The U.S Copyright Office has finalized its rule change on streaming royalties, delivering a long-awaited clarification on who receives streaming royalties when songwriters exercise termination rights that allow authors and heirs to terminate copyright grants — including transfers or licenses — for their music. The rule clarifies who is entitled to collect mechanical royalties paid by streaming platforms after the termination has been invoked. Specifically, the final rule confirms “that the derivative works exception to termination rights under the Copyright Act does not apply to the statutory blanket mechanical license established under the Music Modernization Act.”

The ruling addresses nuanced questions about how the blanket license for streaming royalties used by the Mechanical Licensing Collective “interacts with so-called termination rights — a federal provision that empowers authors to reclaim the rights to their copyrighted works decades after selling them away,” Billboard reports.

The move — which would affect streaming platforms including Spotify, Apple and Amazon — overturns “what the Copyright Office called an ‘erroneous’ earlier policy by the MLC” that critics feared would have resulted in former owners receiving royalties “in perpetuity, long after a songwriter took back ownership.”

That error centered on the termination provision’s “exception clause” having to do with derivative works. “Even though a publisher must hand back the rights to the original song, they’re entitled to keep selling any existing ‘derivative works’ they created when they owned it,” and are entitled to continue receiving royalties from those derivative works, Billboard explains.

As a result, the many songwriters who have successfully invoked termination rights “will actually start getting paid streaming royalties,” according to Billboard.

The final rule directs the MLC, created as a result of the Music Modernization Act of 2018, to distribute royalties “in a manner consistent with the Copyright Act,” the Copyright Office explains on its rulemaking web page.

“The ruling confirms that the so-called ‘derivative works exception’ does not apply to the blanket license under Section 115 of the Copyright Act,” writes Music News Worldwide, explaining that the 115 license, also known as the compulsory license, “is administered by the U.S.-based MLC.”

Music Artists Coalition board member Jordan Bromley called the new USCO termination rule a “landmark victory for songwriters,” according to Billboard, which reprinted a statement from him that says the decision “not only ensures fair compensation for songwriters who reclaim their rights, but also sets a precedent that strengthens the very foundation of copyright law in the digital age.”

Related:
What Musicians Should Know About Copyright, U.S. Copyright Office