On July 9, the U.S. Copyright Office issued a final rule regarding the application of the derivative works exception to the statutory termination rights provided in the Copyright Act and its relation to the blanket license established under the Music Modernization Act (MMA). The MLC welcomes this definitive guidance from the Office.

When the Office announced in October of 2022 that it had initiated a rulemaking proceeding with the intention to provide definitive guidance in this area of formerly unsettled law, The MLC immediately and voluntarily suspended our prior interim policy. In the months that followed, we actively participated in the rulemaking process, including by submitting four formal public comments and by holding three formal ex parte meetings with the Office. We did this to help ensure the final rule achieved the Office’s stated positions on this area of law as effectively as possible. The final rule reflects much of the feedback The MLC provided.

What Does This New Rule Mean for Me?

  • The rule adopts the “current payee rule” that The MLC and the overwhelming majority of the industry supported in public comments. As a general rule, the rule provides for The MLC to pay the current payee in its records for all distributions, including regular monthly distributions, adjustments and matched historical distributions, unless specifically informed otherwise.

  • The rule establishes a process for correcting payments made to pre-termination publishers under The MLC’s prior interim policy, though it is worth noting that more than half of the royalties distributed under our prior interim policy went to post-termination owners.
  • The process in the rule begins with a voluntary negotiation period, which gives the pre- and post-termination parties the opportunity to address any corrections directly, without The MLC’s involvement. Where those two parties are publishers or administrators, the hope is that this will allow those parties to avoid a scenario that involves a pre-termination party having to collect prior royalty payments from a songwriter only to pass those royalties on to a post-termination publisher that will then redistribute the royalties back to the same songwriter.

What’s Next?

Now that the Office has completed this rulemaking proceeding and issued a final rule, The MLC has already begun working to implement the new rule. Our first task will be to notify those pre-termination owners who previously received royalties from us under our prior interim policy that they are no longer entitled to retain those royalties under the new rule. We expect to begin sending out those notices over the next few months. We will provide additional updates in our Member newsletters after we have fully reviewed the rule and established a roadmap for distributing royalties in accordance with the rule.