Vol. 79 Thursday, 

No. 181 September 18, 2014 

Part III 

Library of Congress 

U.S. Copyright Office 

37 CFR Parts 201 and 210 

Mechanical and Digital Phonorecord Delivery Compulsory License; Final 

Rule 


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56190 Federal Register / Vol. 79, No. 181 / Thursday, September 18, 2014 / Rules and Regulations 

1Although, the Copyright Royalty Board (‘‘CRB’’) 

has general authority to establish royalty rates and 

terms for the Section 115 license, see 17 U.S.C. 

115(c)(3)(C) & (D), the Act also separately gives the 

Register of Copyrights responsibility for issuing 

regulations relating to specific aspects of that 

license, see id. 115(b)(1) & (c)(4)–(5). See generally 

73 FR 48396 (Aug. 19, 2008) (addressing division 

of authority between the Copyright Royalty Judges 

and the Register of Copyrights under the Section 

115 license). 

2All comments received in relation to this 

rulemaking are available on the Copyright Office 

Web site at http://www.copyright.gov/docs/

docket2012-7/. 

LIBRARY OF CONGRESS 

U.S. Copyright Office 

37 CFR Parts 201 and 210 

[Docket No. 2012–7] 

Mechanical and Digital Phonorecord 

Delivery Compulsory License 

AGENCY: U.S. Copyright Office, Library 

of Congress. 

ACTION: Final rule. 

SUMMARY: The United States Copyright 

Office is issuing a final rule to 

implement section 115 of the Copyright 

Act of 1976. Section 115 establishes a 

compulsory license for the making and 

distribution of phonorecords of 

nondramatic musical works. Section 

115, in turn, requires the Register of 

Copyrights to prescribe by regulation 

the procedures for the monthly payment 

of royalties and preparation and service 

of monthly and annual statements of 

account by licensees. This final rule 

updates the existing payment and 

statement-of-account regulations in 

response to legal and marketplace 

developments, including the Copyright 

Royalty Board’s adoption of newer 

percentage-of-revenue royalty rate 

structures for certain digital music 

services, and changes in accounting and 

industry practice in the years since the 

rules were last substantially amended. 

DATES: Effective Date: November 17, 

2014. 

FOR FURTHER INFORMATION CONTACT: 

Sarang V. Damle, Special Advisor to the 

General Counsel, Stephen Ruwe, 

Attorney-Advisor, Office of the General 

Counsel, or Rick Marshall, AttorneyAdvisor, Office of the General Counsel, 

at the U.S. Copyright Office, P.O. Box 

70400, Washington, DC 20024. 

Telephone: (202) 707–8350. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Copyright Act gives owners of 

musical works the exclusive right to 

make and distribute phonorecords of 

those works (i.e., copies in which the 

work is embodied, such as CDs or 

digital files). 17 U.S.C. 106(1), (3). This 

right (often referred to as the 

‘‘mechanical’’ right) is subject to a 

compulsory license under Section 115 

of the Act. 17 U.S.C. 115. Under that 

provision—instituted by Congress over a 

century ago with the passage of the 1909 

Copyright Act—once a phonorecord of a 

musical work has been distributed to 

the public in the United States under 

the authority of the copyright owner, 

any person can obtain a license to make 

and distribute phonorecords of that 

work. Id. In 1995, Congress confirmed 

that a copyright owner’s exclusive right 

to reproduce and distribute 

phonorecords of a musical work, and 

the Section 115 license, extend to the 

making of ‘‘digital phonorecord 

deliveries’’ (‘‘DPDs’’). See Digital 

Performance Right in Sound Recordings 

Act of 1995 (‘‘DPRSRA’’), Public Law 

104–39, sec. 4, 109 Stat. 336, 344–48 

(1995) (codified at 17 U.S.C. 

115(c)(3)(A)). 

A person wishing to use the 

compulsory license must comply with 

several requirements imposed by statute 

and regulation. For instance, licensees 

must first file a notice of intention to 

use the compulsory license. See 17 

U.S.C. 115(b); 37 CFR 201.18. The 

statute also requires payment of 

royalties and compliance with terms 

established by the Copyright Royalty 

Board (‘‘CRB’’) in periodic ratemaking 

proceedings. See 17 U.S.C. 115(c)(3)(C)– 

(D). And, as most relevant here, the 

statute requires licensees to make 

monthly royalty payments, and provide 

monthly and annual statements of 

account, in compliance with regulations 

issued by the Register of Copyrights. 17 

U.S.C. 115(c)(5).1

The Copyright Office first 

promulgated regulations prescribing the 

procedures for the payment of royalties 

and the preparation and service of 

monthly and annual statements of 

account in 1980; those regulations were 

codified in section 201.19 of title 37 of 

the Code of Federal Regulations. See 45 

FR 79038 (Nov. 28, 1980). In that 

rulemaking, the Office identified a 

‘‘guiding principle’’ that is equally 

applicable today: That the regulations 

should preserve the compulsory license 

as ‘‘a workable tool,’’ while at the same 

time ‘‘assuring that copyright owners 

will receive ‘full and prompt payment 

for all phonorecords made and 

distributed.’ ’’ Id. at 79039 (quoting H.R. 

Rep. No. 94–1476, at 110 (1976)). The 

Office accordingly evaluated proposed 

regulatory features using ‘‘three 

fundamental criteria.’’ Id. First, the 

Office stressed that ‘‘[t]he accounting 

procedures must not be so complicated 

as to make use of the compulsory 

license impractical.’’ Id. Second, ‘‘[t]he 

accounting system must insure full 

payment, but not overpayment.’’ Id. at 

79310. Third, and finally, ‘‘[t]he 

accounting system must insure prompt 

payment.’’ Id. 

Although the Office has amended 

aspects of its payment and statement-ofaccount regulations from time to time, 

the regulations have always assumed 

that the compulsory mechanical license 

will carry a flat royalty rate per 

phonorecord made and distributed. That 

assumption is no longer true. In recent 

years, the CRB has adopted a 

‘‘percentage-of-revenue’’ model for 

calculating royalties for newer digital 

products like interactive streaming and 

limited downloads. See, e.g., 78 FR 

67938 (Nov. 13, 2013). Under that 

model, royalty calculations work 

essentially as follows, with some details 

omitted. First, an ‘‘all-in royalty’’ is 

defined to be a specified percentage of 

the service’s revenues. Second, royalties 

that are separately paid to performing 

rights organizations for the public 

performance of musical works are 

subtracted from the all-in royalty. 37 

CFR 385.12(b)(1)–(2), 385.22(b)(1)–(2). 

The resulting figure represents the total 

royalties that the service must pay to all 

copyright owners under Section 115, 

although there are ‘‘floors’’ to ensure 

services make at least a minimum 

royalty payment. The total payable 

royalty pool must be further allocated to 

individual musical works. To do so, the 

pool is divided by the total number of 

‘‘plays’’ (i.e., the total number of times 

the service played any phonorecord of 

any musical work during the relevant 

accounting period), and the resulting 

‘‘per-play’’ royalty rate is multiplied by 

the number of plays of each individual 

musical work to obtain a ‘‘per-work’’ 

royalty allocation. 37 CFR 385.12(b)(3), 

385.22(b)(3). 

After a number of stakeholders 

expressed concern that the Office’s 

statement-of-account regulations do not 

account for these newer royalty 

structures, the Office proposed 

amendments to those regulations and 

requested public comment in a notice of 

proposed rulemaking (‘‘NPRM’’). See 77 

FR 44179 (July 27, 2012). The Office 

received five initial comments, and 

eighteen reply comments. In December 

2013, the Copyright Office requested 

additional comments concerning the 

proposed amendments. 78 FR 78309 

(Dec. 26, 2013). The Office received one 

initial comment, and three reply 

comments.2


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3The Joint Commenters note that the Securities 

Exchange Commission (‘‘SEC’’) has long been 

exploring a move towards incorporating IFRS into 

the United States’ financial reporting system. Joint 

Commenters Initial Comments at 9 (citing SEC, 

Work Plan for the Consideration of Incorporating 

International Financial Reporting Standards into 

the Financial Reporting System for U.S. Issuers 

(2012), available at http://www.sec.gov/spotlight/

globalaccountingstandards/ifrs-work-plan-finalreport.pdf). 

The Office received a particularly 

significant set of comments from a 

group representing both copyright 

owners and compulsory licensees. That 

group, referred to herein as the ‘‘Joint 

Commenters,’’ consisted of the Digital 

Media Association (‘‘DiMA’’), the 

National Music Publishers’ Association, 

Inc. (‘‘NMPA’’), the Recording Industry 

Association of America, Inc. (‘‘RIAA’’), 

the Harry Fox Agency, Inc. (‘‘HFA’’), 

and Music Reports, Inc. (‘‘Music 

Reports’’). The Joint Commenters 

reached agreement on a broad range of 

modifications to the proposed rule, 

which were reflected in a set of 

proposed regulations they submitted 

along with their initial set of comments. 

See Joint Commenters, Initial Comments 

Submitted in Response to U.S. 

Copyright Office’s July 27, 2012 Notice 

of Proposed Rulemaking at 2–3, exh. A 

(Oct. 25, 2012) (‘‘Joint Commenters 

Initial Comments’’). After carefully 

evaluating the Joint Commenters’ 

proposal against the goals outlined 

above, the Office has adopted many 

elements of that proposal as part of the 

final rule. At the same time, our 

evaluation and consideration of the 

comments has led us to conclude that 

some aspects of the Joint Commenters’ 

proposal would be contrary to the goal 

of providing a workable means of 

licensing mechanical rights for musical 

works. 

II. Discussion 

Section 115(c)(5) of the Copyright Act 

directs the Register of Copyrights to 

issue regulations governing monthly 

payments and monthly and annual 

statements of account for the 

compulsory mechanical license for 

nondramatic musical works. 

Specifically, that provision states: 

‘‘Royalty payments shall be made on or 

before the twentieth day of each month 

and shall include all royalties for the 

month next preceding. Each monthly 

payment shall be made under oath and 

shall comply with requirements that the 

Register of Copyrights shall prescribe by 

regulation. The Register shall also 

prescribe regulations under which 

detailed cumulative annual statements 

of account, certified by a certified public 

accountant, shall be filed for every 

compulsory license under this section. 

The regulations covering both the 

monthly and the annual statements of 

account shall prescribe the form, 

content, and manner of certification 

with respect to the number of records 

made and the number of records 

distributed.’’ 17 U.S.C. 115(c)(5). As the 

legislative history makes clear, the goal 

of this provision is to ensure ‘‘that 

copyright owners . . . receive full and 

prompt payment for all phonorecords 

made and distributed’’ and to ‘‘increase 

the protection of copyright proprietors 

against economic harm from companies 

which might refuse or fail to pay their 

just obligations.’’ H.R. Rep. No. 94– 

1476, at 110–11. 

The final rule fulfills these directives 

by providing new payment and 

statement-of-account regulations for 

services subject to a percentage-ofrevenue royalty rate, referred to here as 

‘‘percentage-rate usages.’’ See 37 CFR 

part 385, subparts B & C. For such 

usages, the revised regulations largely 

incorporate by reference the rate 

calculation methodology established by 

the CRB. In addition, the final rule 

adopts regulations for services subject to 

cents-per-phonorecord rates (i.e., 

physical phonorecord deliveries, 

permanent downloads, and ringtones, 

see 37 CFR part 385, subpart A, referred 

to here as ‘‘cents-rate usages’’) that 

closely mirror existing requirements, 

which were designed with cents-rate 

usages in mind. The final rule also 

makes other technical and 

organizational changes, some of which 

reflect developments in accounting and 

industry practice in the years since the 

rules were last substantially amended. 

Overall, the final rule is designed to be 

flexible, so that as the CRB makes future 

amendments to the rates and terms 

under Section 115, there will be limited 

need to amend these regulations. 

The following sections highlight the 

major features of the final rule, 

including areas that garnered public 

comment or where the final rule 

substantially departed from the 

proposed rule. 

A. Organizational and Technical 

Changes 

1. Overall Structure of the Rule 

The proposed rule contained two 

separate subparts within part 210 in title 

37 of the Code of Federal Regulations. 

Proposed subpart B incorporated the 

existing regulations in section 201.19 

with only minor amendments, and was 

designed to apply to cents-rate usages, 

while proposed subpart C was mostly 

new, and was designed to apply to 

percentage-rate usages. The Joint 

Commenters disagreed with this 

approach, and proposed merging 

subparts B and C of the proposed rule. 

They explained that the proposed rule 

was unnecessarily repetitive, and that 

its structure suggested that licensees 

operating services with different rate 

structures (e.g., a licensee that offers a 

download service and an interactive 

streaming service) would have to 

provide separate statements of account 

for each kind of service. See Joint 

Commenters Initial Comments at 3–5. 

No other commenter opposed the Joint 

Commenters’ proposal. 

The Office agrees with the Joint 

Commenters’ approach. Accordingly, 

the final rule adds only a single 

subpart—subpart B. Within that subpart, 

the provisions governing monthly and 

annual statements of account (sections 

210.16 and 210.17, respectively) each 

have separate paragraphs governing 

cents-rate and percentage-rate usages. 

2. GAAP Accounting Rules 

Several provisions of the rule require 

the application of Generally Accepted 

Accounting Principles (‘‘GAAP’’). In the 

NPRM, the Office questioned whether 

GAAP supplied the appropriate 

accounting methodology. 77 FR at 

44181. In the time since the Office 

issued the NPRM, the CRB has affirmed 

the temporary reliance on GAAP in the 

rate-calculation context and included 

language in its rules that contemplates 

the United States’ eventual migration 

from GAAP standards to International 

Financial Reporting Standards (‘‘IFRS’’). 

See 37 CFR 385.11.3 To maintain 

consistency between the terms adopted 

by the CRB and these regulations, the 

final rule includes a treatment of the 

term GAAP that parallels that in the 

CRB rules. 

3. Defining When Phonorecords Are 

‘‘Distributed’’ 

The final rule makes a purely 

organizational change that consolidates 

the provisions describing when 

phonorecords are considered 

‘‘distributed’’ within the meaning of 

Section 115. Section 115 provides that 

royalties are payable ‘‘for every 

phonorecord made and distributed.’’ 17 

U.S.C. 115(c)(2). It also provides that ‘‘a 

phonorecord is considered ‘distributed’ 

if the person exercising the compulsory 

license has voluntarily and permanently 

parted with its possession.’’ Id. The 

exiting statement-of-account regulations 

implemented these statutory provisions 

in two different places. First, the 

regulatory definition of the term 

‘‘voluntarily distributed’’ generally 

addressed the circumstances in which 

physical phonorecords would be 

deemed ‘‘distributed.’’ See 37 CFR 


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201.19(a)(8). Second, the regulatory 

definition of the term ‘‘digital 

phonorecord deliveries’’ described the 

circumstances in which DPDs would be 

considered distributed. See 37 CFR 

201.19(a)(7). 

The final rule consolidates the 

provisions describing when physical 

and digital phonorecords are to be 

considered distributed under the rule’s 

definition of the term ‘‘distributed’’ in 

the new section 210.12(g). No 

substantive effect is intended by this 

change. In addition, to better reflect the 

language used in the statute, the term 

‘‘distributed’’ replaces the term 

‘‘voluntarily distributed’’ throughout the 

final rule. See 17 U.S.C. 115(c)(2). 

Again, no substantive effect is intended, 

including with respect to the provisions 

governing involuntary relinquishment. 

4. Tax Withholding 

Though not addressed in the NPRM, 

the Joint Commenters raised an issue 

relating to tax withholding that may be 

required under federal tax law. They 

explain that, in certain circumstances, 

‘‘a payor may be required to take backup 

withholding from payments for 

remittance to the IRS.’’ Joint 

Commenters Initial Comments at 28. 

They note, however, that the existing 

regulations do not address how such 

withholdings are to be reported in the 

statements of account. Id. Accordingly, 

they have proposed including a rule that 

requires a licensee to report such 

withholdings either on the monthly 

statement or on or with the payment 

itself. Id. No other commenter opposed 

that proposal. 

After examining the issue, the Office 

agrees that, in the interests of ensuring 

transparency in the accounting process, 

statements of account should make clear 

when money is withheld from royalty 

payments to copyright owners for 

remittance to the IRS. The Office has 

therefore adopted the Joint Commenters’ 

proposal in section 210.16(f)(7) of the 

final rule. 

5. Provisions Relating to Incomplete 

Transmissions and Retransmissions 

The existing rule contains several 

provisions regarding incomplete 

transmissions and retransmissions of 

DPDs. For instance, the rule requires the 

reporting of DPDs that were ‘‘never 

delivered due to a failed transmission,’’ 

or were ‘‘digitally retransmitted in order 

to complete a digital phonorecord 

delivery.’’ 37 CFR 201.19(e)(3)(i)(B). The 

rule also incorporates incomplete 

transmissions and retransmissions of 

DPDs into the calculations of royalty 

rates. 37 CFR 201.19(e)(4)(ii). The 

proposed rule carried forward these 

provisions without alteration. 

The Joint Commenters proposed 

doing away with these provisions. 

Instead, they recommended that the 

Office add a new sentence to the 

definition of ‘‘digital phonorecord 

delivery’’ specifying that a DPD ‘‘does 

not include a transmission that, as 

reasonably determined by the 

distributor, did not result in a 

specifically identifiable reproduction of 

the entire product being transmitted, 

and for which the distributor did not 

charge, or fully refunded, any monies 

that would otherwise be due for the 

relevant transmission.’’ Joint 

Commenters Initial Comments at 29–30. 

According to the Joint Commenters, 

the existing provisions relating to 

incomplete transmissions and 

retransmissions are problematic in 

several respects. For example, they 

noted that the existing rule defines an 

‘‘incomplete transmission’’ as one in 

which the entire sound recording is not 

transmitted, and maintained that, taken 

literally, this definition would appear to 

encompass ringtones. Id. at 29. They 

also asserted that it is technically 

impossible to individually track all 

incomplete transmissions and 

retransmissions, and that even if such 

information could be comprehensively 

tracked, the rule would ‘‘require 

delivery of what would seem to be 

massive amounts of useless 

information.’’ Id. at 30. As a result, 

according to the Joint Commenters, 

industry practice has developed such 

that there is no reporting of incomplete 

transmissions or retransmissions. Id. No 

other commenter disputed the Joint 

Commenters’ claims or opposed their 

proposal. 

The Office concludes that removing 

the provisions requiring reporting of 

incomplete transmissions and 

retransmissions would further the goal 

of ensuring that these regulations are 

not ‘‘so complicated as to make use of 

the compulsory license impracticable.’’ 

45 FR at 79039. In particular, given that 

the Joint Commenters are not aware of 

any reporting of incomplete 

transmissions and retransmissions, and 

given their joint agreement that such 

reporting is unnecessary, it would seem 

prudent to ensure that the regulations 

comport with industry practice. The 

final rule thus adopts the Joint 

Commenters’ approach of excluding 

incomplete transmissions from the 

rule’s definition of ‘‘digital phonorecord 

deliveries.’’ 

6. Reconciling Overpayments in the 

Annual Statement 

The proposed rule, like the existing 

rule, provided that where an annual 

statement of account shows an 

underpayment by the statutory licensee, 

the licensee must deliver the amount of 

the underpayment together with the 

annual statement of account. See 77 FR 

at 44192; 37 CFR 201.19(f)(7)(ii). The 

existing rule, however, did not include 

any provision addressing how 

overpayments by the statutory licensee 

are to be handled. To address this 

shortcoming, the Joint Commenters 

proposed that the final rule specify that, 

where an overpayment exists, such 

amount ‘‘shall be available to the 

compulsory licensee as a credit.’’ See 

Joint Commenters Initial Comments, 

exh. A, at A–21. No other commenter 

objected to that proposal. 

The Office has adopted the Joint 

Commenters’ proposal in the final rule. 

The Office stresses, however, that the 

manner in which any such credit is 

taken must be consistent with GAAP. 

B. Issues Presented Involving 

Calculations of Royalties 

1. Royalty Calculation Issues in General 

The existing statement-of-account 

regulations set forth in detail the 

process for calculating royalty payments 

each month. See 37 CFR 201.19(e)(4). 

The proposed rule carried forward these 

provisions for cents-rate usages. See 77 

FR at 44188. For percentage-rate usages, 

the proposed rule aimed to 

comprehensively mirror the rate 

calculation methodology promulgated 

by the CRB. See 77 FR at 44194. 

The proposed rule’s approach to 

calculation of royalties for cents-rate 

usages was uncontroversial, and the 

final rule adopts the proposed rule with 

only minor modifications (including 

removal of provisions for incomplete 

transmissions and retransmissions of 

DPDs, an issue which is addressed 

above). For percentage-rate usages, 

however, the Joint Commenters 

highlighted several instances where the 

proposed rule was inconsistent with the 

rates adopted by the CRB, including that 

the rule appeared to contemplate 

payment for every phonorecord 

distributed and a separate calculation of 

a per-phonorecord payment by offering. 

Joint Commenters Initial Comments at 

5–6. The Joint Commenters explained 

that ‘‘[u]nder Part 385 Subparts B and C, 

the number of phonorecords made and 

distributed is not generally 

determinative of the rate calculation, 

and phonorecords of multiple 

configurations are generally treated 

together as part of a single rate 


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4The proposed rule called for the ‘‘reasonable 

estimation’’ to be made ‘‘in accordance with 

Generally Accepted Accounting Principles.’’ 77 FR 

at 44194. 

5The Joint Commenters also recommended that 

the Office declare it reasonable to ‘‘use the aggregate 

amount of public performance royalties then sought 

from the licensee by performing rights licensors’’ as 

a basis for computing the interim or estimated 

public performance royalty component. Joint 

Commenters Initial Comments at 7. The Office 

declines to do so. The Office believes that GAAP 

will provide adequate standards for the 

determination of the estimate, and that the use of 

GAAP should mitigate the concern that licensees 

will adopt inappropriate estimates. 

6 Gear Publishing Company (‘‘Gear’’ or ‘‘Gear 

Publishing’’), the only other party to comment on 

this issue, suggested that, in the absence of an 

interim royalty rate, public performance royalty 

rates should be ‘‘no less than one hundred and 

thirty five percent (135%) of the previously set 

rates.’’ Gear Publ’g, Initial Comments Submitted in 

Response to U.S. Copyright Office’s July 27, 2012 

Notice of Proposed Rulemaking at 3 (Oct. 15, 2012) 

(‘‘Gear Publ’g Initial Comments’’). The Office notes 

that Gear appears to misapprehend the function of 

the estimated royalty rates in this context. That 

estimate would not, as Gear appears to believe, 

actually set the interim royalty rates for public 

performances of the musical works; those rates are 

determined under the terms of the consent decrees 

that govern two performing rights organizations, 

ASCAP and BMI. See United States v. ASCAP, 

2001–2 Trade Cas. (CCH) ¶ 73,474, 2001 WL 

1589999 (S.D.N.Y. June 11, 2001); United States v. 

Broadcast Music, Inc., 1966 Trade Cas. (CCH) 

¶ 71,941 (S.D.N.Y. Dec. 29, 1966), amended by 

1996–1 Trade Cas. (CCH) ¶ 71,378, 1994 WL 901652 

(S.D.N.Y. Nov. 18, 1994). Instead, under the current 

CRB rates, the estimated royalty rate is an 

accounting method used to offset payments under 

the Section 115 license until an interim or final 

performance royalty rate is established. 

calculation.’’ Id. at 5. The Joint 

Commenters instead proposed that the 

statements of account regulations ‘‘take 

a minimalist approach to incorporating 

into the accounting regulations details 

imported from Part 385.’’ Id. at 6. In 

particular, they recommended that for 

percentage-rate royalties the rule simply 

provide that the amount of the royalty 

payment shall be calculated as provided 

in the relevant portions of part 385. Id. 

at B–13 to B–14. No other commenter 

opposed this proposal. 

The Office agrees with the Joint 

Commenters’ critique of the proposed 

rule, and adopts their proposed 

solution. Taking a minimalist approach 

has a distinct advantage: It is likely that 

the CRB will alter the current rates in 

future rate periods, and incorporating 

the rates by reference avoids the need to 

revisit these rules after every such 

change. The Office stresses, however, 

that the final rule requires the licensee 

to include a detailed and step-by-step 

accounting of the calculation of 

royalties, to allow the copyright owner 

to verify the accuracy of the royalty 

payment. 

2. Accounting for Deduction of Public 

Performance Royalties 

As noted above, the percentage-ofrevenue royalty rates established by the 

CRB allow licensees to deduct royalties 

due for the public performance of 

musical works from the amounts owned 

under the Section 115 license. See 37 

CFR 385.12(b)(2), 385.22(b)(2). In the 

NPRM, the Office recognized that the 

nature of the music licensing 

marketplace is such that the value of 

applicable performance royalty rates 

may be unknown or established on an 

interim basis at the time statements of 

account and corresponding royalty 

payments become due. 77 FR at 44181. 

To address this scenario, the Office 

proposed that licensees would be 

permitted to account for unknown 

performance royalties by using an 

established interim royalty rate or, if no 

interim rate is established, a ‘‘reasonable 

estimation’’ of the expected final rate.4

In either case, the proposed rule 

required licensees to file amended 

annual statements of account and 

reconcile the actual amounts of royalties 

owed to copyright owners under the 

Section 115 license within six months 

of the establishment of a final 

performance royalty rate. 77 FR at 

44194. 

The Joint Commenters agreed that 

new accounting regulations should 

permit licensees to calculate unknown 

performance royalties based on interim 

or estimated performance rates, with a 

‘‘true-up’’ occurring once the final rates 

for a given period have been 

determined. Joint Commenters Initial 

Comments at 6. However, they offered 

two refinements to the Office’s proposed 

approach. First, they suggested that the 

Office only require licensees to report 

any amendments based on the final 

establishment of performance rates on 

the next regular annual statement of 

account. Id. at 9.5 The Joint Commenters 

maintained that the cost of preparing 

and certifying both an annual statement 

and an amended annual statement for 

each copyright owner would be 

burdensome. Id. In addition, they noted 

that ‘‘where ownership of a work may 

have changed over the relevant period, 

the only practicable approach is to make 

the adjustment between the licensee and 

the current copyright owner’’ in the next 

regular annual statement of account. Id.6

Second, Joint Commenters suggested 

that the rules specify that amended 

statements of account should only be 

required when performance royalties 

have been established for ‘‘all works 

used by the service in an accounting 

period.’’ Id. at 7–8. As justification for 

that refinement, the Joint Commenters 

noted that the performance royalty 

deduction under part 385 currently is 

made at the level of a service offering, 

not a particular work. Id. at 7–8. 

After considering the comments, the 

Office maintains the basic approach set 

forth in the proposed rule, while making 

clear that amended annual statements of 

account will be necessary only when the 

final performance rates are known for 

all works used by the service. The Office 

declines to adopt the Joint Commenters’ 

proposal to permit licensees whose 

prior annual statements (and 

corresponding payments) have been 

rendered inaccurate by a final 

performance royalty determination to 

rectify the inaccuracies via the ‘‘single, 

regular statement of account for the year 

in which the final [public performance] 

royalty expense for the offering is paid.’’ 

Joint Commenters Initial Comments at 9. 

In keeping with our statutory obligation 

to ensure the filing of detailed, 

cumulative, certified annual statements 

of account for each fiscal year, the 

Office finds it necessary to require 

licensees to file amended statements for 

each year in which a licensee’s 

aggregate final public performance 

royalties were incorrectly reflected in its 

previously filed annual statements. See 

generally 17 U.S.C. 115(c)(5). 

The appropriateness of this result is 

underscored, not undermined, by the 

Joint Commenters’ observation that 

there may be changes in musical work 

ownership after initial annual 

statements are issued and before the 

final performance royalties are 

determined. In particular, the Office 

questions the assertion that where there 

has been such a change in ownership, 

any reconciliation must be made with 

the current copyright owner, rather than 

the owner of the copyright at the time 

the original annual statement was 

issued. The transactions transferring 

copyright ownership may provide for a 

different result as a matter of private 

contract, but absent such an 

arrangement, any underpayment or 

overpayment stemming from the 

reconciliation of final performance 

royalty payments may properly be 

attributable to the copyright owner at 

the time of the relevant use of the 

statutory license. 

Nonetheless, to mitigate the cost of 

preparing the amended statement of 

account, the final rule clarifies that, in 

certifying such an amended statement, 

the Certified Public Accountant (‘‘CPA’’) 

may limit its examination to the 

licensee’s recalculation of royalties. The 

accountant need not recertify matters 

that were already examined and 

certified in the original annual 

statement of account. 


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3. Negative Reserve Balances and DPDs 

The accounting requirements in the 

proposed rule were generally 

uncontroversial. One area of 

controversy, however, related to the 

rule’s handling of ‘‘negative reserve 

balances’’ for DPDs. Understanding the 

concept of a ‘‘negative reserve balance’’ 

requires a brief discussion of the 

concept of a ‘‘phonorecord reserve.’’ 

Section 115 provides that royalties are 

payable ‘‘for every phonorecord made 

and distributed,’’ and that ‘‘a 

phonorecord is considered ‘distributed’ 

if the person exercising the compulsory 

license has voluntarily and permanently 

parted with its possession.’’ 17 U.S.C. 

115(c)(2) (emphasis added). In enacting 

that provision, Congress recognized that 

‘‘phonorecords are distributed to 

wholesalers and retailers with the 

privilege of returning unsold copies for 

credit or exchange.’’ H.R. Rep. No. 94– 

1476, at 110. Thus, ‘‘the number of 

recordings that have been ‘permanently’ 

distributed will not usually be known 

until some time—six or seven months 

on the average—after the initial 

distribution.’’ Id. Congress observed that 

‘‘it ha[d] become a well-established 

industry practice, under negotiated 

licenses, for record companies to 

maintain reasonable reserves of the 

mechanical royalties due the copyright 

owners, against which royalties on the 

returns can offset.’’ Id. Congress 

accordingly instructed the Register of 

Copyrights to promulgate rules 

governing the maintenance of such 

reserves. Id.; see also 45 FR at 79038. 

Thus, the existing rule allows 

licensees, when making initial 

distributions of phonorecords, to 

withhold mechanical royalties based on 

the licensee’s estimate of the number of 

phonorecords that will be returned by 

creating a ‘‘phonorecord reserve.’’ 37 

CFR 201.19(a)(10). As phonorecords are 

returned, the phonorecord reserve is 

reduced, reflecting the fact that the 

returned phonorecords were not 

‘‘permanently distributed.’’ Id. 

201.19(c)(1). A ‘‘negative reserve 

balance’’ occurs when phonorecords 

have been returned to the licensee in an 

amount that exceeds the established 

phonorecord reserves (which can occur 

when more phonorecords than were 

expected are returned). Id. 201.19(a)(11). 

When such a negative reserve balance 

exists, it represents an overpayment 

from the licensee to the copyright 

owner. See 45 FR at 79043. Thus, a 

compulsory licensee can claim a credit 

against that balance for future physical 

phonorecord distributions, with the 

negative reserve balance reduced 

accordingly. 37 CFR 201.19(c)(4). 

When the Office issued interim 

payment and accounting rules for DPDs 

in 1999, it concluded that there was ‘‘no 

basis for adopting the concept of 

‘reserves’ to DPDs,’’ principally because 

such DPDs are not typically 

accompanied by a right of return. See 64 

FR 41286, 41287 (Jul. 30, 1999). Thus, 

the existing rule makes clear that record 

companies cannot establish 

phonorecord reserves for DPDs. See 37 

CFR 201.19(a)(9). 

Since then, a further dispute has 

developed: if a record company has a 

negative reserve balance stemming from 

returns of physical phonorecords, 

should it be able to claim a credit 

against that balance for future DPDs? Or 

should the licensee be limited to only 

using future physical phonorecord 

distributions to offset that negative 

reserve balance? The NPRM sought 

comment on that issue. See 77 FR at 

44181–82. Favoring the ability to claim 

a credit for DPDs were the RIAA and the 

American Association of Independent 

Music (‘‘A2IM’’). See RIAA, Initial 

Comments Submitted in Response to 

U.S. Copyright Office’s July 27, 2012 

Notice of Proposed Rulemaking 3–11 

(Oct. 25, 2012) (‘‘RIAA Initial 

Comments’’); A2IM, Reply Comments 

Submitted in Response to U.S. 

Copyright Office’s July 27, 2012 Notice 

of Proposed Rulemaking 2–3 (Dec. 3, 

2012) (‘‘A2IM Reply Comments’’). 

Opposing that position were a group 

comprising the NMPA, HFA, the 

Songwriters Guild of America (‘‘SGA’’), 

and the Nashville Songwriters 

Association International (‘‘NSAI’’) 

(hereafter referred to collectively as the 

‘‘Joint Publishers and Songwriters’’) and 

Gear Publishing. See Joint Publishers 

and Songwriters, Initial Comments 

Submitted in Response to U.S. 

Copyright Office’s July 27, 2012 Notice 

of Proposed Rulemaking 5–7 (Oct. 25, 

2012) (‘‘Joint Publishers and 

Songwriters Initial Comments’’); Gear 

Publ’g Initial Comments at 3. 

In considering this issue, the Office is 

guided by the goals of the accounting 

regulations, particularly the 

requirements that ‘‘[t]he accounting 

system must insure full payment, but 

not overpayment,’’ and that ‘‘[t]he 

accounting procedures must not be so 

complicated as to make use of the 

compulsory license impractical.’’ 45 FR 

at 79039. For the reasons discussed in 

detail below, the Office concludes that 

licensees may claim a credit against 

negative reserve balances for future DPD 

distributions, but only where the DPDs 

have the same royalty rate as physical 

phonorecords (i.e., under the current 

rates, permanent physical downloads). 

a. Whether Negative Reserve Balances 

Can Be Applied to DPD Distributions 

The Joint Publishers and Songwriters 

suggested that the Office had already 

addressed this issue in the regulatory 

amendments adopted in 1999, and 

determined that negative reserve 

balances could not be applied to future 

DPD deliveries. See Joint Publishers and 

Songwriters, Reply Comments 

Submitted in Response to U.S. 

Copyright Office’s July 27, 2012 Notice 

of Proposed Rulemaking 10 (Dec. 10, 

2012) (‘‘Joint Publishers and 

Songwriters Reply Comments’’) 

(referencing 64 FR at 41287–89). But, as 

the RIAA correctly observed, the 1999 

interim rulemaking addressed only 

whether licensees could be permitted to 

maintain phonorecord reserves for DPD 

distributions. See RIAA Initial 

Comments at 7–8. The Office did not 

opine on the separate issue of whether 

negative reserve balances developed as 

a result of returns of physical product 

could be applied to future DPD 

distributions. 

The NPRM here raised two questions 

relevant to that previously unaddressed 

issue. First, the NPRM asked ‘‘whether 

there is statutory authority for allowing 

the application of a credit for negative 

reserve balances to digital phonorecord 

deliveries.’’ 77 FR at 44182. The Office 

concludes that there is such authority. 

The statute broadly delegates to the 

Register the authority to prescribe 

regulations for monthly royalty 

payments and monthly and annual 

statements of account. See 17 U.S.C. 

115(c)(2). The commenters have pointed 

to nothing to suggest Congress wished to 

constrain that authority with respect to 

DPDs when enacting the DPRSRA. 

Second, the NPRM asked whether 

‘‘there are reasons to limit the 

application of credits for negative 

reserve balances to physical 

phonorecords.’’ After considering the 

comments, the Office agrees with the 

RIAA that there is no sound basis for 

such a limitation. As the Office has 

previously explained, a negative reserve 

balance represents an overpayment from 

the licensee to the copyright owner. 45 

FR at 79043. Thus, permitting licensees 

to use DPDs to offset negative reserve 

balances would help satisfy one of 

Congress’s goals in enacting section 

115(c)(5): That ‘‘[t]he accounting system 

. . . insure full payment, but not 

overpayment.’’ 45 FR at 79039. 

For their part, the Joint Publishers and 

Songwriters urged that because ‘‘digital 

phonorecord deliveries cannot be 

returned, it would be incongruous to 

apply the negative reserve balance 

accounting to DPDs.’’ Joint Publishers 


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7The Joint Publishers and Songwriters claim that 

allowing licensees to offset the negative reserve 

balance using DPDs would encourage 

‘‘overshipping’’ of physical product. Joint 

Publishers and Songwriters Initial Comments at 6. 

The Office does not, however, understand how that 

concern would justify a music publisher’s retention 

of a royalty overpayment. 

8RIAA Initial Comments at 12–13 (‘‘If the record 

company applied a negative reserve balance to 

works by a writer other than the one who received 

the overpayment, the music publisher would need 

to debit the account of the writer who received the 

overpayment and credit the account of the writer 

whose work had the negative reserve balance 

applied to it.’’). 

9See also 37 CFR 201.19(a)(10) (defining 

‘‘phonorecord reserve’’ in terms of ‘‘the number of 

phonorecords’’); see also id. 201.19(a)(11) (defining 

‘‘negative reserve balance’’ in terms of ‘‘the 

aggregate number of phonorecords’’). 

and Songwriters Reply Comments at 9. 

But that observation conflates two 

separate issues. The fact that DPDs 

cannot be returned is the reason 

licensees are not permitted to develop 

reserves for DPDs. See 64 FR at 41287. 

That fact has no bearing on whether a 

licensee can claim a credit against an 

existing negative reserve balance for 

future DPDs. 

To be sure, as the Joint Publishers and 

Songwriters noted, Congress was 

concerned about ‘‘the possibility that, 

without proper safeguards, the 

maintenance of . . . reserves could be 

manipulated to avoid making payments 

of the full amounts owing to copyright 

owners.’’ See Joint Publishers and 

Songwriters Reply Comments at 12 

(quoting H.R. Rep. No. 45–1476, at 110). 

But, as the Office explained in its 1980 

rulemaking, that concern is principally 

addressed via ‘‘the statutory 

requirement for an annual CPA audit, 

coupled with our regulatory 

requirements including the application 

of ‘generally accepted accounting 

principles.’ ’’ 45 FR at 79040.7

b. Limitations on Licensees’ Ability To 

Apply Negative Reserve Balances to 

DPDs 

While the Office concludes that 

licensees may offset negative reserve 

balances using future DPDs, that 

conclusion raises a few further 

questions. First is whether a negative 

reserve balance must be applied to 

future DPD distributions of the same 

musical work, or whether it can be 

applied at the statement level to other 

works owned by the same person. See 

77 FR at 44182. The Office agrees with 

the Joint Publishers and Songwriters 

that the negative reserve balance should 

be applied at the work level, not the 

statement level. 

As the RIAA noted, the language of 

the existing rule as codified in the Code 

of Federal Regulations is somewhat 

ambiguous on the issue. RIAA Initial 

Comments at 11–12. But when the 

Office first promulgating that rule in 

1980, it unequivocally explained in the 

rule’s preamble that the negative reserve 

balance is ‘‘to be reduced by applying it 

against shipments of the same recording 

under the same compulsory license.’’ 45 

FR at 79043 (emphasis added). 

The Office sees no basis for 

reconsidering that determination. The 

Joint Publishers and Songwriters and 

Gear Publishing convincingly described 

the practical difficulties that would 

result from the application of negative 

reserve balances at the statement level. 

See Joint Publishers and Songwriters 

Reply Comments at 14–15; Gear Publ’g 

Initial Comments at 5–6. Among other 

things, ‘‘[c]ompulsory accountings are 

generally not made and delivered to the 

author, but rather to a publisher or 

administrator.’’ Gear Publ’g Initial 

Comments at 6. Thus, ‘‘[i]f a compulsory 

licensee was permitted to cross negative 

royalty balances between two or more 

songs then the writer of one work might 

be unfairly punished by the application 

of a negative reserve balance against 

another author’s work.’’ Id. Indeed, the 

RIAA acknowledged this problem, and 

proposed a solution that would create 

obvious administrative difficulties.8

Accordingly, to confirm that a negative 

reserve balance may only be applied at 

the work level, the Office has amended 

the regulations to specifically note that 

phonorecord reserves and negative 

reserve balances may only be comprised 

of the number of phonorecords ‘‘made 

under a particular compulsory license.’’ 

The second question is how the 

negative reserve balance, which is 

expressed in units of physical 

phonorecords, should be applied to DPD 

distributions, which are not necessarily 

tracked on the same basis. Balancing the 

competing principles discussed above, 

the Office concludes that the negative 

reserve balance should be applied to 

those DPDs that have the same statutory 

royalty structure and same statutory 

royalty rate as the physical product— 

i.e., under current rates, permanent 

digital downloads. See 37 CFR 385.3 

(establishing identical structure and rate 

for physical phonorecord deliveries and 

permanent digital downloads). As the 

RIAA noted, ‘‘applying negative reserve 

balances to standalone sales of 

permanent digital downloads is trivial, 

because the statutory royalty rate is the 

same for downloads as for physical 

products.’’ RIAA Initial Comments at 9. 

Moreover, the RIAA acknowledged that 

limiting the application of negative 

reserve balances to permanent digital 

downloads ‘‘takes care of the vast 

majority of relevant commerce, because 

the overwhelming proportion of DPDs 

accounted for by the record companies 

that potentially have negative reserve 

balances are permanent digital 

downloads.’’ Id. 

The RIAA nevertheless asked us to go 

further, and allow record companies to 

apply negative reserve balances to DPDs 

that have a different cents rate, like 

ringtones, (see 37 CFR 385.3(b) (setting 

rate at 24 cents per ringtone delivery)), 

and DPDs that have rates that are 

calculated on a percentage-of-revenue 

basis, like interactive streams (see 37 

CFR 385.12, 385.22). The Office 

declines to do so because that would 

run afoul of the principle that ‘‘[t]he 

accounting procedures must not be so 

complicated as to make use of the 

compulsory license impractical.’’ 45 FR 

at 79039. The complication arises 

because phonorecord reserves (and thus, 

negative reserve balances) ‘‘have 

historically been measured in product 

units’’ of physical product, not in 

dollars and cents. RIAA Initial 

Comments at 9.9 The RIAA’s solution 

for ringtones would be to divide the 24- 

cent ringtone rate by the base 9.1 cent 

physical phonorecord delivery rate to 

achieve a conversion factor, so that a 

delivery of a ringtone would be ‘‘worth’’ 

approximately 2.6374 physical 

phonorecord deliveries. Id. at 10. But 

that would result in reserves being 

expressed as fractions of physical units, 

which could cause problems when 

attempting to apply reserves to future 

physical phonorecord shipments. 

Moreover, that solution would work 

only for royalties that are expressed in 

cents terms; the RIAA offers little 

guidance on the manner in which credit 

could be claimed against negative 

reserves for digital distributions that 

carry a percentage-of-revenue royalty 

rate. Id. at 11. This would also make the 

accounting more difficult to understand 

and less transparent. 

The Office notes that this problem 

might be dealt with more 

comprehensively by expressing 

phonorecord reserves in terms of dollars 

and cents rather than in terms of 

physical units. But that would require a 

significant reworking of the existing 

regulations, including the manner in 

which royalties are calculated and 

accounted for. See generally 37 CFR 

201.19(d)(4)(ii). Notably, no commenter 

has suggested the Office make such 

drastic modifications to the rules. 

Moreover, the benefits of such 

modifications are uncertain, given the 

RIAA’s acknowledgment that applying 

the negative reserve balances to 

permanent digital downloads ‘‘takes 


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10The Joint Commenters explained: ‘‘[t]he issue 

is that older royalty accounting systems originally 

designed primarily for physical configurations may 

not have been designed to perform royalty 

calculations to more than four decimal places, 

while newer systems generally would. As a result, 

the Joint Commenters understand that many, but 

not all, payors have the capability to make this 

calculation to at least six decimal places, and view 

that degree of precision as desirable where 

available.’’ Joint Commenters Initial Comments at 

10. 

11See Joint Commenters Initial Comments at 12 

(explaining that ‘‘[p]aper checks sometimes 

care of the vast majority of relevant 

commerce.’’ RIAA Initial Comments at 

9. Thus, for all of the above reasons, the 

Office declines to allow licensees to 

apply their negative reserve balances to 

DPDs that carry a different royalty 

structure or rate than the physical 

product. 

Finally, the Joint Publishers and 

Songwriters noted that, in practice, the 

rates for permanent digital downloads 

and physical products may not be the 

same because of the prevalence of 

controlled-composition rates for 

physical distribution, and the limitation 

on such rates in the DPRSRA. See Joint 

Publishers and Songwriters Initial 

Comments at 12–14; see also 17 U.S.C. 

115(c)(3)(E). Accordingly, they are 

concerned that allowing licensees to 

offset a negative reserve balance 

expressed in terms of physical units 

carrying a lower royalty under such 

private agreements using digital 

distributions that may have a higher 

royalty under the statutory license 

would give the record companies a 

windfall. See Joint Publishers and 

Songwriter Initial Comments at 13–14. 

That concern, however, is purely the 

result of terms of private licenses— 

specifically, the fact that such licenses 

apparently ‘‘incorporate the regulations 

attendant to Section 115, including the 

reserve accounting rules.’’ Id. at 13. 

Such private agreements could avoid 

the problem by instead adopting 

different reserve accounting rules. To 

the extent there may be an 

underpayment of royalties as a result of 

the terms of private agreements, 

‘‘resolution of [that] issue in particular 

cases is best left to application of 

general legal principles in the 

appropriate forum.’’ 45 FR at 79041. 

4. Degree of Rounding for Decimal 

Points 

In drafting the proposed rule, the 

Office recognized the need for new 

regulations that determine the 

appropriate degree of rounding (in terms 

of the number of decimal places, based 

upon a fraction of a dollar rate) when 

licensees compute percentage-rate 

royalties associated with limited 

downloads, interactive streams, and 

incidental DPDs. 77 FR at 44182. The 

NPRM solicited comments on the extent 

to which licensees are to calculate per 

work royalty allocations. It also 

requested that commenters address 

whether a variance can be allowed in 

the degree of rounding based on the 

technical capabilities of various 

accounting systems, or whether 

reporting to a certain decimal place 

should be completely uniform. Id. 

In addressing these issues, the Joint 

Commenters maintained that rounding 

does not inherently favor one party over 

another. Joint Commenters Initial 

Comments at 10. They suggested that 

the new regulations require payors to 

calculate ‘‘actual or constructive perplay allocations (the number that is then 

multiplied by the number of plays to 

determine the per-work royalty 

allocation)’’ to at least six decimal 

places, provided their systems are 

technologically able to do so. Id. They 

further suggested that the new 

regulations require payors that are not 

technically equipped to make a sixdecimal place calculation round to four 

decimal places. Id. The Joint 

Commenters did not view the benefits of 

the additional precision (rounding to six 

places as opposed to four) as sufficient 

to require reengineering of already 

existing accounting systems. However, 

they did note that where payors are 

capable of making a calculation beyond 

four decimal places, the added precision 

is desirable.10 The only additional 

commenter on this issue, Gear 

Publishing, asserted that rounding 

should be limited to three decimal 

places and that ‘‘rates should never be 

less than 1/10th of a penny.’’ Gear 

Publ’g Initial Comments at 6–7. 

The Office agrees with the general 

proposition that the benefits and 

detriments of calculating actual or 

constructive per-work royalty 

allocations to six digits rather than four 

are essentially random, will generally be 

very small, and do not inherently favor 

the payee or the payor. As such, the 

Office has implemented language in the 

final rule that requires all compulsory 

licensees to make royalty calculations to 

at least four decimal places. 

Regarding the Joint Commenters’ 

request that the new regulations 

mandate additional precision based on 

technical accounting capabilities, the 

Office declines to include language in 

the final rule that would create a 

regulatory distinction between 

compulsory licensees with accounting 

systems designed to make royalty 

calculations to four decimal places and 

compulsory licensees whose systems are 

capable of making royalty calculations 

beyond four decimal places. The Office 

finds that the degree of reporting from 

licensee to licensee need not be 

completely uniform, provided all 

licensees make royalty calculations to at 

least four decimal places. Licensees may 

utilize additional precision beyond four 

decimal places where desirable, but the 

final rule does not require that they do 

so. 

C. Issues Presented Involving Method of 

Payment and Delivery of Royalties 

1. Electronic Payment 

The existing regulations provide that 

monthly statements of account shall be 

‘‘served on the copyright owner or the 

agent with authority to receive Monthly 

Statements of Account on behalf of the 

copyright owner to whom or which it is 

directed, together with the total royalty 

for the month covered by the Monthly 

Statement, by mail or by reputable 

courier service. . . .’’ 37 CFR 

201.19(e)(7)(i). 

In the NPRM, the Office proposed 

maintaining the current default 

requirement that payment be sent by 

mail or courier service. 77 FR at 44182. 

The Office also proposed amending the 

existing regulations to allow copyright 

owners and licensees to independently 

agree to alternative payment methods, 

including electronic payment. Id. 

Finally, the Office proposed adopting a 

regulation that echoed the existing 

requirement that ‘‘when both the 

Monthly Statement of Account and 

payment are sent by mail or courier 

service, they should be sent together,’’ 

but permitted licensees participating in 

independent agreements that authorize 

the sending of statements and payment 

by means other than mail or courier 

service to send them 

contemporaneously. Id. 

The final rule reflects the 

commenters’ general agreement with the 

Office’s proposal to retain service by 

mail or courier service as the default 

requirement. Likewise, it reflects the 

commenters’ general support of a rule 

that provides for independently agreed 

upon alternative payment methods. 

Regarding the timing of service 

requirements, the final rule deviates 

from the Office’s proposal that when a 

licensee serves statements and payment 

via mail or courier service, they must be 

sent together. The Joint Commenters’ 

explanation of the often-times separate 

processes for generating paper checks 

and paper royalty statements has 

persuaded the Office that it is 

sometimes impractical for licensees to 

send statements and payments 

simultaneously.11 Thus, the Office has 


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originate from a payor department other than the 

department that generates royalty statements, and 

the printing and mailing of checks is sometimes 

outsourced to a third party,’’ and that ‘‘some payees 

of mechanical royalties prefer to have their 

payments sent to their lockbox service, while 

receiving their statements themselves’’). 

included language in the final rule that 

reflects the Joint Commenters’ 

suggestion that payments may be sent 

together or separately, but if sent 

separately, the payments must include 

information reasonably sufficient to 

allow the payee to match them with 

corresponding statements. The final rule 

remains consistent with the existing 

requirement that both monthly 

statements of account and payment 

shall be served on or before the 20th day 

of the immediately succeeding month. 

2. Electronic Statements of Account 

The existing regulations require 

compulsory licensees to serve 

statements of account via mail or 

reputable courier service. 37 CFR 

201.19(e)(7), (f)(7). At the urging of 

stakeholders, the NPRM contemplated 

adopting a rule that would alter the 

existing regulations by compelling 

licensees to serve, and copyright owners 

to accept, statements of account via 

electronic transmissions. 77 FR at 

44182–83. Although the proposed rule 

did not go so far as to fully require 

stakeholders to serve and accept 

electronic statements of account, it did 

include provisions whereby a copyright 

owner could notify a licensee of its 

willingness to accept statements by 

means of electronic transmission and 

require licensees whose statements 

covered more than 50 works to serve 

them electronically. The proposed rule 

also included a provision that would 

permit stakeholders to agree upon a 

procedure for verification of authority, 

other than a handwritten signature, 

when statements of account are served 

electronically. 

a. Electronic Statements in General 

Most commenters agreed in principle 

with the proposed rule’s attempt to 

reconcile the various stakeholder 

preferences concerning the format and 

method of delivery for statements of 

account. In this vein, the Joint 

Commenters proposed that the Office 

adopt regulations whereby ‘‘[e]ach 

payor could in the first instance choose 

its preferred mode of delivery, but if a 

payee requests the other approach, that 

request would be honored within a 

reasonable grace period.’’ Joint 

Commenters Initial Comments at 13. 

They further proposed that, to 

‘‘minimize disruption,’’ the new 

regulations should only permit a payor 

to change its elected preference once 

annually. Id. In support of their 

proposal, the Joint Commenters 

explained: ‘‘What has happened in 

practice is that services and agents 

making large scale use of the 

compulsory license have defaulted to 

electronic delivery, but when some 

payees have requested paper statements, 

they have provided them. Conversely, 

record companies have defaulted to 

paper statements, and still use them for 

many payees, but deliver statements 

electronically when requested.’’ Id. at 

12–13. 

The final rule takes into account the 

general agreement among commenters 

that the new regulations should 

authorize electronic service of 

statements of account by adopting 

provisions that permit copyright owners 

to elect the format (paper or electronic) 

in which they receive statements. 

However, contrary to the Joint 

Commenters’ proposal, the Office 

declines to authorize licensees to 

unilaterally elect to serve statements of 

account electronically. Instead, 

consistent with Gear Publishing’s 

proposal, the final rule retains its 

requirement that licensees submit 

statements of account by mail or 

reputable courier by default, and 

provides copyright owners with the 

option to demand electronic statements. 

See Gear Publ’g Initial Comments at 8– 

9. The final rule does not restrict the 

copyright owners’ ability to amend their 

elected service preference. However, 

licensees will not be required to make 

such changes effective until the first 

accounting period ending at least 30 

days after the receipt of a copyright 

owner’s election. 

b. Mode of Electronic Delivery 

The proposed rule included language 

that suggested various acceptable means 

of formatting and delivering electronic 

statements of account. The Joint 

Commenters disagreed with this 

approach, suggesting that the Office 

should avoid specifics and instead 

address mode of electronic delivery 

with ‘‘only a general statement 

concerning format and security.’’ Joint 

Commenters Initial Comments at 13. 

Specifically, they stated: ‘‘In practice, 

electronic statements are generally sent 

by email, made available for download 

from a portal, or uploaded to an FTP 

site. Since electronic delivery is 

accomplished in many ways, and future 

technological changes could bring 

further changes in the way statements 

are delivered, the Joint Commenters 

believe that regulations should not 

address this subject in detail.’’ Id. 

The Office agrees with the Joint 

Commenters and has adopted language 

in the final rule that requires licensees 

to submit statements of account in ‘‘a 

readily accessible electronic format 

consistent with prevailing industry 

practices applicable to comparable 

electronic delivery of comparable 

financial information.’’ Id., exh. A, A– 

14. The Office declines, however, to 

adopt the Joint Commenters’ further 

proposal that the rule specify that 

‘‘[r]easonable measures, consistent with 

prevailing industry practices applicable 

to comparable electronic delivery of 

comparable financial information, shall 

be taken to limit access to the Annual 

Statement of Account to the copyright 

owner or agent to whom or which it is 

directed.’’ Id. The Joint Commenters 

nowhere explain the rationale for this 

provision’s inclusion in their proposal, 

and thus the Office has no basis in the 

record for adopting it. Moreover, for 

reasons explained infra, the Office 

declines to include language in the 

regulations that may be construed as 

permitting ‘‘confidentiality’’ provisions 

intended to limit access to the 

statements of account to the copyright 

owner or agent to whom the statement 

is directed. 

c. Verification of Authority 

The NPRM proposed an exception to 

the requirement for a handwritten 

signature when service is made 

electronically. 77 FR 44183. 

Specifically, the proposed rule specified 

that if a statement is served 

electronically, the licensee and 

copyright owner are to agree upon a 

procedure for verification of authority. 

The Joint Commenters have pointed 

out that this aspect of the proposed 

regulations is ‘‘impracticable for largescale uses of the compulsory license’’ 

and creates the risk of unnecessary 

strain on the licensing system. Joint 

Commenters Initial Comments at 13. 

Specifically, they state: ‘‘Federal law 

supports the use of electronic 

signatures, see 15 U.S.C. § 7004(b); 

sending of unauthorized mechanical 

accounting statements has not been a 

problem; and there is no reason to 

believe that unauthorized mechanical 

accounting statements are more likely to 

be a problem with electronic 

transmission than paper-based 

transmission.’’ Id. 

The Office agrees that the proposed 

approach has the potential to create an 

unnecessary administrative burden, and 

that electronic signatures are an 

acceptable means for verifying 

electronic records. See 15 U.S.C. 

7006(4)–(5). Accordingly, the final rule 

allows for the use of electronic 


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56198 Federal Register / Vol. 79, No. 181 / Thursday, September 18, 2014 / Rules and Regulations 

12 17 U.S.C. 115(c)(5) (‘‘Each monthly payment 

shall be made under oath and shall comply with 

requirements that the Register of Copyrights shall 

prescribe by regulation’’). 

13The Joint Commenters focused on the language 

of paragraph (c)(5), arguing that ‘‘determining 

precisely what are the ‘royalties for the month next 

proceeding’ is a topic for the accounting 

regulations.’’ Joint Commenters Initial Comments at 

14–15. But that view fails to account for the 

language of paragraph (c)(2), which appears to 

provide that royalties are ‘‘payable’’ when 

phonorecords are made and distributed. The Joint 

Commenters’ reliance on the provisions for reserve 

accounting is similarly misplaced. See Joint 

Commenters Initial Comments at 14–15. The 

reserve accounting rules specify that, in certain 

cases, a licensee need not make a royalty payment 

when a record is sold with a return privilege. See 

37 CFR 201.19(c). But those rules are based on the 

logic that phonorecords that have been sold with a 

return privilege have not been ‘‘distributed’’ within 

the meaning of the statute, and thus royalties are 

not yet ‘‘payable.’’ See 17 U.S.C. 115(c)(2) 

(providing that a phonorecord is considered 

‘‘distributed’’ when the licensee ‘‘has voluntarily 

and permanently parted with its possession’’); see 

also H.R. Rep. No. 94–1476, at 110–11. In contrast, 

a DPD is distributed on the date that it is digitally 

transmitted. 

signatures on electronic statements of 

account. 

3. Minimum Amount for Payment 

The NPRM recognized that, under the 

current rates for the making and 

distribution of physical and digital 

phonorecords, there is potential for the 

transactional costs associated with 

making a particular monthly royalty 

payment to a given copyright owner to 

outstrip the actual value of the payment 

(for both copyright owners and 

compulsory licensees). 77 FR at 44183. 

To address such a scenario, the NPRM 

queried whether it would be permissible 

under the statute for the Office to 

implement a rule that requires royalty 

payments to meet a minimum threshold 

before they become due. Id. The Office 

also sought comment on what would 

constitute an acceptable minimum 

threshold. Id. 

The Joint Commenters urged that it 

was within the Office’s authority to 

adopt a minimum payment threshold, 

and proposed that the Office implement 

regulations that give licensees discretion 

to set a minimum payment threshold of 

up to $50, with payment of any royalty 

accrual that remains less than that 

amount to be deferred until either the 

time of the annual statement or 

whenever the royalty accrual exceeds 

$50, whichever comes first. Joint 

Commenters Initial Comments at 15. 

Gear Publishing agrees in principle with 

the Joint Commenters’ approach, but 

proposes that the Office adopt a default 

threshold of one cent and place the 

burden of obtaining the optional $50 

minimum on the licensee. Gear Publ’g, 

Add’l Reply Comments Submitted in 

Response to U.S. Copyright Office’s Dec. 

26, 2013 Request for Add’l Comments at 

1–3 (Feb. 14, 2014) (‘‘Gear Publ’g Add’l 

Reply Comments’’). 

After carefully considering the issue, 

the Office concludes that it has only 

very limited authority to establish a 

minimum payment threshold. Although, 

as the Joint Commenters note, the 

statute gives the Office discretion in 

setting forth the scope and form of any 

monthly payments made under the 

statute, the statute also cabins the 

Office’s ability to alter the basic 

schedule of royalty payments.12 In 

particular, the statute states that ‘‘the 

royalty under a compulsory license 

shall be payable for every phonorecord 

made and distributed in accordance 

with this license,’’ and that a 

phonorecord is ‘‘distributed’’ when the 

licensee ‘‘has voluntarily and 

permanently parted with its 

possession.’’ 17 U.S.C. 115(c)(2). In 

addition, the statute specifies that 

‘‘[r]oyalty payments shall be made on or 

before the twentieth day of every month 

and shall include all royalties for the 

month next preceding.’’ Id. 115(c)(5). 

Thus, when read as a whole, the statute 

provides that royalties are payable when 

the phonorecords have been made and 

distributed by the licensee, and that all 

royalties payable for the prior month 

must be made by the twentieth of every 

month.13

But while the statute on its face 

appears to leave the Office little 

discretion to alter the basic rules 

regarding when royalties must be paid, 

the Office does have the inherent 

authority to allow the withholding of 

amounts it determines are de minimis. 

As the DC Circuit has explained, 

‘‘inherent in most statutory schemes’’ is 

the power for administrative agencies to 

‘‘overlook circumstances that in context 

may fairly be considered de minimis.’’ 

Ala. Power Co. v. Costle, 636 F.2d 323, 

360 (DC Cir. 1979). The court explained 

that ‘‘[t]he ‘de minimis’ doctrine that 

was developed to prevent trivial items 

from draining the time of the courts has 

room for sound application to 

administration by the Government of its 

regulatory programs.’’ Id. (internal 

quotation marks and citation omitted). 

The court stressed that ‘‘[t]he ability 

. . . to exempt de minimis situations 

from a statutory command is not an 

ability to depart from the statute, but 

rather a tool to be used in implementing 

the legislative design.’’ Id. Thus, there is 

‘‘likely a basis for an implication of de 

minimis authority to provide exemption 

when the burdens of regulation yield a 

gain of trivial or no value.’’ Id. at 360– 

61. 

Accordingly, the Office concludes 

that a regulation permitting licensees to 

defer royalty payments that do not meet 

a de minimis payment threshold would 

be consistent with the Office’s 

regulatory authority, but that the Office 

lacks authority to establish a higher 

threshold. 

In determining the appropriate de 

minimis payment threshold, the Office 

notes as an initial matter that the 

calculation mechanisms in the rates 

established by the CRB are such that 

payments to some copyright owners 

may amount to only fractions of a cent. 

Given the impossibility of paying a 

fraction of a cent via commonly used 

banking systems, it is obvious that our 

authority to declare certain otherwise 

payable royalties as de minimis would 

allow setting a minimum payment 

threshold of one cent. See Joint 

Commenters Initial Comments at 14 

(‘‘Because the banking system cannot 

process payments for less than a cent, a 

minimum royalty threshold of a cent is 

simply necessary’’). Accordingly, the 

final rule provides for a mandatory 

minimum payment threshold of one 

cent and permits a compulsory licensee 

to defer delivery of monthly statements 

of account and any associated royalty 

payments until the cumulative unpaid 

royalties that it owes a copyright owner 

equal at least one cent. 

The Office further concludes, 

however, that its authority to declare 

certain payments as being de minimis 

extends beyond that bare minimum 

threshold. There appears to be some 

understanding among the parties that, in 

the specific circumstances associated 

with the Section 115 license, the 

transaction costs involved with making 

a royalty payment could possibly justify 

a threshold of up to $50. See generally 

Joint Commenters Initial Comments at 

14–15. In particular, the licensee must 

incur cost to generate and deliver the 

monthly statement and payment, and 

the copyright owner must incur cost in 

processing those statements and 

payments in their financial and royalty 

systems. Id. at 14. Thus, as the Joint 

Commenters explain, ‘‘[t]he effort and 

expense required on each side can 

dwarf the payments sometimes 

generated from use of less popular 

songs.’’ Id. at 14. The Office does not 

believe, however, that the record in this 

rulemaking can support the finding that 

all payments of under $50 are de 

minimis. The Office instead finds, based 

on our understanding of the transaction 

costs involved, and limited to the 

specific circumstances associated with 

the Section 115 license, that royalty 

payments of under $5 can fairly be 

described as de minimis. See Ala. 


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14For instance, David Lowery, the lone objecting 

commenter addressing this issue, urged that 

licensees should ‘‘pay [copyright owners] what they 

owe when they owe it like everyone else.’’ David 

C. Lowery, Comments Submitted in Response to 

U.S. Copyright Office’s July 27, 2012 Notice of 

Proposed Rulemaking at 2 (Dec. 10, 2012). 

15The Office has not adopted the Joint 

Commenters’ proposal to specify that the 

‘‘copyright owner and the compulsory licensee or 

authorized agent may agree upon alternative 

methods of accounting and payment’’ and that 

statements of account or payments ‘‘provided in 

accordance with such an agreement shall not be 

rendered invalid for failing to comply with the 

specific requirements of’’ the regulations. Joint 

Commenters Initial Comments, exh. A, at A–15, A– 

22. Inclusion of these provisions is unnecessary. 

The statute itself provides that ‘‘[l]icense 

agreements voluntarily negotiated at any time . . . 

shall be given effect in lieu of’’ the rates and terms 

established by the CRB. 17 U.S.C. 115(c)(3)(E)(i). It 

necessarily follows that such agreements can also 

diverge from the Register’s payment and statementof-account regulations, because those regulations 

are so closely intertwined with the rates and terms 

adopted by the CRB. 

16 In so providing, the rule incorporates the 

essential features of the detail requirements that the 

Copyright Royalty Judges had adopted in the latest 

Section 115 rate proceeding, but that the Register 

determined would impermissibly encroach on the 

Register’s authority to establish requirements for 

monthly and annual statements of account. See 78 

FR 28770 (May 16, 2013); see also Joint 

Continued 

Power, 636 F.2d at 360–61 (holding that 

there is ‘‘likely a basis for an 

implication of de minimis authority to 

provide exemption when the burdens of 

regulation yield a gain of trivial or no 

value’’); cf. 37 CFR 201.11(i)(3) 

(establishing a five-dollar threshold for 

payment of interest charges for any 

royalty underpayment or late payment). 

To be sure, the Office recognizes that 

this assessment of the transaction costs 

is inexact, and that certain copyright 

owners may wish to receive statements 

of account and payments where the 

royalties owed are less than five dollars 

in a given month.14 The Joint 

Commenters’ proposal, however, 

addresses these concerns by allowing a 

copyright owner to opt-out of the 

minimum threshold. See Joint 

Commenters Initial Comments at 15 

(‘‘[T]he Joint Commenters’ proposed 

regulations provide a mechanism for a 

copyright owner to obtain a monthly 

payment anytime it has at least a cent 

in royalty accruals.’’). In addition, the 

Joint Commenters’ proposal requires 

payment of any cumulative unpaid 

royalties, even if they are below the 

threshold amount, at the time of 

delivery of the annual statement of 

account. Id. 

Accordingly, in addition to setting the 

mandatory minimum threshold of one 

cent described above, the final rule 

gives licensees the discretion to set a 

default minimum payment threshold of 

up to $5 for payments to any copyright 

owner. (The Office stresses that this is 

a per-copyright-owner threshold, and 

not a per-work threshold). It allows the 

licensee to defer production of 

statements of account and payment of 

any royalty accrual that remains less 

than that amount until the earlier of the 

time for rendering the annual statement 

of account, the time for rendering the 

monthly statement of account for the 

month in which the compulsory 

licensee’s cumulative unpaid royalties 

meet or exceed the minimum threshold, 

or the time for rendering the monthly 

statement of account that is due no 

sooner than 30 days after the copyright 

owner provides written notice of its 

desire to receive payments that are less 

than the minimum threshold 

established by the licensee. 

While the Office contemplated 

adopting Gear Publishing’s proposed 

approach, it finds it too onerous a 

burden to force licensees to proactively 

negotiate minimum payment thresholds 

with all copyright owners. Further, it 

would defeat the purpose of permitting 

a minimum threshold—which is to 

implement a default means of 

preventing situations where the 

transactional costs associated with a 

given royalty payment outweigh the 

actual value of the payment (for both 

copyright owners and compulsory 

licensees). 

D. Issues Presented Involving Reporting 

on Statements of Account 

1. Statement of Account Issues in 

General 

The existing rule set forth detailed 

requirements for the content of monthly 

and annual statements, including 

information about the licensee and the 

licensee’s use of the compulsory license. 

See 37 CFR 201.19(e)(2) and (3); 

201.19(f)(3) and (4). The proposed rule 

carried forward these basic 

requirements both for cents-rate and 

percentage-rate usages, with only minor 

alterations to account for the newer 

royalty rate structures. See 77 FR at 

44188–89, 44194. 

The Joint Commenters recommended 

a number of technical changes to the 

reporting information. See generally 

Joint Commenters Initial Comments, 

exh. C. For instance, the Joint 

Commenters recommended the Office 

require the reporting of International 

Standard Recording Codes (‘‘ISRC’’), an 

international standard code for uniquely 

identifying sound recordings, where 

that code is known. According to the 

Joint Commenters, this will further the 

ability to automatically match large 

statements to repertoire databases. For 

the same reason, the Joint Commenters 

also recommended that the Office 

require the reporting of the writers of 

the musical work, when that 

information is known. 

The Office has largely accepted these 

technical suggestions, which garnered 

no opposition from other commenters.15

The final rule, however, includes a few 

minor changes to the amendments 

proposed by the Joint Commenters. The 

Joint Commenters proposed that the 

ISRC not be reported for cents-rate 

usages and for multi-recording products 

in a music bundle. The Office concludes 

that these carve-outs would add 

needless complication to the rule. 

Instead, the Office has adopted a broad 

rule requiring the reporting of ISRCs 

when that information is known. The 

Office has also added to the writer name 

requirement to permit the reporting of 

other unique identifiers, such as the 

International Standard Name Identifier 

(‘‘ISNI’’) of the writer, or the 

International Standard Musical Work 

Code (‘‘ISWC’’) for the musical work. In 

addition, the Joint Commenters’ 

proposal would have not required the 

reporting of writer name information for 

statements with fewer than 50 lines. 

Again, if that information is known, the 

Office sees no reason to exclude it from 

the statements of account. 

More substantively, the Joint 

Commenters criticized the proposed 

rule’s requirement that, for all 

percentage-rate usages, the statements of 

account must report information such as 

the number of phonorecords involved 

broken down by configuration. The Joint 

Commenters explained that ‘‘[u]nder 

Part 385 Subparts B and C, the number 

of phonorecords made and distributed is 

not generally determinative of the rate 

calculation, and phonorecords of 

multiple configurations are generally 

treated together as part of a single rate 

calculation.’’ Id. at 5. Thus, as with the 

royalty calculation provisions addressed 

above, the Joint Commenters 

recommended a minimalist approach, 

requiring simply a ‘‘separate listing of 

the information required’’ to calculate 

the rates under part 385. Joint 

Commenters Initial Comments, exh. A, 

at A–9. No other commenter opposed 

that proposal. 

The Office agrees with the Joint 

Commenters’ critique of the proposed 

rule and largely adopts its 

recommendation to incorporate by 

reference the requirements of the rates 

in part 385. The final rule makes clear, 

however, that licensees are obligated to 

provide a detailed and step-by-step 

calculation of royalties under that 

part.16


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56200 Federal Register / Vol. 79, No. 181 / Thursday, September 18, 2014 / Rules and Regulations 

Commenters, Add’l Comments Submitted in 

Response to U.S. Copyright Office’s July 27, 2012 

Notice of Proposed Rulemaking (Jan. 30, 2013) at 2– 

3 (urging the adoption of these ‘‘detail 

requirements’’). 

17See also Village of Barrington, Ill. v. Surface 

Transp. Bd., 636 F.3d 650, 661 (D.C. Cir. 2011) 

(explaining that a statute must ‘‘unambiguously’’ 

foreclose the exercise of agency discretion). The 

Office acknowledges that it has, on an earlier 

occasion, suggested that the statute mandates that 

statements of account contain an individual 

accounting of promotional DPDs. See 74 FR 4537, 

4543 (Jan. 26, 2009) (‘‘There is no statutory 

authority for an exception to this requirement for 

certain types of ‘‘phonorecords’ or for the 

participants to alter this provision by agreement.’ ’’). 

That sentence, however, was not directly relevant 

to the issue that was being addressed on that earlier 

occasion, which was related to the relevant division 

of authority between the CRB and the Register with 

respect to statements of account. Id. 

2. Reporting of Promotional Digital 

Phonorecord Deliveries 

As the NPRM explained, 

‘‘[p]romotional Digital Phonorecord 

Deliveries are often an important tool 

for record labels and services to attract 

new listeners, create awareness about a 

particular artist, and increase plays.’’ 77 

FR at 44183. In light of these 

considerations, the CRB established a 

royalty rate of zero for certain 

promotional interactive streams and 

limited downloads and for free trial 

periods for mixed service bundles, paid 

locker services, and limited offerings. 

See 37 CFR 385.14; 385.24. (There is no 

promotional rate for cents-rate usages.) 

The CRB imposed detailed limitations 

on the use of the promotional rates, 

including recordkeeping requirements. 

See 37 CFR 385.14(a)(2),(3); 

385.24(a)(4)(i), (b)–(c). 

This raised the question of whether 

and how promotional DPDs should be 

accounted for in the statements of 

account. The proposed rule noted that 

‘‘[e]ven though no royalty is owed in 

these circumstances, it is unclear 

whether licensees should give a full 

accounting of all the phonorecords 

made under the license in the Statement 

of Account.’’ 77 FR at 44183. The NPRM 

thus asked ‘‘whether the statute requires 

that Statements of Account contain play 

information on promotional digital 

phonorecord deliveries.’’ Id. It further 

asked ‘‘[i]f the conclusion is that there 

is no statutory requirement, . . . 

whether digital phonorecords offered at 

a promotional rate or for a free trial 

period should be reported and with 

what frequency, e.g., monthly or 

annually.’’ Id. The proposed rule 

required detailed accounting of 

promotional DPDs, on the theory that 

such a requirement ‘‘would not seem to 

be a hardship on the licensees,’’ because 

the CRB’s recordkeeping rules ‘‘require[] 

retention of complete and accurate 

records of the relevant authorization, 

identification of each sound recording 

of a musical work made available 

through the free trial period, the activity 

involved, and the number of plays and 

downloads for each recording.’’ Id. 

The Joint Commenters opposed any 

requirement to report promotional uses 

as part of statements of account, on the 

ground that any such requirement 

would be administratively burdensome. 

See Joint Comments at 15–19. Gear 

Publishing supported the imposition of 

such a reporting requirement, citing the 

utility of such information for copyright 

owners. Gear Add’l Reply Comments at 

4. 

After careful consideration, the Office 

has decided not to require detailed 

reporting of promotional uses. Instead, 

the final rule only requires the licensee 

to affirmatively provide the copyright 

owner with detailed instructions on 

how to obtain the records of any 

promotional uses that are required to be 

maintained under the CRB’s existing 

rules. 

First, the Office concludes that the 

statute does not unambiguously require 

statements of account to include 

detailed information (like play counts) 

about licensees’ use of DPDs for 

promotional purposes. The statute 

generally grants the Register broad 

discretion to adopt regulations 

governing monthly and annual 

statements of account. It states that 

‘‘[e]ach monthly payment . . . shall 

comply with requirements that the 

Register of Copyrights shall prescribe by 

regulation,’’ and requires the Register to 

‘‘prescribe regulations under which 

detailed cumulative annual statements 

of account . . . shall be filed[.]’’ 17 

U.S.C. 115(c)(5). The only arguable 

limitation on that generally broad 

delegation of rulemaking authority 

comes in the last sentence of section 

115(c)(5): ‘‘The regulations covering 

both the monthly and annual statements 

of account shall prescribe the form, 

content, and manner of certification 

with respect to the number of records 

made and the number of records 

distributed.’’ Id. 

Properly understood, this sentence 

instructs the Register to prescribe (1) the 

‘‘form’’ of the statements, (2) the 

‘‘content’’ of the statements, and (3) the 

‘‘manner of certification’’ of the 

statements ‘‘with respect to the number 

of records made and the number of 

records distributed.’’ Id. The last clause 

requires only that the ‘‘manner’’ of 

certification relate in some way to the 

number of records made and distributed 

by the licensee. Cf. Landmark Legal 

Found. v. IRS, 267 F.3d 1132, 1136 (D.C. 

Cir. 2001) (noting ‘‘the extremely 

general character of the connecting 

phrase—‘with respect to’ ’’). The clause 

does not, however, require statements of 

account themselves to reflect the exact 

number of records made and distributed 

in all circumstances.17

Second, given that the statute does 

not clearly require statements of account 

to track distributions of promotional 

DPDs, the Office must instead consider 

whether such a requirement would 

nevertheless be appropriate in light of 

the overall purposes of the statute, 

including the goals of preventing 

‘‘economic harm from companies which 

might refuse or fail to pay their just 

obligations’’ and of ensuring the 

administrability of the statutory license. 

H.R. Rep. No. 94–1476, at 111. 

Several competing considerations are 

relevant to that analysis. On the one 

hand, as Gear Publishing notes, 

information regarding promotional uses 

may have value for copyright owners, 

and could help ensure that licensees are 

complying with the conditions imposed 

by the CRB for use of the promotional 

rate. Gear Publ’g Add’l Reply Comments 

at 4. On the other hand, promotional 

uses carry a zero rate, and such uses 

thus have little direct financial impact 

on the copyright owners. Moreover, the 

Joint Commenters—representing both 

copyright owners and compulsory 

licensees—have described in detail the 

administrative burden associated with 

reporting promotional uses in the 

statements of account. Joint 

Commenters Initial Comments at 15–19. 

According to the Joint Commenters, 

many promotional uses are conducted 

by third-party licensees, as with the 

‘‘streaming of preview clips from 

download stores,’’ but detailed 

information regarding play counts and 

the like are typically not reported into 

the royalty accounting systems of 

compulsory licensees. Id. at 16. Thus, 

‘‘[i]mposing a new reporting 

requirement would necessitate creating 

new reporting processes.’’ Id. In 

addition, as noted, the CRB already 

requires licensees to keep records of 

promotional uses and make them 

available to copyright owners on 

request, and thus the proposed rule was 

largely duplicative of provisions already 

in effect. Id. at 18. 

Balancing these considerations, the 

Office has decided not to require 

detailed reporting of promotional uses 

in the monthly and annual statement of 

account. In particular, we believe that 

the needs of copyright owners are 

largely satisfied by the recordkeeping 

terms the CRB has adopted for 


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18The Office notes that the CRB regulations do 

not appear to require services to maintain per-play 

counts of promotional uses of interactive streaming 

of clips. See 37 CFR 385.14(a)(1)(iii)(A), (d). At this 

time, the Office is not requiring the collection of 

that information in its statement-of-account 

regulations, on the ground that the parties in the 

proceedings before the CRB believed that such 

detailed recordkeeping was not necessary for those 

specific uses. 

19For percentage-rate usages, information about 

third-party distributors is provided to copyright 

owners as a matter of course. As the RIAA notes, 

‘‘[t]he percentage rate calculation is specific to a 

particular service offering, so it is only natural that 

the offering would be identified in applicable 

statements. Moreover, this usage is typically 

accounted for by the services [who pay a percentage 

rate] themselves, making identification of the 

distributor trivial.’’ RIAA Initial Comments at 14. 

The final rule codifies the practice of identifying 

the distributor or third-party distributor for 

percentage-rate usages. 

promotional uses, which give copyright 

owners the right to obtain records of 

promotional uses on request. See 37 

CFR 385.14(a)(2), (3); 385.24(a)(4)(i), 

(b)–(c). At the same time, the Office is 

concerned that some copyright owners 

may not know how to invoke that right. 

Accordingly, the final rule provides that 

statements of account must include 

detailed instructions on how a copyright 

owner may obtain the records of 

promotional uses that are required to be 

maintained or provided under section 

385.14 and section 385.24, or any other 

similar regulation the CRB may 

promulgate in the future, including 

records that are required to be 

maintained or provided by third-party 

services that are authorized by the 

licensee to engage in promotional 

uses.18 Where licensees are themselves 

engaged in promotional uses of the 

copyrighted works (e.g., a record label 

Web site that streams free previews), 

providing this basic information should 

be a trivial burden. Where a licensee has 

authorized a third-party service to 

engage in promotional uses, the annual 

statement should disclose sufficient 

information to allow the copyright 

owner to request the material that the 

service is required to maintain under 

the terms adopted by the CRB. This 

modest requirement will ensure that 

copyright owners are regularly informed 

of their right to request records of 

promotional uses. 

3. Reporting the Identification of ThirdParty Licensees 

The NPRM highlighted the ongoing 

disagreement between copyright owners 

and compulsory licensees regarding the 

identification of authorized third-party 

distributors of DPDs and ringtones in 

statements of account.19 FR at 44183– 

84.19. The Office accordingly solicited 

comments on whether new regulations 

should require licensees to issue 

statements that include both the 

identities of the third-party services 

they authorize to distribute DPDs and 

ringtones and the number of DPDs and 

ringtones each such service distributes. 

Id. 

The responses received were 

consistent with the summary of the 

disagreement laid out in the NPRM. 77 

FR 44183–84. Commenting copyright 

owners—represented by the Joint 

Publishers and Songwriters group, and 

Gear Publishing—favored amending the 

existing regulations to require 

compulsory licensees to identify each 

third-party service that distributes a 

DPD or ringtone in connection with the 

compulsory license as well as the total 

number of DPDs and ringtones that 

specific service distributed. See Joint 

Publishers and Songwriters Initial 

Comments at 3; see also Gear Publ’g 

Initial Comments at 14–15. The 

copyright owners claimed that, without 

such information, publishers and 

songwriters have no way of determining 

what third-party services are authorized 

to distribute DPDs and ringtones. Id. 

They further asserted that, given the rise 

in the number of third parties providing 

digital distribution services, permitting 

original licensees to ‘‘cloak’’ the 

identities of sublicensees deprives them 

of valuable information and limits their 

ability to participate in the expanding 

digital marketplace. Joint Publishers and 

Songwriters Initial Comments at 4–5. 

Regarding the ease with which licensees 

could implement such regulations, the 

copyright owners claimed that thirdparty services already track and report 

DPD and ringtone distributions to 

compulsory licensees, making the 

licensees’ identification of third-party 

services in their statements of accounts 

‘‘not only reasonable, but also necessary 

to ensure transparency in the digital 

environment.’’ Joint Publishers and 

Songwriters Initial Comments at 3–4. 

Commenting compulsory licensees— 

represented by RIAA and A2IM—took 

the opposing view. RIAA Reply 

Comments at 11–17; A2IM Reply 

Comments at 3–4. They disagreed with 

the copyright owners’ assertion that this 

aspect of the Section 115 license 

requires additional transparency and 

maintained that ‘‘[t]he mere fact that 

some publishers are curious to have this 

information is not a sufficient reason to 

require record companies to reengineer 

their royalty reporting systems to 

provide it.’’ RIAA Reply Comments at 

15; see also RIAA Initial Comments at 

13–14. In this regard, the RIAA claimed 

that separately calculating and reporting 

usage figures for each third-party 

distributor would lead to a 

multiplication in the volume of data 

processed by record companies, would 

cause an increase in the size of the 

statements delivered to copyright 

owners, and would require record 

companies with ‘‘legacy royalty 

accounting systems’’ to make 

‘‘significant changes to business 

processes and systems, at a substantial 

cost.’’ RIAA Initial Comments at 14. 

Likewise, A2IM claimed that small- and 

medium-sized record companies often 

do not have access to this information 

(where digital distribution is handled 

through an aggregator) and that, even if 

they could obtain this information, a 

requirement to report it in the manner 

the commenting copyright owners 

suggested would ‘‘dramatically 

increase’’ their administrative burden. 

A2IM Reply Comments at 3. 

After careful consideration of the 

comments, the Office has decided to 

amend the regulations to require 

licensees to issue statements of account 

that identify authorized third-party 

distributors, and list the number of 

DPDs and ringtones each such party 

distributes. The Office is of the opinion 

that transparency is critical where 

copyright owners are compelled by law 

to license their works. As the Joint 

Publishers and Songwriters pointed out, 

information regarding the breadth of the 

distribution of their works has the 

potential to influence their future 

business decisions and impact the scope 

of their involvement in the digital music 

industry. Joint Publishers and 

Songwriters Initial Comments at 5. In 

addition, increasing transparency of the 

uses of music is likely to enhance the 

copyright owners’ faith in the accuracy 

of the accounting statements. The Office 

fails to see the advantages in permitting 

licensees to withhold such basic 

information as: What services are 

exploiting their works, who is 

authorizing the services to exploit their 

works, and the frequency with which 

the works are being exploited. To the 

contrary, the music industry stands to 

profit from increased transparency 

among copyright owners and the 

licensees who exploit protected works 

pursuant to the compulsory license. 

The Office is cognizant that 

compulsory licensees will have to bear 

some administrative burden in 

implementing this amendment. As the 

RIAA correctly noted, the Office has 

previously cautioned against the 

implementation of regulations that 

would ‘‘substantially multiply necessary 

paperwork’’ and ‘‘put compulsory 

licensing beyond the means of many 

record companies.’’ 45 FR at 79039. 

Nevertheless, the Office is not 

persuaded by the licensees’ argument 

that the burden in this instance would 


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20The Office recognizes that some commenters 

requested the establishment of a right to audit the 

records kept by users of the compulsory license as 

part of these statement-of-account regulations. The 

Office declines to adopt such audit provisions 

because it is not apparent that the statute authorizes 

the Register to do so. However, the Office reiterates 

its conclusion that the CRB does have the authority 

to issue requirements regarding audit of records that 

are required to be kept as part of the terms of the 

compulsory license. See 73 FR at 48398. 

21See Joint Commenters Reply Comments at 5– 

6; Music Reports, Reply Comments Submitted in 

Response to U.S. Copyright Office’s July 27, 2012 

Notice of Proposed Rulemaking at 9 (Dec. 10, 2012) 

(‘‘Music Reports Reply Comments’’); see also RIAA 

Reply Comments at 2, 18 (urging the Office to adopt 

a certification option for small-scale use of the 

compulsory license). 

22Although no commenter has disputed our 

statutory authority to adopt this amendment, the 

Office has independently concluded that this 

bifurcated certification procedure is consistent with 

the statutory instruction to ‘‘prescribe the form, 

content, and manner of certification with respect to 

the number of records made and the number of 

records distributed.’’ 17 U.S.C. 115(c)(5). As 

indicated above, the statutory language gives the 

Register broad discretion with regard to certification 

of the processes used to track usage of the license 

Cf. Landmark Legal Found. v. IRS, 267 F.3d 1132, 

1136 (DC Cir. 2001) (noting ‘‘the extremely general 

character of the connecting phrase—‘with respect 

to’’’). The statute does not mandate an individual 

count of records in all cases. 

23 43 FR at 4515–16. 

24See AICPA, Statements on Standards for 

Attestation Engagements at 101.114, http://

www.aicpa.org/Research/Standards/AuditAttest/

DownloadableDocuments/AT-00101.pdf (examples 

of examination reports) (last updated June 1, 2013). 

be unreasonable. Based on the 

information the Office received over the 

course of numerous rounds of 

stakeholder comments, it is not 

convinced that tracking and reporting 

works across multiple distributors is 

cost- or resource-prohibitive. As 

discussed, the new regulations will only 

require a change in reporting practices 

with respect to DPDs and ringtones 

distributed by third-party licensees. Our 

understanding is that most third-party 

licensees already collect and report 

relevant usage information to 

compulsory licensees for payment 

purposes. See Joint Publisher and 

Songwriter Reply Comments at 5 & 

nn.2–3. The licensee’s only burden, 

then, is to report the information that 

they already receive to copyright 

owners. Thus, balancing all the factors, 

the Office believes the added 

transparency will benefit rather than 

harm the compulsory licensing 

marketplace. 

4. CPA Certification of Annual 

Statements of Account 

The statute requires the Register to 

‘‘prescribe regulations under which 

detailed cumulative annual statements 

of account, certified by a certified public 

accountant, shall be filed for every 

compulsory license.’’ 17 U.S.C. 

115(c)(5). The statute also instructs the 

Register to issue regulations that 

‘‘prescribe the form, content, and 

manner of certification with respect to 

the number of records made and the 

number of records distributed.’’ Id. As 

the Office explained in the NPRM, the 

certification requirement ‘‘should assure 

that copyright owners receive the 

royalties to which they are entitled, but 

. . . should not burden the licensee to 

the point that it would prevent the 

compulsory license from being a 

practical option for record companies or 

services.’’ 77 FR at 44184.20 For 

purposes of the proposed rule, the 

Office retained the existing regulations 

for CPA certification of annual 

statements of account, which had been 

in place since 1980. 77 FR at 44191, 

44196. The NPRM nevertheless asked 

whether there were ‘‘alternative 

certification methods that . . . should 

be considered by the Office.’’ Id. at 

44184. 

Commenters broadly agreed that the 

existing certification regulations should 

be revised, and agreed in general terms 

about the basic structure and many of 

the specific elements of the revised 

certification provisions. After 

considering fully the comments 

received, the Office has adopted the 

structure and uncontroversial elements 

of the Joint Commenters’ proposal 

regarding certification of the annual 

statements of account in the new section 

210.17(f), with conforming revisions to 

the certification requirements for the 

monthly statements of account in the 

new section 210.16(f). At bottom, the 

Office has designed the CPA 

certification rule to provide copyright 

owners with firm assurance that the 

annual statement accurately reflects, in 

all material respects, the compulsory 

licensee’s usage of musical works, the 

statutory royalties applicable thereto, 

and any other data that is necessary for 

the proper calculation of the statutory 

royalties in accordance with the statute 

and applicable regulations. See H.R. 

Rep. No. 94–1476, at 111 (explaining 

that the annual statement requirement 

should ‘‘increase the protection of 

copyright proprietors against economic 

harm from companies which might 

refuse or fail to pay their just 

obligations’’). 

One of the key features of this new 

rule is the accommodation for 

alternative methods of certification for 

small-scale users and large-scale users. 

According to the commenters, the 

existing regulations appeared to assume 

individual review and certification of all 

statements of account, a step that is 

impracticable for large-scale use of the 

compulsory license.21 The Office agrees. 

The revised rule thus provides that, 

where the accountant determines in its 

professional judgment that the volume 

of data involved would render 

individual review and certification of 

annual statements of account 

impracticable, an accountant certifying 

the annual statement of account may 

instead examine the internal processes 

and controls of the licensee to 

determine whether they were suitably 

designed and operated effectively to 

accurately calculate royalties and 

generate compliant statements of 

account. A similar provision applies to 

monthly account statements.22

Another notable revision is the 

removal of the requirement that the CPA 

use specific certification language. 

Instead, consistent with the 

commenters’ proposals, the final rule 

now specifies the scope of the 

examination and the general substance 

of the opinion the CPA must render 

after that examination. Although this 

departs from our conclusion in 1978,23

the Office believes it is appropriate to 

do so in light of the following factors: 

First, the commenters in this 

proceeding, who have dealt with the 

certification language under the existing 

rule for many years, all agreed that the 

Office should not specify the 

certification language. Second, as the 

Joint Commenters pointed out, ‘‘[i]f the 

required substance of the certification is 

anchored in appropriate professional 

standards, it is not necessary to provide 

exact certification language to have a 

rigorous certification process.’’ Joint 

Commenters Reply Comments at 6. 

Finally, our understanding is that the 

language used in opinions rendered by 

CPAs is largely dictated by the 

American Institute of Certified Public 

Accountants’ (‘‘AICPA’’) standards.24

The Office is wary of requiring the use 

of specific certification language that 

could interfere with those standards. 

Beyond these uncontroversial 

changes, there were three areas of 

disagreement between Music Reports 

and the Joint Publishers and 

Songwriters about the particulars of the 

manner of certification, particularly as 

they related to large-scale uses of the 

compulsory license. As explained 

below, the Office largely agreed with the 

Joint Publishers and Songwriters on 

each of these points, and the final rule 

reflects their proposal. 


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25For that reason, Music Reports also missed the 

mark when it asserted that the Joint Publishers and 

Songwriters’ proposal would ‘‘require a process 

audit of the Usage and Royalty data in high-volume 

contexts, but not require a process audit in lowvolume contexts,’’ and that the proposal thus 

‘‘creates a double standard which discriminates 

against DSPs vis a vis [sic] record companies.’’ 

Music Reports Add’l Reply Comments at 7. A lowvolume context would presumably be one in which 

it is unnecessary to examine the processes used to 

generate annual statements because it is relatively 

easy to examine the annual statements and the 

underlying data directly. 

26See also AICPA, Clarified Statements on 

Auditing Standards AU–C § 200.01, http://

Continued 

a. Requirement for a Single Certification 

Many compulsory licensees outsource 

royalty accounting services to a thirdparty service provider like Music 

Reports, which raises the question of 

how the CPA certification should 

operate in those circumstances. Music 

Reports proposed that two separate 

CPAs would issue two separate and 

essentially unrelated certifications—the 

CPA for the licensee would certify the 

statement to the extent it contains usage 

and other data used to calculate 

royalties, and the CPA for the service 

provider would certify the process used 

to generate the statement. Music 

Reports, Add’l Reply Comments 

Submitted in Response to U.S. 

Copyright Office’s Dec. 26, 2012 Notice 

of Proposed Rulemaking at 8–9 (Feb. 14, 

2014). By contrast, the Joint Publishers 

and Songwriters proposed requiring a 

single certification from a CPA engaged 

by the compulsory licensee. See Joint 

Publishers and Songwriters Reply 

Comments at 15–16. Under that 

proposal, to the extent the licensee 

relies on a third-party service provider 

for royalty accounting services, the 

licensee’s CPA would be able to rely on 

a report and opinion generated by the 

service provider’s CPA certifying the 

process used to generate the annual 

statement. Id. Gear Publishing proposed 

that, where the licensee’s CPA relies on 

a report of the CPA of the third-party 

service provider, the licensee’s CPA 

should be required to disclose that they 

have relied on such a report. Gear Publ’g 

Initial Comments at 16. 

After careful consideration of the 

comments, the Office adopts in general 

Gear Publishing and the Joint Publishers 

and Songwriters’ proposals. Allowing 

different CPAs to certify different 

portions of annual statements would 

substantially detract from the chief goals 

of the CPA certification requirement— 

assuring transparency and certainty of 

royalty payments. Permitting piecemeal 

certifications creates a risk that no 

person bears responsibility for 

examining the process as a whole to 

ensure that it is suitably designed to 

generate compliant annual statements. 

Under the statute, a compulsory 

licensee bears full responsibility to 

produce accurate and complete annual 

account statements, and should 

ultimately be responsible for 

shortcomings in those statements no 

matter their source. See 17 U.S.C. 

115(c)(5). The CPA engaged by the 

compulsory licensee should similarly 

bear responsibility to provide a 

certification as to all aspects of the 

statement. 

The final rule thus provides that the 

licensee’s CPA must certify the 

statement as a whole, even where a 

third party provides services related to 

the annual statement. The Office 

appreciates Music Reports’ concern that 

requiring the licensee’s CPA to base its 

certification on a report received from a 

third-party service provider’s CPA could 

introduce complexity into the 

certification process. See Music Reports 

Reply Comments at 8. In response to 

that concern, the final rule makes clear 

that the licensee’s CPA may rely on the 

report produced by the service 

provider’s CPA, if that fact is disclosed 

in the certification. Whether in a 

particular case the licensee’s CPA might 

be required to assess the bases for the 

third-party report is a matter that the 

Office entrusts to the judgment of the 

licensee’s CPA under the pertinent 

professional standards. The Office 

notes, however, that nothing in the rule 

prevents the same CPA from examining 

and rendering an opinion with respect 

to both the licensee and the third-party 

service provider. 

b. Requirement To Examine the Process 

by Which Usage Data Is Generated 

The second area of dispute relates to 

the examination of large-scale licensees 

who use third-party services (like Music 

Reports) to generate annual statements 

of account. Typically, such licensees 

supply usage and other data relevant to 

the royalty calculation (e.g., revenues, 

performance rights payments, play 

counts, and subscriber counts) to the 

third-party service, which in turn is 

responsible for actually generating the 

statements of account based on that 

data. Music Reports argues that, for such 

licensees, the CPA examination should 

exclude the processes used by the 

licensee to track usage and other royalty 

data supplied to the third-party service. 

Instead, Music Reports appears to take 

the view that the accuracy of that data 

should be taken at face value. Music 

Reports Add’l Reply Comments at 6–7. 

In particular, Music Reports suggests 

that this data is already ‘‘highly 

scrutinized’’ by ‘‘the CFO of the 

licensee, by the sound recording owners 

and performance rights organizations, 

[and] by the licensee’s potential 

investors.’’ Id. at 8. The Joint Publishers 

and Songwriters take the opposite view, 

urging that an examination of the 

processes used to generate the usage and 

other data is necessary to ensure that the 

annual statements are accurate. See 

Joint Publishers and Songwriters Reply 

Comments at 3–5. 

The Office agrees with the Joint 

Publishers and Songwriters. As 

explained, the purpose of the CPA 

certification requirement is to give the 

copyright owner firm assurance that it is 

receiving all the royalties to which it is 

entitled. Given that goal, Music Reports 

nowhere explains how an acceptable 

CPA examination can realistically take 

place for large-scale licensees without 

examining the reliability of the 

processes used to track the data used in 

royalty calculation. See generally Music 

Reports Reply Comments at 8. Music 

Reports’ assertion that licensees ‘‘have 

had no reason under current law and 

regulation’’ to think that these processes 

would be subject to examination (Music 

Reports Add’l Reply Comments at 7), is 

difficult to fathom. It should have been 

obvious to any licensee that a fair 

assessment of the accuracy of royalty 

payments necessarily requires an 

examination of the accuracy of the data 

used for the royalty calculations and, if 

necessary, of the processes used to track 

that data.25

c. Underlying Auditing Standard 

The third and final area of 

disagreement relates to the professional 

standards that the CPA must employ 

when examining annual statements. 

Under the current rule, the CPA must 

certify that they have examined the 

annual statement in accordance with 

‘‘generally accepted auditing 

standards,’’ or GAAS. 37 CFR 

201.19(f)(6)(ii)(A). The Joint 

Commenters explained, however, that 

GAAS is not the most directly 

applicable standard under modern 

accounting practice. According to them, 

GAAS provides specific standards for 

the audits of corporate financial 

statements rather than the activities 

contemplated by Section 115. See Joint 

Commenters Reply Comments at 3–4. 

Instead, ‘‘[t]he certification required by 

the current regulations is more akin to 

the certification that applicable 

professional standards contemplate 

when a CPA completes an examination 

under the AICPA Attestation 

Standards,’’ a different set of 

professional standards for CPAs. Id. at 

4.26 Christian Castle reinforced this 


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www.aicpa.org/Research/Standards/AuditAttest/

DownloadableDocuments/AU-C-00200.pdf (last 

updated June 1, 2013); AICPA, Statements on 

Standards for Attestation Engagements AT § 101.01, 

http://www.aicpa.org/Research/Standards/

AuditAttest/DownloadableDocuments/AT00101.pdf (last updated June 1, 2013). 

27For example, CPAs can be engaged to conduct 

‘‘compilations’’ or ‘‘reviews,’’ which provide 

comparatively lower levels of service. See AICPA, 

What is the Difference Between a Compilation, a 

Review, and an Audit?, http://www.aicpa.org/

InterestAreas/PrivateCompaniesPracticeSection/

QualityServicesDelivery/KeepingUp/Downloadable

Documents/Brochure%20Customizable- 

%20Difference%20between%20Comp%20Review

Audit.pdf (last visited July 31, 2014). 

28See AICPA, Statements on Standards for 

Attestation Engagements, supra note 21, § 101.54, 

(noting that ‘‘an attest engagement designed to 

provide a high level of assurance’’ is ‘‘referred to 

as an examination’’); id. § 101.69 (‘‘In an 

engagement to achieve a high level of assurance (an 

examination), the practitioner’s conclusion should 

be expressed in the form of an opinion.’’). 

29Music Reports also asks us to provide a view 

of whether the AICPA’s attestation standards 

require use of an ‘‘independent’’ auditor. See Music 

Reports Reply Comments at 8. The Office is not in 

a position to provide such a view. 

30 Indeed, it appears that the AICPA is currently 

engaged in an effort to clarify and recodify several 

of its professional standards, including the 

attestation standards. See AICPA, Proposed 

Statement on Standards for Attestation 

Engagements (July 24, 2013), http://www.aicpa.org/ 

Research/ExposureDrafts/AccountingandAuditing/

DownloadableDocuments/20130724a_ED_

Attestation_Standards_1to4.pdf. 

31 In their initial comments, the Joint Commenters 

explain, ‘‘Large-scale use of the compulsory license, 

particularly for percentage-rate usages, has made 

preparation and auditing of annual statements a 

complex process. In addition, it is important to 

remember that the first month of the annual 

statement period is necessarily devoted to 

completing the monthly accounting for the last 

month of the year, since the monthly statements 

can’t be tallied until the last one is done. Two 

months after preparation of the last monthly 

statement is completed is not long to complete the 

whole annual statement process.’’ Joint 

Commenters Initial Comments at 20. 

point, proposing that the Office ‘‘specify 

. . . that the certified public accountant 

certifying Annual Statements of 

Account must perform their certification 

review in accordance with the 

attestation standards designated by the 

Copyright Office.’’ Christian L. Castle, 

Initial Comments Submitted in 

Response to U.S. Copyright Office’s July 

27, 2012 Notice of Proposed Rulemaking 

at 11 (Oct. 25, 2012) (‘‘Castle Initial 

Comments’’). 

Thus, there appears to be general 

agreement that the AICPA’s ‘‘attestation 

standards’’ are appropriate in at least 

some circumstances. Music Reports, 

however, proposed that our regulation 

specify the use of these attestation 

standards only for high-volume uses of 

the compulsory license, and even then 

only for the CPA’s examination of the 

processes used to generate the annual 

statements (either by the licensee or a 

third party) and not for the examination 

of the usage and other data used in the 

royalty calculation. Music Reports 

Reply Comments, exh. A, at A–2 to A– 

3. For those other situations, Music 

Reports proposed leaving the particular 

standard open-ended, by providing that 

the examination must take place ‘‘in 

accordance with the professional 

standards of the American Institute of 

Certified Public Accountants.’’ Id., exh. 

A, at A–2. The Joint Publishers and 

Songwriters, in contrast, urged the 

specification of attestation standards in 

all circumstances. Joint Publishers and 

Songwriters Reply Comments at 15–18. 

And notably, the RIAA, whose members 

are typically small-scale users of 

compulsory licenses, disagreed with 

Music Reports, and proposed the use of 

the attestation standard for CPA 

examination of annual statements 

generated by such users. RIAA Reply 

Comments at 18. 

After full consideration of the 

comments on this issue, the Office 

agrees in general with the Joint 

Publishers and Songwriters’ proposal, 

and rejects Music Reports’ competing 

proposal. Most problematically, the 

reference to ‘‘professional standards’’ in 

Music Reports’ proposal is non-specific, 

and could encompass examinations that 

are not especially demanding.27

Moreover, as the Joint Publishers and 

Songwriters convincingly explain, 

requiring CPAs to employ the attestation 

standards, and by further specifying that 

the attest engagement must include an 

‘‘examination’’ of the annual statements 

followed by an ‘‘opinion’’ that those 

statements accurately reflect the 

relevant information, ‘‘provide[s] a high 

level of assurance that compulsory 

licensees were complying [with] Section 

115 and the attendant regulations.’’ Joint 

Publishers and Songwriters Reply at 

17.28 The Office believes that adopting 

those standards is thus likely to fulfill 

Congress’s overarching goal in enacting 

the certification requirement, i.e., ‘‘to 

increase the protection of copyright 

proprietors against economic harm from 

companies which might refuse or fail to 

pay their just obligations.’’ H.R. Rep. 

No. 94–1476, at 111.29 Accordingly, the 

final rule requires the use of the 

AICPA’s ‘‘attestation standards’’ in all 

circumstances, and further specifies that 

the CPA must conduct an 

‘‘examination’’ and render an ‘‘opinion’’ 

regarding the annual statements under 

those standards. 

Certain commenters asked us to go 

even further and provide more detail 

regarding the precise manner of 

examination. For instance, the Joint 

Publishers and Songwriters proposed 

that the rule provide detailed guidance 

regarding the CPA’s examination. See 

Joint Publishers and Songwriters Reply 

Comments at 23. Similarly, the Joint 

Publishers and Songwriters and Music 

Reports together urged that the Office 

specify that the CPA examination of 

third-party service providers take place 

under the AICPA’s Statement on 

Standards for Attestation Engagements 

No. 16 (SOC), Type II. Songwriters 

Reply Comments at 18. Similarly, 

Christian Castle proposed that the Office 

adopt ‘‘specific attestation standards.’’ 

See Castle Initial Comments at 10. 

The Office declines to provide more 

detail governing the conduct of the 

CPA’s examination. Among the 

concerns the Office has is that the 

AICPA amends or recodifies its 

standards with some regularity.30 It 

would thus be inappropriate to embed 

specific standards into the rule. 

Accordingly, the final rule simply 

provides the examination of third-party 

providers should simply take place 

under the AICPA’s attestation standards 

generally. The Office believes details of 

how a CPA will conduct its examination 

in accordance with the standards set 

forth in the regulations are best left to 

the CPA’s professional judgment, and 

trusts that CPAs will choose the specific 

standards and procedures that are most 

appropriate for each examination. 

5. Adjustment of Timetables for 

Reporting 

The NPRM proposed extending the 

deadline for filing annual statements of 

account from three months after the 

close of the licensee’s fiscal year to six 

months after the close of the licensee’s 

fiscal year. 77 FR at 44184. The Joint 

Commenters agreed that the increased 

complexity of compiling annual 

statements of account that include 

percentage-of-revenue based royalty 

allocations warrants a deadline 

extension.31

Gear Publishing, however, opposed an 

extension, claiming ‘‘[t]he digital age is 

supposed to make things faster not 

slower’’ and ‘‘[a] summary of streams 

related to any musical work should be 

available at any time.’’ Gear Publ’g 

Initial Comments at 17. They countered 

the proposed extension with a request 

that the time to produce an annual 

statement be reduced from three months 

to forty-five days. Id. A number of 

independent commenters also opposed 

the extension, claiming extending the 

deadline creates a ‘‘new safe harbor’’ 

which provides licensees with 

additional time to meet obligations they 

could have easily fulfilled under the 

existing regulations. See, e.g., Castle 

Initial Comments at 9–10. 


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32 In the only other comments the Office received 

on this aspect of the proposed rule, Gear Publishing 

urged that the rule had been confusingly drafted. 

Gear Publ’g Initial Comments at 17. Since the Office 

is departing substantially from the proposed rule, 

that comment is moot. 

33The Joint Commenters’ proposal would have 

required licensees to provide compliant statements 

for past reporting periods only where ‘‘it was 

impracticable for the licensee to provide’’ the 

statement earlier. See Joint Commenters Initial 

Comments, exh. A, at A–22. The final rule does not 

contain this limitation; if the annual statement was 

not provided, the reason for that failure is 

irrelevant. 

The Office concludes that the 

accounting requirements are sufficiently 

complex to justify extending the period 

for statutory licensees to file their 

annual statements from three to six 

months. The Office also believes this 

extended deadline will generally benefit 

copyright owners by allowing sufficient 

time for the robust CPA examination 

and certification contemplated by the 

regulations. 

6. Reporting for Periods Prior to 

Enactment of New Regulations 

As noted, one key purpose of this 

rulemaking is to amend the existing 

statement-of-account regulations to 

reflect the CRB’s establishment of new 

rate structures for DPD configurations 

not previously subject to the Section 

115 license. See 37 CFR part 385. One 

question the NPRM addressed was 

whether statements of account that 

complied with these new accounting 

rules would have to be filed for 

reporting periods occurring after those 

rates took effect on March 1, 2009. 77 

FR at 44184. The proposed rule required 

the delivery of statements of account for 

any prior accounting period within 180 

days after the new statement-of-account 

regulations took effect. Id. 

The Joint Commenters objected to 

providing statements of account for past 

reporting periods, on the ground that it 

would be a needless administrative 

burden. Joint Commenters Initial 

Comments at 21–23. They observed that 

monthly statements of account 

produced by the digital music services 

already take into consideration 

percentage-rate usages. Id. At the same 

time, they noted that with respect to 

annual statements ‘‘certain licensees 

making large-scale use of the 

compulsory license for percentage rate 

configurations have not been providing 

annual statements,’’ because it was 

‘‘difficult or impracticable to do so’’ in 

the absence of regulatory guidance. Id. 

at 23. In recognition of that fact, the 

Joint Commenters proposed a rule 

providing that ‘‘when an annual 

statement for a fiscal year after March 1, 

2009 was not provided because it was 

impracticable for the licensee to provide 

it’’ the copyright owner may demand a 

statement that confirms with the new 

statement-of-account regulations. Id. 

Notably, no other commenter opposed 

the Joint Commenters’ proposal.32

After carefully weighing the issue, the 

Office adopts the Joint Commenters’ 

approach. Based on the representation 

that ‘‘[r]estating several years of 

monthly statements that have passed 

without objection would be a massing 

undertaking serving no useful purpose,’’ 

the final rule does not require the 

preparation and service of compliant 

monthly statements of account for 

periods prior to the effective date of 

these rules. Joint Commenters Initial 

Comments at 23. But as suggested by the 

Joint Commenters, the final rule will 

allow copyright owners to request 

annual statements of account for fiscal 

years ending after March 1, 2009 and 

before the effective date of this rule, 

where the copyright owner did not 

receive any annual statement of account 

for any reason.33

7. Record Retention (AKA 

Documentation) 

In the NPRM, the Office proposed 

extending the existing regulations that 

require licensees to retain all records 

and documents necessary to support 

information set forth in annual 

statements of account and monthly 

statements of account from three years 

from the date of service to five years 

from the date of service. 77 FR at 

44184–85. The commenters agreed in 

principle that it would be appropriate to 

extend the general record retention 

requirement, though some proposed the 

Office adopt an even longer mandatory 

retention period. See Joint Commenters 

Initial Comments at 24; see also Gear 

Publ’g Initial Comments at 18. The final 

rule adopts the Office’s original 

proposal to extend the retention period 

from three to five years from the date of 

service. 

The final rule also includes language 

that requires licensees to retain all 

records and documents necessary to 

support information set forth in 

amended annual statements of account 

for five years from the date of service of 

the amended statements. This 

additional regulation is intended to 

alleviate the Office’s concern, as 

expressed in the NPRM, regarding the 

timing of record retention in situations 

where a licensee files an annual 

statement of account prior to public 

performance rates having been set for 

the time period covered therein. 77 FR 

at 44185. 

8. Harmless Error Provision 

The NPRM noted that ‘‘[b]ecause of 

the detailed requirements in the 

regulations, licensees’ accounting 

statements may contain inadvertent 

errors.’’ 77 FR at 44185. The Office 

accordingly sought comment on ‘‘the 

Office’s authority to include a harmless 

error provisions and whether such a 

provision in the Statement of Account 

regulations would be useful as a way to 

protect licensees from inadvertent errors 

that do not materially affect the 

adequacy of the information provided 

on the Statement of Account.’’ Id. 

The Joint Commenters favored the 

inclusion of such a provision, 

essentially for the reasons identified in 

the NPRM. Joint Commenters Initial 

Comments at 24–25. Gear Publishing, on 

the other hand, disagrees with the 

inclusion of a harmless error provision. 

They claim that an inquiry into whether 

an error was harmless ‘‘has the potential 

to become the focus of many copyright 

infringement claim.’’ See Gear Publ’g 

Initial Comments at 18–19. There was 

no dispute that the Office possessed the 

authority to adopt a harmless error rule. 

After carefully weighing the 

comments, the final rule provides that 

errors in statements of account that do 

not materially prejudice the rights of a 

copyright owner shall be deemed 

harmless and shall not render the 

account statement invalid or provide a 

basis for the exercise of remedies under 

17 U.S.C. 115(c)(6). As the Office noted, 

the accounting regulations here require 

licensees to provide a detailed 

accounting of their use of the statutory 

license. Requiring licensees to provide 

this information serves Congress’s goal 

of protecting copyright owners from 

‘‘economic harm from companies which 

might refuse or fail to pay their just 

obligations.’’ H.R. Rep. No. 94–1476, at 

111. But that requirement carries with it 

the risk that account statements will 

occasionally contain insubstantial 

deviations from the strictures of these 

regulations. It would be unduly severe 

to treat such inconsequential mistakes 

as equal to errors that result in material 

prejudice to the copyright owner. 

Indeed, as the NPRM noted, similar 

considerations led the Register to adopt 

a harmless error provision as part of the 

rules governing notices of intention. See 

37 CFR 201.18(f); 66 FR 45241, 45243 

(Aug. 28, 2001). To Gear Publishing’s 

point that adoption of such a rule would 

be difficult to apply in the context of 

infringement litigation, our experience 

with section 201.18(f) belies that 

concern: The Office is not aware of any 

difficulties with applying the harmless 


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error rule in the notice of intention 

context. 

9. Confidentiality 

In the NPRM, the Office noted that the 

rates the CRB had originally proposed 

included provisions that would have 

restricted a copyright owner’s ability to 

disclose the contents of statements of 

account received pursuant to Section 

115. See 77 FR 29259, 29262, 29267–68 

(May 17, 2012) (proposed sections 

385.12(f) and 385.22(e)). Specifically, 

the provisions stated that a ‘‘licensee’s 

statements of account, including any 

and all information provided by a 

licensee with respect to the computation 

of a subminimum, shall be maintained 

in confidence by any copyright owner, 

authorized representative or agent that 

receives it.’’ Id. at 29262. Accordingly, 

under the CRB proposal, copyright 

owners and their authorized 

representatives or agents could use the 

statements of account only ‘‘for 

purposes of reviewing the amounts paid 

by the licensee and verifying the 

accuracy of any such payments,’’ and 

for no other purpose. Id. 

The Office observed in the NPRM that 

these proposed requirements illustrated 

a ‘‘general desire among licensees and 

licensors for maintaining confidentiality 

of information contained in statements 

of account,’’ but questioned the validity 

of such a ‘‘broadly framed’’ provision. 

77 FR at 44185. Accordingly, the Office 

solicited comments regarding the 

Office’s authority to adopt regulations 

that would require copyright owners to 

keep information contained in 

statements of account confidential, as 

well as the appropriate limits of any 

such regulations. Id. The Office did not 

include a confidentiality requirement as 

part of the proposed rule. 

In response to the NPRM, the Joint 

Commenters urged the Office to either 

allow the CRB to adopt the 

confidentiality provision proposed as 

part of the rates and terms for the 

statutory license, or to itself adopt an 

identical provision in the Office’s 

statement-of-account regulations. Joint 

Commenters Initial Comments at 25–28. 

Specifically, the Joint Commenters 

noted that, in the case of percentage-rate 

usages, the statements of account would 

reflect ‘‘competitively sensitive’’ 

information like the licensee’s overall 

revenues, royalty payments to record 

companies and performance rights 

organizations, and overall usage. Id. at 

27. Gear Publishing, by contrast, did not 

believe that a confidentiality provision 

for a statutorily obtained license should 

be permitted. It stated: ‘‘There should be 

no restriction on what a copyright 

owner does with their own royalty 

information under a compulsory 

license. Once again, if a music user 

wishes to secure confidentiality 

provisions then they are free to 

negotiate directly with the copyright 

owner to achieve such an arrangement.’’ 

Gear Publ’g Initial Comments at 19. 

Since the NPRM issued and these 

comments were received, the Office has 

further analyzed the confidentiality 

issue in proceedings outside of, but 

related to, this rulemaking. On June 25, 

2013, the CRB referred a novel material 

question of substantive law to the 

Register, inquiring whether the CRB is 

authorized to adopt regulations 

imposing a duty of confidentiality upon 

copyright owners where, like the 

proposed requirement, the duty is 

‘‘included in a voluntarily negotiated 

license agreement between copyright 

owners and licensees in a proceeding 

under section 115 of the Act.’’ 78 FR 

47421 (Aug. 5, 2013). The Register 

answered the CRB’s question in the 

negative, finding the CRB lacked the 

authority under 17 U.S.C. 115(c)(3)(C) to 

restrict what a copyright owner may do 

with information in a statement of 

account after that statement has been 

prepared and served in accordance with 

the Office’s regulations. Id. at 47423. As 

particularly relevant to this rulemaking, 

the Register noted that, as a matter of 

policy, ‘‘government actors should err 

on the side of transparency’’ where 

transparency ‘‘serves to provide 

maximum confidence in the law for all 

who rely upon it, including those who 

require access to the details of license 

records.’’ Id. at 47423. In addition, the 

Register noted the general legal 

principle ‘‘that statutory licenses must 

‘be construed narrowly’ ’’ as applied 

‘‘against the rights of copyright owners.’’ 

Id. at 47424 (quoting Fame Publ’g Co. v. 

Ala. Custom Tape, Inc., 507 F.2d 667, 

670 (5th Cir. 1975)). 

These previously announced policy 

decisions dictate the outcome here. The 

competitive concerns raised by the Joint 

Commenters are insufficient to 

overcome the strong policy that ‘‘in the 

context of statutory licenses, 

government actors should err on the 

side of transparency.’’ 78 FR at 47423. 

Thus, the Office concludes that once the 

statements of account have been 

delivered to the copyright owners, there 

should be no restrictions on the 

copyright owners’ ability to use the 

statements or disclose their contents. 

Indeed, an examination of the Joint 

Commenters’ sweeping confidentiality 

proposal only buttresses that 

conclusion. The proposal would have 

restricted not only the disclosure of the 

statements of account, but also the 

permissible uses of those statements. 77 

FR at 29262 (providing that the 

statements can only be used ‘‘for 

purposes of reviewing the amounts paid 

by the licensee and verifying the 

accuracy of any such payments’’). As 

written, the proposal would also have 

barred copyright owners from disclosing 

the contents of the statements of 

account to other parties who were 

downstream beneficiaries of the 

statutory royalties (such as songwriters 

entitled to receive a share of the 

royalties as part of their publishing 

contracts). And, most troublingly, the 

Joint Commenters’ proposal would have 

burdened copyright owners’ ability to 

disclose to the public the royalties they 

received under the statutory license. 

The Office is particularly reluctant to so 

drastically restrict copyright owners’ 

ability to freely discuss the effects of 

government policy. 

List of Subjects 

37 CFR Part 201 

Copyright. 

37 CFR Part 210 

Copyright, Phonorecords, Recordings. 

Final Regulations 

For the reasons set forth in the 

preamble, the U.S. Copyright Office 

amends 37 CFR part 201 and adds part 

210 as follows: 

PART 201—GENERAL PROVISIONS 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 17 U.S.C. 702. 

■ 2. Revise paragraph (b) of § 201.18, to 

read as follows: 

§ 201.18 Notice of intention to obtain a 

compulsory license for making and 

distributing phonorecords of nondramatic 

musical works. 

* * * * * 

(b) Agent. An agent who has been 

authorized to accept Notices of 

Intention in accordance with paragraph 

(a)(4) of this section and who has 

received a Notice of Intention on behalf 

of a copyright owner shall provide 

within two weeks of the receipt of that 

Notice of Intention the name and 

address of the copyright owner or its 

agent upon whom the person or entity 

intending to obtain the compulsory 

license shall serve Statements of 

Account and the monthly royalty in 

accordance with § 210.11(e) of this 

chapter. 

* * * * * 

§ 201.19 [Removed and reserved] 

■ 3. Remove and reserve § 201.19. 

■ 4. Add part 210 to read as follows: 


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PART 210—COMPULSORY LICENSE 

FOR MAKING AND DISTRIBUTING 

PHYSICAL AND DIGITAL 

PHONORECORDS OF NONDRAMATIC 

MUSICAL WORKS 

Subpart A—[Reserved] 

Sec. 

210.1–210.10 [Reserved] 

Subpart B—Royalties and Statements of 

Account Under Compulsory License 

210.11 General. 

210.12 Definitions. 

210.13 Accounting requirements where 

sales revenue is ‘‘recognized.’’ 

210.14 Accounting requirements for 

offsetting phonorecord reserves with 

returned phonorecords. 

210.15 Situations in which a compulsory 

licensee is barred from maintaining 

reserves. 

210.16 Monthly statements of account. 

210.17 Annual statements of account. 

210.18 Documentation. 

210.19 Harmless errors. 

Authority: 17 U.S.C. 115, 702. 

Subpart A—[Reserved] 

§§ 210.1–210.10 [Reserved] 

Subpart B—Royalties and Statements 

of Account Under Compulsory License 

§ 210.11 General. 

This subpart prescribes rules for the 

payment of royalties and the 

preparation and service of statements of 

account under the compulsory license 

for the making and distribution of 

phonorecords of nondramatic musical 

works, including by means of a digital 

phonorecord delivery, pursuant to 17 

U.S.C. 115 and the rates and terms in 

part 385 of this title. 

§ 210.12 Definitions. 

As used in this subpart: 

(a) A Monthly Statement of Account 

or Monthly Statement is a statement 

accompanying monthly royalty 

payments identified in 17 U.S.C. 

115(c)(5), and required by that section to 

be filed under the compulsory license to 

make and distribute phonorecords of 

nondramatic musical works, including 

by means of a digital phonorecord 

delivery. 

(b) An Annual Statement of Account 

or Annual Statement is a statement 

identified in 17 U.S.C 115(c)(5), and 

required by that section to be filed 

under the compulsory license to make 

and distribute phonorecords of 

nondramatic musical works, including 

by means of a digital phonorecord 

delivery. Such term, when used in this 

rule, includes an Amended Annual 

Statement of Account filed pursuant to 

§ 210.17(d)(2)(iii). 

(c) A digital phonorecord delivery is 

each individual delivery of a 

phonorecord by digital transmission of 

a sound recording which results in a 

specifically identifiable reproduction by 

or for any transmission recipient of a 

phonorecord of that sound recording, 

regardless of whether the digital 

transmission is also a public 

performance of the sound recording or 

any nondramatic musical work 

embodied therein. The reproduction of 

the phonorecord must be sufficiently 

permanent or stable to permit it to be 

perceived, reproduced, or otherwise 

communicated for a period of more than 

transitory duration. Such a phonorecord 

may be permanent or it may be made 

available to the transmission recipient 

for a limited period of time or for a 

specified number of performances. A 

digital phonorecord delivery includes 

all phonorecords that are made for the 

purpose of making the digital 

phonorecord delivery. A digital 

phonorecord delivery does not include 

any transmission that did not result in 

a specifically identifiable reproduction 

of the entire product being transmitted, 

and for which the distributor did not 

charge, or fully refunded, any monies 

that would otherwise be due for the 

relevant transmission. 

(d) Ringtone shall have the meaning 

given in § 385.2 of this title. 

(e) The term copyright owner, in the 

case of any work having more than one 

copyright owner, means any one of the 

co-owners. 

(f) A compulsory licensee is a person 

or entity exercising the compulsory 

license to make and distribute 

phonorecords of nondramatic musical 

works as provided under 17 U.S.C. 115, 

including by means of a digital 

phonorecord delivery. 

(g) A phonorecord is considered 

distributed if the compulsory licensee 

has voluntarily and permanently parted 

with possession of the phonorecord, 

which shall occur as follows: 

(1) In the case of physical 

phonorecords relinquished from 

possession for purposes other than sale, 

at the time at which the compulsory 

licensee actually first parts with 

possession; 

(2) In the case of physical 

phonorecords relinquished from 

possession for purposes of sale without 

a privilege of returning unsold 

phonorecords for credit or exchange, at 

the time at which the compulsory 

licensee actually first parts with 

possession; 

(3) In the case of physical 

phonorecords relinquished from 

possession for purposes of sale 

accompanied by a privilege of returning 

unsold phonorecords for credit or 

exchange: 

(i) At the time when revenue from a 

sale of the phonorecord is ‘‘recognized’’ 

by the compulsory licensee; or 

(ii) Nine months from the month in 

which the compulsory licensee actually 

first parted with possession, whichever 

occurs first. For these purposes, a 

compulsory licensee shall be considered 

to ‘‘recognize’’ revenue from the sale of 

a phonorecord when sales revenue 

would be recognized in accordance with 

GAAP. 

(4) In the case of a digital 

phonorecord delivery, on the date that 

the phonorecord is digitally transmitted. 

(h) A phonorecord reserve comprises 

the number of phonorecords made 

under a particular compulsory license, 

if any, that have been relinquished from 

possession for purposes of sale in a 

given month accompanied by a privilege 

of return, as described in paragraph 

(g)(3) of this section, and that have not 

been considered distributed during the 

month in which the compulsory 

licensee actually first parted with their 

possession. The initial number of 

phonorecords comprising a 

phonorecord reserve shall be 

determined in accordance with GAAP. 

(i) A negative reserve balance 

comprises the aggregate number of 

phonorecords made under a particular 

compulsory license, if any, that have 

been relinquished from possession for 

purposes of sale accompanied by a 

privilege of return, as described in 

paragraph (g)(3) of this section, and that 

have been returned to the compulsory 

licensee, but because all available 

phonorecord reserves have been 

eliminated, have not been used to 

reduce a phonorecord reserve. 

(j) GAAP means U.S. Generally 

Accepted Accounting Principles, except 

that if the U.S. Securities and Exchange 

Commission permits or requires entities 

with securities that are publicly traded 

in the U.S. to employ International 

Financial Reporting Standards, as 

issued by the International Accounting 

Standards Board, or as accepted by the 

Securities and Exchange Commission if 

different from that issued by the 

International Accounting Standards 

Board, in lieu of Generally Accepted 

Accounting Principles, then an entity 

may employ International Financial 

Reporting Standards as ‘‘GAAP’’ for 

purposes of this subpart. 

§ 210.13 Accounting requirements where 

sales revenue is ‘‘recognized.’’ 

Where under § 210.12(g)(3)(i), revenue 

from the sale of phonorecords is 

‘‘recognized’’ during any month after 

the month in which the compulsory 


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licensee actually first parted with their 

possession, said compulsory licensee 

shall reduce particular phonorecord 

reserves by the number of phonorecords 

for which revenue is being 

‘‘recognized,’’ as follows: 

(a) If the number of phonorecords for 

which revenue is being ‘‘recognized’’ is 

smaller than the number of 

phonorecords comprising the earliest 

eligible phonorecord reserve, this 

phonorecord reserve shall be reduced by 

the number of phonorecords for which 

revenue is being ‘‘recognized.’’ Subject 

to the time limitations of 

§ 210.12(g)(3)(ii), the number of 

phonorecords remaining in this reserve 

shall be available for use in subsequent 

months. 

(b) If the number of phonorecords for 

which revenue is being ‘‘recognized’’ is 

greater than the number of 

phonorecords comprising the earliest 

eligible phonorecord reserve but less 

than the total number of phonorecords 

comprising all eligible phonorecord 

reserves, the compulsory licensee shall 

first eliminate those phonorecord 

reserves, beginning with the earliest 

eligible phonorecord reserve and 

continuing to the next succeeding 

phonorecord reserves, that are 

completely offset by phonorecords for 

which revenue is being ‘‘recognized.’’ 

Said compulsory licensee shall then 

reduce the next succeeding phonorecord 

reserve by the number of phonorecords 

for which revenue is being ‘‘recognized’’ 

that have not been used to eliminate a 

phonorecord reserve. Subject to the time 

limitations of § 210.12(g)(3)(ii), the 

number of phonorecords remaining in 

this reserve shall be available for use in 

subsequent months. 

(c) If the number of phonorecords for 

which revenue is being ‘‘recognized’’ 

equals the number of phonorecords 

comprising all eligible phonorecord 

reserves, the person or entity exercising 

the compulsory license shall eliminate 

all of the phonorecord reserves. 

(d) Digital phonorecord deliveries 

shall not be considered as accompanied 

by a privilege of return as described in 

§ 210.12(g)(3), and the compulsory 

licensee shall not take digital 

phonorecord deliveries into account in 

establishing phonorecord reserves. 

§ 210.14 Accounting requirements for 

offsetting phonorecord reserves with 

returned phonorecords. 

(a) In the case of a phonorecord that 

has been relinquished from possession 

for purposes of sale accompanied by a 

privilege of return, as described in 

§ 210.12(g)(3), where the phonorecord is 

returned to the compulsory licensee for 

credit or exchange before said 

compulsory licensee is considered to 

have ‘‘voluntarily and permanently 

parted with possession’’ of the 

phonorecord as described in § 210.12(g), 

the compulsory licensee may use such 

phonorecord to reduce a ‘‘phonorecord 

reserve,’’ as defined in § 210.12(h). 

(b) In such cases, the compulsory 

licensee shall reduce particular 

phonorecord reserves by the number of 

phonorecords that are returned during 

the month covered by the Monthly 

Statement of Account in the following 

manner: 

(1) If the number of phonorecords that 

are returned during the month covered 

by the Monthly Statement is smaller 

than the number comprising the earliest 

eligible phonorecord reserve, the 

compulsory licensee shall reduce this 

phonorecord reserve by the total 

number of returned phonorecords. 

Subject to the time limitations in 

§ 210.12(g)(3)(ii), the number of 

phonorecords remaining in this reserve 

shall be available for use in subsequent 

months. 

(2) If the number of phonorecords that 

are returned during the month covered 

by the Monthly Statement is greater 

than the number of phonorecords 

comprising the earliest eligible 

phonorecord reserve but less than the 

total number of phonorecords 

comprising all eligible phonorecord 

reserves, the compulsory licensee shall 

first eliminate those phonorecord 

reserves, beginning with the earliest 

eligible phonorecord reserve, and 

continuing to the next succeeding 

phonorecord reserves, that are 

completely offset by returned 

phonorecords. Said compulsory licensee 

shall then reduce the next succeeding 

phonorecord reserve by the number of 

returned phonorecords that have not 

been used to eliminate a phonorecord 

reserve. Subject to the time limitations 

in § 210.12(g)(3)(ii), the number of 

phonorecords remaining in this reserve 

shall be available for use in subsequent 

months. 

(3) If the number of phonorecords that 

are returned during the month covered 

by the Monthly Statement is equal to or 

is greater than the total number of 

phonorecords comprising all eligible 

phonorecord reserves, the compulsory 

licensee shall eliminate all eligible 

phonorecord reserves. Where said 

number is greater than the total number 

of phonorecords comprising all eligible 

phonorecord reserves, said compulsory 

licensee shall establish a ‘‘negative 

reserve balance,’’ as defined in 

§ 210.12(i). 

(c) Except where a negative reserve 

balance exists, a separate and distinct 

phonorecord reserve shall be 

established for each month during 

which the compulsory licensee 

relinquishes phonorecords from 

possession for purposes of sale 

accompanied by a privilege of return, as 

described in § 210.12(g)(3). In 

accordance with § 210.12(g)(3)(ii), any 

phonorecord remaining in a particular 

phonorecord reserve nine months from 

the month in which the particular 

reserve was established shall be 

considered ‘‘distributed’’; at that point, 

the particular monthly phonorecord 

reserve shall lapse and royalties for the 

phonorecords remaining in it shall be 

paid as provided in § 210.16(d)(2). 

(d) Where a negative reserve balance 

exists, the aggregate total of 

phonorecords comprising it shall be 

accumulated into a single balance rather 

than being separated into distinct 

monthly balances. Following the 

establishment of a negative reserve 

balance, any phonorecords relinquished 

from possession by the compulsory 

licensee for purposes of sale or 

otherwise, shall be credited against such 

negative balance, and the negative 

reserve balance shall be reduced 

accordingly. Digital phonorecord 

deliveries may be credited against such 

negative reserve balance, but only if 

such digital phonorecord deliveries 

have the same royalty rate as physical 

phonorecords under part 385 of this 

title. The nine-month limit provided in 

§ 210.12(g)(3)(ii) shall have no effect 

upon a negative reserve balance; where 

a negative reserve balance exists, 

relinquishment from possession of a 

phonorecord by the compulsory 

licensee at any time shall be used to 

reduce such balance, and such 

phonorecord shall not be considered 

‘‘distributed’’ within the meaning of 

§ 210.12(g). 

(e) In no case shall a phonorecord 

reserve be established while a negative 

reserve balance is in existence; 

conversely, in no case shall a negative 

reserve balance be established before all 

available phonorecord reserves have 

been eliminated. 

§ 210.15 Situations in which a compulsory 

licensee is barred from maintaining 

reserves. 

Notwithstanding any other provisions 

of this section, in any case where, 

within three years before the 

phonorecord was relinquished from 

possession, the compulsory licensee has 

had final judgment entered against it for 

failure to pay royalties for the 

reproduction of copyrighted music on 

phonorecords, or within such period 

has been definitively found in any 

proceeding involving bankruptcy, 

insolvency, receivership, assignment for 


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the benefit of creditors, or similar 

action, to have failed to pay such 

royalties, that compulsory licensee shall 

be considered to have ‘‘Permanently 

parted with possession’’ of a 

phonorecord made under the license at 

the time at which that compulsory 

licensee actually first parts with 

possession. For these purposes the 

compulsory licensee shall include: 

(a) In the case of any corporation, the 

corporation or any director, officer, or 

beneficial owner of twenty-five percent 

(25%) or more of the outstanding 

securities of the corporation; 

(b) In all other cases, any entity or 

individual owning a beneficial interest 

of twenty-five percent (25%) or more in 

the entity exercising the compulsory 

license. 

§ 210.16 Monthly statements of account. 

(a) Forms. The Copyright Office does 

not provide printed forms for the use of 

persons serving Monthly Statements of 

Account. 

(b) General content. A Monthly 

Statement of Account shall be clearly 

and prominently identified as a 

‘‘Monthly Statement of Account Under 

Compulsory License for Making and 

Distributing Phonorecords,’’ and shall 

include a clear statement of the 

following information: 

(1) The period (month and year) 

covered by the Monthly Statement. 

(2) The full legal name of the 

compulsory licensee, together with all 

fictitious or assumed names used by 

such person or entity for the purpose of 

conducting the business of making and 

distributing phonorecords. 

(3) The full address, including a 

specific number and street name or rural 

route, of the place of business of the 

compulsory licensee. A post office box 

or similar designation will not be 

sufficient for this purpose, except where 

it is the only address that can be used 

in that geographic location. 

(4) For each nondramatic musical 

work that is owned by the same 

copyright owner being served with the 

Monthly Statement and that is 

embodied in phonorecords covered by 

the compulsory license, a detailed 

statement of all of the information 

called for in paragraph (c) of this 

section. 

(5) The total royalty payable to the 

relevant copyright owner for the month 

covered by the Monthly Statement, 

computed in accordance with the 

requirements of this section and the 

formula specified in paragraph (d) of 

this section, including detailed 

information regarding how the royalty 

was computed. 

(6) The amount of late fees, if 

applicable, included in the payment 

associated with the Monthly Statement. 

(7) In any case where the compulsory 

licensee falls within the provisions of 

§ 210.15, a clear description of the 

action or proceeding involved, 

including the date of the final judgment 

or definitive finding described in that 

section. 

(8) Detailed instructions on how to 

request records of any promotional uses 

of the copyright owner’s works that are 

required to be maintained or provided 

under § 385.14 or § 385.24 of this title, 

or other applicable provision, including, 

where applicable, records required to be 

maintained or provided by any third 

parties that were authorized by the 

compulsory licensee to engage in 

promotional uses during any part of the 

month. If this information is provided, 

Monthly Statements need not reflect 

phonorecords subject to the promotional 

royalty rate provided in § 385.14 or 

§ 385.24 of this title, or any similar 

promotional royalty rate of zero that 

may be provided in part 385 of this title. 

(c) Specific content of monthly 

statements—(1) Accounting of 

phonorecords subject to a cents rate 

royalty structure. The information called 

for by paragraph (b)(4) of this section 

shall, with respect to each nondramatic 

musical work as to which the 

compulsory licensee has made and 

distributed phonorecords subject to part 

385, subpart A of this title or any other 

provisions requiring computation of 

applicable royalties on a cents-per-unit 

basis, include a separate listing of each 

of the following items of information: 

(i) The number of phonorecords made 

during the month covered by the 

Monthly Statement. 

(ii) The number of phonorecords that, 

during the month covered by the 

Monthly Statement and regardless of 

when made, were either: 

(A) Relinquished from possession for 

purposes other than sale; 

(B) Relinquished from possession for 

purposes of sale without any privilege 

of returning unsold phonorecords for 

credit or exchange; 

(C) Relinquished from possession for 

purposes of sale accompanied by a 

privilege of returning unsold 

phonorecords for credit or exchange; 

(D) Returned to the compulsory 

licensee for credit or exchange; or 

(E) Placed in a phonorecord reserve 

(except that if a negative reserve balance 

exists give either the number of 

phonorecords added to the negative 

reserve balance, or the number of 

phonorecords relinquished from 

possession that have been used to 

reduce the negative reserve balance). 

(iii) The number of phonorecords, 

regardless of when made, that were 

relinquished from possession during a 

month earlier than the month covered 

by the Monthly Statement but that, 

during the month covered by the 

Monthly Statement either have had 

revenue from their sale ‘‘recognized’’ 

under § 210.12(g)(3)(i), or were 

comprised in a phonorecord reserve that 

lapsed after nine months under 

§ 210.12(g)(3)(ii). 

(iv) The per unit statutory royalty rate 

applicable to the relevant configuration; 

and 

(v) The total royalty payable for the 

month covered by the Monthly 

Statement (i.e., the result in paragraph 

(d)(2)(v) of this section) for the item 

described by the set of information 

called for, and broken down as required, 

by paragraph (c)(1) of this section. 

(vi) The phonorecord identification 

information required by paragraph (a)(3) 

of this section. 

(2) Accounting of phonorecords 

subject to a percentage rate royalty 

structure. The information called for by 

paragraph (b)(4) of this section shall, 

with respect to each nondramatic 

musical work as to which the 

compulsory licensee has made and 

distributed phonorecords subject to part 

385, subparts B or C of this title, or any 

other provisions requiring computation 

of applicable royalties on a percentagerate basis, include a detailed and stepby-step accounting of the calculation of 

royalties under § 385.12, § 385.22, or 

other provisions of part 385 of this title 

as applicable, sufficient to allow the 

copyright owner to assess the manner in 

which the licensee determined the 

royalty owed and the accuracy of the 

royalty calculations, including but not 

limited to the following information: 

(i) The number of plays, constructive 

plays, or other payable units, of the 

relevant sound recording for the month 

covered by the Monthly Statement for 

the relevant offering. 

(ii) The total royalty payable for the 

month for the item described by the set 

of information called for, and broken 

down as required, by paragraph (c)(3) of 

this section (i.e., the per-work royalty 

allocation for the relevant sound 

recording and offering). 

(iii) The phonorecord identification 

information required by paragraph (c)(3) 

of this section. 

(3) Identification of phonorecords in 

monthly statements. The information 

required by this paragraph shall 

include, and if necessary shall be 

broken down to identify separately, the 

following: 


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(i) The title of the nondramatic 

musical work subject to compulsory 

license. 

(ii) A reference number or code 

identifying the relevant Notice of 

Intention, if the compulsory licensee 

chose to include such a number or code 

on its relevant Notice of Intention for 

the compulsory license. 

(iii) The International Standard 

Recording Code (ISRC) associated with 

the relevant sound recording, if known, 

and at least one of the following, as 

applicable and available for tracking 

sales and/or usage: 

(A) The catalog number or numbers 

and label name or names, associated 

with the phonorecords; 

(B) The Universal Product Code (UPC) 

or similar code used on or associated 

with the phonorecords; or 

(C) The sound recording identification 

number assigned by the compulsory 

licensee or a third-party distributor to 

the relevant sound recording. 

(iv) The names of the principal 

recording artist or group engaged in 

rendering the performances fixed on the 

phonorecords. 

(v) The playing time of the relevant 

sound recording, except that playing 

time is not required in the case of 

ringtones or licensed activity to which 

no overtime adjustment is applicable. 

(vi) If the compulsory licensee 

chooses to allocate its payment between 

co-owners of the copyright in the 

nondramatic musical work, as described 

in paragraph (g)(1) of this section, and 

thus pays the copyright owner (or agent) 

receiving the statement less than one 

hundred percent of the applicable 

royalty, the percentage share paid. 

(vii) The names of the writer or 

writers of the nondramatic musical 

work, or the International Standard 

Name Identifiers (ISNIs) or other unique 

identifier of the writer or writers, if 

known. 

(viii) The International Standard 

Musical Work Code (ISWC) or other 

unique identifier for the nondramatic 

musical work, if known. 

(ix) Identification of the relevant 

phonorecord configuration (for example: 

compact disc, permanent digital 

download, ringtone) or offering (for 

example: limited download, music 

bundle) for which the royalty was 

calculated, including, if applicable and 

except for physical phonorecords, the 

name of the third-party distributor of 

the configuration or offering. 

(d) Royalty payment and 

accounting—(1) In general. The total 

royalty called for by paragraph (b)(5) of 

this section shall be computed so as to 

include every phonorecord 

‘‘distributed’’ during the month covered 

by the Monthly Statement. 

(2) Phonorecords subject to a cents 

rate royalty structure. For phonorecords 

subject to part 385, subpart A of this 

title, or any other applicable royalties 

computed on a cents-per-unit basis, the 

amount of the royalty payment shall be 

calculated as follows: 

(i) Step 1: Compute the number of 

phonorecords shipped for sale with a 

privilege of return. This is the total of 

phonorecords that, during the month 

covered by the Monthly Statement, were 

relinquished from possession by the 

compulsory licensee, accompanied by 

the privilege of returning unsold 

phonorecords to the compulsory 

licensee for credit or exchange. This 

total does not include: 

(A) Any phonorecords relinquished 

from possession by the compulsory 

licensee for purposes of sale without the 

privilege of return; and 

(B) Any phonorecords relinquished 

from possession for purposes other than 

sale. 

(ii) Step 2: Subtract the number of 

phonorecords reserved. This involves 

deducting, from the subtotal arrived at 

in Step 1, the number of phonorecords 

that have been placed in the 

phonorecord reserve for the month 

covered by the Monthly Statement. The 

number of phonorecords reserved is 

determined by multiplying the subtotal 

from Step 1 by the percentage reserve 

level established under GAAP. This step 

should be skipped by a compulsory 

licensee barred from maintaining 

reserves under § 210.15. 

(iii) Step 3: Add the total of all 

phonorecords that were shipped during 

the month and were not counted in Step 

1. This total is the sum of two figures: 

(A) The number of phonorecords that, 

during the month covered by the 

Monthly Statement, were relinquished 

from possession by the compulsory 

licensee for purposes of sale, without 

the privilege of returning unsold 

phonorecords to the compulsory 

licensee for credit or exchange; and 

(B) The number of phonorecords 

relinquished from possession by the 

compulsory licensee, during the month 

covered by the Monthly Statement, for 

purposes other than sale. 

(iv) Step 4: Make any necessary 

adjustments for sales revenue 

‘‘recognized,’’ lapsed reserves, or 

reduction of negative reserve balance 

during the month. If necessary, this step 

involves adding to or subtracting from 

the subtotal arrived at in Step 3 on the 

basis of three possible types of 

adjustments: 

(A) Sales revenue ‘‘recognized.’’ If, in 

the month covered by the Monthly 

Statement, the compulsory licensee 

‘‘recognized’’ revenue from the sale of 

phonorecords that had been 

relinquished from possession in an 

earlier month, the number of such 

phonorecords is added to the Step 3 

subtotal. 

(B) Lapsed reserves. If, in the month 

covered by the Monthly Statement, 

there are any phonorecords remaining 

in the phonorecord reserve for the ninth 

previous month (that is, any 

phonorecord reserves from the ninth 

previous month that have not been 

offset under FOFI, the first-out-first-in 

accounting convention, by actual 

returns during the intervening months), 

the reserve lapses and the number of 

phonorecords in it is added to the Step 

3 subtotal. 

(C) Reduction of negative reserve 

balance. If, in the month covered by the 

Monthly Statement, the aggregate 

reserve balance for all previous months 

is a negative amount, the number of 

phonorecords relinquished from 

possession by the compulsory licensee 

during that month and used to reduce 

the negative reserve balance is 

subtracted from the Step 3 subtotal. 

(v) Step 5: Multiply by the statutory 

royalty rate. The total monthly royalty 

payment is obtained by multiplying the 

subtotal from Step 3, as adjusted if 

necessary by Step 4, by the statutory 

royalty rate set forth in § 385.3 or other 

provisions of part 385 of this title as 

applicable. 

(3) Phonorecords subject to a 

percentage rate royalty structure. For 

phonorecords subject to part 385, 

subparts B or C of this title, or any other 

applicable royalties computed on a 

percentage-rate basis, the amount of the 

royalty payment shall be calculated as 

provided in § 385.12, § 385.22, or other 

provisions of part 385 of this title as 

applicable. The calculations shall be 

made in good faith and on the basis of 

the best knowledge, information, and 

belief of the licensee at the time 

payment is due, and subject to the 

additional accounting and certification 

requirements of 17 U.S.C. 115(c)(5) and 

this section. The following additional 

provisions shall also apply: 

(i) A licensee may, in cases where the 

final public performance royalty has not 

yet been determined, compute the 

public performance royalty component 

based on the interim public 

performance royalty rate, if established; 

or alternatively, on a reasonable 

estimation of the expected royalties to 

be paid in accordance with GAAP. 

Royalty payments based on anticipated 

payments or interim public performance 

royalty rates must be reconciled on the 

Annual Statement of Account, or by 


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complying with § 210.17(d)(2)(iii) 

governing Amended Annual Statements 

of Account. 

(ii) When calculating the per-work 

royalty allocation for each work, as 

described in § 385.12(b)(4), 

§ 385.22(b)(3), or any similar provisions 

of part 385 of this title as applicable, an 

actual or constructive per-play 

allocation is to be calculated to at least 

the hundredth of a cent (i.e., to at least 

four decimal places). 

(e) Clear statements. The information 

required by paragraphs (b) and (c) of 

this section requires intelligible, legible, 

and unambiguous statements in the 

Monthly Statements of Account without 

incorporation of facts or information 

contained in other documents or 

records. 

(f) Certification. (1) Each Monthly 

Statement of Account shall be 

accompanied by: 

(i) The printed or typewritten name of 

the person who is signing and certifying 

the Monthly Statement of Account. 

(ii) A signature, which in the case of 

a compulsory licensee that is a 

corporation or partnership, shall be the 

signature of a duly authorized officer of 

the corporation or of a partner. 

(iii) The date of signature and 

certification. 

(iv) If the compulsory licensee is a 

corporation or partnership, the title or 

official position held in the partnership 

or corporation by the person who is 

signing and certifying the Monthly 

Statement of Account. 

(v) One of the following statements: 

(A) I certify that (1) I am duly 

authorized to sign this Monthly 

Statement of Account on behalf of the 

compulsory licensee; (2) I have 

examined this Monthly Statement of 

Account; and (3) all statements of fact 

contained herein are true, complete, and 

correct to the best of my knowledge, 

information, and belief, and are made in 

good faith; or 

(B) I certify that (1) I am duly 

authorized to sign this Monthly 

Statement of Account on behalf of the 

compulsory licensee, (2) I have prepared 

or supervised the preparation of the data 

used by the compulsory licensee and/or 

its agent to generate this Monthly 

Statement of Account, (3) such data is 

true, complete, and correct to the best of 

my knowledge, information, and belief, 

and was prepared in good faith, and (4) 

this Monthly Statement of Account was 

prepared by the compulsory licensee 

and/or its agent using processes and 

internal controls that 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 suitably designed to generate 

monthly statements that accurately 

reflect, in all material respects, the 

compulsory licensee’s usage of musical 

works, the statutory royalties applicable 

thereto, and any other data that is 

necessary for the proper calculation of 

the statutory royalties in accordance 

with 17 U.S.C. 115 and applicable 

regulations. 

(2) If the Monthly Statement of 

Account is served by mail or by 

reputable courier service, certification of 

the Monthly Statement of Account by 

the compulsory licensee shall be made 

by handwritten signature. If the 

Monthly Statement of Account is served 

electronically, certification of the 

Monthly Statement of Account by the 

compulsory licensee shall be made by 

electronic signature as defined in 

section 7006(5) of title 15 of the United 

States Code. 

(g) Service. (1) The service of a 

Monthly Statement of Account on a 

copyright owner under this subpart may 

be accomplished by means of service on 

either the copyright owner or an agent 

of the copyright owner with authority to 

receive Statements of Account on behalf 

of the copyright owner. In the case 

where the work has more than one 

copyright owner, the service of a 

Statement of Account on at least one coowner or upon an agent of at least one 

of the co-owners shall be sufficient with 

respect to all co-owners. The 

compulsory licensee may choose to 

allocate its payment between co-owners. 

In such a case the compulsory licensee 

shall provide each co-owner (or its 

agent) a Monthly Statement reflecting 

the percentage share paid to that coowner. Each Monthly Statement of 

Account shall be served on the 

copyright owner or the agent to whom 

or which it is directed by mail, by 

reputable courier service, or by 

electronic delivery as set forth in 

paragraph (g)(2) of this section on or 

before the 20th day of the immediately 

succeeding month. The royalty payment 

for a month also shall be served on or 

before the 20th day of the immediately 

succeeding month. The Monthly 

Statement and payment may be sent 

together or separately, but if sent 

separately, the payment must include 

information reasonably sufficient to 

allow the payee to match the Monthly 

Statement to the payment. However, in 

the case where the compulsory licensee 

has served its Notice of Intention upon 

an agent of the copyright owner 

pursuant to § 201.18 of this chapter, the 

compulsory licensee is not required to 

serve Monthly Statements of Account or 

make any royalty payments until the 

compulsory licensee receives from the 

agent with authority to receive the 

Notice of Intention notice of the name 

and address of the copyright owner or 

its agent upon whom the compulsory 

licensee shall serve Monthly Statements 

of Account and the monthly royalty 

fees. Upon receipt of this information, 

the compulsory licensee shall serve 

Monthly Statements of Account and all 

royalty fees covering the intervening 

period upon the person or entity 

identified by the agent with authority to 

receive the Notice of Intention by or 

before the 20th day of the month 

following receipt of the notification. It 

shall not be necessary to file a copy of 

the Monthly Statement in the Copyright 

Office. 

(2) A copyright owner or authorized 

agent may send a licensee a demand 

that Monthly Statements of Account be 

submitted in a readily accessible 

electronic format consistent with 

prevailing industry practices applicable 

to comparable electronic delivery of 

comparable financial information. 

(3) When a compulsory licensee 

receives a request to deliver or make 

available Monthly Statements of 

Account in electronic form, or a request 

to revert back to service by mail or 

reputable courier service, the 

compulsory licensee shall make such a 

change effective with the first 

accounting period ending at least 30 

days after the compulsory licensee’s 

receipt of the request and any 

information (such as a postal or email 

address, as the case may be) that is 

necessary for the compulsory licensee to 

make the change. 

(4)(i) In any case where a Monthly 

Statement of Account is sent by mail or 

reputable courier service and the 

Monthly Statement of Account is 

returned to the sender because the 

copyright owner or agent is no longer 

located at that address or has refused to 

accept delivery, or the Monthly 

Statement of Account is sent by 

electronic mail and is undeliverable, or 

in any case where an address for the 

copyright owner is not known, the 

Monthly Statement of Account, together 

with any evidence of mailing or 

attempted delivery by courier service or 

electronic mail, may be filed in the 

Licensing Division of the Copyright 

Office. Any Monthly Statement of 

Account submitted for filing in the 

Copyright Office shall be accompanied 

by a brief statement of the reason why 

it was not served on the copyright 

owner. A written acknowledgment of 

receipt and filing will be provided to the 

sender. 


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(ii) The Copyright Office will not 

accept any royalty fees submitted with 

Monthly Statements of Account under 

this section. 

(iii) Neither the filing of a Monthly 

Statement of Account in the Copyright 

Office, nor the failure to file such 

Monthly Statement, shall have effect 

other than that which may be attributed 

to it by a court of competent 

jurisdiction. 

(iv) No filing fee will be required in 

the case of Monthly Statements of 

Account submitted to the Copyright 

Office under this section. Upon request 

and payment of the fee specified in 

§ 201.3(e) of this chapter, a Certificate of 

Filing will be provided to the sender. 

(5) Subject to paragraph (g)(6) of this 

section, a separate Monthly Statement of 

Account shall be served for each month 

during which there is any activity 

relevant to the payment of royalties 

under 17 U.S.C. 115. The Annual 

Statement of Account described in 

§ 210.17 of this subpart does not replace 

any Monthly Statement of Account. 

(6) Royalties under 17 U.S.C. 115 

shall not be considered payable, and no 

Monthly Statement of Account shall be 

required, until the compulsory 

licensee’s cumulative unpaid royalties 

for the copyright owner equal at least 

one cent. Moreover, in any case in 

which the cumulative unpaid royalties 

under 17 U.S.C. 115 that would 

otherwise be payable by the compulsory 

licensee to the copyright owner are less 

than $5, and the copyright owner has 

not notified the compulsory licensee in 

writing that it wishes to receive 

Monthly Statements of Account 

reflecting payments of less than $5, the 

compulsory licensee may choose to 

defer the payment date for such 

royalties and provide no Monthly 

Statements of Account until the earlier 

of the time for rendering the Monthly 

Statement of Account for the month in 

which the compulsory licensee’s 

cumulative unpaid royalties under 

section 17 U.S.C. 115 for the copyright 

owner exceed $5 or the time for 

rendering the Annual Statement of 

Account, at which time the compulsory 

licensee may provide one statement and 

payment covering the entire period for 

which royalty payments were deferred. 

(7) If the compulsory licensee is 

required, under applicable tax law and 

regulations, to make backup 

withholding from its payments required 

hereunder, the compulsory licensee 

shall indicate the amount of such 

withholding on the Monthly Statement 

or on or with the payment. 

(8) If a Monthly Statement of Account 

is sent by certified mail or registered 

mail, a mailing receipt shall be 

sufficient to prove that service was 

timely. If a Monthly Statement of 

Account is sent by a reputable courier, 

documentation from the courier 

showing the first date of attempted 

delivery shall be sufficient to prove that 

service was timely. If a Monthly 

Statement of Account or a link thereto 

is sent by electronic mail, a return 

receipt shall be sufficient to prove that 

service was timely. In the absence of the 

foregoing, the compulsory licensee shall 

bear the burden of proving that the 

Monthly Statement of Account was 

served in a timely manner. 

§ 210.17 Annual statements of account. 

(a) Forms. The Copyright Office does 

not provide printed forms for the use of 

persons serving Annual Statements of 

Account. 

(b) Annual period. Any Annual 

Statement of Account shall cover the 

full fiscal year of the compulsory 

licensee. 

(c) General content. An Annual 

Statement of Account shall be clearly 

and prominently identified as an 

‘‘Annual Statement of Account Under 

Compulsory License for Making and 

Distributing Phonorecords,’’ and shall 

include a clear statement of the 

following information: 

(1) The fiscal year covered by the 

Annual Statement of Account. 

(2) The full legal name of the 

compulsory licensee, together with all 

fictitious or assumed names used by 

such person or entity for the purpose of 

conducting the business of making and 

distributing phonorecords. 

(3) If the compulsory licensee is a 

business organization, the name and 

title of the chief executive officer, 

managing partner, sole proprietor or 

other person similarly responsible for 

the management of such entity. 

(4) The full address, including a 

specific number and street name or rural 

route, or the place of business of the 

compulsory licensee (a post office box 

or similar designation will not be 

sufficient for this purpose except where 

it is the only address that can be used 

in that geographic location). 

(5) For each nondramatic musical 

work that is owned by the same 

copyright owner being served with the 

Annual Statement and that is embodied 

in phonorecords covered by the 

compulsory license, a detailed 

statement of all of the information 

called for in paragraph (d) of this 

section. 

(6) The total royalty payable for the 

fiscal year covered by the Annual 

Statement computed in accordance with 

the requirements of § 210.16, and, in the 

case of offerings for which royalties are 

calculated pursuant to part 385, 

subparts B or C of this title, or any other 

provision requiring computation of 

applicable royalties on a percentage-rate 

basis, calculations showing in detail 

how the royalty was computed (for 

these purposes, the applicable royalty as 

specified in part 385, subpart A of this 

title shall be payable for every 

phonorecord ‘‘distributed’’ during the 

fiscal year covered by the Annual 

Statement). 

(7) The total sum paid under Monthly 

Statements of Account by the 

compulsory licensee to the copyright 

owner being served with the Annual 

Statement during the fiscal year covered 

by the Annual Statement. 

(8) In any case where the compulsory 

license falls within the provisions of 

§ 210.15, a clear description of the 

action or proceeding involved, 

including the date of the final judgment 

or definitive finding described in that 

section. 

(9) Any late fees, if applicable, 

included in any payment associated 

with the Annual Statement. 

(d) Specific content of annual 

statements—(1) Accounting of 

phonorecords subject to a cents rate 

royalty structure. The information called 

for by paragraph (c)(5) of this section 

shall, with respect to each nondramatic 

musical work as to which the 

compulsory licensee has made and 

distributed phonorecords subject to part 

385, subpart A of this title, or any other 

provision requiring computation of 

applicable royalties on a cents-per-unit 

basis, include a separate listing of each 

of the following items of information: 

(i) The number of phonorecords made 

through the end of the fiscal year 

covered by the Annual Statement, 

including any made during earlier years. 

(ii) The number of phonorecords 

which have never been relinquished 

from possession of the compulsory 

licensee through the end of the fiscal 

year covered by the Annual Statement. 

(iii) The number of phonorecords 

involuntarily relinquished from 

possession (as through fire or theft) of 

the compulsory licensee during the 

fiscal year covered by the Annual 

Statement and any earlier years, 

together with a description of the facts 

of such involuntary relinquishment. 

(iv) The number of phonorecords 

‘‘distributed’’ by the compulsory 

licensee during all years before the 

fiscal year covered by the Annual 

Statement. 

(v) The number of phonorecords 

relinquished from possession of the 

compulsory licensee for purposes of sale 

during the fiscal year covered by the 

Annual Statement accompanied by a 


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privilege of returning unsold records for 

credit or exchange, but not 

‘‘distributed’’ by the end of that year. 

(vi) The number of phonorecords 

‘‘distributed’’ by the compulsory 

licensee during the fiscal year covered 

by the Annual Statement. 

(vii) The per unit statutory royalty 

rate applicable to the relevant 

configuration. 

(viii) The total royalty payable for the 

fiscal year covered by the Annual 

Statement for the item described by the 

set of information called for, and broken 

down as required, by this paragraph 

(d)(1). 

(ix) The phonorecord identification 

information required by paragraph (d)(3) 

of this section. 

(2) Accounting of phonorecords 

subject to a percentage rate royalty 

structure. (i) The information called for 

by paragraph (c)(5) of this section shall 

identify each offering for which 

royalties are to be calculated separately 

and, with respect to each nondramatic 

musical work as to which the 

compulsory licensee has made and 

distributed phonorecords subject to part 

385, subparts B or C of this title, or any 

other provision requiring computation 

of applicable royalties on a percentagerate basis, include the number of plays, 

constructive plays, or other payable 

units during the fiscal year covered by 

the Annual Statement, together with, 

and which if necessary shall be broken 

down to identify separately, the 

following: 

(A) The total royalty payable for the 

fiscal year for the item described by the 

set of information called for, and broken 

down as required, by paragraph (d)(3) of 

this section (i.e., the per-work royalty 

allocation for the relevant sound 

recording and offering). 

(B) The phonorecord identification 

information required by paragraph (d)(3) 

of this section. 

(ii) If the information given under 

paragraph (d)(2)(i) of this section does 

not reconcile, the Annual Statement 

shall also include a clear and detailed 

explanation of the difference. 

(iii) In any case where a licensee 

serves an Annual Statement of Account 

based on anticipated payments or 

interim public performance royalty rates 

prior to the final determination of final 

public performance royalties for all 

musical works used by the service in the 

relevant fiscal year, the licensee shall 

serve an Amended Annual Statement of 

Account within six months from the 

date such public performance royalties 

have been established. The Amended 

Annual Statement of Account shall 

recalculate the royalty fees reported on 

the relevant Annual Statement of 

Account to adjust for any change to the 

public performance rate used to 

calculate the royalties reported. Service 

shall be made in accordance with 

paragraph (g) of this section. 

Certification of the Amended Annual 

Statement shall be made in accordance 

with paragraph (f) of this section, except 

that the CPA examination under 

paragraph (f)(2) of this section may be 

limited to the licensee’s recalculation of 

royalty fees in accordance with this 

paragraph. 

(3) Identification of phonorecords in 

annual statements. The information 

required by this paragraph shall 

include, and if necessary shall be 

broken down to identify separately, the 

following: 

(i) The title of the nondramatic 

musical work subject to compulsory 

license. 

(ii) A reference number or code 

identifying the relevant Notice of 

Intention, if the compulsory licensee 

chose to include such a number or code 

on its relevant Notice of Intention for 

the compulsory license. 

(iii) The International Standard 

Recording Code (ISRC) associated with 

the relevant sound recording, if known; 

and at least one of the following, as 

applicable and available for tracking 

sales and/or usage: 

(A) The catalog number or numbers 

and label name or names, used on or 

associated with the phonorecords; 

(B) The Universal Product Code (UPC) 

or similar code used on or associated 

with the phonorecords; or 

(C) The sound recording identification 

number assigned by the compulsory 

licensee or a third-party distributor to 

the relevant sound recording; 

(iv) The names of the principal 

recording artist or group engaged in 

rendering the performances fixed on the 

phonorecords. 

(v) The playing time of the relevant 

sound recording, except that playing 

time is not required in the case of 

ringtones or licensed activity to which 

no overtime adjustment is applicable. 

(vi) If the compulsory licensee 

chooses to allocate its payments 

between co-owners of the copyright in 

the nondramatic musical work as 

described in paragraph (g)(1) of 

§ 210.16, and thus pays the copyright 

owner (or agent) receiving the statement 

less than one hundred percent of the 

applicable royalty, the percentage share 

paid. 

(vii) The names for the writer or 

writers of the nondramatic musical 

work, or the International Standard 

Name Identifiers (ISNIs) or other unique 

identifier of the writer or writers, if 

known. 

(viii) The International Standard 

Work Code (ISWC) or other unique 

identifier for the nondramatic musical 

work, if known. 

(ix) Identification of the relevant 

phonorecord configuration (for example: 

Compact disc, permanent digital 

download, ringtone) or offering (for 

example: Limited download, music 

bundle) for which the royalty was 

calculated, including, if applicable and 

except for physical phonorecords, the 

name of the third-party distributor of 

the configuration or offering. 

(e) Clear statement. The information 

required by paragraph (c) of this section 

requires intelligible, legible, and 

unambiguous statements in the Annual 

Statement of Account without 

incorporation by reference of facts or 

information contained in other 

documents or records. 

(f) Certification. (1) Each Annual 

Statement of Account shall be 

accompanied by: 

(i) The printed or typewritten name of 

the person who is signing the Annual 

Statement of Account on behalf of the 

compulsory licensee. 

(ii) A signature, which in the case of 

a compulsory licensee that is a 

corporation or partnership, shall be the 

signature of a duly authorized officer of 

the corporation or of a partner. 

(iii) The date of signature. 

(iv) If the compulsory licensee is a 

corporation or partnership, the title or 

official position held in the partnership 

or corporation by the person signing the 

Annual Statement of Account. 

(v) The following statement: I am duly 

authorized to sign this Annual 

Statement of Account on behalf of the 

compulsory licensee. 

(2) Each Annual Statement of Account 

shall also be certified by a licensed 

Certified Public Accountant. Such 

certification shall comply with the 

following requirements: 

(i) Except as provided in paragraph 

(f)(2)(ii) of this section, the accountant 

shall certify that it has conducted an 

examination of the Annual Statement of 

Account prepared by the compulsory 

licensee in accordance with the 

attestation standards established by the 

American Institute of Certified Public 

Accountants, and has rendered an 

opinion based on such examination that 

the Annual Statement conforms with 

the standards in paragraph (f)(2)(iv) of 

this section. 

(ii) If such accountant determines in 

its professional judgment that the 

volume of data attributable to a 

particular compulsory licensee renders 

it impracticable to certify the Annual 

Statement of Account as required by 

paragraph (f)(2)(i) of this section, the 


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accountant may instead certify the 

following: 

(A) That the accountant has 

conducted an examination in 

accordance with the attestation 

standards established by the American 

Institute of Certified Public Accountants 

of the following assertions by the 

compulsory licensee’s management: 

(1) That the processes used by or on 

behalf of the compulsory licensee, 

including calculation of statutory 

royalties, generated Annual Statements 

that conform with the standards in 

paragraph (f)(2)(iv) of this section; and 

(2) That the internal controls relevant 

to the processes used by or on behalf of 

the compulsory licensee to generate 

Annual Statements were suitably 

designed and operated effectively 

during the period covered by the 

Annual Statements. 

(B) That such examination included 

examining, either on a test basis or 

otherwise as the accountant considered 

necessary under the circumstances and 

in its professional judgment, evidence 

supporting the management assertions 

in paragraph (f)(2)(ii)(A) of this section, 

including data relevant to the 

calculation of statutory royalties, and 

performing such other procedures as the 

accountant considered necessary in the 

circumstances. 

(C) That the accountant has rendered 

an opinion based on such examination 

that the processes used to generate the 

Annual Statement were designed and 

operated effectively to generate Annual 

Statements that conform with the 

standards in paragraph (f)(2)(iv) of this 

section, and that the internal controls 

relevant to the processes used to 

generate Annual Statements were 

suitably designed and operated 

effectively during the period covered by 

the Annual Statements. 

(iii) In the event a third party or third 

parties acting on behalf of the 

compulsory licensee provided services 

related to the Annual Statement, the 

accountant making a certification under 

either paragraph (f)(2)(i) or paragraph 

(f)(2)(ii) of this section may, as the 

accountant considers necessary under 

the circumstances and in its 

professional judgment, rely on a report 

and opinion rendered by a licensed 

Certified Public Accountant in 

accordance with the attestation 

standards established by the American 

Institute of Certified Public Accountants 

that the processes and/or internal 

controls of the third party or third 

parties relevant to the generation of the 

compulsory licensee’s Annual 

Statements were suitably designed and 

operated effectively during the period 

covered by the Annual Statements, if 

such reliance is disclosed in the 

certification. 

(iv) An Annual Statement of Account 

conforms with the standards of this 

paragraph if it presents fairly, in all 

material respects, the compulsory 

licensee’s usage of the copyright 

owner’s musical works under 

compulsory license during the period 

covered by the Annual Statement, the 

statutory royalties applicable thereto, 

and such other data as are relevant to 

the calculation of statutory royalties in 

accordance with 17 U.S.C. 115 and 

applicable regulations. 

(v) Each certificate shall be signed by 

an individual, or in the name of a 

partnership or a professional 

corporation with two or more 

shareholders. The certificate number 

and jurisdiction are not required if the 

certificate is signed in the name of a 

partnership or a professional 

corporation with two or more 

shareholders. 

(3) If the Annual Statement of 

Account is served by mail or by 

reputable courier service, the Annual 

Statement of Account shall be signed by 

handwritten signature. If the Annual 

Statement of Account is served 

electronically, the Annual Statement of 

Account shall be signed by electronic 

signature as defined in section 7006(5) 

of title 15 of the United States Code. 

(4) If the Annual Statement of 

Account is served electronically, the 

compulsory licensee may serve an 

electronic facsimile of the original 

certification of the Annual Statement of 

Account signed by the licensed Certified 

Public Accountant. The compulsory 

licensee shall retain the original 

certification of the Annual Statement of 

Account signed by the licensed Certified 

Public Accountant for the period 

identified in § 210.18, which shall be 

made available to the copyright owner 

upon demand. 

(g) Service. (1) The service of an 

Annual Statement of Account on a 

copyright owner under this subpart may 

be accomplished by means of service on 

either the copyright owner or an agent 

of the copyright owner with authority to 

receive Statements of Account on behalf 

of the copyright owner. In the case 

where the work has more than one 

copyright owner, the service of the 

Statement of Account on one co-owner 

or upon an agent of one of the coowners shall be sufficient with respect 

to all co-owners. Each Annual 

Statement of Account shall be served on 

the copyright owner or the agent to 

whom or which it is directed by mail, 

by reputable courier service, or by 

electronic delivery as set forth in 

paragraph (g)(2) of this section on or 

before the 20th day of the sixth month 

following the end of the fiscal year 

covered by the Annual Statement. It 

shall not be necessary to file a copy of 

the Annual Statement in the Copyright 

Office. An Annual Statement of Account 

shall be served for each fiscal year 

during which at least one Monthly 

Statement of Account was required to 

have been served under § 210.16(g). 

(2) If an Annual Statement of Account 

is being sent electronically, it may be 

sent or made available to a copyright 

owner or its agent in a readily accessible 

electronic format consistent with 

prevailing industry practices applicable 

to comparable electronic delivery of 

comparable financial information. 

(3) If the copyright owner or agent has 

made a request pursuant to 

§ 210.16(g)(3) to receive statements in 

electronic or paper form, such request 

shall also apply to Annual Statements to 

be rendered on or after the date that the 

request is effective with respect to 

Monthly Statements. 

(4) In any case where the amount 

required to be stated in the Annual 

Statement of Account under paragraph 

(c)(6) of this section (i.e., the total 

royalty payable) is greater than the 

amount stated in that Annual Statement 

under paragraph (c)(7) of this section 

(i.e., the total sum paid), the difference 

between such amounts shall also be 

served on or before the 20th day of the 

sixth month following the end of the 

fiscal year covered by the Annual 

Statement. The Annual Statement and 

payment may be sent together or 

separately, but if sent separately, the 

payment must include information 

reasonably sufficient to allow the payee 

to match the Annual Statement and the 

payment. The delivery of such sum does 

not require the copyright owner to 

accept such sum, or to forego any right, 

relief, or remedy which may be 

available under law. In any case where 

the amount required to be stated in the 

Annual Statement of Account under 

paragraph (c)(6) of this section is less 

than the amount stated in that Annual 

Statement under paragraph (c)(7) of this 

section, the difference between such 

amounts shall be available to the 

compulsory licensee as a credit. 

(5)(i) In any case where an Annual 

Statement of Account is sent by mail or 

by reputable courier service and is 

returned to the sender because the 

copyright owner or agent is no longer 

located at that address or has refused to 

accept delivery, or the Annual 

Statement of Account is sent by 

electronic mail and is undeliverable, or 

in any case where an address for the 

copyright owner is not known, the 

Annual Statement of Account, together 


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with any evidence of mailing or 

attempted delivery by courier service or 

electronic mail, may be filed in the 

Licensing Division of the Copyright 

Office. Any Annual Statement of 

Account submitted for filing shall be 

accompanied by a brief statement of the 

reason why it was not served on the 

copyright owner. A written 

acknowledgment of receipt and filing 

will be provided to the sender. 

(ii) The Copyright Office will not 

accept any royalty fees submitted with 

Annual Statements of Account under 

paragraph (g)(5)(i) of this section. 

(iii) Neither the filing of an Annual 

Statement of Account in the Copyright 

Office, nor the failure to file such 

Annual Statement, shall have any effect 

other than that which may be attributed 

to it by a court of competent 

jurisdiction. 

(iv) No filing fee will be required in 

the case of Annual Statements of 

Account submitted to the Copyright 

Office under paragraph (g)(5)(i) of this 

section. Upon request and payment of 

the fee specified in § 201.3(e) of this 

chapter, a Certificate of Filing will be 

provided to the sender. 

(6) If an Annual Statement of Account 

is sent by certified mail or registered 

mail, a mailing receipt shall be 

sufficient to prove that service was 

timely. If an Annual Statement of 

Account is sent by a reputable courier, 

documentation from the courier 

showing the first date of attempted 

delivery shall be sufficient to prove that 

service was timely. If an Annual 

Statement of Account or a link thereto 

is sent by electronic mail, a return 

receipt shall be sufficient to prove that 

service was timely. In the absence of the 

foregoing, the compulsory licensee shall 

bear the burden of proving that the 

Annual Statement of Account was 

served in a timely manner. 

(h) Annual Statements for periods 

before November 17, 2014. If a copyright 

owner did not receive an Annual 

Statement of Account from a 

compulsory licensee for any fiscal year 

ending after March 1, 2009 and before 

November 17, 2014, the copyright 

owner may, at any time before 

November 17, 2014, make a request in 

writing to that compulsory licensee 

requesting an Annual Statement of 

Account for the relevant fiscal year 

conforming to the requirements of this 

section. If such a request is made, the 

compulsory licensee shall provide the 

Annual Statement of Account within 6 

months after receiving the request. If 

such a circumstance and request applies 

to more than one of the compulsory 

licensee’s fiscal years, such years may 

be combined on a single statement. 

§ 210.18 Documentation. 

All compulsory licensees shall, for a 

period of at least five years from the 

date of service of an Annual Statement 

of Account or Amended Annual 

Statement of Account, keep and retain 

in their possession all records and 

documents necessary and appropriate to 

support fully the information set forth 

in such Annual Statement or Amended 

Annual Statement and in Monthly 

Statements served during the fiscal year 

covered by such Annual Statement or 

Amended Annual Statement. 

§ 210.19 Harmless errors. 

Errors in a Monthly or Annual 

Statement of Account that do not 

materially prejudice the rights of the 

copyright owner shall be deemed 

harmless, and shall not render that 

statement of account invalid or provide 

a basis for the exercise of the remedies 

set forth in 17 U.S.C. 115(c)(6). 

Dated: August 8, 2014, 

Maria A. Pallante, 

Register of Copyrights. 

James H. Billington, 

Librarian of Congress. 

[FR Doc. 2014–22235 Filed 9–17–14; 8:45 am] 

BILLING CODE 1410–30–P 


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