(a) General. This section prescribes reporting and payment obligations of the mechanical licensing collective to copyright owners for the distribution of royalties for musical works, licensed under the blanket license for digital uses prescribed in 17 U.S.C. 115(d)(1), that have been matched, either through the processing by the mechanical licensing collective upon receipt of a report of usage and royalty payment from a digital music provider, or during the holding period for unmatched works as defined in 17 U.S.C. 115(d)(3)(H)(i). This section also prescribes reporting and payment obligations of the mechanical licensing collective to copyright owners for the distribution of matched historical royalties. This section does not apply to distributions of unclaimed accrued royalties under 17 U.S.C. 115(d)(3)(J).
(b) Distribution of royalties and royalty statements.
(1) Royalty distributions shall be made on a monthly basis and shall include, separately or together:
(i) All royalties payable to a copyright owner for a musical work matched in the ordinary course under 17 U.S.C. 115(d)(3)(G)(i)(II); and
(ii) All accrued royalties for any particular musical work that has been matched and a proportionate amount of accrued interest associated with that work.
(2) Royalty distributions based on adjustments to reports of usage by digital music providers in prior periods shall be made by the mechanical licensing collective at least once annually, upon submission of the annual reports of usage by digital music providers reporting total adjustments to the mechanical licensing collective pursuant to § 210.27(f) and (g)(3) and (4).
(3) Royalty distributions shall be accompanied by corresponding royalty statements containing the information set forth in paragraph (c) of this section for the royalties contained in the distribution.
(4)
(i)
(A) The copyright owner of a musical work (or share thereof) as of the last day of a monthly reporting period in which such musical work is used pursuant to a blanket license is entitled to all royalty payments and other distributable amounts (e.g., accrued interest), including any subsequent adjustments, for the uses of that musical work occurring during that monthly reporting period, unless such entitlement has been transferred to another individual or entity. As used in the previous sentence, the term uses means all covered activities engaged in under blanket licenses as reported by blanket licensees to the mechanical licensing collective.
(B)
(1) For the purpose of making any distribution of royalties or other amounts (e.g., accrued interest), as a matter of reasonable administrability, the mechanical licensing collective, in the absence of a dispute or investigation, shall treat the individual or entity identified in its records as of the date of the payee snapshot used by the mechanical licensing collective for the applicable distribution as legally authorized to receive such distribution, unless the mechanical licensing collective is notified otherwise.
(2) Nothing in paragraph (b)(4)(i)(B)(1) of this section shall be construed as absolving the mechanical licensing collective of its responsibility to engage in reasonable verification and antifraud efforts in connection with the registration and claiming of musical works (or shares thereof).
(3) No distribution made by the mechanical licensing collective shall alter or prejudice any party's legal entitlement to any of the distributed funds or such party's ability to collect such funds from someone other than the mechanical licensing collective if such funds were not distributed to such party by the mechanical licensing collective.
(4) Notwithstanding any other provision of this section, where the mechanical licensing collective distributes royalties to the wrong party and that error is caused by the actions of the mechanical licensing collective, the mechanical licensing collective shall promptly correct its error upon learning of it. For purposes of this paragraph (b)(4)(i)(B)(4), an error is not caused by the mechanical licensing collective where it acts in accordance with paragraph (b)(4)(i)(B)(1) of this section or otherwise reasonably relies on information provided to it by others that turns out to be inaccurate.
(C) The derivative works exception does not apply to any blanket license and no individual or entity may be construed as the copyright owner or royalty payee of a musical work (or share thereof) used pursuant to a blanket license based on the derivative works exception.
(ii) Subject to the requirements of and except to the extent permitted by § 210.30, the mechanical licensing collective shall not distribute royalties in a manner inconsistent with paragraph (b)(4)(i) of this section.
(c) Content —
(1) General content of royalty statements. Accompanying the distribution of royalties to a copyright owner, the mechanical licensing collective shall provide to the copyright owner a statement that includes, at a minimum, the following information:
(i) The period (month and year) covered by the statement, and the period (month and year) during which the reported activity occurred. For adjustments, the mechanical licensing collective shall report both the period (month and year) during which the original reported activity occurred and the date on which the digital music provider reported the adjustment.
(ii) The name and address of the mechanical licensing collective.
(iii) The name and mechanical licensing collective identification number of the copyright owner.
(iv) ISNI and IPI name and identification number for each songwriter, administrator, and musical work copyright owner, to the extent it has been provided to the mechanical licensing collective by a copyright owner.
(v) The name and mechanical licensing collective identification number of the copyright owner's administrator (if applicable), to the extent one has been provided to the mechanical licensing collective by a copyright owner.
(vi) Payment information, such as check number, automated clearing house (ACH) identification, or wire transfer number.
(vii) The total royalty payable to the relevant copyright owner for the month covered by the royalty statement.
(2) Musical work information. For each matched musical work owned by the copyright owner for which accompanying royalties are being distributed to that copyright owner, the mechanical licensing collective shall report the following information:
(i) The musical work name, including primary and any alternative and parenthetical titles for the musical work known to the mechanical licensing collective.
(ii) ISWC for the musical work, to the extent it is known to the mechanical licensing collective.
(iii) The mechanical licensing collective's standard identification number of the musical work.
(iv) The administrator's unique identifier for the musical work, to the extent one has been provided to the mechanical licensing collective by a copyright owner or its administrator.
(v) The name(s) of the songwriter(s), to the extent they are known to the mechanical licensing collective.
(vi) The percentage share of musical work owned or controlled by the copyright owner.
(vii) For each sound recording embodying the musical work, the identifying information enumerated in paragraph (c)(3) of this section and the royalty information enumerated in paragraph (c)(4) of this section.
(3) Sound recording information.
(i) For each sound recording embodying a musical work included in a royalty statement, the mechanical licensing collective shall report the following information:
(A) The sound recording name(s), including all known alternative and parenthetical titles for the sound recording.
(B) The featured artist(s).
(ii) The mechanical licensing collective shall report the following information to the extent it is known to the mechanical licensing collective:
(A) The record label name(s).
(B) ISRC(s).
(C) The sound recording copyright owner(s).
(D) Playing time.
(E) Album title(s) or product name(s).
(F) Album or product featured artist(s), if different from sound recording featured artist(s).
(G) Distributor(s).
(H) UPC(s).
(4) Royalty information. The mechanical licensing collective shall separately report, for each service, offering, or activity reported by a blanket licensee, the following royalty information for each sound recording embodying a musical work included in a royalty statement:
(i) The name of the blanket licensee and, if different, the trade or consumer facing brand name(s) of the service(s), including any specific offering(s), through which the blanket licensee engages in covered activities.
(ii) The service tier or service description.
(iii) The use type (download, limited download, or stream).
(iv) The number of payable units, including, as applicable, permanent downloads, plays, and constructive plays.
(v) A detailed and step-by-step accounting of the calculation of royalties under applicable provisions of part 385 of this title, sufficient to allow the copyright owner to assess the manner in which the royalty owed was determined and the accuracy of the royalty calculations, which shall include details on each of the components used in the calculation of the payable royalty pool.
(vi) The royalty rate and amount.
(vii) The interest amount.
(viii) The distribution amount.
(d) Cumulative statements of account, and adjustments.
(1) For royalties reported under paragraph (b)(1)(ii) of this section, the mechanical licensing collective shall provide a cumulative statement of account that includes, in addition to the information in paragraph (c) of this section, a clear identification of the total period covered and the total royalty payable for the period.
(2) For adjustments reported under paragraph (b)(2) of this section, the mechanical licensing collective shall clearly indicate the original reporting period of the royalties being adjusted.
(e) Delivery of royalty statements.
(1) Royalty statements may be delivered electronically, including by providing access to statements through an online password protected portal, accompanied by written notification of the availability of the statement in the portal.
(2) The mechanical licensing collective shall provide by request a separate, simplified report containing fewer data fields that may be more understandable for the copyright owner, and may provide royalty information to copyright owners by request in alternative formats.
(3) Upon written request of the copyright owner, the mechanical licensing collective may deliver a physical statement by mail where the statement reports a total royalty payable to the copyright owner for the period covered that is equal or greater than $100. Royalty statements delivered by mail are not required to contain all information identified in paragraph (c) of this section, but may instead provide information in a simplified or summary format.
(f) Clear statements. The information required by paragraph (c) of this section requires intelligible, legible, and unambiguous statements in the royalty statements without incorporation of facts or information contained in other documents or records.
(g) Certification.
(1) Each royalty statement in which the total royalty payable to the relevant copyright owner for the month covered is equal to or greater than $100 shall be accompanied by:
(i) The name of the person who is signing and certifying the statement.
(ii) A signature of a duly authorized officer of the mechanical licensing collective.
(iii) The date of signature and certification.
(iv) The title or official position held by the person who is signing and certifying the statement.
(v) The following statement: This statement was prepared by the Mechanical Licensing Collective and/or its agent using processes and internal controls that were suitably designed to generate monthly statements that accurately allocate royalties using usage and royalty information provided by digital music providers and musical works information as reflected in the Mechanical Licensing Collective's musical works database.
(2) Beginning in the first calendar year following the license availability date, the certification must also include a statement establishing that such processes and internal controls were subject to an examination, during the past year, by a licensed Certified Public Accountant in accordance with the attestation standards established by the American Institute of Certified Public Accountants, the opinion of whom was that the processes and internal controls were so suitably designed.
(h) Reporting threshold.
(1) Subject to paragraph (h)(2) of this section, a separate royalty statement shall be provided for each month during which there is any activity relevant to the distribution of royalties under the blanket license.
(2) Royalties under the blanket license shall not be considered payable, and no royalty statement shall be required, until the cumulative unpaid royalties collected for the copyright owner equal at least one cent. Moreover, in any case in which the cumulative unpaid royalties under the blanket license that would otherwise be distributed by the mechanical licensing collective to the copyright owner are less than $5 if the copyright owner receives payment by direct deposit, $100 if the copyright owner receives payment by physical check, or $250 if the copyright owner receives payment by wire transfer, the mechanical licensing collective may choose to defer the payment date for such royalties and provide no royalty statements until the earlier of the time for rendering the royalty statement for the month in which the unpaid royalties under the blanket license for the copyright owner exceed the threshold, at which time the mechanical licensing collective may provide one statement and payment covering the entire period for which royalty payments were deferred.
(3) Where the mechanical licensing collective elects to defer the royalty payment and statement to a copyright owner pursuant to paragraph (h)(2) of this section because the accrued royalties did not exceed the applicable threshold, and if a copyright owner submits a written request, the mechanical licensing collective shall make available to that copyright owner information detailing the accrued unpaid royalties processed as of the date of the request.
(4) If the mechanical licensing collective is required, under applicable tax law and regulations, to make backup withholding from its payments required hereunder, the mechanical licensing collective shall indicate the amount of such withholding on the royalty statement or on or with the distribution.
(i) Annual statement. The mechanical license collective shall provide an annual statement by electronic means to any copyright owner who has received at least one royalty statement under paragraph (h)(1) of this section in the calendar year preceding. The annual statement shall include a cumulative statement of the information reported in the monthly royalty statements in the year preceding, as well as a statement of any adjustments to royalty distributions reported in the year preceding.
(j) Matched historical royalties. The mechanical licensing collective shall report and distribute matched historical royalties and related accrued interest and adjustments in the same manner and subject to the same requirements that apply to the reporting and distribution of royalties for musical works licensed under the blanket license, as if such matched historical royalties were royalties payable for musical works licensed under the blanket license, but subject to the following clarifications:
(1) Matched historical royalties shall be treated as accrued royalties distributable under paragraph (b)(1)(ii) of this section and shall be separately identified in applicable royalty statements.
(2) With respect to the requirements of paragraph (b)(2) of this section, royalty distributions based on adjustments to matched historical royalties reflected in cumulative statements of account delivered to the mechanical licensing collective by digital music providers pursuant to § 210.10(b)(3)(i) shall be made by the mechanical licensing collective at least once annually, upon submission of one or more statements of adjustment delivered to the mechanical licensing collective by digital music providers pursuant to § 210.10(k), to the extent any such statement of adjustment is delivered to the mechanical licensing collective during such annual period.
(k) Corrective royalty adjustment. Any distribution under paragraph (b) of this section (including any distribution of matched historical royalties, or related accrued interest or adjustments) or deduction under § 210.27(g)(2)(ii) (other than a deduction related to a voluntary license) made by the mechanical licensing collective before August 8, 2024 and based on an application of the derivative works exception that is inconsistent with paragraph (b)(4)(i)(C) of this section (including as such paragraph applies to matched historical royalties through paragraph (j) of this section) or § 210.27(g)(2)(ii)(B)(1), as each of those provisions exist on August 8, 2024, shall be subject to adjustment by the mechanical licensing collective. Any amounts held by the mechanical licensing collective in connection with such application of the derivative works exception as of August 8, 2024 shall also be subject to adjustment. The adjustment process shall be as follows:
(1)
(i) To the extent required by this paragraph (k), where a royalty payee (the prior payee) received amounts from the mechanical licensing collective that such prior payee would not have received had the distribution been made in a manner consistent with the application of the derivative works exception embodied in paragraph (b)(4)(i)(C) of this section, the mechanical licensing collective shall, except as otherwise provided for by this paragraph (k), recover such overpayment from such prior payee and shall distribute it to the royalty payee (the proper payee) who is entitled to such funds under the application of the derivative works exception embodied in paragraph (b)(4)(i)(C) of this section.
(ii) The mechanical licensing collective shall notify each prior payee and proper payee (collectively, the parties) of the overpayment no later than September 9, 2024. Such notice shall contain at least the following information:
(A) A summary of the Copyright Office's conclusions embodied in paragraph (b)(4)(i)(C) of this section and § 210.27(g)(2)(ii)(B);
(B) A description of the adjustment process detailed in this paragraph (k), including the option for the parties to reach a voluntary agreement concerning the overpayment;
(C) For each musical work (or share thereof) at issue, the amount of the overpayment; and
(D) The respective contact information for each of the parties contained in the mechanical licensing collective's records.
(iii) After receiving such notice, the parties may attempt to reach a voluntary agreement with respect to the overpayment. Before October 9, 2024, the parties shall notify the mechanical licensing collective that:
(A) The parties reached a voluntary agreement with respect to the overpayment;
(B) The parties are in the process of attempting to reach a voluntary agreement with respect to the overpayment; or
(C) The parties did not reach a voluntary agreement with respect to the overpayment.
(iv) The mechanical licensing collective shall act as follows in connection with such notice:
(A) If the mechanical licensing collective receives notice that the parties reached a voluntary agreement with respect to the overpayment, it shall not make any adjustment in connection with the overpayment.
(B) If the mechanical licensing collective receives notice that the parties are in the process of attempting to reach a voluntary agreement with respect to the overpayment, it shall not take any action unless and until it receives a subsequent notice. If the subsequent notice states that the parties reached a voluntary agreement with respect to the overpayment, the mechanical licensing collective shall not make any adjustment in connection with the overpayment. If the subsequent notice states that the parties did not reach a voluntary agreement with respect to the overpayment, the mechanical licensing collective shall commence the adjustment process described in paragraph (k)(1)(v) of this section. If such a subsequent notice is received after March 11, 2026, the mechanical licensing collective shall not be required to make any adjustment in connection with the overpayment.
(C) If the mechanical licensing collective receives notice that the parties did not reach a voluntary agreement with respect to the overpayment, it shall commence the adjustment process described in paragraph (k)(1)(v) of this section.
(D) If the mechanical licensing collective does not receive a timely notice under paragraph (k)(1)(iii) of this section, it shall commence the adjustment process described in paragraph (k)(1)(v) of this section.
(v) Where, pursuant to paragraph (k)(1)(iv) of this section, the mechanical licensing collective is required to commence an adjustment process with respect to the overpayment, the following requirements shall apply:
(A) Not later than November 6, 2024 or 30 calendar days after receiving an applicable subsequent notice under paragraph (k)(1)(iv)(B) of this section, whichever is later, the mechanical licensing collective shall notify the prior payee that the adjustment process has commenced and request that the prior payee return the overpayment no later than December 6, 2024 or 30 calendar days after receiving the notice, whichever is later. Any returned amounts shall be distributed, accompanied by an appropriate royalty statement, to the proper payee with the next regular monthly royalty distribution to occur at least 30 calendar days after any such amounts are returned.
(B) If such overpayment is not returned in full in accordance with paragraph (k)(1)(v)(A) of this section, then beginning with the first distribution of royalties to occur at least 30 calendar days after the deadline specified in that paragraph, 50 percent of any and all accrued royalties and other distributable amounts (e.g., accrued interest) that would otherwise be payable to the prior payee from the mechanical licensing collective each month, regardless of the associated work (or share), shall instead be distributed, accompanied by an appropriate royalty statement, to the proper payee until such time as the full amount of the overpayment is recovered. Where the amount to be recovered under this paragraph during a monthly royalty distribution constitutes less than 50 percent of the applicable accrued royalties and other distributable amounts, the mechanical licensing collective shall recover the full amount of the overpayment. Where more than one proper payee is entitled to a corrective royalty adjustment from the same prior payee for different musical works, any amounts recovered and distributed under this paragraph (k)(1)(v)(B) shall be apportioned equally among such proper payees.
(2) Where, as of August 8, 2024, the mechanical licensing collective is holding amounts that would constitute an overpayment under paragraph (k)(1) of this section if such amounts had been distributed to the prior payee, such amounts shall be distributed, accompanied by an appropriate royalty statement, to the proper payee no later than the first distribution of royalties based on the first payee snapshot taken by the mechanical licensing collective at least 30 calendar days after August 8, 2024.
(3) The recovery and distribution processes described in paragraphs (k)(1) and (2) of this section shall also apply, as applicable, to amounts deducted, or held pending deduction, by the mechanical licensing collective under § 210.27(g)(2)(ii), other than with respect to amounts relating to voluntary licenses, where the proper payee is not the payee to whom the relevant usage was originally matched. For purposes of this paragraph (k)(3), the payee to whom the relevant usage was originally matched shall constitute the prior payee as that term is used elsewhere in this paragraph (k).
(4) Nothing in this paragraph (k) shall be construed as prejudicing the proper payee's right or ability to otherwise recover such overpayment from the prior payee outside of the adjustment process detailed in this paragraph (k). Where the overpayment is recovered outside of such adjustment process or a legal proceeding is commenced seeking recovery of the overpayment, the mechanical licensing collective must be notified. Upon receipt of such notice, the mechanical licensing collective shall discontinue any recovery efforts engaged in under this paragraph (k).
(5) Notwithstanding the adjustment process detailed in this paragraph (k), the parties and the mechanical licensing collective may voluntarily agree to an alternative adjustment process.
[85 FR 58165, Sept. 17, 2020, as amended at 89 FR 56612, July 9, 2024; 89 FR 57093, July 12, 2024; 89 FR 70497, Aug. 30, 2024]