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You raise an interesting point. I entered an original arrangement of "We Three Kings," which features a motif based on "Carol of the Bells," both of which are in the public domain.
If anyone flagged my entry, it didn't get removed.
The reason I felt the instrumental category was appropriate (as opposed to the cover song category) is that, under copyright law, I'm allowed to copyright my "original" arrangement of music that's in the public domain. I would not, however, be able to copyright my original arrangement of a Van Halen song, for instance, because none of their songs are in the public domain.
So, legally speaking, an original arrangement of music in the public domain is not considered a "cover" but rather an original work.
All that being said, I'd be interested in hearing what Ourstage has to say about this.
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