In early February, a half century after The Beatles created a frenzy upon North American shores, Love Me Do became the top-selling CD at Walmart stores in Canada.
The reason why might be partly tied to Canadian copyright law. Until recently, sound recordings were only protected for 50 years. As a result, early ’60s recordings by The Beatles, The Rolling Stones, The Beach Boys and others have fallen into the public domain up north to go alongside works like Ian Fleming‘s James Bond character that have also become subject to a lesser copyright term.
Taking advantage of this fact is a company called Stargrove Entertainment, which began producing CDs full of public domain recordings and then selling them at retailers like Walmart for five bucks each. The cheap Beatles albums introduced to the Canadian market earlier this year were a hit.
But what happened next, according to Stargrove’s 408-page filing on Tuesday with the Canadian Competition Tribunal (read in full below), was interference by vertically integrated music giants, Universal and Sony.
Although the recordings were free to be exploited by anybody, a Beatles album embodies compositions necessitating the clearance of publishing rights. This usually happens without a fuss. “In practice, the market for the issuance of mechanical licenses operates as though it were a compulsory system,” states Stargrove in its filing. “The process is so automatic that record labels press and sell CDs before obtaining mechanical licenses.”
In January, Stargrove says it made an application for mechanical licenses for The Beatles Love Me Do and Can’t Buy Me Love, The Rolling Stones Little Red Rooster, Bob Dylan It Ain’t Me Babe and The Beach Boys Fun, Fun, Fun. At about 8 cents a song, Stargrove submitted a royalty payment of $13,799, the check was cashed, and the titles went on sale at Walmart.
Then came the fireworks. The publishers (including ABKCO, Casablanca) allegedly sent out instructions to a Canadian agency charged with such license applications to stop issuing mechanical licenses to Stargrove.
Stargrove’s royalty payment was refunded. And Stargrove’s CDs came grinding to a halt, according to the filing.
“The Title Holders are withholding mechanical licenses in order to artificially extend copyright over recordings that should be in the public domain,” charges Stargrove. “They are doing so in direct response to the legitimate competition that Stargrove’s low pricing policy was bringing to the market. As set out above, some Title Holders have record label divisions, while others are affiliated with record labels. They do not like the fact that Stargrove was able to gain market share so quickly.”
The complaint doesn’t go into much detail about the supposed collusion between recording and publishing arms at the big companies, but it attempts to set out a claim for refusal to deal, price maintenance and exclusive dealing and goes even further with an allegation that Universal Music Canada CEO Randy Lennoxe-mailed Stargrove’s primary distributor to get them to back away from Stargrove products and to partner with Universal to resolve what he called a “public domain issue.” Another employee at Universal is said to have created reviews on Walmart’s website, complaining of the poor quality of Stargrove’s products.
Stargrove says it has lost out on opportunities, and that its sales are now zero. Sony/ATV declined to respond while Universal hasn’t yet responded to a request for comment.
In June, Canada extended the copyright term from 50 to 70 years for published sound recordings, meaning that late ’60s recordings by The Beatles are no longer on the precipices of being in the public domain there. The new law doesn’t revive the copyright of works whose term has already extinguished — The Beatles Love Me Do isn’t now back into copyright — nor does it impact the duration of literary works.
That means that Fleming’s early descriptions of the James Bond character in books like Casino Royale are in the public domain in Canada, which provoked some discussion about implications earlier this year. Some legal observers have theorized that the rights-holders of the Bond films still have copyrights (covering newer authorship), trademarks and business relationships to potentially interfere with any film adaptation that attempted to leverage a public domain version of the character. The latest action at the Canadian Competition Tribunal over early ’60s sound recordings has the potential of setting some boundaries on use of market power.
