Petition for Writ of Certiorari — American Society of Composers, Authors & Publishers v. Turner Broadcasting System, Inc.

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Pio 1 5a5 FItaw

No41- MAR 25 1999

OFFICE oF

IN THE c THE GLene

Supreme Court of the Gnited States

October Term, 1991

AMERICAN SOCIETY OF COMPOSERS,

AUTHORS AND PUBLISHERS,

Petitioner,

Vv.

TURNER BROADCASTING SYSTEM, INC. et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JAY TOPKIS

(Counsel of Record)

PAUL, WEISS, RIFKIND,

ALLAN BLUMSTEIN WHARTON & GARRISON

ROBERT N. KRAVITZ 1285 Avenue of the Americas

DANIEL M. LANE, JR New York, New York 10019

Of Counsel (212) 373-3000

-and-

BERNARD KORMAN, Esq.

One Lincoln Plaza

New York, New York 10023

(212) 621-6210

Counsel for Petitioner

| aaah eae iii

QUESTION PRESENTED

In 1941, ASCAP and the Department of Justice signed an

antitrust consent judgment under which ASCAP agreed to offer two

special forms of license to radio networks and radio broadcasters.

In 1950, after the advent of commercial television, ASCAP and the

Department of Justice carefully amended the 1941 judgment to

make the same two special forms of license available to “telecasting

networks” and “television broadcasters.”

Now, forty-two years later, the courts below have inter-

preted the consent judgment to require ASCAP to offer these same

special forms of license to respondents, who are cable television

program suppliers (such as HBO and MTV). Cable program sup-

pliers transmit programs to local cable systems (such as, in

Washington, District Cablevision) which re-transmit to their

subscribers.

Neither cable program suppliers nor cable systems existed

when the 1950 ASCAP consent judgment was entered; they did not

develop until the 1970's. Significantly, the Department of Justice,

in the trial court, agreed with ASCAP that cable program suppliers

and cable systems could not be equated with television networks

and their affiliated stations.

In these circumstances, this petition presents this question:

Where parties to a consent decree carefully agree to limit

the decree’s application to specific industries, may a federal court

decades later stretch the decree to cover a quite different industry

that did not even exist at the time the decree was entered and that

the parties to the decree could not possibly have contemplated?

LIST OF PARTIES AND RULE 29.1 LIST

The parties to the proceeding below were the petitioner

American Society of Composers, Authors & Publishers ("ASCAP")

and the following cable program suppliers: Turner Broadcasting

System, Inc., USA Network, Lifetime Television, The Discovery

Channel, The CBN Family Channel, Black Entertainment Cable

Network, Arts & Entertainment Cable Network, the Disney

Channel, Home Box Office, Inc., Showtime Networks Inc., MTV

Networks, Inc., Opryland USA, Inc., Playboy Video Entertainment

Group, Inc., American Movie Classics Company, Sportschannel

Prism Associates, Bravo Company, and Country Music Television,

Inc.

The United States, which is a party to the consent judgment

at issue, expressed its views to the trial court, in support of

ASCAP’s position, but did not participate in the court of appeals.

ASCAP is an unincorporated membership association with

no parent companies or subsidiaries.

TABLE OF CONTENTS

Page

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List OF PARTIES AND RULE 29.1 LIST ........... il

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OeeeMeee ne GUE EEE CAD we ee ee 2

REASONS FOR GRANTING THE WRIT ........... 1]

ie gy oa en Ab am a oe OO 16

APPENDIX

Gaon Gn Cuee OF ABOONS. 2. ee ee la

Opinion of Magistrate Judge Dolinger ............ ,

Order re: Corrections, August 6, 1991 ............. 79a

Memorandum and Order, August 8, 1991 ............ 83a

Order and Judgment, August 8, 1991 ............... 89a

Amended Final Judgment, March 14, 1950 ........... 93a

iil

TABLE OF AUTHORITIES

Cases Page(s)

Broadcast Music, Inc. v.

Columbia Broadcasting System, Inc.,

iste ted ie S ose: Se eee 3,4

Buffalo Broadcasting Co. v. AS CAP,

744 F.2d 917 (2d Cir. 1984),

cert. denied, 469 U.S. 1211 cg a ee ee 5

David v. Showtime/The Movie Channel, Inc.,

697 F. Supp. 752 (S.D.N.Y. Re ee ee s

Fortnightly Corp. v.

United Artists Television, Inc.,

392 U.S. 390 DS ora ca a veal aha eae Pee 6

United States v. Armour & Co. ’

at i agli ah | Pa re 14

United States v. ASCAP

(Application of Shenandoah Valley

Broadcasting, Inc.), 331 F.2d 117 (2d Cir.), :

cert. denied, 377 U.S. 997 DE tea. mrt eo 14

Other Authority

House Report on the Cable Communications

Policy Act of 1984, H.R. Rep. No. 934,

98th Cong., 2d Sess. (1984),

reprinted in 1984 U.S.C.C.A. 4655 ................ 6

“Cable—The First Forty Years,”

Broadcasting, Nov. 21, Wm OT en kk vaca 6

IN THE

Supreme Court of the GAnited States

October Term, 1991

AMERICAN SOCIETY OF COMPOSERS,

AUTHORS AND PUBLISHERS,

Petitioner,

Vv.

TURNER BROADCASTING SYSTEM, INC. et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

American Society of Composers, Authors and Publishers

(“ASCAP”) respectfully prays that a writ of certiorari issue to

review the judgment and opinion of the United States Court of

Appeals for the Second Circuit, entered on January 24, 1992.

OPINIONS BELOW

The opinion of the Court of Appeals for the Second Circuit,

which has not been reported, is reprinted in the appendix hereto,

p. la, infra.

The July 11, 1991, opinion of United States Magistrate

Judge Michael H. Dolinger, as corrected by order dated August 6,

1991 (“Dolinger Op.”), has not been reported. It is reprinted in the

appendix hereto, p. 5a, infra. Magistrate Judge Dolinger’s

Memorandum and Order dated August 8, 1991, and Order and

Judgment dated August 8, 1991, are reprinted in the appendix

hereto, p. 83a and p. 89a, infra, respectively.

The amended final judgment entered in United States v.

ASCAP, Civ. No. 13-95 (S.D.N.Y. March 14, 1950), the consent

judgment at issue in this case, is reprinted in the appendix hereto,

p. 93a, infra.

JURISDICTION

The jurisdiction of this Court to review the January 24,

1992, judgment of the court of appeals is invoked under 28 U.S.C.

§ 1254(1).

STATEMENT OF THE CASE

ASCAP seeks review of a decision that sets new Standards

of consent decree construction and that will seriously hinder the

efficient licensing of music in the cable industry. The decision

requires ASCAP in 1992 to offer two special forms of license to

cable program suppliers based on ASCAP’s agreements in 194]

and 1950 to offer such licenses first to radio networks and radio

broadcasters, and then to “telecasting networks” and “television

broadcasters.” In 1950, cable program suppliers did not exist and

only the clairvoyant could have known they ever would exist, let

alone known the entrepreneurial principles under which they would

operate. In consequence, if the decision below is permitted to stand,

courts will be free to rewrite consent decrees, under the guise of

“interpretation,” regardless of the original intent of the parties.

The inevitable results of the decision below will be (1) to

hinder the effective administration of the antitrust laws and other

Statutes by deterring both the government and adverse parties from

signing consent judgments; (2) to burden the courts with trial of

cases that might have been resolved by consent judgments; and

(3) to compel ASCAP forever to license cable in a way it never

agreed to do and does not wish to do.

ASCAP and the AFJ

ASCAP is an unincorporated membership association which

licenses public performances of the copyrighted musical

compositions of its members — some 50,000 writers and publishers

who own the copyrights to a vast number of compositions — and

of hundreds of thousands of foreign writers and publishers.

ASCAP’s licensing activities were reviewed and described by this

Court in Broadcast Music, Inc. v. Columbia Broadcasting System,

Inc., 441 U.S. 1 (1979) (“BMI”).

Nearly all users of ASCAP music are licensed under a

“blanket” license, which, for an agreed-upon fee, gives the

licensee the right to perform all of the compositions in the ASCAP

repertory, as often as desired. This Court described the genesis of

ASCAP and the blanket license in BMI:

. ASCAP and the blanket license developed

together out of the practical situation in the

marketplace: thousands of users, thousands of

Most users want unplanned, rapid, and indemnified

access to any and all of the repertory of composi-

tions, and the owners want a reliable method of

collecting for the use of their copyrights. Individual

sales transactions in this industry are quite

expensive, as would be individual monitoring and

enforcement, especially in light of the resources of

single composers. . . . [T]he costs are prohibitive

for licenses with individual radio stations, night-

Clubs, and restaurants, . . . and it was in that

milieu that the blanket license arose.

Id. at 20.

Virtually every aspect of ASCAP’s Operations is governed

by the Amended Final Judgment (“AFJ”), entered on consent in

1950 in United States v. ASCAP, Civ. No. 13-95 (S.D.N.Y.)

(P. 93a, infra).” The AFJ superseded an antitrust consent decree

entered nine years earlier which dealt primarily with ASCAP’s

relations with the radio industry, and which required ASCAP to

offer to a “radio broadcaster” and to “network radio broadcasting”

two special forms of license. United States v. ASCAP, Civ. No.

13-95 (S.D.N.Y. March 4, 1941) (JA 312, 314).

This case involves the interpretation of two provisions of

the AFJ, which require ASCAP to offer to a “telecasting network”

and to a “television broadcaster” the Same special licenses that the

1941 decree provided for radio. Section V(A) of the AFJ provides:

V. Defendant ASCAP is hereby ordered and

directed to issue, upon request, licenses for rights

of public performance of compositions in the

ASCAP repertory as follows:

(A) To a radio broadcasting network, tele-

casting network or wired music service (as illu-

Strated by the organization known as “ Muzak”), on

terms which authorize the simultaneous and

so-called “delayed” performance by broadcasting

The court’s jurisdiction over entry of the decree was founded on 28

U.S.C. 1337.

¥ "JA __" citations are to the Joint Appendix filed with the Second

Circuit in the appeal of this case.

or telecasting, or simultaneous performance by

wired music service, as the case may be, of the

ASCAP repertory by any, some or all of the

Stations in the United States affiliated with such

radio network or television network or by all sub-

scriber outlets in the United States affiliated with

any wired music service and do not require a sepa-

rate license for each station or subscriber for such

performances[.]

The other provision at issue, Section VII(B), provides in

relevant part:

VII. Defendant ASCAP, in licensing rights for

public performance for radio broadcasting and

telecasting, is hereby:

(B) Ordered and directed to issue to any

unlicensed radio or television broadcaster, upon

written request, per program licenses... .

A “per program” license, like a blanket license, gives a user the

right to perform all of the compositions in the ASCAP repertory,

as Often as desired. But unlike under the blanket license, a per

program licensee pays a fee based only on programs that actually

contain ASCAP music. See Buffalo Broadcasting Co. v. ASCAP,

744 F.2d 917, 922, 926 (2d Cir. 1984), cert. denied, 469 U.S.

1211 (1985).

The Respondents

The respondents are seventeen companies known as cable

services Or program suppliers. These companies transmit programs

and other material to local cable system operators, who re-transmit

to their subscribers. No cable program suppliers existed in 1950,»

and cable is not mentioned in the AF]. The only telecasting

networks were the over-the-air commercial broadcast networks —

ABC, CBS, NBC, and the short-lived Dumont.

Cable

The cable industry originated as community antenna

television (“CATV”), a technique for providing residents of

mountain areas with better reception of over-the-air broadcast

Signals. The first system, built in 1948, and its early successors

were nothing more than powerful mountaintop antennas which

picked up local, over-the-air television Signals and transmitted

them by cable to viewers in adjacent valleys where reception was

poor. CATV provided enhanced reception — nothing else. See

generally “Cable — The First Forty Years,” Broadcasting, Nov.

21, 1988, at 35-36 JA 137-38).

Cable in its current form began in 1975, when Home Box

Office, Inc. (“HBO”) revolutionized the industry by delivering

programs to local cable systems by satellite. This satellite

technology engendered a vast array of national cable services,

which in turn fueled the industry’s dramatic growth in the 1980's.

Id. at 42 (JA 140). Today, there are some sixty cable services

nationwide which, like HBO and the other respondents here, supply

their material to nearly 6,000 local cable Systems. Charap Aff. 4

12 & 20 (JA 103, 107).

* The history of cable television is described in Broadcasting magazine’s

Nov. 21, 1988 special report, "Cable - The First Forty Years,” attached

as Exhibit K to the affidavit of Ross Charap, swom to May 19, 1989 (JA

137), as well as in the House Report on the Cable Communications Policy

Act of 1984, H.R. Rep. No. 934, 98th Cong., 2d Sess., at 20-22 (1984),

reprinted in 1984 U.S.C.C.A. 4655, 4657-59, and in Fortnightly Corp.

v. United Artists Television, Inc., 392 U.S. 390, 391-92 (1968).

Cable is today a potent competitor to broadcast television,

but the two industries have totally different structures and

economics. Television has always had three, or at most four,

national networks, all making almost identical use of music. The

sixty cable program suppliers, by contrast, use music in

widely-divergent fashion, ranging from CNN’s mostly-news format

to the mostly music-video MTV. See Turner Application at 1-2

(JA 61-62); Ricca Aff. ¢ 4 (JA 786). Most areas are served by at

least two — more typically three to seven — local television

stations, whereas local cable systems almost invariably enjoy

monopolies. Charap Aff. ¢ 18 (JA 106).

In television, the money comes from commercial adver-

tising, and each network generally pays its approximately 200 affil-

iated stations to carry its programs; viewers pay nothing. Id. 4 4,

9 (JA 101, 103). In cable, the flow of money is quite different.

Viewers pay much of the freight in the form of subscription fees to

their local system operator, which then passes a small portion

upstream to its 15, 20, or more program suppliers. Jd. {{ 13, 14,

23 (JA 104-05, 109). Most program suppliers also sell advertising

spots, but most of the total cable revenue stays with the local

systems — of the estimated $19 billion in total cable industry

revenue in 1991, local system operators kept about $14.4 billion

and program suppliers received only about $4.6 billion.

Proceedings Below

The Trial Court

This case arises out of the application by respondent Turner

Broadcasting System, Inc. (“Turner”) for a determination of

reasonable ASCAP license fees under Section IX of the AFJ,

* These figures are derived from estimates by Paul Kagan Associates, a

prominent cable consulting firm.

p. 100a, infra, which entitles every user of ASCAP music to have

the court set reasonable fees if the parties cannot agree.

Turner asked the court to order ASCAP to offer it a

combination blanket license covering not only the transmission of

programs to system operators, but also re-transmission to cable

subscribers. (JA 61.)

Turner asked also that ASCAP be required to offer it a

“per program” license as an alternative to the blanket license. The

sixteen other respondents later joined Turner’s request for both

forms of license. ASCAP responded that it was not obligated to

offer either form of license to cable services.

In the past, ASCAP had granted combination licenses to

cable services on the express understanding that such licenses were

experimental and “without prejudice.” Korman Aff. {{ 4-8 (JA

148-49). But when few cable services requested licenses and some

claimed not to need them, ASCAP decided it would be much less

complicated and therefore make better business sense to offer

licenses to system operators that would also cover the services.

Korman Aff. {{ 11-13 (JA 150-51). There is no dispute that, under

the Copyright Act, a cable service’s transmission and the

re-transmission by a system operator are both “performances,”

each requiring a license. See David v. Showtime/The Movie

Channel, Inc., 697 F. Supp. 752, 758-60 (S.D.N.Y. 1988).

In practical terms, then, the dispute comes down to this:

Respondent cable services, by far the smaller segment of cable, say

that the AFJ compels ASCAP to give them licenses which will run

also to the benefit of the industry’s wealthy monopolists, the cable

Systems (the record contains no hint of an explanation of respon-

dents’ contra-economic behavior). ASCAP contends, by contrast,

that the AFJ imposes no such compulsion — ASCAP is, and should

be, free to license either or both, as it sees fit.

The case was referred to Magistrate Judge Michael H.

Dolinger by consent, pursuant to 28 U.S.C. § 636(c). ASCAP

moved for summary judgment that ASCAP has no obligation to

offer the two special licenses to cable services.

When the magistrate judge asked the Department of Justice

for its views, the Department agreed with ASCAP that the AFJ

does not require ASCAP to offer either type of license to cable

services. The Department stated:

Although the question is not free from

doubt, we might conclude that cable services could

be treated as “telecasting networks” under Arti-

cle V(A) without impermissibly straining the

decree’s language. We think, however, that when

cable systems are equated to “affiliated stations”,

the language is stretched too far. A “station”, in

the context of Article V(A)’s reference to broad-

casting and telecasting, would commonly be under-

stood — we think — to describe an over-the-air

local transmitting facility, broadcasting a single

program at a time and competing with transmis-

sions by other local stations serving the same

customers. These characteristics are very different

from those of a local cable system which broad-

casts many programs simultaneously (including

those of local over-the-air--stations) over its

available channels. od

... [W]e conclude, on balance, that the

language of Article V(A), especially as it addresses

the affiliation of “stations” with networks, cannot

quite be stretched to accom[mJodate the cable

industry. If that result is to be reached, we believe

that the amendment process would be required.

Memorandum for the United States on Decree Construction Issues,

at 9-10 (JA 906-07). Similarly, as to the per program issue, the

Department said: "We do not find that the per-program license

requirement is applicable to cable services in the decree as written."

Memorandum for the United States on Applicability of

Article VII(B) of the Amended Consent Decree to Cable Program

Services, at 7 (JA 1079).

Rejecting the views of the parties to the AFJ , the magistrate

judge denied ASCAP’s motion and, sua sponte, granted summary

judgment to respondents. Dolinger Op. at 75-78, 101, pp. 57a-59a,

76a, infra.

Although the term telecasting network had perfectly plain

meaning in 1950, the magistrate judge held that, in today’s world,

the term is “ambiguous.” The court said that, properly construed

in 1991 in light of “equitable considerations” and the “purpose” of

the consent judgment, the AFJ gives cable services the right to

obtain the special licenses, even though such businesses did not

exist and were not conceived of in 1950. Jd. at 22-23, 25-78,

pp. 20a-59a, injra.

The magistrate judge said that Section V(A) is ambiguous

because it “refers to ‘a telecasting network,’ rather than, for

example, ... ‘a network that engages in telecasting by

over-the-air broadcast.’” Jd. at 25-26, p. 22a, infra. He reasoned

also that, when the parties used the term “telecasting network” in

the decree, they may not have meant only networks of the kind that

existed in 1950 (i.e., broadcast networks), but rather “any entity

that — like the then-existing networks — assembled a unique

package of television programming which it supplied to a number

of locally-based telecasters with which it maintained a contractual

relationship, and which in turn transmitted that programming,

under the program supplier's name to the televisions in its

locality.” Jd. at 26, p. 22a, infra.

Similarly, Magistrate Judge Dolinger ruled that “television

broadcaster” in Section VII(B) refers also to cable program

suppliers; in consequence, he ordered ASCAP to offer per program

licenses to respondents. Jd. at 78-102, pp. 59a-75a, infra.

The Court of Appeals

ASCAP appealed both rulings.* The government, for

reasons not divulged, declined to participate in the appeal and

announced it was taking a neutral position. See Letter from Robert

B. Nicholson to Stanley A. Bass, Second Circuit staff counsel,

dated Oct. 8, 1991.

The court of appeals affirmed per curiam, “substantially for

the reasons stated” by Magistrate Judge Dolinger. (P. 4a, infra.)

REASONS FOR GRANTING THE WRIT

This case raises a question never reviewed by this Court:

Whether a court may ignore the clear original intent of parties to

a consent decree and stretch the decree’s carefully limited scope to

include a new industry that the parties could not possibly have

known they were including. The answer to this question could have

a major impact on the willingness of parties to sign a consent

decree — the tool of enforcement that the Antitrust Division, the

Federal Trade Commission, the Securities and Exchange

* Jurisdiction over the appeal was based on 28 U.S.C. § 1292(a)(1). The

magistrate judge also certified his judgment pursuant to Fed. R. Civ. P.

54(b), providing an alternate basis for appellate jursdiction. (P. 90a,

infra.)

Commission and many other federal law enforcement agencies rely

upon heavily.®

The plain facts here are that ASCAP and the Department

of Justice signed one contract in 1950 and the courts below have

created another. ASCAP and the Department agreed to terms

regarding the licensing of the broadcast television industry. The

courts below felt themselves free to apply those terms to cable.

The rulings below would require clairvoyance of litigants

entering consent decrees. The magistrate judge concluded that,

because the parties used the term “telecasting network” rather than

“a network that engages in telecasting by over-the-air broadcast,”

the decree was ambiguous, and he was free to apply that section to

cable program suppliers. But clearly, the parties could not have

thought to distinguish “over-the-air broadcast networks” from

other networks — over-the-air networks were the only ones that

existed in 1950.

There was no ambiguity in 1950 as to what the parties

meant by “telecasting network.” They meant to line up television

with its older brother, radio, and treat the two alike. No further

clarification was necessary.

As the Department of Justice told the trial court, if cable

had existed in 1950, “It is nat obvious . . . that ASCAP would

have consented to a network license requirement for cable.”

Memorandum for the United States on Decree Construction Issues,

at 7 (JA 904). It is one thing for ASCAP to agree to the efficient

* The supervisor of document processing at the FTC advises us that the

agency signed 87 consent orders in 1990 and 1991. The Antitrust

Division signed 18 consent judgments in those two years, according to

figures supplied to us by the Division. And the use of decrees is, of

course, not limited to the antitrust area, but is also important in civil

rights, health and safety, labor, and many other areas.

practice of licensing both networks and stations at the network level

in broadcast radio and television, where there were only three or

four networks, all using music similarly, and where most of the

revenue from network programming goes to the networks; it would

be quite another to agree to license performances at the program

supplier level in cable, where there are some sixty different

services with radically divergent music use (compare CNN with

MTV), and where most of the revenue is collected not by the

services, but by the local system operators.”

ASCAP agreed in 1941 and 1950 to license network

broadcasts in radio and television at the network level because it

made sense in those industries. In cable, licensing at the local

system level, rather than at the program supplier level, is more

sensible because (1) the value of performances of ASCAP music is

best reflected by the revenues of cable system operators, who

collect most of the revenues in cable, and (2) system operators use

music in relatively similar fashion, and so ASCAP can bargain with

system operators in one industrywide negotiation. The program

suppliers, by contrast, have insisted on bargaining separately, each

demanding an idiosyncratic license tailored to its particular use of

music. (JA 148-52).

The rule set below comes down to this: Even though the

terms of a decree are unambiguous when the decree is entered,

subsequent developments may render the terms arguably

ambiguous. In that situation, the court may expand the scope of the

decree beyond what was originally contemplated, unless the parties

had the uncanny foresight to rule out such expansion.

If the decision below is vacated, the free market, not a

magistrate judge, will determine the proper and most efficient

music licensing structure for cable.

v1]

~ See page 7, supra.

The rulings below set a dangerous precedent for consent

decrees generally. As Judge Henry Friendly wrote twenty-five

years ago in interpreting this very same decree:

It is important to the obtaining of consent decrees,

on which the effective enforcement of the antitrust

laws depends in no small degree, that defendants

who sign them should know these will not be

stretched beyond their terms.

United States v. ASCAP (Application of Shenandoah Valley

Broadcasting, Inc.), 331 F.2d 117, 123-24 (2d Cir.), cert. denied,

377 U.S. 997 (1964). If the interpretation here is permitted to

stand, both enforcement agencies and private adversaries will be

reluctant to enter consent decrees for fear that the terms to which

they agree will, decades later, be ripped out of context and applied

to unforeseen and radically different circumstances.

The rule of the courts below also raises Due Process

concerns. As this Court stated in United States v. Armour & Co.,

402 U.S. 673, 682 (1971):

[T]he scope of a consent decree must be discerned

within its four corners . . . . Because the defendant

has, by the decree, waived his right to litigate the

issues raised, a right guaranteed to him by the Due

Process Clause, the conditions upon which he has

given that waiver must be respected, and the instru-

ment must be construed ds it is written... .

We submit the better rule, and the rule more consistent

with Armour, is that a decree means what the parties intended it to

mean at the time they signed it, no less and no more. The Parties

may seek to modify the decree in light of changes or unforeseen

circumstances. But a court is not free to make such modification on

its Own, and contrary to the intent of the parties, in the guise of

interpreting “ambiguity.” Where, as here, the parties agree on

interpretation of the decree and have not moved for modification,

the court should let the decree stand as written.

Indeed, Section XVII of the AFJ specifically provides that

the Department of Justice may apply to the court for modifica-

tion.” (P. 104a, infra.) As the Department told the court when the

AFJ was presented for approval, Section XVII was the mechanism

that the parties intended to use to adjust the AFJ in the event of

new technological developments. The Department’s Sigmund

Timberg said at the hearing before Judge Henry W. Goddard:

This five years [in Section XVII] is merely

to take care of any issue of estoppel that might

arise should the Government feel that new tech-

nological developments, or the way some of these

things work out necessitated our coming back to

your Honor.

3/14/50 Hearing Tr. at 11 (JA 244).

* * *~

The magistrate judge’s opinion goes on for over 100 pages,

but nowhere does it deal with the fundamental issue: Cable program

suppliers did not exist in 1950; ASCAP and the Department of

Justice, therefore, could not have had cable program suppliers in

mind when they drafted Sections V(A) and VII(B).

® In relevant part:

It is expressly understood . . . that the plaintiff may,

upon reasonable notice, at any time after five (5) years

from the date of entry of this Amended Final Judgment

apply to this Court for the vacation of said Judgment, or

its modification in any respect... .

CONCLUSION

Every litigant thinks that its case is important, and this case

is no exception. The cable industry is one of the largest and fastest

growing users of ASCAP music. Licenses worth many millions of

dollars annually are at stake in this dispute — dollars that are

important to the creators of music, ASCAP’s writer and publisher

members. Moreover, this case will set the pattern for how music

will be licensed in the cable industry for many years to come. The

rulings below, if permitted to stand, will prevent the most efficient

licensing of music on cable.

But ASCAP’s members are not the only parties affected.

The opinions below set a dangerous precedent for the interpretation

of consent decrees generally.

The rulings, therefore, merit review by this Court.

Respectfully submitted,

JAY TOPKIS

(Counsel of Record)

PAUL, WEISS, RIFKIND,

ALLAN BLUMSTEIN WHARTON & GARRISON

ROBERT N. KRAVITZ 1285 Avenue of the Americas

DANIEL M. LANE, Jr. New York, New York 10019

Of Counsel (212) 373-3000

-and-

BERNARD KORMAN, Esq.

One Lincoln Plaza

New York, New York 10023

(212) 621-6210

Counsel for Petitioner

March 25, 1992

APPENDIX

ee Pe

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 718—August Term, 1991

(Argued January 15, 1992 Decided January 24, 1992)

Docket No. 91-6212

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

—vV _

AMERICAN SOCIETY OF COMPOSERS,

AUTHORS, AND PUBLISHERS,

Defendant-Appellant,

In the Matter of Application of

TURNER BROADCASTING SYSTEM, INC.,

Applicant-Appellee,

For the Determination Of Reasonable License Fees.

In the Matter of the Applications of USA NETWORK,

LIFETIME TELEVISION, THE DISCOVERY

CHANNEL, THE CBN FAMILY CHANNEL, BLACK

ENTERTAINMENT CABLE NETWORK, ARTS &

ENTERTAINMENT CABLE NETWORK, THE

DISNEY CHANNEL, HOME BOX OFFICE INC.,

SHOWTIME NETWORKS INC., MTV NETWORKS

INC., OPRYLAND USA, INC., PLAYBOY VIDEO

ENTERTAINMENT GROUP, INC., AMERICAN

MOVIE CLASSICS COMPANY, SPORTSCHANNEL

PRISM ASSOCIATES, BRAVO COMPANY, and

COUNTRY MUSIC TELEVISION, INC.,

Applicants-Appellees.

For Licenses for their Cable Program Services. |

Before:

TIMBERS, MESKILL and CARDAMONE,

Circuit Judges.

Appeal from the grant of summary judgment and the entry of

an injunction by the United States District Court for the Southern

District of New York, Dolinger, M.J., on applicants’ request for

certain licenses from the defendant-appellant.

Affirmed.

JAY TOPKIS, New York City (Allan Blumstein, Robert N.

Kravitz, Daniel McNeel Lane, Jr., Paul, Weiss, Rifkind,

Wharton & Garrison, Ross Charap, Bernard Korman,

New York City, of counsel), for Defendant-Appeliant

ASCAP.

R. BRUCE RICH, New York City (Kenneth L. Steinthal,

Evie C. Goldstein, Weil, Gotshal & Manges, New York

City, of counsel), for Applicants-Appellees USA Network,

Lifetime Television, CBN Family Channel, Black

Entertainment Cable Network, Playboy Video

Entertainment Group, Inc. and Cable Educational

Network, Inc.

= —=&«o

BRUCE D. SOKLER, Washington, D.C. (Lisa W.

Schoenthaler, Leslie Ballou Calandro, Mints, Levin,

Cohn, Ferris, Gilovsky and Popeo, Washington,

D.C., David Dunn, Davis, Markel & Edwards,

New York City, of counsel), for Applicant-Appellee

Turner Broadcasting System, Inc.

ROBERT D. JOFFE, Cravath, Swaine & Moore, New

York City, on the brief, for Applicant-Appellee

Home Box Office, Inc.

PHILIP R. HOFFMAN, Pryor Cashman Sherman &

Flynn, New York City, on the brief, for Applicants-

Appellees Opryland USA, Inc. and Country Music

Television, Inc.

ALAN J. HARTNICK, Colton, Hartnick, Yamin &

Sheresky, New York City, on the brief, for

Applicant-Appellee Arts & Entertainment Cable

Network.

THOMAS J. AGNELLO, JR., Simpson Thacher & Bartlett,

New York City, on the brief, for Applicant-Appellee The

Disney Channel.

ROBERT J. SISK, Norman C. Kleinberg, Michael E.

Salzman, Charles Lozow, Padraig A. O’Riordain, Hughes

Hubbard & Reed, New York City, on the brief, for

Amicus Curiae Broadcast Music, Inc.

Per Curiam:

This is an appeal from the grant of summary judgment and the

entry of an injunction by the United States District Court for the

——ee

Southern District of New York, Dolinger, M.J., on applicants’

request for certain licenses from the defendant-appellant American

Society of Composers, Authors and Publishers (ASCAP) pursuant

to the provisions of a consent judgment between ASCAP and the

Department of Justice. United States v. ASCAP, No. Civ. 13-95

(S.D.N.Y. Mar. 14, 1950).

The judgment of the district court is affirmed substantially for

the reasons stated by Magistrate Dolinger in his Memorandum and

Order dated July 11, 1991, as corrected by Order dated August 6,

1991, his Memorandum and Order dated August 8, 1991, and his

Order and Judgment dated August 8, 1991, entered as a final

judgment pursuant to Fed. R. Civ. P. 54(0). ___ F. Supp. ___

(S.D.N.Y. 1991).

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA,

Plaintiff,

-against-

AMERICAN SOCIETY OF COMPOSERS,

AUTHORS AND PUBLISHERS,

Defendants.

In The Matter of the Application of

TURNER BROADCASTING SYSTEM,

INC.

Plaintiff,

For The Determination of Reasonable

License Fees.

MEMORANDUM AND

ORDER

~ Civ. 13-95 (WCC)

In the Matter of the Applications of USA

NETWORK, LIFETIME TELEVISION,

THE DISCOVERY CHANNEL, THE CBN :

FAMILY CHANNEL, BLACK

ENTERTAINMENT TELEVISION, INC.,

ARTS & ENTERTAINMENT CABLE

NETWORK, THE DISNEY CHANNEL,

HOME BOX OFFICE, INC., SHOWTIME

NETWORKS INC., MTV NETWORKS, :

INC., OPRYLAND USA, INC., PLAYBOY

VIDEO ENTERTAINMENT GROUP, INC.,:

AMERICAN MOVIE CLASSICS

COMPANY, SPORTSCHANNEL PRISM

ASSOCIATES, BRAVO COMPANY and

COUNTRY MUSIC TELEVISION, INC..,

Applicants.

For Licenses for their Cable Program

Services.

MICHAEL H. DOLINGER

UNITED STATES MAGISTRATE JUDGE:

This proceeding is an outgrowth of certain provisions of a

Consent Decree (the “Decree”) originally entered into in 1941 by

the United States Department of Justice and the American Society

of Composers, Authors and Publishers (*ASCAP”). The Decree,

as amended in 1950, regulates the manner in which ASCAP

licenses for public performance the copyrighted music of its

members.

The applicants in this proceeding all function as so-called

cable program suppliers. In brief, they each assemble a package of

Programming, which they typically transmit to numerous cable

system operators. The system operators, which are licensed locally

to operate in specified geographic areas, in turn transmit the

programming over cable to the televisions of residents within their

locale who pay subscription fees to be hooked up to the cable and

receive the programming.

At present, the parties have presented to the court for decision

two questions that require interpretation of portions of the Decree.

The first is whether the Decree requires ASCAP to issue a public

performance license to the cable program suppliers that covers not

only the transmission of the suppliers’ programming to the local

cable system operators, but also the transmission of the

programming by the system operators to the viewers.’ The second

is whether the Decree requires ASCAP to issue to the cable

program suppliers, on demand, a so-called per-program license as

an alternative to its more commonly used blanket license. For the

reasons that follow, I conclude that the Decree requires ASCAP to

make both of these licenses available to cable program suppliers.

Procedural Posture

The current proceeding was initiated by the Turner

Broadcasting System, Inc. (“TBS”) on January 13, 1989. Although

styled as an application for the setting of fees under Article IX(A)

of the Decree, the petition principally sought a more preliminary

form of relief—an order that ASCAP make available to TBS a

performance license that covered the transmission of all of its

programming “through to the viewer.” Such a license—which

ASCAP concedes it is required to issue to the traditional “over the

air” networks—is commonly referred to as “licensing at the

source,” presumably because the license is issued to the entity that

’ Wholly apart from the system operators’ transmission of programming

to the public, the applicants require a license because their distribution of

programming to the system operators is itself a public performance under

the Copyright Act. See, e.g., David v. Showtime/The Music Channel,

Inc., 697 F. Supp. 752, 758-60 (S.D.N.Y. 1988). Accord, Broadcast

Music, Inc. v. Hearst/ABC Viacom Entertainment Services, 746 F. Supp.

320, 328-29 (S.D.N.Y. 1990).

is the source of the programming. The applicants assert that the

relief they seek is necessary because ASCAP announced in 1988,

for the first time, that it would no longer agree to licensing at the

source for the cable program suppliers—including TBS’s three cable

programming services, Cable News Network, Headline New>. and

Turner Network Television—and would instead provide only a

license that was limited to the program suppliers’ transmission of

their programming to local system operators; the license would

therefore not cover the transmission of the programs by the system

operators to the viewing public. In effect, ASCAP was asserting a

right to demand licenses from both the program supplier and the

system operator for the performance of ASCAP music as part of

the programming on cable television channels.

TBS’s application was ultimately joined by 16 other entities,

all of which also supply programming to system operators for

transmission to cable viewers. All of these cable program suppliers

reported that they had been stymied in seeking a license from

ASCAP that would cover the public performance of ASCAP music

in programming distributed by them. In each instance, ASCAP had

advised the suppliers that it did not believe itself bound to issue

such a license to them, and that it intended to obtain separate

licenses from both the cable program suppliers and the cable system

operators.

ASCAP has moved for partial summary judgment, urging

dismissal of that portion of the cable program suppliers’ petitions

that seeks an order compelling the issuance to them of a license that

would cover programming transmissions by the system operators.

ASCAP premises its motion on the contention that Article V(A) of

the Decree, which requires ASCAP to issue such a license to

“telecasting networks” for programming aired by the stations

“affiliated” with such networks, does not cover cable program

suppliers and their affiliated cable system operators. The applicants

have opposed the motion, and although not formally cross-moving

for summary judgment, have urged that the court grant their

requested relief on the current motion.

After the briefing and argument of ASCAP’s motion, the

parties agreed to broaden the scope of this proceeding to encompass

another issue of decree interpretation. In the previously filed

Showtime/The Movie Channel Article [IX(A) proceeding, Showtime

raised at trial the question of its entitlement under the Decree to a

so-called per-program license from ASCAP. Ultimately, Showtime

and ASCAP agreed to the withdrawal of that claim from the

Showtime proceeding, and its resurrection in the current

proceeding. Accordingly, the parties have agreed to expand the

scope of ASCAP’s previously filed summary judgment motion to

encompass the question of whether cable program suppliers are

entitled, under Article VII(B) of the Decree, to a per—-program

license as an alternative to a blanket license.

In supplemental briefing, the applicants have argued that they

are “television broadcasters” within the meaning of Article VII(B)

of the Decree, and hence are entitled to such a license. In response,

ASCAP has pressed the argument that this term applies only to

over-the-air or traditional television stations, and that accordingly

it has no obligation to provide a per-program license to the

applicants.

With the consent of the parties, the court invited the

Department of Justice, as a co-signer of the Decree, to offer its

views on both issues. On each issue, the Department—although not

fully agreeing with ASCAP’s interpretation of the Decree or its

legal analysis—has concluded that the Decree does not obligate

ASCAP to issue the types of licenses sought by the applicants.

The Evolution of the Consent Decree

ASCAP is a membership association consisting of

approximately 40,000 composers and music publishers. American

Society of Composers, Authors and Publishers v. Showtime/The

Movie Channel, Inc., 912 F.2d 563, 573 (2d Cir. 1990)

(reproducing Memorandum and Order of the District Court). The

members own copyrights in more than three million musical

compositions, see, e.g., id., and have authorized the Society to

grant licenses for the public performance of those compositions.

Because the formation of ASCAP represented a pooling by the

members of their copyrights for the purpose of obtaining a

commercial advantage in dealing with music users, ASCAP

iia

eventually attracted the attention of the Antitrust Division of the

United States Department of Justice. In 1941, the Government filed

Suit in this court, alleging that ASCAP and its officers and

members had conspired to restrain trade in violation of the Sherman

Act. That suit was quickly settled by a Decree that imposed certain

limitations on ASCAP’s licensing of the performance rights to its

members’ musical compositions. See United States v. ASCAP,

1940-43 Trade Cas. (CCH) q 56,104 (S.D.N.Y. March 4, 1941).

In general terms, the 1941 Decree required that ASCAP’s

members give the Society only a non-exclusive agency to issue

performance licenses, thus retaining for the members themselves

the right to negotiate directly for such licenses or to assign that role

to another person or entity. The Decree also prohibited ASCAP

from “discriminating in price or terms between licensees similarly

situated.” Id., Art. II(2).

The Decree addressed in some detail the manner in which

ASCAP was to issue licenses for the performance of music by radio

broadcasters. Thus, it prohibited ASCAP from insisting on a license

fee for commercial radio programs that was predicated in whole or

part on the revenues received by the broadcaster from programs

that contained no music licensed by ASCAP. Jd., Art. II(3).? It

also required ASCAP to issue to radio broadcasters, on request, a

per-program license, and to quote fees for such a license that

would not frustrate “the purpose of this subparagraph to afford

radio broadcasters alternative bas[e]s of license compensation.” Jd.

The Decree further provided that ASCAP must issue licenses

for “network radio broadcasting” that would cover, for a single

license fee, “the simultaneous broadcasting of... performance(s) by

all stations on the network.” Jd., Art. II(4). Thus, ASCAP was

prohibited from “requiring separate licenses for such several

stations for such performance.” Jd. Similarly, the Decree required

ASCAP to issue to producers or distributors of electronic transcrip-

~ The same provision prohibited ASCAP from insisting on a license fee

which “does not vary in proportion either to actual performances” of

ASCAP music during the license term “or to the number of programs on

which such compositions shall be performed; . . .” Id.

10a

tions or other recordings a license that covered the public

performance of recordings prepared for performance on any

designated radio programs. In such a circumstance ASCAP would

be barred from seeking a separate license from any radio stations

designated by the licensee for the performance of the recording.

Id., Art. II(5).

The Decree contained .additional limitations on ASCAP’s

licensing practices, including a requirement that it issue licenses on

demand by “users other than broadcasters,” Jd., Art. 11(6), and that

it issue to “radio broadcasters,” if so requested, “a license on a per

performance or per program basis.” Jd., Art. II(7). The Decree

also prohibited ASCAP and its members from withholding from

performance any composition in the ASCAP repertory for the

purpose of extracting “additional consideration.” Jd., Art. II(8).

The Decree also addressed a variety of internal ASCAP

matters, including membership eligibility, the election of its Board

of Directors, and the distribution of fees to the members. Finally,

it provided for monitoring by the Department of Justice and

continuing jurisdiction by this court. Jd., Arts. IIQ), (10), (11); III,

IV, VI.

The 1941 Decree was superseded in 1950 by a substantially

revised agreement between the Government and ASCAP. See

United States v. ASCAP, 1950-51 Trade Cas. (CCH) 462,595

(S.D.N.Y. March 14, 1950). The amendment of the Decree was

apparently instigated by a number of related developments, two of

which are of particular pertinence in this case. First, during the late

1940’s, radio ceased to be the only broadcast medium available to

American households. Although still in its infancy, television began

to be recognized as a potentially significant transmitter of

programming to the American public. It therefore became necessary

to address the manner in which its use of copyrighted music would

be licensed by ASCAP.

Second, in 1948 two federal courts were confronted with an

antitrust challenge to the manner in which ASCAP was licensing

the performance rights to copyrighted music incorporated in motion

pictures. The controversy focussed on ASCAP’s practice of

granting movie producers solely the right to incorporate the music

lla

neater

on the soundtrack of the film—the so-called synchronization

right—while withholding the right to perform the music publicly

when the film was played in movie theatres. Rather than granting

both rights to the movie producers, ASCAP insisted that each local

film exhibitor separately obtain a public performance license for the

films played in its theatres.

The movie exhibitors challenged this practice, and in 1948

Judge Leibell in this court and Judge Nordbye in the District of

Minnesota both concluded that ASCAP’s practice of splitting the

rights necessary to exhibit the films constituted a violation of the

Sherman Act. See Alden-Rochelle Inc. v. ASCAP, 80 F. Supp.

888, 893-95 (S.D.N.Y. 1948); M. Witmark & Sons v. Jensen, 80

F. Supp. 843, 848-50 (D. Minn. 1948). In consequence, Judge

Leibell enjoined ASCAP from dealing with the film exhibitors in

the licensing of ASCAP music for public performance in films.

Alden Rochelle Inc. v. ASCAP, 80 F. Supp. 900, 903-05

(S.D.N.Y. 1948).

In the wake of these developments, the Justice Department

and ASCAP undertook negotiations to modify the 1941 Decree. See

generally Timberg, “The Antitrust Aspects of Merchandising

Modern Music: The ASCAP Consent Judgment of 1950”, 19 J.

Law & Contemp. Probs. 294, 299-306 (1954). The final version

of the amended Decree was presented in March 1950 to Judge

Goddard, who had overseen the original 1941 Decree, and he

approved it.”

The 1950 Decree contains a number of significant changes

from its predecessor. The most prominent of these involve the

expansion of its terms to cover television, the incorporation of

provisions designed to address the issues raised in Alden-Rochelle,

and the creation of a so-called rate court, with attendant terms

2 The Decree was also submitted to Judge Leibell, with explanatory

memoranda from the parties, because it addressed the issues that he had

dealt with in Alden-Rochelle and was intended in part to supplant the

injunctive relief he had awarded, thereby mooting ASCAP’s then-pending

appeal from his decision.

12a

governing the procedures for obtaining a license and court

determination of any disputes concerning fees.

Under the terms of the 1950 Decree, ASCAP must issue a

license to “any user” who makes a written request for it, but may

not issue, except on written request, a license limited to specific

compositions in its repertoire. 1950 Decree, Art. VI. The Decree

also specifies certain licensing requirements for specific types of

users. Thus, in connection with motion pictures, the Decree

embodies the holding of Alden-Rochelle and Witmark by requiring

ASCAP to issue to the movie producer, on demand, “a single

license of motion picture performance rights” for the entire United

States, id., Art. V(C), and barring ASCAP from negotiating with

or collecting money from “any motion picture theatre exhibitors”

concerning motion picture performance rights. Jd., Art. IV(E).

As for the broadcast media, they are treated together with

wired music services, and the relevant provisions are those

centrally at issue in this case. Thus, Article V(A) represents a

codified version of the 1941 provision governing licensing at the

source:

Defendant ASCAP is hereby ordered and directed to

issue, upon request, licenses for rights of public

performance of compositions in the ASCAP repertory as

follows:

(A) To a radio broadcasting network,

telecasting network or wired music service..., on

terms which authorize the simultaneous and

so-called “delayed” performance by

broadcasting or telecasting, or simultaneous

performance by wired music service, as the case

may be, of the ASCAP repertory by any, some

or ail of the stations in the United States

affiliated with such radio network or television

network or by all subscriber outlets in the

United States affiliated with any wired music

service and [t]o not require a separate license

for each station or subscriber for such

performances; ....

13a

The Decree also reincorporates the old “licensing at the source”

requirement with respect to manufacturers, producers and

distributors of recordings, and thus limits ASCAP to a single

license for recordings that are “recorded for performance on

specified commercially sponsored radio programs or television

programs...” In such a case, the license to the manufacturer,

producer or distributor is to cover the broadcasting of the recording

“by all radio stations or television stations in the United Sates

enumerated by the licensee without requiring separate licenses for

such enumerated stations for such performance.” Jd., Art. V(B).

In a separate set of provisions addressed to the licensing of

public performance rights for “radio broadcasting and telecasting,”

ASCAP is prohibited—as it was in the 1941 Decree in connection

with radio broadcasting—from imposing fees from commercial

programming based upon a percentage of income received by the

licensee from programs with no ASCAP music, unless requested by

the licensee. Jd., Art. VII (A). ASCAP is also required to issue

per-program licenses “to any unlicensed radio or television

broadcaster, upon written request.” Jd., Art. VII(B). Under the

terms of the Decree, the fees for such a license for commercial

programs may be based, at the option of ASCAP, either on a fixed

payment per program or on a percentage of the revenues paid by

the sponsors of the program. Jd., Art. VII(B)(1).%

In provisions of more general applicability, the Decree

reiterates the requirements of its predecessor that ASCAP receive

from its members only a non-exclusive right to negotiate for

performance rights. Jd., Art. IV(B). It also contains two

antidiscrimination provisions. One prohibits ASCAP from entering

into any license “which discriminates in license fees or other terms

and conditions between licensees similarly situated.” Jd., Art.

IV(C). The other directs ASCAP “to use its best efforts to avoid

any discrimination among the respective fees fixed for the various

= For sustaining programs, ASCAP may opt for a flat fee for each

licensed program or a percentage of the rate card that would have been

applicable if the program had been commercial. Jd., Art. VI1I(B)(2).

l4a

types of licenses which would deprive the licensees or prospective

licensees of a genuine choice from among such various types of

licenses.” Jd., Art. VIII.

As noted, the Decree also establishes a set of procedures for

fee-setting. Article IX(A) requires ASCAP, on receipt of a written

license application, to advise the applicant in writing “of the fee

which it deems reasonable for the license requested.” If the parties

cannot agree on a fee within sixty days, the applicant may apply to

the court for the setting of “a reasonable fee.” The Decree also

provides that if the court sets a fee, ASCAP must offer “a license

at a comparable fee to all other applicants similarly situated who

shall thereafter request a license.” Jd., Art. [X(C).

Finally, as with its predecessor, the 1950 Decree contains a

series of provisions governing the membership and management of

ASCAP, voting rights, distribution of fees, and other matters

relating to internal administration, as well as a provision for the

continuing jurisdiction of this court. Jd., Arts. IV(E), X-XVII.

ANALYSIS

ASCAP seeks summary judgment with respect to both of the

applicants’ requests for relief. Insofar as the applicants seek an

order requiring a “through to the viewer” license under Article

V(A) of the 1950 Decree, ASCAP argues principally that the

applicants are not “telecasting networks” and the cable system

operators are not “affiliated stations” within the meaning of Article

V(A) of the Decree, and are therefore not entitled to such licensing

at the source. ASCAP rests this argument on the conceded differ-

ences in the technology of cable and over-the-air television

transmission and certain acknowledged dissimilarities between the

financial arrangements found in the traditional over-the-air

television industry and in the far newer cable television industry.

Since cable television did not exist in 1950, ASCAP suggests, the

drafters of the Decree could not have intended to include those

novel entities within the language of the Decree.

As for the per-program issue, ASCAP again rests its

argument principally on the notion that cable television is a new

form of mass communication. Accordingly, ASCAP urges that it

15a

was not intended to be covered by the term “television broadcaster”

found in Article VII(B) of the Decree.

In resisting these arguments, the applicants suggest that the

differences between the manner of operation of the over-the-air

networks and the cable program suppliers are immaterial in view

of the purposes of the Decree, and particularly the purposes of

Articles V(A) and VII(B). They invoke the asserted functional

equivalence of the original television networks and the cable

program suppliers, and suggest as well that the Decree was

designed to be forward-looking and to encompass all forms into

which the television industry, which was still in its infancy in 1950,

might thereafter evolve.

Specifically, with respect to the licensing-at-the-source

question, the applicants assert, as an alternative argument, that even

if the term “telecasting network” is narrowly defined, they should

nonetheless be entitled to the same form of license as the Decree

guarantees to the traditional television networks based on the

anti—discrimination provision of Article IV(C). The applicants also

invoke the language of Article IX, which requires ASCAP to quote

a fee on demand “for the license requested.” They contend that this

language entitles them, at a minimum, to any reasonable form of

license that they may request, even if it is not otherwise required

by the Decree.

Finally, on the question of the per-program license, the

applicants also cite the anti-discrimination provision of Article

VIII. Specifically, they argue that it underscores the drafters’

intention that all “licensees” be given “a genuine choice” among

the various types of licenses, including the per-program license.

Before addressing these arguments, I briefly summarize the

legal standards that govern the resolution of these matters.

A. Standards for Summary Judgment

For ASCAP to prevail on its motion, it must satisfy the court

that there is no dispute as to any material fact and that, based on

the undisputed facts, it is entitled to judgment as a matter of law.

See, e.g., Montana v. First Federal Savings & Loan Ass’n, 869

F.2d 100, 103 (2d Cir. 1989); Knight v. U.S. Fire Ins. Co., 804

16a

_—— <_< a,

F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932 (1987);

Falls Riverway Realty, Inc. v. Niagara Falls, 754 F.2d 49, 54 (2d

Cir. 1985). It is axiomatic that the role of the court on such a

motion “is not to resolve disputed issues of fact but to assess

whether there are any factual issues to be tried, while resolving

ambiguities and drawing reasonable inferences against the moving

party.” Knight v. U.S. Fire Ins. Co., 804 F.2d at 11; Eastway

Constr. Corp. v. New York, 762 F.2d 243, 249 (2d Cir. 1985),

cert. denied, 484 U.S 918 (1987). See, e.g., Parsons v. Honeywell,

Inc., 929 F.2d 901, 904 (2d Cir. 1991); Branwm v. Clark, 927

F.2d 698, 704 (2d Cir. 1991); Twin Laboratories, Inc. v. Weider

Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990); Montana v.

First Fed. Sav. & Loan Ass’n, 869 F.2d at 103; Ramseur v. Chase

Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989).

The movant bears the initial burden of informing the court of

the basis for its motion and identifying those portions of the

“pleadings, depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any,” that demonstrate the

absence of a genuine issue of material fact. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986). Accord, e.g., Citizens Bank of

Clearwater v. Hunt, 927 F.2d 707, 710 (2d Cir. 1991). If the

movant fails to meet its burden, the motion must be denied even if

the opposing party does not submit any evidentiary matter to

establish a genuine factual issue for trial. Adickes v. S.H. Kress &

Co., 398 U.S. 144, 160 (1970).

If the movant carries its initial burden, the burden shifts to the

party opposing the motion to demonstrate a genuine dispute as to

one or more of the material facts. Celotex Corp. v. Catrett, 477

U.S. at 322. See also Citizens Bank of Clearwater v. Hunt, 927

F.2d at 710; Greater Buffalo Press, Inc. v. Federal Reserve Bank

of New York, 866 F.2d 38, 42 (2d Cir.), cert. denied, 490 US.

1107 (1989). In responding to the motion, the opposing party

cannot simply rely on its pleadings or on conclusory factual

allegations, or on conjecture as to the facts that discovery might

disclose. See, e.g., Gray v. Town of Darien, 927 F.2d 69, 74 (2d

Cir. 1991). Rather, the opposing party must present specific

evidence in support of its contention that there is a genuine dispute

17a

ee ..LhLhLlUu

as to the material facts. See, e.g., Celotex Corp. v. Catrett, 477

U.S. at 324; Twin Laboratories v. Weider Health & Fitness, 900

F.2d at 568; Montana v. First Fed. Sav. & Loan Ass'n, 869 F.2d

at 103; Knight v. U.S. Fire Ins. Co., 804 F.2d at 12; L& L

Started Pullets, Inc. v. Gourdine, 762 F.2d 1, 3-4 (2d Cir. 1985).

To demonstrate a “genuine dispute,” the opposing party must come

forward with enough evidence to justify a reasonable jury returning

a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 585-86 (1986); Citizens Bank of Clearwater

v. Hunt, 927 F.2d at 710; Cinema North Corp. v. Plaza at Latham

Associates, 867 F.2d 135, 138 (2d Cir. 1989)

B. The “Licensing at the Source” Claim

ASCAP argues that the Decree should be read as a contract:

that, so read, it unambiguously precludes cable program suppliers

from the protection of Article V(A)—which governs radio

broadcasting networks, telecasting networks and wired music

services—and that therefore summary judgment should be granted

in its favor on this portion of the applicants’ petition. As will be

seen, I conclude that the language of Article V(A) does not

unambiguously support ASCAP’s reading, and that with the

guidance of appropriate aids to construction, it becomes apparent

that in fact the applicants are covered by Article V(A). In view of

this conclusion, and the absence of any disputed issues of material

fact, the court will enter summary judgment for the applicants on

this claim.

1. Interpreting a Consent Decree

We start by noting that, in general terms, ASCAP is correct

in asserting that the courts will interpret decrees with the same tools

as are utilized in the construction of private contracts. This follows

from the fact that “[a] consent judgment, though it is a judicial

decree, is principally an agreement between the parties.” S.E.C. v.

Levine, 881 F.2d 1165, 1178 (2d Cir. 1989). Accordingly, decrees

are generally to be interpreted consistently with their “plain

meaning” or “explicit language.” See, e.g., United States v.

18a

Atlantic Refining Co., 360 U.S. 19, 22-23 (1959); Suarez v. Ward,

896 F.2d 28, 30 (2d Cir. 1990); Berger v. Heckler, 771 F.2d

1556, 1568 (2d Cir. 1985).

The point of this oft-cited observation, and of the frequent

admonition to read decrees within their “four corners”, is that the

decree “represents a compromise between parties who have waived

their right to litigation and, in the interest of avoiding the risk and

expense of suit, have give[n] up something they might have won

had they proceeded with the litigation. . . .” Berger v. Heckler,

771 F.2d at 1568 (quoting United States v. Armour & Co., 402

U.S. 673, 681 (1971)). Thus, we are warned that “the scope of the

decree must be discerned within its four corners, and not by

reference to what might satisfy the purposes of one of the parties

to it.” Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561,

574 (1984). Accord, e.g., S.E.C. v. Levine, 881 F.2d at 1178-79;

Berger v. Heckler, 771 F.2d at 1568. To do otherwise, by ignoring

plain language and meaning, would deprive one of the parties to the

decree of the benefits for which he bargained and in exchange for

which he “waived his right to litigate the issues raised, a right

guaranteed to him by the Due Process Clause.” United States v.

Armour & Co., 402 U.S. at 682. Accord, e.g., S.E.C. v. Levine,

881 F.2d at 1181.

Notwithstanding the stringency of these strictures, they

necessarily are limited to cases in which the relevant provisions of

the decree have a clear and unambiguous meaning. If the language

utilized has only one reasonable interpretation, see generally Burger

King Corp. v. Horn & Hardart Co., 893 F.2d 525, 528 (2d Cir.

1990); Schering Corp. v. Home Ins. Co., 712 F.2d 4, 9-10 (2d

Cir. 1983), then the court must look exclusively to the language

found in the decree. See United States v. Armour & Co., 402 U.S.

at 680-83. If, however, the wording is susceptible to more than one

reasonable construction, then the court must look to extrinsic

evidence, as is the case with ambiguous contracts. See, e.g., United

States v. ITT Continental Baking Co., 420 U.S. 223, 238 (1975);

S.E.C. v. Levine, 881 F.2d at 1179; Schurr v. Austin Galleries of

Illinois, Inc., 719 F.2d 571, 575 (2d Cir. 1983). As noted by the

Supreme Court in /7T,

19a

iii iia

[s]uch aids include the circumstances surrounding the

formation of the consent order, any technical meaning

words used may have had to the parties, and any other

documents expressly incorporated in the decree.

420 U.S. at 238.2

The reference in I7T to “the circumstances surrounding the

formation of the consent order” encompasses not only traditional

parol evidence—that is, the representations made by the negotiators

to each other in the course of the negotiations, see e.g., Roberts v.

Consolidated Rail Corp. , 893 F.2d 21, 24 (2d Cir. 1989); Pantone,

Inc. v. Esselte Letraset Lid., 691 F. Supp. 768, 774 (S.D.N.Y.

1988), affd, 878 F.2d 601 (2d Cir. 1989)—but also any

meaningful indicia of the purpose, if any, of the contested

provision. This point was made, somewhat elliptically, by the

Supreme Court in J7T when it took pains to distinguish its prior

comment in United States v. Armour & Co. that “the decree itself

cannot be said to have a purpose; rather the parties have purposes,

generally opposed to each other, and the resultant decree embodies

as much of those opposing purposes as the respective parties have

the bargaining power and skill to achieve.” 402 U.S. at 681-82

(emphasis in original). As the Court noted in J7T, this comment,

and similar remarks found in United States v. Atlantic Refining

Co., 360 U.S. at 22-23, and Hughes v. United States, 342 U.S.

353, 356-57 (1952), all were made only after the court had found

the disputed decree language to be unambiguous. Therefore, the

Court in those cases was in effect simply declining to change the

parties’ prior bargain to serve the asserted policies of the statute

under which the decree had been entered. See 420 U.S. at 235-37.

The obvious point is that if the defendant did not bargain for

unambiguous language precluding the competing interpretation, the

court is not limited in what data it may look to in discerning the

* Even if the words of the decree permit only one reasonable

interpretation, extrinsic evidence may be appropriate if it is unclear

whether the unambiguous provision applies to the set of facts presented by

the case. See e.g., White v. Roughton, 689 F.2d 118, 119-20 (7th Cir.

1982), cert. denied, 460 U.S. 1070 (1983).

20a

proper meaning of the decree, and in particular it may look to

equitable considerations that flow from the statute underlying the

decree and the fact that, in this respect, the decree is a court order

as well as a contract. See, e.g., United States v. American

Cyanamid Co., 719 F.2d 558, 564 (2d Cir. 1983), cert. denied,

465 U.S. 1101 (1984).

The Court in J7T further distinguished the three earlier cases

by noting that in each of them the Government was seeking to

punish past conduct by the defendant, whereas in /7T the parties

were seeking simply to define the parameters of required future

conduct by the defendant under the decree. Jd. at 237. This point

is of course consistent with case law that has required that criminal

statutes and injunctions be sufficiently specific to guide the defen-

dant’s conduct before he may be punished for non-compliance.

See, e.g., Kolender v. Lawson, 461 U.S. 352, 357-58 (1983);

Pasadena City Bd. of Educ. v. Spangler, 427 U.S. 424, 438-39

(1976).

These same two distinctions have since been echoed by the

Second Circuit, which has also emphasized that where the decree

language is ambiguous and all that is at issue is future conduct, “a

court of equity may, in construing the provision, consider the

purpose of the provision in the overall context of the judgment at

the time the judgment was entered.” United States v. American

Cyanamid Co., 719 F.2d at 564. Accord, e.g., United States v.

Western Elec. Co., 894 F.2d 1387, 1391-92 (D.C. Cir. 1990). See

also ASCAP v. Showtime/The Movie Channel, Inc., 912 F.2d at

570 (noting that “context” of 1950 Decree reflects intent to

“disinfect” ASCAP “as a potential combination in restraint of

trade. . . .”) (quoting K-91, Inc. v. Gershwin Publishing Corp.,

372 F.2d 1, 4 (9th Cir. 1967), cert. denied, 389 U.S. 1045

(1968)); of United States v. County of Nassau, 907 F.2d 397 (2d

Cir. 1990) (per curiam) (affirming refusal to modify decree, in

part based on conclusion that change “would undermine the

purpose of the decree”).

With an eye to these general standards, I turn to the parties’

respective interpretations of Article V(A).

2la

2. Are the Applicants Covered by Article V(A)?

(a) The Purpose and Context of Article V(A)

As noted, ASCAP presses the view that the coverage of the

terms “telecasting network” and “stations...affiliated with

such...television network” should be limited to the three major

over-the-air networks—ABC, CBS and NBC—all of which were

in existence when the Decree provision in question was drafted and

approved, and should certainly not extend to the applicants. In

advancing this conclusion, ASCAP seems to make two slightly

different, yet related, arguments. First, it suggests that since cable

television was not yet contemplated, much less developed, by 1950,

the drafters of the Decree could not have intended to include it

within the scope of Article V(A). Second, ASCAP argues that in

any event the method of operation of the applicants is so different,

both technologically and financially, from the over-the-air

television networks that they belong to an entirely different genus

of mass media, and hence are not covered by the Decree.

We start our analysis of ASCAP’s first argument by noting

that the relevant language of Article V(A) is ambiguous. The

Decree refers to “a...telecasting network,” rather than, for

example, “one of the existing television networks” or “a network

that engages in telecasting by over-the-air broadcast,” and it does

not define or otherwise explain this term in any respect. Although

it is conceivable from the wording that the drafters may have

intended to cover only the then-existing three networks, or only

such entities as thereafter operated in virtually the same

technological and financial manner, that reading is not compelled

by the language used. An alternative reading, which is at least

equally plausible solely from the face of the Decree, is that this

provision was intended to cover any entity that—like the

then-existing networks—assembled a unique package of television

programming which it supplied to a number of locally-based

telecasters with which it maintained a contractual relationship, and

which in turn transmitted that programming, under the program

supplier’s name, to the televisions in its locality. So construed, the

Decree would cover the cable program suppliers.

22a

ASCAP’s principal argument is that the cable program

suppliers are in fact so different from the over-the-air networks as

to preclude application of Article V(A) to them. Again, the wording

of the Decree is certainly not self-explanatory, and hence our

evaluation of this argument requires a review of some aspects of

the drafting and approval of the Decree.

As noted, the 1941 Decree, although imposing some

restrictions on ASCAP’s licensing methods generally, embodied

specific limitations solely with respect to only one medium of mass

communication, the radio industry. Among the limitations imposed

on ASCAP in its dealings with radio broadcasters was the

requirement that it must issue licenses to the radio networks that

would encompass the performance of network programming “by all

stations on the network,” and that it must refrain from seeking a

separate license from the local stations for such programming.

(1941 Decree at Art. (II)(4).)

Although the Decree does not explicitly state the reason for

the inclusion of this requirement, it is not difficult to discern in

context. ASCAP became a target of the Government because of its

potential ability to control a significant portion of the market for

music used in non-dramatic public performances, whether on radio

or in other settings. In the context of a network-affiliate relation-

ship, such potential control could be very effectively exploited to

extract non-competitive fees by the simple expedient of demanding

not only a license from the network—which conceivably has some

bargaining power by virtue of its ability to control the choice of

music to be included in its network programming—but also a

separate license from each of the affiliated stations, which lack this

leverage since they do not control what music is included in the

network programming that they air. Indeed, the Government’s 1941

complaint alleged this precise form of abuse. (See Complaint at pp.

7-8, 14-15, attached to USA Network Memorandum in Opposition

at Exh. F.) By limiting ASCAP to a license with the radio

networks themselves, Article II(4) balanced the playing field to a

degree and spared the local stations from facing the unenviable

choice of either paying whatever ASCAP demanded or foregoing

network programming.

23a

This interpretation is given added support both from other

language in the 1941 Decree and from later history. Article II(3) of

the 1941 Decree required ASCAP to offer radio broadcasters a

per-program license on request on terms that would not frustrate

“the purpose of this subparagraph to afford radio broadcasters

alternative bas[e]s of license compensation.” This language

explicitly confirms the obvious—that the Decree was designed to

limit ASCAP’s ability, by pooling copyrights for large amounts of

music used in radio broadcasting, to extract unreasonable fees for

performance of the music. The availability of per-program licenses,

if reasonably priced as compared to the alternative blanket license,

was one means of accomplishing this purpose, since it gave the

broadcaster the ability to minimize its fees either by limiting the

number of programs on which it played ASCAP music, or possibly

by seeking direct licensing from the composers, see, e.g., Buffalo

Broadcasting Co. v. ASCAP, 744 F.2d 917, 926 n.7 (2d Cir.

1984), cert. denied, 469 U.S. 1211 (1985), a possibility that was

kept at least theoretically alive by the additional requirement that

ASCAP members give the Society only a non-exclusive agency to

license their music. (1941 Decree at Art. II(1).) The stated purpose

of the per-program requirement thus accords fully with our

understanding of the purpose of the “licensing at the source”

provision.

Subsequent events underscore our reading of Article II(4) of

the 1941 Decree and offer a clearer view of the intended scope of

the equivalent provision in the 1950 Decree. As noted, ASCAP,

although precluded by the 1941 Decree from splitting the

performance rights in network radio programming, proceeded’ to

use essentially the same technique in connection with the film

industry. As recapitulated in Alden-Rochelle, ASCAP licensed only

the “synchronization” right to the movie producer, and insisted on

Separate licenses for the performance rights to the music from all

local movie theatre exhibitors. See Alden-Rochelle v. ASCAP, 80

F. Supp. at 894. This practice was condemned as an antitrust

violation both in Alden-Rochelle and in the parallel Minnesota

litigation, M. Witmark & Sons v. Jensen, because it enabled

ASCAP to extract extortionate fees from the exhibitors, since they

24a

ca cieaniena tle,

faced the same choice as the local radio stations before the 1941

Decree—either pay what ASCAP demanded or forego any films or

programming that incorporated ASCAP music.”

It was apparently the holding of Alden-Rochelle and the

emergence of television as a new medium of mass communication,

as well as complaints to the Justice Department about the adequacy

of the 1941 Decree, that gave impetus to the 1950 amendments to

the Decree. (March 13, 1950 Tr. at 2, 7-8, annexed to ASCAP

Memorandum). In this historical context, the 1950 Decree added

provisions explicitly incorporating Alden-Rochelle-type relief for

the movie industry and extended the specific protections of the

1941 Decree—including both the requirement for one license to

cover the public performance of network programming and the

availability of per-program licenses to radio broadcasters—to all

forms of mass communication known at the time that might utilize

significant amounts of ASCAP music. This effort at inclusiveness

is apparent both from the face of the Decree and from the

contemporaneous representations of the negotiators.

As noted, the Decree addresses radio, motion pictures, wired

music and television, and it contains no language limiting its

application to defined segments of any of these industries.

Accordingly, on its face the Decree appears to apply to television

programming transmitted to the public irrespective of the

technology used to make the transmission. Furthermore, the

language of Article V(A) can most fairly be read to cover not only

any technology for transmission of television programming into the

home, but also any financial arrangement between the original

packager of programming identified with the packager and the

entity that transmits that packaged programming to television

viewers. The problem that Article V(A) addresses is potentially

found whenever programming is packaged by an entity for

the composers, but it can fairly be assumed that this would have been

impracticable, in view of the evident self-interest of ASCAP members in

relying on the bargaining leverage that ASCAP wielded. See ASCAP v.

Showtime/The Movie Channel, 912 F.2d at 570.

25a

eee

transmission to the public by another entity, and the solution

adopted by the Decree rests on the fact that the packager has

greater ability to negotiate on equal terms with ASCAP than does

the affiliated telecaster. These considerations are not at all affected

by the technology of transmission or by the financial arrangements

between the two entities.

The contemporaneous statements of the negotiators underscore

these conclusions. First, each side acknowledged internally, to each

other and to the court that a primary impetus for the 1950

amendment process was the Alden-Rochelle holding. (See, e.g.,

ASCAP Memorandum to Hon. Vincent L. Leibell at 1-2, attached

to Affidavit of Bruce D. Sokler, Esq., sworn to July 17, 1989, at

Exh. E.) As noted, the central problem addressed by

Alden-Rochelle was the unfair advantage obtained by ASCAP in

splitting the rights between the producer and the exhibitor. This

Same problem was inherent in both the radio and the television

industries to the extent that program suppliers fed packaged

programming to affiliated local entities for broadcast, and yet could

not compel ASCAP to issue a license through to the ultimate

audience for that programming. It is thus not surprising to find the

original 1941 protection of the radio networks re-incorporated in

the 1950 Decree and extended to television and wired music—the

other industries in which the same potential for abuse could be

found—as well as to the movie industry in a somewhat different

form, which took account of the specific holding in

Alden-Rochelle.

Second, it is evident from the contemporaneous documentation

that both sides viewed the Decree as covering television as’ a

generic means of program transmission. In the Spring of 1949 the -

parties were discussing a proposed amended version of the Decree

which would include a broader provision for licensing through to

the viewer than existed in the 1941 Decree. This provision was

Separate from one that incorporated the Alden-Rochelle holding

specifically with respect to the movie industry, and included general

references to “telecasting” and “television.” Thus, as early as

March 1949, in an internal Justice Department memorandum, the

Department’s principal negotiator, Sigmund Timberg, noted that

26a

ASCAP had already agreed to a provision requiring, for motion

pictures, that licensing of performing rights be done solely through

the movie producers, thus in effect concurring with the holding in

Alden-Rochelle. Timberg went on to note:

This should be done not only for the motion picture and

radio industries, which to date have been the primary

complainants against ASCAP’s activities, but seems

desirable for any other industry where it is feasible to

collect royalties in a similar manner. Such a provision

would, of course, simplify ASCAP’s administrative

operations.

(Memorandum dated March 8, 1949 from Sigmund Timberg to

Herbert A. Bergson at 2, attached to USA Network Memorandum

at Exh. H.) Thus, early in the negotiations, the Department was

apparently seeking to require licensing at the source in all situations

where it could be applied.

Significantly, only a short time later, ASCAP apparently

concurred in this broad approach. Thus, in another internal Justice

Department memorandum, Timberg referred to ASCAP’s draft

proposal and observed:

This rider, along with the other new references to

telecasting and television inserted on pages 4 and 5, is

intended to lay the basis for licensing at the source by

ASCAP for industries other than the motion picture

industry. Defense counsel tell me that these industries

exhaust the industrial situations where licensing at the

source is feasible.

(Memorandum dated May 2, 1949 from Sigmund Timberg to

Harold Lasser and Beatrice Rosenberg at 2, attached to USA

Network Memorandum at Exh. B.) In short, both sides understood

that the “licensing-at-the-source” principle was to be imposed

wherever the split rights problem was posed.

Later, in July 1949, one of the ASCAP attorneys

memorialized in a memorandum a meeting between representatives

of the Department and of ASCAP in which the details of

agreed-upon terms were discussed. In the course of the summary,

the writer recounted that ASCAP was to prepare a new draft

27a

embodying the agreed-upon provisions, and noted as one of the

points that “[rjadio and television (are) to be treated alike for

purposes of [the] Decree.” (Memorandum to the file dated July 6,

1949 at 3, attached to USA Network Memorandum at Exh. E.)

Again, although this point seems fairly obvious from the ultimate

Decree presented to the court, the language in the memorandum

reinforces the evident understanding of the parties that television

was being treated as a generic industry, and thus that the

protections afforded in the Decree were intended to reach as far as

the potential harms identified either in the prior Decree or in the

Alden-Rochelle decision.”

Several weeks later, in what was apparently their next

meeting, the negotiators continued to debate the extent to which the

Alden-Rochelle holding should serve to bar any efforts by ASCAP

or its members to license movie exhibitors. At that time, ASCAP

apparently was taking the position that its members should be able

to seek such licenses directly, whereas the Department of Justice

was seeking to bar any ASCAP involvement in the acquisition of

performance licenses for music in movies. Although this point was

not yet resolved, ASCAP at this time agreed to the principle of

“licensing at the source” for other music uses. As noted in a

memorandum, “[t]his development, which will affect the motion

picture, radio, wired music and electrical transcription industries,

is socially desirable.” (See Memorandum dated July 22, 1949, from

* These observations are fully supported by additional documentation in

the record. Thus, a January 1949 memorandum notes that ASCAP’s

counsel was seekiny to address the Alden-Rochelle holding in the consent

decree, and had suggested certain changes in an earlier draft to accomplish

this. At the same time, Mr. Timberg “suggested consideration” of a

“[b]roader application of the principle of collecting from the primary

user,” an evident reference to the application of the Alden-Rochelle

principle beyond the movie industry. That comment plainly foreshadows

the later willingness of the two sides to bar the splitting of rights in any

industry in which such a practice might occur. (See Memorandum to the

files from W.D. Kilgore, Jr., dated Jan. 24, 1949, attached to USA

Network Memorandum at Exh. M.).

28a

| iia

Sigmund Timberg to Herbert A. Bergson at 1-2, attached to USA

Network Memorandum at Exh. L.)

Subsequently, the intention of the Department of Justice to

apply the basic holding of Alden-Rochelle more broadly was

reiterated in connection with a proposed revision of the July 1949

draft amended Decree. As noted in an August 1949 internal

Department memorandum, “while the 1941 Decree was entered at

a time when radio licensing was of major importance, it is intended

that the new judgment include television and such modification as

will eliminate the practices found to be illegal in the

Alden-Rochelle case.” (See Memorandum dated August 29, 1949

from Harold Lasser and Beatrice Rosenberg to Sigmund Timberg,

attached to USA Network Memorandum at Exh. I.) This internal

memorandum is not direct evidence of the meaning of the Decree,

and in fact the revised version that it discussed was ultimately

modified, in particular to retain in ASCAP the non-exclusive right

to license music in motion pictures, albeit not from motion picture

exhibitors. Nonetheless, the general observations made are

consistent with the prior negotiations, with the final version of the

Decree presented to the court in March 1950, and with the

representations made to the court in connection with that

presentation.

As noted, the final version of the Decree gave ASCAP the

right to license performance rights in motion pictures, but barred

such licensing of film exhibitors. At the same time, it extended to

the television and wired music industries the principle embodied in

the 1941 Decree with respect to radio and in the 1948

Alden-Rochelle holding, that ASCAP and its members could not

split performance rights—or performance and synchronization

rights, where applicable—and thereby compel the ultimate exhibitor

of programming assembled by a supplier to pay for a separate

performance rights license.

In presenting the proposed Decree to Judge Leibell, the

Department’s memorandum noted that the Decree sought to address

issues raised in Alden-Rochelle with respect to the motion picture

industry, “some of which, of course, are of general applicability to

ASCAP’s activities in other fields,” as well as complaints made

29a

both by ASCAP members and by “the users of ASCAP music”

concertiing the operation of the 1941 Decree. (See Memorandum

to the court at 2-3, attached to Sokler Aff. at Exh. C.) After

reviewing those new provisions that were intended specifically to

enforce Alden-Rochelle, the Government turned “to other provi-

sions, not directly related to motion picture licensing, which in our

judgment eliminate actual or potential restraints suggested by the

Department’s inquiry.” (Jd. at 7.) After reviewing a number of

other terms, it turned to Article V, which it described as “[g]eneral

licensing at the source.” (Jd. at 8.) In explaining this set of

provisions, the Department’s memorandum made plain that the

underlying principle was the same as embodied in the

Alden-Rochelle decision, and that it was intended to be applied in

other industries as well, where the same problems could be

anticipated:

The 1941 Decree required ASCAP to license

performances on radio networks on a basis which

permitted the network to obtain a single license for

performance by all affiliated stations. (Sec. 11(4)). A

similar provision covers the performance of electrical

transcriptions. (Sec. 11(5)). This principle, known as

“licensing at the source,” impresses us as being strongly

in accord with the rationale of the Alden-Rochelle

opinion. After a study of the needs of the other users of

ASCAP music, it was concluded that “licensing at the

source” should be made possible, not only for the radio

industry, but for television networks, wired music

services (such as the organization known as “Muzak”),

and motion pictures. (Sec. V(A), (B) and (C) of the

proposed Judgment).

(/d.) This commentary, including its references to “the needs of the

other users of ASCAP music,” makes it evident, once again,

especially when viewed in light of the negotiating history, that the

parties were agreeing to apply the “licensing at the source”

principle—more precisely, licensing solely from the originator of

the program rather than from its ultimate exhibitor—to all industries

in which it was potentially applicable.

30a

This characterization is entirely consistent with ASCAP’s own

March 1950 memorandum to Judge Liebell, in which it also

reviewed the terms of the proposed 1950 Decree and its impact on

the Alden-Rochelle judgment. (See Sokler Aff. at Exh. E.) In

describing the Decree, ASCAP’s counsel noted that it had its origin

in the Alden-Rochelle litigation (id. at 1-2) but that it contained

significantly broader terms. ASCAP thus noted that the Decree

provided for “licensing at the source” (id. at 3), a concept that it

referred to later in discussing “Limitations on Licensing.” (Jd.

at7.) In explaining these “limitations” generally, ASCAP

observed:

The proposed judgment imposes numerous limitations

upon ASCAP’s licensing of performing rights in order

to assure to users of music complete freedom of choice

in obtaining a license to perform some, all or any one of

the musical compositions in the ASCAP repertory at a

fair and nondiscriminatory rate.

(/d.) The ASCAP memorandum then proceeded briefly to describe

each of these limitations, including Article V, which it

characterized as a requirement that ASCAP

must grant to radio broadcasting and telecasting

networks or wired music services or to the manufac-

turer, producer or distributor of a transcription or

recordation of a composition in ASCAP’s repertory for

performance on specified commercial programs on an

electrical transcription and to any person engaged in

producing motion pictures, a so-called “clearance at the

source” license. (V(A), (B), (C)).

(Id. at 7-8.) Finally, in a concluding justification for the amended

Decree, ASCAP borrowed language from the Ninth Circuit in

Cutter Laboratories, Inc. v. Lyophile-Chryochem Corp., 1948-51

Trade Reg. Rep. (CCH) { 62,542 (9th Cir. 1948), and stated that .

the proposed Decree

will secure to any would-be licensee an opportunity to

procure just the license he wishes and no more, at

reasonable non-discriminatory royalties without making

3la

any agreement as to pricing or as to the use or sale of

films, programs or records using copyrighted music.

(id. at 14-15.) In sum, the written comments of counsel for both

the Government and ASCAP to the court at the time of the

submission of the Decree emphasized that it was intended to apply

the general rule of Alden-Rochelle to all users of ASCAP music

who could benefit from it, without suggesting any artificial

limitation on the scope of the pertinent provisions.

Finally, in his oral statement to Judge Goddard in presenting

the proposed amended Decree, the Department’s counsel, Mr.

Timberg, again emphasized the breadth of the sought-after relief.

In his opening remarks, he noted the Department’s investigation of

“numerous complaints” since 1941 “from both the users of ASCAP

music and authors and composers throughout the United States,”

and indicated that the proposed Decree was designed to deal with

these complaints and the decisions of the courts in Alden-Rochelle

and Witmark v. Jensen. (March 13, 1950 Tr. at 2, annexed to

ASCAP Memorandum.)

In the course of describing the new provisions, Mr. Timberg

noted that the proposed Decree, “so far as it bears on licenses for

radio broadcasters, remains unchanged from its predecessors.” (Id.

at 8.) In contrast, however, he observed that the new Decree “does

take account of new problems raised by the advent of television and

the current legal controversy over motion picture performance

rights.” (Id.)

Mr. Timberg went on to describe Article V. After noting that

the proposed Decree permitted ASCAP, “under carefully qualified

and guarded limitations,” to license motion picture producers

“covering the subsequent performance of [their) music in motion

picture films,” he described the extension of this principle to other

industries and its rationale:

In like fashion, it is provided that the ASCAP music

used in network telecasting be licensed at the source,

that is, a single license to the originator of a telecasting

program may cover the use of ASCAP music over all

Stations receiving the telecasted program. These

provisions bring ASCAP’s licensing activities in the

32a

motion pictures and television field into conformity with

what the 1941 Decree provided with respect to radio

broadcasting. Such licensing at the source is intended to

avoid the harassment of suits against individual stations

and individual motion picture exhibitors, such as was

complained of in the Alden-Rochelle suit, and makes it

possible for ASCAP to license the performing right at

the same time that an ASCAP member grants recording

or synchronization rights, along (the) lines suggested in

Judge Leibell’s opinion.

(Id. at 9.)

This analysis, which was fully endorsed by ASCAP’s counse!

(id. at 13), once more makes it evident that the intended reach of

Article V was defined in functional terms, that is, to protect the

ultimate users of ASCAP music who would otherwise be subjected

to “the harassment of suits” if they failed to comply with ASCAP’s

fee demands. This inclusionary definition—based on a description

of the harm sought to be avoided—again indicates that the term

“telecasting network” is to be read in its functional sense, that is,

to cover the supplying of programming by a packager to another

entity for transmission, under the packager’s name, to household

televisions, and should not be limited based on either the particular

technology used to transmit the programs into the homes of the

ultimate audience or the particular financial arrangement existing

between the packager and the local transmitter of the programs.

In short, the language of Article V is not self-evidently

limited to over-the-air broadcasting, or to program suppliers whose

financial arrangements with the ultimate transmitters of the

programming mirrors that of the three major television networks

extant in 1950. Moreover, the purpose of Article V, as evidenced

by both the negotiating history of the Decree and the

representations of the parties to the court at the time of its

presentation, strongly indicates that Article V was intended to cover

television generically—that is, all forms of television programming

that are assembled by one entity and then distributed to a separate

but affiliated entity for transmission, under the name of the

program supplier, into the homes of a local audience. To construe

33a

this provision more narrowly, based on the state of technology in

1950 or financial characteristics not related to the underlying

problem addressed by Article V, would appear to contravene both

the intent of the parties and the public policies embodied in the

Decree. Moreover, such an interpretation would ignore the obvious

fact that the Decree was entered into at a time when the television

industry was in its infancy, as noted in the Government's

memorandum to Judge Liebell (Sokler Aff., Exh. C at 2) and hence

could be expected to change in numerous ways, both technological

and economic. The parties were of course aware of this fact and

can scarcely be assumed to have intended their agreement to be so

narrowly drawn as to be almost inevitably outmoded within the

foreseeable future.”

(b) Other Considerations Supporting

Applicants’ Interpretation

The applicants cite one additional body of evidence in support

of their reading of Article V(A). As noted, ASCAP’s decision in

1988 to refuse to provide licensing at the source for cable television

was a new development; previously ASCAP had routinely issued

licenses to the cable program suppliers that covered the

performance of their programming by the cable system operators.

(See Sokler Aff. at Exhs. B, G-J.) The applicants point to this

prior history as an indication of the fact that ASCAP itself always

knew that Article V(A) was applicable to cable television. See,

e.g., Board of Educ. Yonkers City School Dist. v. CNA Ins. Co.,

* As Mr. Timberg noted to Judge Goddard with respect to the provision

for reexamination of the Decree after five years,

[I]t really does not imply that the judgment which we are submitting

is not the best that we have been able to work out at this time . . .

(March 13, 1950 Tr. at 10.) The inclusion of this provision is evidence

of the parties’ understanding that experience with the decree or changes

in the industry might in the future justify additional modifications to the

Decree. (See id. at 10-11.) It does not suggest, however, that they

intended the Decree, as drafted, to have a limited useful life.

34a

| —eeee

839 F.2d 14, 18 (2d Cir. 1988); Ocean Transport Line, Inc. v.

American Philippine Fiber Indus., Inc., 743 F.2d 85, 91 (2d C,r.

1984); Viacom Int'l Inc. v. Lorimar Productions, Inc., 486 F.

Supp. 95, 98 n.3 (S.D.N.Y. 1980) (conduct of parties in perform-

ing contract before dispute arose is entitled to great weight in

interpreting relevant contractual terms).

We must exercise some caution in weighing this evidence. As

ASCAP notes, almost all of these license agreements contain a

provision stating, in substance, that the license is experimental in

nature and shall not be “binding upon or prejudicial to any position

taken by either of the parties for any period subsequent to the

termination of this agreement.” (License Agreement between

ASCAP and Showtime Entertainment for January 1, 1977 through

December 31, 1979, at ¢ 1(C), attached to Sokler Aff. at Exh. G).

(See also License Agreement between ASCAP and Home Box

Office, Inc. for January 1, 1980 through December 31, 1982, at

{ 1(C), attached to Sokler Aff. at Exh. H.) Nonetheless, this

historical pattern is not entirely without weight.

First, it bears emphasis that ASCAP’s issuance of such

licenses was not a brief or isolated event, but rather covered a

period of ten years. Second, none of the “without prejudice”

provisions specifically targeted the “licensing at the source” term.

Thus, it is not entirely clear that ASCAP had that issue in mind

when it added those provisions. Indeed, a contrary inference is

suggested by the fact that in one instance the “without prejudice”

provision was explicitly directed to the question of reasonable fee

levels, and in another instance ASCAP did not even include a

“without prejudice” provision in the license agreement. Thus, in its

license with the Disney Channel for the period from April 18, 1983

through December 31, 1985, which included a “licensing at the

source” provision ({ 1(C)), ASCAP inserted a “without prejudice”

provision stating only:

This Agreement is being entered into on an experimental

and non-precedential basis, and shall not be prejudicial

to any position taken by either of the parties as to what

is a reasonable license fee for the License Term or any

period subsequent to the License Term.

35a

(See Sokler Aff., Exh. I, at { 1(D)). (Compare License between

ASCAP and MTV Networks for January 1, 1986 through

December 31, 1988, at { 1(E), attached to Sokler Aff. at Exh. J).

On another occasion ASCAP apparently entered into a license

agreement with Univision, Inc. and Spanish International

Communications Corporation for the period from November 1,

1987 through October 31, 1992, and included a “licensing at the

source” clause (see Sokler Aff., Exh. B at ¢ 1(A)), but no “without

prejudice” provision.

On balance, this evidentiary presentation does not Clearly

evidence ASCAP’s understanding that Article V(A) applies to cable

television, but it does offer some equivocal support for the

applicants’ reading of the Decree. Moreover, additional support

may be found in deposition testimony of ASCAP’s general counsel,

Bernard Korman, Esq., taken March 7, 1986 in connection with the

Showtime proceeding. At that time, when ASCAP was presumably

pot focussing on the possibility of limiting Article V(A) in the

manner that it now presses, Mr. Korman seemed to read that provi-

sion as the applicants now do. Thus, in answering a question as to

whether he viewed a license to the system operators as also cover-

ing the program suppliers, he responded:

Well, I didn’t mean to suggest—and I don’t think my

answer did suggest, that these were separate

performances by the program suppliers. I consider that

they are participating in a public performance and are

therefore licensable.

I think that it is really the choice of the industry as

to how they wanted to be licensed. If the cable systems

had said it is our preference that we obtain licenses for

everything we do and we had issued such licenses, it is,

at least theoretically, possible that those licenses would

have covered everything that the program suppliers did

so that no other license would have been necessary.

Similarly, when a network Says, Or a so-called cable

network says it wants a license which would run to the

cable systems, if we issue such a license, as we have,

then we would not expect to receive any money or to

36a

license the cable systems themselves with respect to

those performances. So that when HBO takes a license,

we don’t expect any additional money from the cable

system for the performances that HBO furnishes for that

particular channel.

(Deposition of Bernard Korman, Esq., at 18-19, annexed to Sokler

Aff. at Exh. A).

Again, this testimony, which does not speak directly to

ASCAP’s interpretation of Article V(A), is hardly dispositive of the

case, although it may modestly strengthen the inference that

ASCAP’s issuance of licensing at the source to cable program

suppliers over an extended period of time reflected its under-

standing that it was obligated to do so. On balance, the historical

evidence cited by the applicants offers some modest support to their

argument, although it is in no sense crucial to the court’s reading

of the Decree, which rests rather on the language used, the negoti-

ating history, the context of the provision, and its evident purpose.

and Cable Television

Bearing these general conclusions in mind, I turn now to

ASCAP’s specific arguments for the proposition that Article V(A)

should not be read to apply to the applicants. As mentioned, they

rest almost exclusively on distinctions between the methods of

operation—both technological and financial—of the over-the-air

networks and the cable program suppliers. In this regard, it bears

noting that ASCAP’s motion compares the applicants to the broad-

cast networks as they currently operate. This poses at leasf a

theoretical anomaly, since the logic of ASCAP’s argument should

require a review of the broadcast networks’ mode of operation in

1950, when the amended Decree was signed. Nonetheless, since

this distinction does not affect the results of my analysis, I assume

for the present purposes that ABC, CBS and NBC operate in all

material respects in the same way as they did more than 40 years

ago.

37a

In comparing the applicants with the traditional television

networks, the parties are in general agreement as to the basic

facts.” The cable program suppliers produce or acquire program-

ming, package it under their own name, and in most cases transmit

it by satellite to local system operators with which they are

affiliated. The local operators in turn transmit the programming in

unaltered form by cable to the televisions of subscribers in their

designated locality. The programining of each program supplier is

usually made available on a separate channel and is identified with

the name of the supplier.

Some of the cable suppliers provide what is known as “basic”

cable programming, which consists of programming that is made

available to cable subscribers as part of the basic cable service

provided by the cable system operator, and for which the subscriber

need not pay a charge in addition to the standard monthly charge

for cable service. Other cable suppliers provide so-called

“premium” programming, for which the subscriber must pay an

additional monthly charge if he wishes to receive it.2% In addition,

some cable program suppliers operate on the basis of “pay per

view,” providing occasional programs featuring a special event

such as a boxing match or major concert.

The program suppliers that provide basic programming

receive most of their revenue from advertising on the programs. In

addition, they receive a share of the subscribers’ payments to the

System operator for basic cable service. The program suppliers of

premium programming receive their revenue solely from a share of

the subscribers’ payments to the Systems operator for that

programming. .

* The following description is derived principally from the affidavit of

Ross Charap, submitted by ASCAP, and the affidavits of Terence F.

McGuirk, Gregory Ricca, Brenda Fox and Judith McHale, submitted by

the applicants.

1’ A few suppliers provide basic cable programming in some areas and

premium programming in others.

38a

The cable system operators typically provide a variety of

services to their subscribers. By virtue of their control of the

television cables, they supply a basic package that consists of the

transmission of over-the-air channels with the enhanced visual

quality obtained by the use of cable, together with a set of

so-called basic cable channels, the programming for which they

have obtained from one or more program suppliers. In addition, the

system operators typically provide, for an additional fee, the

programming of one or more program suppliers who originate

premium programming. Again, these packages of premium

programming will typically be provided on separate channels by the

system operator. The system operators may also provide some local

origination programming, which consists of programs prepared by

or for the system operator at the local level, and not packaged by

the cable program suppliers.

The over-the-air networks operate in a somewhat different

fashion. Like the cable program suppliers, the networks have

arrangements with locally-based entities that are equipped to

transmit programming to the televisions located within their

broadcasting area. Under their arrangements with their affiliated

stations, the networks put together a package of programming

under their own name which they provide by satellite to the local

affiliated stations, and those stations in turn broadcast that program-

ming over the air rather than by cable. The local station will

typically identify itself and its programming as affiliated with the

network supplying it with that programming.

The networks pay their affiliated stations to show their

programming, and obtain their revenues from advertising run on

their programming. Because of the difference in operating

technology, the local over-the-air stations do not limit their

transmissions to subscribers, as do the cable systems, and thus do

not earn revenue by receiving subscription fees. Instead, local

stations earn revenues from advertising received from local

advertisers and payments made by the networks out of the network

advertising revenues.

Unlike the cable system operators, which provide multiple

channels for the programming that they provide their subscribers,

39a

the local over-the-air stations are limited to one channel. On that

channel they will typically run both network-supplied programming

and programming that the station itself has acquired, either by

arranging for its production or by purchasing it from syndicators.

In terms of numbers, the cable suppliers and cable system

operators differ somewhat from the over-the-air networks and their

affiliated stations. There are approximately sixty cable program

suppliers, and about 6,000 cable system operators. By contrast,

there are a only a handful of over-the-air networks, whether

three—-as contended by ASCAP—or a few more, as suggested by

the applicants. As for local over-the-air stations, there are more

than 1,000 nationwide. Of these, more than 600 are affiliated with

or owned and operated by the three major networks. In addition

there are about four hundred so-called independent stations, which

are not affiliated with a network.

From this congeries of similarities and dissimilarities between

cable and over-the-air entities, ASCAP cites a host of differences,

the collective weight of which, it asserts, demonstrates that cable

program suppliers are not “telecasting networks” within the

meaning of Article V(A). In citing these differences, ASCAP does

not appear to suggest that any of them demonstrates the

inapplicability to cable television of the “licensing at the source”

principle embodied in Article V(A). Rather, it simply argues that

cable television is so different from over-the-air television in its

technology and financial structure that it would stretch the bounds

of reason to conclude that the authors of the 1950 Decree, had they

foreseen the advent of cable television, would have understood that

their agreement covered it. ASCAP’s argument is unpersuasive.

I briefly review each of the cited differences. The most

obvious technological difference is that the over-the-air networks’

programming is initially transmitted by the affiliated stations by

over-the-air signals rather than by cable. This distinction is plainly

irrelevant to the concerns that Article V(A) was designed to

address, and it hardly justifies artificially carving out a portion of

the generic medium to which the amended Decree was addressed,

based simply on the method by which the programming is trans-

mitted from a broadcast facility to the televisions of people in the

area served by the transmitting entity. This distinction is even less

supportable when we recall that, at present, in large areas of the

country most of the viewing audience of over-the-air network

programming actually receives it via the very same cables that

supply the programming prepared by the cable program suppliers.

Finally, the irrelevance of this difference for purposes of construing

the intended scope of the Decree is underscored by hypothesizing

a situation in which the over-the-air affiliated stations decided, for

either technological or business reasons, to switch their method of

transmissicn to cable rather than over-the-air signals.” In such

an instance it can scarcely be suggested that the traditional

networks, by virtue of this change, would cease to be “telecasting

networks” under the Decree and hence would lose their entitlement

to the protections of Article V(A).

The second technological distinction is that the cable system

operators can provide simultaneous programming on numerous

channels, whereas the over-the-air stations each provide program-

ming only on one channel. Again, for purposes of Decree inter-

pretation, this appears to be a distinction without a difference, since

it is entirely irrelevant to the concerns that brought about the

addition of Article V(A) to the Decree, and since it does not make

cable television any less a part of what is generically the business

of producing and transmitting television programming into the

homes of a local audience.”

1’ | of course assume for purposes of this hypothesis that the stations

could obtain the appropriate governmental approvals.

1Y Jt should be noted that ASCAP’s technological differentiation might

carry more weight if it were addressing, for example, the video cassette

industry rather than cable television. Arguably the sale or rental of

cassettes to members of the public who then bring the cassettes into their

own homes and play them on a video-cassette recorder and view them on

their television or on a monitor is so different from the basic function of

the television industry — to communicate programming from a trans-

mitting facility into the homes of the television owners — that it would not

(continued. ..)

4la

The remaining distinctions cited by ASCAP concern

differences in the financial and operating relationships between the

cable program suppliers and cable system operators, on the one

hand, and the over-the-air networks and affiliated stations, on the

other. Thus, for example, ASCAP notes that there are far more

cable program suppliers than traditional networks. This is indis-

putably true, but plainly irrelevant as well. Moreover, it can

scarcely be said that if more traditional networks opened for

business in the next few years, they and their predecessors would,

by virtue of that fact, cease to be considered telecasting networks

and no longer be covered by Article V(A) of the Decree.

ASCAP also notes that in most localities there are at least

three or more competing local over-the-air stations, whereas typic-

ally there is only one cable system operator in a given locality,

operating without competition. Again this argument carries no

weight. First, it is irrelevant to the raison d'etre for Article V(A),

and fails to suggest why cable television should be excepted ‘rom

the protection of that provision, given the negotiators’ obvious

assumption that television as a generic medium was to be protected

to the extent that licensing at the source was feasible. Second, it

bears emphasis that there is no inevitability to the number of local

over-the-air stations or to the number of cable system operators in

a given locality. Thus, although many municipalities choose to

license only one cable operator for any given geographic area, this

is not always the case. See, e.g., Warner Cable Communications,

Inc. v. City of Niceville, 911 F.2d 634, 635 (11th Cir. 1990), cert.

denied, 59 U.S.L.W. 3836 (U.S. June 18, 1991). See also City of

Los Angeles v. Preferred Communications, Inc., 476 U.S. 488,

493-94 (1986). Third, even in localities where only one cable

system operator is active, this does not speak to whether the system

operator, in its capacity as a transmitter of unique programming, is

12. ..continued)

be fairly covered by the wording of the Decree or the presumed under-

standing of its drafters. Cf Cohen v. Paramount Pictures, Corp., 845

F.2d 851, 853-854 (9th Cir. 1988).

42a

without competition. Obviously, the system operator in such a

case is the only source of programming provided by cable program

suppliers, but that programming is of course in direct competition

with the programming provided by the over-the-air stations,

including stations affiliated with the networks, stations owned and

operated by the networks and independent stations. Indeed, there is

no question that cable and over-the-air television compete directly

for audience, programming and advertising.“ Fourth, it cannot

seriously be suggested that if, in the future, the local television

industry contracted to the point that many localities had only one

network affiliate, the Decree might be interpreted to exclude the

traditional networks from coverage under Article V(A). Similarly,

ASCAP does not suggest that if more localities were to allow

competition among cable system operators, this would render

Article V(A) applicable to cable program suppliers.

ASCAP makes the related point that most local over-the-air

stations are affiliated, if at all, with only one network, whereas the

cable system operators typically arrange for programming from a

number of cable program suppliers. This difference is attributable

to the fact that the cable system operators have the technology to

operate multiple channels simultaneously and hence can contract to

transmit a variety of cable program suppliers’ programming at

Insofar as the system operator is providing another form of service —

that is, enhanced visual quality for all channels — it would be operating

without competition, although subject to regulation both by the munjci-

pality and by the FCC. This function is, however, irrelevant to the present

proceeding, which is examining solely the transmission of cable

programming through the local system operators. In this respect the

system operator performs a service analogous to that of the network

affiliate.

The close similarity in programming and audience is also underscored

by recent announcements of joint programming projects by cable program

suppliers and over-the-air networks. See “ABC Agrees to Broadcast Cable

Show,” N.Y. Times, May 30, 1990, at D1; “MTV’s 10th Birthday Show

to be Broadcast on ABC,” N.Y. Times, June 12, 1991, at C17.

43a

once. Like the over-the-air networks, however, the programming

of each cable supplier is typically transmitted on a separate channel

and that programming is explicitly identified with the supplier. In

any event, as noted, this technological distinction does not in any

sense suggest a reasoned basis for interpreting Article V(A) as not

intended to cover television networks generically.

ASCAP also points to the differences in the source of

revenues for the over-the-air networks and their affiliated stations,

on the one hand, and for the cable program suppliers and local

system operators, on the other. As noted, the networks pay their

affiliated stations to run their programming, and their revenues

derive from advertising on that programming. The cable companies

present a somewhat different practice in two respects. First, the

cable program suppliers do not pay the system operators to run

their programming. Second, the premium program suppliers receive

their revenues exclusively from their share of the operators’

subscriber fees, while the basic cable suppliers derive their

revenues principally from advertising and to a lesser degree from

subscriber fees paid to the system operators.

These differences quite obviously derive in significant

measure from the technological differences between the

over-the-air and cable transmissions. The over-the-air broadcasts

are available to anyone with a television, whereas the cable

programming requires a hook-up between the cable and the

viewer’s television. Not surprisingly, then, the cable systems

“generally operate on the basis of a wholly different entrepreneurial

principle.” Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 700

(1984). °

The system operators’ reliance on the acquisition of

fee-paying subscribers, and its sharing of those fees with the

originator of the programming, do not, however, demonstrate a

difference between cable and over-the-air television that would

justify the reading of Article V(A) that ASCAP now presses. As

noted, the drafters of the Decree were seeking to apply the

previously established principle of “licensing at the source” to all

circumstances in which it might be relevant, and they included

television as an emerging medium of mass communication that

relied in part on separate entities to package and broadcast

programming. There is no reason to believe that, when including

television within the coverage of Article V(A), the drafters placed

any weight or significance on the source of the revenues of either

the networks or their affiliated stations. What mattered was that the

networks controlled the assembling of a significant body of

programming and transmitted it to a separate entity—the local

station—for rebroadcast. Given that relationship, the drafters

recognized the beneficial potential of a “licensing at the source”

requirement, and their reasoning applies irrespective of whether the

program supplier obtains its revenues from advertising on its

programs or from moneys paid it by the broadcaster, and irrespec-

tive of whether the broadcaster obtains its revenues from adver-

tising or from subscribers or from the program supplier.”

ASCAP also relies on perceived differences in the ownership

of cable program suppliers and cable system operators, on the one

hand, and over-the-air networks and affiliated local stations, on the

other. Thus ASCAP notes that no local over-the-air stations own

a majority of shares of any of the networks, and that each network

is prohibited by FCC regulations from owning and operating more

than five stations each, and may not own production companies that

supply it with programming. By contrast, in the cable industry,

ASCAP notes, there is far more concentrated ownership, with a

number of so-called multi-system operators (MSO’s) owning a

1¥ If, by chance, the over-the-air networks were to change their

contractual relations with their local stations in such a manner as to leave

all advertising revenue in the first instance to the local stations and require

the stations to pay a portion of these revenues to the networks, this

revenue flow would far more closely resemble that found in cable tele-

vision. Such a change, however, would hardly disentitle the networks to

the protection of Article V(A). Similarly, if as a result of technological

innovation the over-the-air stations could scramble their signals and

require viewers to subscribe to their services, this too would not deprive

the networks of the protection of Article V(A).

45a

large number of local system operators, and several large

MSO’s also owning or controlling some of the largest cable

program suppliers.

ASCAP does not suggest that these differences in pattern of

ownership have any independent significance in construing the

scope of Article V(A),” nor could it reasonably do so. The fact

that many system operators are owned by the same company or that

company or its parent also owns a cable program supplier does not

alter the fact that cable television is reasonably understood to be

television within the meaning of the 1950 Decree, and that

there is no reason to assume that in applying Article V(A) to “tele-

casting networks,” the drafters were concerned with who owned the

networks or the local affiliated stations, or with the degree of

concentration of such ownership. Indeed, the television industry in

1950 was in its infancy, and it can scarcely be expected that the

negotiators had in mind the precise financial arrangements of the

television industry that would evolve under the aegis of either

Congress or the FCC.

ASCAP further seeks to distinguish cable and over-the-air

program suppliers by noting that the cable suppliers do not

18 According to ASCAP, the fifteen largest MSO’s own 60 percent of all

local system operators and the fifty largest own nearly 82 percent.

Affidavit of Ross Charap, sworn to May 19, 1989, at { 20.

1” Perhaps an argument could be constructed to the effect that the greater

degree of concentrated ownership of system operators might place them

in a somewhat stronger bargaining position vis-a-vis ASCAP than their

over-the-air counterparts if they were compelled to negotiate a separate

license fee for cable programming. This seems a doubtful proposition,

however, in view of the degree of industry-wide cooperation among the

thousand-plus local television stations, virtually all of which are

represented by the All-Industry Committee. In any event, these develop-

ments were obviously not foreseeable by the drafters of the 1950 Decree.

18 | note that a number of local over-the-air television stations are also

controlled by companies that own more than one station.

46a

distribute their programs exclusively through local system

operators. Although this is their principal means of transmission,

the program suppliers also utilize some other means, including

master antenna television, multi-point distribution systems, satellite

master antenna television, backyard satellite dishes and even some

local over-the-air television stations. This variety is not surprising

in view of technological developments, but it also does not alter the

fact that, in their relationship with the local system

operators—which is the only relationship currently at issue in this

proceeding—the program suppliers play the same role as the

networks in distributing programming to local cablecasters for

transmission under their name to a local television audience. It is

this division of function that led the drafters of the 1950 Decree to

apply the “licensing at the source” requirement to television, and

hence there is good reason to infer that this licensing principle

applies to.the relationship between the cable program supplier and

the local system operator as well.

In a related argument, ASCAP notes that the local system

operators also perform more functions than simply transmitting the

programs received from the cable program suppliers. Thus, they

transmit both local and distant over-the-air stations via cable, and

in some markets also provide radio station signals and home

security and alarm services. Again, this argument is of little

consequence. The over-the-air affiliated stations also do not

function exclusively to transmit programming from their respective

networks. In addition to that service, they provide both syndicated

programming and locally produced programming. Thus, the fact

that the local system operators do more than simply transmit cable

programming from their suppliers does not distinguish them from

over-the-air local stations.

More importantly, the purported distinction is entirely

irrelevant. As repeatedly noted, the issue addressed by Article V(A)

is whether ASCAP may require not only the network but also the

local affiliated station to obtain a license in order to broadcast

network programming. Therefore, the only pertinent activity of the

lecal telecaster is its transmission of programming received from

the program supplier for broadcast. In this respect, the local

47a

affiliated over-the-air stations and the system operators play the

same role. Additionally, it should again be emphasized that the

drafters of Article V(A) can scarcely be charged with knowledge

of, much less reliance upon, the scope of services ultimately

provided by television broadcasting companies in addition to those

foreseen at the time of the Decree. Indeed, were the local

over-the-air stations in the future to enter such areas of endeavor

as apartment security or other unrelated businesses in addition to

their prime function of telecasting, we would scarcely conclude that

this development deprives the networks of their protection under

Article V(A).

Finally, ASCAP notes that local over-the-air telecasters must

obtain a license from the FCC in order to operate, whereas the

local system operators are licensed locally. This is true but once

again irrelevant. Congress has chosen for a variety of reasons to

impose on cable television a somewhat different regulatory regime

than exists with respect to over-the-air television. Thus, in the

Cable Communications Policy Act of 1984, 47 U.S.C. § 521 et

seq., Congress authorized state and local authorities to enfranchise

cable syst2ms and to establish regulations governing the type of

equipment that the franchisees may use, but at the same time the

law reserved to the FCC broad authority over the manner in which

local governments exercise their licensing authority” and over

technical standards. See generally City of New York v. FCC, 486

U.S. 57, 65-67 (1988). This hardly speaks, however, to the proper

scope of Article V(A). Indeed, if Congress had chosen in 1984 to

give the FCC the authority to license the cable system operators or

if next year it chose to remove licensing authority over local

television stations from the FCC and give it to the states or to

municipal authorities, this would not in any way alter our reading

of the 1950 Decree.

In sum, none of ASCAP’s proffered distinctions between

over-the-air television and cable television individually justify

1 See 47 U.S.C. §§ 541, 542 (1991).

48a

reading Article V(A) as narrowly as ASCAP suggests. Moreover,

the collective weight of those distinctions equally fails to suggest

that the cable television program suppliers should be viewed as

outside the coverage of Article V(A). As noted, none of the dif-

ferences cited by ASCAP reflects on the rationale for requiring

“licensing at the source” in television, nor do any of the cited

unique characteristics of over-the-air television appear to have

guided the approach of the negotiators in drafting Article V(A).

Thus, the collective weight of a number of irrelevant distinctions

should not be any greater than the weight of any single one.

In substance, ASCAP argues that a sufficient number of

distinctions, even if otherwise irrelevant, should lead to the

conclusion that cable television is so different from over-the-air

television as not to be “television” within the meaning of the

Decree and the understanding of its drafters. Although modern

science and industry might well develop a medium of mass commu-

nication that resembled television broadcasting and yet could not

fairly be so characterized—arguably, for example, the videocassette

industry™—that is simply not the case with cable television.

Moreover, ASCAP’s method of seeking to distinguish cable tele-

vision would lead us to a virtually inarticulable standard for

interpreting the Decree. ASCAP’s approach begs numerous ques-

tions. For example, how many otherwise irrelevant distinctions

suffice to separate protected television broadcasting from

unprotected television broadcasting? How are we to treat distinc-

tions that are created by recent changes in technological or financial

conditions? Of what relevance to interpreting a forty-year-old

decree are future changes in the television industry? Will the

over-the-air television networks themselves be in danger of losing

their status as telecasting networks if they make sufficient changes,

either technological or financial, in their manner of operation or if

Congress or the FCC significantly changes governing regulatory

policies? To raise these questions suggests the unclarity of the

analytical tool that ASCAP seeks to wield on this motion. Cf.

2 See supra at note 12.

49a

McCarthy v. Bronson, 111 S. Ct. 1737, 1742 (1991) (citing

simplicity as additional reason for its reading of Magistrates Act).

Since the alternative interpretation suggested by the applicants

better serves the underlying purpose of Article V(A) and since the

analysis on which that reading rests is more cogent and readily

applicable, I conclude that ASCAP’s analysis cannot be accepted.

(d) The Views of the Department of Justice

There remain for consideration the expressed views of the

Department of Justice, which was invited by the court to brief the

issue of whether Article V(A) should apply to the applicants. In

assessing the position of the Department, I note that its inter-

pretation is to be given serious attention both because it is

principally responsible for executive enforcement of the antitrust

laws and because the Government was a signatory, along with

ASCAP, to the Decree. Nonetheless, the views of the Antitrust

Division, even if they coincide with those of ASCAP, are not

necessarily dispositive.

It bears emphasis that a consent decree is not merely a

contract, but also a court judgment, which the court approves only

after reviewing it and determining that it sufficiently serves the

public interest embodied in the statute under which it is entered.

See, e.g., United States v. American Cyanamid Co., 719 F.2d at

563-64. See also In re International Business Machines Corp. , 687

F.2d 591, 600 (2d Cir. 1982) (discussing the Tunney Act, 15

U.S.C. § 16(b)). Thus, as noted, in interpreting an ambiguous

consent decree, the court is exercising an equitable power that is to

be used in the service of the public policies that underlie the decree

itself. United States v. American Cyanamid Co., 719 F.2d at 564.

It also should be emphasized that in this case the Department of

Justice does not purport to offer the views of its own negotiators of

the Decree. Indeed, although both attorneys who were principally

involved in the drafting of the Decree—Mr. Timberg for the

Department, and Herman Finkelstein, Esq. for ASCAP—were at

some point deposed on related issues in an earlier proceeding, none

of the parties to this proceeding offer any testimony by them that

50a

is directly addressed to the issue at hand. Since “[t}he relevant

‘understanding’ is the one that the parties held ‘contemporaneously’

with the decree’s formation,” United States v. Western Elec. Co.,

894 F.2d at 1393 (citing United States v. Western Elec. Co., 846

F.2d 1422, 1427 (D.C. Cir.), cert. denied 488 U.S. 924 (1988)),

it follows that the Depar.ment’s analysis cannot be said to speak

definitively as to the meaning of the disputed provision. Cf. United

States v. Loew’s Inc., 882 F.2d 29, 33-34 (2d Cir. 1989) (approv-

ing district court’s searching review of agreed-upon reading of

decree by Government and defendant).

Bearing these considerations in mind, I address the analysis

proffered by the Department of Justice. The Department’s stated

views generally accord in all respects but one with the applicants’

analysis; that one difference, however, leads the Department to

conclude that Article V(A) should not be read to cover the

applicants.

In substance, the Department opines that application of Article

V(A) to the cable program suppliers would further the policies

underlying the Decree and, particularly, the goals sought by the

inclusion of that article in the Decree. It also agrees that if the

negotiators of the 1950 Decree had been able to foresee the

development of cable television, the Department would have sought

to include it within the scope of Article V, although it observes that

the likely reaction of ASCAP in this hypothetical situation is

unknowable. The Department also notes that although neither party

in 1950 negotiated in direct contemplation of cable television, this

is not dispositive in assessing the scope of Article V(A). Rather,

one must determine whether the language used in the Decree’ is

sufficiently broad or flexible to cover this new form of television.

In this regard, the Department further opines that, in assessing the

scope of Article V(A), differences in technology between

over-the-air and cable television should not be dispositive, since

2 The only testimony offered of the principal negotiators of the Decree

is a brief excerpt from the deposition of Mr. Timberg taken in the Buffalo

Broadcasting proceeding, which is of no obvious relevance to the issue

before the court. (See ASCAP Reply Memorandum at 11 n.1 & Exh. 1.)

Sla

the inevitability of future technological change was foreseeable at

the time that the Decree was signed. Thus, the court should look to

the language used, the degree of similarity of operations between

traditional and newer forms of television, and the explanations for

the provision at issue that were offered when the Decree was

approved.

In comparing over-the-air and cable networks, the

Department notes both “strong operational and economically

significant similarities” and “important differences.” (Memorandum

for the United States at 8.) Among the similarities that it cites is the

function played by the cable programming suppliers, which produce

or acquire programming for distribution to cable Systems under

contractual affiliation for retransmission to viewers. The

Department also notes that the cable Systems are paid for their

retransmission of these programs, whether through advertising or

subscription fees. Finally it notes, and the record demonstrates, that

the cable program suppliers compete with the over-the-air

networks for programming, audience and advertising revenues. As

for the differences, the Department notes (1) that there are only

three “major television networks” as compared with at least sixty

cable program suppliers competing for access to local system

operators, (2) that the over-the-air networks’ use of music in their

programming is “essentially homogeneous” whereas the cable

services vary in the extent of their use of music, and (3) that basic

cable program suppliers derive most of their revenue from adver-

tising, as do the over-the-air networks, whereas the premium

services rely on a portion of subscriber fees paid to the cable

System operators. .

The Department does not purport to Suggest that the

distinctions it cites are directly relevant to the question of whether

Article V(A) should be read to apply to cable programming

services—indeed, they appear quite irrelevant—and in any event it

arrives at the tentative conclusion “that cable services could be

treated as ‘telecasting networks’ under Article V(A) without

impermissibly straining the Decree’s language.” (Jd. at 9.) Thus,

until the last step of its analysis, the Department appears to support

the conclusions pressed by the applicants.

52a

The basis for the Department’s contrary final conclusion is its

view that the cable system operators cannot be equated to “affiliated

stations” as that term is used in Article V(A). The sole explanation

for this assertion is found in the following passage in the

Department’s brief:

We think, however, that when cable Systems are equated

to “affiliated stations,” the language is stretched too far.

A “station,” in the context of Article V(A)’s reference

to broadcasting and telecasting, would commonly be

understood—we think—to describe an over-the-air local

transmitting facility, broadcasting a single program at a

time and competing with transmissions by other local

Stations serving the same customers. These

characteristics are very different from those of a local

cable system which broadcasts many programs

simultaneously (including those of local over-the-air

Stations) Over its available channels.

(Id.) (footnote omitted). The balance of the Department’s discussion

of the issue is limited to explaining the policy reasons for requiring

“licensing at the source” in television generally.

Giving the Department’s stated views careful consideration

and such deference as is due, I nonetheless cannot agree with the

last step in its analysis. There are several problems with its

argument.

The first problem is that it appears inconsistent with the

Department’s suggestion that the applicants may permissibly be

viewed as within the intendment of the term “telecasting network.”

Even as an abstract definitional exercise, the determination ‘of

whether the program suppliers constitute such networks necessarily

depends upon the role that they play, and that role is defined in

significant part by their relationship to the system operators.~ If

2 For example, Webster’s New Collegiate Dictionary (1977) defines

“network” in pertinent part as:

(continued...)

53a

the system operators are so dissimilar from over-the-air local

Stations as not to be considered “affiliated stations” under Article

V(A), it is difficult to understand how the cable program suppliers

can be deemed to be “telecasting networks” within the meaning of

the Decree. By the same token, if cable program suppliers can

fairly be so characterized, it is equally difficult to understand how

the cable system operators can be deemed not to be affiliated

stations.

The second problem with the Department’s analysis is that it

appears inconsistent with its prior assertion that technological

differences between cable and over-the-air television should not be

dispositive. The distinctions relied upon by the Department all

either concern or flow from the fact that the system operators have

the technological capacity w use cable to transmit television

programs, and hence they can obtain revenue not only from adver-

tising but also from subscription fees, and can telecast on multiple

channels simultaneously.

The third problem with the Department’s analysis is that the

distinctions it draws between the system operators and local

over-the-air stations have no relevance to the policy embodied in

Article V(A)—indeed the Department appears to concede this

point—and its conclusion ignores the relevant drafting history and

the stated intentions and purposes of the drafters. As noted, the

evidentiary record reflects the drafters’ intention to apply the

“licensing at the source” principle to all relevant industrial circum-

2...continued)

4a: a group of radio or televisions stations linked by wire or

radio relay b: a radio or television company that produces

programs for broadcast over such a network{.]

Id. at 771. The American Heritage Dictionary (2d ed. 1982) gives

this relevant definition: “3. A chain of interconnected radio or

television broadcasting stations, usually sharing a large proportion

of their programs.” Id. at 838. This dictionary in turn defines

“Broadcasting” as the “transmission” of radio or television

programming. /d. at 210.

54a

Stances, and that included the emerging medium of television.

Under the circumstances, the most reasonable reading of the term

“telecasting network” and the companion term “affiliated station”

would encompass the television industry generically, and would not

be limited to television broadcasting that utilizes the same basic

technology or involves the same financial relationships as existed

in 1949 or 1950. Since the relevant functional relationship of the

cable program suppliers to the system operators is the same as the

relationship between the over-the-air networks and their affiliated

stations, the fact that the system operators can each transmit

programs simultaneously on multiple channels or receive money

from subscription fees should not justify their exclusion from the

reach of Article V(A).

The fourth problem with the Department’s interpretation is

that it apparently relies on nothing more than counsel’s intuitive

assumption as to what is the commonly understood meaning—if one

exists—of the term “stations.” As is evident from our discussion of

the standards that govern the interpretation of ambiguous terms of

a decree, this is too narrow an approach. In addition, even if this

were in theory a defensible means of determining the meaning of

the term, it would fail in this instance because counsel’s conclusion

does not rest on any body of objective data. As noted, the

Department mentions none, and indeed appears to suggest by its

interjected phrase “we believe,” that it is merely speculating on the

matter.

Moreover, if common public understanding of the term

“station” were the dispositive issue, we could readily conclude that

in fact cable system operators do qualify. For example, Webster’s

New Collegiate Dictionary defines the term “station,” inter alia, as

either “a complete assemblage of radio or television equipment for

transmitting or receiving” or “the place in which such a station is

located.” Id. at 1136. Similarly, The American Heritage Dictionary

defines “station” as “[aJn establishment equipped for radio or

television transmission” and “{a]n input or output point along a

communications system.” Jd. at 1190. Under either definition, it

appears that the system operators would qualify. Furthermore, as

TBS notes in its memorandum, the courts frequently refer to system

55a

operators as “stations” or “cable stations.” See, e.g., Cottle v.

Storer Communication, Inc., 849 F.2d 570, 573 (11th Cir. 1988);

Hubbard Broadcasting, Inc. v. Southern Satellite Systems, Inc. , 777

F.2d 393, 399 (8th Cir. 1985), cert. denied, 479 U.S. 1005 (1986);

Cleveland Television Corp. v. F.C.C., 732 F.2d 962, 968 (D.C.

Cir. 1984); Quincy Cable TV, Inc. v. F.C.C., 730 F.2d 1549, 1550

(D.C. Cir. 1984); Crimpers Promotions, Inc. v. Home Box Office,

Inc., 724 F.2d 290 (2d Cir. 1983), cert. denied, 467 U.S. 1252

(1984); Christian Broadcasting Network, Inc. v. Copyright Royalty

Tribunal, 720 F.2d 1295, 1309 (D.C. Cir. 1983); Committee for

Open Media v. F.C.C., 533 F.2d 1 (D.C. Cir. 1976). Although

ASCAP is correct in noting that these decisions did not focus on

any definitional issues, that is beside the point; to the extent that the

Department's analysis appears to turn on its assumption as to

common usage of the term “stations,” it is appropriate to look to

the terminology utilized, in however casual a fashion, by the

courts.

In assessing this semantic question, I note one possible

argument that could be advanced in support of ASCAP’s position.

In common parlance the term “television station” is often used

interchangeably with the term “channel.” Arguably this might

provide a distinction between over-the-air and cable television

broadcasters since the cable operators control multiple channels.

Ultimately, though, this argument is unconvincing for several

reasons. First, as noted, the ability of system operators to control

multiple channels does not impact in any way on the rationale for

applying the “licensing at the source” principle to cable television,

and it does not make cable television any less a constituent part of

“television” as a generic mass communications medium. Second,

Article V(A) of the Decree, in referring to “affiliated stations,” was

presumably referring to the companies that operate the actual

broadcast facilities that in turn broadcast programs. Indeed, when

ASCAP enters into a license to cover local over-the-air telecasting,

its license is with the company, not the “channel.” Whether the

company Owns or controls only one channel or more than oe is

seemingly of no consequence under the Decree—indeed some

companies control more than one over-the-air station—and hence

this purported distinction between cable and over-the-air

broadcasting falls of its own weight.

In sum, neither ASCAP’s arguments nor the analysis of the

Department of Justice persuasively explains why the protection of

Article V(A) should be limited to over-the-air television networks

and thus denied to cable program suppliers insofar as those

companies play the same functional role as the traditional networks.

Necessarily, then, ASCAP’s motion for summary judgment must

be denied.

(e) Should Judgment Be Entered for the Applicants?

There remains the procedural question of whether, at this

juncture, judgment may be entered in favor of the applicants on this

issue. This question is posed because (1) applicants did not

themselves move for summary judgment and (2) the court has

found the relevant terms of the Decree to be ambiguous. In fact,

however, neither of these considerations poses an obstacle to entry

of judgment at this time.

With respect to the failure of the applicants to move for

summary judgment, I note that when one side has moved under

Rule 56, the court has discretion in appropriate cases to enter

summary judgment against the moving party. See, e.g., Celotex

Corp. v. Catrett, 477 U.S. 317, 326 (1986); Coach Leatherware

Co. v. Ann Taylor, Inc., Dkt. Nos. 90-9082, 90-9124, slip op.

4271, 4278 (2d Cir. May 15, 1991). Indeed, in limited cases the

court may even enter summary judgment sua sponte without prior

notice. See, e.g., id. at 4278-79; Abrams v. Occidental Petroleum

Corp., 450 F.2d 157, 165-66 (2d Cir. 1971), aff'd, 411 U.S. 582

(1973); Local 33, Int'l Hod Carriers Bldg. & Common Laborers

Union v. Mason Tenders Dist. Council of Greater New York, 291

F.2d 496, 501 (2d Cir. 1961). In any event, ASCAP had adequate

notice, since not only did applicants in their submissions request

entry of judgment in their favor, but the court at oral argument

inquired of ASCAP’s counsel whether there would be a need for an

evidentiary hearing in the event that the court rejected ASCAP’s

argument that the Decree unambiguously excluded the applicants

and instead found the Decree to be ambiguous. Counsel responded

57a

that no such hearing would be necessary since the record was

complete and he could think of nothing that could be added.

(Sept. 18, 1989 Tr. at 62-63.)

As for the second potential obstacle to entry of judgment for

the applicants, I note that the Second Circuit has often observed

that summary judgment in a contract case is appropriate if the

- relevant contractual terms are unambiguous, but not if the terms are

ambiguous. See, e.g., New York News Inc. v. Newspaper Guild of

New York, 927 F.2d 82, 84 (2d Cir. 1991) (affirming summary

judgment because contract was “not susceptible of competing

interpretations.”); Cable Science Corp. v. Rochdale Village Inc.,

920 F.2d 147, 151 (2d Cir. 1990); American Home Assur. Co. v.

Baltimore Gas & Elect. Co., 845 F.2d 48, 50-51 (2d Cir. 1988).

Notwithstanding those general statements, there are circumstances

in which summary judgment may be granted even if the contractual

language is ambiguous. Such ambiguity requires the factfinder to

examine evidence external to the language of the agreement in

order to discern the parties’ intent in entering into the contract. See,

e.g., Crescent Oil & Shipping Services, Ltd. v. Phibro Energy,

Inc. , 929 F.2d 49, 52 (2d Cir. 1991); United States Naval Institute

v. Charter Communications, Inc., 875 F.2d 1044, 1048 (2d Cir.

1989). In doing so, if there is no genuine dispute as to the material

facts relevant to the discernment of the drafters’ intentions—even

if the evidence is extrinsic to the contract itself—the court may

interpret the contract as a matter of law, based on those undisputed

facts, and hence summary judgment may be appropriate. See, e.g.,

Crescent Oil & Shipping Services, Ltd. v. Phibro Energy, Inc., 929

F.2d at 52-54 (affirming summary judgment even though contract

was ambiguous, since plaintiff's extrinsic evidence did not create

triable disputes as to material facts); Burger King Corp. v. Horn

& Hardart Co., 893 F.2d at 528; Schering Corp. v. Home Ins.

Co. , 712 F.2d at 9; National Union Fire Ins. Co. v. Argonaut Ins.

Co., 701 F.2d 95, 97 (9th Cir. 1983); Sutton v. East River Savings

Bank, 55 N.Y. 2d 550, 554, 450 N.Y.S.2d 460, 462-63 (1982).

See generally Antilles S.S. Co. v. Members of American Hull Ins.

Syndicate, 733 F.2d 195, 203-07 (2d Cir. 1984) (Newman, J.,

concurring) (suggesting that determination of meaning of contract

58a

that is either unambiguous or not illumined by extrinsic evidence

is question of law).

In this case, the entire negotiating history of the Decree,

insofar as it is relevant, and all the other pertinent extrinsic

evidence reflecting on the intentions of the parties are now part of

the record. From that record it is apparent that there are no

disputed issues concerning the material evidentiary facts, although

the parties of course disagree strongly as to the inferences to be

drawn from those facts. Under these circumstances, as ASCAP’s

counsel agreed, there is no need to conduct a trial.

Based on the evidence of record, I conclude that applicants

are “telecasting networks” within the meaning of Article V(A) of

the Decree. They are therefore entitled to a license that would

cover the performance of their programming by cable system

operators with which they are affiliated.

C. The Per-Program License Claim

The second controversy submitted by the parties for decision

concerns the provisions of Article VII(B) of the 1950 Decree,

which requires ASCAP “to issue to any unlicensed radio or

television broadcaster, upon written request, per program

licenses, . . . .” The applicants contend that they are “television

broadcasters” and hence are entitled to the issuance of a

per—program license on reasonable terms. ASCAP has resisted this

demand, asserting that this term covers only over-the-air

television, and hence that the cable program suppliers, as well as

the cable system operators, are limited to a blanket license under

2’ It appears in any event that the negotiators for the parties are no longer

available except as embodied in prior deposition testimony, and the parties

have submitted only one snippet of marginally relevant testimony from

those individuals. :

# In view of this disposition, there is no need to address applicants’

alternative arguments based on the non-discrimination provision of Article

IV or the wording of Article IX(A).

59a

the Decree, unless ASCAP voluntarily chooses to offer them an

alternative form of licensing.

This issue was first raised at the conclusion of the trial in the

Showtime proceeding. Ultimately, the parties there agreed to

withdraw the matter from consideration in that case, and to address

it fully in this proceeding by expanding the scope of ASCAP’s

then-pending motioa for summary judgment. Accordingly, the

court invited all applicants to file papers “directed to the question

of their entitlement to a per-program license.” (Order dated

Dec. 20, 1989.) The court also authorized discovery in connection

with this question (id.), an invitation that none of the parties

pursued. Briefing was received from ASCAP and the applicants, all

of whom rely almost entirely on the record created in connection

with ASCAP’s original motion. In addition, by invitation of the

court, the Department of Justice has submitted its views on the

proper interpretation of Article VI(B).

In pressing its argument that cable television is not within the

scope of Article VII(B), ASCAP once again urges this court to

view the disputed language as unambiguously limited to

over-the-air television broadcasters, and therefore not to look to

any of the interpretive aids available to a court in construing

ambiguous decrees. Somewhat inconsistently, ASCAP rests this

argument principally on the assumption that the drafters of the

Decree were relying on the definition of “broadcasting” in the

Communications Act of 1934, 47 U.S.C. § 153(0).2 Again, its

argument is unconvincing.

The term “television broadcaster” is not defined in the

Decree. Although, as argued by ASCAP, it could be read as having

a precise technological meaning that is limited to over-the-air

transmissions, see 47 U.S.C. §§ 153(a), (6), and (0) (defining

broadcasting in terms of “radio communications” as distinct from

“wire communications”), it may also fairly be read more broadly.

2 The anomaly in ASCAP’s argument is that the 1934 Communications

Act constitutes an extrinsic aid to interpretation, and should therefore not

be consulted if the Decree is unambiguous on its face.

60a

In common parlance the term is understood to encompass any

transmitter of television programs. Thus, for example, Webster’s

New Collegiate Dictionary defines the word “broadcast” as “the act

of transmitting sound or images by radio or television,” id. at 140,

while The American Heritage Dictionary defines the term as “[t]o

transmit a radio or television program.” Jd. at 210. Nonetheless, a

number of court decisions have used the term “broadcast” to refer

to cable television. See, e.g., Jimmy Swaggart Industries v. Board

of Equalization of California, 110 S. Ct. 688, 692 (1990); United

States Football League v. National Football League, 842 F.2d

1335, 1362 (2d Cir. 1988) (referring to the sale of broadcasting

rights to cable television). Furthermore, the ambiguity of the term

as used in the Decree is underscored by reading Article VII in its

entirety, since it makes plain that the drafters used “television

broadcaster” interchangeably with “telecaster.” Thus, the

introductory clause to Article VII provides that “Defendant

ASCAP, in licensing rights for public performance for radio

broadcasting and telecasting. . . .” Similarly, Article VII(B), in

specifying how the per-program license may be priced, provides

that the fee may be “based upon the payment of a percentage of the

sum paid by the sponsor of such program for the use of the

broadcasting or telecasting facilities of such radio or television

broadcaster.” In contrast, Article VII(A) refers to “the radio

broadcaster or telecaster.” See also Decree Art. V(A) (referring to

“radio broadcasting network” and “telecasting network”). Indeed,

ASCAP’s own counsel, in his memorandum of explanation to Judge

Leibell in March 1950, described the obligation of ASCAP to offer

per-program license as running to “telecasters.” (See ASCAP

memorandum at 8, attached to Sokler Aff. as Exh. E.)

The term “telecaster” is, if anything, broader in scope than

“broadcaster” since it is divorced from any possible implication,

based on the 1934 Communications Act, 47 U.S.C. § 153(0), that

the transmission must be by radio communication. Indeed, the

Television Program Improvement Act of 1990 defines the term

“telecast” to mean—“(A) to broadcast by a television broadcast

station; or (B) to transmit by a cable television system or a satellite

television distribution service.” 47 U.S.C. § 303c(b)(3).

6la

In short, the disputed term is susceptible to more than one

reasonable interpretation. Necessarily, then, the court may look to

extrinsic aids to construction” I therefore turn first to the

historical context of Article VII.

The per-program license differs from the more commonly

utilized blanket license in that the licensee pays a fee only for

designated programs. In contrast, under the blanket license the

licensee is required to pay for a license that covers all programs,

irrespective of the fact that some of those programs may have no

uncleared music. The per-program license therefore has several

potential advantages for a telecaster. If he carries a significant

number of programs without music or with music that he has

cleared either directly with the composer or through a syndicator

or through a performing rights society other than ASCAP, a

per-program license is likely to save him money if it is priced

appropriately in relation to the blanket license. Moreover, the

availability of a per-program license gives the telecaster an

incentive to seek so-called source or direct licensing since such

licensing would reduce the expense of his ASCAP license. See

ASCAP v. Showtime/The Movie Channel, 912 F.2d at 570. In

short, the per-program license serves as a counterbalance to

ASCAP’s market power, which is most clearly exercised by its

preference for the blanket license.

The 1941 complaint of th

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