the parties notify the
MLC that they are continuing efforts to reach an agreement, the MLC
will not commence the corrective adjustment process unless and until it
receives a subsequent notice that the parties were unable to reach an
agreement. If such a subsequent notice is received more than 18 months
after the effective date of the rule, the MLC may, but is not required
to, adjust the overpayment.
The Office believes that it is reasonable to give the prior and
proper payees an opportunity to engage in the adjustment process
themselves, but that option would be ineffective without also requiring
the MLC to implement a corrective adjustment as an alternative.
Further, even if one party was willing to engage in a voluntary
adjustment, the other party may wish to have the MLC implement the
corrective adjustment for tax or accounting purposes.\361\
---------------------------------------------------------------------------
\361\ See Warner Chappell Music SNPRM Reply Comments at 2-3.
---------------------------------------------------------------------------
While parties should jointly be able to determine the method they
want to pursue to complete the adjustment, the Office does not believe
that decision should be unbounded in time. Parties must decide whether
the MLC is going to engage in a corrective adjustment (and notify the
MLC of that decision) within 18 months of this rule's effective date.
After that time, the MLC will not be required to initiate the
corrective adjustment process.\362\ The Office believes that the MLC
should not be required to undertake the corrective adjustment
indefinitely.
---------------------------------------------------------------------------
\362\ As the final rule makes clear, the MLC will discontinue
any recovery efforts if it is notified that the overpayment was
recovered outside of the corrective adjustment process (e.g., where
there was a subsequent agreement or settlement) or a legal
proceeding was commenced seeking recovery of the overpayment.
---------------------------------------------------------------------------
Finally, the Office is not adopting Promopub's repayment proposals
for the corrective adjustment, as it wishes to first monitor how the
adjustment process is working in practice, before making any
significant amendments. We are, however, incorporating in the final
rule Promopub's requested clarification that the MLC must provide
royalty statements to proper payees when it makes a corrective
adjustment.\363\
---------------------------------------------------------------------------
\363\ Promopub SNPRM Initial Comments at 3.
---------------------------------------------------------------------------
ii. Limiting Recovery of the Overpayment to the Publisher's Share
The Office did not receive significant comments directly responding
to ClearBox Rights' proposal that the MLC may only recover the
publisher's share of the overpayment to make the corrective
adjustment.\364\ Consequently, that provision is not included as a
requirement in the final rule. The Office, however, sees no reason why
songwriters, publishers, and the MLC could not agree to this type of
agreement as a type of voluntary solution. Nothing in this rule
prohibits the prior payee, proper payee, and MLC from all agreeing to
engage in a corrective adjustment that only recovers and distributes
the publisher's share of the overpayment.
---------------------------------------------------------------------------
\364\ 88 FR 65908, 65921. But see MAC et al. SNPRM Initial at 3-
4 (stating that `` `where a publisher has already distributed a
portion of the applicable royalties to its songwriters,' we believe
the Office's proposal regarding recovery of overpayment by the MLC
is the proper course'' (quoting 88 FR 65908, 65921)).
---------------------------------------------------------------------------
The Office notes that the MLC stated that the rule envisioned a
process that ``requires a songwriter to pay back royalties to the pre-
termination publisher'' before that publisher returns funds to the
MLC.\365\ The MLC claimed that this could be problematic for
songwriters as ``the process could lead to songwriters having to use
funds to temporarily pay back royalties paid to them years ago, and
then wait several months or more to get those funds back.'' \366\ It
also noted that it does not ``know the terms of the private contracts
between the parties or how much was paid to the songwriter out of the
total initial distribution,'' \367\ making it problematic to recover
only the publisher's share in any corrective adjustment procedure.
---------------------------------------------------------------------------
\365\ MLC Ex Parte Letter at 4 (Feb. 21, 2024).
\366\ Id.
\367\ Id.
---------------------------------------------------------------------------
The MLC's comments imply that the rule requires songwriters (or
other downstream royalty payees) to repay the prior payee before that
prior payee would need to remit royalties to the MLC for further
processing and distribution to the proper payee. Such an initial
songwriter-repayment procedure, however, was not a requirement of the
proposed rule and is not included in the final rule.
iii. Voluntary Licenses
The final rule does not require the MLC to make a corrective
adjustment with respect to any amounts deducted, or held pending
deduction, in connection with voluntary licenses. As discussed in Part
III.A.3. above, the Office believes that voluntary licenses should be
treated differently than section 115 statutory licenses.
3. The Final Rule Is Not an Impermissible Retroactive Rule or an
Unconstitutional Taking
As an initial matter, the Office recognizes the unusual
circumstances that led to this rule, namely that a government-
designated collective adopted and distributed royalties pursuant to a
policy that embodied a legal interpretation of the Exception, in
conflict with the Office's prior guidance. While the MLC may have
intended to ensure ``prompt and uninterrupted royalty payments'' with
its actions,\368\ it is the Office (and not the MLC) that has authority
to interpret the Copyright Act, including with respect to the Act's
termination provisions in the context of the blanket license.\369\ As
discussed at length above, the Office finds that the MLC's Termination
Policy was based on an unreasonable reading of the Act, specifically
regarding its understanding of the Exception. The final rule's
corrective adjustment fixes that legal error.\370\
---------------------------------------------------------------------------
\368\ 87 FR 64405, 64407 (noting that ``[i]n meetings with the
Office, the MLC described its policy as a middle ground and
explained that the policy was intended, in part, to avoid
circumstances where parties' disputes could cause blanket license
royalty payments to be held, pending resolution of the dispute, to
the disadvantage of both songwriters and publishers'').
\369\ While the Office acknowledges that, in the notice of
proposed rulemaking in the earlier rulemaking proceeding about DMP
reporting obligations, we suggested that the ``MLC's interpretation
of the [Exception] seems at least colorable,'' the Office's
intention was to ``give interested persons an opportunity to
participate in the rule making through submission of written data,
views, or arguments,'' 5 U.S.C. 553(c), without prejudging the
rulemaking's outcome, especially as termination was ``one of the
more complicated [topics] in [that earlier] proceeding'' and parties
had not provided much commentary on the MLC's theory. 85 FR 22518,
22532 n.210, 22533.
\370\ See, e.g., Farmers Tel. Co. v. FCC, 184 F.3d 1241, 1250
(10th Cir. 1999) (holding that when the FCC established an
organization to prepare and file access tariffs, whose board was
comprised of industry participants, and that organization issued an
interpretation of a regulation which was later overruled by the
agency, the agency's interpretation did not implicate the
prohibition on retroactive rulemaking, including because the
organization had ``no authority to perform any adjudicatory or
governmental functions'').
---------------------------------------------------------------------------
With that background, the Office now turns to the NMPA's objection
that promulgating the proposed corrective adjustment provision is
outside the Office's authority. First, NMPA suggested that this
provision ``may arguably be an unconstitutional taking in violation of
the Fifth Amendment,'' as ``it effectively takes property interests
that pre-termination copyright owners may have had and transfers them
to the post-termination copyright owner.'' \371\ Second, it stated that
a rule that required the MLC to make an
[[Page 56611]]
adjustment to previously distributed royalties would be an
impermissibly ``retroactive'' rule because it would ``expressly undo
royalty payments already made under the Blanket License pursuant to the
MLC's [then-]current [Termination Policy].'' \372\
---------------------------------------------------------------------------
\371\ NMPA NPRM Initial Comments at 12.
\372\ Id. at 5. NMPA also argued that directing the MLC to pay
the copyright owner at the time of the use would ``impact all
subsequent adjustments and accrued interest payments made based on
usage not only prior to a valid termination, but also prior to any
other type of ownership transfer.'' Id. This second point is
discussed in depth in Part III.B. above.
---------------------------------------------------------------------------
i. ``Takings'' Concerns
The Constitution's Takings Clause prohibits the government from
``depriving private persons of vested property rights except for a
`public use' and upon payment of `just compensation.' '' \373\ It is
self-evident that, for there to be a taking, a party must possess (and
then be deprived of) a vested property right.
---------------------------------------------------------------------------
\373\ Landgraf v. USI Film Prods., 511 U.S. 244, 266 (1994)
(referencing U.S. Const. Amend. V).
---------------------------------------------------------------------------
That is not what the corrective adjustment does. It merely applies
the law as it existed at the time the MLC made the royalty
distributions at issue. As the Office's legal analysis in the NPRM,
SNPRM, and Part III.A.1. above make clear, prior payees never had a
vested property right to the post-termination royalties the MLC
distributed to them. These royalties always belonged to the post-
termination copyright owner. Because prior payees have no vested
property right in the erroneous overpayments they received, recovering
those amounts so they can be properly distributed in accordance with
the law is not a ``taking'' within the meaning of the Takings
Clause.\374\
---------------------------------------------------------------------------
\374\ See Lucas v. South Carolina Coastal Council, 505 U.S.
1003, 1027 (1992) (observing that, under a takings claim,
compensation is not owed where the government is depriving a person
of something that they were not entitled to in the first place).
---------------------------------------------------------------------------
ii. ``Retroactivity'' Concerns
The Office disagrees that the final rule's corrective adjustment
process to remedy improper prior MLC distributions constitutes an
impermissible retroactive rule. NMPA is correct that, generally, a
``statutory grant of legislative rulemaking authority will not . . . be
understood to encompass the power to promulgate retroactive rules
unless that power is conveyed by Congress in express terms.'' \375\ The
Office is not, however, adopting a new retroactive rule regarding the
effect of termination on section 115 statutory licenses. Instead, we
are adopting a rule applying the law as it existed at the time that the
improper royalty distributions were made, and implementing the law by
requiring parties to act in accordance with their legal obligations.
---------------------------------------------------------------------------
\375\ NMPA NPRM Initial Comments at 5, n.8 (quoting Bowen v.
Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988)).
---------------------------------------------------------------------------
Promulgating the corrective adjustment process is the most
efficient, reasonable, and least burdensome, means of fixing the MLC's
legal error. Far from establishing new obligations, the Office is
merely enforcing preexisting obligations to ensure that parties who
should have received the applicable payments from the start can obtain
them.\376\
---------------------------------------------------------------------------
\376\ Moreover, this rule does not alter any party's royalty
entitlements. Although the Copyright Office is directing the MLC to
adjust the amounts distributed to various entities, the MLC's
distributions do not constitute a final determination of the amounts
to which any entity is entitled.
---------------------------------------------------------------------------
In promulgating this rule, the Office has considered any reasonable
reliance interests and expectations of the prior payee and proper
payee. We conclude that any disruption caused by the corrective
adjustment process adopted in this rule is likely to be modest, and
that any reliance interests or expectations are minimized by several
factors. First, the MLC's interpretation of the law was in doubt no
later than September 2020, when the Office warned that parties viewed
its interpretation as being ``legally erroneous.'' \377\ Second, as the
SNPRM noted, ``[c]orrective royalty adjustments are common in the music
industry and explicitly contemplated by the statute[,] the Office's
existing regulations,'' and the MLC's own guidelines.\378\ Third, the
MLC only started distributing royalties in 2021, its Termination Policy
reflects a September 2021 date,\379\ and it was suspended in November
2022.\380\ To the extent that the corrective adjustment is potentially
burdensome to prior payees, as discussed in Part III.F.2. above, the
Office has both weighed that burden against the proper payees'
interests and taken steps to alleviate those burdens by adjusting the
rule's regulatory language. We believe that the final rule's corrective
adjustment provision embodies the most reasonable course of action, as
it implements the law as it already existed, while accounting for
various administrability concerns.
---------------------------------------------------------------------------
\377\ 87 FR 64405, 64407.
\378\ 88 FR 65908, 65921.
\379\ The original version of the MLC's Termination Policy has a
September 2021 date, The MLC, Notice and Dispute Policy: Statutory
Terminations (Sept. 2021), https://www.themlc.com/hubfs/Marketing/website/Original.pdf, while the current version has an August 2022
date, The MLC, Notice and Dispute Policy: Statutory Terminations
(Aug. 2022), https://www.themlc.com/hubfs/Marketing/website/MLC%20Statutory%20Terminations%20Policy%20v1.2.pdf. The Office is
not aware when the MLC started making distributions based on an
erroneous view of the Exception.
\380\ The MLC, October Member Updates (Nov. 1, 2022) (on file
with the Office) (noting that ``The MLC is immediately suspending
its [Termination] Policy pending the outcome of the rulemaking
proceeding initiated by the U.S. Copyright Office'' and that it
would be placing all royalties associated with work shares
previously subject to that policy on hold ``effective with the first
distribution of blanket license royalties related to October
2022'').
---------------------------------------------------------------------------
G. Effective Date and Compliance Deadline
As is typical for many rules enacted by the Office, this final rule
is effective 30 days after being published in the Federal Register.
However, because the Office agrees with the MLC that it will need more
than 30 days to update its processes and systems before it can
reasonably be expected to implement most of the final rule,\381\ its
compliance deadline is extended to the first distribution of royalties
based on its first payee snapshot after the date that is 90 days after
the rule is published in the Federal Register. This deadline is based
on the timing requested by the MLC \382\ and is consistent with the
Office's practice of providing reasonable transition periods where MMA-
related rules necessitate significant process changes and system
updates and development.\383\
---------------------------------------------------------------------------
\381\ See MLC Ex Parte Letter at 3-4 (Mar. 22, 2024) (``This
estimated timeframe accounts for basic code development, testing
phases, and the general integration of new processes into The MLC's
end-to-end overlapping distribution cycle process. This estimate
also recognizes that, particularly regarding the distribution of
royalties from periods after the effective date, the rule as
currently proposed requires The MLC to operationalize nuanced
practices and processes including requirements that must be met
before implementing a change, requirements for confirming receipt of
appropriate notice of a change, and timelines for implementing a
change (among others).'').
\382\ Id. The Office does not believe the MLC needs the longer
transition period it requested ``[i]f the final rule directs The MLC
to distribute royalties to a pre-termination owner and/or a post-
termination owner, depending on when corresponding usage occurred,
regardless of which party is the current payee registered in The MLC
database.'' See id. at 4. While that might be a possibility under
the final rule going forward, it would appear to only arise in the
context of adjustments, which the MLC is only required to make once
annually. See 37 CFR 210.29(b)(2). Thus, the MLC has ample time to
complete those particular updates.
\383\ See, e.g., 37 CFR 210.27(e)(2)(i), (e)(3)(ii), (e)(5).
---------------------------------------------------------------------------
This later compliance deadline does not apply to four sections of
the final rule: (1) the provision embodying the Office's legal
conclusions about how the Exception operates in connection with blanket
licenses; (2) the provision embodying the Office's legal conclusions
about how the Exception operates in connection with individual download
licenses; (3) the corrective royalty adjustment remedying the MLC's
previous misapplication of the
[[Page 56612]]
Exception; and (4) the provision requiring the MLC to adopt notice
requirements for non-termination-related payee changes.
The first two provisions are carved out because they state the
accurate interpretation of the law with respect to the Exception and
section 115 statutory licenses. Because the MLC has already suspended
its Termination Policy and, to the best of the Office's knowledge, is
not currently making distributions in a manner inconsistent with these
provisions, it should not need any additional time to comply with the
prohibitions they contain.
The second two provisions are carved out because those provisions
have their own separate timing requirements written into the regulatory
text. With respect to the corrective adjustment, the MLC is required to
send and receive certain notices sooner than the general compliance
deadline, which the Office believes is reasonable to require given the
relatively low burden involved. Additionally, the rule requires the MLC
to distribute amounts currently on hold sooner than the general
compliance deadline because it did not explain why it needed more time
for that particular action and the equities weigh in favor of
terminating parties obtaining their royalties in a timely manner.
The Copyright Office may, upon the MLC's request, extend the
compliance deadlines in our discretion by providing public notice
through our website.\384\
---------------------------------------------------------------------------
\384\ Any extensions will be reflected on the Copyright Office's
website at https://copyright.gov/rulemaking/mma-termination/.
---------------------------------------------------------------------------
List of Subjects in 37 CFR Part 210
Copyright, Phonorecords, Recordings.
Final Regulations
For the reasons set forth in the preamble, the U.S. 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.
0
2. Amend Sec. 210.22 as follows:
0
a. Redesignate paragraphs (d), (e), (f), (g), (h), (i), and (j) as
paragraphs (e), (g), (h), (i), (j), (n), and (p), respectively; and
0
b. Add new paragraphs (d) and (f) and paragraphs (k), (l), (m) and (o).
The additions read as follows:
Sec. 210.22 Definitions.
* * * * *
(d) The term derivative works exception means the limitations
contained in 17 U.S.C. 203(b)(1) and 304(c)(6)(A).
* * * * *
(f) The term historical unmatched royalties means the accrued
royalties transferred to the mechanical licensing collective by digital
music providers pursuant to 17 U.S.C. 115(d)(10) and Sec. 210.10.
* * * * *
(k) The term matched historical royalties means historical
unmatched royalties attributable to a musical work (or share thereof)
matched after being transferred to the mechanical licensing collective.
(l) The term payee snapshot means the royalty payee information in
the mechanical licensing collective's records as of a particular date
used for a particular monthly royalty distribution.
(m) The term pre-termination copyright owner means the owner of the
relevant copyright immediately prior to:
(1) The effective date of termination for an effective termination
under 17 U.S.C. 203 or 304; or
(2) The purported effective date of termination for a claimed,
disputed, or invalid termination under 17 U.S.C. 203 or 304.
* * * * *
(o) The term terminating party means:
(1) A party entitled under 17 U.S.C. 203 or 304 to terminate a
grant, who is seeking to terminate such a grant under such provisions;
(2) A party who has effectuated termination of a grant under 17
U.S.C. 203 or 304;
(3) A party to whom rights have reverted or are expected to revert
pursuant to the effective termination of a grant under 17 U.S.C. 203 or
304; or
(4) A successor in interest to a party identified in paragraph
(o)(1), (2), or (3) of this section (e.g., a subsequent publisher or
administrator).
* * * * *
0
3. Amend Sec. 210.27 by redesignating paragraph (g)(2)(ii) as
paragraph (g)(2)(ii)(A) and adding paragraph (g)(2)(ii)(B).
The addition reads as follows:
Sec. 210.27 Reports of usage and payment for blanket licensees.
* * * * *
(g) * * *
(2) * * *
(ii)(A) * * *
(B) To the extent applicable to the mechanical licensing
collective's efforts under paragraph (g)(2)(ii)(A) of this section:
(1) The derivative works exception does not apply to any individual
download license and no individual or entity may be construed as the
copyright owner or royalty payee of a musical work (or share thereof)
used pursuant to any such license based on the derivative works
exception.
(2) The derivative works exception does not apply to any voluntary
license and no individual or entity may be construed as the copyright
owner or royalty payee of a musical work (or share thereof) used
pursuant to any such license based on the derivative works exception,
unless and only to the extent that the mechanical licensing collective
is directed otherwise pursuant to:
(i) The resolution of a dispute regarding the application of the
derivative works exception to a particular voluntary license or its
underlying grant of authority; or
(ii) A notice submitted under Sec. 210.30(c)(1).
* * * * *
0
4. Amend Sec. 210.29 as follows:
0
a. In paragraph (a), remove ``reporting obligations'' and add in its
place ``reporting and payment obligations'' and add two sentences at
the end; and
0
b. Add paragraphs (b)(4), (j), and (k).
The additions read as follows:
Sec. 210.29 Reporting and distribution of royalties to copyright
owners by the mechanical licensing collective.
(a) * * * This section also prescribes reporting and payment
obligations of the mechanical licensing collective to copyright owners
for the distribution of matched historical royalties. This section does
not apply to distributions of unclaimed accrued royalties under 17
U.S.C. 115(d)(3)(J).
(b) * * *
(4)(i)(A) The copyright owner of a musical work (or share thereof)
as of the last day of a monthly reporting period in which such musical
work is used pursuant to a blanket license is entitled to all royalty
payments and other distributable amounts (e.g., accrued interest),
including any subsequent adjustments, for the uses of that musical work
occurring during that monthly reporting period, unless such entitlement
has been transferred to another individual or entity. As used in the
previous sentence, the term uses means all covered activities engaged
in under blanket licenses as reported by blanket licensees to the
mechanical licensing collective.
(B)(1) For the purpose of making any distribution of royalties or
other amounts (e.g., accrued interest), as a matter of reasonable
administrability, the mechanical licensing collective, in
[[Page 56613]]
the absence of a dispute or investigation, shall treat the individual
or entity identified in its records as of the date of the payee
snapshot used by the mechanical licensing collective for the applicable
distribution as legally authorized to receive such distribution, unless
the mechanical licensing collective is notified otherwise.
(2) Nothing in paragraph (b)(4)(i)(B)(1) of this section shall be
construed as absolving the mechanical licensing collective of its
responsibility to engage in reasonable verification and antifraud
efforts in connection with the registration and claiming of musical
works (or shares thereof).
(3) No distribution made by the mechanical licensing collective
shall alter or prejudice any party's legal entitlement to any of the
distributed funds or such party's ability to collect such funds from
someone other than the mechanical licensing collective if such funds
were not distributed to such party by the mechanical licensing
collective.
(4) Notwithstanding any other provision of this section, where the
mechanical licensing collective distributes royalties to the wrong
party and that error is caused by the actions of the mechanical
licensing collective, the mechanical licensing collective shall
promptly correct its error upon learning of it. For purposes of this
paragraph (b)(4)(i)(B)(4), an error is not caused by the mechanical
licensing collective where it acts in accordance with paragraph
(b)(4)(i)(B)(1) of this section or otherwise reasonably relies on
information provided to it by others that turns out to be inaccurate.
(C) The derivative works exception does not apply to any blanket
license and no individual or entity may be construed as the copyright
owner or royalty payee of a musical work (or share thereof) used
pursuant to a blanket license based on the derivative works exception.
(ii) Subject to the requirements of and except to the extent
permitted by Sec. 210.30, the mechanical licensing collective shall
not distribute royalties in a manner inconsistent with paragraph
(b)(4)(i) of this section.
* * * * *
(j) Matched historical royalties. The mechanical licensing
collective shall report and distribute matched historical royalties and
related accrued interest and adjustments in the same manner and subject
to the same requirements that apply to the reporting and distribution
of royalties for musical works licensed under the blanket license, as
if such matched historical royalties were royalties payable for musical
works licensed under the blanket license, but subject to the following
clarifications:
(1) Matched historical royalties shall be treated as accrued
royalties distributable under paragraph (b)(1)(ii) of this section and
shall be separately identified in applicable royalty statements.
(2) With respect to the requirements of paragraph (b)(2) of this
section, royalty distributions based on adjustments to matched
historical royalties reflected in cumulative statements of account
delivered to the mechanical licensing collective by digital music
providers pursuant to Sec. 210.10(b)(3)(i) shall be made by the
mechanical licensing collective at least once annually, upon submission
of one or more statements of adjustment delivered to the mechanical
licensing collective by digital music providers pursuant to Sec.
210.10(k), to the extent any such statement of adjustment is delivered
to the mechanical licensing collective during such annual period.
(k) Corrective royalty adjustment. Any distribution under paragraph
(b) of this section (including any distribution of matched historical
royalties, or related accrued interest or adjustments) or deduction
under Sec. 210.27(g)(2)(ii) (other than a deduction related to a
voluntary license) made by the mechanical licensing collective before
August 8, 2024 and based on an application of the derivative works
exception that is inconsistent with paragraph (b)(4)(i)(C) of this
section (including as such paragraph applies to matched historical
royalties through paragraph (j) of this section) or Sec.
210.27(g)(2)(ii)(B)(1), as each of those provisions exist on August 8,
2024, shall be subject to adjustment by the mechanical licensing
collective. Any amounts held by the mechanical licensing collective in
connection with such application of the derivative works exception as
of August 8, 2024 shall also be subject to adjustment. The adjustment
process shall be as follows:
(1)(i) To the extent required by this paragraph (k), where a
royalty payee (the prior payee) received amounts from the mechanical
licensing collective that such prior payee would not have received had
the distribution been made in a manner consistent with the application
of the derivative works exception embodied in paragraph (b)(4)(i)(C) of
this section, the mechanical licensing collective shall, except as
otherwise provided for by this paragraph (k), recover such overpayment
from such prior payee and shall distribute it to the royalty payee (the
proper payee) who is entitled to such funds under the application of
the derivative works exception embodied in paragraph (b)(4)(i)(C) of
this section.
(ii) The mechanical licensing collective shall notify each prior
payee and proper payee (collectively, the parties) of the overpayment
no later than August 8, 2024. Such notice shall contain at least the
following information:
(A) A summary of the Copyright Office's conclusions embodied in
paragraph (b)(4)(i)(C) of this section and Sec. 210.27(g)(2)(ii)(B);
(B) A description of the adjustment process detailed in this
paragraph (k), including the option for the parties to reach a
voluntary agreement concerning the overpayment;
(C) For each musical work (or share thereof) at issue, the amount
of the overpayment; and
(D) The respective contact information for each of the parties
contained in the mechanical licensing collective's records.
(iii) After receiving such notice, the parties may attempt to reach
a voluntary agreement with respect to the overpayment. Before September
9, 2024, the parties shall notify the mechanical licensing collective
that:
(A) The parties reached a voluntary agreement with respect to the
overpayment;
(B) The parties are in the process of attempting to reach a
voluntary agreement with respect to the overpayment; or
(C) The parties did not reach a voluntary agreement with respect to
the overpayment.
(iv) The mechanical licensing collective shall act as follows in
connection with such notice:
(A) If the mechanical licensing collective receives notice that the
parties reached a voluntary agreement with respect to the overpayment,
it shall not make any adjustment in connection with the overpayment.
(B) If the mechanical licensing collective receives notice that the
parties are in the process of attempting to reach a voluntary agreement
with respect to the overpayment, it shall not take any action unless
and until it receives a subsequent notice. If the subsequent notice
states that the parties reached a voluntary agreement with respect to
the overpayment, the mechanical licensing collective shall not make any
adjustment in connection with the overpayment. If the subsequent notice
states that the parties did not reach a voluntary agreement with
respect to the overpayment, the mechanical licensing collective shall
commence the adjustment process described in paragraph (k)(1)(v) of
this
[[Page 56614]]
section. If such a subsequent notice is received after August 8, 2024,
the mechanical licensing collective shall not be required to make any
adjustment in connection with the overpayment.
(C) If the mechanical licensing collective receives notice that the
parties did not reach a voluntary agreement with respect to the
overpayment, it shall commence the adjustment process described in
paragraph (k)(1)(v) of this section.
(D) If the mechanical licensing collective does not receive a
timely notice under paragraph (k)(1)(iii) of this section, it shall
commence the adjustment process described in paragraph (k)(1)(v) of
this section.
(v) Where, pursuant to paragraph (k)(1)(iv) of this section, the
mechanical licensing collective is required to commence an adjustment
process with respect to the overpayment, the following requirements
shall apply:
(A) Not later than October 7, 2024 or 30 calendar days after
receiving an applicable subsequent notice under paragraph (k)(1)(iv)(B)
of this section, whichever is later, the mechanical licensing
collective shall notify the prior payee that the adjustment process has
commenced and request that the prior payee return the overpayment no
later than November 6, 2024 or 30 calendar days after receiving the
notice, whichever is later. Any returned amounts shall be distributed,
accompanied by an appropriate royalty statement, to the proper payee
with the next regular monthly royalty distribution to occur at least 30
calendar days after any such amounts are returned.
(B) If such overpayment is not returned in full in accordance with
paragraph (k)(1)(v)(A) of this section, then beginning with the first
distribution of royalties to occur at least 30 calendar days after the
deadline specified in that paragraph, 50 percent of any and all accrued
royalties and other distributable amounts (e.g., accrued interest) that
would otherwise be payable to the prior payee from the mechanical
licensing collective each month, regardless of the associated work (or
share), shall instead be distributed, accompanied by an appropriate
royalty statement, to the proper payee until such time as the full
amount of the overpayment is recovered. Where the amount to be
recovered under this paragraph during a monthly royalty distribution
constitutes less than 50 percent of the applicable accrued royalties
and other distributable amounts, the mechanical licensing collective
shall recover the full amount of the overpayment. Where more than one
proper payee is entitled to a corrective royalty adjustment from the
same prior payee for different musical works, any amounts recovered and
distributed under this paragraph (k)(1)(v)(B) shall be apportioned
equally among such proper payees.
(2) Where, as of August 8, 2024, the mechanical licensing
collective is holding amounts that would constitute an overpayment
under paragraph (k)(1) of this section if such amounts had been
distributed to the prior payee, such amounts shall be distributed,
accompanied by an appropriate royalty statement, to the proper payee no
later than the first distribution of royalties based on the first payee
snapshot taken by the mechanical licensing collective at least 30
calendar days after August 8, 2024.
(3) The recovery and distribution processes described in paragraphs
(k)(1) and (2) of this section shall also apply, as applicable, to
amounts deducted, or held pending deduction, by the mechanical
licensing collective under Sec. 210.27(g)(2)(ii), other than with
respect to amounts relating to voluntary licenses, where the proper
payee is not the payee to whom the relevant usage was originally
matched. For purposes of this paragraph (k)(3), the payee to whom the
relevant usage was originally matched shall constitute the prior payee
as that term is used elsewhere in this paragraph (k).
(4) Nothing in this paragraph (k) shall be construed as prejudicing
the proper payee's right or ability to otherwise recover such
overpayment from the prior payee outside of the adjustment process
detailed in this paragraph (k). Where the overpayment is recovered
outside of such adjustment process or a legal proceeding is commenced
seeking recovery of the overpayment, the mechanical licensing
collective must be notified. Upon receipt of such notice, the
mechanical licensing collective shall discontinue any recovery efforts
engaged in under this paragraph (k).
(5) Notwithstanding the adjustment process detailed in this
paragraph (k), the parties and the mechanical licensing collective may
voluntarily agree to an alternative adjustment process.
0
5. Revise Sec. 210.30 to read as follows:
Sec. 210.30 Transfers of copyright ownership, royalty payee changes,
and related disputes.
(a) General. This section prescribes rules governing the mechanical
licensing collective's administration of transfers of copyright
ownership, other royalty payee changes, and related disputes.
(b) Requirements for the mechanical licensing collective to
implement a change. The mechanical licensing collective shall not take
any action to implement or give effect to any transfer of copyright
ownership (including a transfer resulting from an effective termination
under 17 U.S.C. 203 or 304) or other change to a royalty payee, unless
the requirements of paragraph (c) of this section are satisfied or the
mechanical licensing collective is acting in connection with the
resolution of a dispute. Where the requirements of paragraph (c) of
this section are satisfied, the mechanical licensing collective shall
implement and give effect to such transfer or other change in
accordance with paragraph (d) of this section.
(c) Notices of change. The mechanical licensing collective must be
appropriately notified in writing with respect to any transfer or other
change described in paragraph (b) of this section. Subject to the
further requirements of this paragraph (c), such notice must comply
with any reasonable formatting and submission requirements that the
mechanical licensing collective establishes and makes publicly
available on its website. No fee may be charged for submitting such a
notice. Upon submitting such a notice, or any additional information
related to such notice, the submitter shall be provided with a prompt
response from the mechanical licensing collective confirming receipt of
the notice, or any additional information related to such notice, and
the date of receipt.
(1)(i)(A) Subject to paragraph (c)(1)(ii) of this section, for any
transfer or other payee change not addressed by paragraph (c)(2) of
this section, the mechanical licensing collective shall be notified of
such transfer or payee change in accordance with any reasonable
requirements that the mechanical licensing collective establishes and
makes publicly available on its website.
(B) If such requirements are not publicly available on the
mechanical licensing collective's website as of July 9, 2024, the
mechanical licensing collective shall adopt such requirements and make
them available as soon as reasonably practicable, but no later than
September 9, 2024, unless the Copyright Office allows for an extension
in its discretion. The mechanical licensing collective shall make such
requirements publicly available on its website at least 30 calendar
days before such requirements become effective.
(C) The mechanical licensing collective shall make any amendment to
such requirements publicly available on its website at least 30
calendar days
[[Page 56615]]
before such amendment becomes effective, unless the mechanical
licensing collective can articulate good cause for not providing such
advanced notice. In no case shall an amendment be effective before
being published on the mechanical licensing collective's website.
(ii) Notwithstanding paragraph (c)(1)(i) of this section, any
notice seeking to change the royalty payee from a terminating party (or
its designee) to a corresponding pre-termination copyright owner (or
its designee) is subject to the following additional requirements:
(A) The notice must be signed after the effective date of
termination.
(B) The notice must set forth in plain language an acknowledgement
that the requested action alters the royalty payee from that
established by Sec. 210.29(b)(4)(i).
(2) Specific requirements for notices about transfers of copyright
ownership resulting from an effective termination under 17 U.S.C. 203
or 304 are as follows:
(i) The required notice shall include all of the following
information:
(A) A true, correct, complete, and legible copy of the signed and
as-served notice of termination submitted to the Copyright Office for
recordation pursuant to Sec. 201.10.
(B) A true, correct, complete, and legible copy of the statement of
service submitted to the Copyright Office for recordation pursuant to
Sec. 201.10, if one was submitted.
(C) Either:
(1) Proof, as to a particular musical work, that the notice of
termination was recorded in the Copyright Office before the effective
date of termination. Where the notice of termination identifies more
than one musical work, each musical work shall be treated
independently; or
(2) If the Copyright Office has not yet recorded the notice of
termination, proof, as to a particular musical work, that the notice of
termination was submitted to the Copyright Office for recordation
before the effective date of termination, provided that proof, as to
such musical work, that the notice of termination was recorded in the
Copyright Office before the effective date of termination is delivered
to the mechanical licensing collective at a later date. Where the
notice of termination identifies more than one musical work, each
musical work shall be treated independently.
(D) The terminating party, identified by name and any known and
appropriate unique identifiers, appropriate contact information for the
terminating party or their administrator or other representative, and,
if the terminating party is not already receiving royalty distributions
from the mechanical licensing collective, any additional information
that is necessary for the terminating party to receive royalty
distributions from the mechanical licensing collective.
(ii) With respect to the information required by paragraphs
(c)(2)(i)(A) through (C) of this section, providing an official
Copyright Office certification for any such information shall not be
required. If the mechanical licensing collective has good cause to
doubt the authenticity of any such information, the mechanical
licensing collective shall either seek verification from the Copyright
Office or request that such verification be provided to the mechanical
licensing collective by the submitter.
(iii) Where the information required by paragraph (c)(2)(i) of this
section is insufficient to enable the mechanical licensing collective
to implement and give effect to the termination with respect to a
particular musical work, the mechanical licensing collective shall
promptly correspond with the terminating party and the pre-termination
copyright owner (or their respective representatives) to attempt to
obtain the minimum necessary information.
(iv) The required notice shall be submitted and signed by either
the terminating party or the pre-termination copyright owner (or their
respective duly authorized representatives). Such signature shall be
accompanied by the name and title of the person signing the notice and
the date of the signature. The notice may be signed electronically. The
person signing the notice shall certify that they have appropriate
authority to submit the notice to the mechanical licensing collective
and that all information submitted as part of the notice is true,
accurate, and complete to the best of the signer's knowledge,
information, and belief, and is provided in good faith. If the notice
is submitted by the terminating party, the following additional steps
shall be required:
(A) The mechanical licensing collective shall notify the pre-
termination copyright owner about the terminating party's notice within
15 calendar days of receiving either the notice or the last piece of
information necessary for the mechanical licensing collective to
implement the change as to a particular musical work, whichever is
later, and shall contemporaneously alert the terminating party that
such notice was sent to the pre-termination copyright owner.
(B) If the pre-termination copyright owner does not initiate a
dispute with the mechanical licensing collective regarding the
termination, in accordance with paragraph (e) of this section, within
30 calendar days of receiving such notice, the mechanical licensing
collective shall implement and give effect to the transfer of copyright
ownership resulting from the termination, in accordance with paragraph
(d) of this section. Nothing in this paragraph (c)(2)(iv)(B) shall
prevent the pre-termination copyright owner from disputing the
termination with the mechanical licensing collective at a later date or
challenging the termination in a legal proceeding.
(v) Where there is more than one terminating party or pre-
termination copyright owner, the required notice shall include a
satisfactory identification of any applicable ownership shares for each
musical work subject to the termination. Where there is more than one
terminating party, the notice shall be effective only as to those
terminating parties whose information is provided in accordance with
paragraph (c)(2)(i)(D) of this section. Where there is more than one
terminating party, a notice that is signed and certified by any one
terminating party in accordance with paragraph (c)(2)(iv) of this
section is sufficient as to all terminating parties.
(vi)(A) A notice submitted to the mechanical licensing collective
pursuant to this paragraph (c)(2) may be withdrawn in accordance with
any reasonable requirements that the mechanical licensing collective
establishes and makes publicly available on its website.
(B) A notice submitted to the mechanical licensing collective
pursuant to this paragraph (c)(2) may be converted into a notice under
paragraph (c)(1) of this section in accordance with any reasonable
requirements that the mechanical licensing collective establishes and
makes publicly available on its website.
(C) Such requirements shall comply with the requirements of
paragraphs (c)(1)(i)(B) and (C) of this section.
(d) Implementation of a change. Upon receiving a notice that
complies with the requirements of paragraph (c) of this section, the
mechanical licensing collective shall implement and give effect to the
identified transfer or other payee change on a per work basis as
follows:
(1)(i) Except as provided by paragraph (d)(1)(ii) of this section,
where the mechanical licensing collective receives the notice before
the first day of the first monthly reporting period to commence
[[Page 56616]]
after the change is effective, the mechanical licensing collective
shall implement and give effect to the change, on a prospective basis,
beginning no later than the first distribution of royalties for such
reporting period.
(ii) Where the notice concerns a transfer of copyright ownership
resulting from an effective termination under 17 U.S.C. 203 or 304
submitted by the terminating party under paragraph (c)(2) of this
section, and the pre-termination copyright owner does not initiate a
dispute as described in paragraph (c)(2)(iv)(B) of this section, where
the mechanical licensing collective receives the notice at least 45
calendar days before the first day of the first monthly reporting
period to commence after the change is effective, the mechanical
licensing collective shall implement and give effect to the change, on
a prospective basis, beginning no later than the first distribution of
royalties for such reporting period.
(2)(i) Except as provided by paragraph (d)(2)(ii) of this section,
where the mechanical licensing collective receives the notice on or
after the first day of the first monthly reporting period to commence
after the change is effective, the mechanical licensing collective
shall implement and give effect to the change, on a prospective basis,
beginning no later than the first distribution of royalties based on
the first payee snapshot taken by the mechanical licensing collective
at least 30 calendar days after the mechanical licensing collective
receives the notice.
(ii) Where the notice concerns a transfer of copyright ownership
resulting from an effective termination under 17 U.S.C. 203 or 304
submitted by the terminating party under paragraph (c)(2) of this
section, and the pre-termination copyright owner does not initiate a
dispute as described in paragraph (c)(2)(iv)(B) of this section, where
the mechanical licensing collective receives the notice less than 45
calendar days before the first day of the first monthly reporting
period to commence after the change is effective, the mechanical
licensing collective shall implement and give effect to the change, on
a prospective basis, beginning no later than the first distribution of
royalties based on the first payee snapshot taken by the mechanical
licensing collective at least 30 calendar days after the pre-
termination copyright owner's deadline to dispute under paragraph
(c)(2)(iv)(B) of this section.
(3) Where additional information related to the notice is required
to enable the mechanical licensing collective to implement and give
effect to the change, and such information is received after receipt of
the notice, the timing requirements described in paragraphs (d)(1) and
(2) of this section shall be based on the date that the last piece of
necessary information is received by the mechanical licensing
collective.
(4) Where the change is effective as to one or more monthly
reporting periods for which the mechanical licensing collective
distributed royalties before implementing and giving effect to the
change, the mechanical licensing collective may, but is not required
to, make a corrective royalty adjustment if the notice requests one.
(5) If the mechanical licensing collective does not implement and
give effect to the change in accordance with the deadlines prescribed
by paragraphs (d)(1) through (3) of this section, the mechanical
licensing collective shall implement and give effect to the change as
soon as reasonably practicable, provided that the change is implemented
and given effect by the mechanical licensing collective no later than
the next regular monthly royalty distribution to occur either after the
implementation deadline that originally applied under paragraphs (d)(1)
through (3) of this section, as applicable, or at least 30 calendar
days after the date that the mechanical licensing collective learns
that the change was not implemented on time, whichever is later. In
such cases, the mechanical licensing collective shall implement and
give effect to the change as of the implementation deadline that
originally applied under paragraphs (d)(1) through (3) of this section,
as applicable, including by making any necessary corrective royalty
adjustments.
(6) No action or inaction by the mechanical licensing collective
with respect to implementing and giving effect to a transfer or other
payee change shall alter or prejudice any party's rights to royalties
pursuant to such change or such party's right to collect such royalties
from someone other than the mechanical licensing collective if such
royalties were not distributed to such party by the mechanical
licensing collective.
(7) Where the notice concerns a transfer of copyright ownership
resulting from an effective termination under 17 U.S.C. 203 or 304
submitted under paragraph (c)(2) of this section, and the notice is
accompanied by proof that the notice of termination was submitted to
the Copyright Office for recordation, but the notice is not accompanied
by proof that it was recorded in the Copyright Office before the
effective date of termination, the mechanical licensing collective
shall act as follows:
(i) Upon subsequent receipt of proof that the notice of termination
was recorded in the Copyright Office before the effective date of
termination, the mechanical licensing collective shall treat the proof
of recordation as a type of additional information under paragraph
(d)(3) of this section. The mechanical licensing collective shall not
implement or give effect to any such termination unless and until such
proof is received.
(ii) Until receipt of the proof described in paragraph
(d)(7)(ii)(B) or (C) of this section, as the case may be, and subject
to paragraph (d)(7)(ii)(D) of this section the mechanical licensing
collective shall hold applicable accrued royalties and accrued interest
pending receipt of proof that the notice of termination was recorded in
the Copyright Office before the effective date of termination as
follows:
(A) The mechanical licensing collective shall commence holding such
amount no later than the implementation deadline that would apply under
paragraphs (d)(1) through (3) of this section, as applicable, if proof
of recordation had been provided with the notice.
(B) After receiving proof that the notice of termination was
recorded in the Copyright Office before the effective date of
termination is received, the mechanical licensing collective shall
implement and give effect to the termination as provided by paragraphs
(d)(1) through (5) and (d)(7)(i) of this section, as applicable.
(C) After receiving proof that the Copyright Office refused to
record the notice of termination, the recordation submission was
withdrawn, or the notice of termination was recorded on or after the
effective date of termination, the mechanical licensing collective
shall release the held funds to the pre-termination copyright owner.
(D) If the mechanical licensing collective does not receive the
proof described in either paragraph (d)(7)(ii)(B) or (C) of this
section within 6 months after the mechanical licensing collective
commences holding applicable accrued royalties and accrued interest,
the mechanical licensing collective shall request that the terminating
party provide an update about the status of the relevant recordation
submission. If the submission remains pending at that time, the
mechanical licensing collective may continue to request periodic
updates from the terminating party in its discretion. Upon receiving
the proof described in either paragraph
[[Page 56617]]
(d)(7)(ii)(B) or (C), the mechanical licensing collective shall act in
accordance with paragraph (d)(7)(ii)(B) or (C), as the case may be.
(iii) Where a notice of termination identifies more than one
musical work, whether the notice is timely recorded in the Copyright
Office shall be determined on a per work basis with respect to each
musical work identified in the notice.
(e) Termination disputes. The following requirements shall apply to
any dispute initiated with the mechanical licensing collective
regarding a termination under 17 U.S.C. 203 or 304:
(1) Such a dispute must be with regard to the validity of the
termination or the application of the derivative works exception to a
particular voluntary license or its underlying grant of authority.
(2) Only a pre-termination copyright owner (or its representative)
may initiate such a dispute.
(3)(i) If a pre-termination copyright owner (or its representative)
initiates such a dispute and delivers the information required to
substantiate the dispute to the mechanical licensing collective under
paragraph (e)(4) of this section, the mechanical licensing collective
shall hold applicable accrued royalties and accrued interest pending
resolution of the dispute.
(ii) With respect to any dispute concerning the application of the
derivative works exception to a particular voluntary license or its
underlying grant of authority:
(A) The mechanical licensing collective shall, as needed and on an
ongoing basis, invoice any applicable digital music provider for the
royalties associated with the dispute.
(B) The mechanical licensing collective shall hold such royalties
in the same manner and at the same interest rate as any other funds
held pursuant to 17 U.S.C. 115(d)(3)(H)(ii).
(C) Where the resolution of the dispute results in payment being
made by the mechanical licensing collective pursuant to a blanket
license, the payment must include any accrued interest. Where the
resolution of the dispute results in a digital music provider paying a
voluntary licensor, the mechanical licensing collective must promptly
return the held amount, including any accrued interest, to the digital
music provider accompanied by notice that the dispute has been resolved
in such manner.
(4) The minimum information that must be delivered to the
mechanical licensing collective to substantiate a termination-related
dispute shall consist of the following:
(i) A cognizable explanation of the grounds for the dispute,
articulated with specificity.
(ii) Documentation sufficient to support the grounds for the
dispute, which shall consist of the following:
(A) A true, correct, complete, and legible copy of each grant in
dispute.
(B) A true, correct, complete, and legible copy of any other
agreement or document necessary to support the grounds for the dispute.
(C) Such other documentation or substantiating information as the
mechanical licensing collective may reasonably require pursuant to a
dispute policy adopted under 17 U.S.C. 115(d)(3)(K).
(iii) A satisfactory identification of each musical work in
dispute.
(iv) A certification that the submitter has appropriate authority
to initiate the dispute with the mechanical licensing collective and
that all information submitted in connection with the dispute is true,
accurate, and complete to the best of the submitter's knowledge,
information, and belief, and is provided in good faith.
(v) The following additional information if the dispute concerns
the application of the derivative works exception to a particular
voluntary license or its underlying grant of authority:
(A) A true, correct, complete, and legible copy of each voluntary
license at issue.
(B) A satisfactory identification of each relevant sound recording
that constitutes a derivative work within the meaning of 17 U.S.C. 101
that was prepared pursuant to appropriate authority.
(C) The date of preparation for each such sound recording, which
must be before the effective date of termination.
(5) Notwithstanding anything to the contrary that may be contained
in Sec. 210.34, any and all documentation provided to the mechanical
licensing collective pursuant to paragraph (e)(4) of this section shall
be disclosed to all parties to the dispute. If a party to the dispute
is not a party or successor to a party to an otherwise confidential
document, such disclosure shall be subject to an appropriate written
confidentiality agreement.
(6) Any dispute initiated with the mechanical licensing collective
under this paragraph (e) shall be limited to those musical works
identified pursuant to paragraph (e)(4)(iii) of this section. The
existence of such a dispute shall not affect the implementation of a
change with respect to any other musical work identified in the same
notice of change and that is not subject to a dispute.
0
6. Amend Sec. 210.34 as follows:
0
a. In paragraph (c)(5), remove ``to paragraph (c)(4) of'' and add in
its place ``to paragraph (c)(4) or (6) of''; and
0
b. Add paragraph (c)(6).
The addition reads as follows:
Sec. 210.34 Treatment of confidential and other sensitive
information.
* * * * *
(c) * * *
(6) Notwithstanding paragraph (c)(1) of this section, where the
mechanical licensing collective places any amount on hold pursuant to a
dispute initiated under Sec. 210.30(e), the mechanical licensing
collective shall promptly disclose the total amount held for each
disputed work (or share thereof) to the parties to the dispute, which
shall include an identification of the approximate amount of royalties
expected to have been distributed for each disputed work (or share
thereof) in the first monthly distribution to occur after the
initiation of the hold. Upon the written request of any party to the
dispute, the mechanical licensing collective shall provide an update
about the amount held to all parties to the dispute within a reasonable
period of time, except that the mechanical licensing collective is not
required to provide such an update more frequently than once every
three months.
* * * * *
Dated: June 25, 2024.
Suzanne Wilson,
General Counsel and Associate Register of Copyrights.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2024-14609 Filed 7-8-24; 8:45 am]
BILLING CODE 1410-30-P