File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and – UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents ———————————————————————————————— APPLICATION RECORD (Application for Leave Pursuant to Section 103.1 of the Competition Act and Application for Interim Order Pursuant to Section 104 of the Competition Act) ———————————————————————————————— VOLUME 1 WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Nikiforos Iatrou Scott McGrath Bronwyn Roe Sangeetha Punniyamoorthy Thomas Kurys Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613-957-7851 Fax: 613-952-1123 AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819-997-4282 Fax: 819-997-0324 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M5S 2S3 Tel: 416-926-1966 Fax: 416-926-7521 INDEX INDEX TAB DESCRIPTION OF DOCUMENT PAGE A Notice of Application for Leave dated August 28, 2015 1-7 B Proposed Notice of Application (under ss. 75, 76, and 77 of the Competition Act) dated August 28, 2015 8-33 C Notice of Application for Interim Order (Pursuant to s. 104 of the Competition Act) dated August 28, 2015 34-48 D Memorandum of Fact and Law dated August 28, 2015 49-85 E Affidavit of Terry Perusini sworn August 26, 2015 86-111 1 Exhibit “1” – Excerpt from Sony/ATV Music Publishing Canada website, “FAQs” 112-114 2 Exhibit “2” – Excerpts from CMRRA website 115-136 3 Exhibit “3” – BLG Opinion dated May 30, 2014 137-148 4 Exhibit “4” – Anderson Merchandisers Purchase Order dated January 8, 2015 149-150 5 Exhibit “5” – E-mail dated November 20, 2014 from K. Kozey to T. Perusini 151-152 6 Exhibit “6” – Stargrove cheque dated January 8, 2015 153-154 7 Exhibit “7” – Wal-Mart Top 10 week ending February 8, 2015 155-156 8 Exhibit “8” – E-mail dated January 22, 2015 from V. Syrtash to J. Holt 157-159 9 Exhibit “9” – E-mail dated January 24, 2015 from K. Kozey to T. Perusini 160-162 10 Exhibit “10” – E-mail dated February 4, 2015 from J. Holt to N. Levesque 163-165 11 Exhibit “11” – E-mail dated February 11, 2015 from C. Rioux to J. Holt 166-168 TAB DESCRIPTION OF DOCUMENT PAGE 12 Exhibit “12” – E-mail dated February 13, 2015 from J. Holt to C. Rioux 169-170 13 Exhibit “13” – Letter dated February 25, 2015 from N. Lévesque to J. Holt 171-173 14 Exhibit “14” – E-mail dated February 11, 2015 from P. McAlpine to T. Perusini 174-175 15 Exhibit “15” – Reviews of Stargrove CDs from www.walmart.ca 176-189 16 Exhibit “16” – E-mail dated February 24, 2015 from C. Minicuci to T. Perusini 190-191 17 Exhibit “17” – Letter dated March 9, 2015 from S. Punniyamoorthy to C. Rioux 192-195 18 Exhibit “18” – Letter dated March 12, 2015 from V. Syrtash to S. Punniyamoorthy 196-198 19 Exhibit “19” – Letter dated March 16, 2015 from S. Punniyamoorthy to V. Syrtash 199-201 20 Exhibit “20” – Letter dated March 17, 2015 from S. Punniyamoorthy to G. Furniss 202-204 21 Exhibit “21” – Letter dated March 17, 2015 from S. Punniyamoorthy to A. Coleman 205-207 22 Exhibit “22” – Letter dated March 17, 2015 from S. Punniyamoorthy to J. Mitchell 208-210 23 Exhibit “23” – Letter dated March 20, 2015 from M. Kramer to S. Punniyamoorthy 211-213 24 Exhibit “24” – Letter dated March 24, 2015 from J. Mitchell to S. Punniyamoorthy 214-215 25 Exhibit “25” – Letter dated March 25, 2015 from V. Syrtash to S. Punniyamoorthy 216-219 26 Exhibit “26” – Spreadsheet of publishers and distributors 220-221 27 Exhibit “27” – E-mail dated April 1, 2015 from J. Holt to N. Levesque 222-223 28 Exhibit “28” – E-mail dated April 2, 2015 from N. Levesque to J. Holt 224-226 TAB DESCRIPTION OF DOCUMENT PAGE 29 Exhibit “29” – E-mail dated April 2, 2015 from J. Holt to N. Levesque 227-229 30 Exhibit “30” – E-mail dated April 7, 2015 from J. Holt to N. Levesque 230-232 31 Exhibit “31” – E-mail dated April 7, 2015 from J. Holt to N. Levesque 233-235 32 Exhibit “32” – E-mail dated April 8, 2015 from J. Holt to T. Perusini 236-239 33 Exhibit “33” – E-mail dated April 21, 2015 from N. Levesque to J. Holt 240-245 34 Exhibit “34” – CMRRA-Manufacturer Mechanical Licensing Agreement (Independent Labels – Model I-1) dated as of January 1, 2013 246-287 35 Exhibit “35” – Mechanical Licensing Agreement (Model I-2) dated as of January 1, 2013 288-322 36 Exhibit “36” – E-mail dated April 28, 2015 from T. Perusini to N. Levesque 323-325 37 Exhibit “37” – Letter dated May 22, 2015 from N. Iatrou to Universal Music Publishing Group Canada, Sony/ATV Music Publishing Canada Co., ABKCO Music Inc., Casablanca Media Publishing/Red Brick Songs 326-330 38 Exhibit “38” – E-mail dated May 27, 2015 from P. McAlpine to T. Perusini 331-333 39 Exhibit “39” – E-mail dated June 10, 2015 from C. Minicuci to T. Perusini 334-336 40 Exhibit “40” – E-mail dated August 10, 2015 from P. McAlpine to T. Perusini 337-338 41 Exhibit “41” – Economic Action Plan 2015, tabled in the House of Commons April 21, 2015 (excerpt) 339-346 42 Exhibit “42” – Letter dated April 21, 2015 from S. Harper to G. Henderson 347-348 43 Exhibit “43” – Bill C-59 (excerpt) 349-351 TAB DESCRIPTION OF DOCUMENT PAGE Affidavit of Mario Bouchard sworn August 27, 2015 352-353 A Exhibit “A” – M. Bouchard's Expert Opinion 354-488 B Exhibit “B” – M. Bouchard's curriculum vitae 489-492 C Exhibit “C” – M. Bouchard's Certificate Concerning Code of Conduct 493-498 F for Expert Witnesses TAB A 1 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents NOTICE OF APPLICATION FOR LEAVE (Pursuant to section 103.1 of the Competition Act) 2 -2TAKE NOTICE THAT: 1. The Applicant will make an application to the Competition Tribunal (“Tribunal”) on a date and time to be set by the Tribunal at Ottawa or Toronto, Ontario pursuant to Section 103.1 of the Competition Act (the “Act”) seeking leave to bring an application for: (a) an Order pursuant to section 75(1) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to the Canadian Musical Reproduction Rights Agency Ltd.; (b) an Order pursuant to section 76(2) of the Act prohibiting the Respondents from continuing to engage in the practices that form the basis of this Application; (c) an Order pursuant to section 76(2) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; (d) an Order pursuant to section 76(8) of the Act prohibiting the Respondents from continuing to engage in the practices that form the basis of this Application; (e) an Order pursuant to section 76(8) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; -3(f) 3 an Order pursuant to section 77(2) of the Act prohibiting the Respondents from continuing to engage in exclusive dealing; (g) an Order pursuant to section 77(2) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; (h) an Order expediting the hearing of the within Application; (i) an Order for costs, if the within Application is opposed; and (j) such further and other orders as the Applicant may request and the Tribunal deems just. AND TAKE NOTICE THAT: 2. Concurrently with its Application for Leave, the Applicant will seek an interim order under section 104 of the Act requiring the Respondents to grant mechanical licences to the Applicant on the usual terms associated with the granting of said licences through CMRRA, lasting until a final decision is made on the Applicant's Application for Leave pursuant to s. 103.1 of the Act or, if the Application for Leave is granted, until a final decision is made on the Proposed Notice of Application pursuant to ss. 75, 76, and 77 of the Act. 3. The persons against whom the orders are sought are the Respondents: Universal Music Publishing Group Canada; Universal Music Canada Inc.; Sony/ATV Music Publishing Canada Co.; Sony Music Entertainment Canada Inc.; ABKCO Music & Records, Inc.; -4- 4 Casablanca Media Publishing; and Canadian Musical Reproduction Rights Agency Ltd. The Respondents? addresses are set out below. 4. The Applicant will rely on the Statement of Grounds and Material Facts attached as Schedule to the Proposed Notice of Application; the Affidavit of Terry Perusini, sworn August 26, 2015; the Affidavit of Mario Bouchard, sworn August 27, 2015; the Memorandum of Fact and Law accompanying this Application; and such further or other material as counsel may advise and the Tribunal may permit. 5. The Applicant requests that this Application be heard in the English language. 6. The Applicant requests that the documents for this Application be filed in electronic form. 7. Dated at Toronto this 28th day of August, 2015. WEIRFOULDS LLP STRATTON LLP Barristers Solicitors 20 Queen Street West, 32nd Floor 4100 66 Wellington Street West Toronto, ON M5H 3R3 PO. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 Sangeetha Punniyamoorthy Thomas Kurys Nikiforos latrou Scott McGrath Tel: 416-971-7202 Bronwyn Roe Fax: 416-971-6638 Tel: 416-365-1110 spunniyamoorthy@dimock.com Fax: 416-365-1876 tkurys@dimock.com niatrou@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant -5TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613-957-7851 Fax: 613-952-1123 AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819-997-4282 Fax: 819-997-0324 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 5 -6AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M5S 2S3 Tel: 416-926-1966 Fax: 416-926-7521 6 7 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents NOTICE OF APPLICATION FOR LEAVE (Pursuant to s. 103.1 of the Competition Act) WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Sangeetha Punniyamoorthy Thomas Kurys Nikiforos Iatrou Scott McGrath Bronwyn Roe Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8067230.4 TAB 8 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents PROPOSED NOTICE OF APPLICATION (under ss. 75, 76, and 77 of the Competition Act) -2- 9 TAKE NOTICE THAT: 1. The Applicant will make an application to the Competition Tribunal (“Tribunal”) pursuant to sections 75, 76, and 77 of the Competition Act (the “Act”) for: (a) an Order pursuant to section 75(1) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to the Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”); (b) an Order pursuant to section 76(2) of the Act prohibiting the Respondents from continuing to engage in the practices that form the basis of this Application; (c) an Order pursuant to section 76(2) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; (d) an Order pursuant to section 76(8) of the Act prohibiting the Respondents from continuing to engage in the practices that form the basis of this Application; (e) an Order pursuant to section 76(8) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; (f) an Order pursuant to section 77(2) of the Act prohibiting the Respondents from continuing to engage in exclusive dealing; (g) an Order pursuant to section 77(2) of the Act requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA; -3- 10 (h) an Order expediting the hearing of the within Application; (i) an Order for costs, if the within Application is opposed; and (j) such further and other orders as the Applicant may request and the Tribunal deems just. AND TAKE NOTICE THAT: 2. The persons against whom the orders are sought are the Respondents: Universal Music Publishing Group Canada; Universal Music Canada Inc.; Sony/ATV Music Publishing Canada Co.; Sony Music Entertainment Canada Inc.; ABKCO Music & Records, Inc.; Casablanca Media Publishing; and Canadian Musical Reproduction Rights Agency Ltd. The Respondents’ addresses are set out below. 3. The Applicant will rely on the Statement of Grounds and Material Facts attached as Schedule “A” hereto; the Affidavit of Terry Perusini, sworn August 26, 2015; the Affidavit of Mario Bouchard, sworn August 27, 2015; and such further and other grounds and material facts as counsel may advise and the Tribunal may permit. 4. A concise statement of the economic theory of the case is contained in Schedule “B” hereto. 5. The Applicant requests that the within Application be heard in the English language. 6. The Applicant requests that the documents for this Application be filed in electronic form. -4- 11 Toronto this a day of August, 201 WEIRFOULDS LLP -. DIMOCK STRATTON LLP Barristers Solicitors 9. 20 Queen Street West, 32nd Floor 4100 - 66 Wellington Street West Toronto, ON PO. Box 35, Toronto-Dominion Centre M5H 3R3 Toronto, ON M5K1B7 Nikiforos latrou Sangeetha Punniyamoorthy Scott McGrath Thomas Kurys Bronwyn Roe Tel: 416?971-7202 Tel: 416-365-1110 Fax: 416-971-6638 Fax: 416?365-1876 spunniyamoorthy@dimock.com niatrou@weirfoulds.com tkurys@dimock.com broe@weirfoulds.com Lawyers for the Applicant TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613-957-7851 Fax: 613?952-1123 AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819?997-4282 Fax: 819-997?0324 AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M58 283 Tel: 416?926-1966 Fax: 416-926-7521 -5AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 12 SCHEDULE “A” – STATEMENT OF GROUNDS AND MATERIAL FACTS 13 PART 1 - THE APPLICATION IN A NUTSHELL 1. Stargrove is a record label that manufactures CD compilations of sound recordings of The Beatles, The Rolling Stones, and other artists for sale at low prices ($5.00) at Walmart stores. It can offer such low prices because the sound recordings it uses are no longer protected by copyright; they are in the public domain. As such, Stargrove does not require a “master sound recording licence” to use the recordings. 2. Although the sound recordings are in the public domain, the musical works (songs) on the recordings continue to be copyright protected. Stargrove requires what are known as “mechanical licences” for each song it seeks to use. In Canada, there are standard industry practices and terms that govern the issuance of mechanical licences; for the songs relevant to this application, these are administered by the Canadian Musical Reproduction Rights Agency. Stargrove is willing to abide by those terms and practices. The Respondents, however, have banded together to shut Stargrove out, having CMRRA deny Stargrove any mechanical licences (not just for the titles in question). 3. Stargrove is being targeted for its low pricing model, but the real victims are consumers; instead of being able to buy popular titles for just $5.00 per CD, they pay much more. 4. The Respondents have campaigned to block Stargrove by pressuring Stargrove’s distributor, concocting false negative reviews of Stargrove’s CDs, and having CMRRA refuse to deal with Stargrove on standard terms. They have violated sections 75, 76, and 77 of the Competition Act, depriving consumers of competitive prices and artificially extending copyright over public domain recordings. This has negatively affected competition. Stargrove seeks to be treated fairly, in accordance with standard industry terms. Since the Respondents are unwilling to engage with Stargrove, Stargrove asks this Tribunal to order them to do so. -2- 14 PART 2 - FACTS A. The Parties 5. The Applicant, Stargrove Entertainment Inc. (“Stargrove”), is a company incorporated in July 2014 under the laws of Ontario. Stargrove is a record label in the business of manufacturing and selling competitively-priced musical compact discs (“CDs”). 6. The Respondents Sony/ATV Music Publishing Canada Co. and Sony Music Entertainment Canada Inc. (collectively, “Sony”) and Universal Music Publishing Group Canada and Universal Music Canada Inc. (collectively, “Universal”) are music publishing companies and record labels located in Toronto, Ontario. The Respondent Casablanca Media Publishing (“Casablanca”) is a music publishing company located in Toronto. The Respondent ABKCO Music and Records Inc. (“ABKCO”) is a record label, music publisher, and film and video production company headquartered in New York, New York. 7. The Respondent Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”) is a music licensing collective representing music publishers. On behalf of music publishers, CMRRA issues licences for the reproduction of musical works on various media, including mechanical licensing for the reproduction of songs on CDs. 8. Sony, Universal and Casablanca are represented by CMRRA and have representatives on the Board of Directors of CMRRA. ABKCO is represented by CMRRA but, to Stargrove's knowledge, does not have representatives on its Board of Directors. 9. Anderson Merchandisers Canada Inc. (“Anderson”) (which is not a party to the case) distributes CDs to major Canadian retailers, including Walmart and BestBuy. Anderson -3- 15 is the exclusive distributor for CDs in Walmart in Canada and is the distributor for Stargrove’s CDs. B. Licensing Musical Works in Canada 10. For the purposes of this Application, there are two copyrights that matter: (1) The copyright in the musical work. In order to reproduce a musical work, a party must obtain a “mechanical licence” from the holder of the copyright in the musical work, if the work is protected by copyright. If the work has fallen into the “public domain”, no licence is required to use the work. (2) The copyright in the master sound recording. In order to reproduce the sound recording on which a musical work is fixed, a party must obtain a “master recording licence” from the holder of the copyright in the sound recording. If the sound recording has fallen into the public domain, no licence is required to use the sound recording. 11. Stargrove’s business is to manufacture and sell CDs. Its current business activity is to manufacture and sell CDs of musical works whose sound recordings are in the public domain. In order to do so, Stargrove needs to obtain mechanical licences for the works, but does not need to obtain master recording licences. Stargrove then manufactures and sells these CDs at very competitive prices. 12. Although a record label in Stargrove’s position can seek to obtain a mechanical licence directly from the copyright holders, the common practice in Canada is for a record label to apply for mechanical licences from CMRRA, which is the authorized representative for most musical work copyright holders in Canada. For a record label of Stargrove’s size, -4- 16 the typical way to obtain such mechanical licences is by entering into a mechanical licence agreement (“MLA”) with CMRRA. A record label that has signed an MLA obtains mechanical licences on standard terms and at standard rates. 13. The standard mechanical royalty rate in Canada is currently $0.083 per song, per copy (for recordings with a running time of five minutes or less). Applications to CMRRA are granted as a matter of course at this standard rate. CMRRA’s contracts with the publishers it represents (called “Affiliation Agreements”) contemplate that CMRRA “shall” issue the mechanical licences on standard terms, unless the publisher decides that it wants to deal directly with the record label to issue the licence. 14. In practice, the market for the issuance of mechanical licences operates as though it were a compulsory system. The process is so automatic that record labels almost always produce CDs even before they have obtained mechanical licences. Royalties owed on these CDs are held pending the identification of the copyright owner. C. Stargrove's Business Was Immediately Successful 15. In January 2015, Stargrove made an application to CMRRA for mechanical licences for five titles (collectively, the “Titles”): The Beatles Love Me Do, The Beatles 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 (each of these titles is a compilation of 11 songs). 16. For each of these titles, copyright in the musical work still exists (hence the need for a mechanical licence), but copyright in the sound recording has expired. As such, the sound recording is in the public domain, meaning that the public has the right to use and copy that recording without permission. -517. 17 With its mechanical licence application to CMRRA, Stargrove submitted the required royalty payment of $13,799.10. 18. CMRRA cashed Stargrove’s cheque and Stargrove began producing its CDs for sale. The CDs went on sale in Walmart on February 3, 2015 for a retail price of $5.00. In the first week of sales, The Beatles’ Love Me Do was Walmart’s top-selling CD, with 1,488 copies sold in one week alone. D. The Respondents Ordered CMRRA to Stop Issuing Stargrove Mechanical Licences 19. The publishers associated with each of the Titles include ABKCO, Casablanca and Sony (collectively, the “Title Holders”). One by one, and in quick succession, each of the Title Holders gave instructions to CMRRA in January or February 2015 to stop issuing mechanical licences to Stargrove. 20. A CMRRA representative professed her surprise to Stargrove at this instruction from the Title Holders, but CMRRA followed their instruction. In fact, CMRRA went even further and refused to grant Stargrove any mechanical licences, whether from one of the Title Holders or not. Stargrove’s attempts to enter into an MLA were stymied by CMRRA, who erected barrier after barrier to Stargrove’s application. 21. CMRRA refunded Stargrove’s royalty payment for the Titles at the end of February 2015. 22. On multiple occasions, Stargrove requested explanations for the refusals to grant mechanical licences, both from CMRRA and from the Title Holders directly, and asked them to reverse course. Stargrove has been refused an explanation, other than in a letter from CMRRA, which stated that the Title Holders’ “refusal to deal is at least partially related to the fact that there are public domain master recordings on the products in question.” -623. 18 The Title Holders are withholding mechanical licences 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 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 Stargrove’s pricing model and the fact that Stargrove was able to gain market share so quickly. E. Universal Tried to Prevent or Harm Stargrove's Business 24. Randy Lennox, the CEO of Universal Music Canada Inc., sent an e-mail to the principals of Anderson, the distributors of Stargrove’s CDs, asking Anderson to partner with Universal to find solutions and resolve what he called a “public domain issue”. 25. Brian Greaves, an account manager at Universal Music Canada Inc., concocted negative reviews on Walmart's website, complaining that Stargrove’s products were of poor quality. He encouraged other Universal employees to do the same and to help him with Universal’s “campaign” to discourage Anderson from distributing Stargrove’s CDs, stating that poor reviews would deter Anderson from distributing Stargrove’s products in the future. Walmart subsequently removed all the fake reviews from its site. Stargrove’s CDs had a low return rate: of the over 2000 Stargrove CDs sold, only one CD was returned. 26. Mr. Greaves noted that Stargrove’s CDs were taking away from Universal’s sales and market share, and claimed that Universal had already successfully removed a Rolling Stones title from the CDs offered for sale by Stargrove, despite the fact that the copyright in question was held by ABKCO, not Universal. -7- 19 F. The Respondents Campaigned to Shut Stargrove Out 27. The Respondents mean to punish Stargrove for its low pricing and ability to compete with established record labels. Ultimately, this keeps the prices of CDs high. The decision to instruct CMRRA to refuse to issue mechanical licences to Stargrove surprised even the employees of CMRRA. 28. Since Stargrove has been shut out of the market, it has missed out on several lucrative opportunities to market its CDs, resulting already in an estimated loss of $150,000 in wholesale sales. Anderson wanted approximately 20,000 copies of Beatles CDs that Stargrove would have otherwise produced. Anderson continues to identify marketing opportunities for Stargrove through Walmart that Stargrove is unable to pursue because of CMRRA’s and the Respondents’ refusal to issue it mechanical licences. As recently as three weeks ago, Anderson identified a lack of stock of Beatles and Rolling Stones CDs; it wanted Stargrove to help it fill its orders. Stargrove cannot do so, as long as it is being unfairly and unlawfully blocked from the market. 29. Stargrove’s CDs have been pulled from Walmart’s shelves, and its sales – given that it can obtain no mechanical licences from CMRRA – are now zero. PART 3 - GROUNDS FOR THE SECTION 75, 76, AND 77 APPLICATION 30. The Respondents’ conduct violates sections 75, 76, and 77 of the Act. 31. Stargrove has been directly affected by the Respondents’ conduct. By refusing to deal with Stargrove and forcing CMRRA not to deal with Stargrove, the Respondents are preventing Stargrove from entering the market and from having the competitive impact that was observed in the short time that Stargrove was able to sell CDs. Without being able to obtain mechanical licences through CMRRA, Stargrove will go out of business. -8- 20 A. Refusal to Deal (Section 75(1)) 32. Section 75(1) of the Act sets out the requirements for the reviewable trade practice of refusal to deal: Jurisdiction of Tribunal where refusal to deal 75. (1) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that (a) a person is substantially affected in his business or is precluded from carrying on business due to his inability to obtain adequate supplies of a product anywhere in a market on usual trade terms, (b) the person referred to in paragraph (a) is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market, (c) the person referred to in paragraph (a) is willing and able to meet the usual trade terms of the supplier or suppliers of the product, (d) the product is in ample supply, and (e) the refusal to deal is having or is likely to have an adverse effect on competition in a market, the Tribunal may order that one or more suppliers of the product in the market accept the person as a customer within a specified time on usual trade terms unless, within the specified time, in the case of an article, any customs duties on the article are removed, reduced or remitted and the effect of the removal, reduction or remission is to place the person on an equal footing with other persons who are able to obtain adequate supplies of the article in Canada. 33. Stargrove is substantially affected in its business and precluded from carrying on its business due to its inability to obtain the right from the Respondents to reproduce songs on usual trade terms (through mechanical licences). 34. Stargrove is unable to obtain these rights because the mechanical licences at issue are in the sole control of the Respondents. 35. Stargrove is willing to meet the usual trade terms of the Respondents through CMRRA for issuing mechanical licences. It has tried to enter into CMRRA’s standard MLA, but CMRRA refuses to deal with it on its standard terms. -936. 21 The granting of rights to reproduce songs is not limited in supply – as noted above, mechanical licences are normally granted as a matter of course. 37. The Respondents' refusal to deal is having an adverse effect on competition in the market for CDs in Canada, specifically in respect of popular music whose sound recordings are in the public domain. The consuming public, whose purchase decisions made Stargrove’s CDs top sellers in their first week of sales, is being denied the lowcost alternative that Stargrove seeks to provide. 38. Stargrove therefore submits that the Respondents’ refusal to deal satisfies all the elements of s. 75 of the Act and respectfully requests that the Tribunal make an order under s. 75 of the Act requiring the Respondents to accept Stargrove as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA. B. Price Maintenance (Section 76) 39. The Respondents’ conduct violates s. 76 of the Act, which states, in part: Price maintenance 76. (1) On application by the Commissioner or a person granted leave under section 103.1, the Tribunal may make an order under subsection (2) if the Tribunal finds that (a) a person referred to in subsection (3) directly or indirectly … (ii) (b) … has refused to supply a product to or has otherwise discriminated against any person or class of persons engaged in business in Canada because of the low pricing policy of that other person or class of persons; and the conduct has had, is having or is likely to have an adverse effect on competition in a market. - 10 - 22 Persons subject to order (3) An order may be made under subsection (2) against a person who (a) is engaged in the business of producing or supplying a product; … or (c) has the exclusive rights and privileges conferred by a patent, trade-mark, copyright, registered industrial design or registered integrated circuit topography. Refusal to supply (8) If, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that any person, by agreement, threat, promise or any like means, has induced a supplier, whether within or outside Canada, as a condition of doing business with the supplier, to refuse to supply a product to a particular person or class of persons because of the low pricing policy of that person or class of persons, and that the conduct of inducement has had, is having or is likely to have an adverse effect on competition in a market, the Tribunal may make an order prohibiting the person from continuing to engage in the conduct or requiring the person to do business with the supplier on usual trade terms. 40. The Respondents fall under both s. 76(3)(a) and (c), as they are engaged in the business of supplying rights to reproduce musical works (through mechanical licences), and they have the exclusive rights and privileges conferred by the copyright in the musical works associated with the mechanical licences. 41. The Respondents’ conduct falls within s. 76(1)(a)(ii) because they have refused to supply a product to Stargrove. Specifically, the Respondents have refused to grant Stargrove the right to reproduce musical works in an attempt to keep Stargrove from competing in the market for CDs where the sound recordings are in the public domain. The Respondents are doing so because Stargrove’s low pricing policies were going to disrupt the CD market and take away market share from the record labels. 42. The Respondents have also acted contrary to s. 76(1)(a)(ii) because they have “otherwise discriminated against” Stargrove. The Respondents have discriminated against Stargrove by denying it access to the right to reproduce musical works (through - 11 - 23 mechanical licences and an MLA) and by refusing to deal with it on terms similar to the terms that would apply to any other record label. This discrimination arises because of Stargrove's low pricing policy. E-mails from executives at Universal identify that the refusal to supply and discriminatory treatment occurred because Stargrove’s $5.00 CDs were gaining market share. 43. The Respondents have also acted contrary to s. 76(8) by inducing CMRRA, as a condition of doing business with the Respondents, to refuse to supply the relevant rights (through mechanical licences and an MLA) to Stargrove. This refusal arises because of Stargrove’s low pricing policy. 44. The Respondents’ refusal to supply has impeded Stargrove’s entry into and expansion in the CD market in Canada and has resulted, and is likely to result, in a substantial lessening or prevention of competition, as consumers are being denied access to the low-cost CDs they want. 45. Stargrove therefore respectfully requests that the Tribunal make orders pursuant to ss. 76(2) and 76(8) of the Act (1) prohibiting the Respondents from continuing to engage in price maintenance and (2) requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal’s order, on the same standard trade terms applicable to other applicants to CMRRA. C. Exclusive Dealing (Section 77) 46. The Respondents’ conduct is in violation of s. 77 of the Act. 47. Subsection 77(1) defines “exclusive dealing” as: (a) any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to - 12 - 24 (i) deal only or primarily in products supplied by or designated by the supplier or the supplier’s nominee, or (ii) refrain from dealing in a specified class or kind of product except as supplied by the supplier or the nominee, and (b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a)(i) or (ii) by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees to meet the condition set out in either of those subparagraphs 48. Subsection 77(2) provides: (2) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that exclusive dealing or tied selling, because it is engaged in by a major supplier of a product in a market or because it is widespread in a market, is likely to (a) impede entry into or expansion of a firm in a market, (b) impede introduction of a product into or expansion of sales of a product in a market, or (c) have any other exclusionary effect in a market, with the result that competition is or is likely to be lessened substantially, the Tribunal may make an order directed to all or any of the suppliers against whom an order is sought prohibiting them from continuing to engage in that exclusive dealing or tied selling and containing any other requirement that, in its opinion, is necessary to overcome the effects thereof in the market or to restore or stimulate competition in the market. 49. The Respondent publishers and CMRRA are major suppliers of rights to reproduce musical works (through mechanical licences and MLAs) in Canada. 50. Universal pressured Anderson not to deal with Stargrove, offering veiled incentives and making veiled threats to deter Anderson from dealing with Stargrove and posting false online reviews in order to influence Anderson and others away from Stargrove. 51. The Respondents’ exclusive dealing has impeded Stargrove’s entry into and expansion in the CD market in Canada. - 13 52. 25 The Respondents’ exclusive dealing has resulted, and is likely to result, in a substantial lessening of competition, as consumers are being denied access to CDs they want at low prices. 53. Stargrove therefore respectfully requests that the Tribunal make orders under s. 77(2) of the Act (1) prohibiting the Respondents from continuing to engage in exclusive dealing; and (2) requiring the Respondents to accept the Applicant as a customer within 15 days of the Tribunal's order, on the same standard trade terms applicable to other applicants to CMRRA. 54. In support of this Application, and the Grounds and Material Facts set out above, Stargrove relies on: (a) the affidavit of Terry Perusini, sworn August 26, 20015; (b) the affidavit of Mario Bouchard, sworn August 27, 2015; (c) the Competition Act, RSC 1985, c C-34, as amended, including ss. 75, 76, 77 and 103.1; (d) the Competition Tribunal Rules, SOR/2008-141; and (e) such further and other grounds and material facts as counsel may advise and the Tribunal may permit. SCHEDULE “B” – CONCISE STATEMENT OF THE 26 ECONOMIC THEORY OF THE CASE 1. This schedule provides a concise statement of the economic theory that supports the Application requesting that the Tribunal1 issue orders pursuant to sections 75, 76 and 77 of the Act. 2. The conduct of the Respondents, in respect of their refusal to provide the right to reproduce musical works (by way of mechanical licences and an MLA on standard terms), is not a mere exercise of intellectual property rights or of market power. This statement of economic theory identifies why the refusals increase market power and harm competition. 3. The relevant geographic market is Canada, given the Federal statutory framework that applies to copyright and that prices are unlikely to vary across the country for a given retailer. 4. The relevant product market, i.e., where competition is harmed, is in the wholesale sale of CDs containing popular music titles recorded before 1964 and that have three characteristics: (i) the sound recording being marketed is in the public domain; (ii) the musical work fixed on the sound recording remains protected by copyright; and (iii) the recordings are of performances by artists who continue to be popular. Examples include the performers of the titles at issue in this application, including The Beatles, The Rolling Stones, and The Beach Boys. 1 This schedule adopts the definitions set out in the Notice of Application and Statement of Grounds and Material Facts. -25. 27 The effect of the refusal is reflected in retail prices. The effect of the refusal is to maintain retail prices in the range of ~$15 to $20 per CD, instead of a price level of approximately $5 per CD, the price they would be with a mechanical licence containing the usual terms, conditions, and royalty rates. In the absence of cost differences, the difference in price between the but for world with the issuance of mechanical licences (~$5 per CD) and the price given the refusal to issue mechanical licences (~$15 per CD) is indicative of the market power maintained by the refusal and the harm to competition. 6. The retail price difference indicates differences of similar magnitudes with respect to wholesale pricing. It should be expected that the wholesale price of the titles would be substantially less than the wholesale prices of similar CDs offered by the labels with publishing rights. 7. The price differential maintained by the refusal far exceeds the normal thresholds for the small but significant and non-transitory price increase used in the hypothetical monopolist test to define relevant markets. 8. The mere exercise of copyright to exclude others is not conduct that typically can be found to violate the Competition Act.2 If an exclusion simply maintains market power in the supply of the copyrighted material, it is considered an acceptable cost during the lifetime of the copyright in exchange for the increased incentives 2 The exception to this is Section 32 of the Act. Section 32 is a special remedy under which the Federal Court can make an order when the conduct involves nothing more than the mere exercise of intellectual property rights. -3- 28 provided for to the creators of intellectual property. However, if the conduct by the copyright holder creates, enhances, or maintains its market power beyond the level of market power consistent with the mere exclusion of others from using its intellectual property, that conduct engages the Competition Act.3 9. To manufacture and sell a CD in Canada, a record label wishing to use a preexisting sound recording must have rights (i) to the sound recording (typically by way of “master sound recording licence”) and (ii) to reproduce the song (by way of “mechanical licence”), if those rights have not expired. For certain recordings, namely recordings made in 1964 and earlier, the sound recording rights in Canada are now in the public domain, i.e., the copyright in the sound recording has expired, such that anyone can copy the recording without obtaining a master sound recording licence. 10. For sound recordings not in the public domain, the sound recording and mechanical rights are complementary. Royalties for each will be required to produce a CD. If the wholesale revenue of a CD containing songs for which both the sound recording and the mechanical rights are not in the public domain is r, then r  p  m    c where p is the royalty for the performances, m the royalty 3 This is the fundamental distinction that underlies the interface between competition policy and intellectual property rights in Canada. See Section 4.2 Competition Bureau, (2000), Intellectual Property Enforcement Guidelines. -4- 29 for the mechanical right, c all other costs of production, and  record label profits.4 11. Consider the case of a record label that owns both the publishing and the mechanical rights. The opportunity cost to it of licensing would be its lost profit if the CD was supplied by a rival instead of by the rights holder. If the rival record label is just as efficient as the rights holder then the joint royalty rate would be rc pm and the economic profits of the rights holder would be   r  c  p  m  0 : any excess return it earns is attributable to its control of the publishing and mechanical rights. 12. If the mechanical royalty rate administered by the CMRRA is denoted mR then p  r  c  mR is the implicit return to the holder of the performing rights if both sets of rights are not in the public domain. 13. Suppose that the sound recording rights expire. If mechanical licences were available at the administered rate mR then the cost of production would fall to c  mR . This would be the price under competition, and in the absence of other barriers to entry competition should be expected if mechanical licences are available at royalty rate mR . The vertically integrated record label’s upstream publishing division or affiliate would receive mechanical royalties equal to mR and 4 These are economic profits, the excess of revenues over the opportunity cost of all inputs, including the cost of capital (normal profits). In the long run, competition will typically mean that economic profits are zero. If the label has market power in the supply of the CD, then its economic profits are monopoly profits. -5- 30 its economic profits from the sale of CDs would be zero. The net profits of the integrated record label would be mR , the royalty rate on its valid song copyrights. The net loss of the vertically integrate firm from the expiry of its performing rights is p . The price of CDs would also fall by this amount, benefiting consumers. 14. However, the vertically integrated firm can continue to capture p by following one of two strategies. It can either (i) refuse to supply other labels with a mechanical licence or (ii) it can raise its royalty rate for a mechanical licence. If it refuses to issue mechanical licences, it remains the only supplier of the CD and hence captures r  c  p  mR because it forestalls the price falling as a result of entry by competitors with lower costs. It could also, in the absence of a regulatory constraint on its mechanical royalty, raise the mechanical royalty rate for rival labels to mM  r  c . Under either strategy its return is maintained at r-c. 15. The refusal to issue a mechanical licence to competing firms enables an integrated record label to exercise market power in CDs, maintaining their price at r (above the competitive price c  mR ) and earning monopoly profits of p. 16. The integrated label will be indifferent to adopting either strategy (assuming rivals are equally as efficient). The refusal to issue a mechanical licence is the only strategy that is feasible, however, if there is an external constraint on the mechanical royalty rate, limiting it to mR . Refusal to license then allows the integrated firm to escape the constraint on its ability to raise mechanical royalty rates. -617. 31 The relevant institutional framework here effectively establishes a compulsory licence regime for mechanical licences with a standard negotiated rate irrespective of whether a sound recording is in the public domain. Subject to a few exceptions regarding budget CDs, the negotiated rate is the same for all songs of a given length, e.g., $0.083 for recordings with a running time of five minutes or less (on a song basis rather than a CD basis this is mR ). Hence the refusal to license and vertical integration or affiliation allows the publishers to escape the constraint on market power implicit in the relevant institutional framework for mechanical rights. 18. The conduct and its effect appears to be more than unilateral. The conduct goes beyond a simple unilateral refusal to deal by individual publishers, but involves a coordinated boycott of Stargrove by all Respondent music publishers that utilize CMRRA. CMRRA appears to be the instrument used by music publishers to implement a coordinated boycott of Stargrove. At least two Respondents appear to have directly coordinated efforts to refuse mechanical licences for The Rolling Stones titles in question (Universal and ABKCO) with the intent of putting Stargrove out of business, eliminating it as a potential competitor. 19. Given a fixed royalty rate, more licensing leads to greater sales of CDs that contain the song and hence higher revenues for an unaffiliated music publisher. Hence unaffiliated/non-integrated music publishers have an incentive to maximize volume if they are represented by CMRRA. The decision to not issue an MLA to Stargrove by CMRRA is not in an unaffiliated/non-integrated publisher’s unilateral commercial interest. Unaffiliated/non-integrated music -7- 32 publishers would prefer that Stargrove enter and compete with CDs that contain their songs. 20. The willingness of unaffiliated/non-integrated publishers to participate in the denial of mechanical licences to Stargrove is consistent with a concerted effort on behalf of all music publishers, through CMRRA, to boycott Stargrove. To the extent that the concerted boycott puts Stargrove out of business, it may maintain market power of the integrated labels – who have commercial relationships with the unaffiliated/non-integrated publishers and who have dealings with them as fellow board members of CMRRA – potentially favourably altering the terms of trade in other transactions/dealings. 21. Finally, as part of the “campaign” to prevent Stargrove from entering and supplying CDs to Canadian retailers, there is evidence of at least one integrated record label attempting to dissuade Stargrove’s distributor from handling Stargrove’s CDs. Foreclosing distribution can have a negative effect on competition if it leads to the exit or marginalization of a competitor. Walmart’s potential importance as a retailer of CDs in Canada and Anderson’s status as the exclusive distributor of CDs to Walmart, as well as being a distributor of CDs to other important retailers, e.g., Best Buy, suggest that inducing Anderson not to distribute Stargrove CDs might well result in foreclosure with negative consequences for consumers and competition. It would have this effect if replacing Anderson raised Stargrove’s costs of distribution sufficiently that it was not as effective in constraining the pricing of the integrated labels. 33 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents PROPOSED NOTICE OF APPLICATION (under ss. 75, 76, and 77 of the Competition Act) WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Sangeetha Punniyamoorthy Thomas Kurys Nikiforos Iatrou Tel: 416-971-7202 Scott McGrath Fax: 416-971-6638 Bronwyn Roe Tel: 416-365-1110 spunniyamoorthy@dimock.com Fax: 416-365-1876 tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8067650.13 TAB 34 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents ____________________________________________________________________________ NOTICE OF APPLICATION FOR INTERIM ORDER (Pursuant to s. 104 of the Competition Act) ____________________________________________________________________________ -2- 35 TAKE NOTICE THAT: 1. The Applicant will make an application to the Competition Tribunal (“Tribunal”) pursuant to section 104 of the Competition Act (“Act”) on a date and time to be set by the Tribunal at Ottawa or Toronto, Ontario for: (a) An interim and interlocutory order: (i) requiring the Respondents to grant mechanical licences to the Applicant on the usual terms associated with the granting of said licences through the Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”), lasting until a final decision is made on the merits of the Applicant’s application for leave pursuant to s. 103.1 of the Act or, if the application for leave is granted, until a final decision is made on the merits of the Applicant’s proposed application pursuant to ss. 75, 76, and 77 of the Act; (b) Costs of this Application, if opposed; and (c) Such further and other final or interim orders as the Tribunal deems just. AND TAKE NOTICE THAT: 2. The persons against whom the orders are sought are the Respondents: Universal Music Publishing Group Canada; Universal Music Canada Inc.; Sony/ATV Music Publishing Canada Co.; Sony Music Entertainment Canada Inc.; ABKCO Music & Records, Inc.; Casablanca Media Publishing; and Canadian Musical Reproduction Rights Agency Ltd. The Respondents’ addresses are set out below. 3. The Applicant will rely on the Statement of Grounds and Material Facts attached as Schedule “A” hereto; the Affidavit of Terry Perusini, sworn August 26, 2015; the Affidavit -3- 36 of Mario Bouchard, sworn August 27, 2015; the Applicant?s Notice of Application for leave pursuant to section 103.1 of the Act; the Applicant?s Proposed Notice of Application under sections 75, 76, and 77 of the Act; and such further and other grounds and material facts as counsel may advise and the Tribunal may permit. 4. The Applicant requests that the within Application be heard in the English language. 5. The Applicant requests that the documents for this Application be filed in electronic form. oronto.this 28th day of August, 20; WEIRFOULDS LLP DIMOCK STRATTON LLP Barristers Solicitors 20 Queen Street West, 32nd Floor 4100 - 66 Wellington Street West Toronto, ON M5H 3R3 PO. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 Sangeetha Punniyamoorthy Thomas Kurys Nikiforos latrou Scott McGrath Tel: 416-971-7202 Bronwyn Roe Fax: 416-971-6638 Tel: 416-365-1110 spunniyamoorthy@dimock.com Fax: 416-365-1876 tkurys@dimock.com niatrou@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613?957-7851 Fax: 613?952-1123 -4AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819-997-4282 Fax: 819-997-0324 AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M5S 2S3 Tel: 416-926-1966 Fax: 416-926-7521 AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 37 SCHEDULE “A” – STATEMENT OF GROUNDS AND MATERIAL FACTS 38 PART 1 - THIS APPLICATION IN A NUTSHELL 1. In conjunction with its application for leave (“Leave Application”) to bring an application under sections 75, 76, and 77 of the Act against the Respondents (“Proposed Application”), Stargrove seeks an interim and interlocutory order requiring the Respondents to grant mechanical licences to Stargrove on the usual terms associated with the granting of said licences through the Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”), lasting until a final decision is made on Stargrove’s Leave Application or, if the Leave Application is granted, until a final decision is made on the Proposed Application. 2. Stargrove’s Leave Application and Proposed Application raise serious issues. Stargrove alleges that the Respondents have violated sections 75, 76, and 77 of the Act by banding together to shut Stargrove out of the market by having CMRRA refuse to deal with Stargrove on standard terms; denying Stargrove the mechanical licences that are necessary inputs for its CDs; pressuring Stargrove’s distributor; and concocting false negative reviews of Stargrove’s CDs. 3. Stargrove will be irreparably harmed absent an interim order. Without being able to obtain mechanical licences through CMRRA on usual trade terms, Stargrove will go out of business. 4. The balance of convenience favours granting the interim order. In addition to the harm Stargrove will suffer, consumers will also be harmed if Stargrove is prevented from entering into or expanding in the market, because they will be denied the low-cost CDs that Stargrove offers. The price of CDs will be maintained artificially high. -2- 39 PART 2 - FACTS1 A. The Parties 5. The Applicant, Stargrove Entertainment Inc. (“Stargrove”), is a company incorporated in July 2014 under the laws of Ontario. Stargrove is a record label in the business of manufacturing and selling competitively-priced musical compact discs (“CDs”). 6. The Respondents Sony/ATV Music Publishing Canada Co. and Sony Music Entertainment Canada Inc. (collectively, “Sony”) and Universal Music Publishing Group Canada and Universal Music Canada Inc. (collectively, “Universal”) are music publishing companies and record labels located in Toronto, Ontario. The Respondent Casablanca Media Publishing (“Casablanca”) is a music publishing company located in Toronto. ABKCO Music and Records Inc. (“ABKCO”) is a record label, music publisher, and film and video production company headquartered in New York, New York. 7. The Respondent Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”) is a music licensing collective representing music publishers. On behalf of music publishers, CMRRA issues licences for the reproduction of musical works on various media, including mechanical licensing for the reproduction of songs on CDs. 8. Sony, Universal and Casablanca are represented by CMRRA and have representatives on the Board of Directors of CMRRA. ABKCO is represented by CMRRA but, to Stargrove's knowledge, does not have representatives on its Board of Directors. 9. Anderson Merchandisers Canada Inc. (“Anderson”) (which is not a party to the case) distributes CDs to major Canadian retailers, including Walmart and BestBuy. Anderson 1 This “Facts” section is identical to the “Facts” as set out in the Statement of Grounds and Material Facts at Schedule “A” to Stargrove’s Proposed Notice of Application (paras 5-29). -3- 40 is the exclusive distributor for CDs in Walmart in Canada and is the distributor for Stargrove’s CDs. B. Licensing Musical Works in Canada 10. For the purposes of this Application, there are two copyrights that matter: (1) The copyright in the musical work. In order to reproduce a musical work, a party must obtain a “mechanical licence” from the holder of the copyright in the musical work, if the work is protected by copyright. If the work has fallen into the “public domain”, no licence is required to use the work. (2) The copyright in the master sound recording. In order to reproduce the sound recording on which a musical work is fixed, a party must also obtain a “master recording licence” from the holder of the copyright in the sound recording. If the sound recording has fallen into the public domain, no licence is required to use the sound recording. 11. Stargrove’s business is to manufacture and sell CDs. Its current business activity is to manufacture and sell CDs of musical works whose sound recordings are in the public domain. In order to do so, Stargrove needs to obtain mechanical licences for the works, but does not need to obtain master recording licences. Stargrove then manufactures and sells these CDs at very competitive prices. 12. Although a record label in Stargrove’s position can seek to obtain a mechanical licence directly from the copyright holders, the common practice in Canada is for a record label to apply for mechanical licences from CMRRA, which is the authorized representative for most musical work copyright holders in Canada. For a record label of Stargrove’s size, the typical way to obtain such mechanical licences is by entering into a mechanical -4- 41 licence agreement (“MLA”) with CMRRA. A record label that has signed an MLA obtains mechanical licences on standard terms and at standard rates. 13. The standard mechanical royalty rate in Canada is currently $0.083 per song, per copy (for recordings with a running time of five minutes or less). Applications to CMRRA are granted as a matter of course at this standard rate. CMRRA’s contracts with the publishers it represents (called “Affiliation Agreements”) contemplate that CMRRA “shall” issue the mechanical licences on standard terms, unless the publisher decides that it wants to deal directly with the record label to issue the licence. 14. In practice, the market for the issuance of mechanical licences operates as though it were a compulsory system. The process is so automatic that record labels almost always produce CDs even before they have obtained mechanical licences. Royalties owed on these CDs are held pending the identification of the copyright owner. C. Stargrove's Business Takes Off 15. In January 2015, Stargrove made an application to CMRRA for mechanical licences for five titles (collectively, the “Titles”): The Beatles Love Me Do, The Beatles 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 (each of these titles is a compilation of 10 or 11 songs). 16. For each of these titles, copyright in the musical work still exists (hence the need for a mechanical licence), but copyright in the sound recording has expired. As such, the sound recording is in the public domain, meaning that the public has the right to use and copy that recording without permission. 17. With its mechanical licence application to CMRRA, Stargrove submitted the required royalty payment of $13,799.10. -518. 42 CMRRA cashed Stargrove’s cheque and Stargrove began producing its CDs for sale. The CDs went on sale in Walmart on February 3, 2015 for a retail price of $5.00. In the first week of sales, The Beatles’ Love Me Do was Walmart’s top-selling CD, with 1,488 copies sold in one week alone. D. The Respondents Order CMRRA to Stop Issuing Stargrove Mechanical Licences 19. The publishers associated with each of the Titles include ABKCO, Casablanca and Sony (collectively, the “Title Holders”). One by one, and in quick succession, each of the Title Holders gave instructions to CMRRA in January or February 2015 to stop issuing mechanical licences to Stargrove. 20. A CMRRA representative professed her surprise to Stargrove at this instruction from the Title Holders, but CMRRA followed their instruction. In fact, CMRRA went even further and refused to grant Stargrove any mechanical licences, whether from one of the Title Holders or not. Stargrove’s attempts to enter into an MLA were stymied by CMRRA, who erected barrier after barrier to Stargrove’s application. 21. CMRRA refunded Stargrove’s royalty payment for the Titles at the end of February 2015. 22. On multiple occasions, Stargrove requested explanations for the refusals to grant mechanical licences, both from CMRRA and from the Title Holders directly, and asked them to reverse course. Stargrove has been refused an explanation, other than in a letter from CMRRA, which stated that the Title Holders’ “refusal to deal is at least partially related to the fact that there are public domain master recordings on the products in question.” 23. The Title Holders are withholding mechanical licences in order to artificially extend copyright over recordings that should be in the public domain. They are doing so in -6- 43 direct response to the legitimate competition that Stargrove 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 Stargrove’s pricing model and the fact that Stargrove was able to gain market share so quickly. E. Universal Tried to Prevent or Harm Stargrove's Business 24. Randy Lennox, the CEO of Universal Music Canada Inc., sent an e-mail to the principals of Anderson, the distributors of Stargrove’s CDs, asking Anderson to partner with Universal to find solutions and resolve what he called a “public domain issue”. 25. Brian Greaves, an account manager at Universal Music Canada Inc., concocted negative reviews on Walmart's website, complaining that Stargrove’s products were of poor quality. He encouraged other Universal employees to do the same and to help him with Universal’s “campaign” to discourage Anderson from distributing Stargrove’s CDs, stating that poor reviews would deter Anderson from distributing Stargrove’s products in the future. Walmart subsequently removed all the fake reviews from its site. Stargrove’s CDs had a low return rate: of the over 2000 Stargrove CDs sold, only one CD was returned. 26. Mr. Greaves noted that Stargrove’s CDs were taking away from Universal’s sales and market share, and claimed that Universal had already successfully removed a Rolling Stones title from the CDs offered for sale by Stargrove, despite the fact that the copyright in question was held by ABKCO, not Universal. F. The Respondents’ Campaign to Shut Stargrove Out 27. The Respondents mean to punish Stargrove for its low pricing and ability to compete with established record labels. Ultimately, this keeps the prices of CDs high. The -7- 44 decision to instruct CMRRA to refuse to issue mechanical licences to Stargrove surprised even the employees of CMRRA. 28. Since Stargrove has been shut out of the market, it has missed out on several lucrative opportunities to market its CDs, resulting already in an estimated loss of $150,000 in wholesale sales. Anderson wanted approximately 20,000 copies of Beatles CDs that Stargrove would have otherwise produced. Anderson continues to identify marketing opportunities for Stargrove through Walmart that Stargrove is unable to pursue because of CMRRA’s and the Respondents’ refusal to issue it mechanical licences. As recently as three weeks ago, Anderson identified a lack of stock of Beatles and Rolling Stones CDs; it wanted Stargrove to help it fill its orders. Stargrove cannot do so, as long as it is being unfairly and unlawfully blocked from the market. 29. Stargrove’s CDs have been pulled from Walmart’s shelves, and its sales – given that it can obtain no mechanical licences from CMRRA – are now zero. PART 3 - GROUNDS FOR INTERIM RELIEF A. Stargrove has Applied for Relief Pursuant to Section 103.1 30. Concurrent with the filing of this Notice of Application, Stargrove Entertainment Inc. (“Stargrove”) is filing the Leave Application pursuant to s. 103.1 of the Act for leave to make an application under ss. 75, 76, and 77 of the Act. 31. Included with its Leave Application, Stargrove has filed the Proposed Application pursuant to ss. 75, 76, and 77 of the Act, seeking relief against the Respondents on the grounds set out in the Statement of Grounds and Material Facts at Schedule “A” to the Proposed Application. -8- 45 B. The Leave Application and the Proposed Application Raise Serious Issues 32. The Leave Application raises two serious issues: (1) has Stargrove been directly affected by the Respondents’ conduct?; and (2) could the Respondents’ conduct be the subject of an order under ss. 75, 76 or 77? 33. The Proposed Application raises several serious issues, as further described in the Statement of Grounds and Material Facts at Schedule “A” to the Proposed Application: (a) Has Stargrove been substantially affected in its business or precluded from carrying on its business due to its inability to obtain rights to reproduce musical works (through mechanical licences and MLAs) to which the Title Holders hold copyright from CMRRA on usual trade terms? (b) Is Stargrove unable to obtain the right to reproduce musical works (through mechanical licences and MLAs) from other suppliers? (c) Is Stargrove willing and able to meet the usual trade terms of CMRRA and the Title Holders for issuing mechanical licences? (d) Are rights to reproduce musical works in ample supply? (e) Is the Respondents’ refusal to deal likely to have an adverse effect on competition in a market? (f) Have the Respondents refused to supply a product or otherwise discriminated against Stargrove because of Stargrove’s low pricing policy? (g) Has the Respondents’ conduct had an adverse effect on competition in the market for CDs in Canada, specifically in respect of public domain sound recordings of popular music? C. Stargrove Will be Irreparably Harmed Absent an Interim Order 34. Without an interim order requiring the Respondents to issue mechanical licences to Stargrove, the Respondents will continue to withhold mechanical licences from Stargrove, leaving Stargrove unable to sell the CDs it has manufactured and unable to produce the additional CDs it planned to produce. 35. Because of the Respondents’ conduct, Stargrove’s CDs have been pulled from the shelves of Walmart. Stargrove’s sales have been reduced to zero. It cannot obtain any new mechanical licences from CMRRA because of CMRRA’s refusal to do business with -9- 46 Stargrove on usual or any trade terms. The Respondents’ conduct has caused Stargrove to miss out on key business opportunities. 36. Even if Stargrove were to change its business model, CMRRA’s decision not to issue Stargrove any mechanical licences to songs to which the Title Holders own copyright effectively precludes Stargrove from participating in the CD market at all. 37. Without being able to obtain mechanical licences through CMRRA for the Titles and other songs on the usual trade terms, Stargrove will go out of business. This damage cannot be compensated in monetary damages, as such damages are not available under the Act. D. The Balance of Convenience Favours Granting an Interim Order 38. The balance of convenience favours granting the interim order. The irreparable harm that Stargrove is poised to suffer if an interim order is denied is far greater than any arguable harm to the Respondents. 39. Stargrove simply seeks an interim order granting it the right to be issued rights to reproduce songs (through mechanical licences or MLAs) through CMRRA on the same trade terms to which all other applicants are entitled when applying for mechanical licences. Granting the interim relief sought will maintain the industry’s typical mechanical licensing process pending the hearing of the Leave Application and the Proposed Application. 40. In addition to the harm Stargrove will suffer, consumers will also be harmed if the interim order is not granted. Stargrove produces competitively-priced CDs that are in consumer demand. If Stargrove is prevented from entering into or expanding in the market and from competing with record labels, the price of CDs will be maintained artificially high. 41. The Respondents will suffer no corresponding anticompetitive harm. They will merely be required to do business with Stargrove on the same terms that they ordinarily do business with each other and other companies in the market. 42. Stargrove’s products are of good quality and will do no harm to the reputation of the Respondents or the songs to which they hold copyright. - 10 43. 47 In support of this Application, and the Grounds and Material Facts set out above, Stargrove relies on: (a) the affidavit of Terry Perusini, sworn August 26, 2015; (b) the affidavit of Mario Bouchard, sworn August 27, 2015; (c) the Leave Application; (d) the Proposed Application; (e) the Competition Act, RSC 1985, c C-34, as amended, including ss. 75, 76, 77, 103.1 and 104; (f) the Competition Tribunal Rules, SOR/2008-141; and (g) such further and other grounds and material facts as counsel may advise and the Tribunal may permit. 48 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents NOTICE OF APPLICATION FOR INTERIM ORDER (Pursuant to s. 104 of the Competition Act) WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Sangeetha Punniyamoorthy Thomas Kurys Nikiforos Iatrou Scott McGrath Bronwyn Roe Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8067685.4 TAB 49 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and – UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents ———————————————————————————————— MEMORANDUM OF FACT AND LAW OF THE APPLICANT (Application for Leave Pursuant to Section 103.1 of the Competition Act) ———————————————————————————————— 50 WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Nikiforos Iatrou Scott McGrath Bronwyn Roe Sangeetha Punniyamoorthy Thomas Kurys Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613-957-7851 Fax: 613-952-1123 AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819-997-4282 Fax: 819-997-0324 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 51 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M5S 2S3 Tel: 416-926-1966 Fax: 416-926-7521 52 TABLE OF CONTENTS Page PART I THE APPLICATION IN A NUTSHELL ...................................................... 1 PART II STATEMENT OF FACTS ......................................................................... 2 A. The Parties ........................................................................................... 2 B. Licensing Musical Works in Canada..................................................... 4 C. Stargrove’s Business Model................................................................. 4 D. Stargrove’s Business Was Immediately Successful............................. 6 E. The Respondents Ordered CMRRA To Stop Issuing Stargrove Mechanical Licences ........................................................................... 8 F. Universal Tried to Prevent or Harm Stargrove’s Business.................... 9 G. The Respondents Campaigned to Shut Stargrove Out ...................... 10 H. Stargrove Seeks Relief at the Competition Tribunal........................... 12 PART III ISSUE ..................................................................................................... 12 PART IV ARGUMENT ........................................................................................... 12 The Applicable legal test......................................................................... 12 Question #1: Stargrove has been directly and substantially affected in its business by the respondents’ conduct............................................ 14 Question #2: The respondents’ conduct could be subject to an order pursuant to sections 75, 76, and 77 of the act............................... 15 PART V ORDER SOUGHT .................................................................................. 23 SCHEDULE A – AUTHORITIES SCHEDULE B – STATUTES AND REGULATIONS 53 PART I - THE APPLICATION IN A NUTSHELL 1. Stargrove seeks leave to commence an application to the Competition Tribunal against the Respondents pursuant to s. 103.1 of the Competition Act. Stargrove’s proposed application alleges that the Respondents have violated ss. 75, 76, and 77 of the Act by refusing to grant “mechanical licences” to Stargrove, which Stargrove needs to manufacture and sell low-cost CDs in Canada. 2. Stargrove is a record label that manufactures CD compilations of sound recordings of The Beatles, The Rolling Stones, and other artists for sale at low prices ($5.00) at Walmart stores. It can offer such low prices because the sound recordings from which it prepares the CDs are no longer protected by copyright; they are in the public domain. As such, Stargrove does not require a “master sound recording licence” to use the recordings. 3. Although the sound recordings are in the public domain, the musical works (songs) on the recordings continue to be copyright protected. Stargrove therefore requires what are known as “mechanical licences” for each song it seeks to use. In Canada, there are standard industry practices and terms that govern the issuance of mechanical licences; for the songs relevant to this application, these are administered by the Canadian Musical Reproduction Rights Agency. Stargrove is willing to abide by those terms and practices. The Respondents, however, have banded together to shut Stargrove out of the market, having CMRRA deny Stargrove any mechanical licences (not just for the titles in question). -24. 54 Stargrove is being targeted for its low pricing model, but the real victims are consumers; instead of being able to buy popular titles for just $5.00 per CD, they pay much more. 5. The Respondents have campaigned to block Stargrove by pressuring Stargrove’s distributor, concocting false negative reviews of Stargrove’s CDs, and having CMRRA refuse to deal with Stargrove on standard terms. They have violated sections 75, 76, and 77 of the Competition Act, depriving consumers of competitive prices and artificially extending copyright over public domain recordings. This has negatively affected competition. 6. Stargrove’s proposed application readily meets the low threshold required on a leave application. The conduct complained of could be the subject of an order pursuant to each of sections 75, 76 and 77. It has directly and substantially affected Stargrove’s business and has resulted in a substantial lessening or prevention of competition. The Application should be granted. PART II - STATEMENT OF FACTS A. The Parties 7. The Applicant, Stargrove Entertainment Inc. (“Stargrove”), is a company incorporated in July 2014 under the laws of Ontario. Stargrove is a record label in the business of manufacturing and selling competitively-priced musical compact discs (“CDs”).1 1 Affidavit of Terry Perusini sworn August 26, 2015 (“Perusini Affidavit”), para 3. -38. 55 The Respondents Sony/ATV Music Publishing Canada Co. and Sony Music Entertainment Canada Inc. (collectively, “Sony”) and Universal Music Publishing Group Canada and Universal Music Canada Inc. (collectively, “Universal”) are music publishing companies and record labels located in Toronto, Ontario. The Respondent Casablanca Media Publishing (“Casablanca”) is a music publishing company located in Toronto. The Respondent ABKCO Music and Records Inc. (“ABKCO”) is a record label, music publisher, and film and video production company headquartered in New York, New York. 2 9. The Respondent Canadian Musical Reproduction Rights Agency Ltd. (“CMRRA”) is a music licensing collective representing music publishers. On behalf of music publishers, CMRRA issues licences for the reproduction of musical works on various media, including mechanical licensing for the reproduction of songs on CDs.3 10. Sony, Universal and Casablanca are represented by CMRRA and have representatives on the Board of Directors of CMRRA. ABKCO is represented by CMRRA but, to Stargrove’s knowledge, does not have representatives on its Board of Directors.4 11. Anderson Merchandisers Canada Inc. (“Anderson”) (which is not a party to the case, but plays an important role in the market) distributes CDs to major Canadian retailers, including Walmart and BestBuy. Anderson is the exclusive 2 Perusini Affidavit, ibid, paras 4-6. Perusini Affidavit, ibid, para 7; Affidavit of Mario Bouchard, sworn August 27, 2015, Exhibit “A” (“Bouchard Affidavit”), para 25. 4 Perusini Affidavit, supra note 1 at para 8. 3 -4- 56 distributor for CDs in Walmart in Canada and is the distributor for Stargrove’s CDs. B. Licensing Musical Works in Canada 12. For the purposes this Application, there are two copyrights that matter:5 (1) The copyright in the musical work. In order to reproduce a musical work, a party must obtain a “mechanical licence” from the holder of the copyright in the musical work, if the work is protected by copyright. If the work has fallen into the “public domain”, no licence is required to use the work. (2) The copyright in the master sound recording. In order to reproduce the sound recording on which a musical work is fixed, a party must also obtain a “master recording licence” from the holder of the copyright in the sound recording, if the sound recording is protected by copyright. If the sound recording has fallen into the “public domain”, no licence is required to use the sound recording. C. Stargrove’s Business Model 13. Stargrove’s business is to manufacture and sell CDs. Its current business activity is to manufacture and sell CDs of musical works whose sound recordings are in the public domain. In order to do so, Stargrove needs to obtain mechanical licenses for the works, but does not need to obtain master sound recording 5 Perusini Affidavit, ibid at paras 9-10; Bouchard Affidavit, supra note 3 at paras 18-19. -5- 57 licences. Stargrove then manufactures and sells these CDs at very competitive prices.6 14. Although a record label in Stargrove’s position can seek to obtain a mechanical licence directly from the publisher, the common practice in Canada is for a record label to apply for mechanical licences from CMRRA, which is the authorized representative for most musical work copyright holders in Canada. CMRRA distributes royalties to publishers, who in turn pay royalties to the authors of musical works for which a licence was issued.7 15. CMRRA offers two options for mechanical licences: (i) “pay-as-you-press” licencing and (ii) three standard Mechanical Licencing Agreements (“MLA”). CMRRA suggests that pay-as-you-press licences are appropriate for licensees who only occasionally manufacture products in Canada or who do so in small quantities.8 16. For a record label of Stargrove’s size, the typical (and most cost-efficient) way to obtain such mechanical licenses is by entering into an MLA with CMRRA.9 A record label that has signed an MLA obtains mechanical licences on standard terms and at standard rates. 17. The standard mechanical royalty rate in Canada is currently $0.083 per song, per copy (for recordings with a running time of five minutes or less).10 The royalty 6 Perusini Affidavit, ibid at para 20. Bouchard Affidavit, ibid at para 31. 8 Perusini Affidavit, ibid at para 16; Bouchard Affidavit, supra note 3 at note 17. 9 Perusini Affidavit, ibid at para 16. 10 Perusini Affidavit, ibid at para 17. 7 -6- 58 rate is fixed on a per song/per copy basis, irrespective of the price for which a CD is sold. Applications by record labels to CMRRA for mechanical licences are granted as a matter of course at this standard rate.11 18. CMRRA’s contracts with the publishers it represents (called “Affiliation Agreements”) contemplate that CMRRA “shall” issue the mechanical licences on standard terms, unless the publisher decides that it wants to deal directly with the record label to issue the licence.12 This is the only situation in which the MLA provides that CMRRA may decline to issue a licence to a record label that has otherwise complied with the terms of its MLA.13 19. In practice, the market for the issuance of mechanical licences operates as though it were a compulsory system. The process is so automatic that record labels press and sell CDs before obtaining mechanical licences. Royalties owed on these CDs are held pending the identification of the copyright owner.14 D. Stargrove’s Business Takes Off 20. In January 2015, Stargrove made an application to CMRRA for mechanical licences for five titles (collectively, the “Titles”): The Beatles Love Me Do, The Beatles Can’t Buy Me Love, The Rolling Stones Little Red Rooster, Bob Dylan It 11 The mechanical royalty rate may be lower for certain budget-priced CDs. Bouchard Affidavit, supra note 3 at paras 36-37. 12 Bouchard Affidavit, ibid at para 34. 13 Bouchard Affidavit, ibid at para 34. 14 Bouchard Affidavit, ibid at paras 29, 41-49. -7- 59 Ain’t Me Babe and The Beach Boys Fun, Fun, Fun (each of these titles is a compilation of 11 songs).15 21. For each of these titles, copyright in the musical work still exists (hence the need for a mechanical license), but copyright in the sound recording has expired. As such, the sound recording is in the public domain, meaning that the public has the right to use and copy that recording without permission. 22. Although an MLA would be more appropriate for a record label like Stargrove, CMRRA required Stargrove to apply for a pay-as-you-press licence for the mechanical licences.16 With its application, Stargrove submitted the required royalty payment of $13,799.10.17 23. CMRRA cashed Stargrove’s cheque and Stargrove began producing its CDs for sale. The CDs went on sale at Walmart on February 3, 2015 for a retail price of $5.00 each. Consumers reacted positively to this offering. In the first week of sales, The Beatles’ Love Me Do was Walmart’s top-selling CD, with 1,488 copies sold. Three of Stargrove’s other titles also had strong initial sales: Fun, Fun, Fun, It Ain’t Me Babe, and Can’t Buy Me Love sold a combined total of 755 units in their first week of sales.18 15 Perusini Affidavit, supra note 1 at paras 24, 25, 27 and 31. Perusini Affidavit, ibid at para 32. 17 Perusini Affidavit, ibid at para 32. 18 Perusini Affidavit, ibid at para 34. 16 -8- 60 E. The Respondents Order CMRRA to Stop Issuing Stargrove Mechanical Licences 24. The publishers associated with the Titles include ABKCO, Casablanca and Sony Publishing (collectively, the “Title Holders”). One by one, and in quick succession, each of the Title Holders gave instructions to CMRRA in January or February 2015 to refuse to issue the mechanical licences for Stargrove. 25. A CMRRA representative professed her surprise to Stargrove at these instructions from the Title Holders, but CMRRA followed their instructions. In fact, CMRRA went even further, and refused to grant Stargrove any mechanical licences, whether from one of the Title Holders or not.19 Stargrove’s attempts to enter into an MLA were stymied by CMRRA, which erected barrier after barrier to Stargrove’s application. 26. CMRRA refunded Stargrove’s royalty payment for the Titles at the end of February, 2015, causing the sale of Stargrove’s CDs to grind to a halt.20 27. On multiple occasions, Stargrove requested explanations for the refusals to grant mechanical licences, both from CMRRA and from the Title Holders directly, and asked them to reverse course. Stargrove has been refused an explanation, other than in a letter from CMRRA, which stated that the Title Holders’ “refusal to deal is at least partially related to the fact that there are public domain master recordings on the products in question.”21 The responses that Stargrove received from ABKCO and Casablanca representatives stated, in part, that ABKCO and 19 Perusini Affidavit, ibid at paras 40-43. Perusini Affidavit, ibid at para 45. 21 Perusini Affidavit, ibid at para 60. 20 -9- 61 Casablanca were not required to provide an explanation for their refusal to grant licences.22 28. The Title Holders are withholding mechanical licences 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. 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. F. Universal Tried to Prevent or Harm Stargrove’s Business 29. In February 2015, fabricated, negative reviews were posted on Walmart’s website about Stargrove’s Beatles’ titles.23 30. Randy Lennox, the CEO of Universal Music Canada, sent an e-mail to the principals of Anderson, the distributors of Stargrove’s CDs, asking Anderson not to carry Stargrove’s products and to partner with Universal to resolve what he called a “public domain issue”.24 31. Brian Greaves, an account manager at Universal Music Canada, created reviews on Walmart’s website, complaining of the poor quality of Stargrove’s products. He also encouraged other Universal Music Canada employees to do the same and help him with his “campaign” to discourage Anderson from distributing 22 Perusini Affidavit, ibid at paras 64-65. Perusini Affidavit, ibid at paras 46-49. 24 Perusini Affidavit, ibid at para 51. 23 - 10 - 62 Stargrove’s products in the future.25 Walmart subsequently removed all the fake reviews from its site. Stargrove’s CDs had a low return rate: of the over 2000 Stargrove CDs sold, only one CD was returned.26 32. Mr. Greaves noted that Stargrove’s CDs were taking away from Universal’s sales and market share, and claimed that Universal had already successfully removed a Rolling Stones title from the CDs offered by Stargrove for sale, despite the fact that the copyright in question was held by ABKCO, not Universal.27 Clearly, Universal worked with ABKCO and CMRRA to have the title pulled from shelves. 33. Universal’s reaction shows what an effective competitor Stargrove was going to be. The fact that Stargrove could attract so many customers in such a brief time, ousting major record labels’ stranglehold on Top Ten lists at Walmart, had clearly provoked concern among the Title Holders, and prompted this concerted effort to prevent Stargrove from entering the market and competing for CD sales. G. The Respondents Campaign to Shut Stargrove Out 34. The Respondents mean to punish Stargrove for its low pricing and ability to compete with established record labels. Ultimately, this keeps the prices of CDs high. Mechanical licences are ordinarily issued as a matter of course within the MLA structure. The process is so automatic that record labels almost always produce CDs even before they have obtained mechanical licenses.28 The 25 Perusini Affidavit, ibid at paras 50 and 52. Perusini Affidavit, ibid at paras 49, 53. 27 Perusini Affidavit, ibid at para 52. 28 Bouchard Affidavit, supra note 3 at para 29. 26 - 11 - 63 decision to instruct CMRRA to refuse to issue mechanical licences to Stargrove surprised even the employees of CMRRA. 35. Since Stargrove has been shut out of the market, it has missed out on several lucrative opportunities to market its CDs. 36. For instance, Anderson wanted Beatles CDs that Stargrove would have otherwise produced. Anderson continues to identify opportunities for Stargrove through Walmart that Stargrove is unable to pursue because of CMRRA and the Respondents’ refusal to issue it mechanical licenses.29 As recently as three weeks ago, Anderson noted a lack of stock of Beatles and Rolling Stones CDs; it wanted Stargrove to help it fill its orders.30 Stargrove cannot do so, as long as it is being unfairly and unlawfully blocked from the market. 37. Stargrove was offered the opportunity to put 20,000 CDs of its two Beatles titles in Walmart locations for a promotional “front of store” bin sale for three weeks, from July 25 to August 14, 2015. It was unable to seize this opportunity because of the Respondents’ refusal to grant mechanical licences to Stargrove.31 38. These lost opportunities alone have resulted in an estimated loss to Stargrove of $150,000 in wholesale sales.32 39. Stargrove’s CDs have been pulled from Walmart’s shelves, and its sales – given that it can obtain no mechanical licenses from CMRRA – are now zero. 29 Perusini Affidavit, supra note 1 at paras 78-79. Perusini Affidavit, ibid at para 79. 31 Perusini Affidavit, ibid at paras 76-77. 32 Perusini Affidavit, ibid at paras 76-77. 30 - 12 - 64 H. Stargrove Seeks Relief at the Competition Tribunal 40. Based on the foregoing, Stargrove filed this Application for leave to commence a proceeding against the Respondents pursuant to s. 75, s. 76 and s. 77 of the Competition Act (“Act”). At Schedule “A” to its Notice of Application for Leave, it has attached its proposed Notice of Application against the Respondents if leave is granted. 41. Stargrove has concurrently filed an Application seeking an interim and interlocutory order to compel the Respondents to deal with Stargrove on CMRRA’s ordinary trade terms pending the result of this leave Application and, if it is granted, the application on the merits.33 PART III - ISSUE 42. The sole issue on this Application is whether Stargrove should be granted leave to make an application under ss. 75, 76, and/or 77 against the Respondents. PART IV - ARGUMENT The Applicable Legal Test 43. Section 103.1 of the Act grants private parties the right to commence an application pursuant to ss. 75, 76 or 77 of the Act, with leave of the Competition Tribunal (“Tribunal”): 33 Application for Interim Order. - 13 - 65 Leave to make application under section 75, 76 or 77 103.1 (1) Any person may apply to the Tribunal for leave to make an application under section 75, 76 or 77. The application for leave must be accompanied by an affidavit setting out the facts in support of the person’s application under that section. 44. Subsections 103.1(7) and 103.1(7.1) set out the tests to be employed by the Tribunal for requests for leave under that section to commence an action pursuant to s. 75 and s. 76, respectively: Granting leave to make application under section 75 or 77 (7) The Tribunal may grant leave to make an application under section 75 or 77 if it has reason to believe that the applicant is directly and substantially affected in the applicants’ business by any practice referred to in one of those sections that could be subject to an order under that section. Granting leave to make application under section 76 (7.1) The Tribunal may grant leave to make an application under section 76 if it has reason to believe that the applicant is directly affected by any conduct referred to in that section that could be subject to an order under that section. 45. When determining whether to grant leave, the Tribunal is to ask whether the leave application is supported “by sufficient credible evidence to give rise to a bona fide belief that the applicant may have been directly and substantially affected in the applicant’s business by a reviewable practice, and that the practice in question could be subject to an order.”34 46. The standard of proof on a leave application pursuant to s. 103.1 is lower than when the application is considered on its merits. The Tribunal needs to be 34 National Capital News Canada v Milliken, 2002 Comp Trib 41 at para 14. - 14 - 66 satisfied that the respondent’s practice could be the subject of an order. The burden of proof is lower than the ordinary burden of balance of probabilities.35 47. With this lower standard of proof in mind, the Tribunal must answer two questions on this leave application: (1) has Stargrove been directly and substantially affected in its business by a reviewable practice?; and (2) could the reviewable practice in question be the subject of an order pursuant to the sections of the Act on which Stargrove relies? Question #1: 48. Stargrove Has Been Directly and Substantially Affected in its Business by the Respondents’ Conduct An application under s. 103.1 of the Act requires sufficient credible evidence to give rise to a bona fide belief that the applicant may have been directly and substantially affected in its business by a reviewable practice. A “substantial” effect on business means something just beyond de minimis. The evidence must be direct and not speculative.36 49. Together, the Respondents have campaigned to keep Stargrove from obtaining mechanical licences, and have effectively shut Stargrove out of the CD market entirely. Their conduct should therefore be considered collectively, rather than individually. 50. The Respondents’ conduct has gutted Stargrove’s business model and effectively locked it out of access to CMRRA, the gatekeeper for mechanical 35 Symbol Technologies Canada ULC v Barcode Systems Inc, 2004 FCA 339 at para 17 [Barcode]. Canada (Director of Investigation & Research) v Chrysler Canada Ltd (1989), 27 CPR (3d) 1 (Comp Trib) at 23; aff'd (1991), 38 CPR (3d) 25 (FCA). 36 - 15 - 67 licences. Unless the Tribunal grants relief to Stargrove, it will be put out of business, and its competitive impact will vanish. 51. The Titles effectively constitute Stargrove’s entire business. There is therefore no need for the Tribunal to analyze whether the harm created by the Respondents has a substantial effect on Stargrove’s business as a whole – it is specifically targeted at Stargrove’s whole business. Even if Stargrove were to change its business model and focus on titles not controlled by the Title Holders, CMRRA’s decision not to enter into an MLA with Stargrove precludes it from participating in CD sales to any credible degree. There is no question that Stargrove’s business has been substantially and directly affected by the Respondents’ conduct. Question #2: 52. The Respondents’ Conduct Could be Subject to an Order Pursuant to Sections 75, 76, and 77 of the Act In assessing the potential merits of a case, the Tribunal may address the relevant elements summarily in keeping with the expeditious nature of the leave proceeding under section 103.1.37 53. Subsection 75(1) of the Act sets out the requirements for the reviewable trade practice of refusal to deal: Jurisdiction of Tribunal where refusal to deal 75. (1) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that (a) 37 a person is substantially affected in his business or is precluded from carrying on business due to his inability to obtain adequate supplies of a product anywhere in a market on usual trade terms, Barcode, supra note 35 at para 19. - 16 (b) the person referred to in paragraph (a) is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market, (c) the person referred to in paragraph (a) is willing and able to meet the usual trade terms of the supplier or suppliers of the product, (d) the product is in ample supply, and (e) the refusal to deal is having or is likely to have an adverse effect on competition in a market, 68 the Tribunal may order that one or more suppliers of the product in the market accept the person as a customer within a specified time on usual trade terms unless, within the specified time, in the case of an article, any customs duties on the article are removed, reduced or remitted and the effect of the removal, reduction or remission is to place the person on an equal footing with other persons who are able to obtain adequate supplies of the article in Canada. 54. Unlike other forms of intellectual property which may not ordinarily meet these criteria,38 the right to reproduce songs (through mechanical licences) is subject to standard rates and usual supply terms, with MLAs being ordinarily available to anyone willing to pay applicable fees and abide by standard terms. Stargrove is being uniquely targeted and discriminated against by CMRRA and the Title Holders; even CMRRA acknowledged that this is out of the ordinary. 55. This case meets all five requirements of s. 75: (a) As set out above in response to Question #1, Stargrove’s business is substantially affected by its inability to obtain the right to reproduce the musical works (through mechanical licences) for the Titles. Stargrove has lost an opportunity to put at least 20,000 CDs in Walmart locations for a promotional “front of store” bin sale for three weeks, from July 25 to August 14, 2015. There are other opportunities and promotions that 38 Canada (Director of Investigation & Research) v Warner Music Canada Ltd (1997), 78 CPR (3d) 321, CT-1997/003 Doc #22 (Comp Trib). - 17 - 69 Stargrove could have participated in had it been granted mechanical licences by the Respondents. (b) Stargrove is unable to otherwise obtain the right to reproduce the musical works because the rights are in the sole control of the Respondents (there is insufficient competition among “suppliers” in the market). (c) Stargrove is willing to meet the usual trade terms of the Respondents through CMRRA. (d) The granting of rights to reproduce songs is not limited in supply – as noted above, mechanical licences are normally granted as a matter of course. (e) The Respondents’ refusal to deal is having an adverse effect on competition in the market for CD sales in Canada, specifically in respect of popular music whose sound recordings are in the public domain. The Respondents clearly recognized Stargrove for what it is: a maverick that has identified a way to disrupt the market and offer consumers a product they seek at far lower prices than are currently available. By blocking Stargrove’s CD sales, the Respondents are artificially suppressing competition in the market, creating a corresponding artificial inflation of their own market share and the prices for CDs. The consuming public, whose purchase decisions made Stargrove’s CDs top sellers in their first week of sales, is being denied the low-cost alternative that Stargrove seeks to provide. - 18 56. 70 Similarly, there is sufficient credible evidence that the Tribunal could make an order against the Respondents pursuant to ss. 76(2) and 76(8) of the Act: Price maintenance 76. (1) On application by the Commissioner or a person granted leave under section 103.1, the Tribunal may make an order under subsection (2) if the Tribunal finds that (a) a person referred to in subsection (3) directly or indirectly (ii) (b) has refused to supply a product to or has otherwise discriminated against any person or class of persons engaged in business in Canada because of the low pricing policy of that other person or class of persons; and the conduct has had, is having or is likely to have an adverse effect on competition in a market. … Persons subject to order (3) An order may be made under subsection (2) against a person who (a) is engaged in the business of producing or supplying a product; … or (c) has the exclusive rights and privileges conferred by a patent, trade-mark, copyright, registered industrial design or registered integrated circuit topography. … Refusal to supply (8) If, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that any person, by agreement, threat, promise or any like means, has induced a supplier, whether within or outside Canada, as a condition of doing business with the supplier, to refuse to supply a product to a particular person or class of persons because of the low pricing policy of that person or class of persons, and that the conduct of inducement has had, is having or is likely to have an adverse effect on competition in a market, the Tribunal may make an order prohibiting the person from continuing to engage in the conduct or requiring the person to do business with the supplier on usual trade terms. 71 - 19 57. The Respondents could be subject to an order under s. 76(2) pursuant to both ss. 76(3)(a) and (c). The Respondents are engaged in the business of producing and supplying products – in the case of the record labels, CDs, and in the case of the publishers and CMRRA, the right to reproduce musical works by way of mechanical licences and MLAs. They also have copyright to the songs associated with the mechanical licences – s. 76(3)(c) explicitly makes intellectual property holders subject to an order under that subsection. 58. The Respondents’ conduct falls within s. 76(1)(a)(ii) because they have refused to supply a product to Stargrove. Specifically, the Respondents have refused to grant Stargrove the right to reproduce musical works in an attempt to keep Stargrove from competing in the market for CDs where the sound recordings are in the public domain. The Respondents are doing so because Stargrove’s low pricing policies were going to disrupt the CD market and take away market share from the record labels. 59. The Respondents have also acted contrary to s. 76(1)(a)(ii) because they have “otherwise discriminated against” Stargrove. The Respondents have discriminated against Stargrove by denying it access to the right to reproduce musical works (through mechanical licences and an MLA), and refusing to deal with it on terms similar to the terms that would apply to any other record label. This discrimination arises because of Stargrove's low pricing policy. E-mails from executives at Universal identify that the refusal to supply and discriminatory treatment occurred because Stargrove’s $5.00 CDs were gaining market share. - 20 60. 72 The Respondents have also acted contrary to s. 76(8) by inducing CMRRA, as a condition of doing business with the Respondents, to refuse to supply the relevant rights (through mechanical licences and an MLA) to Stargrove. This refusal arises because of Stargrove’s low pricing policy. 61. The Respondents’ refusal to supply has impeded Stargrove’s entry into and expansion in the CD market in Canada and has resulted, and is likely to result, in a substantial lessening or prevention of competition, as consumers are being denied access to the low-cost CDs they want. As Mr. Greaves of Universal noted, Stargrove’s sales were eating into the established players’ market share. Stargrove’s strong sales in just one week in the market, and the frequent requests by Anderson for more product, are indicative of the adverse impact on competition. 62. Subsection 77 has also been violated by the Respondents in this case: Definitions 77. (1) For the purposes of this section, “exclusive dealing” means (a) any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to (i) deal only or primarily in products supplied by or designated by the supplier or the supplier’s nominee, or (ii) refrain from dealing in a specified class or kind of product except as supplied by the supplier or the nominee, and (b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a)(i) or (ii) by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees to meet the condition set out in either of those subparagraphs; - 21 - 73 … Exclusive dealing and tied selling (2) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that exclusive dealing or tied selling, because it is engaged in by a major supplier of a product in a market or because it is widespread in a market, is likely to (a) impede entry into or expansion of a firm in a market, (b) impede introduction of a product into or expansion of sales of a product in a market, or (c) have any other exclusionary effect in a market, with the result that competition is or is likely to be lessened substantially, the Tribunal may make an order directed to all or any of the suppliers against whom an order is sought prohibiting them from continuing to engage in that exclusive dealing or tied selling and containing any other requirement that, in its opinion, is necessary to overcome the effects thereof in the market or to restore or stimulate competition in the market. 63. The Title Holders are the major suppliers of the rights to reproduce musical works (through mechanical licences and MLAs) in the market (in fact, they are the only suppliers for the Titles). Currently, the Respondent record labels are the only suppliers of CDs of the relevant songs. Their behaviour is specifically aimed at preventing Stargrove from entering and expanding in the market. 64. In addition to using their power over the Titles and their position within CMRRA to coordinate this harm to Stargrove, they also, in the case of Universal, sought to use their position in the broader CD market to influence Anderson to stop dealing with Stargrove. 65. Universal pressured Anderson not to distribute products of Stargrove’s that competed with Universal’s, offering veiled incentives and making veiled threats to - 22 - 74 deter Anderson from dealing with Stargrove.39 Universal also placed negative reviews of Stargrove’s CDs on Walmart’s website with a view to obtaining a similar advantage in the market. Further, Universal appears to have been complicit in ABKCO and CMRRA’s activities with respect to the Rolling Stones title in issue. 66. The Respondents’ conduct is not a legitimate exercise of intellectual property rights. 67. The Competition Bureau’s Intellectual Property Enforcement Guidelines explain that the circumstances in which the Bureau could apply the Act to anticompetitive conduct involving intellectual property rights includes circumstances involving anticompetitive conduct that is “something more than the mere exercise of the IP right”.40 The Guidelines go on to state: …If a company uses IP protection to engage in conduct that creates, enhances or maintains market power as proscribed by the Competition Act, then the Bureau may intervene. When joint conduct of two or more firms lessens or prevents competition, the competitive harm clearly flows from something more than the mere exercise of 41 the IP right to refuse. 68. This is clearly the case here, with the various Respondents banding together with CMRRA to shut Stargrove out. 39 Perusini Affidavit, supra note 1 at para 30. Competition Bureau, Intellectual Property Enforcement Guidelines (Ottawa: 1 September 2000), s. 4.2 at p 7. 41 Ibid, s. 4.2.1 at p. 8. 40 - 23 69. 75 The United States Department of Justice and Federal Trade Commission describe the intersection between intellectual property law and antitrust law in their Antitrust Guidelines for the Licensing of Intellectual Property: Intellectual property law bestows on the owners of intellectual property certain rights to exclude others. These rights help the owners to profit from the use of their property. An intellectual property owner's rights to exclude are similar to the rights enjoyed by owners of other forms of private property. As with other forms of private property, certain types of conduct with respect to intellectual property may have anticompetitive effects against which the antitrust laws can and do protect. … … As in other antitrust contexts, however, market power could be illegally acquired or maintained, or, even if lawfully acquired and maintained, would be relevant to the ability of an intellectual property owner to harm competition 42 through unreasonable conduct in connection with such property. 70. While Stargrove does not gainsay the Respondents’ rights to benefit from their intellectual property, the Respondents may not exploit it in a manner that violates the Act, as they are doing in this case. 71. Stargrove has met the low threshold required on a leave application pursuant to s. 103.1. It should be granted leave. PART V - ORDER SOUGHT 72. Stargrove seeks an order: (a) granting it leave to commence an Application against the Respondents pursuant to ss. 75, 76, and 77 of the Act, in the form contained within the Proposed Notice of Application; and 42 United States Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (6 April 1995), ss. 2.1, 2.2. opposed. Date: August 28, 2015 WEIRFOULDS LLP Barristers Solicitors 4100 - 66 Wellington Street West PO. Box 35, Toronto?Dominion Centre Toronto, ON M5K 1B7 Nikiforos latrou Scott McGrath Bronwyn Roe Tel: 416-365-1110 Fax: 416-365-1876 niatrou@weirfoulds.com broe@weirfoulds.com -24- 76 awarding Stargrove its costs of this Application for leave, if ALL OF WHICH IS RESPECTFULLY SUBMITTED STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Sangeetha Punniyamoorthy Thomas Kurys Tel: 416-971-7202 Fax: 416-971-6638 spunniyamoorthy@dimock.corn tkurys@dlmock.com Lawyers for the Applicant 77 SCHEDULE “A” – Authorities 1. National Capital News Canada v Milliken, 2002 Comp Trib 41. 2. Symbol Technologies Canada ULC v Barcode Systems Inc, 2004 FCA 339. 3. Canada (Director of Investigation & Research) v Chrysler Canada Ltd (1989), 27 CPR (3d) 1 (Comp Trib); aff'd (1991), 38 CPR (3d) 25 (FCA). 4. Canada (Director of Investigation & Research) v Warner Music Canada Ltd (1997), 78 CPR (3d) 321, CT-1997/003 Doc #22 (Comp Trib) 5. Competition Bureau, Intellectual Property Enforcement Guidelines (Ottawa: 1 September 2000). 6. United States Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (6 April 1995). 78 Schedule “B” – Statutes and Regulations Competition Act, RSC, 1985, c C-34 PART VIII MATTERS REVIEWABLE BY TRIBUNAL RESTRICTIVE TRADE PRACTICES Refusal to Deal Jurisdiction of Tribunal where refusal to deal 75. (1) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that (a) a person is substantially affected in his business or is precluded from carrying on business due to his inability to obtain adequate supplies of a product anywhere in a market on usual trade terms, (b) the person referred to in paragraph (a) is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market, (c) the person referred to in paragraph (a) is willing and able to meet the usual trade terms of the supplier or suppliers of the product, (d) the product is in ample supply, and (e) the refusal to deal is having or is likely to have an adverse effect on competition in a market, the Tribunal may order that one or more suppliers of the product in the market accept the person as a customer within a specified time on usual trade terms unless, within the specified time, in the case of an article, any customs duties on the article are removed, reduced or remitted and the effect of the removal, reduction or remission is to place the person on an equal footing with other persons who are able to obtain adequate supplies of the article in Canada. When article is a separate product (2) For the purposes of this section, an article is not a separate product in a market only because it is differentiated from other articles in its class by a trade-mark, proprietary name or the like, unless the article so differentiated occupies such a dominant position in that market as to substantially affect the ability of a person to carry on business in that class of articles unless that person has access to the article so differentiated. Definition of “trade terms” 79 (3) For the purposes of this section, the expression “trade terms” means terms in respect of payment, units of purchase and reasonable technical and servicing requirements. Inferences (4) In considering an application by a person granted leave under section 103.1, the Tribunal may not draw any inference from the fact that the Commissioner has or has not taken any action in respect of the matter raised by the application. Price Maintenance Price maintenance 76. (1) On application by the Commissioner or a person granted leave under section 103.1, the Tribunal may make an order under subsection (2) if the Tribunal finds that (a) a person referred to in subsection (3) directly or indirectly (i) by agreement, threat, promise or any like means, has influenced upward, or has discouraged the reduction of, the price at which the person’s customer or any other person to whom the product comes for resale supplies or offers to supply or advertises a product within Canada, or (ii) has refused to supply a product to or has otherwise discriminated against any person or class of persons engaged in business in Canada because of the low pricing policy of that other person or class of persons; and (b) the conduct has had, is having or is likely to have an adverse effect on competition in a market. Order (2) The Tribunal may make an order prohibiting the person referred to in subsection (3) from continuing to engage in the conduct referred to in paragraph (1)(a) or requiring them to accept another person as a customer within a specified time on usual trade terms. Persons subject to order (3) An order may be made under subsection (2) against a person who (a) is engaged in the business of producing or supplying a product; (b) extends credit by way of credit cards or is otherwise engaged in a business that relates to credit cards; or (c) has the exclusive rights and privileges conferred by a patent, trade-mark, copyright, registered industrial design or registered integrated circuit topography. … 80 Refusal to supply (8) If, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that any person, by agreement, threat, promise or any like means, has induced a supplier, whether within or outside Canada, as a condition of doing business with the supplier, to refuse to supply a product to a particular person or class of persons because of the low pricing policy of that person or class of persons, and that the conduct of inducement has had, is having or is likely to have an adverse effect on competition in a market, the Tribunal may make an order prohibiting the person from continuing to engage in the conduct or requiring the person to do business with the supplier on usual trade terms. … Inferences (10) In considering an application by a person granted leave under section 103.1, the Tribunal may not draw any inference from the fact that the Commissioner has or has not taken any action in respect of the matter raised by the application. … (12) For the purposes of this section, “trade terms” means terms in respect of payment, units of purchase and reasonable technical and servicing requirements. Exclusive Dealing, Tied Selling and Market Restriction Definitions 77. (1) For the purposes of this section, “exclusive dealing” « exclusivité » “exclusive dealing” means (a) any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to (i) deal only or primarily in products supplied by or designated by the supplier or the supplier’s nominee, or (ii) refrain from dealing in a specified class or kind of product except as supplied by the supplier or the nominee, and (b) any practice whereby a supplier of a product induces a customer to meet a condition set out in subparagraph (a)(i) or (ii) by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees to meet the condition set out in either of those subparagraphs; … 81 Exclusive dealing and tied selling (2) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that exclusive dealing or tied selling, because it is engaged in by a major supplier of a product in a market or because it is widespread in a market, is likely to (a) impede entry into or expansion of a firm in a market, (b) impede introduction of a product into or expansion of sales of a product in a market, or (c) have any other exclusionary effect in a market, with the result that competition is or is likely to be lessened substantially, the Tribunal may make an order directed to all or any of the suppliers against whom an order is sought prohibiting them from continuing to engage in that exclusive dealing or tied selling and containing any other requirement that, in its opinion, is necessary to overcome the effects thereof in the market or to restore or stimulate competition in the market. Damage awards (3.1) For greater certainty, the Tribunal may not make an award of damages under this section to a person granted leave under subsection 103.1(7). Where no order to be made and limitation on application of order (4) The Tribunal shall not make an order under this section where, in its opinion, (a) exclusive dealing or market restriction is or will be engaged in only for a reasonable period of time to facilitate entry of a new supplier of a product into a market or of a new product into a market, (b) tied selling that is engaged in is reasonable having regard to the technological relationship between or among the products to which it applies, or (c) tied selling that is engaged in by a person in the business of lending money is for the purpose of better securing loans made by that person and is reasonably necessary for that purpose, and no order made under this section applies in respect of exclusive dealing, market restriction or tied selling between or among companies, partnerships and sole proprietorships that are affiliated. Where company, partnership or sole proprietorship affiliated (5) For the purposes of subsection (4), (a) one company is affiliated with another company if one of them is the subsidiary of the other or both are the subsidiaries of the same company or each of them is controlled by the same person; 82 (b) if two companies are affiliated with the same company at the same time, they are deemed to be affiliated with each other; (c) a partnership or sole proprietorship is affiliated with another partnership, sole proprietorship or a company if both are controlled by the same person; and (d) a company, partnership or sole proprietorship is affiliated with another company, partnership or sole proprietorship in respect of any agreement between them whereby one party grants to the other party the right to use a trade-mark or tradename to identify the business of the grantee, if (i) the business is related to the sale or distribution, pursuant to a marketing plan or system prescribed substantially by the grantor, of a multiplicity of products obtained from competing sources of supply and a multiplicity of suppliers, and (ii) no one product dominates the business. When persons deemed to be affiliated (6) For the purposes of subsection (4) in its application to market restriction, where there is an agreement whereby one person (the "first" person) supplies or causes to be supplied to another person (the "second" person) an ingredient or ingredients that the second person processes by the addition of labour and material into an article of food or drink that he then sells in association with a trade-mark that the first person owns or in respect of which the first person is a registered user, the first person and the second person are deemed, in respect of the agreement, to be affiliated. Inferences (7) In considering an application by a person granted leave under section 103.1, the Tribunal may not draw any inference from the fact that the Commissioner has or has not taken any action in respect of the matter raised by the application. GENERAL Leave to make application under section 75, 76 or 77 103.1 (1) Any person may apply to the Tribunal for leave to make an application under section 75, 76 or 77. The application for leave must be accompanied by an affidavit setting out the facts in support of the person’s application under that section. Notice (2) The applicant must serve a copy of the application for leave on the Commissioner and any person against whom the order under section 75, 76 or 77, as the case may be, is sought. Certification by Commissioner 83 (3) The Commissioner shall, within 48 hours after receiving a copy of an application for leave, certify to the Tribunal whether or not the matter in respect of which leave is sought (a) is the subject of an inquiry by the Commissioner; or (b) was the subject of an inquiry that has been discontinued because of a settlement between the Commissioner and the person against whom the order under section 75, 76 or 77, as the case may be, is sought. Application discontinued (4) The Tribunal shall not consider an application for leave respecting a matter described in paragraph (3)(a) or (b) or a matter that is the subject of an application already submitted to the Tribunal by the Commissioner under section 75, 76 or 77. Notice by Tribunal (5) The Tribunal shall as soon as practicable after receiving the Commissioner’s certification under subsection (3) notify the applicant and any person against whom the order is sought as to whether it can hear the application for leave. Representations (6) A person served with an application for leave may, within 15 days after receiving notice under subsection (5), make representations in writing to the Tribunal and shall serve a copy of the representations on any other person referred to in subsection (2). Granting leave to make application under section 75 or 77 (7) The Tribunal may grant leave to make an application under section 75 or 77 if it has reason to believe that the applicant is directly and substantially affected in the applicants' business by any practice referred to in one of those sections that could be subject to an order under that section. Granting leave to make application under section 76 (7.1) The Tribunal may grant leave to make an application under section 76 if it has reason to believe that the applicant is directly affected by any conduct referred to in that section that could be subject to an order under that section. Time and conditions for making application (8) The Tribunal may set the time within which and the conditions subject to which an application under section 75, 76 or 77 must be made. The application must be made no more than one year after the practice or conduct that is the subject of the application has ceased. Decision 84 (9) The Tribunal must give written reasons for its decision to grant or refuse leave and send copies to the applicant, the Commissioner and any other person referred to in subsection (2). Limitation (10) The Commissioner may not make an application for an order under section 75, 76, 77 or 79 on the basis of the same or substantially the same facts as are alleged in a matter for which the Tribunal has granted leave under subsection (7) or (7.1), if the person granted leave has already applied to the Tribunal under section 75, 76 or 77. Inferences (11) In considering an application for leave, the Tribunal may not draw any inference from the fact that the Commissioner has or has not taken any action in respect of the matter raised by it. Inquiry by Commissioner (12) If the Commissioner has certified under subsection (3) that a matter in respect of which leave was sought by a person is under inquiry and the Commissioner subsequently discontinues the inquiry other than by way of settlement, the Commissioner shall, as soon as practicable, notify that person that the inquiry is discontinued. Interim order 104. (1) If an application has been made for an order under this Part, other than an interim order under section 100 or 103.3, the Tribunal, on application by the Commissioner or a person who has made an application under section 75, 76 or 77, may issue any interim order that it considers appropriate, having regard to the principles ordinarily considered by superior courts when granting interlocutory or injunctive relief. Terms of interim order (2) An interim order issued under subsection (1) shall be on such terms, and shall have effect for such period of time, as the Tribunal considers necessary and sufficient to meet the circumstances of the case. … 85 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents MEMORANDUM OF FACT AND LAW OF THE APPLICANT (Application for Leave Pursuant to Section 103.1 of the Competition Act) WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, TorontoDominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Nikiforos Iatrou Scott McGrath Bronwyn Roe Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 Sangeetha Punniyamoorthy Thomas Kurys spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8210841.13 TAB 86 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents ____________________________________________________________________________ AFFIDAVIT OF TERRY PERUSINI ____________________________________________________________________________ 87 -2WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O.Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Nikiforos Iatrou Scott McGrath Bronwyn Roe Tel: 416-971-7202 Fax: 416-971-6638 Sangeetha Punniyamoorthy Thomas Kurys spunniyamoorthy@dimock.com tkurys@dimock.com Tel: 416-365-1110 Fax: 416-365-1876 niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant -3- 88 I, TERRY PERUSINI, of the City of Burlington, in the Province of Ontario, MAKE OATH AND SAY: 1. I am the sole Director and Officer of Stargrove Entertainment Inc. (“Stargrove”), and as such I have personal knowledge of the matters herein deposed. 2. This affidavit is sworn in support of two applications being brought by Stargrove: (1) an application for an order pursuant to s. 103.1 of the Competition Act (“Act”) for leave to bring an application against the Respondents under ss. 75, 76, and 77 of the Act; and (2) an application for an interim order pursuant to s. 104 of the Act compelling the Respondents to issue mechanical licences to Stargrove on usual trade terms pending determination of Stargrove’s applications under ss. 75, 76, and 77 of the Act. A. The Parties 3. Stargrove is a company incorporated in July 2014 under the laws of Ontario. Stargrove is a record label in the business of producing and selling competitively-priced musical compact discs. 4. The Respondents Sony/ATV Music Publishing Canada Co. and Sony Music Entertainment Canada Inc. (collectively, “Sony”) and Universal Music Publishing Group Canada and Universal Music Canada Inc. (collectively, “Universal”) are music publishing companies and record labels located in Toronto, Ontario. 5. The respondent ABKCO Music and Records, Inc. (“ABKCO”) is a record label, music publisher, and film and video production company headquartered in New York, New York. 6. The respondent Casablanca Media Publishing (“Casablanca”) is a music publishing company headquartered in Toronto. I do not know if Casablanca is affiliated with a record label, but Casablanca does rely on Universal for distribution in respect of some of the titles at issue in this proceeding. I believe that Casablanca is affiliated with another Toronto-based independent music publishing company, Red Brick Music Publishing (“Red Brick”), as Casablanca’s Vice President is also Red Brick’s President. 7. The respondent Canadian Musical Reproduction Rights Agency Limited (“CMRRA”) is a music licensing collective representing music rights-holders, on whose behalf CMRRA -4- 89 issues licences for the reproduction of musical works on various media, including mechanical licensing for the reproduction of songs on CDs and similar physical products. 8. CMRRA’s Board of Directors includes Gary Furniss, President of Sony Publishing; Shawn Marino, Vice President of Universal Music Canada; and Jennifer Mitchell, Vice President of Casablanca and President of Red Brick. B. Licensing Musical Works in Canada 9. For the purposes of reproducing a pre-existing sound recording of a copyrighted musical work, there are two copyrights in issue: (1) the copyright in the musical work (i.e., song) itself, which is originally owned by the songwriter(s), and is often later assigned to a music publisher; and (2) the copyright in the “master” sound recording, which is originally owned by the “maker” of the sound recording, and may also be assigned.1 10. There are two forms of licences that correspond to these two copyrights: “mechanical licences”, which may be granted by the holder of the copyright in the musical work; and “master recording licences”, which may be granted by the holder of the copyright in the master sound recording. 11. Until recently, in Canada, under the Copyright Act, RSC, 1985, c C-42, copyright over sound recordings continued until the end of 50 years after the end of the calendar year in which the first publication of the sound recording occurs. Sound recordings that had been published for at least 50 years were considered to be in the “public domain”. 12. As discussed below in further detail, in June 2015, Bill C-59, the Economic Action Plan 2015 Act, No. 1 received royal assent, extending the term of copyright in sound recordings from 50 years to 70 years. However, the new law is not retroactive. Therefore, a number of sound recordings that were published between 50 and 70 years ago, including the tracks for which Stargrove seeks mechanical licences, will remain in the public domain. 13. If a record label seeks to reproduce a recording of a musical work and the sound recording has fallen into the public domain, a mechanical licence may still be required in 1 An original recording also includes a third copyright: the performance of the singers and musicians. However, this copyright is not in issue when making copies of an existing sound recording. -5- 90 order to reproduce the musical work, as copyright will often still subsist in the musical work itself. 14. Obtaining a mechanical licence in Canada may be done in one of two ways. A purchaser may contact the musical work copyright holder directly and obtain a mechanical licence; however, it is much more common to apply for a mechanical licence from CMRRA, which is the authorized representative for most musical work copyright holders in Canada. 15. For example, on Sony Publishing’s website, Sony Publishing advises that CMRRA is its exclusive licensing agent. A copy of Sony Publishing’s website’s “FAQ” section is attached hereto as Exhibit “1”. 16. CMRRA offers two options for mechanical licences: “pay-as-you-press” licensing and a standard Mechanical Licensing Agreement (“MLA”). CMRRA suggests that pay-as-youpress licences are appropriate for licensees who only occasionally manufacture products in Canada or who do so in small quantities. Royalties for pay-as-you-press licences must be paid in advance. CMRRA suggests that an MLA is appropriate for licensees manufacturing sound recording products on a continuing basis. Under an MLA, royalties are payable as products are sold on a quarterly basis. An MLA is more appropriate for a record label like Stargrove, who is not planning to produce CDs on a one-off or occasional basis. 17. The standard mechanical royalty rate in Canada is currently $0.083 per song, per copy (for recordings with a running time of five minutes or less).2 For example, if the applicable rate is 8.3 cents and I sell 100 CDs, CMRRA would collect $8.30, irrespective of the price of the CD. The rate for a mechanical licence is the same regardless of whether or not the sound recording has fallen into the public domain. 18. Information from CMRRA’s website describing mechanical licensing, pay-as-you-press, and MLAs is attached hereto as Exhibit “2”. 19. To provide a more detailed, independent explanation of relevant copyright legislation, CMRRA, and the music licensing process in Canada, I authorized my lawyers to retain 2 The mechanical royalty rate may be lower for certain budget-priced CDs. -6- 91 Mario Bouchard, former counsel to the Copyright Board of Canada. Mr. Bouchard’s report will be filed with my applications. C. Stargrove’s Business and Business Model 20. Stargrove’s business model relies on distributing low-cost compact discs. These discs consist of: (i) sound recordings of which Stargrove owns the sound recording copyright; (ii) sound recordings licensed to Stargrove from various independent labels (e.g., K-Tel International); or (iii) sound recordings that have fallen into the public domain and for which master recording licences are not required. As is described in greater detail below, the first five titles that Stargrove produced consisted of public domain sound recordings. 21. For a brief period, until it was forced to stop selling its products due to the Respondents’ refusals to issue mechanical licences to Stargrove, Stargrove’s products were sold at Walmart Canada (“Walmart”), in-store and online. Stargrove sells its CDs wholesale to its distributor, Anderson Merchandisers Canada Inc. (“Anderson”), for approximately $3 unit. At Walmart, the CDs are sold to customers for a retail price of $5.00. D. Stargrove’s Inception and First Five Titles 22. Prior to commencing operations, I wanted to ensure that Stargrove’s business model was consistent with Canadian copyright law. In or around May 2014, I retained the law firm of Borden Ladner Gervais (“BLG”) to provide a legal opinion regarding the law on sound recordings in Canada. Among other things, BLG provided the opinion that sound recordings first published 50 years ago would be in the public domain in Canada. A copy of the BLG opinion dated May 30, 2014 is attached hereto as Exhibit “3”. 23. In or around July 2014, I incorporated Stargrove and decided to compile a number of sound recordings that had fallen into the public domain and to manufacture and release CDs of these sound recordings. 24. The first six compilation CDs that Stargrove intended to produce were: (a) The Beatles, Love Me Do (b) The Beatles, Can’t Buy Me Love (c) The Rolling Stones, Little Red Rooster -7(d) Elvis Presley, Suspicion (e) Bob Dylan, It Ain’t Me Babe (f) The Beach Boys, Fun, Fun, Fun 92 25. Each of the above titles is a compilation of 11 songs. 26. I began meeting with representatives of Anderson in November 2014 to discuss the sale of Stargrove titles in Walmart. On November 7, 2014, I contacted Patricia McAlpine of Anderson and informed her I had previews of Beatles and Rolling Stones cover art. 27. I met with Ms. McAlpine on January 7, 2015 and she informed me that Walmart was interested in selling five of our six titles—Love Me Do, Can’t Buy Me Love, Little Red Rooster, It Ain’t Me Babe, and Fun, Fun, Fun— and that Anderson would be ordering between 1000 and 3500 units per title. I received the order from Anderson on January 8 for a total quantity of 12,400 CDs. A copy of the order is attached hereto as Exhibit “4”. E. Universal Music Group Had “Major Concerns” About Stargrove’s Beatles Titles Before They Were Even Released 28. In the interim, in November 20, 2014, Ken Kozey at Anderson contacted me about an email he received from Brian Greaves of Universal Music Group, in which Mr. Greaves asked Mr. Kozey who was selling “the new Beatles public domain product” and stating that the product in question “has obviously raised major concerns over here”. A copy of the e-mail chain dated November 20, 2014 is attached hereto as Exhibit “5”. 29. At that time, we had not pressed any titles. We were planning to release the initial titles in January 2015. 30. In a conversation with Mr. Kozey in December 2014, I was informed that in meetings between Anderson and Universal Music Canada, Universal Music Canada pressured Anderson not to carry Stargrove products and informed Anderson that Universal Music Canada was lobbying the Canadian government to make changes to the legislation regarding public domain for sound recordings. -8- 93 F. Stargrove’s Business Was Immediately Successful 31. In early January 2015, Stargrove contacted CMRRA to enquire about obtaining a mechanical licence for the five titles we intended to wholesale to Anderson for sale in Walmart. 32. CMRRA required Stargrove to apply for a pay-as-you-press licence for the mechanical licences. Stargrove completed CMRRA’s application requirements and submitted the required royalty payment of $13,799.10 by cheque to CMRRA on January 8, 2015. 33. CMRRA cashed Stargrove's cheque on January 9, 2015. Stargrove then began producing its CDs for sale to Anderson. Stargrove produced five CDs in its first run to fulfill Anderson’s order, for a total of 12,400 units. Stargrove sold the CDs to Anderson for $3.00 per unit. A copy of Stargrove’s cheque, which was cashed January 9, 2015, is attached hereto as Exhibit “6”. 34. The first five Stargrove titles went on sale on Walmart’s website on or around January 20, 2015 and in Walmart stores on or around February 3, 2015, for a retail price of $5.00 each. In Stargrove’s first week of CD sales in Walmart stores, its Beatles Love Me Do title was Walmart’s top seller, with 1,488 copies sold. A copy of the list of top 10 sellers for the week of February 2 - 8, 2015 is attached hereto as Exhibit “7”. Three of Stargrove’s other titles had strong initial sales as well: Fun, Fun, Fun, It Ain’t Me Babe, and Can’t Buy Me Love sold a combined total of 755 units in their first week of sales. 35. Including the six titles noted at paragraph 22, Stargrove intended to produce 45 titles for sale by 2016. G. The Respondents’ Campaign to Lock Stargrove Out (i) ABKCO Refuses to License Rolling Stones Musical Works to Stargrove 36. On January 22, 2015, Veronica Syrtash, Vice President, Legal and Business Affairs at CMRRA, e-mailed Ms. Holt of Stargrove to advise that ABKCO had instructed CMRRA not to issue any licences for the reproduction of five musical works owned by ABKCO on Stargrove’s Rolling Stones title, Little Red Rooster. A copy of the e-mail dated January 22, 2015 is attached hereto as Exhibit “8”. -937. 94 On January 23, 2015, Alisa Coleman of ABKCO e-mailed Ned Talmey of Anderson and stated that Stargrove did not have mechanical licences for five musical works owned by ABKCO on Stargrove’s Rolling Stones title, Little Red Rooster. Ms. Coleman requested that Anderson remove Little Red Rooster from its catalogue and notify Walmart to remove the CD from the marketplace and online, “before we have to take any additional legal steps to protect our rights.” Ken Kozey of Anderson forwarded me Ms. Coleman’s e-mail on January 24, 2015. A copy of the e-mail chain dated January 23 and 24, 2015 is attached hereto as Exhibit “9”. 38. As a result of ABKCO’s email to Anderson, Anderson removed Little Red Rooster from distribution and returned the product to Stargrove. No copies of Little Red Rooster were sold in Walmart. (ii) Casablanca Refuses to License Beatles Musical Works to Stargrove 39. On February 4, 2015, Nathalie Levesque, Assistant Manager, Independent Licensing & Royalties at CMRRA, e-mailed Ms. Holt to advise that Casablanca represents three musical works contained on Stargrove’s Beatles titles, and that Casablanca had instructed CMRRA not to issue any licences for the reproduction of these works by Stargrove. Ms. Holt responded by e-mail the same day to ask why Casablanca had instructed CMRRA not to issue licences to Stargrove for these musical works. A copy of the e-mail chain dated February 4, 2015 is attached hereto as Exhibit “10”. (iii) CMRRA Refuses to Deal With Stargrove On Any Product 40. I am advised by Ms. Holt and I believe that on February 9, 2015, Ms. Holt spoke with Caroline Rioux of CMRRA by telephone regarding the Respondent Publishers’ refusals to sell mechanical licences to Stargrove. During that conversation, Ms. Rioux expressed to Ms. Holt that she was surprised by the Respondent Publishers’ refusals and stated that the situation was unusual. Ms. Rioux also stated that Sony Publishing had refused to provide Stargrove with a mechanical licence. 41. On February 10, 2015, Ms. Holt e-mailed Ms. Rioux to ask which publishers had refused mechanical licences and to inquire regarding the status of all of the Stargrove mechanical licence applications. Ms. Holt also stated in her e-mail that the Respondent Publishers’ refusals raised questions about “unfair trading and competition laws”. - 10 42. 95 Ms. Rioux responded by e-mail on February 11, 2015, and wrote that CMRRA would not be processing any applications from Stargrove: Given the concerns that you raise in your email, we think it is best that CMRRA not be involved in this situation any further. We will be returning all payments submitted by you already, and will not be processing any applications from you. I suggest that you contact the publishers directly with any questions you may have, or seek to obtain licences from them directly. … 43. A copy of the e-mail chain dated February 9-11, 2015 is attached hereto as Exhibit “11”. 44. Ms. Holt responded to Ms. Rioux on February 13, 2015 and informed her that Stargrove had a number of what Ms. Holt termed “regular” titles which included compilations of “non-controversial” tracks which have been widely marketed by other lower-priced record labels for years. Ms. Holt requested that, as Stargrove was looking to manufacture catalogue titles on a continuing basis, CMRRA enter into an MLA with Stargrove. A copy of Ms. Holt’s e-mail dated February 13, 2015 to Ms. Rioux is attached hereto as Exhibit “12”. Ms. Holt never received a response from Ms. Rioux to this e-mail. 45. On February 25, 2015, Ms. Holt received a letter from CMRRA enclosing a refund cheque for “all payments [Stargrove] submitted to CMRRA.” A copy of CMRRA’s letter dated February 25, 2015 is attached hereto as Exhibit “13”. (iv) Universal Music Group Orchestrated Fabricated Negative Reviews of Stargrove Products, Perpetuated Myth that Stargrove Products are of Inferior Quality, and Encouraged Publishers Not to Deal with Stargrove 46. On February 11, 2015, I received an email from Patricia McAlpine of Anderson. She asked me to go onto Walmart’s website (www.walmart.ca) to see negative reviews that had been left of our Beatles titles. She also told me that she had received emails from Nielsen SoundScan, Universal, and Anderson’s CEO. A copy of Ms. McAlpine’s e-mail to me dated February 11, 2015 is attached hereto as Exhibit “14”. 47. At that time, there were four Stargrove titles for sale in Walmart and on walmart.ca: Can’t Buy Me Love (Beatles); Love Me Do (Beatles); Fun, Fun, Fun (Beach Boys); and It Ain’t - 11 - 96 Me Babe (Bob Dylan). I went to walmart.ca and saw that negative reviews had been left for three of the titles: Can’t Buy Me Love; Love Me Do; and Fun, Fun Fun. There were seven reviews of Love Me Do, of which six were negative; eight negative reviews of Can’t Buy Me Love; and four negative reviews of Fun, Fun, Fun. There were no reviews of It Ain’t Me Babe. A copy of the reviews is attached hereto as Exhibit “15”. 48. I read the reviews of Stargrove’s titles and believed that Stargrove had been targeted with fabricated, negative reviews, for several reasons: (a) I noticed that there was a great deal of overlap between the usernames of negative reviewers. For example, five of the six people that left negative reviews of Love Me Do also posted a negative review of Can’t Buy Me Love or Fun, Fun, Fun, or both. (b) Some reviews indicated that the reviewer had owned the product for a greater length of time than it had existed or been available in Walmart. For example, “RingoStarr”’s review of Love Me Do indicated that, as of the date of his review (which I believe to have been February 9, 2015), the reviewer had owned the product for 5-6 months. Love Me Do was only pressed in January 2015, and at the time of “RingoStarr”’s review, had only been available in-store and online for approximately one week. (c) The reviews generally seemed to attack the sound quality and authenticity of the CDs. For example, reviews included the following statements: “Awful quality, was recorded from an LP”; “Very poor audio quality. Not the real thing. Don’t buy this version!”; “I have seen a few of these weird versions of The Beatles lately. Buyer beware! They are not the original recordings and definitely of inferior quality”; “Subpar quality. Save your $5 and put it towards REAL Beatles recordings”; “Do not buy, these versions aren’t originals and have terrible quality;” “Don’t know why someone would buy such a bad album and not the original. Save your money and get the real thing! Or you’ll just waste it!” (d) No other Beatles titles on walmart.ca had any reviews, negative or positive. (e) The three Stargrove titles that had received negative reviews all contained sound recordings of music artists affiliated with Universal. - 12 49. 97 I reported the reviews to Walmart on February 13, 2015; by February 15, 2015 the reviews had been removed from walmart.ca. 50. Subsequently, it came to my attention that Brian Greaves, an account manager at Universal Music Canada, had sent an e-mail around to Universal employees identifying that he had created reviews for Stargrove's products on Walmart's website and encouraging Universal employees to do the same. He called it his “campaign” to discourage Anderson from placing Stargrove's products on its shelves. 51. I met with Patricia McAlpine and Chad Minicuci of Anderson on February 12, 2015 at Anderson’s offices. I asked Ms. McAlpine what she had meant when she wrote that she had received emails from Nielsen SoundScan, Universal, and Anderson’s CEO (Exhibit “14”). Ms. McAlpine showed me an e-mail from Randy Lennox, President of Universal Music Canada to Ned Talmey, CEO of Anderson, and Ken Kozey, Associate Vice President of Purchasing at Anderson. In the e-mail, Mr. Lennox asked how Universal Music Canada and Anderson could partner to “resolve the public domain issue”. He specifically mentioned the Beatles and the Rolling Stones. He stated that Universal Music Canada was happy to provide very fair pricing for the “legitimate versions of the largest artists in the history of music” and wanted to discuss solutions. I understood this e-mail to be an attempt by Mr. Lennox to discourage Anderson from supporting Stargrove’s products, and an insinuation that Stargrove’s recordings were somehow illegitimate. 52. Below Mr. Lennox’s e-mail to Mr. Talmey and Mr. Kozey was the above-noted email from Brian Greaves, Account Manager at Universal Music Group, to employees of Universal Publishing and other Universal companies. I noticed that one of the recipients was Shawn Marino, Vice President of Universal Publishing and member of the CMRRA Board of Directors. In the e-mail, Mr. Greaves asked recipients to help his “campaign” to “discourage” Anderson from selling “unlicensed/public domain product”. He stated that Beatles and Beach Boys CDs being sold for $5 retail in Walmart “are taking away from Universal sales and market share”, and specifically noted two of Stargrove’s Titles (Love Me Do and Can’t Buy Me Love) were in the Top 100 for that week. He wrote about continuing the effort to remove these CDs from Walmart’s shelves, and stated that Universal Music Group had successfully removed a Rolling Stones title. He went on to request the e-mail recipients to contribute a review on walmart.ca “as if you just - 13 - 98 purchased a $5 CD from Walmart and you were disappointed in the poor sound quality”, as these reviews would “bring attention of these poor quality products and will deter Anderson Merchandisers from placing these type of products in the future.” 53. Mr. Minicuci listened to Stargrove’s CDs and advised me that he was more than satisfied with the quality of the CDs. He noted that, of the over 2000 Stargrove units sold in-store at Walmart, only one CD had been returned, which suggested that customers were satisfied with the product. 54. It seems clear from the foregoing that the Respondents engaged in a concerted campaign to prevent Stargrove from entering the market and competing for CD sales. 55. Luckily for Stargrove, Anderson did not bow to the pressure from Universal and the other Respondents. Anderson is still willing to distribute Stargrove's CDs today. H. Despite Demand, Stargrove Is Forced to Stop Pressing and Shipping Products, Due to the Respondents’ Refusal to License Stargrove 56. During my meeting with Chad Minicuci and Patricia McAlpine on February 12, 2015, I advised that Stargrove would not press any more product until we had resolved the licensing issues with the Respondent Publishers. Mr. Minicuci was disappointed, as Love Me Do had been Anderson’s top CD in units sold the prior week. Taking into account the pace at which Stargrove’s titles had sold in their first sale week, Mr. Minicuci indicated that he believed that, with the total of four Beatles titles Stargrove planned to release, Stargrove could have easily surpassed 250,000 units sold in the year. 57. On February 23, 2015, I received a telephone call from Mr. Minicuci asking for an update on the Stargrove titles. I replied to Mr. Minicuci by e-mail that same day, stating that I was unfortunately still on standby. A copy of my e-mail to Mr. Minicuci dated February 23, 2015, and Mr. Minicuci’s reply dated February 24, 2015 is attached hereto as Exhibit “16”. I. Stargrove Continues to Attempt to Deal with the Publishers and CMRRA 58. On March 9, 2015, Stargrove’s intellectual property lawyer, Sangeetha Punniyamoorthy of Dimock Stratton LLP, wrote to Ms. Rioux requesting further information concerning CMRRA’s refusal to grant Stargrove mechanical licences with respect to various works. Dimock Stratton’s letter requested that CMRRA provide Stargrove with a list of the - 14 - 99 publishers that instructed CMRRA to refuse a licence to Stargrove; the publishers’ stated reasons for denying a licence; and CMRRA’s reasons for not providing a mechanical licence to Stargrove in respect of other publishers. A copy of the letter dated March 9, 2015 is attached hereto as Exhibit “17”. 59. On March 12, 2015, Veronica Syrtash, Vice President, Legal & Business Affairs at CMRRA, responded to Dimock Stratton and confirmed that the publishers that had instructed CMRRA not to issue licences to Stargrove are ABKCO, Casablanca, and Sony Publishing. A copy of Ms. Syrtash’s letter dated March 12, 2015 to Dimock Stratton is attached hereto as Exhibit “18”. 60. In response to Dimock Stratton’s questions regarding the publishers’ stated reasons for denying a licence to Stargrove and CMRRA’s reasons for not providing a mechanical licence to Stargrove in respect of other publishers, CMRRA replied: 2. These publishers have not indicated to us all their reasons for denying licenses, nor do they have an obligation to. […] What we have been told, however, is that their refusal is at least partially related to the fact that there are public domain master recordings on the products in question. Beyond that, we are simply unable to speculate on the reasoning behind their decision-making. 3. CMRRA made a decision not to pursue licensing on behalf of other music publishers after having received an e-mail from Ms. Holt raising the issues of possible unfair trading and competition law. We felt it prudent not to remain in a position where we may be implicated in the practices of copyright owners licensing (or not licensing, as the case may be) users of those copyrights, when CMRRA is only an agent designated to facilitate this process. … 61. Dimock Stratton replied to CMRRA by letter dated March 16, 2015, a copy of which is attached hereto as Exhibit “19”. Dimock Stratton wrote, in part: …Stargrove’s requested mechanical license was not limited to copyrighted material owned by only these three publishers. In fact, the vast majority of the tracks are owned by other publishers. Your letter indicates that CMRRA unilaterally made a decision on behalf of all these other musical publishers to deny a license to Stargrove because - 15 - 100 Stargrove has raised issues of possible unfair trading and competition law. However, it is only a refusal to license that raise any such issues. … Further, it is Stargrove’s understanding based on years of experience within the industry that the usual and ordinary course for obtaining mechanical licenses is through CMRRA, which is in the business of granting permissions on behalf of music publishers. … CMRRA’s refusal, on its own initiative, to license Stargrove on behalf of other music publishers (who have not instructed CMRRA to refuse to license Stargrove) is clearly inconsistent with CMRRA’s normal course of conduct. … 62. Dimock Stratton requested the CMRRA reconsider its decision to deny Stargrove its requested mechanical licences for what she referred to as “non-contentious” tracks. 63. On March 17, 2015, Dimock Stratton wrote to Sony Publishing, ABKCO, and Casablanca regarding their respective refusals to grant mechanical licences to Stargrove. Dimock Stratton requested that each publisher grant a mechanical licence to Stargrove with respect to musical works described in the letters; and that, if the respective publishers decided to maintain their refusals to license Stargrove, to provide their reasons for denying a licence. Dimock Stratton also wrote that “Any refusal to license Stargrove in the ordinary course for unjustified reasons may give rise to unfair trading or competition law issues.” Copies of Dimock Stratton’s letters dated March 17, 2015 to Sony Publishing, ABKCO, and Casablanca are attached hereto as Exhibits “20”, “21”, and “22”, respectively. 64. On March 20, 2015, ABKCO’s lawyer responded to Dimock Stratton by letter, a copy of which is attached hereto as Exhibit “23”. ACKBO’s lawyer wrote, in part, that ABKCO’s decision not to grant mechanical licences to Stargrove “does not require any explanation”. 65. On March 24, 2015, Jennifer Mitchell, President of Red Brick Songs and Vice President of Casablanca, responded to Ms. Punniyamoorthy by letter, a copy of which is attached hereto as Exhibit “24”. Ms. Mitchell wrote, in part, that a copyright owner is not required “to provide an explanation to the applicant for the refusal.” - 16 66. 101 On March 25, 2015, Ms. Syrtash of CMRRA responded to Dimock Stratton’s letter dated March 16, 2015. Ms. Syrtash advised that CMRRA had sought authorizations from publishers for the licensing of songs on Stargrove’s CDs and set out the songs for which CMRRA had or had not received authorization to issue licences to Stargrove: 1. For Product Catalogue STR0009, Album Title “Fun, Fun, Fun” (a) CMRRA has the authorization from the music publisher(s) to issue licenses for the following songs: Summertime Blues, Surfer Girl, Surfin’, Surfin’ Safari, and Surfin’ USA. (b) CMRRA does not have the authorization from the music publisher(s) to issue licenses for the following songs: Be True To Your School, Dance Dance Dance, Fun Fun Fun, I Get Around, Ten little Indians, and When I Grow Up (To Be A Man). 2. For Product Catalogue STR0001, Album Title “Love Me Do” (a) CMRRA has the authorization from the music publisher(s) to issue a license for the following song: Til There Was You (b) CMRRA does not have the authorization from the music publisher(s) to issue licenses for the following songs: All My Loving, A Hard Day’s Night, I Feel Fine, If I fell, It Won’t Be Long, This Boy, You Can’t Do That, Love Me Do, Please Mr. Postman, and I Saw Her Standing There. 3. For Product Catalogue STR0002, Album Title “Can’t Buy Me Love” (a) CMRRA has the authorization from the music publisher(s) to issue licenses for the following song: Honey Don’t (b) CMRRA does not have the authorization from the music publisher(s) to issue licenses for the following songs: Can’t Buy Me Love, And I Love Her, Do You Want To Know A Secret, From Me To You, I Wanna Be Your Man, Mr. Moonlight, No Reply, Please Please Me, and You’ve Really Got A Hold On Me. (Collectively, the songs listed in paragraphs 1(a), 2(a) and 3(a), for which CMRRA has the authorization from the music publishers to - 17 - 102 issue licences, are referred to hereafter as “the CMRRA Licensable Songs”.) 4. For Product Catalogue STR0008, Album Title “It Ain’t Me Babe”, CMRRA does not have the authorization from the music publisher(s) to issue licenses for any of the songs. 5. For Product Catalogue STR0004, Album Title “Little Red Rooster”, CMRRA does not have the authorization from the music publisher(s) to issue licenses for any of the songs. 67. CMRRA then requested that Stargrove re-submit its licence applications for what she described as the “CMRRA Licensable Songs”. A copy of the letter dated March 25, 2015 from CMRRA to Dimock Stratton is attached hereto as Exhibit “25”. 68. I have made a spreadsheet setting out the publishers and distributors for the songs on the above five Stargrove titles. A copy of this spreadsheet is attached hereto as Exhibit “26”. 69. Between April 1 and 21, 2015, Ms. Holt corresponded with Ms. Lévesque of CMRRA in an attempt to enter into an MLA. Copies of the e-mail chains dated between April 1 and April 21, 2015 are attached hereto as Exhibits “27” – “33”. Copies of two MLA models for independent labels are attached hereto as Exhibits “34” – “35”. 70. In this correspondence, it became increasingly clear that CMRRA did not intend to enter into an MLA with Stargrove. In an e-mail dated April 16, 2015 (Exhibit “33”), Ms. Lévesque suggested that the pay-as-you-press licensing method might be best suited to Stargrove’s needs and suggested a meeting “in the coming weeks”. 71. Ms. Holt replied on April 20, 2015 and stated that Stargrove would be willing to enter into a pay-as-you-press licence; however, she wrote, “We do not want to get in the situation we just had where we pay you for units pressed, you cash that money and then we are told we cannot have the licence.” Ms. Holt further wrote, “I appreciate the offer for a meeting in the coming weeks but that does not work. This matter has become very urgent for us and I really do not have weeks to sort it.” (Exhibit “33”). 72. In Ms. Lévesque’s response dated April 21 (Exhibit “33”), she reiterated that “CMRRA has been instructed by several of our publisher principals not to act on their behalf with - 18 - 103 respect to issuing licences to Stargrove”, and stated that “the remaining volume of licences that you would be seeking from CMRRA do not justify the work required under an MLA.” 73. On April 28, 2015, I e-mailed Ms. Lévesque, a copy of which e-mail is attached hereto as Exhibit “36”. I wrote, in part: Let’s be candid; members of your principal publishers sit on your board. The comment that your principal publishers (your board) are instructing you not to deal with Stargrove is the reality of what is going on here. We asked to go on a MLA and you came up with every excuse to avoid that. Even when you rejected our program we asked for a referral to another. We were happy to go with something else that worked, but oddly you had no suggestions of a program that would work for you. You suggested a pay as you press on a quarterly basis. We said happy to go with that please explain further. Instead of explain further you came back with some aside about Legacy. Based on your principal publishers instructions it is very clear CMRRA does not want to work with Stargrove in aiding us to distribute budget priced cds in the Canadian market. Considering your “principal publishers” are subsidiaries of “principal record” labels that are not happy to have our lowered priced products, such as the Beatles in the marketplace, it is not difficult to conclude what is going here. It is unfortunate for the 1000s of publishers (artists) you represent that they are not fairly represented by CMRRA because of a board that truly does not have the interests of those publishers (artists) in mind. There is no doubt those other publishers (artists) would want the revenues our products generate them. In fact there is no doubt the artists under your “principal publishers” would also love the income our products will generate for them. Unfortunately this will not happen for them because “principal publishers” that sit on your board have record labels to protect. Your principal publishers will not deal with us therefore clearly a meeting is pointless and will not get us any further then this email exchange has. … 74. On May 22, 2015, Stargrove’s competition lawyer, Nikiforos Iatrou of WeirFoulds LLP, wrote to Universal Publishing, Sony Publishing, ABKCO, and Casablanca, copying - 19 - 104 CMRRA, to request that the Respondent Publishers reconsider their refusals to supply Stargrove with mechanical licences. WeirFoulds wrote, in part: Stargrove has been engaged with each of you through the Canadian Musical Reproduction Rights Agency Limited (“CMRRA”) for months, to no avail, trying to find a solution to your apparent unwillingness to issue Stargrove mechanical licenses on standard terms. This refusal to supply mechanical licenses directly affects Stargrove’s business, artificially maintains elevated prices of sound recordings that are in the public domain, and is a violation of the Competition Act. This refusal benefits your respective affiliated labels to the expense of consumers. 75. A copy of WeirFoulds’ letter dated May 22, 2015 letter is attached hereto as Exhibit “37”. I understand from Mr. Iatrou that he received no substantive responses, just acknowledgments and one commitment to respond which never materialized. J. Stargrove Continues to Lose Money As a Result of the Respondents’ Refusals to Deal 76. In May 2015, Anderson alerted me to a promotional opportunity at Walmart to use “front of store” bins for $5 CDs for three weeks, from July 25 to August 14, 2015. Patricia McAlpine of Anderson advised me that Anderson would like to order 10,000 units each of both of Stargrove’s Beatles titles for the promotion. A copy of Ms. McAlpine’s May 27, 2015 e-mail to me is attached hereto as Exhibit “38”. 77. Because of the Respondents’ ongoing refusals to license public domain musical works to Stargrove, Stargrove was unable to participate in the Walmart promotion. While it is difficult to estimate Stargrove’s financial losses in this regard, as I am not aware of Walmart having ever done a CD promotion of this nature, I estimate that Stargrove lost out on approximately $150,000 in wholesale sales as a result of our inability to participate in Walmart’s promotion. 78. Anderson continues to be interested in distributing Stargrove’s CDs in Walmart. On June 10, 2015, I received an e-mail from Mr. Minicuci at Anderson, indicating Anderson’s interest in acquiring more titles like Stargrove’s. A copy of Mr. Minicuci’s e-mail to me dated June 10, 2015 is attached hereto as Exhibit “39”. Mr. Minicuci wrote: - 20 - 105 Hi Terry, as you know, we do a great volume of CD sales on the $5 price point. Walmart customers embrace the variety of choice and of course the affordable pricing that allows them to buy more! In particular, the Beatles ‘Love Me Do’ title that we shipped in February of this year was welcomed by the Walmart consumer as evident in the sales results. There is no doubt that we are in need of more titles like it. Based on the fact that defective returns were only 0.032% (way below Industry average) means the customers are satisfied with the quality of the product. Obviously I am not in a position to make decisions or take sides on legal controversy. My primary interest is to make CD’s available at Walmart that the customer is looking for at pricing they expect. The product you recently made available to us certainly hit the mark and we hope that you can provide us with more selections in the near future. 79. On August 10, 2015, I received an e-mail from Ms. McAlpine of Anderson advising that she is out of stock on Beatles titles and would “love to be able to buy some Beatles stock from someone”. A copy of Ms. McAlpine’s email dated August 10, 2015 is attached hereto as Exhibit “40”. K. Changes to the Copyright Act 80. As I described above (para. 28), Ken Kozey of Anderson told me in December 2014 that Universal Music was lobbying the Canadian government to make changes to legislation regarding public domain for sound recordings. 81. On April 21, 2015, the Canadian government tabled the 2015 budget (the “Budget”). The Budget included a proposal to amend the Copyright Act “so that the term of protection of performances and sound recordings is extended from 50 years to 70 years following the date of the release of the sound recordings” (page 305). A copy of relevant portions of the Budget (including pages 22, 265, 300, 305-06) is attached hereto as Exhibit “41”. This amendment is further explained in Mr. Bouchard’s report. 82. That same day, the Prime Minister of Canada sent a letter to Music Canada, a trade organization that represents the major record companies in Canada, including Sony Music Entertainment Canada and Universal Music Canada, confirming the amendment. - 21 - 106 A copy of the letter from the Rt. Hon. Stephen Harper dated April 21, 2015 is attached hereto as Exhibit “42”. 83. Upon learning of the Budget’s proposed change to the Copyright Act, I was concerned that these changes could affect Stargrove’s business. It was not clear from the Budget whether the changes to the Copyright Act would have retroactive application, and we did not know when these changes would come into effect. We put our operations temporarily on hold until we could obtain more information. 84. On May 7, 2015, Bill C-59, An Act to Implement Certain Provisions of the Budget Tabled in Parliament on April 21, 2015 and Other Measures (short title: Economic Action Plan 2015 Act, No. 1), was tabled in the House of Commons. Section 81 of the Bill set out the proposed amendments to the Copyright Act, and s. 82 confirmed that the amendments would not operate to “revive” copyright in a sound recording in which the copyright had already expired: 81. (1) Paragraph 23(1)(b) of the Copyright Act is replaced by the following: (b) if a sound recording in which the performance is fixed is published before the copyright expires, the copyright continues until the earlier of the end of 70 years after the end of the calendar year in which the first such publication occurs and the end of 100 years after the end of the calendar year in which the first fixation of the performance in a sound recording occurs. (2) Subsection 23(1.1) of the Act is replaced by the following: (1.1) Subject to this Act, copyright in a sound recording subsists until the end of 50 years after the end of the calendar year in which the first fixation of the sound recording occurs. However, if the sound recording is published before the copyright expires, the copyright continues until the earlier of the end of 70 years after the end of the calendar year in which the first publication of the sound recording occurs and the end of 100 years after the end of the calendar year in which that first fixation occurs. 82. Paragraph 23(1)(b) and subsection 23(1.1) of the Copyright Act, as enacted by section 81, do not have the effect of reviving the - 22 - 107 copyright, or a right to remuneration, in a sound recording or performer’s performance fixed in a sound recording in which the copyright or the right to remuneration had expired on the coming into force of those provisions. [Bold and underlining in original] 85. A copy of sections 81-82 of Bill C-59 is attached hereto as Exhibit “43”. 86. On June 23, 2015, Bill C-59 received royal assent and the amendments to the Copyright Act thereby came into force. 87. The amendments to the Copyright Act do not have retroactive effect, and thus, Stargrove’s model of seeking to sell CDs like the initial five CDs it sought to sell continues to be lawful under Canadian copyright law. Unfortunately, the Respondents’ concerted campaign is denying Canadian consumers Stargrove’s competitive CDs. L. The Respondents’ Refusal to Deal with Stargrove is Devastating Stargrove’s Business 88. Stargrove’s business model relies heavily on producing CD compilations of sound recordings that are in the public domain. The Respondents’ refusal to license Stargrove under usual licensing terms has caused losses to Stargrove and has cut off any future growth of the business. 89. I estimate that, if Stargrove’s business is able to continue and we are able to sell a mix of licensed sound recordings, our own sound recordings, and public domain sound recordings, we will achieve sales of $3 to $5 million per year in Canada. 90. Under our current business model, without being able to obtain mechanical licences on ordinary terms through CMRRA, Stargrove will go out of business. M. Stargrove Remains Willing to Deal with the Respondents 91. Stargrove remains willing to deal with CMRRA and/or the Respondent Publishers to obtain mechanical licences for public domain sound recordings. 92. Stargrove will pay CMRRA the standard royalty fees required to obtain the mechanical licences to the Titles, if given the chance. ?23? 108 N. The Respondents? Refusal to License Stargrove ls Having An Adverse Effect on Competition in the Market 93. As the e?mail from Mr. Greaves of Universal admits, Stargrove's CD sales were eating into Universal's market share. By freezing Stargrove out, I believe that the Respondents are artificially suppressing competition in the market, which is artificially inflating CD pnces. 94. Stargrove is willing to provide an undertaking as to damages in the event it obtains the interim order sought. SWORN before me at the City of Oakville, in the Province of Ontario, this 26th day of August, 2015. Terry Perusini - 24 TO: The Registrar Competition Tribunal 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: 613-957-7851 Fax: 613-952-1123 AND TO: John Pecman Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, QC K1A 0C9 Tel: 819-997-4282 Fax: 819-997-0324 AND TO: Canadian Musical Reproduction Rights Agency Ltd. 320-56 Wellesley Street West Toronto, ON M5S 2S3 Tel: 416-926-1966 Fax: 416-926-7521 AND TO: ABKCO Music & Records, Inc. 85 5th Ave #11 New York, NY 10003 United States Tel: 212-399-0300 AND TO: Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Tel: 416-921-9214 AND TO: Sony/ATV Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 3C2 Tel: 416-489-5354 AND TO: Sony Music Entertainment Canada Inc. 150 Ferrand Drive Toronto, ON M3C 3E5 Tel: 416-589-3000 AND TO: Universal Music Publishing Group Canada (A Division of Universal Music Canada Inc.) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 109 - 25 AND TO: Universal Music Canada Inc. (A Division of Universal Music Group) 2450 Victoria Park Avenue, Suite 1 Toronto, ON M2J 5H3 Tel: 416-718-4000 Fax: 416-718-4224 110 111 File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents AFFIDAVIT OF TERRY PERUSINI WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7 Nikiforos Iatrou Scott McGrath Bronwyn Roe DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Sangeetha Punniyamoorthy Thomas Kurys Tel: 416-971-7202 Fax: 416-971-6638 Tel: 416-365-1110 Fax: 416-365-1876 spunniyamoorthy@dimock.com tkurys@dimock.com niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8067390.10 112 This is Exhibit referred to in the Affidavit of Terry Peruoini sworn before me this 26th day of August, 2015 Mir/$6M A CommissiorQr for taking Affidavits, etc. Maria Elizabeth Wake?eld 3 Com I . miss Prormce of Ontario. for WeirFouIds Linens?. Barristers and Solicitors. . Expires October 24. 2016. 6124:2015 amyrarv Music Publishing Global Reach. Persona! Attention Sony/AW 113 'MUsro smarter: . 7 . . WRITER-s - cosmos I FAQs Ma I submit to Son ATV is I want to record and release a song that is owned/controlled in whole or in part by Music ubli hin What st must be taken to obtain the nec mech ical li ense? find co 0 she usic son to 'o ment c. of son 5 that are in trole oleo ?b Puin hin 1-inac a onizticnlice.- or ,1ofatat-i wne on olle 'at: Here are the suggestions if streaming mg files is not working in SAfl?y: eneraloo 11 ht 1n ulrie 1?111 on karaok rln' nd mercha For general administratiye inquiries please contact ,lanet Baker at the follom'ng address: ignet.baker@sgnyaty.com. May I submit songs to for revieW? We are currently only accepting material from our contracted writers or from legal or business representatives known to us; we are not permitted to review any songs or accept any packages that are submitted otherwise. It is not our intention to hinder or ?ustrate the creative process. There are legal reasons for strict adherence to this policy on our part which cannot be altered. So, thank you again for your interest, but permission cannot be extended at this time. back to top I want to record and release a song that is owned/controlled in whole or in part by Music Publishing? What steps must be taken to obtain the necessary mechanical license? Please contact our exclusive licensing agent, CMRRA (Canadian Musical Reproduction Rights Agency) at You will be advised accordingly. back to top Where can I find copies of sheet music, song folios, arrangements, etc, of songs that are omedfcontrolled in whole or in part by Music Publishing? Please contact our exclusive print agent, The Hal Leonard Company at mm I am interested in acquiring a license for use of a song that is owned/controlled in whole or in part by SonylATV Music Publishing. What steps must be taken to request same? Click here to View and print our Request form. back to top Here are the suggestions if streaming sound files is not working in SATV: 1. Enter the options of the media player and choose the tab "network" (right top): 0 Make sure, that all of your 4 Checkboxes are checked (Multicast, UDP, TCP and HTTP) No proxy server should be used 2. Try to strewn on some other PCs in your office and check, whether you got the same error~ message 8124:2015 SonwAW Mimic mutating Global Reach. Parsmal Mom] on 3. Talk to your network administrator whether the proxy allows to stream ?les on 4. De-install your current Windows-?Media?Player completely and. download the latest version from Microsoft 5. Point 1. should be repeated! Map. For general copyright inquiries and for ringtone, karaoke, print and merchandise licensing, please contact: laneLBalggr. bank to top - For general administrative inquiries please contact Janet Baker at the following address: Worn. bk Password Login Not Registered Yet Contact Us Forgot Password? I m. 13;? ?13 . To.? l- in: Catalog Corner Music geareh News ls Change Language/Region Missing Royalties I Change of Address Privacy Policy Cookie Policy 2015 SonyfATV Music Publishing LLC 212 115 This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 2-6th day of August, 2015 A Commissioner for taking Affidavits, etc. Maria Elizabeth Wakefield. a Commissioner. 610., Province of Ontario. for WeirFouids LLP, Barristers and Solicitors. Expires October 24, 2016. HOME MUSICEPUBLISHERS- MUSICUSERS REPERTOIRE I NEWS I FAQ I CONTACTUS I EN I FR Need a Licence? -: - i, If you plan to otter products or services In Canada which contain songs which you don?t own or control, you need to obtain permission to use those songs. Such permission is granted through different types of licences, and we?re here to help you get through this process with a minimum of fuss. Refer to the descriptions below to determine which type of li.cence(s) you require. i? I am reproducing music on physical e.g. CDs, Vinyl, Cassettes, USB Keys CMRRA issues mechanical licenses through two basic plans to individuals or companies reproducing music on physical product(s): "pay~as~you?press or-pursuant to the terms of the standard Mechanical Licensing Agreement. See which plan you qualify for below. Limited Quantity Licensing If you are manufacturing or Importing products in small quantities, or releasing sound recordings on a oneshot or limited basis, our Pay~AshYou~Prese/ Import plan is the appropriate method of application for you. To obtain a "pay?as?you?pressfimport? licence, or for more detailed information about this plan, please click here or-yisit our Pay?AsYouPress Licensing FAQ. - The Mechanical Licensing Agreement: if you are manufacturing or importing sound recording products on a continuing basis, we may require that you enter into standard Mechanical Licensing Agreement (MLA). Under the MLA, royalties are payable as products are sold on a quarterly basis. The MLA sets out standard terms and conditions related to licence application, royalty rates, sales and royalty reporting requirements, reserve accounting, promotional copies, deletes and, Where applicable, the treatment of songs coyered by controlled composition clauses. For more information regarding the MLA, please visit our Mechanical Licensing FAQ or contact our Independent Licensing Department. a~ I am reproducing music for the purpose of onlina music distribution, eg. permanent downloads, streaming, weboasting radio broadcaster I am a satellite radio broadcaster 1+ I offer a back-ground music service in Canada i am reproducing music in audiovisual production SEARCH Search this RECENT POSTS Get To Know Lori Ellis, Vice President of Operations Staff Announcement and Celebrate 40 Years Congratulations Spanish EPoint lacittaieateai Congratulations David Murphy! CATEGORIES Naaelsiat 118 Home Music Users About CMRRA Need a Licence? Meet the "learn Pey-Ae-You?Prees Board of Directors Forms for Licence Applicants "Jarredian Music Publishers Licensee Login Association ween-sooner: inc. (cor) Reperto're Repertoire Publishers Search OLir'Song Database Our Services Publishers Search Affiliation Agreement CMRRA Direct Pending List Class Action News Settlement News lipdasrte My Address GMPA Magazine FAQ Mueic Pubiiehing Mechenicei Licensing 'Oniine Licensing Synci'ironizetion Licensing Contact Us Contact info Work at CMRRA Like on Fecebook Foiiow on Twitter Connect on L-fnkedin SITE MAP PRIVACY copyright 2015 CMRRA I Website by inc. TERMS OF USE HOME MusiceusLierz-Rs REPERTOIRE NEWS FAQ I corn-acres The PaynAs-You-Press/lmport Licence Application Process Applying fora licence is a multi?step process. STEP Tl: You must complete an Application for Mechanical Licensing Form for each song you intend to reproduce (or each song embodied on a product you intend to Import). STEP 2: You must complete the Mechanical Licensing Royalty Calculation Sheet, which summarizes the total amount payable for all the songs for which you are seeking licences. The total amount payable comprise the royalty fees, CMRRA's handling fee and the payment of all applicable taxes. First, royalties must be calculated based on the standard mechanical royalty rate and the total number of copies to be manufactured or imported, which must be reported on the Royalty Calculation Sheet. Royalty Rate: the standard mechanical royalty rate in Canada is currently $0.088 per song, per copy, where the running time of the recording is five minutes or less, plus $0.01 66 per copy for each additional minute or partial minute of running time. Minimum number of copies: the minimum number of copies for which a mechanical licence will be issued is 500, whether or not you are pressing or importing a smaller number of copies. Please note that a few publishers represented by CMRRA reserve the right to separately approve each application, and that their royalty rate may be higherthan the current standard rate, in which case we will advise you of the additional ar-nount to be paid. if a publisher refuses to authorize a licence, we will advise you and refund the amount in question. (ii) Second, your application is subject to a nonrefundable Handling Fee of'6% of your total i or $5.00; whichever is greater. This fee is necessary to cover printing, postage and other costs are not met from the royalties alone. Third, if you are a Canadiant resident, your payment must also include the applicable taxes (HST for provinces where it is applicable, otherwise GST only forprov-inces with no HST). residents are exempt. STEP 3: You must provide us with your royalty payment as calculated in Step 2 above. Payment may be made by way of certified cheque or money order. Where payment is made by cheque, yourlicence application will not be processed until your cheque has cleared. For the quickest service, pay by way of money order and provide uswith the required copy of yourpressing invoice at the same time. Note on Refund Policy: if you make an application, and render payment, for a song in the public domain or not represented by OMRRA, the royalty portion of yourpeyment for this song/share will be refunded immediately upon confirmation by CMRRA, but not the associated Handling Fee. Important: Once a licence has been issued by CMRRA, we are unable to refund or credit any royalties for the song in question in the event you decide to not use it. it is thus critically important that you be certain of the song you wish to use before the licence is issued by OMRRA. if a licence has not been issued, and you have decided to not use the song in question, CMRRA will refund the royalty portion of your payment for this song, but not the associated Handling Fee. STEP 4: You must provide us with a confirmation from yourpresser of the number of copies to be manufactured. This can take the form of a copy of your pressing order, the presser?s invoice or a written confirmation from the presser of the number of copies to be manufactured. For imports, you will need to provide us with the customs manifest or other documentation confirming the number of copies to be imported. Note that a pressing confirmation is not necessary where fewer than 200 copies are manufactured. STEP 5: You must complete, sign and date the enclosed Pressing information Waiver. While it is your responsibility as the licence applicant to provide us with the :pressing documentation outlined above, we have found that this documentation is not always provided to us in a timely fashion. As such, it is necessary for CMRRA to be given the authorization to obtain this information directly from your presserto ensure prompt processing of your licences and of our publisher principals? royalties. STE-P 6: If you intend to create an adaptation or translation of an original work, or to use an adap?tgigin or already existing translation, you need to obtain authorization. While CM-RRA can grantmechanica 5 for the reproduction of musical works controlled by its publishers, the words and the melody Used for your recording must correspond to those ofthe original musical work. In other words, a license can only be granted for a new arrangement of a work if no changes are brought to the fundamental structure, chords andr?or lyrics of the composition. With the exception of public domain works, any fundamental modifications made to a musical work must first be approved in writing by its publisher(s), and possibly its author(s), before CMRRA can grant a license for it. Please note that if a composition is owned by more than one publisher, all publishers must give their authorization before the adaptation can be recorded. Since any publisher can refuse to authorize an adaptation or translation, we recommend that you not record your version ofthe song before the appropriate rights are secured. The responsibility to secure these rights is that of the adaptor, translator or eventual recipient of the license. in order to obtain these rights, you must contact the concerned publis?her(s) directly. Generally, a publisher will require the following information to approve an adaption/translation of its work: The original title of the work used along with the name of its authors/composers; The new title given to the adaptation along with the names of the adaptors/translators; The original lyrics. of the work being arranged; - The new or translated lyrics of the adaptation; - If the adaptation is in a language otherthan English, a literal English translation of the lyrics. Once you have received the required approvals from the concerned publisher(s), GMRRA will be happy to issue the mechanical icense(s) on behalf of the =publisher(s) for your recording. Please note that a copy of the signed agreement between you and the concerned publisher(s) will need to be included in your license application. If you wish to use an existing adaptation or translation of a musical work, you must send an application for mechanical licenses to CMRRA following the procedures outlined In the Instructions for Mechanical Licensing Application. On the form entitled Application for Mechanical Licensing, you must include both the title of the original Work and the adapted work as well as the name of the authors and composers of the original work and the name of the adaptors and/ortranslators. if the adaptation is registered as authorized in our database, you will be granted a license. How may happen that the adaptation/translation you wish to use has never been properly authorized by the concerned parties. it this is the case, and you still wish to reproduce the arrangement, you will have to follow the steps outlined above under ?Creation of an adaptation or translation of an original work." STEP 7: Mail all of the above (licence applications, payment, pressing invoice, as well as any other correspondence) to the following address: CMRRA Attention: independent Licensing Department 56 Wellesley Street West, Suite 820 Toronto, Ontario M58 288. in order to avoid any processing delays, please ensure that you have provided CMRRA the following necessary items: - Application for Mechanical License form(s), one for each composition CMRRA Royalty Calculation Sheet, listing all compositions and amounts payable A cheque or-money order-in the amount payable (credit cards are not accepted) A copy of either you-r pressing order, invoice, or letter from the presser confirming the total number of units to be manufactured. CileRA will not accept 'quotes? - A completed copy of the Pressing Information Waiver it is important to note that all of the items listed below must be supplied in order "for to process you-r application. Where the ownership of the song you have applied for has already been confirmed and registered in our database, you can expect to receive your licences within three to six weeks. When you receive your licence, you will be required to signand return one copy to OMRRA. Any errors should be brought to our attention immediately. SEARCH 123 Search this websl'ta.., RECENT POSTS Get To Know Lori Ellis, Vice President of Operations Staff Announcement CM-RRA and SIM-A Celebrate 40 Years Congratulations Spanish Point Congratulations David Murphy! CATEGORIES Home Users About GMRRA Need a Licence? Meet the Team Board or Dire c'izo rs Canadian Music Publishers Asaociation inc. (CSI) Music Publishers Our Services Affiliation Agreement PaywAa-Vou?Presa Forms for Licence Applica nta Licensaa Login Repertoire Repertoire Search Our Song Database Affiliated Publishers; Search GMRRA Direct News 3 . a; I LISI. pleas?. ANION News 1 Settlement CMM Magazine My Address FAQ Music Publishing Maohanicai l-loensing Onilne l..icensal?ng Licenssing Coniact Us Contact info Work at CMRRA We on Facebook Follow on Twitter Connect on Linkedin. SITE MAP PRWAGY POLICY nopyright 2015 CMRRA Website by Maclfat'ter Inc. TERMS HOME MUSICUSERS REPERTOIRE NEWS FAQ CONTACTUS EN FR Mechanical Licensing FAQ General Licensing r- What is a mechanical licence? A mechanical licence Is the agreement by which permission to reproduce a musical work on a sound carrier ls-granted by the copyright owner or its representative. "Mechanical" refers to the reproduction of copyrighted music. in for the "mechanical reproduction of music." If this makes you thinkef music boxes, it?s because it is, admittedly, somewhat outmoded language Nevertheless, "mechanical licence" is the customary industry term for such permission. Such a licence is extremely specific: it is limited to a particular musical work, as reproduced by the-user on a particular product. The licence is also specific as to the catalogue number of the product, the playing time of the recording and the performer. Note that mechanical licences are not issued per album but, rat-her, on a song?byeong basis. If a product contains ?1 0 songs, you :must obtain permission for each one. Also because the ownership of a copyright can be divided between more than one owner, licences are required from all owners before't-he work is fully licensed. Do .I need a mechanical licence to import products in Canada? Note that each country has its own mechanical licensing collective. The Mechanical Copyright Protection Society (MOPS) carries on business in the United Kingdom and issues licences for its territory, just as CMRRA does for Canada. Similarly, The Harry Fox Agency licenses for the territory oi the United States. This is repeated throughout the world. It you plan to import produots from another country, it is critical that you obtain mechanical licences from CMRRA as it is impossible for a foreign manufacturer to ?clear? Canadian royalties unless it has entered into direct worldwide deals with the publishers involved. While possible, this is extremely rare. The rule is simple: it you sell or distribute recordings in Canada, whether they were made here or elsewhere, they must be licensed in Canada and royalties must be paid in Canada. i What happens if i don?t apply for a mechanical licence? 126 if you manufacture or import sound carriers which reproduce copyrighted songs without obtaining a mechanical licence for each song (either directly from the publisher or through CMRRA) then you have infringed the copyrights in question. Canada?s copyright legislation provides for civil penalties and criminal prosecution for copyright infringement. if a product contains unlicensed music, it can be removed from the market by way of injunction. As well, anyone handling infringing merchandise is likewise guilty of infringement including distributors, wholesalers and retailers. Copyright is the basis of the music industry. Without copyright protection, would be unable to assure themselves of a reasonable return and the protection of law for their products. if you manufacture or import sound carriers into Canada, you must obtain licences. it?s the law. i? How do i apply for a mechanical licence? You must apply for a mechanical ilcence(s) for your product before you manufacture or import it. issues mechanical licences through two basic plans: either "pay~as~ycu~pressx import", or pursuant to the terms of the standard Mechanical Licensing Agreement. You?il find information on both of these plans in the Need a License? section of our website. i How much does it-ccst to obtain a mechanical licence? CMRRA currently issues mechanical licences on the basis of 8.8 cents per song, per copy manufactured, Where the playing time-is five minutes or less. For each additional minute (or par-t thereof) 1.66 cents is added to the rate. Note however that a small number of publishers represented by CMRRA do not participate in the industry agreement and charge a higher?thanetandard royalty rate. This royalty rate is applicable only to reproduction of musical works embodied in audio~only sound recordings, such as CDs, cassettes and vinyl recordings. The royalty rate for the reproduction of musical works embodied in any other merchandise, such as toys, games, or any other special product is subject to individual negotiation. If you are applying for a licence under "pay~as~you~press" plan, your application will be subject to an additional handling fee. Please refer to our Pay-"AquoLr-Press Licensing FAQ for more information in this regard. if you have entered into CMRRA's standard Mechanical Licensing Agreement, you may be entitled to a discount on the royalty rate above for budget recordings and musical works subject to controlled composition clauses. Please :refer?to the provisions of the agreement or contact us for assistance in this regard. 1? Are all the songs listed on your database represent-ed by No. Whenever a song is indicated as "not represented" in our database, it means that, while we have logged information such as the title, composer and/or publisher of the song, we do not represent the owner of that song for mechanical licensing purposes. There are many instances where the ownership .of a song is divided between two or more publishers, and may represent some, but not all, of those publishers. in these instances, We are able to issue licences on behalf of the publishers we represent, but before theuser can legally reproduce the song in question, he or she must also obtain licences directly from the copyright owners that are not represented by CMRRA. v- How do i know if represents the songs that i want to license? We invite you to search our song database. it?s free to use and does not carry any obligation of affiliation. After accepting the terms of use, you may then carry out song searches either by song title or by writer name. 1 27 The web site will offer you a list of potential titles based on the information that you enter. Please select the most relevant title; details will be available on the next screen that will indicate whether or not CMRRA represents shares of the-song. If you cannot find a specific title, or if you don?t know the names of the composer(s), we suggest that you send in a licence application to CMRRA, providing as many details as possible about the song (eg. Title I composer] publis?her/ artist who performed the title). We will then be able to research the song and, if necessary, carry out verifications with our affiliated -.publishers. If ultimately we do not represent the song, we will refund the amount of the royalty payment to you. If you still wish to use a song that we do not represent, it is your responsibility to obtain a licence directly from the copyright owner. Which songs are represented by onlinedatabase contains more than two million songs and is an excellent source of information regarding compositions written and published by copyright owners located all over the world. While we do our best to ensure'that all information concerning those compositions is accurate and upsets?date, song and catalogue ownership can change hands frequently and, as a result, the information may need to-be verified with the publisherts) in question. it is also possible that the song you are looking for is not listed in our online database. This does not mean that the composition is not represented by CMRRA but it does indicate that we will have to verify its ownership with the pu?blis?her(s) concerned if that publisheris represented by CMRRA. The process of verifying song ownerships with our-publishers may take a few days to many months and'we cannot issue a license until this confirmation has been obtained. It may also happen on occasion that a copyright owner cannot be identified or located. If that?s the case with the composition you wish to use, CMRRA will refund the royalties to you after we have exhaustedall possible avenues of research. At that point, if you can demonstrate that all reasonable efforts to locate the copyright owner have been made, you may then submit your license application to the Copyright Board of Canada pursuant to Section 70.7 of the Copyright Act. if you make applications to CMRRA for any songs which are in the public domain, ornot represented your payment for those songs will "be refunded (excluding the associated handling fees). In order to avoid submitting license applications and making a payment of royalties and handling fees for songs not represented by CMRRA, we invite you to research Song Database and Affiliated Publisher list in advance. How do I locate the music publisher? There are, literally, tens of thousands of music publishers, ranging from multinational organizations to individual songwriters with very small catalogues. Finding a particular one can be timeoonsuming. Forthis reason, music publishers have formed larger bodies to centralize and standardize the process of licensing and collecting royalties. One such organization is CMRRA. CMRRA represents the majority of music publisl?iers doing business in Canada and can generally issue most-of the mechanical licences you?ll need for your product. You can perform a search of affiliated publishers here. in some cases, however, there may be songs (orportions of songs) that we do not represent. in those cases, it's your responsibility to obtain licences for the missing shares. There are a number of online resources available to locate copyright owners. The following organizations each have se?archable online databases that we have found to be helpful in this regard: What about the master recording? Every recording of a copyrighted composition actually-represents a blend of two copyrights: first, the copyright in the musical work its-elf which is represented by the music publisher, and second, the-recording of the musical work, which is usually owned by the record producer or record company involved. if you are the producer of the original sound recording, it Is likely you own the copyright in the master recording. However, if you plan to reproduce a master owned by another party, you must obtain the-permission of the owner of that recording, in addition to the necessary mechanical licences. Both copyrights must be properly licensed: the penalties for infringement of the master recordings are as serious as those for infringement of the song. How do I get-permission to use a master recording? CMRRA does not represent the owners of master recordings and cannot obtain licences for-you in this regard. For further information on master recordings please contact the following organizations: i? I want to sample a recording and use it in my song. Do i have to pay? Yes. in order to legally make use of songs and recordings you do not own or control, and which have been sampled in your recording, you must obtain the consent of the owners of the copyright in each of those songs, as well as the consent of the owners of each of the recordings you have used. We suggest you start by contacting the record company that released the recordinng) you wish to sample in order to obtain a 'master rights? ?license. Once you have obtained the master rights licence,'you must then obtain the music publisher's permission to sample the musical work. You may contact the publisher directly but providing a letter explaining your project and a copy of the master rights licence. Your letter should include: a) the title at the musical work b) a desorlption of the use, is. how long the sample is o) how many times it is used d) duration of the sample e) where it appears in your recording and which other songs are being used in your recording i) any other pertinent information Most music publishers and record companies are willing to license sample usage, but their terms and conditions can vary widely. Clearing samples can be a time?consuming process, so it is best to allow yourself ample time to cornijezae necessary licensing. lf permission is granted, you will then need to submit a mechanical licence application pursuant to CMRRA's method, including a copy of the publishers' authorization. i Do need to apply for a licence to record my own song? if you are the sole copyright owner of the musical work, and have not assigned your'rights to a music publisher or third party, you do not need to apply to CMRRA or a licence, nor pay mechanical royalties for the use of your own song. This is true even if you, as a copyright owner, are represented by CMRRA. Howeveradminister the 100% of the copyright in the song, you will need to obtain a licence for the share(s) you don't control. Can I change the lyrics toa song, or use the music alone and add my own words? While gran-t mechanical licenses for the reproduction of musical works cont-rolled by its publishers, the words and the melody used for your racerding must correspond to those of the original musical work. in other words, a license can only be granted for a new arrangement of a work "if no changes are brought to the fundamental structure, chords and/or?iyrics of the composition. With the exception of public domain works, any fundamental modifications made to a musical work must first be approved in writing by its published-3), and possibly its before CMRRA can grant a license for it. Please note that if a composition is owned by more than one publisher, all publishers must give their authorization before theadaptation can be recorded. Since any publisher can refuse to authorize an adaptation or translation, we recommend that you not record your version of the song before the appropriate rights are secured. The responsibility to secure these rights is that of the adaptor, translatoror eventual recipient of the license. in order to obtain these rights, you must contact the concerned publisheris) directly. Generally, a publisher will require the following information to approve an adaption/translation of its work: - The original title of the work used along with the name of Its authorsfcomposers; The new title given to the adaptation along with the names of the adaptors/translators; - The original lyrics of the work being arranged; The new or translated lyrics of the adaptation; - If the adaptation is in a language other than English, a eliteral English translation of the ilyrics. Once you have received the required approval-s from. the concerned publisheds), CMRRA will be happy to issue the mechanical license(s) on behalf of the publ-isheris) for your recording. Please note that a copy of the signed agreement between you and the concerned publisher(s) will need to be included in your license application. Use of an already existing adaptation or translation: if you wish to use an existing adaptation or'translatlon of a musical work, you must send an application for mac ical licenses to CMRRA following the procedures outlined in the Instructions for Mechanical Licensing Application! 535% form entitled Application for Meol?ranical Licensing, you must include both the title of the original work and the adapted work as well as the name of the authors and composers of the original work and the name of the adaptors and/or translators. if the adaptation is registered as authorized in our database, you will be granted a license. i?iowever. it may happen that the adaptation/translation you wish to use has never been properly authorized by the concerned parties. If this is the case, and you still wish to reproduce the arrangement. you will have to follow the steps outlined above under "Creation of an adaptation or translation of an original work." Crossborder Licensing l?rn pressing my CD in the US. but will distribute copies in Canada. Can CMRRA issue licences? Yes, Issues licences for the sale or other distribution of audio pron-lusts in Canada. it copies are pressed in the U.S. and some or all of the units are shipped to Canada. you will need to obtain a licence from CMRRA and pay royalties on those copies imported in Canada. For the licensing of small quantities, you will need to apply for a licence under CMRRA's "paywasyoupressrimport? plan, and you will need to supply-us-with a crossborder confirmation instead of a pressing order. i?m pressing my CD in Canada but don't reside inCanada. Can CMRRA- issue licences? To the extent the-copies manufactured in Canada will also be-sold or otherwise distributed in Canada, CMRRA can issue licences for your product. However; it you are manufacturing in Canada but exporting copies for distribution in the US or any other territority, will not be able to license the copies export-ed outside Canada. For the licensingci small quantities, you will need to apply for a licence under CMRRA's "pa-yas-youupressi?import" plan, and you will need to supply us with a confirmation instead of a pressing order. l'm pressing my CD in Canada but want to export copies to another country? Can CMR-RA issue licences? CMRRA can only issue licences for the copies that remain for sale or other distribution in Canada. You will need to seek licences forthe exported units from the licensing collective in the country of destination. Licensing i What is a licence? A "pay~as~you~press/import" licence is a type of mechanical licence issued by GM R-RA for licensees who only occasionally manufacture or import products in Canada or who do so in small quantities. Royalties for this type of licence must be paid in advance. along with the submission of the licence application, and is limited to the number of units manufacturedi?imported and paid for. Can I pay royalties quarterly based on my sales? 131 No. The pay~as~ycu~press system is specifically designed for licensees who occasionally manufacture or import products, or-do so in small quantities. It is not economical for CMRRA to process small amounts of royalties on a quarterly basis as products are sold. As such, we require that payment be made upfront to minimize the administrative work associated with quarterly accounting. Labels who are licensed under the Mechanical Licensing Agreement can report royalties to CMRRA on a quarterly basis as products are sold. However, they are also required to keep track of, and process, any change in the ownership of the musical works they have used in order to produce accurate royalty statements each quarter. This task in itself can be quite time consuming for them, and if not done properly, will lead to additional administrative costs and efforts to make the appropriate corrections. iFor most small licensees, this administrative burden is just not worth it, and the "pay?as?you? press" plan is the best-option to meet their licensing obligations. Also, note that our "pay-as?you-press" licences are only valid for the number of units manufactured and paid for. In the event you are manufacturing additional copies, you need to apply for new licences for those additional units. i? What if I apply for licence, but the song is not represented by If you have submitted a licence application and royalty payment for a song that CMRRA does not represent, we will issue a refund cheque to you once we have processed your application. Please note that CMRRA will only refund the royal-ties you have paid, and not the administration fee charged to process your application. a What is a pressing order? Why is it required? order is a document sent by you to the manufacturer that confirms the number of units of your product that will be pressed. CMRRA requires this documentation to ensure you are paying royalties on all copies manufactured. In the alternative, you can also submit your pressing invoice, which would serve the same purpose. Note that We cannot accept a quote in lieu of a pressing order. If you are manufacturing the product yourself, please submit a signed and dated written statement detailing the number of units manufactured. Can the manufacturer start pressing my product as soon as lsend my royalty payment to No. A licence must be issued to you before your product can be manufactured. The fact that you have sent GMRRA :a licence application and a royalty payment does not mean that we will be able to issue the licence you need for your project. .- The manufacturer tells me that it cannot press my product until I have my licences, and CMRRA tells me that it cannot issue licences without a pres-sing order. How does this work? The pressing order is a document you must submit to the manufacturer to place your order for a certain number of units. The manufacturer can (and should) put your order on hold until such time as your licence has been issued. We require - that you submit a copy of this pressing order along with your licence application and royalty payment. Once the licence has been issued, you'll be able to return to the manufacturer and get your order processed. i How long can the licensing process take? 132 Where the ownership of the song you have applied for has already been registered with CMRRA by the copyright owner, you can expect to receive your licence within a 3 to 6 week period. This is highly dependent on the volume of applications received by CMRRA at any given time, and seasonality. Spring and the period leading to Christmas are generally very busy times for us. We find that we If the ownership of the song has not been registered with CMRRA by the copyright owner, it could take many more weeks or months before we are able to issue the licence. While we will endeavour to identify the copyright owner(s) and seek the required copyright registration from him or her, we cannot guarantee that we will receive this documentation in a timely I fashion. The licence will be issued as soon as we've received the registration in the event we find out that the song or copyright owner is ultimately not represented by CMRRA, we will let you know and you will need to obtain your licence directly. a? What?s the methods of payment? Payment can be made to CMRRA by way of: i) cheque (where payment is made by cheque, your licence application will not be processed until yourchequeihas been cashed - usually one week from receipt). 2) certified cheque or 3) money order For the quickest service, pay by way of certified cheque or money order and provide us with the required copy of your pressing order/invoice at the same time. What?s your refund policy? refund policy will be applied based on the following two criteria: Where a licence has already been issued: Once your licence has been issued, cannot to refund or credit any royalties for the song in question in the event you decide to not use it. It :is very Important that you are certain of the songs you wish to use before the-licensing process is completed. Where a licence has not yet been Issued: if a licence has not been issued, and you have decided to not use the song in question, CMRRA will refund the royalty portion of yourrpayment for this song. Note that the Handling Fee will not be refunded to you. i obtained a licence for a previous pressing at my CD. Do I need a licence for subsequent pressings? Yes. The "payeeyou-press" licence issued to you by CMRRA is limited to the number of units you manufactured and paid for. if you intend to manufacture in excess of the number of units specified on your licence, you need to obtain a new licence. r? rnisplacediilost my licence, how can get another copy? 133 if you have misplaced or lost your licence, you can submit a request for a reprint by filling out the Mechanical License Reprinting Form. There is a fee of $20 per request, plus the applicable taxes (HST for provinces where it is applicable, otherwise GST only for provinces with no lv-lST). U.8. residents are exempt. Can send copies of my application/royalty payment/licences to my presser? No. it is the applicant's responsibility to retain copies of his or her application forms. royalty payment and licences for this purpose. CMRRA does not forward copies of licences or other documents to anyone but the applicant. I want to manufacture a small number of for a promotional giveaway or a charitable organization. Do I still have to pay royalties? Yes. CMRRA does not issue gratis licences on behalf of its music publisher clients. All reproductions of a musical work must be licensed, at the applicable royalty rate, no matter what purpose they will serve or the number of copies being pressed. I want to make a demo CD. Do i have to obtain licences and pay royalties? Yes. You must obtain licences for the musical works reproduced in your demo. You will be required to obtain licences using our "pay?asyou-press?" plan. Our licences will authorize you to manufacture up to the number of units you paid for, with a minimum of 500 units. i? How do i license a medley? Why are the individual songs in the medley licensed separately? The rnUSical works in a medley are equallyva?lued by the music publishers who own them and each one is individually licensed at the same royalty rate as non?medley works. We treat each one-as though they are separate and independent songs on your product. As such. we require a separate licence application for each song, with an indication that the song is used as part of a medley. When specifying the duration of the song, please indicate only the duration for that particular portion of the medley and not the duration of the entire medley. Can publishers demand a higher royalty rate than the standard rate outlined in documentation? Yes but very few of the publishers represented by CMRRA do. We'll let you know if your licence application is subject to a higher royalty rate once we?ve had the opportunity to review it. is Has the royalty rate changed since my initial pressing? The mechanical royalty rate has increased periodically since 1988. Please refer to the table below for information on the applicable royalty rate for a given year. The values below are stated in cents (SC) as the minimum rate for recordings with a running time of five minutes or less and thee dded rate per minute or partial minute of running time: June 22, 1988 to September 80th 1989 5.252125 1 3 October 1st 1989 to December 81, 1991 59/118 1992-98: 625/125 1994?95: 6.47/130 996-97: 6.7/1.84 199899: 7.1X1.4-2 200001: 7.4/1.48 2002-03: 7.7211 .54 2004-0 5: 8.5/1.70 200607: Kit/1.54- 200809: 8.1 /1 .62 201012: .66 Where a ?pay?as?you~press?license has been earlier issued to you at a lower rate, you will be obliged, as the rates increase from time to time, to pay the new, higher-rates should you need "to press further copies of your recording. i want to include a song on myproduct that was written more than 50 years ago. Is it in the public domain? Not necessarily. In Canada, a musical work will fall in the public domain starting on January 1st of the year following a fifty yearperlod after the death of the last surviving author. For instance, it the last surviving author died on say, July 15, 19-40, the work will enter the public domain on January 1, 19-91. So, the process is a matter of finding out when the author(s) died. Of-cour?se, if the author is still alive then the work is protected by copyright and needs to be licensed. Likewise, note that there are many copyrighted arrangements of public domain works that also need to be licensed when reproduced. If a song is in the public domain, and you're reproducing your own arrangement, you do not require a licence and you don?t need to pay royal-ties. SEARCH Search this 1 35 RECENT POSTS Get To Know Leri Ellie, CM Vice President of Opera-"lions Staff Announcement CMRRA and Celebrate 40 Years ef?uee?ieiem Congratulations Spanish Point jigglinologiewel Congratulations David Murphy! EEWE Home Music Users About CMRRA Need 51 Licence? Meet the Team Board of Direotore L?Ienedien Music l'?ubliehers Association CMR-RA-SODRAC lr'lC. (GSI) Music Publishers Our Services; A'l'filielion Agreement Civil-ERA Direct Payne?You?Prese Forrne for Lieenoe Applicants Licensee Logln Repertoire Repertoire. Search Our Song Af?liated Publishers Searoh News E'Jending List Class Act'inn News Settlement Magazine 1 Update My FAQ Music Mechanical licensing Onltne Licensing Synohmn?izatlon Licensing Contact Us Contact Info Work at CMRRA Like on Facebook Foiiow on Twitter Connect-on Linkedm SITE MAP PRIVACY POLICY copyright 2015 GMRRA 1 Website by Madfatter Inc. TERMS OF USE This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 26?? day of August, 2015 A Commissi?gr for taking Affidavits, etc. Maria Elizabeth Wakefield . a Commissioner, an, Province of Ontario, ior WeirFoulds Lu?, Barristers and Soiicitors. Expires October 24. 2016. 137 138 Chantal Saunders Borden Ladner Gervais LLP 613.369.4783 World Exchange Piazza osaunders@blg.com 100 Queen St. Suite 1300 Ottawa, ON, Canada K1P1J9 6132373160 6132303842 Borden Ladner Gervals rstewes@bf.com 613.787.3558 (IP) blgcom File No. OPN 296664 PRIVILEGED AND CONFIDENTIAL May 30, 2014 Delivered by Email Terry Perusini Mark Frey 5123 Bay?eld Crescent Cress Farm Burlington, Ontario Sharpes Lane L7L3J5 Bourne End Canada I?Iertfordshire HPIQRX UK Mr. Frey and Mr. Re: Sound Recordings in Canada Introduction We have been retained to provide you with an opinion with respect to four (4) questions related to the law on sound recordings in Canada. Speci?cally, we have been asked to provide an Opinion based on the following issues: (1) whether sound recordings published in Canada fall into the public domain in the calendar year following the 50?1 year after original publication; (2) that ?rst publication in Canada is not limited to sound recordings in Canada, and that ?publication? also includes legitimate sound recordings that are imported "for sale in Canada; (3) whether a corporation may seek to manufacture (but not sell) compact discs sound recordings) outside of Canada with the intent to import such products for sale within Canada; and (4) what, if any, copyright implications exist where an original release sound recording (ie in vinyl record format) is enhanced for release as a sound recording in compact disc format? We have not provided an opinion with respect to any particular sound recording, or with respect to whether any copyright that exists in a country other than Canada would be contravened by the manufacture of compact discs in that country. We have also not provided an opinion related to Lawyers 1 Patent a Trade-mark Agents EEG Borden Ladnar Barrels any other intellectual property rights that may exist or with respect to the payment of royalties or license fees to collective societies or other third parties. Brief Conclusions (1) Where a sound recording is published where copies are made available to the public) before the copyright cXpires, the copyright continues until the end of 50 years after the end of the calendar year in which the first publication of the sound recording occurs. It is important to note, however, that pursuant to subsection 23(l.1) of the Copyright Act (the the term of copyright in sound recordings will ?rst begin when fixation of the sound recording occurs.l If that sound recording is subsequently published (before the copyright resulting from fixation eXpires), the term of cepyright is essentially extended for another 50 years after the end of the calendar year in which the first publication of the sound recording occurs. As such, any determination as to the term of c0pyright in a sound recording must consider when, and if, publication of the sound recording has occurred. (2) The ?rst publication in Canada will not be limited to sound recordings manufactured in (and made available to the public in) Canada. ?Publication? of a sound recording will be established, even for sound recordings that are imported for sale in Canada, as long as the Publication requirement is met (described in more detail below under Section ?General Background: the Law on Sound Recordings?). As such, we do not believe that the term of copyright would begin simply upon importation of the sound recording into Canada as Opposed to the date of publication, as long as publication occurred in a Berne Convention country, a Rome Convention country, or a country that is a WTO member. (3) There is no reason from a copyright perspective that a corporation cannot manufacture (but not sell) sound recordings outside of Canada with the intent to import such products for sale within Canada. However, manufacturing outside of Canada and then importing into Canada for the purpose of selling or distributing a sound recording that is known to infringe any existing Canadian copyright will constitute copyright infringement. It should also be noted that cepyright will attach to any new sound recording (regardless of whether it is manufactured outside of, and then imported into, Canada) if the requirements for obtaining such copyright are met according to Canadian copyright law. in coming to this conclusion, we have not opined on or considered any foreign laws, such as whether foreign copyright would be contravened in the country of manufacture. (4-) There are copyright implications for original release sound recordings in vinyl record format) that are enhanced and fixed in compact disc format. The requirement for ?originality? under copyright law suggests that the skill and judgment required to successiully mechanically reproduce the enhanced sounds (is. the selection of the specific sounds to be included, the treatment given to them, such as the arrangement or ?ltering of static or other background noise) will arguably suf?ce to create an ?original? work under Canadian copyright law. Tl?iereibre, since fresh copyright likely exists in the ?enhanced? Section 230.1) states that copyright subsists until the end of50 years after the end of the calendar year in which the mitigation of the sound recording occurs. 2 EEG Borden Leaner Gsrrals sound recording, reproductions should, if and when possible, be made from the original release vinyl record format so as to minimize the potential for any infringement allegation if the cepyright in the ?enhanced? sound recording has not also expired. There is very limited case law interpreting the various provisions of the Act relating to sound recordings, particularly those provisions that are the subject of this opinion. As such, our opinion is based on the sections of the Act themselves, and commentary where available. Therefore, it may be necessary to reassess our opinion if the Court considers these sections in the future. Analysis A. General Background: the Law on Sound Recordings A ?sound recording? is de?ned by the Act as meaning ?a recording, ?xed in any material form, consisting of sounds, whether or not of a performance of a work, but excludes any soundtrack of a cinematographic work where it accompanies the cinematographic work.?2 ?Copyright? in relation to a work includes the sole right, in the case of a musical work, to make any sound recording (and to authorize such act) by means of which the work may be mechanically reproduced or performed.3 Section 18 of the Act sets out the rights associated with sound recordings. The maker4 of a sound recording has copyright in the sound recording, consisting of the sole right to do the following (and to authorize any of the following) in relation to the sound recording or any substantial pant thereof: - i. publish it for the first time (to. ?publication? includes making of copies of a sound recording available to the public, but not through the ?communication to the public by telecommunication?)5; ii. reproduce it in any material form; i. it out; iv. make it available to the public by telecomrnunication6 in a way that allows a member of the public to havo access to it from a place and at a time individually chosen by that 2 Copyright Act, 11.313. 1985, as am, 3. 2 [hereinafter the rear, 8. 4 A ?maker? is defined as the person by whom the arrangements necessary for the ?rst ?xation of the sounds are undertaken. A further de?nition ot? ?maker? is found at s. 2.11, which states that, ?For greater certainty, the arrangements referred to in paragraph of the definition ?maker? in section 2, as the term is used in section l9 and in the de?nition ?eligible maker? in section 79, include arrangements For entering into contracts with ?nancial arrangements and technical arrangements required for the ?rst fixation of the sounds for a sound recording.? 5 For further clari?cation of the right to ?communicate to the public by toleconununication?, see footnote 6, below. 6 ?Communication to the public by telccommunication? is known as the ?making available right?. This concept was introduced through the Copyright Modernization Act and proclaimed into force on November 7, 20i2 (see s. 2.40. its applicability and enforceability is currently before the Cepyright Board, and inevitably, the courts. It has 3 Borden Ladner Gervals member of the public and to communicate it to the public by telecommunication in that waythe form of a tangible object, to sell or otherwise transfer ownership of the tangible object, as long as that ownership has never previously been transferred in or outside Canada with the authorization of the owner of the copyright in the sound recording. Subsection 18(2) also provides ?conditions? for copyright in sound recordings. For the rights enumerated under section 18(1) to be available to the maker of a sound recording, namely the sole right to publish it for the ?rst time, reproduce it in any material form, or it out (and to authorize any such acts), one of the following factors must be satis?ed: (1) Citizenship requirements: the ?maker? of the sound recording was a Canadian citizen or permanent resident of Canada, or a citizen or permanent resident of a Berne Convention country, a Rome Convention country, or a country that is a WTO member, or had its headquarters in one of those countries, in the case of a corporation, at the date of the ?rst ?xation (the ?Citizenship requirement?); or (2) Publication requirement: the ?rst publication of the sound recording in such a quantity as to satisfy the reasonable demands of the public occurred in any country referred to above, in paragraph (1) (the ?Publication requiremen Subsection 18(2.1) provides further ?conditions? in relation to the rights conferred under subsection 18( 1.1), which constitute the sole right to make the sound recording available to the public by telecommunication and to ?rst sell or otherwise transfer ownership of the tangible object in or outside Canada. These conditions are virtually identical to the Citizenship requirement and Publication requirement outlined in subsection 18(2) and described above. Therefore, cOpyright will have attached to a sound recording if one of the Citizenship or Publication requirements is met. The maker would have the sole right to, among other things, reproduce the sound recording in any material form. been argued that the introduction of 2.40. 1) the ?making available right?) overrules the recent decision of the Supreme Court in 13le r. SOCAN in 2012, where it was held that a ?download? was not a ?communication to the public?. New proceedings have been undertaken by the Copyright Board to clarify the ?making available right? and a decision is forthcoming. While this is all being interpreted in the context of online musical works. it will have an impact on how the ?making available right? will be interpreted in the context o'fsound recordings, as well. 4 EEG Borden Latincr Gerrals B. Term of Protection You have asked us to consider Whether sound recordings published in Canada fall into the public domain in the calendar year following the 50?1 year after original publication. 5 0 Years-?oat First Fixation (if Unpublished) Section 23 of the Act, as recently amended by the Copyright Modernization Act, provides that copyright in a sound recording subsists until the end of 50 years after the end of the calendar year in which the ?rst ligation of the sound recording occurs. The date of ?xation must be determined factually. The act of ?xation refers to the commercial activity of settling the ?nal version of the record or sound recording, which is typically carried out by a record company.7 (ii) 50 Years?om First Publication (y'PubZished) However, if the sound recording is published where copies are made available to the public)8 before the copyright resulting from ?xation expires, the copyright continues until the end of 50 years after the end of the calendar year in which the ?rst publication of the sound recording occurs. This to section 23 applies whether the ?xation occurred before or after the coming into force of the amended section 23 (on Noyember 7, 2012). 7 David Vaver, Intellectual Property Law, 2d ed. (Toronto: Irwin Lawshould be noted that, under subsections 2.2(l.l) and 23(l.l) ot? the Act, the term ?publication? is defined as ?making copies of a sound recording available to the public?. Subsections 186000) and also contain reference to the concept of ??rst publication?. Under these subsections, however, ?rst publication of the sound recording is only achier when the sound recording is published ?in such a quantity as to satisfy the reasonable demands of the public?, which appears to be a higher threshold than the meaning oi"?publication? found elsewhere in the Act in relation to sound recordings. is our opinion that any apparent discrepancy can be reconciled, howsver, on the basis that the provisions under section 18 are with respect to the ?conditions? for obtaining copyright lt? fixation has occurred in a country other than those listed under section 18, or it" publication occurs in one of those countries, that the publication must be in such a quantity as to satisfy the reasonable demands of the public). in order to meet the threshold for ?publication? with respect to subsection 230.1), which corresponds to the ?term? oi" copyright in sound recordings, the sound recording must only be ?made available to the public? arguably a lower threshold as compared to the meaning ot??t?1rstpublication? under section 18. There has been no judicial consideration as to what constitutes the ?reasonable demands of the public?, and it is therefore a term that remains to he construed by the courts. We have conducted a search ot? relevant Hansel-d papers (Le. Parliamentary debates), evidence from Parliamentary committee meetings, white papers, and Regulatory impact Analysis Statements that discuss subsections 18(2)(b) and which provided no further clarity. Elth Borden tadner Gervais It is our opinion that the term of cepyright is the same for sound recordings made prior to the coming into force of the various amendments of the Act.9 As a result, it is our opinion that the above terms of protection apply in respect of sound recordings published fifty (50) years ago. C. ?Publication? of Sound Recordings You have asked us to confirm that ?rst ?publication? in Canada is not limited to sound recordings manufactured in Canada, and that ?publication? also includes legitimate sound recordings that are imported for sale in Canada. Note that our opinion is based on Canadian law only, and we are not able to opine on the potential applicability of foreign laws. In relation to sound recordings, the Act defines ?publication? to mean the making of copies of a sound recording available to the public (but does not include the performance in public, or the communication to the public by telecommunication of a sound recording). Subsections 18(2) and (2.1) of the Act outline the current ?conditions? for a maker of a sound recording to have cepyright in sound recordings. In view of these provisions, a sound recording attracts copyright protection if one of these conditions is met: First, its maker must have been a citizen or permanent resident of Canada or a citizen or permanent resident of a Borne Convention country, at Rome Convention country, or a country that is a WTO member when the record was first ?xed. Alternatively, if the maker is a corporation, the corporation?s headquarters must have been in Canada or a Borne/Rome Convention or WTO member country when the record was ?lm. Lastly, if neither of these conditions is met, the sound recording is protected if it was published in Canada or a Borne/Rome Convention or WTO member country in such a quantity as to satisfy reasonable public demand. 10 As a result of subsections 18(2) and (2.1), first ?publication? in Canada does not appear limited to sound recordings manu?zcmred in and made available to the public in Canada, but requires only that ?publication? occur in any of the countries referred to in the Act, namely Borne and Rome Convention countries, or WTO member countries. A sound recording that was previously published in a Borne/Rome Convention or WTO member country, and subsequently imported for sale into Canada, is recognized as being already ?published? under Canadian copyright law. A sound recording that is manufactured outside of Canada, but imported into Canada and first published in Canada, is considered ?published? when the sound recording is ?rst made publicly available, with the copyright owner?s authority. 9 These include amendments to the Act in i994 (8.0. 1993, c. 44, ss. 60), 1997 1997, c. 24, s. 8, 14, 55) and 2012 (R.S.C. 2012, c. 20, s. 17). '0 See discussion of?rcasonable demands of the public? at footnote 8, supra. ?t?G Borden Leaner Gerrals I). Importation of Sound Recordings into Canada for Sale in Canada We have also been asked to consider whether a corporation may seek to manufacture (but not sell) compact discs outside of Canada with the intent to import such products for sale within Canada. We have made the assumption that the question also relates to whether new copyright is created (in the new sound recording). Again, our opinion is based on Canadian law only, and does not consider the potential applicability of foreign laws. The "Maker Ufa Sound Recording The first copyright owner (Le. the ?maker?) in a sound recording is whoever undertook the arrangements necessary to ?rst ?x the sounds. Rights under subsection 1. 8(1) are available to maker of the sound recording who is a. citizen or permanent resident of Canada, or a Berne Convention country, a Rome Convention country or a country that is a WTO member, or, if a corporation, has its headquarters in one of the foregoing countries. Therefore, by virtue of the Act and Canada?s international obligations under the Act, a maker of a sound recording will be a valid copyright holder in that sound recording, even if it is manufactured outside of Canada. The Act only requires that the maker of the sound recording to be a Canadian citizen or permanent resident, or a citizen or permanent resident of one of the above-noted countries (or a corporation with its headquarters in one of those countries) at the date of ?rst fixation or publication. The Rights to Distribution, etc. Copyright in sound recordings includes the right to first distribution, reproduction and authorization of such rights, as well as rights over unauthorized distribution or importation of sound recordings. The right of ?rst distribution includes the power to decide whether to distribute the work at all and, if so, when. where, and in wharlform the distribution wit! occur. Note: in?ringcmentfor Importation Works It should also be noted that the Act speci?cally deals with infringement in the context of importation of sound recordings. According to section 27(2) of the Act, it is an infringement of copyright for any person to import into Canada for the purpose of selling or distributing (to the prejudice of the copyright owner) by way of trade a sound recording that the person knows or should have known infringes copyright or would infringe copyright if it had been made in Canada by the person who made it. While it is our understanding that you are not proposing to reproduce sound recordings that are still protected by copyright, it should nevertheless be recognized that the importation andror possession of known copyright-protected material could constitute an infringement of copyright. Cor/reinstate There does not appear to be any limitation in the Act that requires a sound recording to be manufactured in Canada, if it will ultimately be imported into and sold in Canada. On the contrary, where a sound recording is manufactured outside of Canada (Le. where it is first fixed or published in a Borne Convention country, a Rome Convention country or a country that is a WTO 7 Bordon tadner member), that sound recording will be the proper and lawful subject of copyright in Canada. Such a sound recording will entitle the ?maker? to all of the rights enumerated at subsections i8'(l) and (Li) of the Act, which include the ability to publish, reproduce, make available to the public by telecommunication, sell, and to authorize such acts. 'l?herefore, under Canadian copyright law, it is our opinion that a corporation may seek to manufacture (but not sell) sound recordings outside Canada, with the intent to import such products for sale within Canada, as long as the corporation had its headquarters in one of the above-noted countries at the date of ?xation or first publication, and obtain Canadian copyright in the sound recording, assuming the other criteria for copyright are met, such as originality. This is based only on the opinion that there is nothing from a Canadian copyright perspective (apart from the application of the Citizenship or Publication requirements noted above under Section preventing a corporation from manufacturing sound recordings outside Canada, with the intent to import such products for sale within Canada. Seeking to manufacture sound recordings outside of Canada, however, will not avoid any potential copyright infringement of existing Canadian copyright, if the sound recording is to be ultimately imported for sale in Canada. 1' Similarly, if the concern is whether or not new copyright is created in the sound recordings that are generated by you, where the sound recording is manufactured is immaterial to the acquisition of enforceable copyright, subject only to the requirement that it is manufactured. in a Berne Convention country, a Rome Convention country, or in a country that is a WTO member. E. Enhancing an Original Release Sound Recording Lastly, we have been asked to consider what, if any, copyright implications exist where an original release sound recording a sound recording in vinyl record format) is enhanced for release as a sound recording in compact disc format. Therefore, we have prepared our review based on the situation where the choice is between reproducing music from either: a. an original release vinyl record, or b. an enhanced compact disc format of the original release vinyl record. Originating) Originality is an important requirement of copyright law. The Act provides that copyright shall subsist in every ?original? literary, dramatic, musical and artistic work (subject to certain requirements relating to citizenship or residency). The Supreme Court has held that for a work to be ?original? within the meaning of the Act, it must be more than a mere copy of another work. At the same time, it need not be creative, in the sense of being noVel or unique. What is required to attract copyright protection is the exercise of skill and judgment. Skill requires the use of one?s knowledge, developed aptitude or practiced See discussion in respect ofs. 27(2), above. Borden Latlner Gervals ability in producing the work. Judgment requires the use of one?s capacity for discernment or ability to form an opinion or evaluation by comparing different possible options in producing the work. The exercise of skill and judgment, however, must not be so trivial that it could be characterizad as a purely mechanical exercise. ?2 A work which is substantially derived from pro-existing material will be the proper subjectmmatter of copyright if suf?cient labour and skill have been invosted. It has been suggested that, for works such as sound recordings, the requirement for originality will be satis?ed by the ?expression? (is. ?xation) of the sounds contained in such works. While there is no case law on this point, it has been submitted by commentators that the requirement for ?originality? could be capable of being satisfied by the skill and judgment required to successfully mechanically reproduce the sounds in issue. Furthermore, the selection of the speci?c sounds to be included, and the treatment given to them the an?angement or ?ltering of static or other background noise) could also suf?ce to be considered ?origina under copyright law. '3 We share this view. Conclusion Therefore, while not a settled legal principle, it can be reasoned that fresh copyright would subsist in an enhanced sound recording (in compact disc format) that has been derived from an original release vinyl record. On this basis, it would be our recommendation, so as'to avoid any potential claim for infringement of copyright, to reproduce music from the original release vinyl record where possible, rather than the enhanced version in compact disc format. This view assumes that copyright in the sound recording for the original release vinyl record. is expired, but not for the enhanced compact disc version. Conclusions In view of the above, we make the ?l'bllowing comments and recommendations: i. Consider carefully the copyright term (and corresponding expiry of such copyright) attached to the sound recording that is to be reproduced. For sound recordings that have already been published before the expiry of copyright (either in Canada or one of the treaty countries listed at section 18 of the Act), the copyright does not expire until the end of 50 years after the end of the calendar year in which the first publication of the sound recording occurred. ?3 See Canadian Ltd. v. La-nnS'ociery of Upper Canada, [2004] I S.C.R. 339, 2004 .SCC i3. '3 See, For John S. McKeown, Fox on Canadian Law of Copyright and Industrial Designs, ed. (Toronto: Thomson Reuters, 2012) at 1449. 9 Bordon Ladner Gcrrals Manufacture, Importation and Publication ot?Sound Recordings. ?Publication? occurs when cepies of a sound recording are made available to the public. The Act does not appear to contain any limitations on where a sound recording is manufactured, per so. However, the conditions for copyright in a sound recording require the ?maker? (at the date of ?xation) to be a Canadian citizen or permanent resident, or a citizen/permanent resident of a Berne Convention country, a Rome Convention country or a country that is a WTO member, or, if a corporation, has its headquarters in one of the foregoing countries. Where the sound recording is published, the Act requires the first publication to how: occurred in one of the above-noted countries. As noted above, copyright in sound recordings includes the right to ?rst distribution, reproduction and authorization of such rights, as well as rights over unauthorized distribution or importation of sound recordings. Therefore, the right of first distribution includes the power to decide whether to distribute the work at all and, it? so, when, where. and in urhot?irm the distribution wilt occur. Seeking to manufacture sound recordings outside of Canada will not avoid any potential copyright infringement of existing Canadian copyright, if the sound recording is to be ultimately imported for sale in Canada.M Similarly, if the concern is whether or not new copyright is created in the sound recordings that are generated by you, where the sound recording is manufactured is immaterial to the acquisition of enforceable copyright, subject only to the requirement that it is manufactured in a Berne Convention country, a Rome Convention country, or in a country that is a WTO member. However, first ?publication? is not limited to sound recordings in and made available to the public in Canada; ?publication? will be achieved by importing a sound recording for sale in Canada, and then making it available to the public for the ?rst time in Canada. In accordance with the Act and Canada?s international obligations under the Act, it is our opinion that a corporation may seek to manufacture compact discs (reproduced from copyrightuexpired sound recordings) outside of Canada with the intent to import and make available such products for sale within Canada. Reproductions should be taken from original release vinyl records, not from enhanced compact disc versions of the same work, it? the copyright has not expired in the ?cnhancet sound recording. This is based on our view that fresh copyright liker subsists in an enhanced sound recording (in compact disc format) derived from an original release vinyl record, as the requirements for originality (and thus copyright protection) can likely be made out. See discussion Act under Section above, 10 Borden Ladner Garvals Please let us know if you would like to discuss any of the above, or if you have any further questions. Yours very truly, Borden Ladner Gervais LLP manta! Saunders Partner Steeves Ass ciate 1] This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 26?? day of August, 2015 A Commissioner for taking Affidavits, etc. Marie Eilzaheth Wake?eld. a Commissioner, om, Province of Ontario. for Weir-Forums up, Barristers and Solicitors. Expires October 24, 2016. 149 150 "mamwm?? om Munch oow.nn "muwuumwo Hmuph D?1?~N??tt oo.oom~o? muoatm oom~m mwoq ma mum H*mmu Homuwm ao-mom.v coma-m mama-m omm.? mmamoom mmacmm woomom 8-306 886 886 gin ham Bum ?ow 3.3% oo-oom~m coco.m oao.m mg 9H wuaomm no-onm.oa mono-m oouo.m oomum . an ma mpom Homeom mm? UMHMH :r . null: tun- 1 undo ?moo ?n Fume Ewan? 33mm ugh hug v.33 nonugmum?hm gnaw mma tr Tillrl 1.. duke? gunman nun uanm Wine? .3 5pm.? "Ewan mnmso?om on? 3% $qu "numnH "Human nunmnm nm??mm "Eda uum HEP "manun uum unmannmu mu we mnou mHmme u?om "Hmh Hm?mwa mo mauamUHm mum mu zuawmuqmwm un?mn mama om Hwom xam -o.m um nzummunm mwomummHm om mmhab m?omummym i!ivi unua..0.H ?g +?i~mmnmo mm?mumbm ..?mammu ":?mnm mmumMnm mm\mox? mamhwm 151 Affidavit of This IS 5 referred to In the Terry Perusini sworn before me this 26th day of August, 2015 A Commis?ogmer for taking Affidavits, etc. Marie Elizabeth Wakefield. a Commissloner, aim, Province of Ontario, for WeirFoulds w. Barristers and Solicitors. 5mm October 24. 2016. 152 From: Ken Kozoy Soot: November~20~14 2:47 PM To: Tom! Poruslnl Subject: Fwd: The Beatles Universal is asking about the Beatles product. For our discussion them are no issues col-root? Forwarded message From: Grooves, Brian Date: Thu, Nov 20, 2014 211:2:24 PM Subject: The Boatloo To: "Ken Kozoy 1"on Ken, I forgot to ask you this on the you have any information about the now Boa?tlos public domain product you?ve been I asked Trish about it but understandably she did not answer don?t want to be out oi?lino, but could I ask you who is soiling it? It has obviously raised maj or concerns over here 153 This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 A Commissi/ogr for taking Affidavits, eto.. Maris Eliza beih Wakefield. a Commissioner, eta, Province of Ontario, for WeirFoulds Barristers and Solicitors. Expires October 24. 2016. 1321*?an - goof: View Item Onlino lmpo?ant Notloo Plooso Print this page before you olose lt. ?11m: Loam more about Vlewlno Items Onllne i If you have a question or a concern about this Item ploaso send us a secure message by clickan on Investigate this Item below. We will respond within 24 hours. lf your Inquiry Is urgent, please contact us at ?t 800 769?2555. linuootlg ate This. litolnil mm omnonovoa an INMENTINO. motto? too warm om 01082016 II a PM Thousand Haven Hundred Nlnow-Nlne and 101100 5 ?13399.10 'i To me Ema? E?fg??em Shout West 7 I @532 I3 rm 2 m. MEMO PoyAsWuPtm vacuums! I30?2?2w?03l3 mommamgo Back ltom Dotails {mum ?n lined? Lut- on 0V ouT 1 ATM. 1l10I11: This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 A Commie)ng for "taking Affidavits, etc. Mari? Efimbeth Wakefield, a Commissioner, etc? Prat-.5236 of Ontario, for WeirFoulds up. Barristers and Solicitors. Expires Gotcha: 24. 2016. 155 Wal~Mart T010 10 week ending February 8, 2015 156 . . . Ralwe Total Total 81011 Artist Title Curr Prev Lifetime Vendor a 6 Week Week 5 a, I 1 10121238 131114.118 LOVE ML DO 02/03/2015 1,488 0 1,488 ENTERTAINMENT 10411101132015 GRAMMY 011/101 MUSIC 2 1.0121086 ARTISTS - NOMWEES 01/20/2015 1,435 1,095 4,032 ENTERTAINM HITS 011 THE . . 7' PLAY 241.7 CANADA 3 10100812 808 09/24/2013 1,109 1,314 22,791 INC. 4 10104938 1001.1 06/30/20141,083 1384118301 SWIFT r" I .5 [10108696 TAYLOR 1989 10/27/2014 927 814 32,415 UNIVERSALMUSIC 1 SONOMA CASH JOHNNY CASH I d. .. - 0 10058203 JOHNNY (20D) 08/31/2010 873 999 11,983 . ?1191111113 A . 1, I 7 10104524 SAM LONELYHOUR 00/17/2014 8/3 863 32,670 UNIVERSALMUSIC 81310131114111 . . WARNER MUSIC 00 8 10104717 ED 06/23/2014 817 828 13,608 CANADA KRALL I 9 10108810 DIANA WALLFLOWR 02/03/2015[ 771 0 771 UNIVERSAL M0810 1118-1141014 "k - I SONY 131/10 MUSIC 10 10121084 MEGHAN 11110 01/13/2015p10 747 3,138 ENTERTAWM This is Exhibit referred to in the Af?davit of Terry Perusini sworn before me this 26 day of August, 2015 A Commissioner for taking Affidavits, etc. Maria Elizabeth Wake?eld. a Commissioner; an. Province of Ontario, for WeirFOulds up. Barristers and Solicitors. Expires October 24, 2016. 157 158 Terry Perusini From: Jennifer Sent: January~26-15 9:41 AM To: Terry Peruainl Subject: FW: THE ROLLING STONES LITTLE RED ROOSTER Subject: THE ROLLING STONES LITTLE RED ROOSTER To: Jnlersma@hotmali.com CC: NLeyesoue@cmrra.ca; acolemant?ci?nbkcocom From: yw?yytes?bwgicmrraca Date: Thu, 22 Jan 2015 11:29:04 ~?0500 Dear Ms. Holt. a it has come to my attention that Star Grove Entertainment has recently made 2? applications to CMRRA to obtain licenses for the reproduction of musical works on an album called "Little Red Rooster". Please be advised that ABKCO Music '81 Records, inc. is the worldwide 100% copyright owners of the following compositions on this release: "Heart of Stone? (Jagger/Richards) "What A Shame? (Jagger/Richards) "Good Times Bad Times? {Jagger/Richards) a ?its All Over Now? (Womack/Womack) "Grown Up Wrong? (Jagger/Richards] ABKCO has instructed CMRRA not to issue any licenses for the reproduction :w of these works by Star Grove. As ABKCO's licensing agent, CMRRA must act pursuant to their instructions. As such, CMRRA will not be issuing any licenses to Star Grove for the reproduction of'these works on "Little Red Rooster". I understand that your license application process is already underWay through our "PayuAsYowPress" department, and that a cheque has been sent to us. This application has not yet been processed by us. CMRRA will a continue to process your license applications for the other musical works for which licenses are being sought, and ap ply your cheque to those licenses only. Any excess funds will be returned to you. Please advise as to whether you would still like us to issue licenses for the remaining songs on "Little Red Rooster", with the understanding that you would have to remove the abouenoted ABKCO owned songs from that album. :a Thank you, Veronica Syrtash V.P., Legal and Business Affairs a? CMRRA (Canadian Musical Reproduction Rights Agency Ltd.) 320 - 56 Wellesley Street West, Toronto, ON M55 253 Phone: 416?926?1966. ext. 281 I Fax: 416~926~7521 Email: 3? 159 160 This is Exhibit referred to in the AfiLdavit of Terry Perusini sworn before me this 26 day of August, 2015 A Commiss?pgr for taking Affidavits, etc. Maria Elizabeth Wakefield. a Commissioner. eta, Province of Ontario. for WeirFoulds up, Barristers and Solicitors. Expires October 24. 2016. 161 Terry F?erueini From: Ken Kozey sken.kozey@amerehca.eom> Sent: January~24-15 12:50 PM To: Terry Peruslnl Subject: Fwd: FW: ANDERSON THE ROLLING STONES - LITTLE RED ROOSTER WALMART STAR GROVE ENTERTAINMENT Terry, let me know how we should respond to this. Ken Forwarded message From: Ned Talmey Date: Sat, an 24, 2015 at 12:06 AM Subject: Re: FW: ANDERSON THE ROLLING STONES RED ROOSTER WALMART STAR GROVE ENTERTAINMENT To: Alisa Coleman Ken Kozey Ce: "Nikesthusara?lwalmart.com" Ken please look into this situation. ?rst thing Monday and respond/notify all parties herein what action has "been taken. Ned On Friday, January 23, 2015, Alisa Coleman wrote: Dear Ned: We hate: been advised that Anderson has distributed the above mentioned product by Star Grove Entertainment to Wahnart for aide as is currently found in this link: rooster/6000191253796 Please note that Star Grove does not have valid mechanical licenses for the use of our compositions and as such any sale of this product is an infringement of our valuable copyrights. Attached is an email from Veronica Syrtash, V.P., Legal and Business Affairs advising Star Grove that they do not have mechanical licenses for 5 compositions on this release. We would appreciate Anderson?s removal of this product ?'om its catalog and its noti?cation to Walmart to remove this product from the marketplace and online, before we have to take any additional legal steps to protect our rights. Please confirm that you will act accordingly by return e-rnail. 1 Best regards, Alisa Coleman Senior Executive Vice President ABKCO Music Records, Inc. 85 Fifth Avenue M??i??em a Ei?i??mm plessemte that my new email address is: gedialmey?lemerchee.corn .131. (Ned) Talmey Senior Vice President/GM Andersen Merchandisers Canada 1110' 60 Leek Cree. Rich-1110116 Hill Ontario L413 11-1] 905 ?763 1999 ext {123 wu- Ken .Kozey AW Purchasing Anderson Merehendis ers 60 Leek Crescent Richmond Hill, 0n L413 11?11 9054763? 1.999 X423 NEW EMAIL - Immkezey??smerchameem 162 1O 163 This is Exhibit "10? referred to in the Affidavit of Terry Perusini sworn before me this 26?"1 day of August, 2015 A Commissioner for taking Affidavits, etc. Marie Elizabeth Wake?eld. a Commissioner. ate, Province of Ontario, for WeirFouIds up, Barristers and Solicitors. Expires October 24. 2016. 164 Terry Perueini From: Jennifer@atargrove.ca Sent: February-0M 5 4:34 PM To: Terry Perueini Subject: Fwd: Stergrove Entertainment i Love me Do and Can't buy me love (STRODUZ) Hello Nathalie: Then]: you for letting me know about the Casablanca tracks. Do you lolow why Casablanca has instructed CMRRA to not lscue licenses to Stargrovo for theec tracks? Please continue to procese the licensee for all the remaining tracks on Our original cheque has been cashed and we applied for these licenses a month ago. Do you happen to know when we can expect to receive all the mechanical licenses? Thank you, Jemilfer Holt Stargrove Entertainment Begin forwarded message: From: Nathalie Levesque Date: February 4, 2015 at 3:38:53 PM EST To: - Cc: Veronica Syrtash cot: Stargrove Entertainment Low me Do and Can't buy me love Me. Holt, Stargrove Entertainment has recently made applications to CMRRA to obtain licences for the reproduction of musical works on the following two albums: Love me do by The Beatles ??Can't buy me love by The Beatles Please be advised that Casablanca Media Publishing (?Caeablenca?) represents the following compositions on these I Saw Her Standing There From Me To You (STRODOQ) Wanna Be Your Man Casablanca has instructed GMRRA not to issue any licences for the reproduction of these works by 'Stargrove. As C-asabiancate licensing agent, CMRRA must act pursuant to their instructions. As such, CMRRA will not be teeming any licences to St-argrove for-the reproduction of these works on ?Love me do' by The Beatles and 'Can't buy me lova?by The Beatles. 165 Please advise as to whether you wouid Eli?. like us to Issue licences for the remaining songs on ?Lovo me do' and 'Gan't buy mo love', with the understanding that you would have to remove the abovomotod Casablanca owned songs from those albums. We look forward to hearing from you. Nathalie Lovesquo I Assistant Manager - Assistanto la Direction, Independent Licensing Royalties CMRRA (Canadian Musicai Reproduction Rights Agency) 320 56 Wellesioy Street West? Toronto, ON M55 283 Phone: 4151-9264966 ext. 251 Fax: 416-926-7521 I Email: 11 This is Exhibit "11? referred to in the Af?davit of Terry Pe'rusini sworn before me this 26 day of August, 2015 A Commissie?r for taking Affidavits, etc. Maria Elizabeth Wakefield. a Commissioner, em, Province of Ontario, for WeirFouids up, Barristers and Solicitors. Expires October 24. 2016. 166 ?Terry Perueini 167 From: Jennifer@etargroye.oa Sent: February~11u15 1:51 PM To: Terry Peruelni Subject: Fwd: Stargrove Mechanical Licensee Sent from my iPhono Begin folwarded message: From: Caroline Rioux ag?gni?bomrreew Date: Fobmery 11, 2015 at 1:36:23 PM EST To: "Jonr?for-Holt" Ce: "Nathalie Levesque? , ?Veronica Syrtash'" Subject: Re: S-targrove Mechanical Licenses Dear Jennifer, Given the concerns that you ralee in your email, we it Is best that CMRRA not be Involved In this situation any further. We will be returning all paymente submitted by you already, and will not be processing any applications from you. i suggest that you contact-the publishers directly with any oneetione you may have, or seek to obtain licenses from them directly. Alternatively, we can facilitate the issuance of licences once you have renewed authorization from the publishers in question and if they agree to such an arrangement. i'm sorry that we cannot be of further assistance at this time. Best regards, Caroline Rloux President: CMRRA Canadian Mualcai Reproduction Rights Agency Ltcl. Agence canotiienne (J85 droite do reproduction muslcoux it?e. 320 - S?'Wetieeley Street West, 'l?oronto, ON 1:125:2- 25?13 Phone: 4-16v926-1966. ext. 234 (Joli: 416445143921 I Email: From: "Jennlter Holt" {Welargrmoio To: ?Caroline Rtoux?" a Lea? Co: ?Nathalie Layesque'" who yeeguegocmrra ,oab. I"Veronica Syriaeh'" ?ew ehgqfignmuayey Date: 02!10i2015 11:11 AM Subject: Stargrovo Mechanical Dear Caroline, Thank you for speaking with me yesterday. ihave spoken with head office In the UK. They are as confused as you and Libut are becoming concerned that: there is some sort of commercial pressure being introduced here. You expressed how surprised you were at the refusals, the UK tell me that many of the copyrights concerned are 1 . 1r- 168 already in the Canadian market" prohabiyllcensed by CMRRA. It Is the belief that record label Influence has been pushed on the publishing arms and refusal therefore given. This raises many questions about unfair trading and competition laws, This is outside of my area of expertise and the UK will probably be taking over the enquiry. What they do wish to know Is precisely which publishers have refused rights. As i understand it, we have refusals from ABKCO and Casablanca. You indicated that has also refused and you were contacting Universal to inquire their status. Could you please confirm the above to me and please let me know the status of all of the Stargrove applicationst That includes the Beatles and Rolling Stones titles, the Beach Boys and Bob Dylan. Thank you, Jennifer Holt Stargret/e Entertainment 12 This is Exhibit referred to in the Af?davit of Terry Perueini sworn before me this 26 day of August, 2015 A Commissigng for taking Affidavits, etc. Maria Elizabeth Wake?eld, a Com mission er, etc, Province of Ontario, for Weii'Foulds up, Barristers and Solicitors. Expires October 24, 2016. 169 1 70 Terry Perueinl Subject: FW: Stergroye Mechanical Licenses From: Jennifer Holt Sent: February 13, 2015 10:59 AM To: 'Carollne Rioux? Cc: 'Nathalle Levesque,- ?Veronica Syrtash' Subject: RE: Stargrove Mechanical Licenses Dear Caroline, I understand what you say and appreciate you are caught somewhat In the middle. I am leaving matters up to the UK to see how they are going to proceed on these copyrights. An unfortunate consequence of this is that I need to licence a large number ofwhat I would call ?regular? titles which include ?non-controvorsial? tracks that have been widely marketed by ?low price' labels for many, many years. Ibelieye you are familiar with Madacy, St. Clair, etc. We have a number of these type- of compilations to release. Can I look to you for a normal mechanical licence? I do not think the pay to press arrangement will work for either ofus. I reviewed your web site and we will not be manufacturing In small quantities or releasing on a one shot limited basis. We will be manufacturing catalogue titles on a continuing basis. With that I mind we would like to enter into The Mechanical Licensing Agreement as noted on your web site.- I hope that the issues on the Beatles and Rolling stones cepyrights do not further have the effect of stalling of our business. I do know our parent company has our law firm In Ottawa dealing with Issues surrounding those tiles. When it Is sorted with the publishers and we have authorization we will then return to facilitate the Issuance of those licenses as you note in your email. Thank you, Jennifer Holt Stargroye Entertainment 13 This is Exhibit "13" referred to in the A?Ldavit of Terry Perusini sworn before me this .261 day of August, 2015 A Commissi?r?r for taking Affidavits, etc. Maria Elizabeth Wakefield, a Commissioner, eta, Province of Ontario. for WeirFoulds LLP, Barristers and Solicitors. Expires October 24. 2016. 171 112 rewrite tummy ?mitten 56 Wellesley Street West, Sulte 320, Toronto, Ontarlo Canada M55 233 Phone: (416) 92-6-1966 Fax: (415) 9267521 emall: nlevesque@cmrra.ce Web Site: Nathalie L-?vesqu?f?xt. 251 Assistant Manager Toronto, February 25. 2015 Jennifer Holt Stargrove Entertainment 1 Janet Street Brantford, ON N3R 364 Subject: Refund cheque I Star-grove Entertainment Dear Jennifer, As mentioned In our email of February 11, 2015, please find enclosed your refund cheque for all payments you Submitted to For further information, please do not hesitate to contact us. All the best; (new. End. GST Registration Number Canadian Musical Reproduction nghta NO. 02041533 Agency lelted I TO: STARGROVE ENTERTAINMENT 023 56'? RE: RETURN FROM QUARTER 1/2035 FROM: CANADIAN MUSICAL RIGHTS AGENCY GROSS 13799.10 . TOTAL HST OF 3.587.511 nanmnunmcm? NET 137199?3351! Bginl?otfgaqada {h NEIQ Canadian Musical Tom?to'omarm '0 Raproduotlon Rights Agency Limited 53 Walla fey 31; w. 316 320 Toronto. Onlarlb M58 233 - $Mw13?799.10 pm? HUNDRED 99 DOLLARS 8.: 10 CENTS can DOLLARS TO THE ORDER ENTERTAINMENT 35"" . OF cmv?m?H?W.? AUTHORIZED x. 14 This is Exhibit "14? referred to in the Affidavit of Terry Perusini sworn before me this 261h day of August, 2015 men/W A Commissi?-mgr for taking Affidavits, etc. Marie Elizabeth Wake?eld. a Commissioner, Province of Ontario, for WeirFouIds up, Barrislers and Solicitors. Expires October 24, 2016. 174 175 ?Terry Perueini From: Patricia MoAfpine Sent: February-1MB 3:22 PM To: Terry Peruelnl Co: Petrlole MoAIpine Subject: Beatles review on WMGA ?l?erry 1313 go onto and look at the reviews on film Beetles $5 CD is the sound quality that bad? Ringo Star has sent comments. None of them are good. I've got emails oomi?g in ?oor Neilson Sou11clsoan,UNImusie, our CEO, etc. P13 be prepared to speak to this tomorrow morning when you are here Tris-11 MoAlpine Anderson Merchandisers Canada 15 This is Exhibit ?15? referred to in the Af?davit of Terry Perusini sworn before me this 26 day of.August, ?2015 V/?f?v A Commissioner for taking Affidavits, etc. Marie Elizabeth-Wakefield, a commissioner. are" Province of Ontario. for WeirFoulds up, Barristers and Solicitors. Expires October 24. 2016. 176 LOVE ME DO thlgoStaL-r R'mgoSterr Toronto, ON, Canada Reviews 5 Votes 20 at: Top 500 Contributor Age 35 44- I~Iow loug have you owned this product? 5 - 6 months Gender Male How often do you use this product? Onoo a Week Top 500 Contributor ?referrer 7% it? were out ol?S stars. Ringo Starr - 2 days ago DONOT-BLNIIHH Awful quality, was recorded from an LP. Save your Jz? No, '1 do not this product. 5 people found this review helpful. 0 people did not ?nd this review helpful. Holpl? I "Yes 5 5 people found this review helpful. Cl-lok'lo agree. No 0 0 people did not ?nd this review helpful. Click to agree. Report Holl??eezesover Hell?'eezeoover Montreal, QC, Canada Review 1 Votes 2 Age 45 54 How long have you owned this product? 2 ?7 weeks Gender Female 177 . 178 How often do you use this product? Never ewe-ewe 1 Out ofS stare. He] l?'eezeeover 20 hours ago Do nol waste your money! Audio is horrible! Wouldn?t want it even It was free! No, I do not this product. 2 people found this review helpful. 0 people did not ?nd this review help?d. Helpful? Yes - 2 2 people found this review helpful. Click to agree. No 0 people did not ?nd this review helpful. Click to agree. Report 6 et-rlaltdelele et-rlaltdelete Review 1 Votes 2 ?il'??wlwk drirv'??l' 1 out ofS stars. olrlaltclelete 20 hours ago Poor Quality Very poor audio quality. Not the real thing. Don't buy this version! 2 people found this review helpful. 0 people did not find this review helpful. Helpful? Yes - 2 2 people found this review helpful. Click to agree. No - 0 people did not ?nd this review helpful. Click to agree. Report (31 .FMerous .lMeu'eus 179 Toronto, on Review 1 Votes 2 Age 35 44 How long have you owned this product? 1 week or less Gender Male How often do you use this product? Never blril'wl?lf?ilr 1 out ofS stars. JMaroue 191101113 ago 13ml Sound Quality With all of the amazing remasterng that has happened to the Beatles catalogue (War the loot few years, it is shocking that anyone would pick this up, as it sounds so bad save your moueyl No, Iclo not recommend this product. 2 people found this review helpful. 0 people clicl not ?nd this review 11e1p?11. Helpful? Yes I 2 2 people found this review helpful. Cllok to agree. No 0 people did not ?nd this review helpful. Click to agree. Report SthBeatle 5tl1Beatle Canada Reviews 3 Votes 4 Age 25 34 How long have you owned 11113 product? 1 Week or less Gender Male How often do you use this product? Never 1 out ofS stare. - 18 hours ago Horrible Quality Reeoulinge! Do No! Buy! I have seen a few ofthese weird versions of The Beatles lately. Buyer beware! They are not the original recordings and definitely of inferior quality. it No, I do not recommend this product. 2 people found this review helpful. 0 people did not find this review helpful. Help?ll? Yes - 2 2 people found this review helpful. Click to agree. No at) 0 people did not ?nd this review helpful. Click to agree. Report 9 SunuyB SurmyB Toronto, ON, Cousda Reviews 4 Votes 3 Age 35 44 How long have you owned this product? 1 week or less Gender Female How often do you use this product? Not/or stumble 3h? 1 out ofS stars. SuunyB - 20 hours ago Absolutely terrible! Suhpar quality. Save your $5 and put it towards REAL Beatles t?ecordings. No, I do not this product. 1 person found this review helpful. 0 people did not find this review help?ll. Helpful? 2 1 person found this review helpful. Click to agree. No - 0 0 people did not ?nd this review helpful. Cliok to agree. Reported You have successfully reported this content as inappropriate. Your vote was successful. The number of positive helpfulness votes is new 2. . .. 6? PMoCarlnoy PMch?lnoy London, United Kingdom Roviow 1 Votes 0 Age 35 - 44 How long have you owned this product? 1 week or loss Gender Male How often do you use this product? Every clay 74:" ?lr?ilf?ilm?r??r 5 out off? stars. PM oCartnoy 10 hours ago Wow? Now this is gran! vnluoll Finally a Beatles ocl in Wal-Mart that ?ts the Wal~Mart pricing strategy. Yes, lreoonmlend this product. 0 people found this review helpful. 0 people did not ?nd this review helpful. Helpful? Yes 0 0 people found this review holp?ll. Click to agree. No - 0 0 people did not ?nd this roviow helpful. Click to agreo. Report 181 . more our roe more Foam mom mum-m - mm Gm?gzla) WWII Mu. moon: our Wyn-emu:- i RIngoStarr RingoStarr Toronto, ON, Canada Review 5 Votes 20 rI-?op 500 Contributor Age 35 44 How long l1aVeyou owned thie product? 5 6 months Gender Male How often do you use this product? Once a week Top 500 rrdr?ilr?il?lr 1 out of5 stars. RingoStar?r - 2 days ago BUY Terrible qualib? This was recorded from an LP, very poor sound quality. No, I do not recommend This product. '7 people found this review helpful. 0 people did not ?nd this review helpful. Helpful? Yes - "f ?7 people found this review helpful. Click to agree. No - 0 0 people did not ?nd this review helpful. Click 10 agree. Report 5; 182 I--la1'risonLover HarrlsonLover Toronto, ON, Canada Review 1 Votes 4 Age 18 24 Hour long have you owned this product? 2 - 7 weeks Gender Female How often do you use this product? Never ?reeledstars. I-larrisonLover 2} hours ago Terrible Quality Do no: buy, these versions aren't originals and have terrible quality. No, I do not recommend this produot. 4 people found this review helpful. 0 people did not find this review help?ll. Helpful? Yes 4 4 people found [his review helpful. Click to agree. No 0 0 people did not ?nd this review help?rl. Click to agree. Report DAREEZCARE DAREQCARE Montreal, QC, Canada Review 1 Vote 1 A {e 45 54 How long have you owned lhis product? 1 eels: or less Gender Female How o?'en do you use this product? Never 183 ?Ilr? ?flirt? 1 out ofS stars. DAREZCARE 20 hours ago AweFull Don't know why someone would buy such a "had album and not the original. Save your money and gel the real thing! 01' you'll. just waele if! No, Ido not recommend this product. 1 person found this review helpful. 0 people did not ?nd this review helpful. Helpful? Yes I 1 person found this review helpful. Click to agree. No 0 people did not ?nd this review llelp?ll. Click to agree. Report 6? K0251 Koza Montreal, QC, Canada Review 1 Vote 1 ?rework 34K welt? 1 out of 5 store. Kozu - 20 hours ago 'Poor sound quality it?s very low quality album, the sound is terrible. No, I do not recommend this product. 1 person found this review helpful. 0 people (lid not ?nd this review helpful. Helpful? Yes 1 person found this review helpful. Click to agree. No - 0 0 people (lid not find review helpful. Click to agree. Report 8111111le 184 Sumin Toronto Reviews 4 Votes 3 Ago 35 44 How long have you owned this product? 1 week or less Gender Female How o?en do you use [his product? Never ?554'er 1 our stars. SunnyB - 20 hours ago Pom-Quality. Don?t buy this! Don't waste your time or money. Terrible recording. No, I do not recommend this product. I person found (his review helpful. 0 people did 110t?11d this review helpful. Helpful? Yes - 1 person found this review helpful. Click to agree. No - 0 0 people did not ?nd ibis review helpful. Click. lo agree. Report oirlaltdeloie otrlulidelete Review 1 Vote 1 rhirrk?rrdr 1 out off": stars. olrlalideloie 20 hours ago 13nd Quality Very poor audio quality. Not the real thing. Don't buy this version! 1 person found this review helpful. 0 people did not ?nd this review helpful. Helpful? 185 186 Yes .1 person found this review helpful. (31in to agree. No - 0 0 people did nol ?nd this review helpful. Clio]: to agree. Report 6? 51er eatle 5thBeoile Canada Roviows 3 Votes 4 Age 25 34 How long have you owned this product? 1 week or less Gender Male How o?'en do you use this produoi? Never ??air 1 out of 5 stars. Stl?'?eatle - 18 hours ago DO NOT Not The. Real Thing! I have seen a few of these weird versions of?I?he Beatles lately. Buyer bewarel They are not the original recordings and de?niter of inferior quality. .3: No, I do noi recommend this product. 1 person found this review helpful. 0 people-did not ?nd this review helpful. Helpful? Yes - 1 person found this review helpful. Click to agree. No '0 0 people did nor find this review 1101131111. Click to agree. Report (3?1 ?1?Yl364 Review 1 Votes 0 How long here you owned this product? 1 week or less Gender Male fairerer ?redeem-9W? 5 out o'fS stare. TYB64 1-0 hours ago BEACH BOYS RingoStarr RingoStarr Toronto, ON, Canada Reviews 5 Votes 20 7% Top 500 Contributor Age 35 44 How long have you owned this product? 5 6 months Gender Male How often do you use this product? Once a week 3% 'l?ep 500 Contributor 1 out of? stars. RingoStarr - 2 clays ago Save your Terrible sound quali'tyl Save your This sounds like a cheap copy No, I (lo not recommend this product. 4 people found this review help?ll. 0 people not ?nd {his review helpful. Helpful? Yes - 4 4 people found this review helpful. Click to agree. No - 0 0 people did not ?nd this review helpful. Click. to agree. Reperl 65? elrlelldelele efrlall'clelele Review I ote 'l ?J?I?r?r?ilr?l?lr?rk? ??e??lr?lf ?55:14? I out efS stars. clrlultdelel?e 20 hours ago Pour 187 Very poor audio quality. Not the real thing. Don't buy this version! 1 person found this review helpful. 0 people did not find this review helpful. Helpful? Yes - 1 person found this review helpful. Click to agree. No a 0 0 people did not ?nd this review helpful. Click to agree. Report 6 Marcus JMareue Toronto, on Review I Vote 1 Age 35 44 How long have you owned product? 1 week or less Gender ale How often do you use this product? Never drr?i??t?rlf?tr 1 out ofS stars. JMareus - 19 hours ago Terrible Sound Quality 1 purchased this expecting the quality,r to he there with the great value, and the sound reproduction is awful please save your money it No, I do not recommend this product. 1 person found this review helpful. 0 people did not find this review helpful. t-lelpful? Yes l. 1 person found this review helpful. Click to agree. No 0 0 people did not ?nd this review helpful. Click to agree. Report E2 CunnyB Sunny?B Toronto, ON, Canada 188 Reviews 4 Votes 3 Age '35 44 How long have you owned this produet? 1 week or less Gender Female How often do you use this product? Never I out off)" stars. 81111113113 - 18 hours ago Inferior Pmrluoliun Quality Suggest purchasing the real tln'og before was?ng your money. 0 people found this review helpful. 0 people?did not ?nd this review helpful. Helme Yes i 0 0 people found this review helpful. Click to agree. No - 0 people did not ?nd this revlew helpful. Click to agree. Report 189 16 '190 This is Exhibit referred to in the Affidavit of Terry Perusini sworn before me this 26"? day of August, 2015 Ma?y?wo A Commissici?rgr for taking Affidavits. etc. Marie Elizabeth Wakefield, a Commissioner. eta. Province of Oniario, ior WeirFoulds up. Barristers and Solicitors. EXpires October 24, 2016. 191 From: Chad Minicucl Sent: February-24-15 7:33 AM To: Terry Peroainl Subject: RE: up date Thanks for the update. We?re pulling foryou buddle As always, keep me posted. Ciao, Chad Minlcuoi AVP Sales Anderson Merchandisers Canada Inc. 9050634999 ext. 431 change of email address to chatl.ininlcuol@mereheacom please update your contact list. From: Terry Peruslni Sent: Monday, February 23, 2015 2:34 PM To: Chad Minlcucl Subject: up date Hey Chad: Juat to give you an update unfortunately i am still on standby. it seems In an effort to prevent competition in the market place someone with similar products to ours has pretty much Informed the Canadian mosic industry that our produots are illegitimate. The precincts are not illegitimate but needless to say the inaccurate comments made have soared off some necessary suppliers from dealing With us. Our lawyers are Working on resolving this issue and lam basically waiting for on their instructions. Sorry but trust me i am doing all -I can as lwant to make sure we do it right. Thank; Terry 17 192 This is Exhibit ?17" referred to in the Afriihdavit of Terry Perusini sworn before me this 26 day of August, 2015 ?Mm/Mia}? A Commiesio?gwgr taking Affidavits, etc. Marie Elizabeth Wakefieid, a Commissioner. etc-.3 Province of Ontario, for WeirFoulds LLP. Barristers and Solicitors. Expires October 24. 2016. 193 20 Queen St. W, 32nd ?oor DIMQCK LLP Toronto, Ontario, Canada MSH 3R3 experience. results, 74163717202 F4l6.97l.6538 wdimock.com SANGEETHA 416.971.7202 spunniyamoorthy@dimock.com SENT BY EMAIL COURIER March 9, 2015 Ms. Caroline Rioux President Canadian Musical Reproduction Rights Agency Ltd. 320 - 56 Wellesley Street West Toronto, ON M23 283 Dear Ms. Rioux: Re: Stargrove Entertainment Inc. re CMRRA Licence Refusal Our Ref: 3378-2 We represent Stargrovc Entertainment Inc. (?Stargrove?) and are writing for further information concerning the refusal by Canadian Musical Reproduction Rights Agency to grant Stargrove a mechanical licence with respect to various works, as set out below. Stargrove was surprised and confused by the denial, which it believes to be unprecedented, since such licenses are routinely sought and granted to applicants. For completeness, we have set out below a summary of the facts and interactions between Stargrove and CMRRA from December 2014 to present, as set out in the various correspondences: In December, 2014 Stargrove contacted CMRRA to enquire about obtaining a mechanical license for six titles (Beatles - Love Me Do; Beatles Ca11"t Buy Me Love; The Rolling Stones Little Red Rooster; Elvis Presley Suspicion; Bob Dylan - It Ain?t Me Babe; The Beach Boys Fun, Fun, Fun). Stargrove was informed that it needed to obtain a pay~as~you-press license; a In early January, 2015, Stargrove completed and submitted to CMRRA the appropriate paperwork for the license along with a cheque for $13,799.10 for the mechanical royalties on the units to be pressed; a? On January 9, 2015 CMRRA cashed Stargrove?s cheque leading Stargrove to believe that the requested licence was in place. As such, 'Stargrovc went to market with its products incorporating the licensed works. 194 On January 22, 2015, Ms. Jennifer Holt at Stargrove received an email from Ms. Veronica Syrtash, V.P. Legal and Business Affairs at CMRRA. After aclmowledging Stargrove?s application for a license from CMRRA for an album called ?Little Red Rooster?, Ms. Syrtash advised Ms. Holt that ABKCO Music Records, Inc. had instructed CMRRA not to issue any licenses for the reproduction of ?ve songs by the Rolling Stones, the copyright in Which was purportedly owned by ABKCO. CMRRA denied issuing a license for these songs, with Ms. 'Syrtash stating that ?as licensing agent, CMRRA must .act pursuant to their instructions?; On February 4, 2015, Ms. I-Iolt received another, similar email from this time from Nathalie Levesque, Assistant Manager, Independent Licensing and Royalties. Ms. Levesque advised that Casablanca Media Publishing (?Casablanca?) had instructed CMRRA not to issue any licenses to for the reproduction of three Beatles songs. That day, Ms. Holt responded to Ms. Levesque and asked why Casablanca had instructed CMRR-A not to issue licenses; On February 9, 2015, you had a conversation with Ms. Holt in which you stated that you were surprised by the various instructions to deny the licences. During that conversation you also stated that SonyfATV had refused to provide Stargrove with a license; The conversation of February 9, 2015 was con?rmed to you in an email of February 10, 20.15 from Ms. Holt. In that email, Ms. Holt also requested the status of all Stargrove licence applications, including with respect to songs by the Beatles, Rolling Stones, Beach Boys, and Bob Dylan; You responded to Ms. Holt on February 11, 2015 by advising that CMRRA would not be involved in this ?situation? and that CMRRA would be refunding Stargrove?s payment; TWO days later, on ebruary 13, 2015, Ms. Holt wrote to you again about obtaining a mechanical license for other, ?non-controversia songs (of which there are many). Ms. Holt never received a response; Finally, on February 25, 2015, Ms. Holt received a letter ??om CMRRA enclosing a refrmd cheque for ?all payments [Stargrove] submitted to You have suggested to Stargrove that it contact the publishers directly. However, with respect, given the lack of Stargrove has received, that suggestion is impractical and is also at odds with the normal procedure in Canada for obtaining mechanical licences. Accordingly, so that we may resolve this situation as quickly and amicably as possible, we request that you provide US with the following information: I A list of the publishers that instructed CMRRA to refuse a license to Stargrove; a The publishers? stated reasons for denying a licence; and 195 -3- reasons for not providing a mechanical license to Stargrove in respect of other publishers. We look forward to hearing from you by March 13 2015. Yours truly, DIMOCK STVT 0 LLP 18 I This is Exhibit ?18? referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 A CommissioLngor taking Affidavits, etc. Marie Elizabeth Wakefield, a Commissioner, etc. Prownce of Ontario, for WeirFoulds 3 Barristers and Solicitors. EXPIIBS October 24, 2016. 196 191. CMRRII Canadian Musical Reproduction Rights Agency Limited 56 Wellesley Street West, Suite 320, Toronto, Ontario Canada M55 233 Phone: (416)926-1966 Fax: (416)926?7521 internet: Web: Veronica Syrtash, Ext. 281 Vice President, Legal 8! Business Affairs March 12, 2015 Dimock Stratton LLP 20. Queen Street West, 32nd Floor Toronto, Ontario MSH 3R3 Attention: Sangeetha Punniyamoorthy Dear Ms. Punniyamoorthy, Re: Stargrove Entertainment and CMRRA We are in receipt of your letter to Caroline Rioux, President of Canadian Musical Reproduction Rights Agency Ltd. dated March 9, 20l 5. Your summary of the situation is accurate, except that i would suggest that the normal procedure in Canada for obtaining mechanical licenses includes contacting music publishers directly, in addition to contacting CMRRA. CMRR-A represents its music publisher principals on a non-exclusive basis for mechanical licensing, and direct licensing is common practice in Canada. The following points are responses to your request for information, in order of those requests: 1. Your letter already details the publishers that instructed CMR-RA not to issue licenses to Stargrove. Namely, those publishers are ABKCO, Casablanca, and 2. These publishers have not indicated to us all their reasons for denying licenses, nor do they have an obligation to. As i have stated in my correspondence with Ms. Holt, CMRRA has an agency relationship with its publisher principals and acts pursuant to their instructions. What we have been told, however, is that their refusal is at least partially related to the fact that there are public domain master recordings on the products in question. Beyond that fact, we are simply unable to speculate on the reasoning behind their decision-making. GST Registration Number R100768696 138 Sangeetha Punniyamoorthy March 12, 2015 Page 2 3. CMRRA made a decision not to pursue licensing on behalf of other music publishers after having received an e-mail from Ms. Holt raising the issues of possible unfair trading and competition law. We felt it prudent not to remain in a position where we may be implicated in the practices of copyright owners licensing (or not licensing, as the case may be) users of those copyrights, when CMRRA is only an agent designated to facilitate this process. We suggested to Ms. Holt that if Stargrove could obtain the necessary authorizations from the remaining publishers, then CMRRA would continue to facilitate the licensing of the songs represented by those publishers (please refer to the e?mail from Caroline Rioux to Jennifer Holt, dated February 11, 2015). if you have any further questions, please feel free to contact me directly. Sincerely, tags. Veronica Syrtash Veronica Syrtash, Legal 8: Business Affairs 56 Weiiesley St. W., Suite 320, Toronto, Ontario Canada M55 253 19 199 This is Exhibit "19? referred to in ?the Affidavit of Terry Perusini sworn before me this 26th day of August, .2015 Mar/<45 A Commissio?LeMgr taking Affidavits, etc. Maria Elizabeth Wake?eld. a Commissfoner, Province of Ontario, ior WeirFouIds up, Barristers and Soricltors. Expires October 24. 2016. 2?00 20-Queen St. W. 32nd floor LLP Toronto, Ontario, Canada MSH 3R3 experience. results, T4l6.971.7202 F416.971.6638 wdlmockmm SANGEETHA PUNNIYAMOORTI-IY 416.971.7202 SENT BY EMAIL March 16, 2015 Ms. Veronica Syrtash Vice-President. Legal and Business Affairs CMRRA (Canadian Musical Reproduction Rights Agency Ltd.) 320 - 56 Wellesley Street West Toronto, ON M23 283 Dear Ms. Syrtash: Re: St-arnge Entertainment Inc. re CMRRA Licence Refusal Our Ref: 3378?2 We are writing on behalf of Star-grove Entertainment Inc. (?Stargrove?) and further to your letter dated March 12, 2015. You indie-ate that CMRRA was expressly instructed by ABKCO, Casablanca and SonyfATV to not issue licenses to Stargrove and that CMR-RA acted pursuant to their instructions as it is an agent for those publishers. However, Stargrove?s requested mechanical license was not limited to copyrighted material owned by only these three publishers. In fact, the vast majority of the tracks are etched by other publishers. Your letter indicates that CMRRA unilaterally made a decision on behalf of all these other musical publishers to deny a license to Star-grove because Stargrove has raised issues of possible unfair trading and competition law. However, it is only a refusal to license that raises any such issues. Stargrove is not asserting any unfair trading or competition law issues in relation to CMRRA issuing licenses to Stargrove in the ordinary course. Such issuances of licenses b-y CMRRA cannot reasonably be interpreted as implicating CMRRA in any unfair trading or competition law issues. It is a refusal. to license that raises such issues. Further, it is Stargrove?s understanding based on years of experience within the industry that the usual and ordinary course for obtaining mechanical licenses is through CMRRA, which is in the business of granting permissions on behalf of -1nusic publishers. Also, as stated on your website, in the vast majority of cases, those publishers issue their licenses through CMRRA. We understand that CMRRA issues more than 125,000 mechanical licenses every year. refusal, on. its own initiative, to license Stargrove on behalf of other music publishers (who have not instructed CMRRA to refuse to license Stargrove) is clearly inconsistent with normal course of conduct. Accordingly, in light of our clari?cation in this letter, we ask that you 201 please reconsider decision to deny Stargrove its requested mechanical licenses for these other ?non-contentious? tracks. As noted above, the issuance by CMRRA of a mechanical license will not give rise to any unfair trading or competition law issues asserted by Stargrove against CMRRA. If, however, any party (including CMRRA) is refusing to license Stargrove for unjusti?ed reasons, Stargrove will consider all options available to it, including but not limited to any cause of action based-on unfair trading andfor competition law. Lastly, you indicate that ABKCO, Casablanca and have expressly instructed CMRRA to not issue licenses to Stargrove. Please con?rm whether Universal has also instructed CMRRA to withhold licenses to Stargrove and if so, kindly provide a copy of that communication. As set out in Ms. Holt?s email of February 10, 2015, CMRRA had indicated that it was contacting Universal to inquire about their status, but Stargrove has not heard anything further. We look forward to hearing from you by March 19, 2015. Yours very truly, DIMOQK TON LLP SANGEETHA PUNNIYAMOO SP: cm 20 This is Exhibit ?20? referred 1:0 in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 Midi/Mew: A Commissio?eijfor taking Affidavits, etc. I Maria Elizabeth Wakefieid, a Commissioner, eta, Province 0! Ontario, for WeirFoulds ur. Barristers and Solicitors. Expiras W24. 2016. 202 20?3 St. W, 32nd ?oor DIMOCK LLP Toronto, Ontario, Canada MSH 3R3 exgicricuce. results. T41 6.9711202 wdimocksom 416.971.7202 spunniyamoorthy@dimock.com SENT BY EMAIL COURIER March 17, 2015 Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto, ON M4G 302 Attel tion: Dear Mr. Fu-rniss: Re: Stargrovc Entertainment Inc. re CMRRA Licence Refusal Our Ref: 3378-2 We represent 'Stargrove Entertainment Inc. (?Stargrove?) and are writing with reapect to the refusal by Music Publishing Canada Co. to grant Stargrove a mechanical license with respect to various works. As you know, Stargrove recently applied to Canadian Musical Reproduction Rights Agency Ltd. for a mechanical licence in respect of several tracks for which we Understand owns the Canadian copyright. On February 9, 2015, Stargrovc was advised by CMRRA that your company had instructed CMRRA to refuse Stargrovc a license. Stargrovc was surprised by this refusal since it is inconsistent with the normal course of conduct with these types of licenses, and in Stargrovc?s experience, unprecedented. The refusal to license is causing StargrOVe signi?cant ?nancial loss and other damages. Accordingly, on behalf of Stargrove, we are writing to request a mechanical license for the various tracks. If you decide to maintain your refusal to license Stargrove, please provide your reasons for denying a license and the speci?c tracks for which you are refusing a license. Any refusal to license Stargrove in the ordinary course for unjusti?ed reasons may give rise to unfair trading or competition law issues. If there is such a refusal of a mechanical license by Stargrove will consider all options available to it, including but not limited to any cause of action'bascd on unfair trading andfor competition law. 204 .. 2 .. We look forward to hearing from you by March 24, 201?. Yours truly, DIMOCK STRTON LLP SANGEETHA PUNNIYAMOORTHY SP: cm 21 This is Exhibit ?21? referred to in the Affidavit of Terry Perusini sworn before me 26th day of August, 2015 1 MxA/a/w/J A Commissione?fgr taking Affidavits, etc. Marie Elizabeth Wake?eld, a Commissfoner, em, Province of Ontario. for WeirFoulds up. Barristers and Solicitors. Expires October 24, 2016. 205 206 20 Queen St. W. 32nd floor DIMOCK STRATTON Toronto, Ontario, Canada MSH 3R3 experience. results. T41 5.9717202 F416.97l.6538 wdimock.com SANGEETHA 416.971.7202 spunniyaIncorthy@dimock.com SENT BY EMAIL COURIER March 17, 2015 ABKCO Music 85 Records, Inc. 85 Fifth Avenue New York, NY 1003 Attentioi Alisa Coleman, Senior Executive Vice President Dear Ms. Coleman: Re: Stargrove Entertainment Inc. re CMRRA Licence Refusal Our Ref: 3378?2 We represent Stargrove Entertainment Inc. targrovc?) and are writing with respect to the refusal by ABKCO Music 85 Records Inc. to grant Stargrove a mechanical license with respect to various works, as set-out below. As you know, Stargrove recently applied to Canadian Musical lleproducticn Rights Agency Ltd. for a mechanical licence in respect of the following ?ve tracks for which we understand ABKCO owns the worldwide copyright: 1) Heart of Stone (J aggerZRichards); 2) What A Shame (J agger/Richards); 3) Good Times Bad Times (JaggerfRichards); 4) It?s All Over Now (Womack/Womack); and 5) Grown Up Wrong (Jagger/Richards). On January 22, 2015, was advised by CMRRA that your company had instructed CMRRA to refuse Stargrove a license with respect to these tracks. Stargrove was surprised by this refusal since it is inconsistent with the normal course of conduct with these types of licenses, and in Stargrove?s experience, unprecedented. The refusal to license is causing Stargrove signi?cant ?nancial loss and. other damages. Accordingly, on behalf of Stargrove, we are writing to request a mechanical license for the tracks referenced above. if you decide to maintain your refusal to license Stargrove, please provide your reasons for denying a license. Any re?isal to license Stargrove in the ordinary course for unjusti?ed reasons may give rise to unfair trading or competition law issues. If there is such a. refusal of a mechanical license by 207 ABKCO, Stargrove will considor all options available to it, including but not limited to any cause of action based on unfair trading and/or competition law. We look forward to hearing from you by March 24, 2015. Yours truly, DIMOCK STRATTON LLP ANGL UNNIYAMO HY SP: cm 22 This is Exhibit ?22" referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 ?WMi?/b A Commissi?n?gr for taking Affidavits, etc. Marie Eiizabeth Wakefield, a Commissioner. eta.J Province of Ontario, for WeirFoulds up. Barristers and Solicitors. Explres October 24. 2016. 208 209 20 Queen St. W, 32nd floor DIMQCK LL13 Toronto, Ontario, Canada MSH 3R3 experience. results. T416.971.7202 F416.97l.6638 PUNNIYAMOORTHY 416.971.7202 spunniyamoorthy@dimock.com SENT BY EMAIL COURIER March 17, 2015 Casablanca Media Publishing 249 Lawrence Avenue East Toronto, ON M4N 1T5 Attentio Jennifer Mitchell, President Dear Ms. Mitchell: Re: Entertainment Inc. re CMRRA Licence Refusal Our Ref: 3378~2 We represent Stargrove Entertainment Inc. (?Stargrove?) and are writing with respect to the refusal by Casablanca Media Publishing (?Casablanca?) to grant a mechanical license with respect to various works, as set out below. As you know, recently applied to Canadian Musical Reproduction Rights Agency Ltd. for a mechanical licence in respect of the following three Beatles tracks for which We understand Casablanca owns the Canadian copyright: 1) I Saw Her Standing There; 2) From Me to You; and. 3) I Wanna Be Your Man. On February 4, 2015, Stargrove was advised by CMRRA that your company had instructed CMRRA to refuse Stargrove a license with respect to these tracks. Stargrove was surprised by this refusal since it is inconsistent with the normal course of conduct with these types of licenses and in Stargrove?s experience, unprecedented. The refusal to license is causing Stargrove signi?cant ?nancial loss and other damages. Accordingly, on behalf of Stargrove, we are writing to request a mechanical license for the tracks referenced above. If you decide. to maintain your refusal to license Stargrove, please provide your reasons for denying a license. 3 Any refusal to license Stargrove in the ordinary course for unjusti?ed reasons may give rise to unfair trading or competition law issues. If there is such a refusal of a. mechanical license by Casablanca, Stargrove will consider all options available to it, including but not limited to any cause of action based on unfair trading andXor competition law. 210 2 .. We look forward to hearing from you by March 24: 2.015. Yours truly, DIMOCK STRATTON LLP PUNNIYAMOORTHY SP: cm 23 211 This is Exhibit referred to in the Af?davit of Terry Perusini sworn before me this 26 day of August, 2-015 ?it/a, Mr? A Commissio?eg for taking Affidavits, etc. ??aabeth a Commissioner, Province of Ontario, for WeirFoulds up, Barristers and Solicitors. Eiqail?es October 24. 2013. 212 MICHAEL E. KRAMER 8c Assocmirns A'l' LAW zoo sown smnm' now YQRII. NEW YGHK union mos-an B. TELEPHONE (212} 819*0130-4: rooms 53.4112.sz ms: (sun) aiowoans MORGAN E. WEBER ARTEMIS NAT. 3c Nail. March 20, 2015 Via Email Esq. 2t) Quccn St. W, 32"? Floor Toronto, Ontario, Canada MS.le 3R3: spunniyamoort-hyfg?dimoclccom Re: Entertainment I nc, CMRRA Licenses Dear Ms. This ?rm is counsel to ABKCO Music Inc. and I am writing in response to your March 17, 2015 letter to ABKCO Music Records, Inc. regarding decision not to grant Stargrovc Entertainment, lnc. (?Stargrovc?) mechanical liocnsos for the Following compositions: Heart ol?Stonc 2) What a 3) Good Times Bad Times (JaggcriRichards); 4) it?s All Over Now (Womack/Womook); S) Grown Up Wrong AMl?s decision not to grant :ncchanicsl licenses to your client, through the Canadian Musical chroduotlon Rights Agency, Ltd. or othorwisc, quite frankly, does not require any explanation. As you know, AMI, as the owner of tho worldwide copyrights in the compositions lislocl nhovc, has the exclusive right to exploit such works or refrain in any mannor or medium that it desires. Inherent in such rights is prerogative to license or to decline to license such works in the ordinary course. of business. Finally, any losscs or damages purportedly suffered by Stargrovc arise solely From Stsi?gl?ovo?s own or negligence in not clearing rights in the music. This Failure is by no means tho fault 213 MICHAEL E. KRAMER 8c Amocmwm In the future, please direct any further correspondence regarding this matter :0 this 0 l'l?icc, _ww truly yours, Michael B. Kramer cc: Jody H. Klein Alisa Coleman Peter J. l-loward, Esq. Peter T. Salzler, Esq. 24 214 This is Exhibit "24? referred to in the Affidavit of Terry Perusinl sworn before me this 26th day of August, 2015 mm? A Commissi?rrgr for taking Affidavits, etc. Marie Elizabeth Wakefield. a Commission er, (ath Province of Oniario, for WeirFoulds up, Barristers and Solicitors. Emlmsoanhar 24.2018; 215 March 24, 2015 SENT BY EMAIL Stratton LLP 20 Queen Wort, 32?" Floor Toronto, Ontario. 3R3 Dear Ms. Purmiysinoorthy: Re: Sta-rgrovc Entertainment Inc. re CMRRA Licence Refusal We are in receipt orf'your letter dated March 17, 2015. As you know, under the Copyright 1401? (Canada), the right to rcproducc a musical work. is granted exclusively to the copyright owner. A copyright omer?s refusal to issue a mechanical is a. valid of that exclusive right. It does not contravene any unfair trading anclfor competition laws in this country, not is the owncr rcquircd to provide an {explanation to the applicant for the refusal. While it may not be common. practice to I'cfusc mechanical licenses, rcf?usals do occrn? within the music industry for a variety of reasons. It .is therefore. incumbent upon your clicnt to sock mechanical prior to releasing product into the marketplace. Any losscs that your clicn?t claims to have suffered as a result of our rcfusal of its application are entirely of its own making. Yours tru Jo 1 hell r?sidcnt 1652181 Ontario Inc. {Uh/u Rod Brick Songs T: (416) 9219-9214 ext 224 E: cc. Cassy ClliSiCli, Brock r; Blackwell LLP Red Brick Songs, 24-9 Lawrence Avenue East, 'i?cronto, Ontario. Canada. M4N 1T5 T: (416] 8214:1233} E: 25 This is Exhibit "25" referred to in the Affidavit of Terry Perusini sworn before me this 26th day of Aug ust, 2015 A Commissi?ugr for taking Affidavits, etc. Marin Elizabeth Wake?eid. a Commissioner, eta. Province of Ontario, for WeirFoulds v.9. Barristers and Solicitors. aspires W24. 2016. 216 CMRRII cunuuiun Musical Reproduction Rights Agency Limited 56 Wellesley Street West, Suite 320, Toronto, Ontario Canada M55 253 Phone: (416) 926?1966 Fax: (416) 926-7521 lnternet: Web: Veronica Syrtash, Ext. 281 Vice President, Legal 8: Business Affairs March 25, 2015 Dimock Stratton LLP 20 Queen Street West, 32nd Floor Toronto, Ontario 3R3 Attention: Sangeetha Punniyamoorthy Dear Ms. Punniyamoorthy, Re: Stargrove Entertainment and CMRRA lam writing in response to your letter to me, dated March 16, 2015. As indicated in my letter to you dated March 12, 2015, Canadian Musical Reproduction Rights Agency is a licensing agency that acts pursuant to the instructions of its music publisher principals. As an agent, CMRRA cannot act contrary to the instructions of its principals. It is for this reason that CMRRA cannot issue licenses for works where the owners of such works have instructed CIVIRRA not to do so. Furthermore, where a publisher principal has declined to authorize CMRRA to issue a license on its behalf, CMRRA does not know the reasons for such decisions. It only acts pursuant to instructions. Notwithstanding the fact that we had suggested to Stargrove that CMRRA would facilitate the licensing of the songs if Stargrove could obtain the necessary authorizations from the publishers allowing us to do so, in an effort to resolve this matter as between us, we have proceeded to seek those authorizations directly, and can now advise as follows: 1. For Product Catalogue STR0009, Album Title Fun, Fun, Fun? has the authorization from the music publisher(s) to issue licenses for the following songs: Summertime Blues, Surfer Girl, Surfin Sur?n' Safari, and Surfin' USA. GST Registration Number R100758696 218 Sangeetha Punniyamoorthy March 25, 2015 Page 2 CMR-RA does not have the authorization from the music publisher(s) to issue licenses for the following songs: Be True To Your School, Dance Dance Dance, Fun Fun Fun, lGet Around, Ten little lndians, and When Grow Up (To Be A Man). . For Product Catalogue Album Title Love Me Do? CM RRA has the authorization from the music publisher(s) to issue a license for the following song: Til There Was You does not have the authorization from the music publiSher(s) to issue licenses for the following songs: All My Loving, A Hard Day's Night, lFeel Fine, if I Fell, it Won 1* Be Long, This Boy, You Can?t Do That, Love Me Do, Please Mr. Postman, and lSaW Her Standing There. . For Product Catalogue Album Title "Can?t Buy Me Love CMRRA has the authorization from the music publisher(s) to issue a license for the following song: Honey Don?t CMRRA does not have the authorization from the music publisher(s) to issue licenses for the following songs: Can?t Buy Me Love, And Love Her, Do You Want To KnowA Secret, From Me To You, Wanna Be Your Man, Mr. Moonlight, No Reply, Please Please Me, and You?ve Really Got/ii Hold On Me. (Collectively, the songs listed in paragraphs 2(a) and for which CMRRA has the authorization from the music publishers to issue licences, are referred to hereafter as ?the CMRRA Llcensable Songs" .) . For Product Catalogue Album Title ?It Ain?t Me Babe", CMRRA does not have the authorization from the music publisher(s) to issue licenses for any of the songs. . For ProdUCt Catalogue Album Title Little Red Rooster?, CMRRA does not have the authorization from the music publisher(s) to issue licenses for any of the songs. With respect to your request for us to provide a copy of our communication with at least one of our publisher principals, we are not at liberty and are under no obligation to share our business correspondence with you. Please confirm that your client would like CMRRA to facilitate licenses for the CMRRA Licensable Songs. Once we have that confirmation from you, if Stargrove would still like to apply for licenses for the Licensable Songs, we will kindly request that Stargrove reusubmit its license applications for those songs pursuant to PayHAs- Veronica Syrtash, Legal Business Affairs CMRRA 56 Wellesley St. W., Suite 320, Toronto, Ontario Canada M55 253 Sangeetha ~Punniyamoortl?y March 25, 2015 Page 3 You-Press licensing process. As noted in my last correspondence, if Stargrove is able to secure the necessary authorizations from the music publishers allowing CMRRA to licence the other songs, we would be pleased to facilitate those licences for Stargrove. I trust this information satisfies the requests that you have made of us. Sincerely, Veronica Syrtash Veronica Syrtash, Legal 8: Business Affairs CMRR-A 56 Weilesley St. W., Suite 320, Toronto, Ontario Canada M53 283 26 220 This is Exhibit ?26" referred to in the Affidavit of Terry Perueini sworn before me this 26th day of August. 2015 A Commissi?ngr for taking Affidavits, etc Marie Elizabeth Wakefield, a Commissioner, eta, Province of Ontario, ior WeirFoulds up. Barristers and Solicitors. Expires October 24, 2016. 221 CAT NO STR0001 TITLE Love Me Do TRACK 1 2 3 4 5 6 7 8 9 10 11 STR0002 Can't Buy Me Love STR0004 TRACK Love Me Do I Feel Fine This Boy I Saw Her Standing There All My Loving Please Mister Postman A Hard Days Night You Can't Do That It Won't Be Long Till There Was You If I Fell Writers Lennon/McCartney Lennon/McCartney Lennon/McCartney Lennon/McCartney Lennon/McCartney Holland Lennon/McCartney Lennon/McCartney Lennon/McCartney Willson Lennon/McCartney Publishing BEECHWOOD MUSIC CORP. (OWNED BY UNIVERSAL) SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING GIL MUSIC Corp (But refusal came from CASABLANCA). SONY/ATV MUSIC PUBLISHING JOBETE/STONE/ UNIVERSAL SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING Frank Music/Chappell/Mecolico SONY/ATV MUSIC PUBLISHING Distributed By Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal 1 2 3 4 5 6 7 8 9 10 11 Can't Buy Me Love From Me To You Please Please Me Do You Want To Know a Secret I Wanna Be Your Man No Reply Honey Don't Words Of Love Mr Moonlight And I Love Her You Really Got A Hold On Me Lennon/McCartney Lennon/McCartney Lennon/McCartney Lennon/McCartney Lennon/McCartney Lennon/McCartney Perkins Holly Johnson Lennon/McCartney Robinson SONY/ATV MUSIC PUBLISHING GIL MUSIC Corp (But refusal came from CASABLANCA). UNIVERSAL/DICK JAMES MUSIC LTD SONY/ATV MUSIC PUBLISHING CMRRA shows nothing (But refusal came from CASABLANCA). SONY/ATV MUSIC PUBLISHING CARL PERKINS MUSIC PEERMUSIC LIMITED SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING JOBETE MUSIC/ UNIVERSAL Universal Universal Universal Universal Universal Universal Universal Universal * no response on this track Universal Universal Universal Little Red Rooster 1 2 3 4 5 6 7 8 9 10 11 I Wanna Be Your Man Little Red Rooster Heart Of Stone What A Shame Tell Me (You're Coming Back) Good Times Bad Times It's All Over Now Time Is On My Side Grown Up Wrong If You Need Me Walking The Dog Lennon/McCartney Dixon Richard/Jagger Richard/Jagger Jagger/Richard Jagger/Richard B & S Womack Meade/Norman Jagger/Richard Pickett/Bateman/Sanders Thomas SONY/ATV MUSIC PUBLISHING ABKCO ABKCO ABKCO PEERMUSIC CANADA (SIT ON CMRRA BOARD) ABKCO ABKCO CMRRA show nothing ABKCO DROP TOP MUSIC (Subject to clarification from CMRRA) UNIVERSAL PUBLISHING Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal STR0008 It Ain't Me Babe 1 2 3 4 5 6 7 8 9 10 11 The Times They Are A Changin It Ain't Me Babe Corrina, Corrina Blowin' In The Wind Bob Dylan's Blues A Hard Rain's A-Gonna Fall Don't Thing Twice It's All Right Ballad Of Hollis Brown Only A Pawn In Their Game With God On Our Side One Too Many Mornings Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dylan SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING SONY/ATV MUSIC PUBLISHING Sony Sony Sony Sony Sony Sony Sony Sony Sony Sony Sony STR0009 Fun Fun Fun 1 2 3 4 5 6 7 8 9 10 11 Surfin' Surfin' Safari Ten Little Indians Surfin' U.S.A Surfer Girl Be True To Your School Fun Fun Fun I Get Around When I Grow Up (To Be A Man) Dance Dance Dance Summertime Blues Love/Wilson Wilson/Love Wilson/Usher Berry/Wilson Wilson Wilson/Love Wilson/Love Love/Wilson Wilson Love/Wilson Cochran BUG MUSIC LIMITED BUG MUSIC LIMITED UNIVERSAL MUSIC PUBLISHING LTD JEWEL MUSIC PUB. CO. LTD. BUG MUSIC LIMITED UNIVERSAL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal Universal WARNER-TAMERLANE PUBLISHING CORP 27 This is Exhibit ?27? referred to in the Affidavit of Terry Perusini sworn before me this 26?? day of August, 2015 .mzl/MWD A Commissi?g for taking Affidavits, etc. Fiizabeth Wakefield 1: I a Commiss i me of Ontario. for WeirFouids loner. em. Barristers and Solicitors. up. Expires October 24, 2013. 222 223 From: Jennlfel'lloll: Sent: Apr" 1, 2015 11:39 AM To: ?Ne'thelle Levesque? subject: Mechenlcel License Agreement Hello Nethalle: Based on communication between Veronlce smash and Sangeethn Punnlyamerthy, can you pleeSe forward me copy o?fthe Mechanical Llcense Agreement? Once I have that, and return along with epplleetlons we have for a number oftreeks we need meehenlcal llcenses for. Please advise-when lean expect the agreement. look forward to you. Thank-you, Jennlfer Holt StergrOVe Entertelnment 28 the Affidavit iS Exhibit 28 referred to In I I 1starry P-erusini sworn before me this 26? day of August, 2015 A Commissi??r for taking Affidavits, etc. Marie Elizabeth Wake?eld. a Commissioner. GIG. Province of Ontario, for WeirFOLIldsur, Barristers and Solicitors. Expires October24. 201a, 224 225 From: Nethelle Sent: April 2, 2015 9:06 AM To: Jennlfer Holt subject: Re: Mechanical Lloense-Agreement/ Stergroye uvr-r?armWIfW-I . wv'ri?! Jennifer. Further to yesterday's oolwereetlon. etteohed the lnformetlon regardan the Meohenloel Llcenelng Agreement and our polloy. Ae explelned, QMRRA elther on heels or to the terms of the Medhenloel L?loenelng Agreement (MLA). The MLA to en tnduetry agreement negotleted between CMRRA end Muelo Genede whloh represente the major labels ee well as eeyerel Independent lebele. The eeme MLA le extended to all leloele dolng In Canada whether or not they ere represented by Muele Cenede, proylded they meet our oredlt redulremente end can llye up to the torme of the Agreement. Dependan on the volume you heVe on on annual beets. We meyneed to oonelder the pey ee you prose optlon. For examplel If you only release a few albums or number of CMRRA eonge end In Ilmlled the beet optlon remelne the pay as you prose system. Otlterwlee. If your volume Ie ooneldereble end you can bring more than $1,600 In 'royeltlee peyeble to CMRR-A on quarterly heels and have royalty reportan system In place. then we ooh Ioolt Into an Agreement. Some of the requlremente are: e) error free querterly reportan In the format outllned tn the Agreement to) proylde eeourtty drepoeltl 'whloh to about the equivalent of quarter's worth of royeltlee o} eomellmee-en edyenoe egelnet the royeltlee owed to eleo reeulredI eepeolelly if the label hee not eeoured Iloenoee for produote already on the market (the odvenoe can too recouped once the label euhmlte he ?rst utlerterly payment), d) to eubm'lt tlmely lloenoe epplloetlone all the necessary dooumenteI e) elong pendan Ilet. etc. to order to-determlne whloh method we oen apply. we need to have a better of: 1) how many produote ere belng released by your lehel 2) what of eelee you ere projeotlng .for the root of the year, lnoludlng the number of unlte. It would also be helpful lf you could glye he on Idea of how many songs on each produot would have wrltere end publlehere represented by CMRRA. You can see representetlon by nolng to our Wehelte et You can research the eonge by tltle. 1 226 The benefite of going with the Pay ee you method ie thet, depending on the eoope oi whet needs to be licensed, whet we would requeet for eeourity depoeit under the MLA they. eotnelly be greater-then the eotuei meehenloeie owed. Furthermore. there would not be any need for Quarterly reporting of The only thing required would be for you to oomplete the epplieetion end eend us your peyment along with the confirmation or confirmation of the number of unite being exported to Genede. In the event thet you deolde to do enoth or pressing or enip additional copies, you eimpty reapply for your ere the wire MLA vereione along with the corresponding royelly reporting templatee (for eeoh model) end the qualifying polloy. 1} the 2013 indie MLA Model 2 Final EN goee with the Excel document Royalty reporting template New MLA 2013 end the Pending liet template Final June 2013 2.) The indy MLA Model 1 Final goes with the Ettool doottment oelled Royalty template model 1 end the Pending ilet template Finel June 2018. i understand that thie information can somewhat be overwhelming so please ietrne know iti can he of further or Wish to eohedule e. eell. Wishing you or greet Eeeter'weekend. Nathalie Levesque i Aestetent Manager - Assistants: lo Direction, Independent Licensing 8t Royalties CMRRA {Canadian nineteen Reproduction Rights Agency) memrm 320 56 WetieeteyEtt-eet West, Toronto, ON MES 293 'Phone: 419926-1966 ext. 251 Fox: 416~926~7521 Email: nleyes mtegmmge From: "Jennifer Holt" To: ?Nathalie Lovestruo?? Dole: oeotreote Subleot: ivieohenioei Llcenee Arne emeni. 29 227 This is Exhibit ?29? referred to in the Affidavit of Terry Perueini sworn before me this 26th day of 2015 WM;le A CommissionL/for taking Affidavits, etc. Maria Elizabeth Wakefield, a Commissioner, ate, Province of Ontario, for WeirleIds up. Barristers and Solicitors. an?ras October 24. 2016. 228 From: Jennifer Holt: [ma?undaunitct?etaramaca] Sent: April 2, 2015 10:48 AM To: ?Nethalle Levesque Subject: FW: Mechanical License Agreement/ Stargrove Good Morning Nathalie: my enewere to your questions below. Can you 'pleaee advice as to what the difference between the two is? have also looked at the excel templates and they would Work well with our royalty reporting. Thank you, Jennifer Holt Stat?grove Entertainment Jennifer. Further to y?eeterday'a conversation, please find attached the information regarding the Mechanical Licensing Agreement and our Qualifying policy. As explained. CMRRA either on a basis or according to the tonne of the Mechanical Licensing Agreement The MLA Is an induetry agreement negotiated between OMRRA and Muele Canada which represents the major Inhale as well as several independent labels. The same MLA to extended to all iabeie doing business In Canada whether or not they are represented by Music Canada, provided they meet our credit requirements and can live up to the tonne of the Agreement. Depending on the volume you have on an annual basis, we may need to consider the pay ea you press option. For example, if you only release a few album a a limited number songs and In limited quantities, the beat option remains the pay as you prose eyetem. Otherwise, if your volume is considerable and you can bring more than $1,500 in royalties payable to GMRRA on a quarterly basis and have royalty reporting eyetem in place. than we can look into an Agreement. Some of-thc requirements are: a error free quarterly reporting in the format outlined ln-the Agreement provide a security deposit, which la about the equivalent of a quertor?e worth of royalties c) eometlmee an advance against the royalttee owed to also required, especially if the label has not secured licences for products already on the market (the advance can be recouped once the. label eubmlte tta ?rst 1 229 quarterly payment), d) ability to submit timely licence applications with all the necessary documents. or) along with a pending listl etc. in order to determine which method We can applyI we need to have a better understanding of 1) how many products are being released by your label (approximately 50 in "year one, and approximately 30 each year thereafter). 2) what kind oisales you are projecting for the rest or the year. Including the number of units. (really depends on when we flnailyreleaee. But: approximately 16.000 units per quarter. We will definitely be more than the $1600 to royalties payable to CMR-RA quarterly you noted above for a MLA.) it Would also be helpful It you could give us an Idea of how many songs on each roduot Would have writers and publishers represented by GMRRA. You can see representation by go ng to our Website at Mendym (search ourdatabase). You can research the songs by title. (Based on whatl hays seen on your Web site-it looks-Hire you will easily represent 90% of the tracks we hate on our products.) The benefits or going with the Pay as you press method is that. depending on the scope of what needs to be licensed, what We wouid request for a security deposit under the MLA may actually be greater than the actual .mechanlcals owed. Furthermore. there would not be any need for Quarterly reporting of sales. The only thing required would be for you to complete the application and send us your payment along with the pressing confirmation or a confirmation of the number of units being exported to Canada. in the event that you decide to do another pressing or ship additional copies' you simply reapply for your-mechanisms. (it is important to understand that we will be shipping orders weekly and possibly even daily. Pay as you press would not work for us. as we would not be able tomcat the strict turn times of our customers.) Enclosed are the two versions along with the corresponding royalty reporting templates (for each model) and the qualifying policy. 1) the 2013 indie MLA Model 2 Final EN goes with the Excel document called Royalty reporting template New MLA 2013 and the Pending list template Final June 2013 2) The indy MLA Model 1 Final goes with the Excel document called Royalty template model 1 and the Pending list template Final June 2013. I understand that this Information can somewhat be overwhelming so please let me know itl can be of further assistance or if you wish to schedule a call. you a great Easterweeitend. Nathalie Levesque Assistant Manager la Direction. independent a Royalties CMRRA (Canadian Musical Reproduction Rights Agehcy) 320 We'llostey Street: West, 'l'oronto. Obi M53 253 Phone: die~92o~1966exh 251 Fax: 4169250521 lainaltt Wm From: To: ?Nathalie grandpa?, Date: Subject: Mechanical License Agreement . A . . I .. 3O 230 This is Exhibit referred to in the Affidavit of Terry Perueini sworn before me this 26th day of August, 2015 A Commissior?r??r taking Affidavits, etc. Marie Elizabeth Wakefield. a Commissioner. eta. Province of Ontario. for WeirFoulds up. Barristers and Solicitors. Expires October 24. 2016. 231 From: Jennifer Holt [mm?mmamm] Sent: April 7, 2015 9:31 AM To: 'Nat'halie Levesque Subject: FW: Mechanical License Agreement I Stergrove Morning Nathalie: i hope youthad a wonderful Easterl Thank-you for the explanation. Model 2 Is clearly least for us. i will sign and courier back to you immediately. 1 have a number of titties: i need to submit applications for mechanical licenses. How do move forward with those applications? Thank you. Jennifer Holt Stargrove Entertainment From: Nathalie Levesque ?Lavoscptethmi-rapeb Date: April 2, 2015 at 1:59:50 PM EDT To: "Jennifer Holt? Subjeot: Re: FW: Mechanical License Agreement I Stergrove Jennifer, Thank you for your email. We usually evaluate with the label. whloh method is best suited to their needs and baaed on what they can provide. Here are the differences batWeen the two documents; 1 i 2013 Indie MLA Model 2 Final EN royeitloe are paid based on a Market ehare representation end report on all precinct pay an advenoe age?lnet the royalties: owed base on the number of unite eold each quarter (laea a resonnabia reserve). identifies the works end will produce the statements for each works-I booed on the number of unite reported. We 1 232 will then proylde copies of the statements along with reoonollielton of booed on the royalty advance. although you have to fill out or report. the onus le on no to calculate the royeitlee oWed based on representation and provide you reconciliation. The label appoints GMRRA as its agent to seek licences from the Copyright Board of Canada for any uniooeteble copyright owner where applicable purenent to Seotlon 77 of the Copyright Aot. The iebei does not have to melntein pending list. I Would suggest that you review tooth .dooumente so we oen further. This Would likely be the preferred method as it is a simplified version of the Standard MLA, which requires robuet royalty eyetem below). 2) The lndy MLA Model 1 Final. This model to for labels who here at robust-royalty system to piece end oen generete etetemen?te while maintaining and llquldetlng and applying returns. All the is performed by the lobe] and you must provide list. Can you tell no which royalty eyetem you currently-hove to place? Do you news on up to date pending list? Let me know If you have further questions. ill be beoit in the office on Tuesday, next week. Beet regorde. Nathalie Levesque Assistant Manager la Direct-ion, Independent: Licensing 8t Royalties CMRRA (correction Reproduction Rights noency) mindset 320 56 Welieeley Street: West, Toronto, ON MES 233 Phone: dole-wedged ext. 25.1. Fax: Email: From: N'tl?on?lter Holt? To: to .ovaeque'"< .gyeeque ammo Date: tone AM Subject: FW: Moohenioni Llocnee Agreement Istorgrove 31 This is Exhibit ?31? referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 A Commissio?rergor taking Affidavits, etc. Maria Elizabeth Wakefield, a Commissioner, 816.; Province of Ontario, for WeirFoulds up. Barristers and Solicitors. Expires October 24. 2EI16. 233 234 From: Jennifer Holt: Sent: April 7, 2015 10:26 AM To: 'Nethelie Levesqutei Subject: FW: Mechanical License Agreement Stergrove Hello Natalie: isew your examples effe'rmetste report In and we are geed on that. In the past I worked for Legacy Entertainment and thls-ls the same reporting format i used for-them with so it is no problem at all. i heve reed threegh the agreement and am ready tee-sign and return. i really went to meve forward with this as it has basically put our business at a standstill. What are the other thinge needed to be addressed? iessume these efthe agreement. Thank you, Jennifer Helt StergrOVe Enterteinment Frem: Nathalie Levesque Date: April 7, 2015 et'9:37:50 AM EDT To: ".lelmifer Holt" Subject: Re: .FW: Mechanical License Agreement 2' Stergreve Jennifer, Thank you for your email. Before we extend a MLA to a label. we need at number of items and eneure-ihe 1 235 manufacturer Is In a posltton to report In the format required under the MLA. There are a-few we need to address before you sign and relurn any documentation. I'm hookad for most of the day today on various meetings and conference calls. What Is your for a call In the wt come of days? Best regards, Nut-Imam L?vasque I Assistant Managar Assistante a la Directlom Indep?ndent 8-: Royalties CMRRA (Canadian Muslca! Repraductlan Righb's Agency} MN 320 :36 3mm West, Toronto, ON M53 283 Phone: 416*926~1966 ext. 251 Film 416~926~752l limit?? From: ?dannlfar Hon? <19p?l1g1?2 starmoveiggb To: ?Nathalie Lavesqua'" 4 Le a I . Dale: 0410732015 08:30 A Isubjool: FW: Mechanism License Agreamanl! stamrova . 32 .. . Exhibit 32 referred to In I 1h .- 'llgfe?y Perusini sworn before me this 26 day of .mww A Commissioner for taking Affidavits, etc? Marie Elizabeth-Wake?eld. a Gammissfoner; arm, Province of Ontario, for WeirFoulds 1m. Barristers and Solicitors. Expims October 24. 2016. 236 237 Pram: Jannlfer'Holt Sent: April~08~15 3:24 PM To: ?retry Peruslni' Subject: FW: CMRHA Terry: This is what I sent Nathalie earlier. i also .iaft her a Voicemail following up this email and asking if that-e was anything else she needed. I also asked about?the online license requesting. I will be filling in the paper forms for the titles tomorrowjust in case We have to send in the paper copies. This way we are ail'ready to go once everything Is okayed. Jenn Frommehnifer Holt [mai 0: ennlfer star to egg] Sank-April 8, 2015 :12:37 PM T0: ?Nathalle Levesque' Subject: RE: CMRRA Hello Nathalie: lam doing Well on this ralny davmyourself? Sorry I noted Model 2 In error. Yes i agree we are much more suited for the Standard Model being the MLA 1 238 The system I plan on using ls that I used Legacy. I input the tracks and the system generates the royaltles due. A copy of the Incorporation papers and credlt applleetlon is attached. In our business it is very to glue sales projectlone. We have some titles that may eellJust a couple hundred unlte and some that will sell 10005. We are not really In the ?hits? business. We are more in the "evergreen" business depends a lot on various promotions our customers may run at any glyen time. The majority ofourpreduct will fall In line budget we alsoheve a full line product. The initial plan ls to come out 25 budget titles and five "full line? products for the remainder of year. on the success those numbers may Increase. The majority of our produote fell under the $3.50 price point and we have a "full fine" products. That belng the case We will be looklng for the ?budget rate" as outllned In section 9 that you referred me to. if it Is helpful I can send you the list of tltles We currently have planned to release year. I have attached the requested credit If you would like to talk furtheryla phone please feel free to call me etyeur conyenlence. Thank you, Jennifer Holt Stargroye Entertainment From: Nathalie Leveeque Sent: Aprll 8, 2015 11:47 AM To: Jennifer?etarnroyeea Subject: CMR-RA Jennlfer, Hope you are well on this relny dey. i haven?t heard back from you regarding this-afternoon and my 2pm tlme slot got hooked qulte rapidly. 239 can you please lot mo know if you need to speak with me? i?m available tomorrow morning between 8am and 10am or at 15h30 Lot me know. Nathalie L?vosquo Assistant: Monogor~ Assistonto la Direction, independent Licensing Rx Royalties CMRRA [Canadian Musical Reproduction Rights Agency) defaol .ht 320 56 Woiiosioy Street West, Toronto, ON M55 283 Phono:4164925~19668xt. 2.51 ?Fox:416~926~7521 Email: mm uo omr .c 33 This is Exhibit ?33? referred to in the Afftihdavit of Terry Perusin?i sworn before me this 26 day of August, 2015 A Man/i5 A Commissioner for taking Affidavits, etc. Marie Elizabeth Wa ke?sld, a Commissioner. eta, Province of Ontario. ior WeirFoulds up. Barristers and Solicitors. Expires October 24. 2016. 240 241' From: Nathalie Levesque Sent: April 21, 2015 1:20 PM To: Jennifer Holt Subject: licensing Stargrove JenniferI Thank you for your email. As I mentioned in my last e-mall to you, there were a number of problems with Legacy's reporting under their MLA and some of these concerns were also highlighted in our correspondence. it did not workI as you?re saying. so we are concerned that you are using their system as an example. As you knowI CMRRA has been instructed by several of our publisher principals not to act on their behalf with respect to Issuing licences to Stargrove. Therefore, the remaining volume of licences that you would be seeking from CMRRA do notjustify the work required under an MLA. As forthe proposition put forward, we understand that you are eager to get your products licensed and so are we to collect the royalties on the products already on the market. HoweverI while we are happy to explore alternatives to our processes to accommodate for the regular shipments of-units, we still think that it would be best achieved by a meeting. Finally, as an aside can you please confirm whether Legacy's products are still being distributed in Canada? We understand from your email that Stargrove has nothing to do with Legacy, but since you were a previous employee of Legacy we hope you might be able to provide with some information or. if you can'tI let us know who we can speak to at Legacy to get this information. Please let us know if you are available for a meeting. l?m in the office on Tuesday, Wednesday and Thursday from 8am to 6pm. Best regards. Nathalie Levesque Assistant Manager Assistants a la Directionlr Independent Licensing 8t Royalties (Canadian Musical Reproduction Rights Agency) 320 5'6 Weliealey Street West, Toronto, ON M555 3233 Phone: 4-16-925?1966 ext. 25.1. Fax: i Era'laii: 1 242 From: "Jennifer Holt" To: "'Natnalie Layeque?"< Loves a rra.oe>, Date: O4!20i201509:48 AM Subject: FW: FW: Siargrove royally system Morning Nathalie: Thank you for your email last-week. My reference to Legacy related to the fact that we would be using the so me royalty reporting system they used. This system did work for CMRRA when I was with Legacy. The MLA has not changed since that time so I am somewhat confused as to the rationale how something that worked for another lmpendent label will not work torus. Stargrove has absolutely nothing-to do with Legacy. lmareiy used Legacy as an example to help us move matters forward. You noted that it is somewhat difficult to envisionextending Stargrove a MLA for three reasons. A) Budget Rate B) 500 units C) the threshold you require Is nearly being met. Can you please elaborate on each of these points please? Do we not get the budget rate? The 500 units is not at all what we will be selling on each album. islmpiyputthat number in the royalty report for example purposes. There will be some titles that will sell a few 1000 units and some that sell: 10,000 to 50,000. It really depends on the strength of each individual title and when you are not in the hits business that really cannot-be determined until the product is in the market. We are happy to explore your suggestion that we have a pay as your press system where we report on a quarterly basis (based on pressing). With this not being your standard practice I need you to elaboratefhow this would work. We do not want to get In the situation we Just had where we pay you for units pressed, you cash that money and then we are told we cannot have the licence. Please explain what you are referring to in terms of our distributor report and established deadlines. I appreciate the offer for a meeting in the coming weeks but that does not work. This matter has become very-urgent for us and I really do not have weeks to sort it, am sure the publishers you represent would be very happy to start generating revenues from the products we plan to distribute. We thaVe been trying to deal with CM ERA for months on and now, which included the Involvement of our counsel. We are simply an independent label that will be manufacturing sound recordings on a continuing basis for years to come. We will be manufacturing very large quantities on some of our titles and larger than small quantities on others. On that basis we should be on a MLA as explained on your web site. i appreciate you have administrative costs in setting up-each license and I assume from your email these costs are more when dealing under an MLA versus =Pay~As~You-Press. We are happy to work with you based on the guarantee that'we will press more than the 500 units you qualify pay?as?you press with, such as maybe minimu ms of 1000 units per?title. Thank you, Jennifer i-ioit Stargrove Entertainment From: Nathalie Levesquo i-malito:NLevesq ue@cmrra.cal Sent: April 16, 2015 4:54 PM To: jenniferC?Dstargrovem Subject: Re: FW: CMRRAX Star-grove - royalty system 243 Jennifer, Thank you for your email and your files. While we appreciate all the efforts Stargrove has made in communicating the information requested in order for CMRRA to assess its eligibility for theAgreement, we still have a number of concerns and trying to determine the best way to licence your products. Please allow us to explain. The royalty reporting system we discossed with Legacy a number of years ago was not developed specifically for your label but a system which has been in place and part of the Agreement for a number of years and applicable to all labels. recall correctly, when we met in 2009. it was to address the number of issues we had been having with the data, formatting, unsigned licences, lack of a pending list. deleted products, price structure list for budget products, etc. it is our understanding that between the time we met and when Legacy ceased its operation. a number of products were released/distributed in Canada but never licensed. Do you still have products that were previously distributed by Legacy that you require licences for? it is important to know that when a label cease Operation. it is expected to provide e'full reconciliation of account for all of its products. A reconciliation usually includes: "Catalogue list including The total units pressed sold i remaining in inventory i destroyed and/or sold to a third party. This is something that was never provided to CMRR-A. We reviewed the document you sent and can advise as follows: The royalty reporting contains formulas Naming convention was not applied Publisher summary is missing The pending list, as explained In the MLA is not in the proper format. Finally, we conducted a brief review of the 7 first products you plan on releasing and based on: a) budget rate is) 500 units 0) the threshold we require is nearly being met for the songs we represent for the purposes of licensing. it is for all these reasons that it is somewhat difficult to envision extending an Agreement under these conditions. As mentioned previously, the Pay as you press method might be best suited for your needs and requires a lot less administrative work. With the understanding that you might be shipping daily or on a regular basis, perhaps we can find a way to work around .it by allowing you to submit your pay as you press applications on a quarterly basis (still based on pressing). However, this is probably something that we should discuss one on one so we can see what your distributor report looks like and established deadlines. Let me know if you would be available for a meeting in the coming weeks. Thank you, Nathalie Levesque Assistant Manager Assistants a la Direction, Independent Licensing 81 Royalties CMRRA (Canadian Musics! Reproduction Rights Agency.) ymw. ,cmrra.ca 320 tit} Weilesiey Street: West, Toronto, ON 2553 Winner4ztor--E~32ti~1966 ext 251. i Fax: 4116-9263?75521 Email: From: "Jennifer Holt? 244 To: "'Nathalie Levesque? . Date: 04115i2015 10:30 AM Subject: FW: Stargrovo - royalty system Morning Nathalie: there is a bit of confusion. We de?nitely do have a royalty reporting system and it does comply with the MLA. Our royalty reporting system is one that CMRRA actually developed with us. When we spoke the other day i' mentioned how we will be using the same reporting system i used when i was with Legacy. You mentioned you believed there were problems with Legacy?s reporting system and on that note l-asked if there was any other system you recommended. We fully planned to start with our-current system but if you had something you recommended, we would look "into it as an eventual replacement if it helped you. Astor our current system, approximately 7 years ago ,myself and Terry Perusini came to your office and met with staff at CMRRA, and tbelleve you were also in the meeting. The meeting addressed some of the problems with the way we were reporting back then. CMRRA then worked closely with us and together-we created a report that worked much better and complied with the MLA. Since that meeting we had no further issues with our reporting system and all worked smoothly. it is that same system -I plan to use now under Stargrove. Sorry Nathalie, i probably should have Just did this from the start. Attached? is an example of that system We developed with CMRRA. i have entered-in some information purely for example purposes. This should resolve the confusion over our royalty reporting system. Hopefully you have everything you need now, and we can both move forward to finalize the MLA, where we can start generating revenues for you and the publishers CMRRA represents. Thank you, Jennifer Holt Stargrove Entertainment From: Nathalie Levesque Sent: April 14, 2015 3:46 PM To: Jennifer Holt Subject: RE: CMRRA royalty system Jennifer. Unfortunately. it is very hard for CMRRA to recommend a royalty system as it depends on whether you have IT resources, which system you already have in place (how the information has been tracked) and what type of budget you dispose of. There is a great variety of options avaiiabie out there so you?ll have to investigate which one is best suited for your needs. At this pointI given that you do not have a royalty system in place or able to produce a pending list (as required under the Standard MLA), it is somewhat difficult to envision extending an Agreement under these conditions. We will review the?information you sent, including the upcoming releases so we can determinerepresentation and assess your request. In the mean time, if you have additional details to provide, please feel free to forward it to my attention. Best regards, 245 Nathalie Levesque i Assistant Manager Assistante a la Direction, Independent Licensing Royalties CMRRA (Canadian Musical Reproduction Righto Agency) 320 56 Welleaiey ?treel: West, Toronto, ON M58 2533 Phone: ext. 2511 1 Fan: I Email: From: "JenniferHoit" <]enn fer star roye.oa> To: "'Naihalle ue cmrra.c Date: Moor-2015 01:23 PM Subject: RE: CMRRA Hello Nathalie: Great speaking with you this morning. Thank you for taking the time. Would you be able to recommend some of the royalty systems that other people are using? Then we could look into them and find one that works for us? Thank you, Jenn Holt Stargrove Entertainment From: Nathalie Levesque Sent: April 8, 2015 11:47 AM To: jennifert?istaroroveea Subject: CMRRA Jenn?en Hope you are well on this rainy day. i haven't heard back from you regarding this afternoon and my 2pm time slot got hooked quite rapidly. Can you please let me know if you need to speak with me? I?m available tomorrow morning between 8am and 10am or at i5h30 Let me know. Nathalie Levesque Assistant Manager Assistante a la Direction, Independent Licensing Royalties CMRRA (Canadian Musical Reproduction Rights Agency) 320 56 Street West, Toronto, ON MES .283 Phone: ext. 251 Fax: Email: nievesgue?cmrraca 34 246 This is Exhibit "34? referred to in the Affidavit of Terry Perusini sworn before me this 26?1 day of August, 2015 A Commissi?nejr for taking Affidavits, etc. Marie Eiizabam?Waka?eid. a Commissioner. an. Province of Ontario, for WeirFoulds up. Barristers and Solicitors. EXpires October 24. 2016. 247 CM MAN FACTU RER Mechanical i SE 9 Ag ree nt (Independent Labels - Mede! 1?1) as of January 1, 2013 248 MECHANICAL LICENSING AGREEMENT DATED as of January 1, 2-013 13 N: Canadian Musical Reproduction Rights Agency Limited, a Corporation incorporated pursuant to the laws of Canada having its principal offices at 56 Wellesley Street West, Suite 320., Toronto, Ontario Canada M55 283 on behalf of its Af?liated Publishers, - OF THE FIRST PART a AND - (?Manufacturer?? OF THE SECOND PART WHEREAS CMRRA carries on business as a non?exclusive agent for certain music publishers which have engaged CMRRA to issue licenses for the mechanical reproduction of certain musical compositions to manufacturers, distributors and importers of Recordings (as hereinafter defined), AND WHERE-AS Manufacturer carries on business by way of the manufacture or authorizes the manufacture, importation and/or distribution in and into Canada of Recordings containing reproductions of certain copyrighted musical works which are owned andx?or administered in Canada by publisher principals, AND CMRRA and Manufacturer acknowledge and agree that the prompt and efficient administration of this Agreement and of the licensing of musical compositions and accounting for and payment of royalties with respect thereto are of the utmost importance, AND WHEREAS Manufacturer acknowledges and agrees that its prompt application for licenses hereunder, its prompt handling of licenses issued by CMRRA hereunder and its prompt and accurate entry of licensing data into its royalty accounting systems are of the essence of this Mechanics?! Licensing Agreement (Independent Labeis) Model Page 1 January I, 2013 249 Agreement, and CMRRA acknowledges and agrees that its prompt handling of license applications and issuance of licenses hereunder are of the essence of this Agreement. AND WHEREAS CMRRA and Manufacturer wish to enter into an Agreement for such ptn'pose, THEREFORE WITNESS that in consideration of the mutual covenants and warranti es herein contained, and subject to all the terms and conditions hereinafter set forth, the parties hereto agree as follows: 1. De?nitions In this Agreement, the following "terms shall have the meanings indicated below: Affiliated Publisher: A music publisher for which CMRRA acts as Agent for'the mechanical licensing of Authorized Compositions (as hereinafter de?ned) in Canada and to carry on such licensing to Manufacturer pursuant to the terms hereof. Af?liated Publishers are set out on Schedule hereto as may be amended by CMRRA from time to time. Authorized Composition: A musical composition owned andior administered in whole or in part by an Af?liated Publisher, which publisher has engaged and instructed CMRRA to act as its agent for the mechanical licensing of such musical composition. CD: A digitally recorded audio compact disc of any size-or format but speci?cally excluding any digitally recorded and reproduced audio?visual disc of any size or format. Digital Recording: A digitally recorded disc, tape or other contrivance, excluding Due Date: That date which is fortyw?ye (45) days after the end of each calendar quarter, speci?cally, February 15, May 15, August 15 and November 15 in each year of the Term (as hereinafter defined). LP: An analogue Vinyl record of any size or playing speed. Manufacturer: the corporation that is the party of the Second Part to this Agreement, engaged in the business of manufacturing or authorizing the manufacture, importing andior distributing Recordings in or into Canada. C: An analogue audio cassette tape, related analogue or other related audio tape format, but speci?cally excluding any audio?Video tape in any format. Mechanical License: A license issued by CMRRA to Manufacturer subject to the terms hereof and pursuant to section 2 hereof. Mechanical! Licensing Agreement (Independent Labels) Mode! Page 2 January I, 2013 250 Musical "Work: A ?musical work? as de?ned in section 2 of the CopyrighiA ci' R.S.C. 1985, c. 042 (the with reference to any Musical Work including any fractional share of the cepyright in that work. Norm! ainorizcd Composition: A musical composition owned and/or administered in Whole or in part by an Af?liated Publisher which said Af?liated Publisher has instructed CMRRA to exclude from the scope of this Agreement as listed on Schedule hereto. A music publisher which has engaged CMRR-A to act as .its agent for the mechanical licensing of musical compositions to Manufacturers in Canada on terms and conditions at variance with those set out herein as listed on Schedule hereto. Prior License: A Mechanical License issued by CMRRA to Manufacturer prior to the effective date hereof. Promotional Product: A Recording containing a reproduction or reproductions of Authorized Compositions, manufactured especially for promotional purposes, including ?Radio ?Dance Pool Products? orany like con?guration, including Recordings available for sale to the general public through Manufacturer?s customary distribution and retail channels, when such Recording are distributed .free in Canada by Manufacturer to promote the sale thereof, provided that either the words ?Promotional Copy Not For Sale? or words having the same effect are marked on each Recording so distributed or on the packaging thereof, or that each Recording so distributed is cut or drilled or otherwise marked by Manufacturer to indicate same. Recording: The reproduction of a sound recording on LP, MC, CD, and/or DR, manufactured, imported or distributed by or on behalf of Manufacturer in or into Canada, but speci?cally excluding any audio?Visual recording. Release Date: The date on which Manufacturer releases a Recording for sale to the general public through its customary distribution and retail channels. Where a Recording is deleted by Manufacturer and subsequently reis sued in any format, the Release Date for such Recording will be the date of such rewrelease for all purposes herein, including the determination of applicable Royalty Rates pursuant to sections 3 and 7 herein. Royalty or The amountCs) payable by Manufacturer to CMRRA pursuant to Mechanical Licenses issued under this Agreement and calculated pursuant to the rates set out herein. Term: The "term of this Agreement shall commence upon January 1, 2013 and. conclude upon December 31, 2013. Track: An audio-only sound recording embodying, subject to subsection one or more Musical Works. Mechanical Licensing Agreement (Independent Lobcis) Model Page 3 January I, 2013 251 Schedules: The following are the schedules to this Agreement, each of which forms an integral part of this Agreement: Schedule - Af?liated Publishers Schedule - Non?Af?liated Publishers and Non~Authorized Compositions Schedule CMRRA Standard Royalty Format (Structured Data File Format) Schedule CMRRA Standard Royalty Format (Microsoft Excel Format) Schedule - Standard Format for Publisher Summary Schedule Unlicensed "Recording List Information Schedule - License Application Information 2. Scope of Agreement a) Applicability ongreemeni.? This Agreement applies only to the mechanical licensing in Canada of Authorized Compo sitions owned anchor administered in whole or in part by Af?liated Publishers to Manufacturer. Af?icted Publisher's: Upon request by Manufacturer, CMRRA shall provide Manufacturer with a list of all Af?liated Publishers, and shall provide Manufacturer with timely advice of all music publishers which become Affiliated Publishers and all music publishers which cease to be represented by CMRRA. Such list will form Schedule to this A greement and may be provided by CMRR-A either in printed or electronic form. Subsequent to the date of execution hereof, and for the duration of the Term, shall represent and issue licenses on behalf of Affiliated Publishers to Manufacturer for the uses set out herein, only pursuant to the terms hereof. Where an Af?liated Publisher ceases to be represented by CMRRA during the Term, it will no longer be bound by the terms hereof respecting the mechanical licensing of its musical compositions to Manufacturer in Canada subsequent to the date on which it ceased to be represented by CMRRA, but all Mechanical Licenses issued by CMRRA to Manufacturer while said Af?liated Publisher was represented by CMRRA will continue in full force and effect until the conclusion of the Term. Subsequent to the execution hereof, CMRRA may amend Schedule by providing Manufacturer with a notice in the form attached hereto as Exhibit and the provision of such notice will be deemed to be an amendment to Schedule CMRRA may revise or replace the form of Schedule and Exhibit at any time by providing notice of same to Manufacturer. (b2) Non?Affiliated Publishers: Prior to the execution hereof, CMRRA shall provide Manufacturer with a list of all Now-Af?liated Publishers. Such list will form Schedule to this Agreement. During the Term hereof, CMRRA will not undertake the representation of any further Non~Aifiliated Publishers, provided that in any case where, prior to the date hereof, has undertaken the representation of a Non?Affiliated. Publisher on the basis of instructions at variance Mechanical Licensing Agreement (Independent Labeis) Model Page 4 January I, 2013 252 with the terms hereof, CMRRA shall continue to so represent such Non?Affiliated Publisher and shall issue licenses with respect thereto exclusively in accordance with such instructions as the Non? Af?liated Publisher thereof has given, or may subsequently give, to CMRRA. (0) Noti?cation ofNon~Aainorizecl Compositions: Upon the execution hereof, CMRRA will provide Manufacturer with a list of all Non~Authorized Compositions. Such list will form Schedule to this Agreement. During the Term hereof, CMRRA will not undertake the representation of any further Non~Authorized Compositions, provided that in any case where, prior to the date hereof, CMRRA has undertaken the representation of a Non~Authori zed Composition on the basis of instructions at variance with the terms hereof, CMRRA shall continue to so represent such Non-?Authorized Composition and shall issue licenses with respect thereto exclusively in accordance with. such instructions as the Publisher thereof has given, or may subsequently give, to CMRRA. Individual Licensing of Works: This Agreement does not constitute a license. (in) Applications for Mechanical Licenses: Manufacturer shall make application to CMRRA for Mechanical Licenses for all Recordings sold or otherwise distributed in Canada by Manufacturer Where such Recordings contain reproductions of musical works. Such application will be made by way of Manufacturer providing CMRRA with one (1) copy of each CD, LP, MC or DR version of each Recording which it releases for sale to the public in the ordinary course of its business (?Sample Product?). Manufacturer will, at the same time, provide CMRRA with information respecting the Musical Works reproduced on such Recordings as set out in Schedule hereto. Manufactiu'er?s application will include all information which is indicated as ?Mandatory? on the said schedule and may include information which is indicated as ?Conditional?. More specifically, ?Conditional? information is information that must be provided to CMRRA if it is available to Manufacturer. Manufacturer may, at its election, provide CMRRA with printed label copy as an accompaniment to, but not in place of, the copy of each Recording provided herein by way of application for licenses. (Lb) Controlled Compositions: Where Manufacturer intends to rely upon the terms of a controlled composition clause in the determination of the Royalty Rate reSpec-ting any - Mechanical License, it shall advise CMRRA of such intention in writing at the time such Recording is provided to CMRRA hereunder. - (Le) Directly Licensed Works: Upon request by CMRRA, Manufacturer will advise CMRRA of any Mechanical Licenses which have been issued directly to Manufacturer at any time during the Term by one or more publishers or copyright owners with respect to musical works reproduced on the Recording. Manufacturer acknowledges that CMRRA has no responsibility or liability for the accuracy or suf?ciency of any such directly issued Mechanical Licensing Agreement (Independent Labels) Model 1-4 Page 5 January 1, 2013 253 license and that Manufacturer at all times bears the risk associated with obtaining and complying with the terms of such licenses. (ii) Disposal cfSampie Products: CMRRA will not sell any Sample Product provided to it by Manufacturer pursuant to this section but will be under no obligation to return such Product to Manufacturer. Compilation Products: Where a Recording contains Tracks performed by different performers, Manufacturer?s application(s) respecting such Recording will wherever reasonably possible disclose the name(s) of the perforn1er(s) of each composition contained therein. (i v) Identical Programs: Where an LP, CD, MC or DR contains a sequence of recordings of Authorized Compositions (?Program?) and such Program is reproduced more than once on such LP, MC, CD or DR, then CMRRAshall issue a Mechanical License only respecting the first such recording of each such Authorized Composition in such Program and Manufacturer shall not be obliged to make application for a Mechanical License or pay Royalties for such Authorized Compositions in such other Pro gram(s). (V) Issuance of Licenses: Subject to the terms and conditions hereof, in response to applications received from Manufacturer pursuant to subsection herein, CMRRA shall, on behalf of Af?liated "Publishers, grant individual Mechanical Licenses to Manufacturer on a use?byatse basis authorizing the mechanical reproduction of Authorized Compositions on Recordings manufactured by or on behalf of Manufacturer in Canada or imported by or on behalf of Manufacturer into Canada, and authorizing the distribution thereof in Canada. Mechanical Licenses issued hereunder may, at election, be provided to Manufacturer in the form of licenses individually issued "with respect to one or more ownership interests in musical works or in the form of reports setting out the terms of each license. Such licenses will be subject to the terms and conditions of this Agreement. Manufacturer agrees to be bound by such licenses at the time they are issued by CMRRA. Manufacturer shall be permitted to reject a Mechanical License only by reason of a deficiency in the Mechanical License itself and shall disclose its reason for doing so with the rejection of the Mechanical License. Each Mechanical License issued by CMRRA to Manufacturer hereunder will include the information set out on Exhibit and will be deemed to include the following terms and conditions: 1. Grant of?Lieense: At the request of Licensee and in its capacity as agent for the Copyright Owner/Administrator, CMRRA hereby grants to Licensee a non?exclusive license to reproduce the Musical Work described above on the Recording described in the Mechanical License and to distribute and sell such Recording in Mechanical Licensing Agreement (Independent Labeis) Model Page 6 January I, 2013 254 Canada for private use by the public, subject to the terms and conditions which follow. Such grant right is limited to the Percentage of Copyright owned or administered by the Copyright Ownen?Administrator. 2. Arrangement or Alteration oansz'cai Work: Licensee may arrange the Musical Work for the limited purpose and to the limited extent necessary to conform it to the style or manner of interpretation of the Artist/Group involved, subject to section 2(e) of the Mechanical Licensing Agreement, but shall have no right to insert new words into the existing lyrics, to alter the basic melody or to otherwise arrange the music, or generally to change the fundamental character and unity of the Musical Work. Licensee may not olaimany ownership or other interestin, or register, any arrangement permitted under this section as a'work under the ILS. 1985, c. C- 42. 3. Label andJaeket Information: Licensee shall use best efforts to imprint the Title of the Musical Work followed by the name(s) of the Composer/Author and Copyright OwnerfAdminisirator on the label, jacket or container of every Recording made under this License where the production of the printed matter associated with a Recording is beyond its control and where the printed matter associated with a Recording is within the Licensees control it will imprint the Title of the Musical Work followed by the name(s) of the composer/Author and Copyright Owner/Administrator on the label, jacket or container of every recording made under this License. 4. Limitations on Use: All reproduction or other use of the Musical Work not specifically authorized by this Mechanical License, or by the written consent of CMRRA, is prohibited. 5. This Agreement is subject to and incorporates the terms and conditions of the Mechanical Licensing Agreement (Independent Labels) dated as of January 2013 between C-MRRA and Licensee. CMRRA will issue such Mechanical Licenses as soon as possible after its receipt of applications therefore from Manufacturer, provided that where Manufacturer has noti?ed CMRRA that it relies upon the terms ot?a controlled composition clause as being applicable to determination of the Royalty Rate for any Mechanical License, CMRRA will ref-rain from issuing such license until Manufacturer has provided CMRRA with the recording agreement excerpts set forth in section 7(d) herein, or until the expiry of the time periods set out in section 7(a) herein, whichever shall ?rst occur. Mechanical Licensing Agreement (Independent Laoeis) Model Page 7 January 1, 20! 3 255 Applicability of Agreement: This Agreement is not applicable to any of the following uses except to the extent that the same has been authorized by the Af?liated Publisher: visual reproduction or printing of lyrics or music of any Authorized Composition; (ii) the use of an Authorized Composition in a medley or a mashup; the use of an Authorized Composition, in whole or in part, as a ?sampled? use, whether the ?sampling? is effected digitally or otherwise in any medium or through the use of any technology now or hereafter known; (iv) any parody or translation of the lyrics of an Authorized Composition. any rental of a Recording by Manufacturer, or sale by Manufacturer of aReeording for the intentional purpose of rental; (vi) any commercial use of the Recording other than for distribution and sale in the Territory for private use by the public (whether for background music, disk jookey or broadcast use), unless such distribution or sale is made with the express limitation that the user is not authorized to reproduce the Recording without the express prior written consent of CMRRA or the Af?liated Publisher(s) involved; (vii) any reproduction of an Authorized Composition in any audio? visual recording; any reproduction of an Authorized Composition by way of any contrivance not speci?cally authorized herein; (ix) any reproduction of a musical composition for Which Manufacturer has obtained a direct license from an Authorised Publisher. Manufacturer may make separate application to CMRRA for the purpose of obtaining licenses for any of the above purposes, the terms and conditions of which licenses, if granted, shall be expressly subject to individual negotiation between Manufacturer and CMRRA on behalf of the Af?liated Publisher(s) involved. Renewal of'PricrLz?eeases: All Prior Licenses, if any, are deemed to be and hereby are renewed for the Term hereof. The terms and conditions appearing on the back of Prior Licenses are hereby replaced by those set out in Section of this Agreement. Mechanical Licensing Agreement (Independent Labeis) Model 1?1 Page 8 January I, 20} 3 256 Amended and Reprinted Prior Licenses: CMRRA may, where reasonable, at its discretion, amend. any Mechanical License or Prior License. Such amendment may occur upon any material change in the ownership of the Authorized Composition (or partial interest therein), to replace a missing or lost license, or at the request of the Af?liated Publisher(s) involved or of the Manufacturer. The amended license will be binding upon the parties hereto respecting the Authorized Composition licensed thereby. Provision ofiiet?aiter Materials: Manufacturer will provide CMRRA with copies of all release announcements or noti?cations, deletion announcements or notifi cations, product catalogues which it customarily provides to its retail customers, at the same time at which such materials are provided to such retailers. Distributed Labels: Manufacturer acknowledges that it may, from time to time, enter into licensing, distribution or other agreements with persons, firms or corporations in the music business (?Third Parties?) for the manufacture and/ or distribution of Recordings which may contain reproductions of Authorized Compositions, but that the terms of such agreements put the onus and responsibility of licensing such reproduction on such Third Parties. Likewise, Manufacturer acknowledges that it may, from time to time, enter into agreements with Third Parties by which Manufacturer acquires the right to sell or otherwise distribute by or on behalf of such Third Parties which may contain reproductions of Authorized Compositions. Manufacturer recognizes interest in ensuring that such reproduction of Authorized Compositions is carried on pursuant to licenses duly issued by CMRRA to such Third Parties, and that royalties are paid by such Third Parties to CMRRA pursuant thereto. Accordingly, Manufacttu?er will, upon receipt of written authorization from any such Third Party, provide CMRRA, in the course of administration of licensing agreements with such Third Parties with such reasonable assistance and provision of information as CMRRA may from time to time request including, without limiting the foregoing, such information as CMRRA may reasonably require to conduct copyright royalty examinations of the books and records of such Third Parties. Manufacturer agrees that it will be jointly and severally liable with Third Parties to CMRRA for the. payment of all royalties payable pursuant to licenses issued with respect to Recordings dealt within this paragraph and that CMRRA may at its discretion seek payment of all such royalties in the event of failure or refusal of Third Parties to pay same. Security: Before this Agreement takes effect, Manufacturer agrees to deposit an amount to be mutually agreed between it and CMRRA, which shall be held in trust by CMRRA as security for the proper performance by Manufacturer of all the terms and conditions of this Agreement. During the term hereof, CMRRA may apply the deposit or any part thereof towards the payment of any Royalty due or other charges by Manufacturer by reason of any default of Manufacturer in complying with the term-s hereof. The deposit shall accrue interest at current bank rates on short-term deposits which shall be held in trust by CMRRA pending full and complete performance of the terms and co nditions herein. CMRRA may additionally require Manufacturer to deposit further amounts with CMRRA during the term hereof for the same purpose. The amount of the initial deposit payable hereunder and any additional deposit(s), the due date(s) for payment Mechanich Licensing Agreement (Independent Labets) Mode! 1?1 Page 9 January 1, 2013 257 thereof and such other terms and conditions as CMRRA may require shall be embodied in one or more amendments to this Agreement. 3. Royalty Rate Royalty Rate: Subject to the provisions of sections 2, 7, 8 and 9 hereof, Manufacturer will pay Royalties pursuant to this Agreement on a quarterly basis by no later than the Due Date following the conclusion of each calendar quarter during the Term at the following royalty rate (?Royalty Rate?): for all Recordings sold or otherwise distributed during the Term, the Royalty Rate shall be, for each reproduction of an Authorized Composition, where the running time of the Recording is five (5) minutes or less, eight and three-tenths cents ($0.083) per Authorized Composition .per Recording (ii) where the running time of the Recording is longer than (5) minutes, eight and three?tenths cents ($0.083) per Authorized Composition per Recording for the first ?ve (5) minutes of such Authorized Composition and one and sixty?six one~ hundre cents $00 1 6 6) per additional minute or part thereof of such Authorized Composition per Recording. Royalty Rate for Peter Periods: Manufacturer?s obligation to account for and pay Royalties will be determined pursuant to the terms hereof. Manufacturer will account for and pay Royalties at the applicable Royalty .Rate during each Period in which Recordings were or are sold or otherwise distributed. The applicable Royalty Rate for prior periods are as follows: Prior Period Royalty Rate Prior to October 1988 0.02 From October 1, 1.988 to September 30, 1990 0.0525 From October 1, 1990 to December 31, 1991 0.059 From January 1, 1992120 December 31, 1993 0.0625 From Janualy 1, 1994 to December 31, 1995 0.0647 From January 1, 1996 to December 31, 1997 0.066 From January .1, 1998 to December 1999 0.071 From January 1, 2000 to December 31, 2001 0.074 From January 1, 2002 to June 30, 2007 0.077 From July. 1, 2007 to December 31, 2009 .081 From January 1, 2010 to December 31, 2012 0.083 4. Payment of Royalties Obligation to Pay Royalties: Subject to the provisions- shall be due on all Recordings sold or otherwise distributed. All my bank charges, Goods and Services or any other applicable tax. Per. Min. Rate 0.004 0.0105 0.0118 0.0125 0.0129 0.0132 0.0142 0.0148 0.0154 0.0162 0.0166 of this Agreement, royalties alty payments will be net of all Interest on Overdue Quarterly Payments: Where Manufacturer?s regular quarterly payment of Royalties is made to CMRRA later than the relevant Due Date, Manufacturer shall pay Mechanical Licensing Agreement (Independent Labels) Model January I, .20} 3 Page 10 258 interest on the full amount of royalties due for that quarter at that rate which is equal to the prime rate as set by the Bank of Canada prevailing on the Due Date plus two per cent calculated on a daily basis. Such interest shall be due and owing upon the day on which the overdue payment is made to CMRRA. Where Manufacturer?s regular quarterly payment includes an overpayment made by Manufacturer, CMRRA shall return such amounts to Manufacturer. Such payment will be made by CMRRA either upon discovery of Manufacturer?s overpayment or upon Manufacturer?s request thereof and will not be deducted by Manufacturer from any amount Otherwise payable to CMRRA hereunder in the absence of such request. If CMRRA does not make such payment to Manufacturer within thirty (30) days after receipt of Manufacturer?s notice to CMRRA or discovery as the case may be, CMRRA shall in addition pay interest on such returned amount, calculated in the manner set-out above. Royalty payments related to the return of Recordings subsequent to the liquidation of Manufacturer?s reserve pursuant to section 11 herein will not constitute an overpayment as set out in this section. (0) Royalty Statements: With respect to each quarterly period of the Term hereof, Manufacturer?s payment-of Royalties shall be accompanied by separate, accurate royalty statements for each Mechanical License issued by CMRRA to Manufacturer. Such royalty statements shall be delivered to CMRRA in electronic form conforming to one of two formats: either as the format outlined in Schedule attached hereto for the submission of a structured data file, or as Schedule attached hereto for the submission of a Microsoft Excel file or such other data ?le agreed to in advance by CMRRA. The royalty statements will include all data which is indicated as ?Mandatory? on the said format and may include data which is indicated as ?Ccnditional?. More speci?cally, ?Conditional? data is data that must'be provided to CMRRA if it is available to Manufacturer. Manufacturer will include all Conditional data for all new licenses issued by CMRRA to Manufacturer after the date of execution thereof and Manufacturer will use its best efforts to include the Conditional data for licenses issued prior to this date. Manufacturer shall work with CMRRA in good faith to ensure that the chosen electronic format is implemented properly. Such efforts to ensure proper implementation shall include Manufacttn'er?s submission of test electronic ?les to CMRRA in a timely manner, for approval by CMRRA. In addition, Manufacturer" 5 payment of .Royalti es and electronic royalty statements shall be accompanied by accurate printed and electronic summaries of the total amounts payable to each Af?liated Publisher, in the format attached hereto as Schedule Any adjustment appearing on a statement must be accompanied by sufficient reasonable information to explain the purpose for which such adjustment was made. The number of units for which Royalties are being paid in each quarterly period shall be adjusted to indicate any reserve(s) claimed by Manufacturer pursuant to section 11 of this Agreement, whether the reserves are withheld or liquidated. For greater clarity, each line item on Manufacturer?s royalty statement shall indicate the number of units payable, accounting for any reserve. A reserve cannot be accounted for by reducing or increasing the royalty amount payable for Mechanical Licensing Agreement (Independent Labels) Mode! Page I I January I, 2013 . 259 each line item, or by reducing or increasing the total amount of royalties payable either to an Af?liated Publisher or Non?Af?liated Publisher, or the total amount of royalties payable to CMRRA. Unlicensed Recording Lists: Each quarterly payment ofRoyalties will be accompanied by an accurate cumulative listing of all Recordings sold or otherwise distributed by Manufacturer up to the end of the quarterly period prior to the Due Date, in respect of which Royalties have not been paid by Manufacturer or Mechanical Licenses have not for any reason been obtained for any ownership interest in any musical compositions reproduced therein (?Unlicensed Recording List?). Manufacturer shall provide CMRRA with the Unlicensed Recording List in the format set out in Schedule or in an electronic format mutually agreeable to CMRRA and Manufacturer. The Unlicensed Re cording List will include all data which is indicated as ?Mandatory? on the said format and may include data which is indicated as ?Conditional?. More speci?cally, ?Conditional? data is data that must be provided to CMRRA if it is available to Manufacturer. Licensing and Payment of Royalties on Unlicensed Recordings: CMRR-A shall, upon its receipt of an Unlicensed Recording List, review such list and identify any musical compositions which are Authorized Compositions or Non?Authorized Compositions and will issue Mechanical Licenses to Manufacturer with reapect thereto pursuant to thisAgreement. Manufacturer will, upon receipt of same, execute each Mechanical License and return such Mechanical License to CMRRA. Payment of all accumulated Royalties respecting such Authorized Compositions or Non-?Authorized Compositions and Royalty statements respecting such payment in like form to that set out in section 4(d) herein shall be delivered to CMRRA on the following Due Date. Interest on Unlicensed Recording: (1) No Application Made: Where CMRRA identi?es a composition and issues a Mechanical License pursuant to section 4(a) herein respecting a Recording containing a reproduction of an Authorized Composition represented by an Af?liated Publisher and no proof of application for such license can be provided respecting such Recording, then interest will be payable upon the payment of Royalties with respect thereto, such inter-est to be calculated pursuant to section 4( g) herein from the next Due Date subsequent to the Release Date of the Recording to the date of payment. (ii) Where Application Mode Inseg??cient Information: where CMRRA identifies a composition and issues a Mechanical License pursuant to section 4(a) herein respecting a Recording containing a reproduction of an Authorized Composition represented by an Affiliated Publisher and an application was received from Manufacturer respecting such Recording, but CMRRA advised Manufacturer that such application did not disclose at least the title of the musical composition, the name(s) of?thc author(s) or the publisher(s') to enable CMRRA to identify the composition, then interest will be payable upon the payment of Royalties with respect thereto, such interest to be calculated pursuant to section 4( g) herein from the Mechanical Licensing Agreement (Independent Labels) Mo del Page 12 January I, 2013 260 next Due Date subsequent to the Release Date of the Recording to the date of payment, excluding the period of time commencing upon the date of application to CMRRA and concluding sixty (60) days after the date of response to Manufacturer with respect to such application (?Interest?Free Period?), In the event that Manufacturer supplied additional information to CMRRA within such sixty (60) day period in an effort to identify the composition or the ownership thereofand such information does not enable CMRR-A to do so, the conclusion of the Interest?Free Period shall be extended to that date which is sixty (60) days after which CMRRA advises Manufacturer that it remains unable to identify the composition in question. The Interest-Free Period may likewise be extended by the provision of further information by Manufacturer to CMRRA. Where Application Made - Unreprescnted .Pabitsher: where CMRRA identi?es a composition and issues a Mechanical License pursuant to section 4(e) herein respecting a Recording containing a reproduction of an Authorized Composition represented by an Affiliated Publisher and an application was received from Manufacturer respecting such Recording, but CMRRA advised Manufacturer that it did not'represent the Publisher thereof at the time of such application, but that the publisher had become af?liated with CMRRA subsequent to such application, then no interest will be payable upon the payment of Royalties with respect thereto. (iv) Royalties Withheld: Where, notwithstanding the issuance of a Mechanical License by CMRRA, Manufacturer withholds the payment of Royalties without just cause and includes such royalties on an Unlicensed Recording List, Manufacturer will pay all such Royalties to CMRRA on the next subsequent Due Date together with interest to be calculated pursuant to section 4(g) herein from the next Due Date subsequent to the Release Date of the Recording to the date ofpayment. receipt of such Royalties will not impair or diminish its remedies arising from such withholding of Royalties. Where a manufacturer withholds payment of Royalties pursuant to this subsection, it will notify CMRRA with same and its reasons for such withholding. (inhalation of Interest: Where interest is payable pursuant to section 4(1) herein, it shall be calculated-on the basis ofa rate which is equal to the prime rate as set from time to time by the Bank of Canada plus two percent (2 on a quarterly basis during the period in which interest is to be calculated pursuant to section 4(1) herein. 5. Free Goods Except as provided in sections 6 and ?7 herein, royalties will bepaid quarterly on Recordings distributed on a free or no charge basis, on the same rates and terms that apply to Recordings otherwise sold. 6. Promotional Copies Mechanical Licensingxigreem eat (Independent Labels) Mode! In] Page 1 3 January I, 2013 261 Allowance: No royalties will be payable on Promotional Products, as that term is defined herein, up to a maximum of two thousand (2,000) units (all formats combined). Manufacturer shall provide CMRRA with one (1) copy of each such Promotional Product for inspection at the same time at which such Promotional Product is distributed by Manufacturer. CMRRA will not sell or otherwise distribute any Promotional Products provided to it hereunder. To the extent that any Promotional Product contains any Authorized Composition, the provision of a copy of such .Promoti onal Product to CMRRA is deemed to be an application for a Mechanical License with respect thereto, and each Authorized Composition reproduced'therein is deemed to be licensed pursuant to the terms hereof, and no royalties are payable with respect thereto. 7. Controlled Compositions Definitions: In this Section, the fallowing terms shall have the meanings indicated be? low: Recording Agreement: A written agreement between Manufacturer and a recording artist for the production of master recordings or a like agreement between Manufacturer and a third party by which the rights granted in such agreement are assigned or licensed to Manufacturer by such recording artist or third. party. Controlled Composition: A musical composition which is wholly or partially owned or controlled by any person, firm or corporation which has granted or authorized the granting of rights thereto in a Recording Agreement. Controlled Composition Clause: Any provision of a Recording Agreement that grants or authorizes the granting of Mechanical Licenses at a rate with respect to a Controlled Composition. Non?Controlled Compositions: Any Authorized Composition or partial ownership interest therein that is not subject to such control, ownership or other form of interest as would make it subject to the provisions of a Controlled Composition Clause will be payable at the applicable Royalty Rate as set out in section 3. (0) Licensing of Controlled Compositions: Subject to section 7(f) herein, Manufacturer will apply to CMRRA for Mechanical Licenses for the reproduction of Controlled Compositions in Recordings pursuant to the terms hereof. The Royalty Rate payable for a Controlled Composition shall be determined solely in accordance with the Controlled Composition Clause, provided howetIer that: Pro-October 1, 1988: Where the Release Date of a Recording occurred prior to October 1, 1988; Mechanical Licensing Agreement (Independent Labels) Model Page 4 January I, 2013 262 (1) Definition: The terms ?statutory rate?, ?industry rate? or any term having a similar effect in a Recording Agreement shall be deemed to refer to the applicable royalty rate below (?Base Royalty Rate?) as of the Release Date, for the ?rst five minutes of playing time (or less) of an Authorized Composition: Release Date Royalty app/feeble on that date Jan. 1, 1924 Dec. 31, 1977 2 cents Jan. 1, 1978 Jun. 30, 1981 2 3/4 cents Jul. 1, 1981 -_Dec. 31,1982 4 cents Jan. 1, 1983?Jun.30, 1984 41/4 cents Jul. 1, 1984- Dec. 31, 1985 4-1/2 cents Jan. 1, 1986~Sept 30, 1988 5 cents (ii) Playing Time Exceeds Five Minutes: Where the playing time of a'Recording of a Controlled Composition exceeds ?ve (5) minutes, the Base Royalty Rate shall be increased by one fifth of its value for each minute (or part thereof) of additional playing time; (?brin/immune Per~Composirion Rate: In no case shall the Royalty Rate payable for a musical composition be .less than two (2) cents; (i?Paymenr 0f Royalties: Royalties will be paid by Manufacturer pursuant to the terms of section 4 of this Agreement. (0.2) October 1, 1988 September 30, 1990: Where the Release Date of a Recording of a Controlled Composition occurred on or after October 1, 198 8 and on or before September 30. 1990, (1) De?nition: The terms ?statutory rate?, ?industry rate? or any term having a similar effect in a Recording Agreement shall be deemed to refer to the Royalty Rate for Recordings applicable during each Period as set out in section '3 herein for a Recording of five (5) minutes playing time or less. (ii) Royalty Rate Percentage: Where the Percentage [hereinafter defined in section is less than seventy ?ve percent it will be deemed to be equal to seventyu?ve percent (75 Where the Percentage in the Controlled Composition Clause is higher than seventy??ve (75 the Percentage will be equal to that number set out in the Controlled Composition Clause. Cap Provisions: Where a Controlled Composition Clause limits the total Royalties which a Manufacturer will pay with respect to all musical compositions reproduced setting a maximum amount which is determined by multiplying a Whole-number (?Multiplier?) bya percentvage (?Percentage?) of the Royalty Mechanical Licensing Agreement (Independent Labels) Model Page 5 January I, 20} 3 . 263 Rate, such provision will be given full force and effect in the determination of the Royalty Rate for any Controlled Composition to which this section 7(c.2) applies, provided that in no event shall the royalty rate payable for a musical composition be at a rate which is less than fifty percent of the Royalty Rate for a Recording with a playing time of less than five (5) minutes which is applicable during each Period as set out in section 3 herein. (iv) Free Goods: Where a Controlled Composition Clause provides that Royalties may be paid on lessthan one hundred percent (100%) ofall Recordings sold, Royalties shall be paid on the proportion of all Recordings on which Manufacturer is obliged to pay Royalties which is Set out in the Controlled Composition Clause, or upon eighty?five percent of all Recordings sold whichever amount is greater. Post-?October .1, 19.90: Where the Release Date of 8. Recording of a Controlled Composition occurred or occurs on or after October 1, 1990, Definition: The terms ?statutory rate?, ?industry rate? or any term having a similar- effect in a Recording Agreement shall be deemed to refer to the Royalty Rate for Recordings applicable during-each Period as set out in section 3 herein for a Recording of five minutes playing time or less. (ii) Royalty Rate Percentage: Where the Percentage [as hereinafter defined in section is less than seventy ?ve percent it will be deemed to be equal to seventy-?ve percent Where the Percentage in the Controlled Composition Clause is higher than seventy?five the Percentage will be equal to that number set out in the Controlled Composition Clause. Cop Provisions: Where a Controlled Composition Clause limits the total Royalties which a Manufacturer will pay with respect to all musical compositions reproduced setting a maximum amount which is determined by multiplying a whole number (?Multiplier?) by a percentage (?Percentage?) of the Royalty Rate, such provision will be given full force and effect in the determination of the Royalty Rate for any "Controlled Composition to which this section applies, provided however that the number of compositions shall be determined as follows: (1) Albums: With respect to an LP, MC, CD, or DR, containing no less than eight (8) musical compositions, where the Multiplier in the Controlled Composition Clause is less than twelve (12), it will be deemed to be equal to twelve (12). Where the Multiplier in the Controlled Composition Clause exceeds twelve (12), the Multiplier will be equal to that number. (2) MrltipZe?A-Zbum Con?gurations: With respect to a multiple set consisting of more than one LP, MC, CD or DR, the Multiplier shall be as follows: Mechanical Licensing Agreement (Independent Labels) Model Page 6 January 1, 2013 264 Number chI? 1, MC CD is Maltualier or DR ?s in Multiple Set each additional I add 8 (3) Singles and Other Formats: With respect to singles, cassette? singles CD singles and all other non-album and non?multiple album formats, the Multiplier shall be that number set out in the Controlled Composition Clause. (iv) Multmle Mixes: Where a CD single or cassette single or ?extended play? product contains multiple Versions of a Controlled Composition, CMRRA will is sue a Mechanical License and Royalties will be pay able at the full Royalty Rate by Manufacturer only with respect to the Recording of such Controlled Composition with the longest running time. Such Mechanical License will be deemed to include all other Versions of such Controlled Composition reproduced on such product. In no event will this section apply to the reproduction of Compositions, provided that Manufacturer may make an application to CMRRA on behalf of the Af?liated Publisher of a Non-Controlled Composition for a Royalty Rate which is at variance from that otherwise applicable pursuant to the terms of this Agreement. (V) Minimum Per~Ccmposition Rate: Notwithstanding the application of any Cap Provision, as modi?ed by this section in no event shall the royalty rate payable for a musical composition be at a rate which is less than ?fty percent of the royalty rate for a Recording with a playing time of less than five (5) minutes Which is applicable during each Period as set out in section 3 herein. (Vi) Free Goods: Where a Controlled Composition Clause provides that Royalties may be paid on less than one hundred percent (100%) ofail Recordings sold, Royalties shall be paid. on the proportion of all Recordings on which Manufacturer is obliged to pay Royalties which is set out in the Controlled Composition Clause, or upon eighty-dive percent of all {Recordings sold whichever amount is greater. RecordingAgreemcnt Excerpts: No Mechanical License will be issued in respect of a Controlled Composition unless and until Manufacturer provides CMRRA with excerpts from the applicable Recording Agreement which contains the Controlled Compos?iti on Clause relied upon by Manufactm'er and which discloses the following information: The date of the Recording Agreement; Mechanical Licensing Agreement? (Independent Labels) Model Page I 7 January I, 2013 265 (ii) the names of all parties to the Recording Agreement; the Controlled Composition Clause; (iv) any de?ned terms set out in any of the above excerpts; and, the signed and dated signature page. Notwithstanding the foregoing, nothing contained herein shall derogate from thevalidity or enforceability of any Controlled Composition Clause relied on by the Manufacturer as between Manufacturer and any party other than CMRR-A or an Authorized Publisher. Failure to Provide Excerpts: In the event that the excerpts from the applicable Re? cording Agreements set out in section 7(d) herein are not provided to CMRRA within sixty (60) days of the Release Date of a Recording, CMRRA may provide Manufacturer with thirty (3 0) days? written notice of its intention to issue a Mechanical License in respect thereof at the full Royalty Rate. If Manufacturer has not provided said excerpts within'said notice period, CMRRA may issue a Mechanical License respecting such Recording at the full Royalty Rate (?Full?Rate License?). Subsequent production by Manufacturer of said excerpts will retroactively cure any prior failure to provide same. On the provision of said excerpts, CMRRA will amend the Full-Rate License to conform to the applicable provisions of this section 7. Manufacturer will be entitled to make adjustments for any overpayment of Royalties which occurs pursuant to this section Challenge to Controlled Compositions: It is understood and agreed that nothing in this section shall in?uence or affect any challenge by any persons, in any forum, of the validity or effect of any Controlled Composition Clause or part thereof. 8. Deletes Deletion: Where Manufacturer deletes a Recording containing reproductions of Authorized Compositions licensed to Manufacturer hereunder from its catalogue of products offered for sale to its customers (?Deleted Recordings?), it will provide CMRRA with written notice of such deletion on a quarterly basis. Manufacturer may, for this purpose, provide CMRRA with a copy of the deletion notice which it provides to its customers. Royalty: Desiree-lion of Delei'ed Recordings: Where Manufacturer destroys Deleted Recordings, no royalty shall be payable to CMRRA with respect thereto. Manufacturer will maintain reasonable records and documentation of such destroyed goods which shall be made available to CMRRA upon request. (ii) Sale of Deleted Recordings: Where Manufacturer sells Deleted Recordings, the Royalty payable will be as follows: Mechanical Licensing Agreement {Independe?iti Labels) r~ Model Page I 8 January l, '20] 3 266 (A) Where Deleted Recordings are sold at or below three dollars and cents each, Manufacturer will pay a Royalty equal to filteen per cent of the proceeds of such sale. (B) Where DeletedRecordings are sold for greater than three dollars and ?fty cents .50) each, Manufacturer will pay the Royalty Rate otherwise applicable pursuant to this Agreement. Payment ofRoyalty: The amount and payment of Royalties referred to in subsection 8(b)(ii) herein will be payable on the next Due Date and will take into account share of market as agreed upon between CMRRA andManufacturer. Manufacturer will maintain records of the proceed of sale of Deleted Recordings and submit such information to CMRRA along with its payment of Royalties Cancellation ofLicenses: Where Manufacturer has provided with notice of Deletion as set out in section herein, CMRRA will cancel all Mechanical Licenses issued to Manufacturer respecting such Deleted Recording, provided that all rights (except for the right to manufacture further Recordings), representations, warranties, covenants, indemni?cations and obligations shall survive the cancellation thereof. 9. Royalty Reduction for Budget Recordings De?nition: In this section, ?Best Setting Price means the price in effect to the largest-volume dealers purchasing Recordings from Manufacturer; (ii) ?Fall Line Product means the product line released by Manufacturer containing most of Manufacturer?s new releases; ?Budget Recording? means a Recording, the Best Selling Price of which is ?fty? five percent or less of the Best Selling Price for Full Line Product offered for sale by Manufacturer. (iv) Where Manufacturer does not sell or otherwise distribute Full Line Products, ?Budget Recording? means a CD whose Best Selling Price is less than three dollars and fifty cents and an MC whose Best Selling Price is less than two dollars If, during the Term hereof, Manufacturer begins selling Full Line Products, ?Budget Recording? shall, from and after the date on which Manufacturer eommences to sell or Mechanical Licensing Agreement (Independent Laban) Mode! Page 19 January I, 2013 267 otherwise distribute such Full Line Products, be determined according to the terms of subsection herein. Badger Rate: Manufacturer may apply to CMRRA for, and CMRRA shall issue, Mechanical Licenses for Authorized Compositions reproduced on Budget Recordings on the basis of three?qu arters (3K4) of the Royalty Rate which would otherwise be-appli cable pursuant to section 3 during each Period (?Budget Reduction?). Where, pursuant to section 7 herein, Manufacturer is entitled to a Royalty Rate which would be lower than that set out in this section, Manufacturer may make application for, and CMRRA shall issue Mechanical Licenses for Authorized Compositions on such basis,'provided that the Budget Reduction and. any Royalty Rate reduction pursuant to section 7 herein are mutually exclusive. (0) Restriction: The Budget Reduction is applicable only to Budget Recordings that contain at least either eight (8) musical works or, in the case of classical or serious music, at least thirty (30) minutes of playing time. Mid?Line Recordings: Recordings known in the trade as ?mid?line? Recordings are speci?cally excluded from the Budget Reduction. Provision ofPriciag Information: .Manufacturershall submit to CMRRA current price list information to qualify for the Budget Reduction. Instructions of Publishers: The Budget Reduction is subject to the individual instructions of the Af?liated Publishers, and nothing in this section precludes Af?liated Publishers from negotiating individually a loner rate or other terms for Budget Recordings. 10. Exports Unless otherwise agreed by the parties hereto, Recordings exported by Manufacturer will be licensed by and royalties will be paid to the mechanical rights society and/or responsible publisher(s) in the country to which the Recordings are exported, and that Manufacturer will not be liable to CMRRA for the payment of Royalties on such exported Recordings to the extent that such Recordings are otherwise subject to Mechanical Licenses issued to Manufacturer by hereunder (?Export Exemption?). Manufacturer will provide CMRRA with advice on a timely basis of all Recordings manufactured pursuant to Mechanical Licenses issued hereunder for which exemption from Royalty payment is claimed by Manufacturer on the grounds of export, including quantity, catalogue number and. identi?cation of purchaser by name and count-1y. It is understood and agreed that the Export Exemption is intended to apply only to Recordings in respect of which all applicable mechanical licenses are obtained and applicable royalties are paid in the territory into which they have been exported, and that the Export Exemption is not intended to provide Manufacturer or the importer or purchaser of such exported Recordings with the opportunity to export or obtain Recordings free of any royalty payments or obligations. Mechanical Licensing Agreement (Independent Loads) Model Page 20 January I, 20.13 268 In addition, Manufacturer will, upon request by CMRRA, provide representatives of CMRRA with reasonable pro of that mechanical licenses have been obtained and applicable royalties have been paid on exported Recordings in the territories into which they have been exported. If Manufacturer is unable to provide CMRRA with such proof for any Recordings in respect of which it claims the benefit of this section, Manufacturer will be obliged to obtain Licenses and pay Royalties as provided hereunder in respect of such Recordings 11. Reserves and Returns Reserve Allowance: Manufacturershall be entitled to a reasonable reserve against the return of Recordings sold or otherwise distributed, save and except for ?one~way sales? of Recordings where such Recordings are sold or otherwise distributed by Manufacturer where the purchaser thereof is not. entitled to return same. Amounts held in reserves will be paid out on a regular quarterly basis, over a maximum period of five (5) calendar quarters, whereby any amount entering the reserve shall be fully liquidated no later than five (5) calendar quarters after such amount entered the reserve. Reserve Accounting-s The number of units for which Royalties are paid shall be adjusted to indicate any reserve(s) claimed by Manufacturer pursuant to Section 11(a) above, whether the reserves are withheld or liquidated. For greater clarity, Manufacturer?s reserve shall be withheld or liquidated only by adjusting the number units payable and not by reducing or increasing the Royalty amount payable for each line item, or by reducing or increasing the total amount of Royalties payable, either to an Af?liated Publisher, Non?Affiliated Publisher or CMRRA. (0) Returns in Excess of Reserves: Royalties associated with returned Recordings in excess of the reserve held by Manufacturer shall be carried forward as a negative credit balance for the applicable Musical Work or share thereof, and shall not be recouped against royalties otherwise payable to CMRRA. 12. Termination Termination of Agreement: Insolvency This Agreement shall terminate in the event is voluntarily wound up or becomes insolvent, makes or is the subject of an assignment in bankruptcy or if a receiver is appointed to manage the affairs of CMRRA. In the event of such termination, all Mechanical Licenses issued by CMRRA to Manufacturer will remain in full force and effect directly between Affiliated Publishers and Manufacturer for the remainder of the Term hereof. (ii) Insolvency rjMannfaetarer: CMRRA may terminate this Agreement in the event that Manufacturer is voluntarily wound up, or is the subject of an assignment in bankruptcy or if a receiver is appointed to manage its affairs. In the event of such termination, all licenses issued to Manufacturer by CMRRA hereunder will be terminated Mechanical Licensing Agreement (Independent Labels) Mode! Page 21 January 1, 2013 269 forthwith and Manufacturer will render an accounting and payment to CMRRA of-all royalties due and owing thereunder. Breach of A grceme at by Manufacturer: CMRRA may terminate this Agreement in the event of any material breach of its terms or of the terms of any Mechanical License issued by CMRRA to Manufacturer. Prior to effecting such termination, CMRRA shall give Manufacturer written notice of its intention to terminate in the manner set out herein. If Manufacturer fails to take reasonable steps to cure such breach within thirty days following the date of such notice, then this Agreement and all Mechanical Licenses issued hereunder shall. terminate on the thirty-first (31st) day following such notice. Upon such termination, Manufacturer will forthwith render an accounting and payment to CMRRA of all Royalties due pursuant to this Agreement. Termination of Individual Mechanich Licenses: Subject to the provisions of Exhibit hereto, CMRRA may terminate any individual Mechanical License issued hereunder upon Manufacturer?s material breach of any of the terms thereof by giving written notice of such breach as set out herein. If Manufacturer fails to take reasonable steps to cure such breach within thirty (30) days following the date of receipt of such notice, then the said Mechanical License shall terminate on the thirty?first (31st) day following the receipt of such notice. Upon any such termination of a Mechanical License, Manufacturer will render an accounting and payment to CMRRA of all Royalties due and owing thereunder in the course of its next quarterly Royalty accounting. 13. Arbitration Disagreements regarding the interpretation of the terms of this Agreement shall first be the subject of discussion between CMRRA and Manufacturer. Failing resolution of the disagreement by such discussion, it shall be referred to arbitration pursuant to the provisions of the Arbitratio ns Act, .O. 1991, c.17, as amended from time to time. The reference to arbitration shall be to one arbitrator, if the parties agree upon one arbitrator, otherwise to three arbitrators, one of whom shall 'be chosen by each party to the dispute and the third by the two so chosen and the third arbitrator so chosen shall be the Chairman. The award may be made by the majority of the arbitrators. Pursuant to of the said Act, the award may be appealed by either party to a Court on a question of fact or on a question of mixed fact and law. 14. Amendment and Severability This Agreement may only be amended in writing signed by the parties hereto. A waiver by either party hereto of any term or condition of this Agreement or of any individual Mechanical License incorporating this Agreement by reference shall not be deemed or construed. as a waiver of any condition or term. hereof for the future or of any subsequent breach thereof. All remedies contained in this Agreement and in any individual Mechanical License incorporating the terms of this Agreement by reference shall he cumulative and none of them shall be in limitation of any other remedy. To the extent that-any provision hereof may be judicially or administratively determined to Mechanical Licensing Agreement (Independent Laban) Mode! Page 22 January I, 2013 270 be illegal or otherwise void, other than articles 2 and 7 herein, it is severed herefrom and will not Otherwise affect or otherwise derogate from any other term hereof. 15. Audit Audit Right: Manufacturer hereby agrees that CMRRA, on behalf of its Affiliated Publisher(s) and those listed on Schedule hereto, shall have the right, not more than once in any twelve 12) month period, to conduct, at its own expense, a Copyright Royalty Examination (?Audit?) of Manufacturer?s books and records as the same relate to the use of the Authorized Compositions and those listed on Schedule hereto, which are the subject of Mechanical Licenses incorporating this Agreement, provided that CMRRA provides Manufacturer with reasonable written notice of its intent to conduct an Audit not less than twenty (20) business days prior to such Audit, and provided further that no such Audit shall take place within thirty (3 0) days prior to any Due Date. The Audit right may be exercised only once during any calendar year with respect to royalty statements rendered within two (2) years of receipt of said statements. Books and Records to be Kept: Without limiting the generality of the foregoing, such books and records shall include books of account and supporting documentation relating to the manufacture, sale or other distribution and return of Recordings sold or otherwise distributed by Manufacturer. Such books and records shall be maintained in a manner consistent with such Generally Accepted Accounting Principles as are and may be established from time to time by the Canadian Institute of Chartered Accountants. Access to In?mmatz?on: Without limiting the generality of the foregoing, Manufacturer shall advise CMRRA and its agents, upon request thereof, where such records, books andsup- porting documentation are kept and shall provide CMRRA and its agents with such information. CMRRA and its agents shall have the right to take handwritten extracts and to make photocopies and computer reports of such records, books and supporting documentation as CMRR-A and its agents determine are reasonably necessary and convenient for the ef?cient conduct of the Audit. Veri?cation by Third Party: in lieu of exercising the Audit Rig-ht herein, CMRRA may, in its sole discretion, accept the findings of a mutually acceptable examiner engaged by and at the cost of Manufacturer, including but not limited to an auditing or accounting firm, for the purpose of verifying the accuracy of Manufacturer?s records and payments made pursuant to this Agreement. Mechanical Licensing Agreem an: (Independent Labels) Model 1-1 Page 23 January 1, 2013 271 16. Applicable Law This Agreement shall be interpreted and governed by and pursuant to the laws of the Province of Ontario. 17. Notice Any notice or other communications hereunder will be in writing and. must be delivered by personal service, facsimile or by pres-paid registered mail to CMRRA and Manufacturer at the addresses set out in this Agreement, and such notice or communication will be deemed to be received in the case of personal service on delivery, or if by facsimile on the day of transmission, or if mailed on the ?fth business day following its mailing. Either party may change its address for notice provided above by giving notice to the other party. Notwithstanding the foregoing, notice of material breach of any term or condition of this Agreement shall be by prepaid registered mail and shall be deemed received on the date of actual receipt by the addressee. 18. Entire Agreement This Agreement and the Schedules and Exhibits attached hereto constitute the entire agreement between the parties and neither party hereto is bound by any representation or inducement not set forth herein. 19. Titles Section titles herein are merely for identi?cation and will be of no effect whatsoever in the application and construction of this Agreement or its provisions. 20. Currency All royalties paid pursuant to Mechanical Licenses issued hereunder shall be calculated and paid in Canadian funds. 21. Assignment Neither this Agreement nor any Mechanical License issued by CMRRA to Manufacturer hereunder may be assigned by Manufacttn'er in whole or in part without the express prior written consent of CMRRA, save and except for any assignment necessitated by a change in control or ownership of Manufacturer occasioned by the acquisition of a substantial controlling interest in the shares thereof or through the merger of Manufacttn?er with another ?rm, in which case assignment will be subject to immediate noti?cation to CMRRA, provided that the assignee in such case is a party hereto. Mechanical Licensing Agreement (Independent Labels) Model Page 24 January I, 2013 . 1r- 272 22. Representation and Warranty by CMRRA CMRRA represents and warrants that its Af?liated Publishers and Non?Affiliated Publishers own and/or control the reproduction rights in the Authorized Compositions and Non~Authorized Compositions pursuant to the terms and conditions of this Agreement and that they have authorized CMRRA to enter into this Agreement with Manufacturers and to grant Mechanical Licenses to Manufacturers as set out herein. In the event that the above representation and/ or warranties is or are breached with respect to any Composition licensed hereunder, and Manufacturer is found liable or settles any claim for damages as a result thereof, CMRRA will indemnify Manufacturer against and hold Manufacturer harmless from any and all claims, demands, liabilities and losses (including reasonable legal fees, interest and court costs) arising out of or in any way related to such breach. CMRRA agrees that Manufacturer may withhold such sums due CMRRA or Affiliated Publisher pursuant to the provisions of section 4(t)(iv) herein, in such amounts reasonably related to such claims until such time as such claims are reduced to a final judgment by a court of competent jurisdiction or are settled. CMRRA agrees that during the Term it shall maintain, in good standing, an errors and omissions insurance policy with coverage in an amount suf?cient to indemnify Manufacturer(s) for any breach of representation and/or warranty as set out above. 23. Con?dentiality Either party hereto may disclose the existence of and the terms of this Agreement to any person, ?rm or corporation. However, all transactions carried on pursuant to this Agreement, including the application for any Mechanical. License by Manufacturer, the issue of such Mechanical License by CMRRA, the payment of royalties thereunder by Manufacturer to CMRRA and the contents of any correspondence-01? dealings between the parties hereto respecting such applications, Mechanical Licenses or Royalty payments shall at all times be treated in a con?dential manner by both parties hereto and shall not be discloscd by either party to any other person, or to any ?rm or corporation without the express prior Written consent of the other, save and except for such disclosure as may be reasonably necessary to either party?s directors, of?cers, auditors (including auditors in the course of their conduct of any audit of Manufacturers hereunder), subsidiaries or parent firms or corporations. Mechanical Licensing Agreem on! (Independent Labels) Model 111 Page 25 January I, 2013 273 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the day and year ?rst above written. CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Name: Caroline Rioux Title: President Date: [Name 01" Manufacturer] Name: Title: Date: Mechanical Licensing Agreement (Independent Labels) Mode! Page 26 January I, 203 274 EXHIBIT Standard CMRRA Mechanical License Each Mechanical License issued by CMRRA to Manufactm?er hereunder will set out on its face the following information: License Number Name of Manufacturer Address of Manufacturer Title of Authorized Composition Composer(s), Author(s) and Arranger(s) of Authorized Composition OwnerfAdministrator of Copyright Percentage of Copyright owned or administered by Owner/Administrator Featured performing Authorized Composition on Recording Release Date of Recording Playing Time of Recording The Recording?s Universal Product Code (UPC) Manufacturer?s Catalogue Number for the Recording Contrivanoe Album Title (where applicable) Date of Issue Mechanical Licensing Agreement (Independent Labetr) Model Page 1? January I, 2013 EXHIBIT Noti?cation efNew Affiliated Publisher 275 TAKE NOTICE that ehedule to the Mechanical Licensing Agreement dated as of anuary 1, 2013 between CMRRA and Manufacturer is hereby amended to add the following persons, ?rms andior companies as Af?liated Publishers: Date: Name of Af?liated Publisher Mechanical Licensing Agreemeni (Independent Labels) Mode! January 2013 Page ii 276 SCHEDULE Affiliated Publishers The following music publisher af?liates of CMRRA are hereby added as Af?liated Publishers to the Mechanical Licensing Agreement dated as of January 1, 2013 between CMRRA and Manufacturer: (computer printout) Mechanical Licensing Agreement (Independent Labels) Mode! Page January I, 20} 3 - 277 SCHEDULE Non-Affiliated Publishers and NonnAuthorized Compositions The following music publishers are Non?Af?liated Publishers pursuant to the Mechanical Licensing Agreement dated as of January 1, .2013 between CMRRA and Manufacturer: Name of NonnAffiliated Publisher Abkco Music Inc. I Ashtray Music Axe Music Black Ice Magic Publishing Legs Music Inc. The following Musical Works are Non-Authorized Compositions pursuant to the Mechanical Licensing Agreement dated as of January 1, 2013 between CMRRA and Manufacturer Musical Work Author(s) Publisher ?White Christmas? Irving Berlin Irving Berlin Music Corp. ch Williamson Music Mechanical Licensing Agreement (Independent Labels) Mo dc! 1?1 Page iv January I, 2 013 278 SCHEDULE Standard Royalty Format Generalized Royalty Input file for submission of Royalty May 11, 1999) Note: all numeric ?elds are implicitly zoned numeric Field Name Type Mandatory Header Record - Company and period Identifier Record code 2a Company Name 50a Period start 8am Period end 8am Transmission date 8am Yes Yes Yes Yes Yes Publisher I-Ieader Record Publisher information Record code 2a Publisher number 1 0 a Publisher name 50a Publisher Balance Forward Detail Record Record code 2a Publisher number 10a Transaction amount 13,211 ?I?ransaction description 5021 Field Name Type Song Header Record Record code 2a Publisher number 10a Song Number 20a Song Title 50a ISWC Code 20a 100a Yes Yes Yes Yes Yes Yes No Mandatory Yes Yes No Yes No No ata to CMRRA rev 1.01 (as of Detail 1 per ?le . HC le? justi?ed 1 per publisher- precedes song information details HP "left justi?ed left justi?ed 1 or more per publisher precedes song information details DP left justi?ed Signed ?eld left justi?ed 1 per song within publisher HS left justi?ed left justified left justi?ed left justi?ed: delimited by Mechanical Licensing Agreement (Independent Labels) Model I?l January I, 2013 Page i Field Name Record code Transaction code Publisher number Song Number Song Title Catalogue number CMRRA license Net Units Rate type code Rate paid Percent ownership Net amount. Timing UPC code IS WC code Distribution method Song Trailer Record Record code Publisher number Type 13,011 In 15,911 7,411 13.211 6,011 20a 20a 5a 2a 10a Mandatory Yes Yes Yes Yes Yes 279 Detail DS left justi?ed Values: Normal (default) NC =4 Normal Controlled NB Normal Budget A Adjustment Normal AC Adjustment Controlled AB Adjustment Budget Balance Wd Normal BC Balance Controlled BB :4 Balance Budget matches record song number left justi?ed (if available) (matches record) left justi?ed - required if song number absent left justi?ed left justi?ed, concatenation of pre?x, suffix Signed ?eld Values: 2 rate percent ownership provided blended rate i.e. rate percent ownership (if available) see Rate type code signed ?eld (if available) includes check digit (BAN code for imports) (if available) (if available) left justi?ed per song TS matches record Mechanical Licensing Agreement (Independent Labels) Model L1 January I, 2013 Page iz' Field Name Song Number Song Title Units Amount Record count Publisher Trailer Record Record code Publisher number Units Amount Record count Company Trailer Record Record code it Company Name Units ?3 Amount Record count Legend: Type 20a 50a 13,011 1.3 ,211 6,011 2a 10a 13,011 13,211 6 ,On 2a 5021 13,011 13,211 6,0n added to record definition changed relative position in record changed description or de?nition WM 3 code changed FILE NAMING CONVENTION: Mandatory No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 280 Detail song number left justi?ed (if available) left justi?ed required if song number absent hash total payable amount 1 per publisher TP matches record hash total payable amount 1 per ?le TC left justi?ed hash total payable amount Manufacturer?s Royalty Statements will be named in accordance with the following convention: Manufacturer Manufacturer ID Manufacturer Name being'the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identification number as provided by CMRRA. Type being Royalty Statement. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 RecordsleGHRoyalty StatelnentHZOlj3'0331.xls Mechanical Licensing Agreement (Independent Labels) Model January I, 2.013 Page SCHEDULE Standard Royalty Format Pursuant to Section 4(c) of this Agreement Manufacturer's roy CMRRA in a Microsoft Excel ?le, or such other (1 accordance with the format and data requirements that must appear in each ?le and a description of each data it 281 alty statements will be delivered to ata file as agreed to in advance by CMRR-A, in below. The following table lists the required data ?elds old. The data ?elds represent individual 33'533?535'1Eii?'EI?i?vi??i?f? Ben arrange. he Ilalneoftlie countess.uses stems. licenses. Mandaton Publisher Number The Copyright Owner identi?cation number, as stated on CMRRA's licenses or as used in Manufacturer's own account system, so long as such identi?cation number is only eVer used to identify one speci?c Copyright Owner account and is not re used .to identify a different Copyright Owner account. Mandatciy License Prefix The License Number Pre?x as provided by CMRRA. Mandatory (iv) License Suf?x The License Number Suf?x as provided by CMRRA. Mandatory (to Song Number The Musical Work?s identification number as stated on CMRRA's licenses or as used in Manufacturer's own accounting system. Mandatory (vi) Song Title The title of the Musical Work as stated on CMRRA's licenses in respect ofwhich Royalties are being paid. Mandatoiy - (vii) Writer Nam e(s) The name of the authors and composers of the Musical Work. Mandatory 3 Unique Product Identi?er The catalogue number assigned to the Recording by Manufacturer. Mandatory (ix) Contrivance The con?guration type of the Recording (contrivancc). Mandatory Royalty Rate The applicable Royalty Rate as per Section 3 or Section 9 of this Agreement. This value should be stated in dollars, for example, as .083 Mandatory (Xi) Ownership Percentage The ownership Percentage of the Copyright Owner as stated on CMRRA's licenses. Must appear as a percentage amount (33.33) Without the percent symbol. Mandatory (xii) Units The number of units for which Royalties are paid in the quarterly period, not of reserves, which is the subject of the statement. Must not include comma separator. Mandatory Royalty Amount The total Royalties paid respecting the share of the Musical Work that is the subject of the Mechanical License. Amount is rounded to two decimal places and must not include a dollar sign. Mandatory (x iv) Calendar Quarter The quarterly period that is the subject of the statement. Must be indicated as YYQQ. YY represents the last two digits of the applicable year. The second represents the applicable calendar quarter. For example, 12Q4 represents the calendar- quarter of the year 2012. Mandatory Mechanical Licensing Agreement {Independent Labels) Model January 1, 2013 Page t-v 282 SCHEDULE Standard Royalty Format (continued) As mentioned above, the data ?elds represent different columns of data that must appear in your Microsoft Excel report. It is of critical importance that the column sequencing is presented in exactly the same order as in the above table and that the Data Fields cannot be merged in a single column. It is essential that you do not add or remove a column. The column width may vary; however, CMRRA requires that it be submitted in a '?at ?le' format. This entails that each cell in each column is ?lled, eVen if the information is repeated from prior rows of data (to. publisher name). The desired result is that each row is .selfnsuf?cient and independent from the others. Your spreadsheet must be free of embedded formulas and ?grand totals? for each column. Manufacturer will ensure that its royalty statements conform to said format and will not make any changes thereto save and except for those which are approved in advance by CMRRA. FILE NAMING CONVENTION: Manufacturer?s Royalty Statements will be named in accordance with the following convention: Manufacturer Manufacturer Manufacturer Name being the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identi?cation number as provided by CMRRA. Type being Royalty Statement. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 StatemelitH20130331xIs Mechanical Licensing Agreement (Independent Labels} Mode! Page January I, 2013 283 SCHEDULE Standard Format for Publisher Summary Pursuant to Section 4(0) of this Agreement, Manufacturer?s will deliver to CMRRA a summary of the total amounts payable to each Af?liated Publisher, in a Microsoft Excel ?le, or such other data ?le as agreed to in advance by CMRRA, in accordance with the format and data requirements below. The following table lists the required data fields in each summary and a description of each ?eld. The data ?elds are to be presented as individual columns in the spreadsheet, with the exception of the last data ?eld in the table below. ublisher Mand .. i Name The name of the Copyright Owner as stated on licenses. (ii) Publisher Number The Copyright Owner identi?cation number, as stated on Mandatory CMRRA's licenses or as used in Manufacturer's own account system so long as such identi?cation number is only ever used to identify one speci?c Copyright Owner account and is not re?used to identify a different Copyright Owner account. Total Payable to Publisher The total Royalties payable to each Copyright Owner. . Mandatory (iv) Grand CMRRA Total The grand total payable to CMRRA. Must be indicated at the Mandatory end of column above. The data ?elds represent the different columns of data that must appear in your report with the exception of (iv) which is a sum of column FILE AMING CONVENTION: Manufacturer?s Publisher Summary will be named in accordance with the following convention: Manufacturer Manufacturer 1s Manufacturer Name being the name of the manufacturer. Manufacturer ID being the Manufacturer?s identi?cation number as provided by CMRRA. Type being Publisher Summary. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 Records?456mPublisher Summarym2013033l Mechanical Licensing Agreement (Independent Labels) Mode! Page vi January I, 2013 284 SCHEDULE Unlicensed Recording List Standard Format Pursuant to Section 4(g) of this Agreement, Manufacturer?s Unlicensed Recording List will be delivered to CMRRA in a Microsoft Excel ?le in accordance to the format and data requirements below. The following table lists the required data ?elds that must appear in each file with respect to each unlicensed Musical Work, or share thereof, and a description of each data ?eld. The data ?elds are to be presented as individual columns in the spreadsheet. Data ?elds marked as ?Conditional? must be provided to to the extent such information is available to Manufacturer, or where Such information is provided by Manufacturer to an online music service. . . . Song Title The title of the Musical Worl . (ii) Catalogue Number The catalogue number of the Recording as assigned by 'MandatOry Manufacturer. Cumulative Units The cumulative number of units for which Royalties are Mandatory payable from inception of distribution of the Recording until the end of the quarterly period which is the-subject ofthc statement. - (iv) Royalty Rate The applicable Royalty Rate. Should appear as dollar amount Mandatory (.083). Total Payable The total Royalties payable for the Musical Work as embodied Mandatory on the speci?c Recording. (vi) Product Title The title of the Recording embodying the Musical Work. Mandatory (vii) Performing Artist The name of each artist to whom the Track is credited. Mandatory Timing The running time of the Track, in minutes and seconds. Mandatory (ix) ISRC ISRC number assigned to the Recording, where such Recording Mandatory for was released after January 1,2007. The ?eld is Conditional Post?2006 where such Recording is released prior to January 1,2007. Recordings. Conditional . for Pre~2007 Recordings Writer Name(s) The name of the author(s) and composer(s) of the Musical Conditional Work. (xi) Unlicensed Percentage The percentage interest therein in respect of which Conditional Manufacturer has not obtained a Mechanical License or has not paid Royalties at the time such Unlicensed Recording List Was prepared. Should appear as a percentage amount (33.33). (xii) Release Date The releaSe date of the Recording. Conditional Mechanical Licensing Agreement (Independent Labels) Mode! 14 Page vii January 1, 2013 285 Recording Deletion Status Information indicating Whether the Recording is still active or has been discontinued. Expected values are the following: DR for Recordings that havo been discontinued AR, for active Recordings that have not been discontinued Mandatory (xiv) Deletion Date The date on which the Recording was deleted ?'om Manufacturer?s catalogue ofproducts offered for sale to its customers. Conditional (xv) UPC Number The Universal Product Code assigned to the album on which the Track appears. Conditional (xvi) Disc Number The disc number associated with the Track such as in a box set. Conditional (xvii) Track Nlunber The track number of the Track on the album on which it appears. Conditional Publisher Name The name of the music publisher(S) associated with the Musical Work. Conditional (xix) Publisher Number Manufacturer?s internal identi?cation number assigned to the music publisher. Conditional (XX) Song Number Manufacturer?s internal identi?cation number assigned to the Musical Work. Conditional (xxi) Unlicensed Reason The reason for which the Musical Work is on the Unlicensed Recording List. Expected values are the following: DISPUTE, for copyright ownership con?ict of the Musical Work N0 LICENSE, for Musical Works, or share thereof, for which you have not received a Mechanical License For all other reasons, you are required to provide a brief explanation. Conditional (xxii) Con?guration The contrivance or format of the Recording (CD, LP, CS, etc.) Conditional Calendar Quarter The calendar quarter applicable to the Unlicensed Recording List. Conditional (xxiv) ISWC The International Standard Work Code of said musical composition. Conditional Ii (xxv) Label Name Label name associated with the "Recording. This relates to Manufacturers that handle Recordings for multiple labels. Conditional (xxv i) Transaction Type Identifies the method Used by the Manufacturer to distribute the product. One of the following values is expected: R8, for Regular Sales FG, for Free Goods PR, for Promotional Goods Conditional Mechanical Licensing Agreement (Independent Labels) Mode! January I, Page 286 SCHEDULE Unlicensed Recording List Standard Format (continued) FILE NAMING CONVENTION: Manufacturer?s Unlicensed Recording List will be named in accordance with the following convention Manufacturer Manufacturer "a Manufacturer Name being the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identi?cation number as provided by CMRRA. Type being Unlicensed Recording List. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 RecordsH456HUnlieensed Recording ListH20130331 Mechanical Licensing Agreement (Independent Labels) Model Page ix January I, 2013 287 SCHEDULE License Application Information Pursuant to section of this Agreement, Manufacturer?s license application must disclose at least the following mandatory information for each Track: (0 (ii) (M (V) (vi) (vii) (ix) Name and address of the Manufacturer; Performing artist to whom the Track is credited; Title of the Recording; Release date of the Recording; Configuration type(s) of the Recording; Manufacturer?s unique catalogue number for each Recording configuration; Title of Musical Work, as well as the title of each individual Musical Work contained in a medley, mash-up or used as a sample; Name of each author and composer of the Musical Work(s); Running time of the Track as well as the running time of each individual Musical Work contained in a medley; The following is a list of Conditional data that must be provided to CMRRA if it is available to Manufacturer: (0 (ii) (iv) (V) (vi) (vii) Name of the music publisher(s) for each Musical Work; Where the Musical Work is a translation or adaptation of another Musical Work, the title of such original Musical Work; UPC (Universal Product Code); ISRC (International Standard Recording Code); ISWC (International Standard Work Code); The wholesale price of the Recording; Rate Category for the Recording (Budget Rate or Full Rate); Number of individual Tracks on the Recording; Mechanical Licensing Agreement (Independent Labels) Model IJ January 1, 2013 Page 35 This is Exhibit ?35? referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 mm?) I A Commissioner for taking Affidavits, etc. Marie Eliza bath Wakefield, a Comm issioner. etc, Province of Ontario, for Weirleids mi. Barristers and Soiicitors. Expires October 24. 2016. 288 289 MECHANICAL LICENSING DATED as of January 1, 2013 BETWEEN: Canadian Musical Reproduction Rights Agency Lim- ited, a Corporation incorporated pursuant to the laws of Canada having its principal of?ces at 56 Wellesley Street West, Suite 320, Toronto, Ontario Canada MS 283 on behalf of its Affiliated Publishers, OF THE FIRST PART and (?Manufacturer?) OF THE SECOND PART WHEREAS CMRRA carries on business as a nonexclusive agent for certain music pub- lishers which have engaged CMRRA to issue licenses for the mechanical reproduction of certain musical compositions to manufacturers, distributors and importers of Recordings (as hereinafter de?ned), AND WHEREAS Manufacturer carries on business by way of the manufacture or author- izes the manufacture, importation and/or distribution in and into Canada of Recordings contain ing reproductions of certain copyrighted musical works which are owned andfor administered in Canada by publisher principals, AND WHEREAS CMRRA and Manufacturer acknowledge and agree that the prompt and ef?cient administration of this Agreement and of the licensing of musical compositions and accounting for and payment of royalties with respect thereto are of the utmost importance, AND WHEREAS Manufacturer acknowledges and agrees that its prompt application for licenses hereunder, its prompt handling of licenses issued by CMRRA hereunder and its prompt and accurate entry of licensing data into its royalty accounting systems are of the essence of this Mechanical Licensing Agreement (Model 1-2) Page 1 January 1, 2013 290 Agreement, and CMRRA acknowledges and agrees that its prompt handling of license applica? tions and issuance of licenses hereunder are of the essence of this Agreement. AND WHEREAS Manufacturer wishes to appoint CMRRA, or its designee, to be its an? thorized agent for the purpose of making applications to the Copyright Board of Canada (the card?) pursuant to section ?77 of the Copyright Act R.S.C. 1985, 0. (3?42 (the ?Act?) for li~ censes to reproduce Musical Works (as defined herein) whose owners cannot be located, AND WHEREAS CMRRA and Manufacturer wish to enter into an Agreement for such purpose, THEREFORE WITNESS that in consideration of the mutual covenants and warranties herein contained, and subject to all the terms and conditions hereinafter set forth, the parties hereto agree as follows: 1. Definitions In this Agreement, the following terms shall have the meanings indicated below: Affiliated Publisher: A music publisher for which acts as Agent for the mechan~ ical licensing of Authorized Compositions (as hereinafter defined) in Canada and to carry on such licensing to Manufacturer ptu'suant to the terms hereof. Affiliated Publishers are set out on Schedule hereto as may be amended by CMRRA from time to time. Authorized Composition: A musical composition owned. and/or administered in whole or in part by an Af?liated Publisher, which publisher has engaged and instructed CMRRA to act as its agent for the mechanical licensing of such musical composition. CD: A digitally recorded audio compact disc of any size or format but specifically ex? cluding any digitally recorded and reproduced audio-Visual disc of any size or format. Digital Recording: A digitally recorded disc, tape or other contrivance, excluding Due Date: That date which is forty-five (45) days after the endof each calendar quarter, specifically, February 15, May 15, August 15 and November 15in each year of the Term (as hereinafter de?ned). LP: An analogue vinyl record of any size or playing speed. Manufacturer: the corporation that is the party of the Second Part to this Agreement, en- gaged in the business of manufacturing or authorizing the manufacture, importing andior distrib- uting Recordings in or into Canada. MC: An analogue audio cassette tape, related analogue or other related audio tape format, but specifically excluding any audio-?Video tape in any format. Mechanism License: A license issued by CMRRA to Manufacturer subject to the terms hereof and pursuant to section 2 hereof. Mechanical Licensing Agreement (Model 1-2) Page 2 January 1, 2013 291 Masicoi Work: A ?musical work? as defined in section 2 of the Act, with reference to any Musical Work including any fractional share of the copyright in that work. Non-Authorized Composition: A musical composition QWned and/or administered in whole or in part by an Affiliated Publisher which said Af?liated Publisher has instructed CMRRA to exclude from the scope of this Agreement as listed on Schedule hereto. Non-A?iioicd Publisher: A music publisher which has engaged CMRRA to act as its agent for the mechanical licensing of musical compositions to Manufacturers in Canada on terms and conditions at variance with those set out herein as listed on Schedule hereto. Prior License: A Mechanical License issued by CMRRA to Manufacturer prior to the of fective date hereof. Promotionai Product: A Recording containing reproductions of Authorized Composi~ tions memufactured especially for promotional purposes, including ?Radio ?Dance Pool Products? or any like configuration, including Recordings available for sale to the general public through Manufacturer?s customary distribution and retail channels, when such Recording are distributed free in Canada by Manufacturer to promote the sale thereof, provided that either the words ?Promotional Copy Not For Sale? or words having the same effect are marked on each Recording so distributed or on the packaging thereof, or that each Recording so distributed is cut or drilled or otherwise marked by Manufacturer to indicate same. Recording: A physical sound carrier LP, MC, CD, andior DR) embodying one or more Tracks, manufactured, imported or distributed by or on behalf of Manufacturer in or into Canada, but specifically excluding any audioivisual product. Release Date: The date on which Manufacturer releases a Recording for sale to the gen- eral public through its customary distribution and retail channels. Where a Recording is deleted by Manufacturer and subsequently reissued in any format, the Release Date for such Recording will be the date of such re?relcase for all purposes. herein, including the determination of applica- Royalty Rates pursuant to sections 3 and 7 herein. Royalty or Royalties: The amount(s) payable by Manufacturer to CMRRA pursuant to Mechanical Licenses issued under this Agreement and. calculated pursuant to the rates set out herein. Term: The term of this Agreement shall commence upon January 1, 2013 and conclude upon December 31, 2013. Track: An audio-only sound recording embodying, subj ect to subsection one or more Musical Works. Unidentified Owncr?s): The owner of copyr-i in and. to a Musical Work who has not yet been so identified by CMRRA or Meniufacturer. Unidentified Worker): A Musical Work embodied in a Recording that has not yet been identi?ed by CMRRA or Manufacturer. Mechanical Licensing Agreement (Model 1?2) Page 3 Januaiy 1,2013 292 Unbeatable The owner of copyright in and to a Musical Work who remains unidenti?ed despite reasonable effort by CMRRA and Manufacturer to locate him or her. 2. Scope of Agreement Appiicabiltty of Agreement: This Agreement applies only to the mechanical li- censing in Canada of Authorized Compositions owned and/or administered in whole or in part by Af?liated Publishers to Manufacturer. 1) A?iliated Publishers: Upon request by Manufacturer, CMRRA shall provide Manufacturer with a list of all Af?liated Publishers, and shall, upon request by Manufacturer, provide Manufacturer with timely advice of all music publishers which become Affiliated Pub? lishers and all music publishers which cease to be represented by CMRRA. Such list will form Schedule to this Agreement and may be provided by CMRRA either in printed or electronic form. Subsequent to the date of execution hereof, and for the duration of the Term, CMRRA shall represent and issue licenses on behalf of Af?liated Publishers to Manufacturer for the uses set out herein, only pursuant to the terms hereof. Where an Af?liated Publisher ceases to be rep- resented by CMRRA during the Term, it will no longer be bound by the terms hereof respecting the mechanical licensing of its musical compositions to Manufacturer in Canada subsequent to the date on which it ceased to be represented by but all Mechanical Licenses issued by CMRRA to Manufacturer while said Affiliated Publisher Was represented by CMRRA will con? tinue in full force and effect until the conclusion of the Term. Subsequent to the execution here of, CMRRA may amend Schedule by providing Manufacturer with a notice in the form at? tached hereto as Exhibit and the provision of such notice will be deemed to be an amend? ment to Schedule may revise or replace the form of Schedule and Exhibit at any time by providing notice of same to Manufacturer. Non?A?liated Pubiiskers: Upon request by Manufacturer, shall provide Manufacturer with a list of all Non?Af?liated Publishers. Such list will form Schedule to this Agreement. During the Term hereof, CMRRA will not undertake the representation of any fur- ther Non~Affiliated Publishers, provided that in any case where, prior to the date "hereof, CMRRA has undertaken the representation of a Non-Affiliated Publisher on the basis of instruc- tions at variance with the terms hereof, CMRRA shall continue to so represent such Non? Affiliated Publisher and shall issue licenses with respect thereto exclusively in accordance with such instructions as the Non?Af?liated Publisher thereof has given, or may subsequently give, to CMRRA. Notification ofNon-Aathorized Compositions: Upon the-execution hereof, CMRRA will provide Manufacturer with a list of all Non?Authorized Compositions. Such list will form Schedule to this Agreement. During the Term hereof, CMRRA will not undertake the representation of any further Non~Authorized Compositions, provided that in any case where, prior to the date hereof, CMRRA has undertaken the representation of a Non?Authorized Com- position on the basis of instructions at variance with the terms hereof, CMRRA shall continue to Mechanical Licensing Agreement (Model 1?2) Page 4 January 1,2013 293 so represent such Non~Authorized Composition and shall issue licenses with respect thereto ex~ clusively in accordance with such instructions as the Publisher thereof has given, or may subse~ quently give, to CMRRA. Licensing chorks: This Agreement does not constitute a license. Mechanics! Licenses: Manufacturer shall make application to CMRRA for Mechanical Licenses for all Re? cordings sold or otherwise distributed in Canada by Manufacturer where such Recordings contain reproductions of musical works. Such application will be made by way of Manufacturer providing CMRRA with one (1) copy of each CD, LP, MC or DR version of each Recording which it releases for sale to the public in the ordi~ nary course of its business (?Sample Product?). Manufacturer will, at the same time, provide CMRRA with data respecting the Musi~ cal Works reproduced on such Recordings as set out in Schedule hereto. Manufacturer? 3 application will include all data which is indicated as ?Mandatory? on the said schedule and may include data which is indicated as ?Conditional?. More speci?cally, ?Con- ditional? data is data that must be provided to CMRRA if it is available to Manufacturer. Directly Licensed Works: Manufacturer will advise CMRRA of the details of any Mechanical Licenses which have been issued directly to Manufacturer at any time during the Term by one or more publishers or copyright owners with respect to mu? sical works reproduced on the Recording. Manufacturer acknowl- edges that CMRRA has no responsibility or liability for the accu~ racy or suf?ciency of any such directly issued license and that Manufacturer at all times bears the risk associated with obtaining and complying with. the terms of such licenses. (ii) Dispose! cfSampic Products: CMRRA will not sell any Sample Product provided to it by Manufacturer pursuant to this section but will be under no obligation to return such Product to Manufacturer. Compiiation Products: where a Recording contains Tracks performed by different performers, Manufacturer?s .application(s) respecting such Recording will wherever reasonably possible dis- close the name(s) of the performer(s) of each composition con? tained therein. (iv) Unbearable Owners: Where Manufacturer has made appli- cation to CMRRA for a mechanical license for a musical work and Mechanical Licensing Agreement (Model l~2) January l,2013 Page 5 294 all or a portion of the ownership interest therein is unknown, Man~ ufacturer hereby appoints CMRRA as its agent for the purpose of making application to the Board for a license pursuant to 3.77 of the Act. Where the Board issues such license, Manufacturer agrees to comply with the requirements thereof with respect to payment of royalties and provision of accountings. (V) Issuance osz'censcs: Subject to the terms and conditions hereof, in response to applications received from Manufacturer pursuant to subsection herein, CMRRA shall, on behalf 'of Affil- iated Publishers, grant individual Mechanical Licenses to Manu- facturer on a use-by-use basis authorizing the mechanical repro? duction of Authorized Compositions on Recordings manufactured by or on behalf of Manufacturer in Canada or imported by or on behalf of Manufacturer into Canada, and authorizing the distribu? tion thereof in Canada. Mechanical Licenses issued here-under may, at election, be provided to Manufacturer in the form of licenses individually issued with respect to one or more ownership interests in musical works or in the form of reports setting out the terms of each li? cense. Such licenses will be subject to .the terms and conditions of this Agreement. Manufacturer agrees to be bound by such licenses at the time they are issued by CMRRA. Manufacturer shall be permitted to reject a Mechanical License only by reason of a defi- ciency in the Mechanical License itself and shall disclose its reason for doing so with the rejection of the Mechanical License. Each Mechanical License issued by CMRRA to Manufacturer hereunder will be deemed to include the following terms and con ditions: 1. Grant of License: At the request of Licensee and in its ca?- pacity as agent for the Copyright Owner/Administrator, CMRR-A hereby grants to Licensee a nonexclusive license to reproduce the Musical Work described above on the Recording described in the Mechanical License and to distribute and sell such Recording in Canada for private use by the public, subject to the terms and con? ditions which follow. Such grant right is limited to the Percentage of Copyright owned or administered by the Copyright Own~ erfAdministrator. 2. Arrangement or Alteration ofMasr?caZ Work: Licensee may arrange the Musical Work for the limited purpose and to the lim? Mechanical Licensing Agreement (Model 1?2) Page-6 January 1, 20 I 3 295 ited extent necessary to conform it to the style or manner of inter? pretation of the Art'isthroup involved, subject to section 2(a) of the Mechanical Licensing Agreement, but shall have no right to in- sert new words into the existing lyrics, to alter the basic melody or to otherwise arrange the music, or generally to change the funda- mental character and unity of the Musical Work. Licensee may not claim any ownership or other interest in, or register, any arrange? ment permitted under this section as a work under the Copyright Act, RS. 1985, c. Q42. 3. Label and Jacket Information: Licensee shall use best of- forts to imprint the Title of the Musical Work followed by the name(s) of the ComposertAuthor and Copyright Own? erfAdministrator on the label, jacket or container of every Record~ 'ing made under this License where the production of the printed matter associated with .a Recording is beyond its control and where the printed matter associated with a Recording is within the Licen~ sees control it will imprint the Title of the Musical Work followed by the name(s) of the composer/Author and Copyright Own- er/Administrator on the label, jacket or container of every recordu ing made under this License. 4. Limitations on Use: All reproduction or other use of the Musical Work not speci?cally authorized by this Mechanical Li~ sense, or by the written consent of CMRRA is prohibited. 5. This Agreement is subject to and incorporates the terms and conditions of the Mechanical Licensing Agreement (Independ- ent Labels) dated as of January 1, 2013 between CMRRA and Li~ censee. Applicability of Agreement: This Agreement is not?applicable to any of the fol~ lowing uses except to the extent that the same has been authorized by the Af?liated Publisher: Visual reproduction or printing of lyrics or music of any Authorized Composition; (ii) the use of an Authorized Composition in a medley or a mashup, the use of an Authorized Composition, in whole or in part, as a ?sampled? use, whether the ?sampling? is effected digitally or otherwise in any medium or though the use of any technology now or hereafter known; Mechanical Licensing Agreement (Model 1?2) Page 7 January I, 2013 296 (iv) any parody or translation of the lyrics of an Authorized Composition. any rental of a Recording by Manufacturer, or sale by Manufacturer of a Recording for the intentional purpose of rental; (vi) any commercial use of the Recording other than for distri- bution and sale in the Territory for private use by the public (Whether for background music, disk jockey or broadcast use), un- less such distribution cr sale is made with the express limitation that the user is not authorized to reproduce the Recording without the express prior written consent of CMRRA or the Affiliated Pub- lisher(s) involved; (vii) any reproduction of an Authorized Composition .in any au? dio?visual recording; any reproduction of an Authorized Composition by way of any contrivance not speci?cally authoriZed herein; (ix) any reproduction of a musical composition for which Man? ufacturer has obtained a direct license from an Authorised Publish- er. Manufacturer may make separate application to CMRRA for the purpose of obtaining licenses for any of the above purposes, the terms and conditions of which licenses, if granted, shall be expressly subject to individual negotiation between Manufacturer and CMRRA on behalf of the Affiliated PubliSher(s) involved. Renewal ofPrior Licenses: All Prior Licenses, if any, are deemed to be and here- by are renewed for the Term hereof. The terms and conditions appearing on the back of Prior Licenses are hereby replaced by those set out in Section of this Agreement. Amended Licenses: CMRRA may, Where reasonable, at its discretion, amend any Mechanical License or Prior License. Such amendment may occur upon any material change in the ownership of the Authorized Composition (or partial interest therein), to replace a missing or lost license, or at the request of the Af?liated Publisher(s) involved or of the Manufacturer. The amended. license will be binding upon the parties hereto respecting the Authorized Composition licensed thereby. Provision Materials: Manufacturer will provide CMRRA with copies of all release announcements or noti?cations, deletion announcements or noti?cations, product catalogues which it customarily provides to its retail customers, at the same time at which such materials are provided to such retailers. Distributed Laheis: Manufacturer acknowledges that it may, from time to time, enter into licensing, distribution or other agreements with persons, firms or corporations in the Mechanical Licensing Agreement (Model 1?2) Page 8 January 1, 2013 297 music business (?Third Parties?) for the manufacture and/or distribution of Recordings which may contain reproductions of Authorized Compositions, but that the terms of such agreements put the onus and responsibility of licensing such reproduction on such Third Parties. Likewise, Manufacturer acknowledges that it may, from time to time, enter into agreements with Third Parties by which Manufacturer acquires the right to sell or otherwise distribute Recordings pro- duced by or on behalf of such Third Parties which may contain reproductions of Authorized Compositions. Manufacturer recognizes interest in ensuring that such reproduction of Authorized Compositions is carried on pursuant to licenses duly issued by CMRRA to such Third Parties, and that royalties are paid by such Third Parties to CMRRA pursuant thereto. Ac?- cordingly, Manufacturer will, upon receipt cf'written authorization from any such Third Party, provide CMRRA, in the course of administration cflicensing agreements with such Third Parties with such reasonable assistance and provision of information as CMRRA may from time to time request including, without limiting the foregoing, such information as CMRRA may reasonably require to conduct copyright royalty examinations of the books and records of'such Third Parties. Manufacturer agrees that it will be jointly and severally liable with Third Parties to CMRRA for the payment of all royalties payable pursuant to licenses issued with respect to Re? cordings dealt with in this paragraph and that CMRRA may at its discretion. seek payment of all such royalties .in the event of failure or refusal of Third Parties to pay same. 3. Royalty Rate Royalty Rate: Subject to the provisions of sections 2, 8 and 9 hereof, Manufactur? er will pay royalties pursuant to this Agreement on a quarterly basis by no later than the Due Date following the conclusion of each calendar quarter during the Term at the following royalty rate (?Royalty Rate?): for all Recordings sold or otherwise distributed during the Term, the Roy- alty Rate shall be, for each reproduction of an Authorized Composition, where the running time of the reproduction is five (5) minutes or less, eight and three tenths cents ($0.083) per Authorized Composition per Recording (ii) where the running time of the reproduction is longer than five (5) minutes, eight and "three?tenths cents ($0.083) per Authorized Composition per Recording for the ?rst ?ve (5) minutes of such reproduction and one and sixty?six one?hundredths cents 0.0166) per addition~ a1 minute or part thereof of such reproduction per Authorized Composition per Recording. Royalty Rarefcr Prior Periods: Manufacturer?s obligation to account for and pay Royalties will be determined pursuant to the terms hereof. Manufacturer will pay Royalties at the applicable Royalty Rate during each period in Which Recordings Were sold or otherwi?Se dis- tributed. The applicable Royalty Rates for prior periods are as follows: Mechanical Licensing Agreement (Model 1?2) Page 9 January 1, 2013 298 Prior Period Royalty Rate Per. Min. Rate Prior to October 1, 1988 0.02 0.004 From October 1, 1988 to September 30, 1990 0.0525 0.0105 From October 1, 1990 to December 31, 1991 0.059 0.0118 From January 1, 1992 to December 31, 1993 0.0625 0.0125 From January 1, 1994 to December 31, 1995 0.0647 00129 From January 1, 1996 to December 31, 1997 0.066 0.0132 From January 1, 1998 to December 31, 1999 0.071 0.0142 From January 1, 2000 to December 31,2001 0.074 0.0148 From January 1, 2002 to June 30, 2007 0.077 0.0154 From July. 1, 2007 to December 31, 2009 .081 0.0162 From Januaty 1, 2010 to December 3 l, 2012 0.083 0.0166 (0) Security: Before this Agreement takes effect, Manufacturer agrees to deposit an amount to be mutually agreed between it and CMRRA, which shall be held in trust by CMRRA as security for the proper performance by Manufacturer of all the terms and conditions of this Agreement. During the term hereof, CMRRA may apply the deposit or any part thereof towards the payment of any Royalty due or other charges by Manufacturer by reason of any default of Manufacturer in complying with the terms hereof. The deposit shall accrue interest at current bank rates on shortuterm deposits which shall be held in trust by CMRRA pending full and com- plete performance of the terms and conditions herein. CMRRA may additionally require Manu? facturer to deposit further amounts with CMRRA during the term hereof for the same purpose. The amount of the initial deposit payable hereunder and any additional deposit(s), the due date(s) for payment thereof and such other terms and conditions as CMRRA may require shall be em~ bodied in one or more amendments to this Agreement. 4. Payment of Royalties Obligation to Pay Royalties: Subject to the provisions of this Agreement, royal~ ties shall be due on all Mechanical Licenses issued by CMRRA to Manufacturer for all Record- ings sold or otherwise distributed by no later than the Due Date following the conclusion of the calendar quarter in which such Mechanical License were issued. All royalty payments will be net of all "bank charges, Goods and Services or any other applicable tax. Interest on Overdue Quarterly Payments: Where Manufacturer?s regular quarterly payment of Royalties, including the Royalty Advance defined in Section is made to CMRRA later than the relevant Due Date, Manufacturer shall pay interest on the full amount due for that quarter at that rate which is equal to the prime rate as set by the Bank of Canada prevail~ ing on the Due Date plus two per cent calculated on a daily basis. Such interest shall be due and owing upon the day on which the overdue payment is made to CMRRA. Royalty Accounting for Pro-2013 Sales: With respect to the sale of a Recording prior to the commencement of the Term hereof, Manufacturer shall calculate the Royalties paya? ble pursuant to Section 4(a) above, and in accordance with Sections 5, 6 and 11 of this agree ment, for each Mechanical License issued by CMRRA. Manufacturer?s payment of Royalties Mechanical Licensing Agreement (Model 1-2) Page 10 January 1, 2013 299 shall be accompanied by separate, accurate, royalty statements for each Af?lated Publisher and Non-Affiliated Publisher, to be delivered to CMRRA in electronic form conforming to the for~ mat Speci?cation outlined in Schedule attached hereto, or such other electronic format mu? tually agreeable to CMRRA and Manufacturer. The royalty statements will include all .data Which is indicated. as ?Mandatory? on the said format and may include data which is indicated as ?Conditional?. More speci?cally, ?Conditional? data is data that must be provided to CMRRA if it is available to Manufacturer. Manufacturer Will include all Conditional data for all new Me- chanical Licences issued by CMRRA to Manufacturer after the date of execution thereof and Manufacturer will use its best efforts to include the Conditional data for Prior Licences. In addition, Manufacturer?s payment of Royalties shall be accompanied by an accurate summary of the total amounts payable to each Af?liated Publisher and Non?Af?liated Publisher, in the form hereto attached as Schedule Any adjustment appearing on a royalty statement or summary must be accompanied by sufficient reasonable information to explain the purpose for which such adjustment was made. Sales Accounting For Post~2012 Sales: Manufacturer will, by no later than the Due Date in each calendar quarter during the Term hereof, and in accordance with Sections 5, 6 and 11 of this agreement, provide CMRRA with a complete electronic report of all its Recording sales during the prior calendar quarter (?Sales Report?), such report to conform to the format specification attached hereto as Schedule The Sales Report will include all data which is indicated as ?Mandatory? on the said format and may include data which is indicated as ?Condi- tional?. More speci?cally, ?Conditional? data is data that must be provided to CMRRA if it is available to Manufacturer. On receipt of a Sales Report from Manufacturer, CMRRA will identify the Musical Works in respect of which it has issued Manufacturer a Mechanical License pursuant to this Agreement. will then calculate the amount of Royalties owing with respect to Manufac turer?s sales or other distributions of such Recordings pursuant to such Mechanical Licenses and will advise Manufacturer of same. I Royalty Advance: Manufacturer will, by no later than the Due Date for each cal? endar quarter during the Term hereof, pay CMRRA an advance against Royalties owing for that quarter (?Royalty Advance?). The amount of the Royalty Advance will be determined by multi- plying, for each Recording, the following .items A, B, and where (A) is the sum of all units sold during the applicable calendar quarter (ii) any units liquidated from reserve, if any less any new units held in reserve as per Section 11 of this Agreement (iv) less any units returned in the current period less any negative unit balance from the previous period (unapplied returns) Mechanical Licensing Agreement (Model 1?2) Page 11 January 2013 300 (B) is the applicable Royalty Rate (C) is the number of audio Tracks contained in the Recording (D) is a percentage to be determined by CMRRA to re?ect its market share on the basis of'Manufacturer?s past .Royalty payment, its payment history and alter con- sultation with Manufacturer Market Share?). Royalty Reconciliation: A??er determining the amount owing as Royalties pursu- ant to section 4(d) above, CMRRA will deduct such amount from Manufacturer?s Royalty Ad? vance. If the amount of Royalties in any quarter is greater than the cumulative Royalty Advance on hand, Manufacturer will, upon request, immediately pay CMRRA the amount by which the Royalties exceed the cumulative Royalty Advance on hand. Any such payment out- standing longer than seven (7) days will bear interest calculated on the basis ofa rate which is equal to the prime rate as set from time to time by the Bank of Canada plus two percent on a quarterly basis during the period in which interest is to be calculated. If the amount. of Royalties in any quarter is less than the Royalty Advance, CMRRA will maintain the balance of the Royalty Advance as a credit toward royalties payable for any Uni- dentified Works, Unidenti?ed Owners or Unlocatable Owners or retain such amount as a pre? payment of Manufacturer?s subsequent royatly obligations hereunder. Pita-2013 Unlicensed Recording List: No later than six (6) months from the date of execution of this Agreement, Manufacturer will provide CMRRA with an accurate cumulative listing of all Recordings sold or otherwise distributed by Manufacturer up to December 31, 2012 in respect of which Royalties how not for any reason been paid by Manufacturer for any owner~ ship interest in any musical compositions reproduced therein (?Unlicensed Recording List?). Upon request by CMRRA, Manufacturer shall thereafter provide CMRRA an updated Unliw censed Recording List. Manufacturer shall provide CMRRA with the Unlicensed Recording List in the format set out in Schedule or in an electronic format mutually agreeable to CMRRA and Manufacturer. The Unlicensed Recording List will include all data which is indicated as ?Mandatory? on the said format and may include data which is indicated as ?Conditional?. More speci?cally, ?Con? ditional? data is data that must be provided to CMRRA if it is available to Manufacturer. Manufacturer is not required to maintain an Unlicensed Recording Lists related to the sale of Recordings post December 31, 2012. (11) Licensing and Payment ofRoyalt-ies 0n Unlicensed Recordings: CMRRA shall, upon its receipt of the Unlicensed Recording List, review such list and identify any musical compositions which are Authorized Compositions or Non~Authorized Compositions and will issue Mechanical Licenses to Manufacturer with respect thereto pursuant to this Agreement. Manufacturer will, upon receipt of same, execute each Mechanical License and return such Me- chanical License to CMRRA. Payment of all accumulated Royalties respecting such Authorized Compositions or Non~Authorized Compositions and Royalty statements respecting such payment Mechanical Licensing Agreement (Model 1?2) Page 12 January 1, 2013 . 1r. 301 in like form to that set out in section 4(c) herein shall be delivered to CMRRA on the following Due Date. 5. Free Goods Except as provided in sections 6 herein, royalties will be paid quarterly on Recordings distributed on a free or no charge basis, on the same rates and terms that apply to Recordings otherwise sold. Such Recordings shall be separately identi?ed in Manufacturer?s Sales Report to CMRRA in accordance to the format speci?cation outlined in Schedule 6. Promotional Copies No royalties shall be payable on Promotional Products, as that term is defined herein, up to a maximum of two thousand (2,000) units (all formats combined). Manufacturer shall provide CMRRA with one (1) copy of each such Promotional Product for inspection at the same time at which such Promotional Product is distrib~ uted by Manufacturer, CMRRA will not sell or distribute any Promotional Products provided to it hereunder. To the extent that any Promotional Product contains any Authorized Composition, the provision of a copy of such Promotional Product to CMRRA is deemed to be an application for a Mechanical License with respect thereto, and each Authorized Composition reproduced therein is deemed to be licensed pursuant to the terms- hereof. All Promotional Products shall be separately identi?ed in Manufacturer?s Sales Report to CMRRA in accordance to the format speci?cation outlined in Schedule [Intentionally Omitted] 8. Deletes Deletion: Where Manufacturer deletes a Recording containing reproductions of Authorized Compositions licensed to Manufacturer hereunder from its catalogue of products offered .for sale to its customers (?Deleted Recordings?), it will provide CMRRA with written notice of such deletion on a quarterly basis. Manufacturer may, for this purpose, provide CMRRA with a copy of the deletion notice which it provides to its customers. Royalty: Destruction ofDelot'ed Recordings: Where Manufacturer destroys Deleted Recordings, no royalty shall be payable to CMRRA with reSpect thereto. Manufacturer will maintain reason~ able records and documentation of such destroyed goods which shall be made available to CMRRA upon request. (ii) Sate Qf'DeZet?ed Recordings: Where Manufacturer sells De- leted Recordings, the Royalty payable will be as follows: Mechanical Licensing Agreement (Model 1?2) Page 13 January I, 2013 302 (A) Where Deleted Recordings are sold at or below three dollars and ?fty cents 0) each, Manufacturer will pay a Royalty equal to ?fteen per cent of the proceeds of such sale. (B) Where Deleted Recordings are sold for greater than three dollars and fifty cents each, Manufacturer Will pay the Royalty Rate otherwise applicable pursuant to this Agreement. Payment cflioyaim The amount and payment of Royalties referred to in subsection 8(b)(ii) :herein will be payable on the next Due Date and will take into account share of market as agreed upon between CMRRA and Manufacturer. Manufacturer will maintain records of the proceeds of sale of Deleted Recordings and submit such information to CMRRA along with its payment of Royalties. (iv) Cancellation of Licenses: Where Manufacturer has provid~ ed CMRRA with notice of Deletion as set out in section herein, CMRRA will cancel all Mechanical Licenses issued to Manufac? turer respecting such Deleted Recording. 9. Royalty Reduction for Budget Recordings De?nition: In this section, ?Best Sailing Price? means the price in effect to the larg? est-volume dealers purchasing Recordings from Manufacturer; (ii) ?Full Line Product? means the product line released by Manufacturer containing most of Manufacturer?s new releases; ?Badger Recording? means a Recording, the Best Selling Price ofW-hich is ?fty-?ve percent or less of the Best Sell- ing Price for Full Line Product offered for sale by Manufacturer. (iv) Where Manufacturer does not sell or otherwise distribute Full Line Products, ?Budget Recording? means a. CD Whose Best Selling Price is less than three dollars and ?fty cents .50) and an MC whose Best Selling Price is less than two dollars If, during the Term hereof, Manufacturer begins selling Full Line Products, ?Budget Recording? shall, from and alter the date on which Manufacturer commences to sell or otherwise"distribute such Full Line Products, be determined according to the terms of subsection herein. Mechanical Licensing Agreement (Model l~2) Janumyrl,2013 Page 14 303 Budget Rate: Manufacturer may apply to CMRRA for, and CMRRA shall issue, Mechanical Licenses for Authorized Compositions reproduced on Budget Recordings on the basis of three?quarters (3X4) of the Royalty Rate which would Otherwise be applicable pursuant to section 3 during each Period (?Budget Reduction?). (0) Restriction: The Budget Reduction is applicable only to Budget Recordings that contain at least either eight (8) musical works or, in the case of classical or serious music, at least thirty (3 0) minutes of playing time. Mid-Line Recordings: Recordings known in the trade as ?midd?ine? Recordings are speci?cally excluded from the Budget Reduction. Provision ofP-ricz'ng Information: Manufacturer shall submit to CMRRA current price list information on each Due Date to qualify for the Budget Reduction. 10. Exports Unless otherwise agreed by the parties hereto, Recordings exported by Manufacturer will be licensed by and royalties will be paid to the mechanical rights society and/or responsible pub~ lisher(s) in the country to which the Recordings are exported, and that Manufacturer will not be liable to CMRRA for the payment of Royalties on such exported Recordings to the extent that such Recordings are otherwise subject to Mechanical Licenses issued to Manufacturer by CMRRA hereunder (?Export Exemption?). Manufacturer will provide CMRRA with advice on a timely basis of all Recordings manufactured pursuant to Mechanical Licenses issued hereunder for which exemption from Royalty payment is claimed by Manufacturer on the grounds of ex~ port, including quantity, catalogue number and identi?cation of purchaser by name and country. It is understood and agreed that the Export Exemption is intended to apply only to Re- cording-s in respect of which all applicable mechanical licenses are obtained and applicable roy? alties are paid in the territory into which they have been exported, and that the Export Exemption is not intended to provide Manufacturer or the importer or purchaser of such exported Record? ings with the opportunity to export or obtain Recordings free of any royalty payments or obliga- tions. In addition, Manufacturer will, upon request by CMRRA, provide reasonable proof that mechanical licenses have been obtained and applicable royalties have been paid on exported Re~ cordings in the territories into which they have been exported. If Manufacturer is unable to pro- vide CMRRA with such proof for any Recordings in respect of which it claims the benefit of this section, Manufacturer will be obliged to obtain Licenses and pay Royalties as provided hereun- der in respect of such Recordings Reserves and Returns Reserve Allowance: Manufacturer shall be entitled to a reasonable reserve against the return of Recordings sold or otherwise distributed, save and except for ?one~way sales? ofRe? cordings where such Recordings are sold or otherwise distributed. by Manufacturer where the Mechanical Licensing Agrcem ent (Model 1?2) Page 15 January 1, 2013 304 purchaser thereof is not entitled to return same. Amounts held in reserve will be paid out on a regular quarterly basis, over a maximum period of five (5) calendar quarters, whereby any amount entering the reserve shall be fully liquidated no later than five (5) calendar quarters after such amount entered the reserve. Reserve Accounting: The number of units for which Royalties are paid shall be ad- justed to indicate any reserve(s) claimed by Manufacturer pursuant to Section 11(a) above, whether the reserves are withheld or liquidated. For greater clarity, Manufacturer?s reserve shall be Withheld or liquidated only by adjusting the number units payable and not by reducing or in creasing the Royalty Advance or Royalties payable for each line item, to an Affiliated Publisher or Non-Affiliated Publisher, or to CMRRA. (0) Returns in Excess ofReserves: Royalties associated with returned Recordings in ex? cess of the reserve held by Manufacturer shall be carried as a negative credit balance and shall not be recouped against royalties otherwise payable to CMRRA. 12. Termination Termination of Agreement: Insolvency This Agreement shall terminate in the event that is voluntarily wound up or becomes insol~ vent, makes or is the subject of an assignment in bankruptcy 01' if a receiver is appointed to manage the affairs of CMRRA. In the event ofsuch termination, all Mechanical Licenses issued by CMRRA to Manufacturer will remain in full force and effect di? rectly between Affiliated Publishers and Manufacturer for the re? mainder of the Term hereof. (ii) Insolvency of Manufacturer: CMRRA may terminate this Agreement in the event that Manufacturer is Voluntarily wound up, or is the subject of an assignment in bankruptcy or if .a receiver is appointed to manage its affairs. In the event of such termination, all licenses issued to Manufacturer by CMRRA hereunder will be terminated forthwith and Manufacturer will render an accounting and payment to CMRRA of all royalties due and owing theretmder. Breach cngreement by Manufacturer: CMRRA may ter? minute this Agreement in the event of any material breach. of its terms or of the terms of any Mechanical License issued by CMRR-A to Manufacturer. Prior to effectng such termination, CMRRA shall give Manufacturer written notice of its intention to terminate in the manner set out herein. If Manufacturer fails to take reasonable steps to cure such breach within thirty (30) days follow" Mechanical Licensing Agreement (Model 1?2) Page 16 January 1, 2013 305 ing the date of such notice, then this Agreement and all Mechanical Licenses issued hereunder shall terminate on the thirty??rst (31st) day following such notice. Upon such termination, Manufacturer will forthwith render an accouuting and payment to CMRRA of all Royalties due pursuant to this Agreement. Termination of Individual Mechanical Licenses: Subject to the provisions of Sec? tion of this Agreement, may terminate any individual Mechanical License is? sued hereunder upon Manufacturer?s material breach of any of the terms thereof by giving writ? ten notice of such breach as set out herein. If Manufacturer fails to take reasonable steps to cure such breach within thirty (3 0) days following the date of such notice, then the said Mechanical License shall terminate on the thirty??rst (31st) day following the date of such notice. Upon any such termination of a Mechanical License, Manufacturer will render an accounting and payment to CMRRA of all Royalties due and owing thereunder in the course of its next quarterly Royalty accounting. 13. Arbitration Disagreements regarding the interpretation of the terms of this Agreement shall ?rst be the subject of discussion between CMRRA and Manufacturer. Failing resolution of the disa~ greement by such discussion, it shall be referred to arbitration pursuant to the provisions of the Arbitratioas Act, 8.0. 1991, 0.17, as amended from time to time. The reference to arbitration shall be to one arbitrator, if the parties agree upon one arbitrator, otherwise to three arbitrators, one of whom shall be chosen by each party to the dispute and the third by the two so chosen and the third arbitrator so chosen shall be the Chairman. The award may be made by the majority of the arbitrators. Pursuant to 8.45 (3) of the said Act, the award may be appealed by either party to a Court on a question of fact or on a question of mixed fact and law. 14. Amendment and Severability This Agreement may only be amended in writing signed by the parties hereto. A waiver by either party hereto of any term or condition of this Agreement or of any individual Mechani~ cal License incorporating this Agreement by reference shall not be deemed or construed as a waiver of any condition or term hereof for the future or of any subsequent breach thereof. All remedies contained in this Agreement and in any individual Mechanical License incorporating the terms of this Agreement by reference shall be cumulative and none of them shall be in limita~ tion of any other remedy. To the extent that any provision hereof may be judicially or adminis? tratively determined to be illegal or otherwise void, other than articles 2 and 7 herein, it is sev~ ered herefrom and will not otherwise affect or otherwise derogate from any other term hereof. 15. Audit Audit Right: Manufacturer hereby agrees that CMRRA, on behalf of its Af?liated Publisher(s) and those listed on Schedule hereto, shall have the right, not more than once in any twelve (12) month period, to conduct, at its own expense, a Copyright Royalty Examination Mechanical Licensing Agreement (Model I42) Page 17 January 1,2013 306 (?Audit?) of Manufacturer?s books and records as the same relate to the use of the Authorized Compositions and those listed on Schedule hereto, which are the subject of Mechanical Li? censes incorporating this Agreement, provided that CMRRA provides Manufacturer with rea- sonable written notice of its intent to conduct an Audit not less than twenty (20) business days prior to such Audit, and provided further that no such Audit shall take place within thirty (30) days prior to any Due Date. The Audit right may be exercised only once during any calendar year with respect to royalty statements rendered within two (2) years of receipt of said statements. Books and Records to be Kept: Without limiting the generality of the foregoing, such books and records shall include books of account and supporting documentation, such as reports from third party manufacturers and distibutors, relating to the manufacture, sale or other distribution and return of Recordings sold or otherwise distributed by Manufacturer. Such books and records shall be maintained in a manner consistent with such Generally Accepted Account~ ing Principles as are and may be established from time to time by the Canadian Institute of Char- tered Accountants. (0) Access to Information: Without limiting the generality of the foregoing, Manufac- turer shall advise CMRRA and its agents, upon request thereof, where such records, books and supporting documentation are kept and shall provide CMRRA and its agents with such infor? mation. CMRRA and its agents shall have the right to take handwritten extracts and to make photocopies and computer reports of such records, books and supporting documentation as CMRRA and its agents determine are reasonably necessary and convenient for the efficient con- duct of the Audit. Veri?cation by ThirdParty: in lieu of exercising the Audit Right herein, CMRRA may, in its sole discretion, accept the ?ndings of a mutually acceptable examiner engaged by and at the cost of Manufacturer, including but not limited to an auditing or accounting firm, for the purpose ofverifying the accuracy of Manufacturer?s records and payments made pursuant to this Agreement. 16. Applicable Law This Agreement shall be interpreted and governed by and pursuant to the laws of the Province of Ontario. 17. Notice Any notice or other communications hereunder will be in waiting and must be delivered by personal service, facsimile or by pro?paid register-ed mail to CMRRA and Manufacturer at the addresses set out in this Agreement, and such notice or communication will be deemed to be received in the case of personal service on delivery, or if by facsimile on the day of transmission, or if mailed on the ?fth business day following its mailing. Either party may change its address for notice provided above by giving notice to the other party. Notwithstanding the foregoing, Mechanical Licensing Agreement (Model 1-2) Page 18 January 1,2013 307 notice of material breach of any term or condition of this Agreement shall be by prepaid regis? tered mail and shall be deemed received on the date of actual receipt by the addressee. 18. Entire Agreement This Agreement and the Schedules and Exhibits attached hereto, constitute the entire agreement between the parties and neither party "hereto is bound by any representation or in" ducement not set forth herein. 19. Titles Section titles herein are merely for identification and will be of no effect whatsoever in the application and construction of this Agreement or its provisions. 20. Currency All royalties paid pursuant to Mechanical Licenses issued hereunder shall be calculated and paid in Canadian funds. 21. Assignment Neither this Agreement nor any Mechanical License issued by CMRRA to Manufacturer hereunder may be assigned by Manufacturer in whole or in part without the express prior written consent of CMRRA, save and except for any assignment necessitated by a change in control or ownership of Manufacturer occasioned by the acquisition of a substantial controlling interest in the shares thereof or through the merger of Manufacturer with another firm, in which case as? signment will be subject to immediate notification to provided. that the assignee in such case is a party hereto. 22. Representation and Warranty by CMRRA CMRRA represents and warrants that its Affiliated Publishers and Non-Affiliated Pub- lishers own and/ or control the reproduction. rights in the Authorized Compositions and Non- Authorized Compositions pursuant to the terms and conditions of this Agreement and that they have authorized CMRRA to enter into this Agreement with Manufacturers and to grant Mechan~ ical Licenses to Manufacturers as set out herein. In the event that the above representation and/ or warranties is or are breached with re? spect to any Composition licensed hereunder, and Manufacturer is found liable or settles any claim "for damages as a result thereof, CMRRA will indemnify Manufacturer against and hold Manufacturer harmless from any and all claims, demands, liabilities and losses (including rea- sonable legal fees, interest and court costs) arising out of or in any way related to such breach. CMRRA agrees that Manufacturer may withhold such sums due CMRRA or Affiliated Publisher pursuant to the provisions of section 4(f)(iv) herein, in such amounts reasonably related to such claims until such time as such claims are reduced to a final judgment by a court of competent jurisdiction or are settled. Mechanical Licensing Agreement (Model 1?2) Page 19 January 1,2013 308 CMRRA agrees that during the Term it shall maintain, in good standing, an errors and omissions insurance policy with coverage in an amount suf?cient to indemnify Manufacturer(s) for any breach of representation and/or warranty as set out above. 23. Confidentiality Either party hereto may disclose the existence of and the terms of this Agreement to any person, ?rm or corporation. However, all transactions carried on pursuant to this Agreement, including the application for any Mechanical License by Manufacturer, the issue of such Me? chanical License by CMRRA, the payment of royalties thereunder by Manufacturer to CMRRA and the contents of any correspondence or dealings between the parties hereto respecting such applications, Mechanical Licenses or Royalty payments shall at all times be treated in a con?- dential manner by both parties hereto and shall not be disclosed by either party to any other per? son, or to any ?rm or corporation without the express prior written consent of the other, save and except for such disclosure as may be reasonably necessary to either party?s directors, officers, auditors (including auditors in the course of their conduct of any audit of Manufac? turers hereunder), subsidiaries or parent ?rms or corporations. Mechanical Licensing Agreement (Model Page 20 January 1, 2013 309 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the day and. year ?rst above written. CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Name: Caroline Rjeux Title: President Date: [name of manufacturer] Name: Title: Date: Mechanical Licensing Agreement (Model 1-2) January 1, 2013 Page 21 310 EXHIBIT Standard CMRRA Mechanical License Each Mechanical License issued by CMRRA to Manufacturer hereunder will set out on its face the following information: License Number Name of Manufacturer Address of Manufacturer Title of Authorized Composition Composer(s), Author(s) and Arranger(s) of Authorized Composition Owner/Administrator of Copyright Percentage of Copy-right owned or administered by Owner/Administrator Featured Artisthroup performing Authorized Composition on Track or Recording Release Date of Recording Playing Time of Track The Recording?s Universal Product Code (UPC) I Manufacturer?s Catalogue Number for the Recording Contrivance Album Title (where applicable) Date of Issue Mechanical Licensing Agreement (Model Page i January 1, 2013 . EXHIBIT Notification of New Affiliated Publisher TAKE NOTICE that Schedule to "the Mechanical Licensing Agreement dated as of January 1, 2013 between CMRRA and Manufacturer is hereby amended to add the following persons, ?rms andfor companies as Af?liated Publishers: Date: Name of Af?liated Publisher 311 Mechanical Licensing Agreement (Model 1-2) January 1, 2-013 Page i 312 SCHEDULE Affiliated Publishers The following music publisher af?liates of CMRRA are here-by added as Affiliated Publishers to the Mechanical Licensing Agreement dated as of January 1, 2013 between CMRRA and Manu- facturer: (computer printout) Mechanical Licensing Agreement (Model 1-2) Page i January 1, 2013 313 SCHEDULE NonuAffiliated Publishers and Non?Authorized Compositions The following music publishers are Non?Affiliated Publishers pursuant to the Mechanical Li? censing Agreement dated as of January 1, 2013 between CMRRA and Manufacturer: Name of err-Affiliated Publisher Ab'kco Music Inc. Ashtray Music Axe Music Black Ice Magic Publishing Leg-s Music Inc. The following compositions are Non?Authorized Compositions pursuant to the Mechanical Li~ censing Agreement dated as of January 1, 2-013 between CMRRA and Manufacturer: Title Publisher- ?White Christmas? Irving Berlin Irving Berlin Music Corp. c/o Williamson Music Mechanical Licensing Agreement (Model 1?2) Page i January 1,2013 314 SCHEDULE Standard Sales Ropert Format Pursuant to Section 4(d) of this Agreement, Manufacturer?s quarterly Sales Report will be deliv? ered to CMRRA in a Microsoft Excel ?le in accordance with the format and data requirements below. The following table lists the required data ?elds that must appear in each ?le and a description of each data ?eld. The data fields are to be presented as individual columns in the spreadsheet. 1 tits I. . . . . ex ?mam: ants-?3721. 'i The quarterly period the sales took place. st he Mandatoly indicated as being the applicable quarter, Q, and being year. For example, 1Q2013. It? (1) Sales Period (ii) UPC The Universal Product Code assigned to the Recording. Mandatory gnique Product Identiu The catalogue number ofthe Recording. . Mandatory ier (iv) Product Title The title of the Recording. Mandaton Performing Artist - The name of each artist to whom the Recording is credited. Mandatnry (vi) Release Date The Release Date of the Recording. Mandatory (vii) Transaction Type Identi?es the method used by the Manufacturer to distribute the Mandatory Recording. One ofthe following values is expected: I RS for Regular Sales FG for Free Goods PR for Promotional Import Allowance Where an Import Allowance'has been agreed to between I Mandatory CMRRA and Manufacturer, one of the following values is are pected: LA for sales subject to the Import Allowance under such agree- 'ment A for sales not subj eet to the Imp ort Allowance under such agreement. Where no such Import Allowance has been agreed to between CMRRA and Manufacturer, the value for this ?eld is NA (ix) Rate Category Identi?es the price categon for the Recording. One of the fol- Mandatory lowing values are expected: FR for Full Rate as per Section '3 of this Agreement BR for Budget Rate as per Section 9 of this Agreement Best Selling Whole? Identi?es the price of the Recording in effect to the largest~ Mend story sale Price of Rr-ccord~ volume dealers purchasing the Recording ??om Manufacturer as in per Section 9 of this Agreement. Mechanical Licensing Agreement (Model 1?2) Page i January 1, 2-013 315 (xi) Royalty Rate The applicable Royalty Rate as per Section 3 or Section 9 of Mandatory . this Agreement. This value should be stated in dollars, for ex? ample, as .083 (xii) Number Of Audio The number of audio Tracks embodied on the Recording. Mandatory Tracks On Recording CMRRA Market _f A percentage to be determined by CMRRA to reflect its market Mandatory Share - share pursuant to Section of this Agreement. (xiv) Amount Per Unit Sold The product ofthe Royalty Rate the Number of Audio Mandatory Tracks on Recording (xii) and the CMRRA Market Share (xv) Sales Units For The The number of units for which Royalties are being paid in the Mandatory 13611061 (1161' Ofl?e- quarterly period. The value in this ?eld must be zero or post? serves) tive. (xvi) Sales Units Released The number of units being liquidated (paid) from a reserve that Mandatory From Reserve For The 'was held in a prior period. The value in this ?eld must be zero Period - or positive. (xvii) Negative Balance Negative credit balance from the previous period as a result of Mandatory Forward From Prev-i? . returns in excess of reserves. The value in this ?eld must be ous Period zero or negative. Returns For Current Returns for current period. The value in this field must be zero Mandatory - Period or negative. (xix) Total Units Payable This is the sum of the Units sold Sales Units Released from Mandatm'y For The Period reserve (xvi), Negative Balance Forward (xvii) and Returns (xx) Life To Date Sales Life To Date sales ofthe Recording. i Mandatory Units (xxi) Royalty Advance As per Section 4(e) of this Agreement: The product of the Total Mandatory Units Payable for the Period (xix), the applicable Royaity Rate the Number of audio Tracks on Recording (xii) and the CMRRA Market Share FILE NAMING CONVENTION: Manufacturer?s Sales Report will be named in accordance with the following convention: Manufacturer Manufacturer V7 V?v? Manufacturer Name being the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identi?cation number CMRRA. Type being Sales Report. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 as provided by Mechanical Licensing Agreement (Model January 1,2013 Page ii SCHEDULE Standard Reyalty Format Pursuant to Section 4(c) of this Agreement Manufacturer? CMRRA in a Microsoft Excel file, ance with the format and must appear in each file and a description of each data field. The in the spreadsheet. .. mic.? -. r- 316 royalty statements will be delivered to or such other data ?le as agreed to in advance by CMRRA, in accord- ata requirements below. The following table lists the required data ?elds that data ?elds represent individual columns Publisher Name The name of the Copyright Owner as stated on li? censes. Mandatory Publisher Numb er The Copyright Owner identi?cation number, as stated on CMRRA's licenses or as used in Manufacturer's own account system, so long as such identi?cation number is only ever used to identify one speci?c Copyright Owner account and is not re- used to identify a different Copyright Owner account. Mandatory License it Pre?x The License Number Pre?x as provided by CMRRA. Mandatory License Suf?x The License Number Suffix as provided by CMRRA. Mandaton Song Number The Musical Work?s identi?cation number as stated on CMRRA's licenses or as used in Manufacturer's accounting system. Mandatory .1 (vi) Song Title The title of the Musical Work as stated on CMRRA's licenses in respect of which Royalties are being paid. Mandaton (vii) Writer Name(s) The name of the authors and composers of the Musical Work. Mandatory Unique Product Identi? tier The catalogue number assigned to the Recording by Manufac? turer. Mandatory (ix) Contrivance The conti guration type of the Recording (contrivan ce). Mandatory (a Royalty Rate The applicable Royalty Rate as per Section 3 or Section 9 of this Agreement. This value should be stated in dollars, for ex? ample,.as .083 Mandatory (xi) Ownership Percentage The ownership Percentage of the Copyright Owner as stated on - CMRRA's licenses. Must appear as .a percentage amount (33.33) without the percent symbol. Mandatory (xii) Units The number of units for which Royalties are paid in the quarter? ly period, not of reserves, which is the subject of the statement. Must not include comma separator. Mandatory Royalty Amount The total Royalties paid respecting the share of the Musical Work that is the subject of the Mechanical License. Amount is rounded to two decimal places and must not include a dollar sign. Mandatory (xiv) Calendar Quarter The quarterly period that is the subject of the statement. Must be indicated as YYQQ. YY represents the last two digits of the applicable year. The second represents the applicable calen- dar quarter. For example, 12Q4 represents the calendar quar- ter of the year 2012. Mandatory Mechanical Licensing Agreement (Model 1?2) January I, 2013 Page 317 SCHEDULE Standard Royalty Format (continued) As mentioned above, the data ?elds represent different columns of data that must appear in your Microsoft Excel report. It is of critical importance that the column sequencing is presented in exactly the same order as in the above table and that the Data Fields cannot be merged in a single column. It is essen~ tial that you do not add or remove a column. The column width may vary; however, CMRRA requires that it be submitted in a ??at ?le' format. This entails that each cell in each column is filled, even if the information is repeated from prior rows of data (Le. publisher name). The desired result is that each row is self?suf?cient and independent from the others. Your spreadsheet must be free of embedded formulas and 'grand totals' for each column. Manufacturer will ensure that its royalty statements conform to said format and will not make any changes thereto save and except for those which are approved in advance by CMRRA. FILE NAMING CONVENTION: Manufacturer?s Royalty Statements will be named in accordance with the following convention: Manufacturer Manufacturer Manufacturer Name being the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identification number as provided by CMRRA [same as Type being Royalty Statement. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 Records_456HRoyalty Statementm2013'0331.xls Mechanical Licensing Agreement (Model i?Z) Page iv January 1., 2013 318 SCHEDULE Standard Format for Publisher Summary Pursuant to Section 4(c) of this Agreement, Manufacturer's will deliver to CMRRA a summary of the total amounts payable to each Af?liated Publisher, in a Microsoft Excel ?le, or such other data ?le as agreed to in advance by CMRRA, in accordance with the format and data requirements below. The fol~ lowing table lists the required data ?elds in each summary and a description of each field. The data ?elds are to be presented as individual columns in the spreadsheet, with the exception of the last data field in the table below. The name of the Copyright Owner as stated on Mandatory licenses. (ii) 1? UbiiShBl? Number The Copyright Owner identi?cation number, as stated on Mandatory CMRRA's licenses or as used in Manufacturer's own account system so long as such identi?cation number is only ever used to identify one speci?c Copyright Owner account and is not - revused to identify a different Copyright Owner account. Total Payable to Publisher The total Royalties payable to each Copyright Owner. Mandatory (iv) Grand CMRRA Total The grand total payable to CMRRA. Must be indicated at the Mandatory end of column above. Publisher Name The data fields represent the different columns of data that must appear in your report with the exception of (iv) which is a sum of column FILE NAMING CONVENTION: Manufacturer?s Publisher Summary will be. named in accordance with the following convention: Manufacturer Manufacturer Manufacturer Name being the name of the manufacturer. CMRRA Manufacturer ID being the Manufacturer?s identi?cation number as provided by CMRRA. Type being Publisher Summary. being a sequence with indicating the year, MM indicating the month and DD indicating the day of the applicable royalty period end date. For example: 123 Recordsm456hPublisher Summary__20130331 Mechanical Licensing Agreement (Model IQ) Page January 1,2013 SCHEDULE Unlicensed Rocording List Standard Format 319 Pursuant to Section 4(g) of this Agreement, Manufacturer?s Unlicensed Recording List will be delivered to CMRRA in a Microsoft Excel ?le in accordance to the format and data requirements below. The following table lists the required data ?elds that must appear in each ?le with respect to each unli~ ceased Musical Work, or share thereof, and a description of each data ?eld. The data ?elds are to be pre- sented as individual columns in the spreadsheet. Data ?elds marked as ?Conditional? must be provided to CMRRA to the extent such information is available to Manufacturer, or where such information is provided by Manufacturer to an online music service. .. am. v. Song Title The title of the Musical Work. M-Mandatcry (ii) Catalogue Number The catalogue number of the Recording as assigned by Manu? Mandatory facturer. Cumulative Units The cumulative number of units for which Royalties are paya? Mandatory ble from inception of distribution of the Recording until the end of the quarterly period which is the subject of the statement. 1 (iv) Royalty Rate The applicable Royalty Rate. Should appear as dollar amount Mandatory (.083). 3- Total Payable. The total Royalties payable for the Musical Work as embodied Mandatory on the speci?c Recording. (vi) Product Title The title ofthe Recording embodying the Musical Work. Mandatory (vii) Performing Artist The name of each artist to whom the Track is credited. Mandatory Timing The running time of the Track, in minutes and seconds. Mandatory (ix) ISRC ISRC number assigned to the Recording, where such Recording Mandatory for January 1,2013 was released after January 1, 200?. The ?eld is Conditional Post42006 where such Recording is released prior to January 1, 2007. Recordings. Conditional for Pre~2007 . Recordings (X) Writer Name(s) The name of the author(s) and composer(s) of the Musical Conditional Work. (xi) Unlicensed Percentage The percentage interest therein in reSpect of which Manufac- Conditional turer has not obtained a Mechanical License or has not paid Royalties at the time such Unlicensed Recording List Was prepared. Should appear as a percentage amount (33.33). (xii) Release Date The release date of the Recording. Conditional Mechanical Licensing Agreement (Model Page vi 320 January 1, 2013 Recording Deletion information indicating whether the Recording is still active or Mandatory Status has been discontinued. Expected values are the following: DR for Recordings that have been discontinued AR, for active Recordings that have not been dis continued (xiv) Deletion Date The date on which the Recording was deleted from Manufac~ Conditional I turer?s catalogue of products offered for sale to its customers. (xv) . UPC Number The Universal Product Code assigned to the album on which Conditional I the Track appears. (xvi) Disc Number The disc number associated with the Track such as in a box Conditional 7 Set. (xvii) Track Number Thetrack number of the Track on the album on which it ap~ Conditional pears. Publisher Name The name of the music publisher(s) associated with the Musi- Conditional cal Work. (xix) 5 Publisher Number Manufacturer?s internal identi?cation number assigned to the Conditional music publisher. (xx) Song Number Manufactumr?s internal identi?cation number assigned to the Conditional Musical Work. (xxi) Unlicensed Reason The reason for which the Musical Work is on the Unlicensed Conditional Recording List. Expected values are the following: DISPUTE, for copyright ownership con?ict of the Musical Work N0 LICENSE, for Musical Works, or share thereof, for which you have not received a Mechanical License For all other reasons, you are required to provide a brief expla? nation. (xxii) . Con?guration The contrivance-or format of the Recording Conditional (CD, LP, CS, etc..) Calendar Quarter The calendar quarter applicable to the Unlicensed Recording Conditional List. (xxiv) ISWC The International Standard Work Code of said musical oompo- - Conditional sition. (xx-v) Label Name Label name associated with the Recording. This relates to Man?i Conditional ufacturers that handle Recordings for multiple labels. (xxvi Transaction Type Identi?es the method used by the Manufacturer to distribute the Conditional product. One oi?the following values is expected: i RS, for Regular Sales PG, for Free Goods PR, for Promotional Goods Mechanical Licensing Agreement (Model 1?2) Page vii 321 SCHEDULE Unlicensed Recording List Standard Format (continued) FILE NAMING CONVENTION: Manufacturer?s Unlicensed Recording List will be named in accordance with the following eon? vention: Manufacturer Manufacturer Manufacturer Name being the name of the mamlfacturer. CMRRA Manufacturer ID being the Manufacturer?s identi?cation number as provided by CMRRA. Type being Unlicensed Recording List. beinga sequence with indicating the year, MM "indicating the month and DD indicating the day of the applicable royalty period end date. VV VV ?9 For example: 123 .Records?S-iUnIicen-sed Recording List_20130331 Mechanical Licensing Agreement (Model 1?2) Page January 1, 2013 322 SCHEDULE License Application Pursuant to section of this Agreement, Manufacturer?s license application must disclose at least the following mandatory information for each Track: (0 (ii) (iv) (Vi) (Vii) (ix) The foll Manufacturer: (ii) (iv) (V) (vi) (vii) Name and address of the Manufacturer; Performing artist to whom the Track is credited; Title of the Recording; Release date of the Recording; Con?guration type(s) of the Recording; Manufacturer?s unique catalogue number for each Recording con?guration; Title of Musical Work, as well as the title ofeach individual Musical Work contained in a medley, mash?up or used as a sample; Name of each author and composer of the Musical Worlds); Running time of the Track as well as the running time of each individual Musical Work contained in a medley; owing is a list of Conditional data that must be provided to if it is available to Name of the music pub?lisher(s) for each Musical Work; Where the Musical Work is .a translation or adaptation of another Musical Work, the title of such original Musical Work; UPC (Universal Product Code); ISRC (International Standard Recording Code); IS WC (International Standard Work Code); The wholesale price of the Recording; Rate Category for the Recording (Budget Rate or Full Rate); Number of individual Tracks on the Recording; Mechanical Licensing Agreement (Model 1-2) January 1, 2013 Page ix 36 This is Exhibit ?36? referred to in the Affidavit of Terry Perusinl sworn before me this 26th day of August, 2015 A Commissioner for taking Affidavits, etc. Marta Elizabeth-Wake?eld. a Commissioner. etc. Province of oma?o,forWeirF01?dsw. Barristers and Solicitors. Biplros October 24, 2016. 323 324 From: Terry Peruelnl [malltetterrycestargrouesea] Sent: Aprli?28-15 To: Cc: Subject: CM R-RA Stargroye iilNatalle: I hope you are well. i assume the suggestion forJennlfe to put you on to someone at Legacy was directed at me. We are both somewhat confused why'her'lnquires for mechanical licenses with Stargrove has moved into your examination of Legacy. this matter Is about CMRRA deellng with Stargrove in the same manner it does other record labels In Canada not about Legacy Entertainment. in terms of the royalty program Legacy used, there seems to he a question-whether that program Worked or not. The feet Is Legacy sent millions of dollars to CMHRA for royalties over the years twee there using that yery same program. On that'faet alone Clearly the program used did work and accomplished what it is intended to do. This would loathe case again if CMRR-A was sincerely interested in working with Stragroue on behalf of the many, many publishers (artists) it represents. Jennifer Informed you she does not work at Legacy any longer. I sold the company many years ago to a group in the UK and lam no longer with the company. Let?s be candid; members of your principal publishers sit on your board. The-comment that your principal publishers (your boa rd) are instructing you not to deal with Stergrove is the reality of What Is going on here. We 1 325 asked to go on a Min. and you came up with eyery excuse to avoid that. Even when you rejected our program we asked for a referral to another. We were happy to go with something else that worked, but oddly you had no suggestions of a program that would work for you. You suggested a pay as you press on a quarterly basis. We said happy to go with that please explain further. instead of explain further you came back with some aside about Legacy. Based on your principal publishers it is very clear CMRRA does not want to worlt with 'Stargroye In aiding us to distribute budget priced ads in the Canadian market. Considering your "principal publishers? are subsidiaries of "principalrecor labels that are not happy to have our lowered priced products, such as the Beatles in the marketplace, it is not difficult to conclude-what is going here. it is unfortunate for the 10005 of pubiisherslartlats) you represent that they are not fairly represented by CMRHA because of a board that truly does not have the interests of those publishers (artists) In mind. There is no doubt those other publishers (artists) would want the revenuas our products generate them. In fact there is no doubt the artists under your "principaipubiishars? would also love the income our products will generate for them. Unfortunateiythis will notheppen for them because "principal publishers? that sit on your board have record labels to protect. Your principal publishers will not deal with us therefore clearly a meeting is pointless and will notget us any further than this email exchange has. . The notion that your principal publishers are Instructing you not to deal with Stargroye Is clearly the central issue in 'CMititn not dealing with us. We appreciate your'publlehera do not need to give reason for their refusal to deal with That being said there are very clear competition laws In Canada to Insure ones rationale for refusal to deal do not discriminate because of one?s pricing policy, etc, etc. This is a matter our counsel and the Canada?s-Competition Tribunal will Investigate. There is no doubt the artists will be shocked to find they are being denied income on-songa they had created. That could very we? be a cause for Canada to follow the USA and EU with compulsory licenses. Since you will not deal us we will follow your Initial Instructions to pursue the publishers directly. Kind regards, Terry Peruslnl . 37 326 This is Exhibit "37" referred to in the Affidavit of Terr-y Perusini sworn before me this 26th day of August, 2015 wit/?WV A Commissioner for taking Affidavits, etc. i? Wakefield, a Commissioner, are, 1 .93 01 Ontario. for WeirFOUIdsm. Barristers and Solicitors. Expires OdohHrZIl. 20w. Barristers Solicitors Nikiforos latrou may 22' 2015 T: 416-947?5072 niatrou@weirfoulds.corn VIA File 17083.00001 Universal MusiciPublishing Group Canada A Division of Universal Music Canada inc. 2450 Victoria Park Avenue, Suite 1 Toronto ON M2J 5H3 Canada Music Publishing Canada Co. 1670 Bayview Avenue, Suite 408 Toronto. ON M48 302 Canada ABKCO Music, inc. 85 Fifth Avenue New York, NY 1003 Canada Casablanca Media Publishing! Red Brick Songs 249 Lawrence Avenue East Toronto, ON M4N 1T5 Dear Sirs and Mesdames: Re Stargrove Entertainment inc. Refusai to Supply Mechanical Licences We act alongside Dimock Stratton LLP for Stargrove Entertainment inc. ("Stargrove") in respect of your respective refusals to supply Stargrove with mechanical licences for the works identified in Appendix to this letter (the ?Works"). Stargrove has been engaged with each of you through the Canadian Musical Reproduction Rights Agency Limited for months, to no avail, trying to find a solution to your apparent unwillingness to issue Stargrove mechanical licenses on standard terms. This refusal to supply mechanical licenses directly affects Stargrove's business, artificially maintains 4100 66 Wellington Street West, PO Box 35, Tcronto~Dominion Centre. Toronto. Ontario, Canada. T: 416-665-1110 F: WeirFouiabLLP elevated prices of sound recordings that are in the public domain, and is a violation of the Competition Act. This refusal benefits your respective affiliated labels to the expense of consumers. CMRRA has told our client that, on instructions from each of you, it will not issue mechanical licenses to Stargrove. As a result, it has refused to enter into a Mechanical License Agreement with Stargrove. This refusal appears to extend beyond simply licensing the Works; if CMRRA refuses to intermediate for any licenses between you and Stargrove, this imperils Stargrove?s business in respect of all manner of rights that ?Stargrove owns or has licensed, wholly separate from the public domain titles that appear to have caused you to take the exceptional action that you have. By. this letter, we would ask that you each reconsider your position. failing which our instructions are to seek relief through all available means. including through the avenues available under the Competition Act. This group boycott of Stargrove is anticompetitive. The principals of Stargrove, with a combined total of over 50 years in the music business internationally, including in Canada, are not aware of any instance of CMRRA having refused a mechanical license to an entity seeking to reproduce a work. Indeed, CMRRA was established for the Very purpose of efficiently issuing mechanical licenses on a routine basis to numerous licensees. Further, it is in the financial interest of owners of works for their works to be licensed and reproduced as frequently as possible. The only reason we can ascertain that you as publishers are refusing to do so relates to the fact that you are affiliated with record companies that seek to compete with Stargrove. Stargrove has been unfairly targeted because it seeks to produce low?cost CDs of sound recordings that are in the public domain. Your decision to break from the standard practice of issuing mechanical licenses to anyone who will agree to abide by standard terms and pay CMRRA's standard royalties can only be motivated by the goal of preventing Stargrove from offering consumers low?cost alternatives and choice. While Stargrove does not relish the prospect of a public dispute over these practices, it cannot stand by and incur significant losses because your organizations are taking unprecedented steps to keep it from offering low?cost alternatives to Canadian consumers. Among other competition law issues raised by the above~described refusals, we note that the price maintenance provisions in section 76 of the Competition Act enable the Competition Tribunal to order an entity to accept another person as a customer on usual trade terms where a Barristers Solicitors LLP refusal to supply a product to another person, or any other form of discrimination against another person, is because of the low pricing policy of that other person, and the conduct is having or is likely to have an adverse effect on competition in a market. Section 76 expressly applies to refusals to supply or discrimination by a person that has exclusive rights and privileges conferred by copyright. Section 75 the provision prohibiting refusals to deal is similarly engaged. Stargrove remains willing and able to enter into the standard CMRRA MLA for the Works and to pay the applicable royalties and fees. Stargrove reiterates its request for CMR-RA to enter into an MLA with it, and requests licenses from each of you for the Works on standard terms and your confirmation that you will not discriminate against Stargrove in respect of mechanical licenses unrelated to the Works. Please note that that if matters are not resolved to Stargrove?s satisfaction by Friday, May 29, 2015, our instructions are to seek relief against you and your respective labels through all available means. Yours truly. WeirFoulds LLP Nikiforos latrou Ni cc: Canadian Musical Reproduction Rights Agency Limited (CMRRA): cc: Michael B. Kramer, Counsel to ABKCO Music, Inc.; cc: Casey Ohisick, Counsel to Casablanca Media Publishing cc: Sangestha Dlmock Stratton 80791023 CAT ND STROUOI STRCOD2 STRC 004 STRODDQ TITLE Lova'Mo Do Con?l Buy Me Love Red Rooeler ll Nn'l Mo Balm Fun Fun Fun TR PICK 1 gamummamu jawmwwahuM?L damaqamau?d ahAuM?h TRACK Lovo Me Do Fool Fine Boy I Saw Her Slowing Them All My Lovlng Please Mlelor Foelman A Hard Nighl You can?t Do That ll Won'l Bo Long II I Fell Gan?l Burr Me Low From Me To You Please Please Me Do You Wanl To Know a Sacral IWonna Be Yaw Man No Reply Words OI Love Mr Moonlight And Love Her You Really Got A Hold On Me I Wanna Bo Your Man Lillie Red'Rooeler Howl-OI Stone A Sharne To" Me (You're Coming Back} Good Tlrnee Bod Tlmee ll?e NI Orrer Now Time Is On My Blde Grown Up Wrong II You?Need Illa Wall:an The'Dog Tire Timer: Thev'Are A ll Ain'l Ma Bebe Corrina. Corrine Blowin? In TheWInd Bob Dylan's Blues A Hard Roln?a A-Gonna Fell Don'l Thing Moe We All Right Ballod Cl Brown Only A Pawn In Their Game Willi God?On Our Blde One Too Many Mornings Ten Lillie Indiana Be True To Your School Fun Fun Fun I Gel Around When I-Grew Up (To Be A Man} Dance Dance Dance Willow LennonIMcCarlnoy LennonIMccannoy LennonIMccerlnoy LonnoniMcCerlnoy Holland LennanlMocariney LonnonIMocarlney LonnoniMoGarinay LennonIMoCurlney LannunIMGCorlney LennonlMcOo?ney Holly Johnson LennoniMcCarlnev Robinson LennonIMnCarIney Rluhorlengger Richardldagger JuggerlRInhard JoggerIRIchord 8. 8 Womaok MendelNormon JoggarlRIchm PickelUBalemanlEiandem Thomas Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dylan Dvlon Dylan Dylan Wilsonerher WiieorIILove LowM'iison Wilson LovaiWiIeon BEECI-MODD MUSIC CORP. BY UNIVERSAL) BONYIATV MUSIC BONYIAW MUSIC PUBLISHING GIL MUSIC Corp (Bu! reluenl name lrorn BONYIAT-V LISHING JOBETEIBTONEI UNIVEREML SONYIATV MUSIC. PUBLISHING BONYIAW MUSIC PUBLISHING SOHYIATV MUSIC PUBLISHING SONYIATV MUSIC PUBLISHING MUSIC PUBLISHING GIL MUSIC Corn (Bul rolueel came UNIVERSAUDICK JAMES MUSIC LTD BONYIATV MUSIC PUBLISHING OMRRA shone noliring {Bul roiusel oarne Irom PEERMUBIC LIMITED CONWATV MUSIC PUBLISHING PUBLISHING JOBETE .SDNYIATV MUSIC PUBLISHING ABIICD PEER MUSIC CANADA (SIT 0N CM RIM ABKDD ABKCO CMRRA ehow norhing ABKGO DROP TOP MUSIC (Btheol to olerillcalion from UNIVERSAL PUBLISHING MUSIC PUBLISHING MUBIGIPUDLIBHING MUSIC PUBLISHING SONYIWI-V SONYIATV MUSIC PUBLISHING MUSIC PUBLISHING SONYIATV MUSIC-PUBLISHING MUSIC PUBLISHING MUSIC-PUBLISHING UNIVERSAL MUSIC PUBLISHING LTD UNIVERBIIL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD UNIVERSHL MUSIC PUBLISHING LTD UNIVERSAL MUSIC PUBLISHING LTD 93 3 Unlvorenl Unlvoreal Universal Universal Unlvoreal Universal Unlroroel Unmrsol Unlrrorsel Universal Unlvereal Universal Universal .Unlvereal Universal Unlvolsal Unlrreleel Unlrrereel Univorerri Unwereal UnIVereal Unwersel Universal Universal -UnIVereul UnIVarael Universe! Unlliereel Sony Sony Sony aony Sony Sony Bony Sony Sony Sony Sony Universal Univarenl- Universal Universal Universal no rasponso on this track 38 331 This is Exhibit ?38? referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August. 2015 ?ea/M13 A Commissioner for taking Affidavits, etc. Marie Elizabeth Wakefield. a Commissioner,eto., Province of Ontario, for WeirFm?ds up. Barristers and Solicitors. Explma W24. 2016. 332 From: Patricia McAIplne Sent: May~27~15 1:18 PM To: Terry Peruslni Subject: Fwd: FOS Bin opportunity? Terry I?d love to have 10,000 units of both of the Beatles titles for-this opportunity Forwarded message From: Chad Minion ci Date: Mon, May 25, 2015 614:0? PM Subject: FOS Bin opportunity? To: Brian.Greeves@umnsie.eem, "Reid, Pat" Ce: Chad Patricia MeAlpine Diane Di Fiere Natasha Wise Rod Lugtenburg We have an opportunity to use the Front Of Store bin for $5 for 3 weeks. (July 25 to August 14) There 375 are stores with these bins. (314 English 61 PQ) We would .Ship roughly 10,000 units of one title and can go as many as 4 titles but might choose to go less titles depending on the offers. 333 So please offer us one to four titles so we can make selections. Obviously if we do amazing sales, we?ll get more opportunities! Unfortunately, (you knew this was oomingl) we have to submit titles, item and forecasts no later than Friday noon therefore need you to get back to us on Wednesday. . .. Thursday at the latest! Please dig into this and .get back to me, thanks, Chad AVP Sales Anderson Merchandisers Canada Inc. 90537634999 ext. 431 nu- Trish MoAlpine Anderson Merchandisers Canada. 39 This is Exhibit "39" referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 Meek/aw A Commissioner for taking Affidavits, etc. Marie Elizabeth Wakefield, a Commissioner, eta, Prownce of Onla rio. for WeiL'Feulds up. Barristers and Solicitors. W83 W24. 2015 334 335 From: Chad Minicuci Sent: June?1045 10:43 AM To: Terry Perusini Subject: Beatles CD's Hi Terry, as you know, we do a great volume of CD sales on the $5 pricepoint. Walmar?t customers embrace the variety of-choice and of course the affordable pricing that allows them to buy more'l in particular, the Beatles ?Love Me Do? title that we shipped in February of this year was-Welcomed by the Walmart consumer as evident in the sales results. There is no doubt that we are in need of more titles like it . Based on the fact that defectIVe returns were only 0.032% '(way below industry average) means the customers are satisfied with the quality of the product. Obviously i am not in a position to make decisions or take sides on legal controversy. My primary interest is to make available at Waimart that the customer is looking for at pricing they expect. The product you recently made available to us certainly hit the mark and we hope that you can provide us with more selections in the near future. Regards, Chad AVP Sales Anderson Merchandisers Canada Inc. 905-763-1999 ext. 4321. chad.minicuci@amerchca.com TELL THE worm: starting Friday Jun; ALL mum WILL BE mu Fammsm 4O This is Exhibit "40" referred to in the Affidavit of Terry Perusini sworn before me this 26th day of August, 2015 Mei/W3 A Commissi?ngr for taking Affidavits, etc. Marie Elizabeth Wake?eld. a Commission Province of Ontario. for WeirFouldsurger? an. Barristers and Solicitors. Expires October 24. 2016. 337 338 From: Patricia McAlplne Sent: Augustn10~15 11:36 AM To: Terr-y Perusini Co: Chad Minlcuci Subject: Re: Beatles Thanks for the update Terry - continue to keep us advised I'd love to be able to buy some Beatles stock from someone (read on) just so you know last fall (ABCO the Beatles portion of UNI music) offered a temp deal with low costs on key Beatles titles we temporarily lowered our retails and did a large buy in at the low cost (as did all of the music industry), with the intention of putting the retails back up when we ran out of stock in the whse (on the stock we bought at the lower cost) - ?ash forward 10 later and I?m ready to put the retails back upstock on the low cost goods, and WM will not allow increases in retails. Consequently, I have no stock to ship or sell on titles like Beatles Ones, Abby Road, Red, Blue, White, etc. Can you imagine the units we can sell on the $5 titles, with none of the other catalogue ava to ship at this time? Good luck 41 339 This is Exhibit ?41? referred to in the Affidavit of Terry Perusinl sworn before me this 26th day ofAugust, 2015 ?air/4W A Commissmner for taking Affidavits. etc. kw" Wakefield, a Commissionermta, of Ontario, for WeirFouldsur. Barristers and Solicitors. Biplres Dumber 9A. 2013. 340 STRONG LEADERSHIP A BALANCED-BUDGET, PLAN FOR JOBS, GROWTH AND SECURITY Tabled in the House of Commons By the Honourable Joe Oliver, P.C., MP. Minister of Finance APRIL 21, 2015 ?Her Majesty the Queen in Right of Canada (2014) All rights reserved All requests for permission to reproduce this document or any part thereof shall be addressed to the Department of Finance Canada. For more information, please contact Service Canada at 1 800 O?Canada (1?800~622~6232) 1?800-926-9105 Cat. N0.: F1 ISSN: 17193740 This document is also available on the Internet at Cam jmiofz'm?wz as; azzm' diqjmaibfc? w?szazz'r. 341 342 Chapteri Providing $200 million over five years, starting in 2015?16, to improve First Nations education. Providing $12 million over three years to Indspire to provide post?secondary scholarships and bursaries for First Nations and Inuit students. Assisting International Communities 0 Allocating $6 million over ?ve years, starting in 2015-?16, to introduce measures that will help ensure Canadians have access to safe, reliable and lower-cost remittance services. Investing $22.8 million in 20164? for Grand Challenges Canada to continue its promising vvork towards solving global health challenges through innovation. Establishing the Development Finance Initiative to support effective international development by providing ?nancing, technical assistance and business advisory services to ?rms operating in developing countries. Celeigrating Our Heritage 1 Supportingactivities and events to celebrate Canada?s 150th anniversary in 2017, with $210 million over four years, starting in 2015?16. Providing $13.4 million over five years, starting in 201 5-16, and $2.8 million ongoing to support and modernize the Canadian Honours System. Investing up to $20 million over four years, beginning in 201647, to support the next generation of Canadian Olympic and Paralympic athletes. Providing $25 million over five years, beginning in 2016?17, to renew the Harbourfront Centre Funding Program. Proposing changes to the to extend the term of protection of sound recordings and performances. Protecting Canada's Environment Continuing to support, with $75 million over three years, starting in 2015?16, the implementation of the Species at Risk Act. Providing $2.0 million in 2015?1 6 to the Pacific Salmon Foundation to support the Salish Sea Marine Survival Project. Extending the Recreational Fisheries Conservation Program by providing $10 million per year for three years, starting in 20164.7. Dedicating $3.4 million over ?ve years, starting in 201546, to continue to support meteorological and navigational warning services in the Arctic. lion?nonic notion PLAN 2015 343 Prosperous Families and Strong, Secure Communitles Strong Communities Assisting International Communities $6 million over five years, starting in to introduce meaeuree that wiil help eneure Canadians have to note. reliable and lower?coat remittance services. $22.8 million in 2016-4? for Grand Chaiiengee Canada to continue ite promieing work towards solving global health challenges through innovation. Eietabilehing the Development Finance Initiative to support effective international development by providing financing, technical and hueineae advisory eervicee to firm operating in developing countriee. Celebrating Our Heritage Supporting activitiee and events to celebrate Canada?s 150?? anniversary in 2017. with $210 million over four yearn. starting in 2'01 546. Providing $13.4 million over-five years, starting in 20154-8, and $2.8 million ongoing to eupport and modernize the Canadian Honours System and bring it to ail Canadiana. investing up to $20 million over tour years, beginning in 201647. to support the next generation of Canedien Olympic and Paralympic athletes. Promoting arts and culture at. Toronto's waterfront by providing $25 million over five years, beginning in 2018-47. to renew the Harbouriront Centre Funding Program. Proposing changes to the to extend the term of protection of sound recordings and performances. Protecting Canada?s Environment Continuing to support, with $75 million over five yearn. eterting- in the implementation of the Species at Risk not to protect Canada's; diveree species and secure the necessary aotione for their recovery. Providing $2.0 million in 2015-46 to the Pacific Salmon Foundation to concert the Salieh Sea Marine Survival Project. Extending the Recreational Fisheriee Qoneervation Program by providing $10 million per year for three years, etarting in 2016-4 7. to eopport the conservation of recreational fieheriee across-e the country. [Dedicating $34 million over five years, starting in 2015-4 6, to continue to evpoort meteorciogioal end navigational warning eervioee in the Arctic. Economiic ACTION PLAN 2015 265 344 Chapter 4.2 Private sector investment is the ire driver of economic growth: it?s essentiai to creating new businesses that provide jobs, earn profits and generate tax revenue, as Weii as other bene?ts to society. But some promising enterprises in many iow? and middie~incorne countrieswand Canadian companies that work in these regions-moan? access the long-term financing they need to grow and reduce poverty. wEnglneers Without Borders Canada Business and economic development go hand?inwhand. Over the past two decades, private sector~ied growth has driven '90 percent of job creation in developing countries and pulled hundreds of millions out of poverty. Accelerating these private capital flows be dittiouit, but instrumentai to the next wave of poverty reduction. ?C'anadian Chamber of Commerce niobm?ng Heritage The Government is continuing to make investments which will ensure that Canadians have opportunities to celebrate and commemorate Canada's heritage and values. Economic Action Plan 2015 proposes to provide funding to support activities and events to celebrate Canada?s 15 0th anniversary in 2017. Economic Action Plan 2015 also proposes to provide funding to support and modernize the Canadian Honours System, to help Canada?s future Olympians and Paralympians, and to support the Harb ourt?ront Centre in Toronto. Economic Action Plan 2015 also proposes to amend the Copyright Act to protect sound recordings and performances for an additional 20 years. 300 {-Econorvtto AcrIon'PLriw 2:04 345 Prosperous Families and Strong, Secure Communities Strong Communities Promoting Arts and Culture at Toronto?s Harbourfront Centre Economic Action 5 proposes to provide 325 million over?ve years, beginning in 20164.2 to renew the Horbonr??onl Centre Funding Program. Harbourfront Centre is a-not?for?profit organization on the Toronto waterfront that delivers arts, culture and recreation programming. Economic Action Plan 2015 proposes to provide $25 million to renew the I-Iarbourfront Centre Funding Program [tom 2016?17 to 2020~21. This program supports the I-Iarbourfront Centre?s operating expenses, making it possible for the Centre to provide high-quality programs for residents and Visitors to the city. Centre is a national showcase for the contemporary visual arts, crafts, literature, music, dance and theatre for adults and children. Its innovative programs and venues Include: a The Power Plant Contemporary Art Gallery, a leading public gallery devoted exclualvely to contemporary visual art. - Harbourfront Centre's World Stage, which presents theatre, dance and performance art. - a series of family-friendly events from skating to circus festivals. - Harbouriront Centre's Arlist-?lmResidenee post?graduate program. which provides creative and business training to assist emerging designers and craftspeople in establishing professional careers. Protection of Sound Recordings and Performances Economic Action Plan 201 5 proposes to amend the Copyn'ghr Act so that the teen of protection and-sound recordings is extended ?ow 50 years to 70 years following the date ofl?he release oftne sound recordings. The mid-19608 were an exciting time in Canadian music, producing many iconic Canadian performers and recordings. While songwriters enjoy the bene?ts ?owing from their copyright throughout their lives, some performers are starting to lose copyright protection for their early recordings and performances because copyright protection for song recordings and performances following the first release of the sound recording is currently provided for only 50 years. Econonloncl'l-on PLAN 2015 30.5 346 Chapter 4.2 Economic Action 'Plan 2015 proposes to amend the Copyright Act to extend the term of protection of sound recordings and performances from '50 to 70 years following the first release of the sound recording. This will ensure that performers and record labels are fairly compensated for the use of their music for an additional 20 years. Canada?s Envirenement A safe and clean environment supports a high quality of life and contributes to a strong economy. Since 2006, the Government has taken signi?cant action to create a cleaner, healthier environment and protect-our natural areas. Substantial investments have been made in clean energy and energy efficiency, protecting Canadians from toxic substances, cleaning up federal contaminated sites and the Great Lakes, and improving Canada?s weather-services. More recently, the Government launched the National Consewation Plan to further protect Canada?s natural heritage for the benefit of future generations. The Plan will provide a more coordinated approach to conservation efforts across the country with an emphasis on enabling Canadians to conserve and restore lands and waters in and around their communities. It also includes significant investments to secure ecologically sensitive lands, support voluntary conservation and restoration actions, strengthen marine and coastal conservation, and encourage Canadians to connect with nature. 306 notion 42 This is Exhibit "42" referred to in the Affidavit of Terr-y Perusini sworn before me this 26*? day of August, 2-015 MMWQ A Commissioner for taking Affidavits, etc. Marie Elizabeth Wakefield. a Commissioner. em. Province of Ontario. for WeirFo?dsw. Barristers and Soilciturs. Expires October 24, 2016. 347 348 its? ?i it til April 21, 2015 Graham Henderson President Music Canada 85 Mowat Avenue Toronto, ON 3E3 Dear Mr. Henderson: Thank you for your recent letter regarding the copyright term for sound recordings. I have reviewed this material carefully, and share your View that the current term of copyright protection for sound recordings falls short of what is required to protect artists and ensure they are fairly compensated for their work. Please know that, as annotutced today in Budget 2015., our Govenunent will extend copyright protection for sound recordings from 50 to 70 years. The extension will be incorporated into the Badger Implementation Act, and will be in effect inunediately upon passage of the legislation. The Government is committed to recognizing the valuable contribution that artists make to the cultural fabric of Canada. I believe this measure is important in fully acknowledging and protecting that contribution. Once again, thank you for taking the time'te share your views on this matter. Sincerely, The Rt. Hon. Stephen I?lalper, P.C., MP. Prime Minister of Canada 43 This is Exhibit ?43" referred to in the Af?davit of Terry Perusini sworn before me this 26 day of August, 2015 A Commissioner for taking Affidavits, etc. Marie Elizabeth Wake?eld . a Commissioner. :2th Province of Ontario, for WeirFouldsuP. Barristers and Soiicitors. Expires October 24. 2013. 349 350 0-59 Second Session, Forty-?rst Parliament, Deuxieme session, quarante et unieme legislature, 62n63~64 Elizabeth II, 62-63-64 Elizabeth II, 2013?2014~2015 HOUSE OF COMMONS OF CANADA CHAMBRE DES COMMUNES DU CANADA BILL 059 PROJET DE LOI 0-59 An Act to implement certain provisions of the budget tabled in Lei portant execution de oertaines dispositions (in budget Parliament on April 21, 2015 and other measures d?pos? au Parlement le 21 avril 2015 et mettant en oeuvre d?autres mesures AS PASSED - BY THE HOUSE OF COMMONS PAR LA CHAMBER DES COMMUNES JUNE 15, 2015 LE 15 JUIN 20I5 90769 66 January 3, 2016 11.8., 0. 0?42 Term of copyright sound recording No revival of copyright 351 Economic Action Pton 20?, No. 1 62-63-64 ELIZ. II Coming into Force Entr?c en vignette 80. This Division comes into force on 80. La pr?sente section entre en vigneur 1e Bjanvier 2016 January 3, 2016. 3 janvier 2016. DIVISION 5 SECTION 5 COPYRIGHT ACT L01 SUR LE DROIT L.R., eh.C~42 81. (1) Paragraph 23(1)(b) of the Copy- rightAct is replaced by the following: 81. (1) L?alin?n 23(1)b) de la Loi sur la droit est par ce qui suit: if a sound recording in which the 5 performance is fixed is published before the copyright expires, the copyright continues until the earlier of the end of 70 years after the end of the calendar year in which the ?rst such publication occurs and the end of 10010 years after the end of the calendar year in which the ?rst ?xation of the performance in a sound recording occurs. o) si on enregistrement sonore an moyen 5 duquel la prostation est ?x?e est public event l?expiration du droit d?auteur, celui?c?i de? menrc jusqu?d la fin de la soixante-dixieme ann?e suivant l?annee civile on on tel enregistrement sonorc est publi? pour la 10 premiere fois ou, si ellc lui est anterieure, la tin dc la centieme annee suivant l'annee civile ou la prestation est force an moyen d?un enregistrelnent soncre pour la premiere fois. 15 (2) Le paragraphs 23(1.1) de la meme lot 15 est rempiac? par cc (1111 suit: (2) Subsection 230.1) of the Act is re? placed by the following: (1.1) Subject to this Act, copyright in a (1.1) Sous reserve des autres dispositions do Dur?odu droit: sound recording subsists until the end of 50 la presente lci, le droit d?auteur sur 1"en1'egis- years after the end of the calendar year in which tremcnt sonore expire a la ?n de la cinquan~ 20 the first ?xation of the sound recording occurs. tiemc annee suivant l?ann?e civiie de so However, if the sound recording is published 20 premiere ?xation; toutei?ois, s?il estpubli? event before the copyright expires, the copyright l?expiration du droit d?auteur, celui?ci demeure continues until the earlier of the end of 70 jusqu?a la ?n de la soixante?dixieme ann?e years after the end of the calendar year in which suivant?l?annee civile de sa premiere publication 25 the ?rst publication of the sound recording on, si elle lui est anterieure, 1a ?n de la centieme occurs and the end of 100 years after the end cf2?5 ann?e suivant 1"annee civile do cettc ?xation. the calendar year in which that ?rst ?xation occurs. 82.. Paragraph 23(1)(b) and subsection 82. L?alin?a et le paragraphc Aucunc reactivation do droil d'autour 23(1.1) of the Copyright Act, as enacted by 230.1) de la Loi sue to (trait d?mtteur, ?dict?s section 81, do not have the effect of reviving 30 par Particle 8'1, n?ont pas pour cffet de 30 the copyright, or a right to remuneration, in r?activcr lc droit d?auteur ou le droit a a sound recording or pcrformer?s perfor? remuneration, scion le cas, our 1111 enregis- mancc ?xed .in a sound recording in which trement sonore on true iix'?e an the copyright or the right to remuneration moyen d?un cnregistrement sonore si ce droit had expired on the coming into force of those 35 ?tait ?teint a l?cntr?e en 'Vigueur de ces 35 provisions. dispositions. File No. CT-2015COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 (the “Act”); AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 103.1 of the Act granting leave to bring an application under sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to sections 75, 76, and 77 of the Act; AND IN THE MATTER OF an application by Stargrove Entertainment Inc. for an order pursuant to section 104 of the Act; BETWEEN: STARGROVE ENTERTAINMENT INC. Applicant - and UNIVERSAL MUSIC PUBLISHING GROUP CANADA, UNIVERSAL MUSIC CANADA INC., SONY/ATV MUSIC PUBLISHING CANADA CO., SONY MUSIC ENTERTAINMENT CANADA INC., ABKCO MUSIC & RECORDS, INC., CASABLANCA MEDIA PUBLISHING, and CANADIAN MUSICAL REPRODUCTION RIGHTS AGENCY LTD. Respondents APPLICATION RECORD – VOLUME 1 (Application for Leave Pursuant to Section 103.1 of the Competition Act and Application for Interim Order Pursuant to Section 104 of the Competition Act) WEIRFOULDS LLP Barristers & Solicitors 4100 - 66 Wellington Street West P.O. Box 35, TorontoDominion Centre Toronto, ON M5K 1B7 DIMOCK STRATTON LLP 20 Queen Street West, 32nd Floor Toronto, ON M5H 3R3 Nikiforos Iatrou Scott McGrath Bronwyn Roe Tel: 416-971-7202 Fax: 416-971-6638 Sangeetha Punniyamoorthy Thomas Kurys spunniyamoorthy@dimock.com tkurys@dimock.com Tel: 416-365-1110 Fax: 416-365-1876 niatrou@weirfoulds.com smcgrath@weirfoulds.com broe@weirfoulds.com Lawyers for the Applicant 8456349.1