Notice2024-01781
Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 30, 2024
Issuing agencies
Library of CongressCopyright Office, Library of Congress
Abstract
The U.S. Copyright Office is issuing a notification of inquiry, as required by the Music Modernization Act, regarding whether the existing designations of the mechanical licensing collective and digital licensee coordinator should be continued.
Full Text
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<title>Federal Register, Volume 89 Issue 20 (Tuesday, January 30, 2024)</title>
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[Federal Register Volume 89, Number 20 (Tuesday, January 30, 2024)]
[Notices]
[Pages 5940-5945]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01781]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2024-1]
Periodic Review of the Designations of the Mechanical Licensing
Collective and Digital Licensee Coordinator
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Notification of inquiry.
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SUMMARY: The U.S. Copyright Office is issuing a notification of
inquiry, as required by the Music Modernization Act, regarding whether
the existing designations of the mechanical licensing collective and
digital licensee coordinator should be continued.
DATES: Initial submissions by the currently designated mechanical
licensing collective and digital licensee coordinator must be received
no later than 11:59 p.m. Eastern Time on April 1, 2024. Written initial
public comments must be received no later than 11:59 p.m. Eastern Time
on May 29, 2024. Written reply public comments must be received no
later than 11:59 p.m. Eastern Time on June 28, 2024. Reply submissions
of the currently designated mechanical licensing collective and digital
licensee coordinator must be received no later than 11:59 p.m. Eastern
Time on July 29, 2024.
ADDRESSES: For reasons of government efficiency, the Copyright Office
is using the <a href="http://regulations.gov">regulations.gov</a> system for the submission and posting of
public comments in this proceeding. All public comments in response to
this notice are therefore to be submitted electronically through
<a href="http://regulations.gov">regulations.gov</a>. Specific instructions for submitting comments are
available on the Copyright Office's website at <a href="https://www.copyright.gov/rulemaking/mma-designations/2024">https://www.copyright.gov/rulemaking/mma-designations/2024</a>. If electronic
submission of comments is not feasible due to lack of access to a
computer or the internet, please contact the Office using the contact
information below for special instructions. Initial and reply
submissions by the currently designated mechanical licensing collective
and digital licensee coordinator should be made by email to the
Copyright Office's Assistant to the General Counsel.
FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the
General Counsel, by email at <a href="/cdn-cgi/l/email-protection#4d20282b390d2e223d343f242a2539632a223b"><span class="__cf_email__" data-cfemail="137e76756753707c636a617a747b673d747c65">[email protected]</span></a> or telephone at (202)
707-8350.
SUPPLEMENTARY INFORMATION:
I. Statutory Background
The Orrin G. Hatch-Bob Goodlatte Music Modernization Act (``MMA'')
\1\ created a statutory blanket mechanical license for the reproduction
and distribution of nondramatic musical works by digital music
providers (``DMPs'') in the form of digital phonorecord deliveries,
including permanent downloads, limited downloads, and interactive
streams (the ``blanket license''), and eliminated the song-by-song
``notice of intention'' process for such uses.
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\1\ Public Law 115-264, 132 Stat. 3676 (2018).
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The MMA directed the Copyright Office (``Office'') to designate a
mechanical licensing collective (``MLC'') to administer the blanket
license \2\ and a digital licensee coordinator (``DLC'') to represent
DMPs in matters related to the administration of the blanket license.
However, if the Office is unable to identify an entity that meets the
statutory qualifications to serve as the DLC, it may decline to
designate one.\3\ As discussed further below, the Office made its
initial MLC and DLC designations in July 2019.\4\ At that time, it
designated the entity ``Digital Licensee Coordinator, Inc.'' as the DLC
and the entity ``Mechanical Licensing Collective'' as the MLC.\5\ The
Office is required to review these designations every five years, with
the first review to begin in January 2024.\6\ This notice initiates the
review process.
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\2\ 17 U.S.C. 115(d)(3)(B); see also id. at 115(e)(15).
\3\ Id. at 115(d)(3)(D)(i)(IV), (d)(5).
\4\ 37 CFR 210.23; 84 FR 32274, 32296 (July 8, 2019).
\5\ 37 CFR 210.23; 84 FR at 32292, 32296. In this notice, the
currently designated digital licensing coordinator will be
designated as the ``Digital Licensing Coordinator'' and the
statutory digital licensing coordinator will be designated in
lowercase or by using the abbreviated term, ``the DLC.'' Similarly,
the currently designated mechanical licensing collective will be
designated via capitalization (the ``Mechanical Licensing
Collective'') and the statutory mechanical licensing collective will
be designated in lowercase or by using the abbreviated term, ``the
MLC.''
\6\ 17 U.S.C. 115(d)(3)(B)(ii) (noting that the review occurs
``every 5 years, beginning with the fifth full calendar year to
commence after the initial designation''); id. at 115(d)(5)(B)(ii)
(same).
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A. The MLC's Designation Criteria
The MMA provides that an entity wishing to be designated as the MLC
must: (1) be a single nonprofit entity, not owned by any other entity,
created by copyright owners to carry out its statutory
responsibilities; \7\ (2) be ``endorsed by, and enjoy[] substantial
support from, musical work copyright owners that together represent the
greatest percentage of the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years''; \8\ and (3) possess the administrative and technological
capabilities necessary to carry out a wide array of responsibilities
associated with administering the blanket license.\9\ If no entity
meets these statutory criteria, the Office must designate an entity as
the MLC that most nearly fits them.\10\
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\7\ Id. at 115(d)(3)(A)(i).
\8\ Id. at 115(d)(3)(A)(ii).
\9\ Id. at 115(d)(3)(A)(iii); see also id. at 115(d)(3)(C)(i)-
(iii) (enumerating thirteen functions, in addition to the ability to
administer voluntary licenses).
\10\ Id. at 115(d)(3)(B)(iii).
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While the first criterion regarding nonprofit status is
straightforward, the second and third criteria require more
explanation. As part of the initial MLC designation proceeding, the
Office had to address the correct construction and
[[Page 5941]]
application of the statute's endorsement criterion. The Office sought
public input on this issue.\11\ After considering the relevant comments
and evaluating the statute, it concluded that the statute's endorsement
criterion ``mandates that the entity designated as the MLC be endorsed
and supported by musical work copyright owners that together earned the
largest aggregate percentage (among MLC candidates) of total royalties
from the use of their musical works in covered activities in the U.S.
during the statutory three-year period.'' \12\ It further concluded
that ``the endorsement criterion is a plurality requirement based on
market share, measured by applicable licensing revenue.'' \13\
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\11\ 83 FR 65747, 65753 (Dec. 21, 2018).
\12\ 84 FR at 32282.
\13\ Id. For a full discussion of the Office's conclusions
regarding how the endorsement criterion is applied, interested
parties should review that portion of the initial designation
determination. Id. at 32280-86.
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The third MLC designation criterion addresses the administrative
and technological capabilities associated with carrying out its
statutory responsibilities. Those responsibilities are executed by the
MLC's board of directors and task-specific committees. The MMA provides
that the MLC's board will consist of 14 voting members and 3 nonvoting
members.\14\ It also requires the MLC's board to establish three
committees: an operations advisory committee; an unclaimed royalties
oversight committee; and a dispute resolution committee.\15\
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\14\ For the statutory requirements regarding the board
described in this paragraph, see 17 U.S.C. 115(d)(3)(D)(i).
\15\ Id. at 115(d)(3)(D)(iv). Further discussion of the MLC's
board and committees can be found in the Office's initial
designation notice. 83 FR at 65748-50.
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The MLC's responsibilities under the MMA include the following
tasks:
<bullet> Offering and administering blanket licenses;
<bullet> Collecting and distributing royalties from DMPs for
covered activities;
<bullet> Identifying musical works embodied in sound recordings and
identifying and locating copyright owners of such musical works; \16\
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\16\ The statute also mentions ``and shares of such works'' when
referring to musical works. See, e.g., 17 U.S.C.
115(d)(3)(C)(i)(III). For brevity's sake, this notice will omit
references to such shares.
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<bullet> Establishing and maintaining a musical works database
relevant to licensing activities under the MMA;
<bullet> Administering a process by which copyright owners can
claim ownership of musical works;
<bullet> Investing in relevant resources, and arranging for
services of outside vendors and others to support the MLC's activities;
and
<bullet> Maintaining records of its activities and engaging in and
responding to audits.\17\
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\17\ Id. at 115(d)(3)(C)(i)(I)-(V), (VII), (XII); see also id.
at 115(d)(3)(C)(i), (iii) (identifying the MLC's additional
statutory authorities and functions).
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B. The DLC's Designation Criteria, Authorities, and Functions
Similar to the MLC, the DLC must be a single nonprofit entity that
is endorsed by and enjoys substantial support from DMPs, and must
possess the administrative and technological capabilities necessary to
carry out its responsibilities.\18\ Unlike the MLC, in the event the
Office is unable to identify an entity that fulfills the criteria for
the DLC, it may decline to designate one.\19\
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\18\ Id. at 115(d)(3)(C)(i)-(iii) (enumerating thirteen
functions, in addition to the ability to administer voluntary
licenses); see also id. at 115(d)(3)(B)(iii).
\19\ Id. at 115(d)(5)(B)(iii).
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The statute authorizes the DLC to perform the following functions:
(1) establishing a governance structure, criteria for membership, and
any dues to be paid by its members; (2) engaging in activities related
to the administrative assessment, including participating in
administrative assessment proceedings before the Copyright Royalty
Judges and engaging in efforts to enforce DMPs' notice and payment
obligations related to the assessment; (3) gathering and providing
documentation for use in proceedings before the Copyright Royalty
Judges to set the statutory mechanical license's rates and terms; (4)
initiating and participating in proceedings before the Copyright Office
with respect to the blanket license; (5) maintaining records of its
activities; and (6) assisting in publicizing the MLC's existence and
functions to copyright owners.\20\
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\20\ Id. at 115(d)(5)(C)(i). The ``administrative assessment''
is the fee paid by digital music providers for the MLC's costs in
establishing, maintaining, and operating the MLC to fulfill its
statutory functions, excluding any added costs related to providing
services under voluntary licenses. Id. at 115(d)(7)(D), (e)(3),
(e)(6).
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Further, under the MMA, the DLC is required to ``make reasonable,
good-faith efforts'' to assist the MLC in its efforts to locate and
identify copyright owners of unmatched musical works by encouraging
DMPs to publicize the MLC's existence and the ability of copyright
owners to claim unclaimed accrued royalties, including by posting
contact information for the collective at reasonably prominent
locations on DMP websites and applications and conducting in-person
outreach activities with songwriters.\21\
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\21\ Id. at 115(d)(5)(C)(i)(VII), (d)(5)(C)(iii).
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The DLC also appoints a representative to act as a nonvoting member
of the MLC's board and DMP representatives to the MLC's operations
advisory committee.\22\
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\22\ Id. at 115(d)(3)(D)(iv)(II), (i)(IV).
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II. Regulatory Background
A. Initial Designation
For the initial MLC and DLC designations, the Office published a
notice in the Federal Register soliciting proposals from parties who
wished to be designated as those entities, and requested information
from those parties regarding governance, administrative and
technological capabilities to perform the MMA's required functions, and
indicia of endorsement and support.\23\ The Office also requested
public comments on the parties' proposals.\24\
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\23\ 83 FR 65747.
\24\ Id.
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The Office received one proposal for designation as the DLC and two
proposals for designation as the MLC. It received over 600 public
comments responding to the proposals and held several ex parte meetings
addressing them.\25\ After considering these comments and the statutory
designation criteria, the Office concluded that the entity ``Digital
Licensee Coordinator, Inc.,'' incorporated in Delaware on March 20,
2019, ``me[t] each of the statutory criteria required of the digital
licensee coordinator,'' and would be designated as the DLC.\26\ With
respect to the MLC, the Office concluded that, while both candidates to
become the MLC ``[met] the statutory criteria to be a nonprofit created
to carry out its statutory responsibilities,'' the Mechanical Licensing
Collective ``made a better showing as to its prospective administrative
and technological capabilities'' and was the only candidate that met
the statute's ``endorsement'' criteria.\27\ Therefore, it designated
the entity ``Mechanical Licensing Collective,'' incorporated in
Delaware on March 5, 2019, as the MLC.\28\
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\25\ U.S. Copyright Office, Ex Parte Communications, <a href="https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html">https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html</a> (last visited Jan. 24, 2024) (hosting ex parte
meeting summary letters related to the Office's initial
designations).
\26\ 37 CFR 210.23; 84 FR at 32292, 32296.
\27\ 84 FR at 32276, 32296.
\28\ 37 CFR 210.23; 84 FR at 32296.
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B. The Periodic Designation Review Process
The MMA requires the Office to periodically evaluate whether the
existing MLC and DLC designations
[[Page 5942]]
should be continued or, if either designation is not continued, whether
a different entity should be designated instead.\29\ The Office
commences this process by publication of a notice in the Federal
Register by the end of January in the relevant year.
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\29\ 17 U.S.C. 115(d)(3)(B)(ii); id. at 115(d)(5)(B)(ii).
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For the instant review of the MLC and DLC designations, the Office
is first soliciting information from the currently designated entities
regarding their past performance and capabilities, as well as future
plans. The responses from the Mechanical Licensing Collective and the
Digital Licensing Coordinator will be available for public review. The
Office encourages public comments concerning whether the existing MLC
and DLC designations should be continued, or different entities should
be designated. Once the public has submitted comments, the currently
designated entities will be given an opportunity to respond. After the
time for submissions from the Mechanical Licensing Collective, Digital
Licensee Coordinator, and the public have expired, the Office may also
utilize informal meetings to address discrete issues prior to issuing a
determination. Any such meetings will occur after written comments have
been submitted and will follow the Office's ex parte meeting
guidelines.\30\
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\30\ 37 CFR 205.24. Instructions on how to request an ex parte
meeting are available on the Office's website at <a href="https://www.copyright.gov/ex-parte-meetings/">https://www.copyright.gov/ex-parte-meetings/</a>.
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After evaluating the record in this proceeding, the Office will
determine whether the current MLC and DLC designations should be
continued. If it concludes that a designation should be continued, it
will publish its determination in the Federal Register, ending this
proceeding.\31\ If the Office decides that either designation should
not be continued, it will solicit proposals for designation in the
Federal Register. If the Office ultimately designates a new MLC or DLC,
it will provide the reasons for such a designation and the
designation's effective date.\32\ Further, if it designates a new MLC,
it will ``adopt regulations to govern the transfer of licenses, funds,
records, data, and administrative responsibilities from the existing
mechanical licensing collective to the new entity.'' \33\
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\31\ 17 U.S.C. 115(d)(3)(B)(ii)(I); see also id. at
115(d)(5)(B)(ii).
\32\ Id. at 115(d)(3)(B)(ii)(I); see also id. at
115(d)(5)(B)(ii).
\33\ Id. at 115(d)(3)(B)(ii)(II).
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III. Request for Information From the Current Designees
The Copyright Office seeks information to assist its review of the
existing MLC and DLC designations and whether they should be continued.
The questions in this notification of inquiry are intended to focus the
current designees' submissions on the statutory designation criteria
and certain areas of interest to the Office. The parties also may
provide additional information they wish the Office to consider in
deciding whether to continue the current designations.
A. Mechanical Licensing Collective-Directed Inquiries
The Office requests the following information from the Mechanical
Licensing Collective, organized by the criteria categories below.
1. Nonprofit Status
The MLC must be a nonprofit entity, not owned by any other entity,
that is created by copyright owners to carry out its statutory
responsibilities. The Office requests proof that the Mechanical
Licensing Collective continues to meet this criterion.
2. Indicia of Endorsement and Support
The MLC must be ``endorsed by, and enjoy[] substantial support
from, musical work copyright owners that together represent the
greatest percentage of the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years.'' \34\ The Office requests information from the Mechanical
Licensing Collective regarding whether it continues to satisfy the
endorsement criterion.
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\34\ Id. at 115(d)(3)(A)(ii).
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3. Administrative and Technological Capabilities
The MLC must have the administrative and technological capabilities
to perform its statutorily required functions.\35\ The Office requests
a detailed description explaining how the Mechanical Licensing
Collective has the administrative and technological capabilities to
perform its required functions. It asks that the response address the
following subjects:
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\35\ Id. at 115(d)(3)(A)(iii).
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i. Progress Implementing the Recommendations in the Office's
``Unclaimed Royalties'' Report
The Office requests an update on the Mechanical Licensing
Collective's efforts to implement recommendations contained in the
Office's report ``Unclaimed Royalties: Best Practice Recommendations
for the Mechanical Licensing Collective,'' \36\ including what
recommendations have been implemented to date, what efforts are in
progress, its plans to implement recommendations in the future, and a
discussion of any recommendations it is not planning to implement,
including the reasons for such decision(s).
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\36\ U.S. Copyright Office, Unclaimed Royalties: Best Practice
Recommendations for the Mechanical Licensing Collective (2021)
(``Unclaimed Royalties Report''), <a href="https://www.copyright.gov/policy/unclaimed-royalties/unclaimed-royalties-final-report.pdf">https://www.copyright.gov/policy/unclaimed-royalties/unclaimed-royalties-final-report.pdf</a>.
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ii. Ownership Identification, Matching, and Claiming Process and
Maintenance of Musical Works Database
The Office requests information about the Mechanical Licensing
Collective's ability to identify musical works embodied in particular
sound recordings, and to identify and locate the copyright owners of
such musical works, including the following:
(a) Please describe how the Mechanical Licensing Collective has
worked to improve automated and manual matching since the blanket
license became available and plans to further enhance such matching
over the next 5 years, including with respect to the matching of
reported sound recordings to musical works as well as the matching of
those musical works to identified and located copyright owners;
(b) Please identify the Mechanical Licensing Collective's target
goals or estimates, including any relevant industry benchmarks, for
matching reported sound recordings to musical works and identifying and
locating copyright owners over the next five years, as expressed in
terms of (1) a match rate (i.e., the total amount of royalties matched
to musical works registered in the Mechanical Licensing Collective's
database, compared to the total royalties reported by DMPs); and (2) a
distribution rate (i.e., the total amount of royalties matched and paid
to the Mechanical Licensing Collective's members, compared to the total
royalties reported by DMPs);
(c) Please explain how the Mechanical Licensing Collective: (1) is
using quantifiable measurements to monitor its match rate confidence;
and (2) tunes confidence levels without using numerical metrics; \37\
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\37\ See The Mechanical Licensing Collective, 2022 Annual Report
9 (2022), <a href="https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf">https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf</a> (stating that the Mechanical
Licensing Collective ``does not use numerical metrics to monitor
match rate confidence''); Designation Proposal of Mechanical
Licensing Collective at 40, Docket No. 2018-11 (Mar. 21, 2019)
(``Mechanical Licensing Collective Initial Designation Proposal''),
<a href="https://www.gov/comment/COLC-2018-0011-0012">https://www.gov/comment/COLC-2018-0011-0012</a> (``Tuning the confidence
levels of a matching system is critical to proper functioning.'').
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[[Page 5943]]
(d) Please address whether the Mechanical Licensing Collective has
identified any notable trends or patterns in reported usage that it has
been unable to match through its efforts to date. If it has identified
such trends or patterns, please describe what targeted efforts have
been undertaken to date, and are planned to take place over the next 5
years, to attempt to address these trends or patterns;
(e) Please describe any efforts the Mechanical Licensing Collective
has undertaken to enhance database and claiming portal functionality,
including with respect to searching the database, sorting and filtering
queries, and sharing and exporting results, as well as specific plans
to develop additional functionality over the next five years;
(f) Please describe any plans the Mechanical Licensing Collective's
has to address disputes and overclaims (or overlapping claims) via a
module within its portal;
(g) Please describe the Mechanical Licensing Collective's efforts
to develop portal access (or a unique portal), or equivalent database
functionalities, for songwriters who are not self-administered (e.g.,
those represented by a publisher, administrator, or collective
management organization) to permit them to access, provide, or correct
information about themselves and their works maintained by the MLC,
including the ability for such songwriters to flag data issues with
their publisher or other representative, to provide data directly to
the MLC, and to have permissions-based access to view information such
as stream counts and revenue associated with their musical works; \38\
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\38\ See Unclaimed Royalties Report at 49-51; The Mechanical
Licensing Collective, Welcome to The MLC's Public Work Search,
<a href="https://portal.themlc.com/search#work">https://portal.themlc.com/search#work</a> (last visited Jan. 24, 2024)
(``Songwriters, Composers & Lyricists: . . . The MLC is working on
additional ways to help you flag and report data errors to your
publisher or administrator. We hope to launch those later this
year.'').
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(h) Please describe how the Mechanical Licensing Collective is
``maintain[ing] at regular intervals historical records of the
information contained in the public musical works database, including a
record of changes to such database information and changes to the
source of information in database fields, in order to allow tracking of
changes to the ownership of musical works in the database over time,''
the length of such ``regular intervals,'' and how it has determined
``the most appropriate method for archiving and maintaining such
historical data to track ownership and other information changes in the
database''; \39\
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\39\ 37 CFR 210.31(f).
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(i) The Mechanical Licensing Collective stated that it would employ
application program interfaces (``APIs'') ``to allow for bulk
submission and updating of rights data'' and to otherwise support data
exchange.\40\ Please describe how the Mechanical Licensing Collective
has employed systems with APIs to support data exchange to date \41\
and its plans to implement any additional such systems over the next
five years.
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\40\ Mechanical Licensing Collective Initial Designation
Proposal at 37, 47.
\41\ See The Mechanical Licensing Collective, Data Programs,
<a href="https://www.themlc.com/dataprograms#public-search-api">https://www.themlc.com/dataprograms#public-search-api</a> (last visited
Jan. 24, 2024) (referencing the beta launch of Mechanical Licensing
Collective's Public Search API).
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iii. Collection and Distribution of Royalties, Including Unclaimed
Accrued Royalties
The Office requests information about the Mechanical Licensing
Collective's royalty distributions, including the following topics:
(a) In its initial designation proposal, the Mechanical Licensing
Collective stated that it ``does not intend to ever distribute the
entirety of unclaimed royalties simultaneously [and] intends to
implement policies allowing use of that discretion to retain unclaimed
accrued royalties and continue matching efforts in situations where
there is reasonable evidence that this will result in material
increases in matching success.'' \42\ Please address whether the
Mechanical Licensing Collective continues to hold these views;
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\42\ Mechanical Licensing Collective Initial Designation
Proposal at 52-53.
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(b) Please provide information regarding: (1) any steps that the
Mechanical Licensing Collective is taking to protect against the
incidence of fraudulent ownership claims and frivolous ownership
disputes; and (2) whether these steps have been successful; and
(c) Please provide information addressing whether and to what
extent the Mechanical Licensing Collective is working with DMPs,
distributors, aggregators, or others to protect against streaming fraud
and the status of such efforts, including their success or failure.
iv. Investment in Resources and Vendor Engagement
The Office understands that the Mechanical Licensing Collective is
relying on third-party vendors, including The Harry Fox Agency and
ConsenSys, to support its operations and fulfill its statutory
obligations.\43\ It is also aware that the Mechanical Licensing
Collective has recently announced a ``Supplemental Matching Network,''
consisting of Bl[ograve]kur, Jaxsta, Pex, Salt and SX Works, to improve
its matching efforts.\44\ Please provide additional information about
these relationships, including the specific functions that they
perform, or have been asked to perform, the vendors' relevant
experience with clients and projects involving similar scale and type,
or their industry-specific knowledge. Please provide the same
information with respect to any other vendors that the Mechanical
Licensing Collective uses, or has plans to use, in performing its
duties.
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\43\ The Mechanical Licensing Collective, 2022 Annual Report 36,
41 (2022), <a href="https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf">https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf</a>.
\44\ See Kristin Robinson, The MLC Partners With 5 Data Matching
Companies to Increase Royalties Match Rate, Billboard (Dec. 7,
2023), <a href="https://www.billboard.com/business/publishing/the-mlc-improve-royalties-match-rate-new-data-network-1235545949/">https://www.billboard.com/business/publishing/the-mlc-improve-royalties-match-rate-new-data-network-1235545949/</a>.
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v. Funding
[[Page 5944]]
The statute directs the MLC to establish procedures to guard
against ``abuse, waste, and the unreasonable use of funds.'' \45\
Review of the MMA's legislative history instructs the Office to
consider the Mechanical Licensing Collective's efficiency or,
conversely, any ``evidence of fraud, waste, or abuse, including the
failure to follow the relevant regulations adopted by the Copyright
Office'' in evaluating whether the current MLC designation should be
continued.\46\ Accordingly the Office requests information about the
Mechanical Licensing Collective's procedures to safeguard its use of
the assessment funds against abuse, waste, and other unreasonable
expenditures.\47\ The Mechanical Licensing Collective should also
provide information regarding whether it has become more efficient over
time. It should address with specificity any expenditure categories
(e.g., personnel costs, information technology, professional fees,
outreach, education, communication & events, insurance, rent, computer
equipment & office expenses) that have significantly increased since
January 2021, and a detailed explanation for the increase.
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\45\ 17 U.S.C. 115(d)(3)(D)(ix)(II)(bb)(BB). As noted above, the
DMPs fund the MLC's operations through an administrative assessment
that is established by the Copyright Royalty Judges.
\46\ H.R. Rep. No. 115-651, at 6 (2018).
\47\ Note that the MMA requires the MLC to retain a qualified
auditor to examine its books, records, and operations and prepare a
report on these topics for the MLC's board. 17 U.S.C.
115(d)(3)(D)(ix)(II). The auditor's letter to the MLC's board can be
found on the Mechanical Licensing Collective's website. Letter from
WithumSmith+Brown, P.C. to the Board of Directors of the Mechanical
Licensing Collective (Dec. 22, 2023), <a href="https://www.themlc.com/hubfs/Auditor%20Letter%20to%20Board%20re%20MMA%20Audit%20Provision%20">https://www.themlc.com/hubfs/Auditor%20Letter%20to%20Board%20re%20MMA%20Audit%20Provision%20</a>(115(d
)(3)(D)(ix)(II)).pdf.
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vi. Governance
The Office seeks information related to the Mechanical Licensing
Collective's governance, including:
(a) A copy of the Mechanical Licensing Collective's current bylaws,
including a summary of changes made, if any, from its initial bylaws;
(b) A list of all the committees the Mechanical Licensing
Collective has created that are not required by statute, the membership
of those committees, and how it determined the membership of those
committees;
(c) Copies of all the Mechanical Licensing Collective's policies
addressing its statutory duties, procedures, practices, and guidelines
(e.g., those governing the collection, processing, holding, and
distribution of royalties, guidelines for adjustments, member
registration, ownership disputes, automated and manual matching, data
quality and verification, investments, conflicts of interest), but
excluding policies unrelated to the MLC's statutory duties (e.g.,
website terms of use, human resources), the location of these policies,
procedures, and practices on its website if they are currently
available to the public, and a summary of changes made, if any, from
earlier versions of these policies, procedures, practices, and
guidelines; \48\
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\48\ To the extent that any of these materials contain
privileged or confidential commercial or financial information or
trade secrets, it should provide two versions of such documents to
the Office: one redacted copy appropriate for public viewing and an
unredacted copy for the Office. See, e.g., Five Years Later--The
Music Modernization Act: Hearing Before the Subcomm. on Courts,
Intell. Prop. and the Internet of the H. Comm. on the Judiciary,
117th Cong. 6 (2023) (responses to questions for the record of Kris
Ahrend, CEO, the Mechanical Licensing Collective) (``Our financial
advisors have advised that we not make public any details about
specific investment solutions [of the Mechanical Licensing
Collective's investment policy]. Their reasons include security
concerns and concerns that such information could be used alongside
our public royalty distribution timelines to engage in market timing
to the detriment of [the Mechanical Licensing Collective].''); see
also 5 U.S.C. 552(b)(4) (exempting agencies from requiring
disclosures if they involve ``trade secrets and commercial or
financial information obtained from a person and privileged or
confidential'').
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(d) The status of any policies or procedures related to the
distribution of unclaimed accrued royalties and accrued interest;
(e) An explanation of how the Mechanical Licensing Collective is
ensuring that: (1) its policies, procedures, and practices are
transparent and accountable; \49\ and (2) that all board and committee
members have equal access to information in the Mechanical Licensing
Collective's possession;
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\49\ See 17 U.S.C. 115(d)(3)(D)(ix)(I)(aa).
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(f) The results of the Mechanical Licensing Collective's ``Board
Diversity Report'' for 2021 and 2023; \50\ and
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\50\ The Mechanical Licensing Collective's bylaws require a
biennial ``Board Diversity Report,'' that ``address[es] the extent
to which the Board fully and fairly represents the whole music
publishing and songwriting communities, and should specifically note
any actual or potential concerns or shortcomings.'' It also
``address[es] diversity in such areas as gender/race/ethnicity,
income, musical genre, geography and expertise/experience.'' The
Mechanical Licensing Collective, Bylaws of the Mechanical Licensing
Collective sec. 4.8, <a href="https://f.hubspotuserconte.net/hubfs/8718396/files/2020-05/Bylaws%20of%20The%20MLC.pdf">https://f.hubspotuserconte.net/hubfs/8718396/files/2020-05/Bylaws%20of%20The%20MLC.pdf</a> (last visited Jan. 24,
2024).
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(g) How the Mechanical Licensing Collective approaches the
resolution of disputes with other interested parties (e.g., DMPs,
songwriters, publishers, or record labels) regarding interpretation of
the MMA or the Office's regulations.\51\
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\51\ The Office notes that certain stakeholders would welcome
referring such questions or disputes to the Office. See, e.g., Five
Years Later--The Music Modernization Act: Hearing Before the
Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm.
on the Judiciary, 117th Cong. 37, 57-58 (2023) (statements of
Garrett Levin, President and CEO, Digital Media Association and Abby
North, President, North Music Group).
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vii. Education and Outreach
The Office requests information regarding the Mechanical Licensing
Collective's education and outreach efforts, including how it reaches
diverse audiences to ``engage in diligent, good-faith efforts to
publicize the collective and ability to claim unclaimed accrued
royalties for unmatched musical works (and shares of such works).''
\52\ The Office is also interested in how the Mechanical Licensing
Collective ``tailor[s] its education and outreach activities in
recognition of the industry's broad and diverse spectrum of songwriters
and copyright owners, including by stakeholders' varying levels of
sophistication, geographic location, age, and music genre,'' including
how it ``employ[s] dedicated, persistent outreach to historically
underserved groups.'' \53\ The Office is further interested in how the
Mechanical Licensing Collective is using data in decision-making and
performance measurement, with respect to its education and outreach
efforts, for example, how it is using data to evaluate its education
and outreach efforts (e.g., in-person outreach at events, webinars,
advertising, interviews for articles and podcasts, partnerships) when
considering whether to participate in an event or activity. Finally,
the Office is interested in how the Mechanical Licensing Collective is
using ``member demographic statistics and DMP usage analytics . . . to
better target its education and outreach efforts towards under-
participating groups.'' \54\
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\52\ S. Rep. No. 115-339, at 14 (2018).
\53\ Unclaimed Royalties Report at 29.
\54\ Id. at 38.
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The Mechanical Licensing Collective is encouraged to provide any
other information that it believes is relevant to demonstrate it
continues to meet the statutory designation criteria.
B. Digital Licensee Coordinator-Directed Inquiries
The Office requests the following information from the Digital
Licensee Coordinator relevant to determining whether its existing
designation should be continued:
1. Nonprofit Status
The Office requests proof that Digital Licensee Coordinator is a
nonprofit entity, not owned by any other entity,
[[Page 5945]]
that is created to carry out its statutory responsibilities.\55\
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\55\ 17 U.S.C. 115(d)(5)(A)(i).
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2. Indicia of Endorsement and Support
The Office requests information from the Digital Licensee
Coordinator regarding whether it continues to be ``endorsed by and
enjoy[] substantial support from digital music providers and
significant nonblanket licensees that together represent the greatest
percentage of the licensee market for uses of musical works in covered
activities, as measured over the preceding 3 calendar years.'' \56\
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\56\ Id. at 115(d)(5)(A)(ii).
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3. Administrative Capabilities and Governance
The DLC must have the administrative capabilities to perform its
statutory functions.\57\ The Office requests a detailed description of
the Digital Licensee Coordinator's administrative capabilities and its
performance of the following functions:
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\57\ Id. at 115(d)(5)(A)(iii).
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i. Governance
The Office requests a copy of the Digital Licensee Coordinator's
current bylaws, including a summary of changes made, if any, from its
initial bylaws. To the extent not addressed by its bylaws, the Office
also requests a summary of its governance structure, criteria for
membership, and dues paid by its members. Lastly, the Office requests a
list of the Digital Licensee Coordinator's current members, and a
description of its efforts to grow its membership to other DMPs, and
any challenges related to such efforts.
ii. Notice and Payment Obligations
The Office requests information addressing the Digital Licensee
Coordinator's efforts to enforce notice and payment obligations with
respect to the administrative assessment, including: (1) how it is
coordinating such efforts with the Mechanical Licensing Collective; and
(2) the extent to which it is disclosing information to, and receiving
information from, the Mechanical Licensing Collective on this topic.
iii. Participation in Proceedings Before the Copyright Office and
Copyright Royalty Judges
The Office requests a summary of the Digital Licensee Coordinator's
participation in Office or Copyright Royalty Judge proceedings,
including: (1) participating in proceedings before the Copyright
Royalty Judges to establish the administrative assessment; (2)
gathering and providing documentation for use in proceedings before the
Copyright Royalty Judges to set rates and terms under the mechanical
license; and (3) participating in proceedings before the Office with
respect to activities regarding the blanket license.\58\
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\58\ Id. at 115(d)(5)(C)(i)(III)-(V).
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iv. Maintaining Records of the Digital Licensee Coordinator's
Activities
The Office requests a description of how the Digital Licensee
Coordinator is maintaining records of its activities, including efforts
to ensure that confidential, private, proprietary, or privileged
information contained in its records is not improperly disclosed or
used.\59\
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\59\ Id. at 115(d)(5)(C)(i)(VI), (d)(12)(C).
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v. Assistance With Publicity for Unclaimed Royalties
The MMA directs the DLC to ``make reasonable, good-faith efforts to
assist the mechanical licensing collective . . . by encouraging digital
music providers to publicize the existence of the collective and the
ability of copyright owners to claim unclaimed accrued royalties.''
\60\ The Office requests a detailed description of the steps that the
Digital Licensee Coordinator has taken to fulfill this requirement,
including whether all its members have posted the MLC's contact
information in a prominent location on their websites and
applications.\61\ The Office also requests a summary of the Digital
Licensee Coordinator's in-person outreach activities with
songwriters.\62\
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\60\ See id. at 115(d)(5)(C)(iii).
\61\ Id. at 115(d)(5)(C)(iii)(I).
\62\ Id. at 115(d)(5)(C)(iii)(II).
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The Digital Licensee Coordinator is encouraged to provide any other
information that it believes is relevant to demonstrate it continues to
meet the statutory designation criteria.
IV. Public Participation
Interested members of the public are encouraged to comment on the
topics addressed in the designees' submissions or raised by the Office
in this notification of inquiry.\63\ Commenters may also address any
topics relevant to this periodic review of the MLC and DLC
designations. Without prejudice to its review of the current
designations, the Office hopes that this proceeding will serve as an
opportunity for any songwriter, publisher, or DMP who wishes to express
concerns, satisfaction, or priorities with respect to the
administration of the MMA's blanket licensing regime to do so, and that
any designated MLC or DLC will use that feedback to continually improve
its services.
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\63\ Submissions by the Mechanical Licensing Collective and
Digital Licensee Coordinator will be found on the Office's website
at <a href="https://www.copyright.gov/rulemaking/mma-designations/2024">https://www.copyright.gov/rulemaking/mma-designations/2024</a>
approximately sixty days after the publication of this Notification
of Inquiry.
Dated: January 25, 2024.
Suzanne V. Wilson,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2024-01781 Filed 1-29-24; 8:45 am]
BILLING CODE 1410-30-P
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