Canadian Recording Biz Faces $6 Billion Suit

Chet Baker was a leading jazz musician in the 1950s, playing trumpet and providing vocals. Baker died in 1988, yet he is about to add a new claim to fame as the lead plaintiff in possibly the largest copyright infringement case in Canadian history. His estate, which still owns the copyright in more than 50 of his works, is part of a massive class-action lawsuit that has been underway for the past year.

The infringer has effectively already admitted owing at least $50 million and the full claim could exceed $6 billion. If the dollars don't shock, the target of the lawsuit undoubtedly will: The defendants in the case are Warner Music Canada, Sony BMG Music Canada, EMI Music Canada, and Universal Music Canada -- the four primary members of the Canadian Recording Industry Association (CRIA).

The CRIA members were hit with the lawsuit in October 2008, after artists decided to turn to the courts following decades of frustration with the rampant infringement (I am adviser to the Canadian Internet Policy and Public Interest Clinic, which is co-counsel, but have had no involvement in the case).

'Exploit now, pay later if at all'

The claims arise from a longstanding practice of the recording industry in Canada, described in the lawsuit as "exploit now, pay later if at all." It involves the use of works that are often included in compilation CDs (like the top dance tracks of 2009) or live recordings. The record labels create, press, distribute, and sell the CDs, but do not obtain the necessary copyright licences.

Instead, the names of the songs on the CDs are placed on a "pending list", which signifies that approval and payment is pending. The pending list dates back to the late 1980s, when Canada changed its copyright law by replacing a compulsory licence with the need for specific authorization for each use. It is perhaps better characterized as a copyright infringement admission list, however, since for each use of the work, the record label openly admits that it has not obtained copyright permission and not paid any royalty or fee.

Over the years, the size of the pending list has grown dramatically, now containing over 300,000 songs. From Beyonce to Bruce Springsteen, the artists waiting for payment are far from obscure, as thousands of Canadian and foreign artists have seen their copyrights used without permission and payment.

What were they thinking?

It is difficult to understand why the industry has been so reluctant to pay its bills. Some works may be in the public domain or belong to a copyright owner difficult to ascertain or locate; yet the likes of Sarah McLachlan, Bruce Cockburn, Sloan, or the Watchmen are not hidden from view.

The more likely reason is that the record labels have had little motivation to pay up. As the balance has grown to over $50 million (Universal alone owes more than $30 million), David Basskin, the President and CEO of the Canadian Musical Reproduction Rights Agency Ltd., notes in his affidavit that "the record labels have devoted insufficient resources to identifying and paying the owners of musical works on the Pending Lists." Basskin adds that some labels believe addressing the issue would be "an unproductive use of their time."

Damages could balloon

Having engaged in widespread copyright infringement for over 20 years, the CRIA members now face the prospect of far greater liability. The class action seeks the option of statutory damages for each infringement. At $20,000 per infringement (the amount owed on some songs exceed this amount), potential liability exceeds $6 billion. These numbers may sound outrageous, yet they are based on the same rules that have led the recording industry to claim a single file sharer is liable for millions in damages.

After years of claiming Canadian consumers disrespect copyright, the irony of having the recording industry face a massive lawsuit will not be lost on anyone, least of all the artists still waiting to be paid. Indeed, they are also seeking punitive damages, arguing "the conduct of the defendant record companies is aggravated by their strict and unremitting approach to the enforcement of their copyright interests against consumers."