(B)
Designation of mechanical licensing collective.—
(i)
Initial designation.—
Not later than 270 days after the enactment date, the Register of Copyrights shall initially designate the mechanical licensing collective as follows:
(I)
Not later than 90 calendar days after the enactment date, the Register shall publish notice in the Federal Register soliciting information to assist in identifying the appropriate entity to serve as the mechanical licensing collective, including the name and affiliation of each member of the board of directors described under subparagraph (D)(i) and each committee established pursuant to clauses (iii), (iv), and (v) of subparagraph (D).
(II)
After reviewing the information requested under subclause (I) and making a designation, the Register shall publish notice in the Federal Register setting forth—
(aa)
the identity of and contact information for the mechanical licensing collective; and
(bb)
the reasons for the designation.
(ii)
Periodic review of designation.—
Following the initial designation of the mechanical licensing collective, the Register shall, every 5 years, beginning with the fifth full calendar year to commence after the initial designation, publish notice in the Federal Register in the month of January soliciting information concerning whether the existing designation should be continued, or a different entity meeting the criteria described in clauses (i) through (iii) of subparagraph (A) shall be designated. Following publication of such notice, the Register shall—
(I)
after reviewing the information submitted and conducting additional proceedings as appropriate, publish notice in the Federal Register of a continuing designation or new designation of the mechanical licensing collective, as the case may be, and the reasons for such a designation, with any new designation to be effective as of the first day of a month that is not less than 6 months and not longer than 9 months after the date on which the Register publishes the notice, as specified by the Register; and
(II)
if a new entity is designated as the mechanical licensing collective, adopt regulations to govern the transfer of licenses, funds, records, data, and administrative responsibilities from the existing mechanical licensing collective to the new entity.
(iii)
Closest alternative designation.—
If the Register is unable to identify an entity that fulfills each of the qualifications set forth in clauses (i) through (iii) of subparagraph (A), the Register shall designate the entity that most nearly fulfills such qualifications for purposes of carrying out the responsibilities of the mechanical licensing collective.
(C)
Authorities and functions.—
(i)
In general.—
The mechanical licensing collective is authorized to perform the following functions, subject to more particular requirements as described in this subsection:
(I)
Offer and administer blanket licenses, including receipt of notices of license and reports of usage from digital music providers.
(II)
Collect and distribute royalties from digital music providers for covered activities.
(III)
Engage in efforts to identify musical works (and shares of such works) embodied in particular sound recordings, and to identify and locate the copyright owners of such musical works (and shares of such works).
(IV)
Maintain the musical works database and other information relevant to the administration of licensing activities under this section.
(V)
Administer a process by which copyright owners can claim ownership of musical works (and shares of such works), and a process by which royalties for works for which the owner is not identified or located are equitably distributed to known copyright owners.
(VI)
Administer collections of the administrative assessment from digital music providers and significant nonblanket licensees, including receipt of notices of nonblanket activity.
(VII)
Invest in relevant resources, and arrange for services of outside vendors and others, to support the activities of the mechanical licensing collective.
(VIII)
Engage in legal and other efforts to enforce rights and obligations under this subsection, including by filing bankruptcy proofs of claims for amounts owed under licenses, and acting in coordination with the digital licensee coordinator.
(IX)
Initiate and participate in proceedings before the Copyright Royalty Judges to establish the administrative assessment under this subsection.
(X)
Initiate and participate in proceedings before the Copyright Office with respect to activities under this subsection.
(XI)
Gather and provide documentation for use in proceedings before the Copyright Royalty Judges to set rates and terms under this section.
(XII)
Maintain records of the activities of the mechanical licensing collective and engage in and respond to audits described in this subsection.
(XIII)
Engage in such other activities as may be necessary or appropriate to fulfill the responsibilities of the mechanical licensing collective under this subsection.
(ii)
Restrictions concerning licensing and administrative activities.—
With respect to the administration of licenses, except as provided in clauses (i) and (iii) and subparagraph (E)(v), the mechanical licensing collective may only—
(I)
issue blanket licenses pursuant to subsection (d)(1); and
(II)
administer blanket licenses for reproduction or distribution rights in musical works for covered activities, including collecting and distributing royalties, pursuant to blanket licenses.
(iii)
Additional administrative activities.—
Subject to paragraph (11)(C), the mechanical licensing collective may also administer, including by collecting and distributing royalties, voluntary licenses issued by, or individual download licenses obtained from, copyright owners only for reproduction or distribution rights in musical works for covered activities, for which the mechanical licensing collective shall charge reasonable fees for such services.
(iv)
Restriction on lobbying.—
The mechanical licensing collective may not engage in government lobbying activities, but may engage in the activities described in subclauses (IX), (X), and (XI) of clause (i).
(D)
Governance.—
(i)
Board of directors.—
The mechanical licensing collective shall have a board of directors consisting of 14 voting members and 3 nonvoting members, as follows:
(I)
Ten voting members shall be representatives of music publishers—
(aa)
to which songwriters have assigned exclusive rights of reproduction and distribution of musical works with respect to covered activities; and
(bb)
none of which may be owned by, or under common control with, any other board member.
(II)
Four voting members shall be professional songwriters who have retained and exercise exclusive rights of reproduction and distribution with respect to covered activities with respect to musical works they have authored.
(III)
One nonvoting member shall be a representative of the nonprofit trade association of music publishers that represents the greatest percentage of the licensor market for uses of musical works in covered activities, as measured for the 3-year period preceding the date on which the member is appointed.
(IV)
One nonvoting member shall be a representative of the digital licensee coordinator, provided that a digital licensee coordinator has been designated pursuant to paragraph (5)(B). Otherwise, the nonvoting member shall be the nonprofit trade association of digital licensees that represents the greatest percentage of the licensee market for uses of musical works in covered activities, as measured over the preceding 3 full calendar years.
(V)
One nonvoting member shall be a representative of a nationally recognized nonprofit trade association whose primary mission is advocacy on behalf of songwriters in the United States.
(ii)
Bylaws.—
(I)
Establishment.—
Not later than 1 year after the date on which the mechanical licensing collective is initially designated by the Register of Copyrights under subparagraph (B)(i), the collective shall establish bylaws to determine issues relating to the governance of the collective, including, but not limited to—
(aa)
the length of the term for each member of the board of directors;
(bb)
the staggering of the terms of the members of the board of directors;
(cc)
a process for filling a seat on the board of directors that is vacated before the end of the term with respect to that seat;
(dd)
a process for electing a member to the board of directors; and
(ee)
a management structure for daily operation of the collective.
(II)
Public availability.—
The mechanical licensing collective shall make the bylaws established under subclause (I) available to the public.
(iii)
Board meetings.—
The board of directors shall meet not less frequently than biannually and discuss matters pertinent to the operations of the mechanical licensing collective, including the mechanical licensing collective budget.
(iv)
Operations advisory committee.—
The board of directors of the mechanical licensing collective shall establish an operations advisory committee consisting of not fewer than 6 members to make recommendations to the board of directors concerning the operations of the mechanical licensing collective, including the efficient investment in and deployment of information technology and data resources. Such committee shall have an equal number of members of the committee who are—
(I)
musical work copyright owners who are appointed by the board of directors of the mechanical licensing collective; and
(II)
representatives of digital music providers who are appointed by the digital licensee coordinator.
(v)
Unclaimed royalties oversight committee.—
The board of directors of the mechanical licensing collective shall establish and appoint an unclaimed royalties oversight committee consisting of 10 members, 5 of which shall be musical work copyright owners and 5 of which shall be professional songwriters whose works are used in covered activities.
(vi)
Dispute resolution committee.—
The board of directors of the mechanical licensing collective shall establish and appoint a dispute resolution committee that shall—
(I)
consist of not fewer than 6 members; and
(II)
include an equal number of representatives of musical work copyright owners and professional songwriters.
(vii)
Mechanical licensing collective annual report.—
(I)
In general.—
Not later than June 30 of each year commencing after the license availability date, the mechanical licensing collective shall post, and make available online for a period of not less than 3 years, an annual report that sets forth information regarding—
(aa)
the operational and licensing practices of the collective;
(bb)
how royalties are collected and distributed;
(cc)
budgeting and expenditures;
(dd)
the collective total costs for the preceding calendar year;
(ee)
the projected annual mechanical licensing collective budget;
(ff)
aggregated royalty receipts and payments;
(gg)
expenses that are more than 10 percent of the annual mechanical licensing collective budget; and
(hh)
the efforts of the collective to locate and identify copyright owners of unmatched musical works (and shares of works).
(II)
Submission.—
On the date on which the mechanical licensing collective posts each report required under subclause (I), the collective shall provide a copy of the report to the Register of Copyrights.
(viii)
Independent officers.—
An individual serving as an officer of the mechanical licensing collective may not, at the same time, also be an employee or agent of any member of the board of directors of the collective or any entity represented by a member of the board of directors, as described in clause (i).
(ix)
Oversight and accountability.—
(I)
In general.—
The mechanical licensing collective shall—
(aa)
ensure that the policies and practices of the collective are transparent and accountable;
(bb)
identify a point of contact for publisher inquiries and complaints with timely redress; and
(cc)
establish an anti-comingling policy for funds not collected under this section and royalties collected under this section.
(II)
Audits.—
(aa)
In general.—
Beginning in the fourth full calendar year that begins after the initial designation of the mechanical licensing collective by the Register of Copyrights under subparagraph (B)(i), and in every fifth calendar year thereafter, the collective shall retain a qualified auditor that shall—
(AA)
examine the books, records, and operations of the collective;
(BB)
prepare a report for the board of directors of the collective with respect to the matters described in item (bb); and
(CC)
not later than December 31 of the year in which the qualified auditor is retained, deliver the report described in subitem (BB) to the board of directors of the collective.
(bb)
Matters addressed.—
Each report prepared under item (aa) shall address the implementation and efficacy of procedures of the mechanical licensing collective—
(AA)
for the receipt, handling, and distribution of royalty funds, including any amounts held as unclaimed royalties;
(BB)
to guard against fraud, abuse, waste, and the unreasonable use of funds; and
(CC)
to protect the confidentiality of financial, proprietary, and other sensitive information.
(cc)
Public availability.—
With respect to each report prepared under item (aa), the mechanical licensing collective shall—
(AA)
submit the report to the Register of Copyrights; and
(BB)
make the report available to the public.
(E)
Musical works database.—
(i)
Establishment and maintenance of database.—
The mechanical licensing collective shall establish and maintain a database containing information relating to musical works (and shares of such works) and, to the extent known, the identity and location of the copyright owners of such works (and shares thereof) and the sound recordings in which the musical works are embodied. In furtherance of maintaining such database, the mechanical licensing collective shall engage in efforts to identify the musical works embodied in particular sound recordings, as well as to identify and locate the copyright owners of such works (and shares thereof), and update such data as appropriate.
(ii)
Matched works.—
With respect to musical works (and shares thereof) that have been matched to copyright owners, the musical works database shall include—
(I)
the title of the musical work;
(II)
the copyright owner of the work (or share thereof), and the ownership percentage of that owner;
(III)
contact information for such copyright owner;
(IV)
to the extent reasonably available to the mechanical licensing collective—
(aa)
the international standard musical work code for the work; and
(bb)
identifying information for sound recordings in which the musical work is embodied, including the name of the sound recording, featured artist, sound recording copyright owner, producer, international standard recording code, and other information commonly used to assist in associating sound recordings with musical works; and
(V)
such other information as the Register of Copyrights may prescribe by regulation.
(iii)
Unmatched works.—
With respect to unmatched musical works (and shares of works) in the database, the musical works database shall include—
(I)
to the extent reasonably available to the mechanical licensing collective—
(aa)
the title of the musical work;
(bb)
the ownership percentage for which an owner has not been identified;
(cc)
if a copyright owner has been identified but not located, the identity of such owner and the ownership percentage of that owner;
(dd)
identifying information for sound recordings in which the work is embodied, including sound recording name, featured artist, sound recording copyright owner, producer, international standard recording code, and other information commonly used to assist in associating sound recordings with musical works; and
(ee)
any additional information reported to the mechanical licensing collective that may assist in identifying the work; and
(II)
such other information relating to the identity and ownership of musical works (and shares of such works) as the Register of Copyrights may prescribe by regulation.
(iv)
Sound recording information.—
Each musical work copyright owner with any musical work listed in the musical works database shall engage in commercially reasonable efforts to deliver to the mechanical licensing collective, including for use in the musical works database, to the extent such information is not then available in the database, information regarding the names of the sound recordings in which that copyright owner’s musical works (or shares thereof) are embodied, to the extent practicable.
(v)
Accessibility of database.—
The musical works database shall be made available to members of the public in a searchable, online format, free of charge. The mechanical licensing collective shall make such database available in a bulk, machine-readable format, through a widely available software application, to the following entities:
(I)
Digital music providers operating under the authority of valid notices of license, free of charge.
(II)
Significant nonblanket licensees in compliance with their obligations under paragraph (6), free of charge.
(III)
Authorized vendors of the entities described in subclauses (I) and (II), free of charge.
(IV)
The Register of Copyrights, free of charge (but the Register shall not treat such database or any information therein as a Government record).
(V)
Any other person or entity for a fee not to exceed the marginal cost to the mechanical licensing collective of providing the database to such person or entity.
(vi)
Additional requirements.—
The Register of Copyrights shall establish requirements by regulations to ensure the usability, interoperability, and usage restrictions of the musical works database.
(G)
Collection and distribution of royalties.—
(i)
In general.—
Upon receiving reports of usage and payments of royalties from digital music providers for covered activities, the mechanical licensing collective shall—
(I)
engage in efforts to—
(aa)
identify the musical works embodied in sound recordings reflected in such reports, and the copyright owners of such musical works (and shares thereof);
(bb)
confirm uses of musical works subject to voluntary licenses and individual download licenses, and the corresponding pro rata amounts to be deducted from royalties that would otherwise be due under the blanket license; and
(cc)
confirm proper payment of royalties due;
(II)
distribute royalties to copyright owners in accordance with the usage and other information contained in such reports, as well as the ownership and other information contained in the records of the collective; and
(III)
deposit into an interest-bearing account, as provided in subparagraph (H)(ii), royalties that cannot be distributed due to—
(aa)
an inability to identify or locate a copyright owner of a musical work (or share thereof); or
(bb)
a pending dispute before the dispute resolution committee of the mechanical licensing collective.
(ii)
Other collection efforts.—
Any royalties recovered by the mechanical licensing collective as a result of efforts to enforce rights or obligations under a blanket license, including through a bankruptcy proceeding or other legal action, shall be distributed to copyright owners based on available usage information and in accordance with the procedures described in subclauses (I) and (II) of clause (i), on a pro rata basis in proportion to the overall percentage recovery of the total royalties owed, with any pro rata share of royalties that cannot be distributed deposited in an interest-bearing account as provided in subparagraph (H)(ii).
(J)
Distribution of unclaimed accrued royalties.—
(i)
Distribution procedures.—
After the expiration of the prescribed holding period for accrued royalties provided in subparagraph (H)(i), the mechanical licensing collective shall distribute such accrued royalties, along with a proportionate share of accrued interest, to copyright owners identified in the records of the collective, subject to the following requirements, and in accordance with the policies and procedures established under clause (ii):
(I)
The first such distribution shall occur on or after January 1 of the second full calendar year to commence after the license availability date, with not less than 1 such distribution to take place during each calendar year thereafter.
(II)
Copyright owners’ payment shares for unclaimed accrued royalties for particular reporting periods shall be determined in a transparent and equitable manner based on data indicating the relative market shares of such copyright owners as reflected in reports of usage provided by digital music providers for covered activities for the periods in question, including, in addition to usage data provided to the mechanical licensing collective, usage data provided to copyright owners under voluntary licenses and individual download licenses for covered activities, to the extent such information is available to the mechanical licensing collective. In furtherance of the determination of equitable market shares under this subparagraph—
(aa)
the mechanical licensing collective may require copyright owners seeking distributions of unclaimed accrued royalties to provide, or direct the provision of, information concerning the usage of musical works under voluntary licenses and individual download licenses for covered activities; and
(bb)
the mechanical licensing collective shall take appropriate steps to safeguard the confidentiality and security of usage, financial, and other sensitive data used to compute market shares in accordance with the confidentiality provisions prescribed by the Register of Copyrights under paragraph (12)(C).
(ii)
Establishment of distribution policies.—
The unclaimed royalties oversight committee established under subparagraph (D)(v) shall establish policies and procedures for the distribution of unclaimed accrued royalties and accrued interest in accordance with this subparagraph, including the provision of usage data to copyright owners to allocate payments and credits to songwriters pursuant to clause (iv), subject to the approval of the board of directors of the mechanical licensing collective.
(iii)
Public notice of unclaimed accrued royalties.—
The mechanical licensing collective shall—
(I)
maintain a publicly accessible online facility with contact information for the collective that lists unmatched musical works (and shares of works), through which a copyright owner may assert an ownership claim with respect to such a work (and a share of such a work);
(II)
engage in diligent, good-faith efforts to publicize, throughout the music industry—
(aa)
the existence of the collective and the ability to claim unclaimed accrued royalties for unmatched musical works (and shares of such works) held by the collective;
(bb)
the procedures by which copyright owners may identify themselves and provide contact, ownership, and other relevant information to the collective in order to receive payments of accrued royalties;
(cc)
any transfer of accrued royalties for musical works under paragraph (10)(B), not later than 180 days after the date on which the transfer is received; and
(dd)
any pending distribution of unclaimed accrued royalties and accrued interest, not less than 90 days before the date on which the distribution is made; and
(III)
as appropriate, participate in music industry conferences and events for the purpose of publicizing the matters described in subclause (II).
(iv)
Songwriter payments.—
Copyright owners that receive a distribution of unclaimed accrued royalties and accrued interest shall pay or credit a portion to songwriters (or the authorized agents of songwriters) on whose behalf the copyright owners license or administer musical works for covered activities, in accordance with applicable contractual terms, but notwithstanding any agreement to the contrary—
(I)
such payments and credits to songwriters shall be allocated in proportion to reported usage of individual musical works by digital music providers during the reporting periods covered by the distribution from the mechanical licensing collective; and
(II)
in no case shall the payment or credit to an individual songwriter be less than 50 percent of the payment received by the copyright owner attributable to usage of musical works (or shares of works) of that songwriter.
(L)
Verification of payments by mechanical licensing collective.—
(i)
Verification process.—
A copyright owner entitled to receive payments of royalties for covered activities from the mechanical licensing collective may, individually or with other copyright owners, conduct an audit of the mechanical licensing collective to verify the accuracy of royalty payments by the mechanical licensing collective to such copyright owner, as follows:
(I)
A copyright owner may audit the mechanical licensing collective only once in a year for any or all of the 3 calendar years preceding the year in which the audit is commenced, and may not audit records for any calendar year more than once.
(II)
The audit shall be conducted by a qualified auditor, who shall perform the audit during the ordinary course of business by examining the books, records, and data of the mechanical licensing collective, according to generally accepted auditing standards and subject to applicable confidentiality requirements prescribed by the Register of Copyrights under paragraph (12)(C).
(III)
The mechanical licensing collective shall make such books, records, and data available to the qualified auditor and respond to reasonable requests for relevant information, and shall use commercially reasonable efforts to facilitate access to relevant information maintained by third parties.
(IV)
To commence the audit, any copyright owner shall file with the Copyright Office a notice of intent to conduct an audit of the mechanical licensing collective, identifying the period of time to be audited, and shall simultaneously deliver a copy of such notice to the mechanical licensing collective. The Register of Copyrights shall cause the notice of audit to be published in the Federal Register not later than 45 calendar days after the date on which the notice is received.
(V)
The qualified auditor shall determine the accuracy of royalty payments, including whether an underpayment or overpayment of royalties was made by the mechanical licensing collective to each auditing copyright owner, except that, before providing a final audit report to any such copyright owner, the qualified auditor shall provide a tentative draft of the report to the mechanical licensing collective and allow the mechanical licensing collective a reasonable opportunity to respond to the findings, including by clarifying issues and correcting factual errors.
(VI)
The auditing copyright owner or owners shall bear the cost of the audit. In case of an underpayment to any copyright owner, the mechanical licensing collective shall pay the amounts of any such underpayment to such auditing copyright owner, as appropriate. In case of an overpayment by the mechanical licensing collective, the mechanical licensing collective may debit the account of the auditing copyright owner or owners for such overpaid amounts, or such owner or owners shall refund overpaid amounts to the mechanical licensing collective, as appropriate.
(ii)
Alternative verification procedures.—
Nothing in this subparagraph shall preclude a copyright owner and the mechanical licensing collective from agreeing to audit procedures different from those described in this subparagraph, except that a notice of the audit shall be provided to and published by the Copyright Office as described in clause (i)(IV).