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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations ARM retained them in their respective proposed statutory text.147 In light of these comments, the interim rule adopts this aspect of the proposed rule. As noted above, while the rule generally states that recipients of confidential information from the MLC or DLC shall not disclose such confidential information to anyone else except as expressly permitted in the Offices regulations, it creates 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.

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3. Interim RuleRestrictions on Use of Confidential Information In response to multiple commenters expressing concern about MLC vendors using the confidential information they acquire while conducting work for the MLC for other purposes,148 the proposed rule restricted MLC vendors from using confidential information for purposes other than for duties performed during the ordinary course of work for the MLC, including the administration of voluntary bundled licensing of performance and mechanical uses that the MLC itself is prohibited from administering.149 The proposed rule similarly restricted DLC
vendors.150 In issuing the proposed rule, the Office tentatively declined to adopt the MLCs proposal to preferentially allow users who submit confidential data to the MLC an ability to voluntarily opt in to share that data for general use by its primary royalty processing vendor, the Harry Fox Agency 147 See MLC NPRM Comment App. at v; DLC
NPRM Comment Add. at A4; ARM NPRM
Comment at 14.
148 See, e.g., National Association of Independent Songwriters NOIS et al. Initial NOI Comment at 16 The vendors for the MLC should not be . . .
able to use information and data that the MLC will gather and control to their competitive advantage.
If they are in competition with other entities considered to be similar in nature or can use the data to their own unique proprietary advantage, they should not be eligible to be selected as a vendor.; Lowery Reply NOI Comment at 12 If the Copyright Office does not prohibit HFA from selling for other commercial purposes the data it acquires through its engagement by MLC to facilitate the compulsory blanket license, the Congress will have just handed HFA a near insurmountable advantage over its competitors.;
see also DLC NPRM Comment at 2, U.S. Copyright Office Dkt. No. 20208, available at https
beta.regulations.gov/docket/COLC-2020-0006.
149 85 FR at 22565; see also 37 CFR 380.5b prohibiting SoundExchange from using any Confidential Information for any purpose other than royalty collection and distribution and activities related directly thereto.
150 85 FR at 22565.

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HFA, as the MLC did not detail what it meant by general use. 151
FMC and CISAC & BIEM support this aspect of the proposed rule, noting that vendors use of confidential information other than for duties performed during the ordinary course of work for the MLC
or DLC has the potential to increase the risk of anti-competitive harm and conflicts of interest.152 In a parallel rulemaking, the DLC, FMC, and SoundExchange emphasized the importance of MLC vendors not receiving preferential treatment or market advantage by virtue of their association with the MLC, with FMC
stating that Congress intended to encourage a healthy competitive marketplace for other kinds of licensing businesses and intermediaries, and its important that MLCs chosen vendors not be able to leverage their status with the MLC to advantage themselves in other business activities not covered under the MMA. 153
SoundExchange asserted that Congress intended to preserve a vibrant and competitive marketplace for intermediaries besides the MLC who provide other license administration services, and this intent would be frustrated if the MLCs vendors were to receive an unfair advantage in the music licensing marketplace through means such as preferred access to digital music providers or referrals by the MLC
for extrastatutory business opportunities in a manner not available to their competitors. 154 The DLC did not oppose this aspect of the proposed rule,155 and in a parallel rulemaking, 151 Id. quoting MLC Ex Parte Letter 1 at 4
citation omitted.
152 FMC NPRM Comment at 1 There should be no provision for HFA to use confidential data for general use, even on an opt-in basis. The risk of anti-competitive harm is too great.; CISAC &
BIEM NPRM Comment at 3 Our organisations support this Proposed Rulemaking because some Vendors may obtain commercially valuable information, use it for their own activities and thus create conflicts of interest..
153 FMC NRPM Comment at 12, U.S. Copyright Office Dkt. No. 20208, available at https
beta.regulations.gov/docket/COLC-2020-0006; see also id. at 2 The Office can require the MLC to disclose what it is doing to prevent any vendor from being too operationally enmeshed with the MLC
that it either enjoys an unfair advantage through that relationship, or that it would be practically impossible for another vendor to step in..
154 SoundExchange NRPM Comment at 8, U.S.
Copyright Office Dkt. No. 20208, available at https beta.regulations.gov/docket/COLC-20200006.
155 See DLC NPRM Comment Add. at A2; DLC
Ex Parte Letter 6 at 7. The DLC does propose an adjustment to the proposed rule to restrict its vendors from using confidential information to duties that are made the responsibility of the DLC, under 17 U.S.C. 115d5C, including efforts to enforce notice and payment obligations with respect to the administrative assessment. DLC Ex Parte Letter 6 at 7.

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expressed concern as to whether the MLCs selected vendors will gain a special competitive advantage in related marketplacessuch as the administration of voluntary licenses merely by dint of their association with the collective responsible for licensing all mechanical rights in the United States. 156
For its part, the MLC contends that this aspect of the proposed rule is overly prescriptive, imposes unnecessary burdens and costs on copyright owners, and is likely not within the scope of the Offices authority. 157 While the proposed rule would restrict only actions of the mechanical licensing collective, the MLC argues that the proposed rule prevents the MLCs copyright owner members from voluntarily electing to share their own information with the MLCs vendors, 158 and that copyright owners that wish to use the MLCs vendors for purposes other than the administration of the blanket license should not have to incur the time and expense to input duplicates of information that can be transferred voluntarily without any transaction costs. 159 NMPA echoes the MLCs position, maintaining that where a copyright owner provides to HFA its confidential information by virtue of HFAs role as administrator of the blanket license, it may make the most business sense and be most efficient to authorize HFA to use that information for the copyright owners other licenses. 160 NMPA also asserts that HFA gains no special advantage by receiving the same information one time rather than multiple times, but that copyright owners are decidedly disadvantaged in having to submit multiple but identical data sets. 161
As noted above, the MMA expressly directs the Office to adopt regulations to, among other things, prevent the improper use of confidential information contained in the mechanical licensing collectives records.162 The MMA also expressly restricts the mechanical licensing collective to administering the mechancial license,163 as the MLC
156 DLC NPRM Comment at 1, U.S. Copyright Office Dkt. No. 20208, available at https
beta.regulations.gov/docket/COLC-2020-0006.
157 MLC NPRM Comment at 13.
158 Id. at 4.
159 Id.
160 Id.
161 Id.
162 17 U.S.C. 115d12C.
163 Id. at 115d3Ciii limiting administration of voluntary licenses to only the reproduction or distribution rights in musical works for covered activities.

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