Reporting and Distribution of Royalties to Copyright Owners by the Mechanical Licensing Collective

Pursuant to the Musical Works Modernization Act, title I of the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (MMA), the Copyright Office has issued an interim rule regarding the obligations of the mechanical licensing collective (MLC) to report and distribute royalties paid by digital music providers under the blanket license to make and distribute digital phonorecord deliveries of musical works to musical work copyright owners.

After soliciting public comments through a notification of inquiry and notice of proposed rulemaking, and engaging in clarifying ex parte communications with commenters as documented here, the Office is issuing an interim rule regarding requirements under which the MLC will be required to distribute royalties on a monthly basis along with a statement providing a detailed account of all royalties. Royalty distributions and statements will include those royalties that were matched upon receipt of reports of usage from digital music providers, accrued royalties that were matched as part of the MLC’s ongoing matching efforts, and any adjustments to prior reported royalties.

The rule addresses the information that the MLC is required to report in statements, as well as the format and delivery of such statements and related distribution payments. Under the interim rule, statements will be delivered to copyright owners electronically, with the option to request paper statements in a simplified or summary format. The rule also proposes thresholds by which the MLC is required to distribute royalties, depending on the method of payment the copyright owner has elected (i.e., $5 for direct deposit, $100 for paper checks, and $250 for wire transfers).

The rule does not address the distribution of unmatched royalties after the prescribed holding period, which the Copyright Office will separately address, including through an ongoing policy study. As previously noted by the Office, in no case can unclaimed royalties be distributed before January 1, 2023. 17 U.S.C. § 115(d)(3)(J)(i)(I).

The interim rule becomes effective October 19, 2020.