“Beatlemania” Rocks Canadian Copyright Law

September 8, 2015

Music CopyrightUntil a few months ago, Canadian copyright law provided for entry of music recordings into the public domain after fifty years.  Under that framework, some recordings created by notable artists including the Beatles, the Rolling Stones, and the Beach Boys have already entered the public domain in Canada.  That transition created a business opportunity for a company called, Stargrove Entertainment.  Efforts by the Canadian government, music recording companies, and music publishers to block Stargrove have led to an antitrust action and a public backlash.

Until April 2015, Canadian copyright law applied a fifty year term for works music recordings.  In April 2015, the Canadian government enacted amendments to the copyright law which extended the term to seventy years.  That amendment was essentially the work of Canada’s major music recording companies, and was reportedly implemented without any meaningful input from the public or other interested parties.

Prior to the change in the law, Stargrove had obtained appropriate licenses from music publishers and other rights holders to enable the company to sell public domain versions of some previously released Beatles recordings.  Although the underlying recordings were in the public domain, Stargrove needed to obtain mechanical licenses from the music publishers in order to create its public domain versions of the recordings.  Stargrove obtained all necessary licenses for the first set of public domain Beatles recordings, and offered them for sale to the public.

Those recordings proved to be highly popular with consumers.  Stargrove reportedly sold its Beatles CDs for five dollars each, and made them available through major retailers including Wal-Mart Canada.  Reports indicate that in their first week of sales through Wal-Mart Canada, these recordings became the most widely purchased music CD sold by Wal-Mart Canada.

As Stargrove prepared to offer in 2016 other Beatles recordings and recordings from other popular artists including the Rolling Stones, it sought licenses from the appropriate Canadian music rights-holders.  After the success of the early Beatles recordings, however, those requests for licenses were denied.  Additionally, Canadian copyright law was amended, and the extension of the copyright term, applied retroactively, substantially impaired the Stargrove business strategy.

Stargrove claims that the actions taken by the various Canadian music rights-holders constituted illegal conduct in violation of Canadian antitrust and competition laws.  Stargrove filed a formal complaint with the Canadian Competition Tribunal.  That complaint makes three key allegations.  It claims that the rights-holders engaged in illegal refusals to deal with Stargrove by denying mechanical licenses and other approvals that are routinely granted in the recording industry.  Stargrove also argues that the rights-holders engaged in illegal price maintenance activities, blocking Stargrove to ensure that current higher prices for music recordings were preserved.  Finally, Stargrove alleges illegal exclusive dealing requirements enforced by record companies to force distributors to deal only with them and not with Stargrove.

The actions by the Canadian government and all of the involved Canadian music rights-holders in this case seem to be extremely ill-advised.  Stargrove’s business strategy provided a way to make vintage music recording available to more consumers at attractive prices.  The efforts to block implementation of that strategy are not consistent with the spirit of copyright protection.

Copyright law is not intended to ensure maximum, virtually perpetual profits for a small group of rights-holders.  Instead, it is intended to provide both incentives for continuing creation of new works and broad public access to those creative works.  Stargrove’s strategic use of the public domain offers important benefits to consumers.  Canadian competition law authorities should recognize those benefits and act to ensure that all Canadian competition laws are fully enforced in the context of access to music recording rights.