Termination Rights and the Music Modernization Act

The U.S. Copyright Office has proposed a rule regarding the applicability of the derivative works exception to termination rights under the Copyright Act to the statutory blanket mechanical license established under the Music Modernization Act (MMA). The proposed rule also addresses the Mechanical Licensing Collective’s (MLC’s) “Notice and Dispute Policy: Statutory Terminations,” which established policies related to disputes involving a statutory termination involving works whose royalties are administered by the MLC.

The Copyright Act permits authors or their heirs, under certain circumstances and within certain windows of time, to terminate copyright grants, including transfers or licenses. This rule is subject to an exception that allows derivative works prepared under the authority of a grant before its termination to continue to be utilized under the terms of the grant after its termination (the “Exception”).

The Office believes that songwriters, music publishers, and the MLC would benefit from guidance regarding the appropriate application of the Exception in the context of the mechanical blanket license. This subject is ripe for the Office to provide such guidance, as few federal court cases have interpreted the Exception, all such cases have predated the MMA, and no case has dealt directly with the application of the Exception to a statutory license.

The Office’s rule intends to clarify that the appropriate payee under the mechanical blanket license to whom the MLC must distribute royalties in connection with a statutory termination is the copyright owner at the time the work is used.

Initial written comments were due December 1, 2022. Written reply comments were due January 5, 2023.