From what I've heard the rules are the way they are now due to a specific instance where a person pulled from a botbr's work on souncloud that was not licensed to be covered. If anyone was present at the time and could elaborate that'd be great.
That said... if it was never entered on botb that is entirely on the host. I don't see why the rules needed to change. If you select a work that is not on botb, again, that is entirely on you for not doing your due diligence to confirm whether or not it was an entry...
I guess that's not really what's being asked here, though, only sort of adjacent. Sorry for going off-topic.
So I do have a question, then; what about creating a format specifically for covers of previous BotB entries?
We have that little rule box that lists the rules for every battle. It can be updated depending on whether or not late penalties have been disabled, so why not just remove / modify that rule when doing a cover battle?
I think it might be a good idea to summarize format-specific rules there, too, then link to the lyceum for more info. Currently a lot of entries get entered that might slightly break the rules in one way or another. Displaying a summary of rules might help new users a lot.
But this way, the same logic can be applied to the Stepmania chart, without going through a bunch of hoops to let users know how those battles work.