Copyright Office Issues Final Rule Regarding Transition Period Cumulative Reporting and Transfer of Royalties to the Mechanical Licensing Collective
Issue No. 870 - January 7, 2021

The U.S. Copyright Office has published a final rule for public inspection implementing requirements under the Music Modernization Act (MMA) for digital music providers to submit cumulative statements of account to the mechanical licensing collective (MLC) at the conclusion of the statutory transition period in order to be eligible for the statutory limitation on liability for prior unlicensed uses of musical works. This rule is designed to be consistent with the statute while furthering the congressional intent to encourage digital music providers to participate in the limitation on liability by transferring accrued royalties for past uses of works for payment to copyright owners.

The rule provides for the MLC to receive metadata, including through supplemental reporting, to enable it to match past uses so it can distribute royalties to those matched copyright owners. It also adopts a mechanism for digital music providers to rely upon royalty input estimations and make subsequent adjustments once the inputs are finalized. This includes allowing digital music providers to employ good-faith estimates in calculating total accrued royalties, subject to subsequent adjustments, to reflect the potential effect of these agreements upon the providers’ reporting obligations. It also allows relevant copyright owners to notify the MLC of a good-faith dispute over reliance on such an agreement and establishes a process for the MLC to invoice and hold the disputed royalties once the MLC is otherwise ready to distribute the funds.

For more information on this rule, please visit our website.