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Federal Register / Vol. 86, No. 42 / Friday, March 5, 2021 / Rules and Regulations collective MLC designated by the Copyright Office the Office. Digital music providers DMPs are able to obtain the new compulsory blanket license to make digital phonorecord deliveries DPDs of musical works, including in the form of permanent downloads, limited downloads, or interactive streams referred to in the statute as covered activity where such activity qualifies for a compulsory license, subject to compliance with various requirements, including reporting obligations.2 DMPs may also continue to engage in those activities solely through voluntary, or direct, licensing with copyright owners, in which case the DMP may be considered a significant nonblanket licensee SNBL under the statute, subject to separate reporting obligations.
On September 17, 2020, the Office issued an interim rule adopting regulations concerning certain types of reporting required under the statute after the license availability date:
notices of license and reports of usage by DMPs, and notices of nonblanket activity and reports of usage by SNBLs the September 2020 rule.3 Those interim regulations include requirements to report certain information about certain permanent download licenses.4 They were adopted to help ensure that the MLC receives sufficient information to be able to fulfill its statutory obligations, including under section 115d3GiIbb, and to effectuate the reporting requirements of section 115d4AiiII.
After the adoption of these rules, which involved multiple rounds of public comments through a notification of inquiry,5 notice of proposed rulemaking,6 and an ex parte communications process,7 the DLC
raised a new concern with respect to the applicability of these particular reporting provisions to pass-through
licenses for permanent downloads.8 The DLC explained that all DMPs operating download stores operate exclusively under so-called passthrough licenses received from record labels, where the label obtains the mechanical licenses from musical work copyright owners and then authorizes downstream distributors to make and distribute permanent downloads. 9 The Office notes that this focus on permanent downloads reflects that the scope of pass-through licensing under section 115 was diminished under the MMA, which eliminated the ability of record labels to pass-through section 115 licenses for streaming or limited downloads.10
The underlying mechanical license pursuant to which the DMP has been given authority for permanent downloads by a record label can be either compulsory or voluntary. Under the MMA, the compulsory version is defined as an individual download license, which is a compulsory license obtained by a record company to make and distribute, or authorize the making and distribution of, permanent downloads embodying a specific individual musical work. 11 The noncompulsory version a voluntary passthrough license does not appear to be directly addressed by the MMA, but in general the MMA provides for preexisting voluntary licenses to remain in effect after the blanket license availability date.12
The DLC raised the concern that the relevant reporting requirements set forth in the September 2020 rule require DMPs and SNBLs operating under the authority of pass-through licenses to report certain information about such licenses, including identification and contact information for relevant musical 8 See
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2 As
permitted under the MMA, the Office designated a digital licensee coordinator DLC to represent licensees in proceedings before the Copyright Royalty Judges CRJs and the Office, to serve as a non-voting member of the MLC, and to carry out other functions. 17 U.S.C. 115d5B;
84 FR 32274 July 8, 2019; see also 17 U.S.C.
115d3DiIV, d5C.
3 85 FR 58114 Sept. 17, 2020.
4 37 CFR 210.24b8, 210.25b6, 210.27c5, 210.28c5.
5 84 FR 49966 Sept. 24, 2019.
6 85 FR 22518 Apr. 22, 2020.
7 Guidelines for ex parte communications, along with records of such communications, including those referenced herein, are available at https
www.copyright.gov/rulemaking/mmaimplementation/ex-parte-communications.html. All rulemaking activity, including public comments, as well as educational material regarding the Music Modernization Act, can currently be accessed via navigation from https www.copyright.gov/musicmodernization/.

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DLC Ex Parte Letter at 47 Nov. 10, 2020.
at 4.
10 See H.R. Rep. No. 115651, at 4 2018
Subsection b3 maintains the pass-through license for record labels to obtain and pass through mechanical license rights for individual permanent downloads. Under the Music Modernization Act, a record label will no longer be eligible to obtain and pass through a Section 115 license to a digital music provider to engage in activities related to interactive streams or limited downloads.; S. Rep.
No. 115339, at 4 2018; Report and Section-bySection Analysis of H.R. 1551 by the Chairmen and Ranking Members of Senate and House Judiciary Committees, at 3 2018, https www.copyright.gov/
legislation/mma/_conference_report.pdf Conf.Rep.; U.S. Copyright Office, Copyright and the Music Marketplace at 2728 2015, https
www.copyright.gov/policy/musiclicensingstudy/
copyright-and-the-music-marketplace.pdf describing previous pass-through licensing practices.
11 17 U.S.C. 115e12.
12 See id. at 115d9C.
9 Id.

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work copyright owners, that they do not have.13 The DLC stated that:
This information is not provided by record labels to download stores through existing reporting mechanisms . . . and for this to occur would require record labels and digital music providers to invest resources to build entirely new systems. The reality is that services are not likely to make those investments, especially because purchases of permanent downloads, while still significant, are declining. It is far more likely that download stores would simply cease operations.14

The DLC submitted proposed regulatory amendments to address their concerns, to which the MLC did not object.15 The MLC and DLC agreed that allowing the existing rules to go into effect without alteration would cause market disruption for permanent download offerings. 16
In response, on December 28, 2020, the Office issued a supplemental interim rule with request for comments the December 2020 rule.17 In the December 2020 rule, the Office tentatively agreed that the issue needed to be addressed and noticed the matter for public comment. It adjusted the September 2020 rule, effective immediately, to prevent the potential market disruption that the MLC and DLC were concerned about while the Office solicited comments and continued to consider how best to proceed with respect to the issue.
Specifically, the December 2020 rule created a temporary exception to the previously adopted reporting requirements with respect to individual download licenses and voluntary passthrough licenses, such that the failure to report information about these licenses will not otherwise impact a DMPs or SNBLs compliance with their various requirements under the MMA and the Offices related regulations e.g., the MLC cannot use the failure to provide that particular information as a basis to reject an otherwise compliant notice of license or serve a notice of default on an otherwise compliant blanket licensee.
The December 2020 rule further provided that after the temporary exception is no longer in effect, the MLC
can take action against a DMP or SNBL
who benefitted from the exception if any amended reporting requirements adopted by the Office are not complied with by the DMP or SNBL within 45
days after their effective date or an alternate date subsequently adopted by 13 DLC

Ex Parte Letter at 46 Nov. 10, 2020.
at 56.
15 DLC & MLC Ex Parte Letter at 4, add. B Dec.
9, 2020.
16 Id. at 4.
17 85 FR 84243 Dec. 28, 2020.
14 Id.

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