U.S. Copyright Office Seeks Comments on Late Fees for Mechanical Royalty Payments

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The US Copyright Office issues a notification of inquiry soliciting public comments on late fees for mechanical royalty payments under the Music Modernization Act.

The US Copyright Office is asking for public feedback on digital music royalty late fees and whether it should consider revising the current system. The office’s Federal Register notice, published on Thursday, requests comments on when it should assess late fees for royalty payments in connection with digital music providers reporting under mechanical blanket licenses issued per the Music Modernization Act (MMA). Initial written comments must be received by 11:59 PM eastern time on April 10.

The Orrin G. Hatch-Bob Goodlatte Music Modernization Act — colloquially referred to as the Music Modernization Act — modified the compulsory mechanical license for reproducing and distributing music recordings by switching from a song-by-song licensing system to a “blanket” licensing system at the start of 2021. This blanket system is administered by a mechanical licensing collective designated by the Copyright Office.

“Digital music providers are able to obtain this new statutory mechanical blanket license to make digital phonorecord deliveries of nondramatic musical works, including in the form of permanent downloads, limited downloads, or interactive streams, subject to various requirements, including reporting obligations,” reads the Federal Registrar notice. “Digital music providers also have the option to engage in these activities, in whole or in part, through voluntary licenses with copyright owners.”

The Copyright Royalty Judges are responsible for setting the blanket license’s rates and terms of royalty payments, which “may include terms with respect to late payments/late fees.” The MMA added a new provision to address the blanket license, stating that “late fees for past due royalty payments shall accrue from the due date for payment until payment is received.” This provision states that licensees must pay a late fee of 1.5% per month, “or the highest lawful rate, whichever is lower, for any payment owed to a Copyright Owner and remaining unpaid after the due date established.”

“Late royalty payments have been a significant problem for copyright owners, and the implementation of a late fee for any royalty amounts paid late was a significant step forward,” reads Notice of Proposed Rulemaking comments from AIMP. “The regulations as proposed should remove any doubt that might interfere with those late fee payments.”