The Copyright Office said it chose the Mechanical Licensing Collective over the American Music Licensing Collective because the former fulfilled all the qualifications required by the Music Modernization Act to receive the designation, while the latter fell short on some of the qualifications.
The Mechanical Licensing Collective is a new entity created by that statute and slated to begin operations on Jan. 1, 2021 to manage a blanket mechanical license and to collect royalty payments from digital services and in turn pay the royalties to the correct copyright owners. In order to insure that occurs, the MLC will build a database matching compositions to recorded masters.
One of the key arguments that the AMLC made as to why it should receive the designation concerned its interpretation of the marketplace as worded in the MMA. The AMLC argues that the statute’s wording, "the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years," referred to the number of copyright owners.
Finally, the Copyright Office questioned the AMLC's budgeting process and questioned whether the AMLC considered the full range of the MLC's necessary operational costs.
While the AMLC didn’t get the Copyright Office designation to run the mechanical licensing collective, its impact on the black box issue reverberates throughout the ruling. But in contrast to what the AMLC claimed, the Copyright Office said that the MMA makes sure that those royalties will be distributed appropriately.
Moreover, every five years, the MLC must retain an independent auditor to examine the books, records and its operations and prepare a report addressing "the implementation and efficacy of procedures" "for the receipt, handling, and distribution of royalty funds, including any amounts held as unclaimed royalties," and "to guard against fraud, abuse, waste, and the unreasonable use of funds," according to the ruling.
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