Transition Period Cumulative Reporting and Transfer of Royalties to the Mechanical Licensing Collective

Pursuant to the Musical Works Modernization Act, title I of the Music Modernization Act (MMA), the U.S. Copyright Office is proposing to amend its regulations pertaining to cumulative statements of account required to be submitted by digital music providers to the mechanical licensing collective, for such providers to qualify for the statutory limitation on liability for unlicensed uses of musical works prior to the license availability date.

The MMA includes a limitation on liability for digital music providers engaging in covered activities (e.g., permanent downloads, limited downloads, or interactive streams) prior to January 1, 2021, subject to certain conditions. Qualifying digital music providers must engage in good faith, commercially reasonable efforts to locate, identify, and pay musical work copyright owners for covered uses of their works and must accrue and hold royalties for unmatched uses of musical works. If a musical work copyright owner remains unidentified as of January 1, 2021, the digital music provider must transfer all accrued royalties to the mechanical licensing collective (MLC) along with a cumulative statement of account. The MLC can use information contained in those cumulative statements of account to engage in additional matching efforts to identify and locate musical work copyright owners entitled to royalties for uses of their works.

The Office previously made a technical implementation of the MMA to conform its regulations to account for new statutory requirements, including for cumulative statements of account. As part of its ongoing efforts to implement the MMA, the Office provided additional opportunities for the public to comment on these regulations in response to a notification of inquiry and a notice of proposed rulemaking. Following consideration of these comments, separate comments related to ongoing monthly reporting by digital music providers, and further comments made through several ex parte meetings, the Office now notices an alternate approach to requirements concerning the content of cumulative statements of account to be submitted by digital music providers to the MLC at the conclusion of the statutory transition period and proposes estimate and adjustment provisions with respect to payment of accrued royalties to the MLC in connection with this reporting.

Although the Office has not made any final conclusions on these matters, it has determined that the public process would benefit from noticing supplemental, alternative regulatory language, to ensure that further stakeholder views can be duly considered as the Office evaluates these important issues.

Written comments were due November 25, 2020.