Frequently Asked Questions on the Designation of the Mechanical Licensing Collective and the Digital Licensee Coordinator
What is the mechanical licensing collective?
The mechanical licensing collective (“MLC”) is a nonprofit entity that will administer the new blanket licensing system established by the Music Modernization Act (“MMA”) beginning on the “license availability date”—that is, January 1, 2021. The MLC will receive notices and reports from digital music providers, collect and distribute royalties, and identify musical works and their owners for payment. It will establish and maintain a publicly accessible database containing information relating to musical works (and shares of such works) and, to the extent known, the identity and location of the copyright owners of such works and the sound recordings in which the musical works are embodied. In cases where the MLC is not able to match musical works to copyright owners, it is authorized to distribute the unclaimed royalties to copyright owners identified in the MLC records, based on the relative market shares of such copyright owners as reflected in reports of usage provided by digital music providers for the periods in question.
What is the new blanket license?
The MMA created a new blanket compulsory licensing system for the reproduction and distribution of musical works by digital music providers engaged in digital phonorecord deliveries, including permanent downloads, limited downloads, and interactive streams. The statute modified the section 115 “mechanical” license, which was previously obtained by licensees on a per-work, song-by-song basis. The blanket licensing structure is designed to reduce transaction costs for commercial services that strive to offer as much music as possible, while ensuring fair and timely payment to copyright owners.
How is the MLC selected?
The MMA directs the Register of Copyrights to designate an entity as the MLC, with the approval of the Librarian of Congress. By statute, the MLC must be:
- a single nonprofit entity that is created by copyright owners to carry out its statutory responsibilities;
- 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;
- able to demonstrate to the Copyright Office that, by the license availability date, it will have the administrative and technological capabilities to perform the required functions; and
- governed by a board of directors and include committees that are composed of a mix of voting and non-voting members as directed by the statute.
If no single entity meets each of these statutory criteria, the Register must designate as the MLC the entity that most nearly fits these qualifications. After 5 years, the Register will commence a periodic review of this designation.
What is the digital licensee coordinator?
The digital licensee coordinator (“DLC”) is a nonprofit entity that will coordinate the activities of the licensees and designate a representative to serve as a non-voting member on the board of the MLC. The DLC will be authorized to participate in proceedings before the Copyright Royalty Judges to establish the administrative assessment to be paid by digital music providers to operate the MLC.
How is the DLC selected?
The MMA allows, but does not require, the Register to designate a DLC, with the approval of the Librarian of Congress. The DLC must:
- be a single nonprofit entity created to carry out certain statutory responsibilities;
- be endorsed by digital music service 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; and
- possess the administrative and technological capabilities necessary to carry out a wide array of authorities and functions.
What entities have been designated as the MLC and the DLC?
Mechanical Licensing Collective, Inc. (“MLCI”) is designated as the MLC. Digital Licensee Coordinator, Inc. (“MLCI”) is designated as the DLC. Before making these selections, the Copyright Office conducted a public proceeding in which it received proposals from entities seeking to be designated, as well as more than 600 comments from stakeholders throughout the music industry. Information about the designation process is available here.
Why did the Register designate the MLCI and the DCLI?
The Register designated MLCI as the MLC because it demonstrated that it meets each of the statutory criteria, and it was only candidate that satisfied the statute’s endorsement requirement. MLCI also demonstrated that it is well positioned to carry out the MLC’s administrative and technological functions, including receiving notices and reports from digital music providers, collecting and distributing royalties, matching copyright owners to sound recordings, and maintaining a publicly accessible database. The Register also determined that each of MLCI’s proposed board members is well qualified to serve on the board in accordance with the statutory criteria.
Similarly, the Register determined that DLCI fulfills each of the statutory criteria for designation. It was endorsed by service providers and licensees representing the greatest percentage of the relevant market, and it demonstrated the administrative and technological capabilities to perform its required duties. The Register found each of its individual board members to be well qualified.
How did the designation process consider diversity?
The Copyright Office received public comments urging the Register to ensure that the MLC is representative of a diverse array of communities and musical genres. The Copyright Office takes representation concerns seriously and agrees that they should be considered as part of the MLC board and committee selection processes. In meetings with the Office, MLCI expressed its commitment to ensuring diversity, noting that its draft bylaws contain a diversity provision that calls for a biannual report on the diversity of the board, which will be used in choosing future candidates for MLCI’s board. MLCI also emphasized its capacity to reach a variety of communities through outreach and education. The Office intends to work with MLCI to ensure engagement with a broad spectrum of musical work copyright owners, including from communities historically underrepresented in leadership in the music industry.
When will the MLC start collecting and paying out royalties?
The MLC will start collecting and paying out royalties beginning on the license availability date established by the MMA—January 1, 2021.
How can a songwriter claim his or her ownership interests with the MLC?
The MLC will establish and administer a process by which copyright owners can claim ownership of musical works (and shares of such works). To facilitate such claims, the MLC will create a claiming portal designed to be usable by individual songwriters and copyright owners, and it will dedicate staff to assist copyright owners with troubleshooting and claims submission.
In addition to the creation of a user-friendly claiming portal, the MLC is required to publicize unclaimed royalties. The DLC must assist with publicity for unclaimed royalties by encouraging digital music providers to publicize information about the MLC on websites and applications, and by conducting in-person outreach activities with songwriters. The Copyright Office will also engage in public outreach and educational activities and will provide information on its website on how to claim ownership interests in musical works.
When will the MLC distribute unclaimed funds?
The MLC will not distribute unclaimed funds prior to January 1, 2023, the earliest allowable initial distribution date under the statute. Congress has asked the Office to study the issue of unclaimed royalties and to provide a report by July 2021 that recommends best practices for the MLC to identify and locate copyright owners with unclaimed royalties, encourage copyright owners to claim their royalties, and reduce the incidence of unclaimed royalties. The MLC must give substantial weight to these recommendations when establishing its procedures to identify and locate copyright owners and to distribute unclaimed royalties.
What are the Copyright Office’s next steps in implementing the MMA?
While the designation of the MLC and DLC allows these entities to begin performing many of their statutory functions, the MMA also requires additional activities of the Copyright Office and, separately, the Copyright Royalty Board. The Copyright Office is directed to promulgate regulations related to the license and operation of the MLC, including requirements for notices of license and non-blanket activity, usage reporting, handling of confidential information, and operational aspects of the MLC database. The Copyright Office will also engage in education and outreach activities to inform the public of important changes under the law, including by educating songwriters and others about the process by which they may claim ownership of musical works in the MLC database and receive royalties for uses of these works. The Office will also conduct a policy study regarding best practices for the MLC.
Separately, the Copyright Royalty Judges have initiated a proceeding to determine the administrative assessment that digital music providers and any significant nonblanket licensees must pay to fund the operations of the MLC. The Copyright Office’s inquiry and process for designating the MLC and DLC was separate and without prejudice to the Copyright Royalty Judges’ administrative assessment proceeding.