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Canadian company accuses majors of anti-competitive behaviour over public domain Beatles tracks

By | Published on Thursday 3 September 2015

The Beatles

Stargrove Entertainment, a company that has been releasing public domain Beatles recordings in Canada, has taken the Sony and Universal record and publishing companies to the country’s Competition Tribunal, claiming that the majors exploited their market dominance in order to stop its legitimate business.

This dispute has everything to do with copyright terms. As much previously reported, the copyright term for sound recordings was increased from 50 to 70 years in Europe at the start of 2013, after years of lobbying by the record business. The extension was secured just in time for the UK industry, because the first Beatles album ‘Please Please Me’ was released in 1963 and was therefore about to come out of copyright under the old system.

That said, the Fab Four’s debut single, ‘Love Me Do’, came out in 1962 so was already out of copyright in Europe by the time the extension kicked in. And because the extension was not applied retrospectively, that track and its B-side ‘PS I Love You’ are still public domain in Europe.

Meanwhile in Canada, the copyright term for sound recordings stayed put at 50 years, until the government there suddenly announced in April a plan to follow Europe’s lead and shift things up to 70 years. That extension then duly occurred in June, but again it was not applied retrospectively.

And, by my maths, by that point at least three Beatles albums had fallen out of copyright in Canada. Meaning anyone could now exploit those recordings in the country without a licence from Universal Music, which has controlled The Beatles catalogue since its big EMI acquisition in 2012.

And so enter Stargrove Entertainment, which packaged together some of the Beatles records now out of copyright in the country, and then did a deal with Walmart to sell those packages in its Canadian stores. Resulting in some low-price Beatles releases appearing on the supermarket giant’s shelves. Hurrah for the public domain and all that.

But, while the copyright in the sound recordings may have expired, the copyright in the songs featured in those recordings has not. What with song copyrights being linked to songwriters’ lives and Paul McCartney still walking the Earth. No probs, thought Stargrove Entertainment, we’ll get a licence for the song copyrights through the Canadian collective licensing system at industry standard rates. All will be fine.

And so enter Sony/ATV, which still controls the Lennon/McCartney oeuvre, and some smaller publishers with interests in some of the songs that featured on these low-price Beatles albums. Despite the Canadian publishing sector’s mechanical rights collecting society having initially issued a licence for Stargrove’s Beatles records, said licence was subsequently revoked at the request of the publishers.

Now, there is no compulsory licence covering the reproduction of songs in Canada, so publishers have every right to refuse permission to labels wishing to release recordings of their songs, even though such ‘mechanical licences’ are usually dished out without question by the Canadian Musical Reproduction Rights Agency.

But, says Stargrove, in its recent lengthy filing to the Canadian Competition Tribunal (published in full by The Hollywood Reporter here): “In practice, the market for the issuance of mechanical licenses operates as though it were a compulsory system. The process is so automatic that record labels press and sell CDs before obtaining mechanical licenses”.

Which means, the company goes on, that the publishers “are withholding mechanical licenses in order to artificially extend copyright over recordings that should be in the public domain. They are doing so in direct response to the legitimate competition that Stargrove’s low pricing policy was bringing to the market”.

Now, the Sony publishing company controls most of the Lennon/McCartney songs, while Universal controls most of The Beatles sound recordings, so there isn’t a direct corporate connection between the two sets of rights.

Though there is generally a gentleman’s agreement between the majors to not exploit recordings originally released by a competitor that are now public domain, which is why it’s generally specialist indies that exploit recordings that are no longer in copyright. And, of course, Sony/ATV’s sister record company Sony Music has its own early 1960s recordings it would rather not see exploited in Canada by a rival.

That said, Stargrove’s complaint doesn’t seem to present any specific evidence of collusion between the majors, or even of collusion between the record companies and publishing divisions of each major music rights firm. Rather, its complaint seems to be more about general industry practices regarding public domain music, which may or may not be designed to prevent third parties from exploiting public domain works, especially in a way that lowers the retail price of those recordings.

There are some more specific allegations in Stargrove’s legal filing against Universal beyond the mechanical licensing issue though, to the effect that the major put pressure on distributors not to distribute the low-price Beatles releases, and that an employee at Universal posted “false reviews” online claiming that the Stargrove CDs were of a poor quality.

Of course, Stargrove will have to wait another 20 years to exploit any Beatles recordings released after 1965, and possibly longer, given the Canadian and European record industries will almost certainly push for parity with the US, which has a 95 year sound recording term, once 1960s catalogue is close to public domain once again.

But there are plenty more early 60s recordings to be packaged into low-price releases by companies like Stargrove, and this Competition Tribunal hearing will be an interesting test as to whether the mainstream music industry can interfere with such activity by refusing song licences. Under Canadian copyright law they can, but what does competition law reckon?

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