Comment Period on Regulations Relating to Mechanical Licensing Collective Created by the Music Modernization Act

Intellectual Property Alert | March.27.2019

On March 13, 2019, the Copyright Royalty Judges issued regulations regarding the procedures for determination and allocation of assessments to fund the mechanical licensing collective and other amendments required by the MMA. The CRJs seek comments on those regulations, and parties wishing to submit such comments must do so by April 12, 2019.

Background:

The Orrin G. Hatch-Bob Goodlatte Music Modernization Act (the “MMA”) made sweeping changes to the digital music licensing landscape. On November 5, 2016, the Copyright Royalty Judges (CRJs) published a Notice of Inquiry seeking recommendations regarding regulatory modifications that must or should be made to effectuate certain terms of the MMA. After reviewing the comments submitted by industry stakeholders, the CRJs issued proposed regulations on March 13, 2019.

Music Licensing Collective and Administrative Assessment:

Title I of the MMA amended the Copyright Act, replacing the existing song-by-song compulsory “mechanical” license structure applicable to on-demand music streaming services with a blanket licensing system. To effectuate that system, the MMA also establishes a “mechanical licensing collective” (the “MLC”), a nonprofit entity which will administer the license by collecting and distributing royalties. The MLC will also be responsible for maintaining a public database of information regarding musical works and the ownership in those works and related sound recordings. The MLC’s operations will be funded by digital music providers through voluntary contributions and an administrative assessment, to be established by CRJs. If the amount of the administrative assessment cannot be set by agreement among stakeholders, that amount will be set in proceedings before the CRJs. The first such proceeding must commence within 270 days of the effective date of the MMA. The MMA authorizes the judges to adjust existing regulations and make new regulations to address the creation of the MLC and the proceedings to set the administrative assessment.

The regulations address, among other considerations, the timing and scheduling of administrative assessment procedures, the scope of discovery and the use of experts in such procedures, and the extent to which parties to the administrative assessment proceedings may seek and submit evidence in opposition to or support of a proposed initial assessment. The CRJs specifically seek comments on these procedural regulations.

Pre-1972 Sound Recordings:

Title II of the MMA made changes relating to the treatment of sound recordings fixed before February 15, 1972, granting those recordings quasi-copyright protection.

The CRJs request for comment addressed proposed regulatory language which would expand the scope of the defined term “copyright owners” in the relevant regulations to include rightsholders in pre-1972 sound recordings and make corresponding changes throughout the regulations. The CRJs have asked for “detailed comment on, and alternatives to” this proposal. Similarly, the CRJs seek comment on the proposal to adjust statutory royalty payments by satellite radio services (SDARS) to reflect the use of pre-1972 sound recordings and adjust related statutory definitions.

Takeaway:

Digital music services that may be subject to the administrative assessment created by the MMA, or SDARs that wish to utilize pre-72 sound recordings should consider to what extent the proposed regulations may impact them, and may want to submit comment to the CRJs before those regulations become final. If you would like to assess how any of these proposed regulatory changes may impact your business, and whether it is wise to file a comment, please contact the authors of this client alert.