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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations confidentiality agreement, and Confidential Information may be withheld from such members only in those instances in which it is demonstrably unnecessary for such persons to know such information in the course of carrying out their duties for the MLC. 130
i. Disclosure of Confidential Information to Mechanical Licensing Collective and Digital Licensee Coordinator Persons and Entities After carefully considering these comments, the Office concludes that taking a more conservative approach to new issues presented in this rulemaking regarding the protection of sensitive financial or business information disclosed by digital music providers, significant non-blanket licensees, and copyright owners or any of their authorized agents or vendors to the mechanical licensing collective or digital licensee coordinator is appropriate. Although the MLC
advocates for a generally more open approach than the DLC, both entities acknowledge that improper disclosure of confidential information could be harmful.131 It is not apparent that the MLCs board of directors must access DMP-specific confidential information in order to generally supervise and manage the business and affairs of the Collective; 132 as also raised by the MLC, the Office is mindful of the need to control, and ensure against, unfettered dissemination of confidential or competitively sensitive information. 133 The Office is inclined to agree with the DLC that although the MLCs officers should be overseen by the MLCs board of directors, the officers should be able to operate generally independently on a day-to-day basis, including when considering information that would be competitively sensitive if disclosed to MLC
directors.134 As noted above, the interim rule adopts the MLCs proposal of excluding from the meaning of confidential information any top-level compilation data presented in anonymized format that does not allow
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130 SGA

& SCL NPRM Comment at 2.
131 See DLC Ex Parte Letter 6 at 6; MLC NPRM
Comment at 5, 15.
132 See The MLC, The MLC Bylaws, https
themlc.com/sites/default/files/2020-05/
Bylaws%20of%20The%20MLC.pdf last visited Feb. 6, 2021.
133 MLC NPRM Comment at 15.
134 See 17 U.S.C. 115d3Dviii; Conf. Rep. at 4 To ensure that the MLCs officers are independent, individuals serving as officers of the collective may not, at the same time, also be an employee or agent of any member of the collectives Board of Directors or any entity represented by a member of the collectives Board of Directors..

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identification of such data as belonging to any digital music provider, significant nonblanket licensee, or copyright owner.135 Accordingly, members of the MLCs board of directors and committees will still receive aggregated data to know how the blanket license is functioning and whether remedial actions may be necessary e.g., the collectives matching rates and distribution times, royalty collection and distribution, budgeting and expenditures, aggregated royalty receipts and payments. As to the MLCs examples for which it proposes that access to DMP-specific confidential information would be necessary i.e., whether to audit, notice a default, or take other action against a DMP, the Office expects that the collective would be able to notify the MLCs board of directors of such situations without needing to disclose granular details regarding the DMPs sensitive financial or business information. To the extent future developments challenge this assumption, the Office believes the more prudent approach is to consider whether easing of restrictions is appropriate, as opposed to tightening up disclosure rules after the fact. Once the MLC has progressed in its administration of the blanket license, if there are concrete, specific examples of situations where members of the MLC or DLC boards or committees find themselves requiring access to certain information to fulfill their duties but are prohibited such access under the interim rule, the Office will consider adjustment of its regulations.
Against this backdrop, the interim rule takes the following approach. The mechanical licensing collective shall limit disclosure of confidential information to its employees, agents, consultants, vendors, and independent contractors who are engaged in the collectives authorized functions under 17 U.S.C. 115d and activities related directly thereto and who require access to confidential information for the purpose of performing their duties during the ordinary course of their work for the mechanical licensing collective, subject to an appropriate written confidentiality agreement.136 In 135 See
MLC Initial NOI Comment at 30.
MLC Ex Parte Letter 9 at 5 proposing general approach. The Office also adjusted some provisions of the interim rule to focus on disclosure rather than receipt of information, as the MLC
requested. See MLC NPRM Comment at 3 A
regulation governing the treatment of confidential information, like a confidentiality or nondisclosure agreement, should regulate disclosure, not receipt, of such information, as the party disclosing the information is in the best position to control dissemination of, and to protect, confidential information . . . ..
136 See
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response to the MLCs concern regarding the phrase only when necessary to carry out their duties being interpreted to require vendors or contractors to use an alternate procedure to perform work without using confidential information if possible even where it would be highly inefficient and costly, the Office changed the language to read require access to Confidential Information for the purpose of performing their duties. 137 The interim rule includes this language because not all employees, agents, consultants, vendors, and independent contractors of the MLC and DLC will need access to confidential information or the same types of confidential information to perform their jobs e.g., receptionists answering telephones for the MLCs office.138
For the reasons discussed, the interim rule precludes the mechanical licensing collective from disclosing confidential information to members of its board of directors or committees, including the collectives Unclaimed Royalties Oversight Committee, or the DLCs board of directors or committees.
Recipients of confidential information from the MLC shall not disclose such confidential information to anyone else except as expressly permitted in the Offices regulations, with an exception for qualified auditors or outside counsel conducting statutorily-permitted audits, or attorneys and other authorized agents of parties to proceedings before federal courts, the Copyright Office, or the Copyright Royalty Judges, or when such disclosure is required by court order or subpoena discussed below.
For parity, the interim rule states that the digital licensee coordinator shall limit disclosure of confidential information to its employees, agents, consultants, vendors, and independent contractors who are engaged in the digital licensee coordinators authorized functions under 17 U.S.C. 115d5C
and activities related directly thereto, and require access to confidential information for the purpose of performing their duties during the 137 See 37 CFR 380.5c1 requiring SoundExchange to limit access to confidential information to employees, agents, consultants, and independent contractors of the Collective, subject to an appropriate written confidentiality agreement, who are engaged in the collection and distribution of royalty payments hereunder and activities related directly thereto who require access to the Confidential Information for the purpose of performing their duties during the ordinary course of their work; id. at 380.24d1 similar; id. at 380.34d1 similar.
138 As discussed below, regarding disclosure of MLC Internal Information, the Office made similar adjustments with respect to receipt of such information by parties performing work for the DLC.

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