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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1992
- **Citation:** 504 U.S. 914

## Text

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.

A

TABLE OF CONTENTS

Page
ah yy 88 Ah): + Sa
List OF PARTIES AND RULE 29.1 LIST ........... il
pe Bs lps. ty. Sc a iv
te oe Ce eye tee be eae ee eee l
sk yg baal. soa 8 en ow a eS 2
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

iV

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
copyright owners, and millions of compositions.
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

V/

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,

10

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.)

1]

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.

12

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.

13

ee

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

14

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... .

15

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

16

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

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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.

2a

= —=&«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

3a

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).

4a

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.

Sa

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

6a

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).

7a

|

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

8a

ia

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

9a

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

a

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

4a

= 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

© In theory, the film exhibitors could have sought direct licensing from
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

Oe

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.

(c) Distinctions Between Over-The-Air
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0401%3A1. Public record. Not legal advice.