The opinion of the court was delivered by: WILLIAM CONNER, Senior District Judge
Applicants Muzak, LLC ("Muzak") and DMX Music, Inc. ("DMX")
(collectively "applicants") bring this application for construction of
certain provisions of the Second Amended Final Judgment (the "AFJ2")
between the plaintiff United States and the defendant American Society of
Composers, Authors and Publishers ("ASCAP").*fn1 Specifically,
applicants seek a construction of the "per-segment license" provision of
the AFJ2 confirming their entitlement to a music publisher catalog-based
license, under which the only catalog-based segments subject to a fee
would be those that are not already the subject of a direct licensing
arrangement between applicants and the publishers. (Applicants' Mem.
Supp. Mot. Constr. at 2, 18-19.) The United States also has filed a
memorandum to aid the Court in the construction of the consent decree.*fn2
For the reasons set forth herein, we conclude that a music publisher's
catalog is not a "segment" for purposes of "per-segment" licensing under
AFJ2 section VII and that ASCAP is, therefore, not required to issue to
applicants a catalog-based license limited to those publishers' catalogs
that are not otherwise directly licensed. We also conclude, however, that
the existence of
such direct licensing relationships may and will be considered by this
Court in a rate court proceeding under AFJ2 section IX in determining
whether ASC AP has met its burden of proving the reasonableness of the
blanket licensing fee it seeks or, in the event that ASCAP fails to meet
that burden, in the Court's calculation of a reasonable fee based on all
Applicants are background/foreground music*fn3 providers that furnish
their services to subscriber-businesses such as restaurants, retail
stores, hotels, offices, medical facilities and fitness centers. (Knittel
Aff. ¶ 4; Walker Aff. ¶ 4.) Background/foreground music services
provide background music*fn4 for non-intrusively enhancing business
settings, and foreground music*fn5 that is intended to be noticed and
enjoyed by the listener, usually as part of a shopping experience.
(Knittel Aff. ¶ 10.) Muzak furnishes its services nationwide through
a network of approximately twelve
regional operations centers and 110 independent affiliates providing
music delivery through direct satellite broadcasts, telephone-line
transmissions and on-premises delivery via tapes and CDs. (Walker Aff. ¶¶
3-4.) DMX is a premium digital audio service that furnishes its products
globally and nationwide through a network of approximately 175,000
independent affiliates providing music delivery via direct satellite
broadcasts and on-premises tapes and CDs. (Knittel Aff. ¶¶ 4, 7-8.) ASCAP
is an unincorporated membership association that aggregates the licensing
authority of approximately 160,000 composers, authors, lyricists and
music publishers, and issues licenses affording users access to its
amassed repertory of approximately four million musical works.
(Applicants' Mem. Supp. Mot. Constr. at 6-7.) For approximately sixty
years, applicants have entered into "through-to-the-audience"*fn6
licensing relationships with ASCAP and similar organizations, such as
ASCAP's primary competitor Broadcast Music, Inc. ("BMI"), in order to
obtain access and performance rights to their amassed repertories of
copyrighted music. (Id. at 7.)
Both applicants have the capability of tracking and monitoring
precisely the music that they deliver to their subscribers. DMX utilizes
"studio" software for on-premises subscribers that records the title,
artist, album, label and length of play for musical works delivered to
all such subscribers. (Knittel Aff. ¶ 11.) For broadcast subscribers,
DMX utilizes "selector" software to track the broadcast channel, title,
artist, album, label, and date and time of transmission. (Id. ¶ 12.) DMX
provides ASCAP with the tracking information from the selector and studio
software on a quarterly basis, which ASCAP uses to calculate its members'
royalty payments. (Id. ¶¶ 13-14.) Muzak has
similar capabilities, although ASCAP has only requested and Muzak has
only provided information pertaining to Muzak's two most popular
broadcast channels on a quarterly basis. (Walker Aff. ¶ 8.) ASCAP has
not requested from Muzak any on-premises musical information. (Id.)
To date, applicants have entered into "blanket" licensing
relationships*fn7 with ASCAP.*fn8 (Applicants' Mem. Supp. Mot. Constr.
at 7.) These blanket licenses afford applicants complete access to the
ASCAP repertory and the licensing fee reflects neither applicants' actual
use of the full repertory nor their dependence on the ASCAP license for
access to the rights to the copyrighted music. (Id. at 7, 11.) Put
differently, the licensing fee for the blanket license is not reduced by
applicants' having obtained performance licenses for some musical works
directly from ASCAP members. Applicants state that, as a practical
matter, they are required to obtain licenses with both ASCAP and BMI
because each organization has a distinct large and diverse repertory of
works necessary for their programming. (Knittel Aff. ¶¶ 16-17; Walker Aff.
¶¶ 9-10.) They claim that as a result, they enjoy no cost savings from the
direct licensing of ASCAP works unless they are able to license all of
those works directly, an alternative that is neither financially
advisable nor feasible
because of the size of ASCAP's repertory. (Applicants' Mem. Supp. Mot.
Constr. at 11-12.) Applicants contend that this is inequitable because
direct licensing presently results in double payment for the use of a
musical work; there is no reason for them to obtain and pay for direct
licenses from any ASCAP members because they already have rights to
perform all their musical works under the ASCAP blanket license which they
were compelled to take as a business necessity. (Id. at 12; Knittel Aff.
¶ 16; Walker Aff ¶ 10.)
Applicants' last ASCAP license expired by its own terms on May 31,
1999. (Witschel Aff., Ex. 30.) Since that time, applicants and ASCAP have
been operating under an interim license incorporating the same terms and
fees as the previous license. (Id.) Applicants and ASCAP have attempted,
albeit unsuccessfully, to reach agreement on licensing fees for a new
license. (ASCAP Mem. Opp. Mot. Constr. at 4.) Thereafter, ASCAP filed an
application for determination of reasonable fees on January 29, 2003.
(Id.) The interim license remains in effect. (Id.) During the fee
proceedings, applicants stated their intention to seek a publisher
catalog-based "per-segment" license under section VII of the AFJ2 that
would provide ASCAP with payment corresponding to the degree to which
applicants rely on an ASCAP blanket license, as opposed to direct
licensing arrangements with ASCAP members. (Applicants' Mem. Supp. Mot.
Constr. at 2.) The licensing fee also would include any adjudicated
administrative fee to which ASCAP would be entitled. (Id. at 18.) ASCAP
opposed applicants' request, leading to the present motion before the
Construction of consent decrees such as the AFJ2 is governed by the
standard recently set forth by this Court in New York ex rel. Spitzer v.
St. Francis Hosp., 289 F. Supp.2d 378 (S.D.N.Y. 2003) (Conner, J.):
"A consent judgment is `an agreement of the parties
entered into upon the record with the sanction and
approval of the [c]ourt.' Schurr v. Austin Galleries
of Ill, Inc., 719 F.2d 571, 574 (2d Cir. 1983). It is
`a contract to end a lawsuit in which the parties
agree to the relief to be provided by the judgment and
the wording to effectuate that relief.' Audiovisual
Publishers, Inc. v. Cenco, Inc., 964 F. Supp. 861, 875
(S.D.N.Y. 1997). For purposes of enforcement, a
consent judgment should be construed and interpreted
as a contract. See United States v. ITT Continental
Baking Co., 420 U.S. 223, 238 (1975); United States v.
Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen &
Helpers of Am., AFL-CIO, 141 F.3d 405, 406 (2d Cir.
1998). Because a consent judgment embodies compromises
for the sake of settling a litigation, unlike other
contracts it cannot be said to have a discernable
`purpose' See ITT, 420 U.S. at 235-36 (citing United
States v. Armour & Co., 402 U.S. 673, 681-82
(1971)). Rather, the scope of a consent judgment must
be ascertained within its four corners. Armour, 402
U.S. at 682; Int'l Bhd., 141 F.3d at 406."
Id. at 383-84 (quoting SEC v. Gellas, 1 F. Supp.2d 333, 336 (S.D.N.Y.
1998) (Conner, J.)).
We also note, however, that
"reliance upon certain aids to construction is
proper, as with any other contract. Such aids include
the circumstances surrounding the formation of the
consent order. . . . Such reliance does not in any way
depart from the `four corners' rule." ITT, 420 U.S. at
238. Moreover, if the wording is susceptible to more
than one reasonable construction, then the court may
look to extrinsic evidence. See Audiovisual
Publishers, 964 F. Supp. at 876; United States v. Am.
Soc'y of Composers, Authors and Publishers,
782 F. Supp. 778, 788 (S.D.N.Y. 1991), aff'd, 956 F.2d 21
(2d Cir. 1992)."
St. Francis Hosp., 289 F. Supp.2d at 384 (quoting Gellas, 1 F. Supp.2d at
336). Accordingly, we now turn to the parties' linguistic arguments with
respect to the provisions of the AFJ2 that are at issue.
II. "Per-Segment" Licensing Under the AFJ2
Applicants propose, and ASCAP has heretofore declined to issue, a
per-segment license under the AFJ2 that would provide ASCAP with those
levels of payments that would correspond to applicants' reliance on ASCAP
licenses. (Applicants' Mem. Supp. Mot. Constr. at 18.) The "segments"
would consist of the "catalogs," or collections of musical compositions,
of the various music publishers that are affiliated with ASCAP. (Id. at
18 & n. 11.) Applicants state that the segments subject to an ASCAP fee
would be those catalog segments that are not the subject of a direct
licensing relationship; the fee would depend on the licensing source for
the musical works played, as tracked by applicants' playlists reported to
ASCAP on a quarterly basis. (Id. at 19.) In addition to the ...