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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations
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acknowledges,164 and the legislative history reflects Congresss intention that this provision was critical to safeguard continued private competition outside of the MLCs administration of the blanket mechanical license.165 Given Congresss actions to preserve competition for music licensing vendors and the overwhelming concern from commenters that MLC vendors should not be able to gain commercial advantage due to its association with the MLC, the Office again declines to adopt the MLCs proposal to 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. 166
If the Office were to adopt the MLCs proposal, HFA would receive an advantage for non-mechanical business opportunities not granted to competitors i.e., confidential information for purposes other than the administration of the blanket license, 167 such as the administration of copyright owners other licenses 168 and preferential access and treatment i.e., data by virtue of HFAs role as administrator of 164 See MLC NOI Comment at 10, U.S. Copyright Office Dkt. No. 20208, available at https
www.regulations.gov/docketBrowser ?rpp=25&so=DESC&sb=comment DueDate&po=0&dct=PS&D=COLC-2020-0006
Because the MLC is prohibited from licensing rights other than mechanical rights, . . . the MLC
agrees with the Office that . . . it is unlikely to be prudent or frugal to require the MLC to expend resources to maintain in the public database PRO
affiliations for rights it is not permitted to license. citing 85 FR at 22576.
165 See also Senate Judiciary Comm., Executive Business Meeting, CSPAN, at 53:2453:59 June 28. 2018, https www.c-span.org/video/?447464-1/
judiciary statement of Sen. Cruz The problem is that there is already right now a functioning marketplace that is doing that there are many companies today that manage, collect, and distribute mechanical rights for digital music companies and this bill would put them all out of business. . . . The amendment that I filed, what it would do is open up blanket licenses to other entitiesto promote competition at a lower price.; Id. at 50:4150:55 statement of Sen.
Cornyn I did want to highlight one issue thats been brought to my attention. The creation of this mechanical licensing collective in the Copyright Officeand precludes any private entity from perhaps providing that same service.; Shirley Halperin, Music Modernization Act Stares Down Potential Snag, Variety July 23, 2018, https
variety.com/2018/music/news/musicmodernization-act-blackstone-sesac-congresssenate-1202881536/ describing issue as endangering prospects for MMA passage; Steve Brachmann, Compromise on Music Modernization Act Leads to Unconditional Support From Music Industry Organizations, IPWatchdog Aug. 18, 2018, https www.ipwatchdog.com/2018/08/18/
compromise-music-modernization-act-musicindustry-support/id=100162/ reporting resolution through amendment limiting the MLCs ability to administer voluntary licenses.
166 MLC Ex Parte Letter 1 at 4.
167 MLC NPRM Comment at 4.
168 NMPA NPRM Comment at 4.

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the blanket license, 169 and without any transaction costs 170. Allowing HFA to benefit from its association with the MLC for business opportunities outside the administration of the blanket license is precisely the scenario multiple commenters have warned against, and is in tension with Congresss deliberate decision to limit the scope of the mechanical licensing collective. Contrary to the MLC and NMPAs position, the Office is not preventing copyright owners from sending their information to a particular vendor; rather, the Office is preventing the MLC from providing its vendor with confidential information in a manner that results in disparate and preferential treatment.
The Office similarly rejects the MLCs proposed language stating that nothing herein shall preclude the party or parties to whom information is confidential from voluntarily transmitting such Confidential Information to a third party with lesser restrictions on use, and nothing herein shall preclude the MLC from assisting in any such voluntary transfer. 171 To the extent this language is suggested to clarify the ability of those outside the MLC to exchange information, the Office finds it unnecessary, and to the extent the language is intended to allow the MLC to facilitate exchange of otherwise confidential information to preferred entities for private use, it would seem to create an end-run around the limitations of the rule.
In the NPRM, the Office noticed a potential alternative to the MLCs proposal. The Office had considered whether to propose language requiring the MLC to offer such information equally to third parties, perhaps restricted to those offering or administering music licensing services, for a reasonable cost, i.e., both the MLCs preferred vendors and others similarly situated in the marketplace.172
The Office noted that this approach would have the potential benefit of leveraging the unique nature of the MLC
database in other aspects of the music ecosystem, without potentially affecting the competitive landscape in ways unrelated to the section 115 license.173
The MLC and NMPA, however, did not respond regarding this proposed alternative.
After careful consideration, the interim rule adopts this aspect of the proposed rule, with the following slight 169 Id.
170 MLC

NPRM Comment at 4.
NPRM Comment App. at iii.
172 85 FR at 22565.
173 Id.
171 MLC

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modifications. The Office adjusted the interim rule so that instead of stating the MLC shall not use any Confidential Information for any purpose other than determining compliance with statutory license requirements, royalty calculation, collection, matching, and distribution, and activities related directly thereto, it states that the MLC
shall not use any Confidential Information for any purpose other than the collectives authorized functions under 17 U.S.C. 115d and activities related directly thereto. 174 Anyone to whom the MLC discloses confidential information as permitted under the regulations shall not use any confidential information for any purpose other than in performing their duties during the ordinary course of their work for the mechanical licensing collective, 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. For parity, the interim rule adopts similar language with respect to the DLC and its authorized functions under 17 U.S.C. 115d5C.175
C. Safeguarding Confidential Information Both the MLC and DLC proposed having the MLC and DLC implement policies and procedures to prevent unauthorized access and/or use of confidential information, an approach that seems necessary to effectuate the intent of the regulations.176
Accordingly, the proposed rule stated that the MLC, DLC, and recipients of confidential information from one of those entities must implement procedures to safeguard against 174 See MLC NPRM Comment at 10 The MLC
proposes, at a minimum, clarifying the Proposed Regulation to ensure that the MLC can conduct the statutory functions charged by Congress..
175 The Office adjusted the interim rule to align with the DLCs responsibilities under section 115.
See DLC NPRM Comment at 78.
176 MLC Initial NOI Comment at 29 stating protection of such confidential, private, proprietary or privileged information may be accomplished through a regulation that requires the MLC and the DLC to implement confidentiality policies that prevent improper or unauthorized use of such material by their directors, committee members, and personnel; DLC Reply NOI
Comment Add. at A2122 proposing that the MLC
and DLC and any person authorized to receive confidential information must implement procedures to safeguard against unauthorized access to or dissemination of Confidential Information using a reasonable standard of care, but no less than the same degree of security that the recipient uses to protect its own Confidential Information or similarly sensitive information.

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