· IN RE: APPLICATION OF THE CAPSTAR November 23, 2010 Page 809 0bn7usa1 [1] UNITED STATES...

In The Matter Of:

IN RE: APPLICATION OF THE CAPSTAR

November 23, 2010

TRIALSOUTHERN DISTRICT REPORTERS

500 PEARL STREETNEW YORK., NY 10007

212-805-0300

Original File 0BN7USAF.txt, Pages 809-917 (109)

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IN RE: APPLICATION OF THE CAPSTAR November 23, 2010

Page 809 0bn7usa1 [1] UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK [2] ------------------------------x [3] IN RE: APPLICATION OF THE CAPSTAR ACQUISITION CORP. (now known as DMX, Inc.) [4] ------------------------------x [5] Related to: [6] UNITED STATES OF AMERICA, [7] Plaintiff, [8] v. 09 Civ. 7069 (DLC) [9] AMERICAN SOCIETY OF COMPOSERS,[10] AUTHORS, AND PUBLISHERS,, [11] Defendant. [12] ------------------------------x [13] November 23, 2010 9:30 a.m.[14] [15] Before: [16] HON. DENISE L. COTE, [17] District Judge [18] [19] [20] [21] [22] [23] [24] [25]

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[1] APPEARANCES [2] WHITE & CASE, LLP Attorneys for Plaintiff [3] BY: CHRISTOPHER J. GLANCY STEFAN MENTZER [4] BORIS SHARAPAN -AND- [5] RICHARD H. REIMER, ASCAP SAMUEL MOSENKIS, ASCAP [6] WEIL, GOTSHAL & MANGES, LLP [7] Attorneys for Defendant BY: E. BRUCE RICH [8] BENJAMIN E. MARKS TODD LARSON [9] JACOB EVIN VANESSA CHANDIS[10] KIM WU -AND-[11] CHRISTOPHER S. HARRISON, DMX General Counsel[12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25]

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[1] (Trial resumed; in open court)

[2] THE COURT: Good morning. So, we will start with

[3] DMX's summation.

[4] MR. RICH: Good morning, your Honor. We have a binder

[5] of demonstratives which I would like to hand up, and those

[6] should also appearing on the computer screens.

[7] The Second Circuit's AEI decision, as authoritatively

[8] construed by Judge Conner in Muzak 1, entitles DMX to

[9] reasonable terms for blanket license with a fee mechanism,

[10] taking account of its direct licensing arrangements with

[11] ASCAP's members.

[12] Under AFJ2 it was ASCAP's obligation to come forward

[13] with reasonable terms for such a license, failing which, this

[14] court was, in the words of the Second Circuit, empowered to set

[15] a reasonable fee for it. And that's of course paraphrasing

[16] from the BMI setting incorporated by the Muzak decision.

[17] Now, following trial, it is manifestly clear that

[18] ASCAP has failed to discharge its burden of demonstrating that

[19] either of the alternative fee proposals its presented provide

[20] DMX with reasonable terms for the license it seeks.

[21] And this failure, your Honor, is at two basic levels:

[22] First, ASCAP has structured its proposals expressly to deprive

[23] DMX of the benefits of its investment in direct licensing and,

[24] second -- this to one side -- the price levels in these

[25] proposals, assertedly based on ASCAP's 2005 Muzak license

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[1] agreement, fail to approximate those that DMX's direct license [2] experience now informs us would result from a competitive [3] marketplace. [4] Even examining the Muzak and other putitive industry [5] benchmarks at face value, ASCAP's proposal is as much as 75 [6] percent higher on a per location basis than the effective rate [7] of the fees agreed to under the Muzak license and as much as 64 [8] percent higher on a per location basis than the effective rate [9] of the fees agreed to earlier this year between ASCAP and Music[10] Choice.[11] Dr. Boyle conceded at trial -- as he had to -- that no[12] other background music service licensee has agreed to pay final[13] license fees at -- and I will add even near -- the levels that[14] ASCAP seeks from DMX. That's transcript 267.[15] Against this ASCAP failure of proof, DMX came forward[16] with a first ever showing of substantial empirical evidence as[17] to prices that a competitive marketplace yields for music[18] performance rights licensed by ASCAP to an entity like DMX.[19] This took the form of some 850 direct licenses with music[20] publishers, covering those music publishers' music catalogs.[21] This evidence goes right to the heart of what this rate-making[22] process is all about. There is no need to hypothesize or to[23] fall back on other ASCAP blanket license agreements with[24] industry competitors.[25] ASCAP's effort to discredit the probative value of

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[1] this empirical evidence reflects really a "circle the wagons" [2] effort to protect artificially-inflated levels that have [3] insulated ASCAP and its members from competitive forces for [4] generations. The trial record reveals that the criticisms and [5] attacks that have been leveled on this direct license evidence [6] really amounts to a lot of smoke and mirrors, combining unsound [7] economics with rank speculation. [8] This first ever empirical data translated by Dr. Jaffe [9] and Dr. Candell into what we call our unbundled music fee,[10] combined with the only estimate provided the court of the[11] reasonable value of the distinct aggregative functions[12] performed by ASCAP, translated into what our experts have[13] called the floor fee, were shown at trial to provide the court[14] with a range of reasonable blanket license fees far more[15] responsive to the goals of the rate making process than ASCAP's[16] own fee proposal.[17] Now, ASCAP's primary fee proposal flies in the face of[18] the AEI and Muzak 1 mandate. It affords DMX no credits[19] whatsoever from the full blanket license fee that would be[20] owing ASCAP. The proposal is grounded on the plainly erroneous[21] premise, to quote from paragraph 45 of Dr. Boyle's affidavit,[22] that "AFJ2 does not require ASCAP to offer DMX a discount from[23] the ASCAP blanket license fee for payments DMX has voluntarily[24] made to publishers pursuant to its catalog agreements."[25] Undeterred by black letter law to the contrary, and

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[1] part and parcel of its effort to nullify its obligation to [2] license on behalf of its writer and publisher members only on a [3] nonexclusive basis, ASCAP adopts as its primary position in [4] this rate case that if DMX wants an ASCAP blanket license it [5] must pay full price for that license irrespective of the degree [6] to which DMX has separately paid ASCAP members for the [7] conveyance of the very same performance rights which are [8] covered by the blanket license. [9] To avoid the plain inequity of a license fee[10] structure, Dr. Boyle testified in response to questioning by[11] your Honor, he said DMX should seek from ASCAP a license form.[12] DMX has not requested, does not desire, and it cannot[13] meaningfully benefit from a per segment license. That's[14] transcript 307.[15] The patent unreasonableness of ASCAP's primary fee[16] proposal is underscored by the inconsistency between the[17] justification offered for it at trial by Dr. Boyle -- namely[18] the asserted unbearing value of having continued access to the[19] full ASCAP repertory, on the one hand -- and what the trial[20] record reveals as to how ASCAP itself deals with direct[21] licensing members.[22] Under Section 3.4.3 of ASCAP's rules and regulation,[23] that's AX-131, ASCAP stops payments to direct licensing members[24] expressly because it recognizes that they have conveyed[25] something of value separately -- their copyright performance

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[1] rights -- and therefore shouldn't be paid twice for them. So, [2] on this side of the equation, ASCAP's distributions to its [3] members, the "invented for litigation" notion that the blanket [4] license has unaltered value, irrespective of the degree to [5] which users and ASCAP members may choose to deal with one [6] another separately, is nowhere to be found. The anomalous [7] outcome is reflected in this colloquy which we will put up now [8] on the screen with Dr. Boyle appearing at transcript 304: [9] "Q. So, ASCAP will not reward its members with double payments[10] who direct license, correct?[11] "A. Correct.[12] "Q. But it will penalize a user who chooses to direct license[13] under this proposal by not reducing its fee obligation to[14] ASCAP. Is that correct?[15] "A. Under that proposal, yes."[16] What is more, Dr. Boyle testified that monies withheld[17] from direct licensing ASCAP members, but that still would be[18] collected from DMX, would be distributed instead to the[19] remaining surveyed writers and publishers who had not directly[20] licensed their works to DMX.[21] I showed Dr. Boyle this demonstrative, which is now in[22] your book and on the screen, to illustrate this point, using[23] assumptions that closely parallel the record evidence, for[24] example, the 30 percent percentage of works directly licensed[25] by DMX. That demonstrative plainly showed the windfall in

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[1] revenues that such remaining ASCAP members would stand to earn. [2] A not inconsequential feature, therefore, of ASCAP's primary [3] fee proposal was shown to be a built-in disincentive to ASCAP's [4] members to direct license their rights. If you say no to [5] entities like DMX, you will be rewarded with a premium in [6] royalties. [7] ASCAP's alternative fee proposal was shown at trial to [8] pay lip service to AEI and to Muzak 1 but no more. It falls in [9] the tradition of earlier ASCAP rate court efforts to justify[10] alternative license forms mandated by AFJ2, by resort to fee[11] formulas and pricing structures that in reality would have made[12] those forms -- to borrow once more from Judge Dolinger --[13] "technically available but practically illusory".[14] The inexorable math of this alternative fee proposal[15] was the following: For the 2005 through 2009 period, despite[16] the significant percentage of ASCAP works directly licensed,[17] and no matter the dramatically lower royalties negotiated with[18] direct licensors in relation to the prevailing ASCAP fee[19] levels, this fee proposal would guarantee that DMX would pay[20] $75,000 more in total performing rights fees -- that's to ASCAP[21] and the direct licensors combined -- than had it not engaged in[22] direct licensing at all.[23] For the 2010 through 2012 period, assuming DMX[24] maintained its 2009 level of direct license expenditures,[25] inflation adjusted, this proposal would result in DMX spending

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[1] $25,000 a year more than if it hadn't embarked on direct [2] licensing at all. And to the extent DMX increased its outlays [3] on direct licensing beyond $230,000 a year, adjusted by [4] inflation, it would leave DMX out-of-pocket for every such [5] additional dollar spent. [6] Professor Greene, Dr. Greene, was forthright at trial [7] in responding in the affirmative to the proposition that under [8] this alternative proposal, "DMX would have no economic [9] incentive to directly license publishers unless it can directly[10] license enough of them to get rid of the ASCAP license[11] entirely." Transcript 425.[12] For its part, Dr. Boyle has acknowledged, ASCAP would[13] never receive less than 95 percent of its full blanket license[14] fee no matter what the level of DMX's expenditures on direct[15] licenses and no matter what percentage of ASCAP works[16] transmitted by DMX may be directly licensed.[17] In short, ASCAP's alternative license proposal ensures[18] throughout the license term that DMX always will pay more to[19] direct license than to forego direct licensing, and that ASCAP[20] and its nondirect licensing members will be insulated[21] economically from any meaningful license fee reductions arising[22] out of DMX's direct licensing activity.[23] Here is what Dr. Jaffe had to say about this proposal[24] at paragraphs 80 and 81 of his affidavit: "ASCAP's proposed[25] pricing structure is exactly the structure that would be

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[1] favored by a cartel, since it eliminates any incentive on the [2] part of the buyer to seek competitive pricing for the products [3] of the cartel's members." He continues: "The virtue of [4] competition is supposed to be the possibility that sellers [5] competing for business might lower their asking prices. There [6] is no better mechanism to make sure that such competition does [7] not occur than to mathematically eliminate any savings that a [8] buyer might otherwise achieve by pursuing such competing sales [9] offers."[10] Now, ASCAP has rested its entire case on these two[11] license proposals. It did not ask the court to consider in the[12] alternative any other price adjustment mechanism to accommodate[13] direct licensing, any form of dynamic carve-out that would take[14] account of DMX's ongoing direct license activities, any other[15] means for measuring the credits to be given DMX for direct[16] licensing, whether on the basis of a percentage of all of its[17] transmissions of ASCAP music or otherwise, any reporting[18] protocols with ASCAP under a dynamic carve-out system, or any[19] estimates as to administrative costs other than a flat[20] guesstimate of $25,000.[21] Were this court to adopt a dynamic carve-out license[22] fee structure, the sole proposals and evidence as to how such a[23] license ought to be structured, as to how credits against a[24] full blanket license fee ought to be calculated and reported,[25] and as to how ASCAP should be reimbursed for the reasonable

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[1] costs of providing that license, came at trial from DMX. They [2] stand unopposed. [3] Just a couple of words about the supposed panacea [4] represented by the per segment license. [5] THE COURT: Before you go there, do you want to [6] address Muzak 2 and what I expect we will hear from -- or are [7] you going to do that later? [8] MR. RICH: I will do that right now, your Honor. [9] THE COURT: OK.[10] MR. RICH: It is accurate that Judge Conner[11] interpreted the scope of the license to require the court to in[12] essence take a snapshot at the trial of past license activity.[13] As I indicated in my opening and as we argue -- and I[14] think the trial record demonstrates -- that occurred in a[15] setting where the court understood, as Mr. Gertz indicated,[16] that there had been negotiated two licenses on Muzak's behalf[17] with two publishers which had not yet been implemented in[18] market operation. There was no system in place yet to pay[19] those publishers. They had not received payments yet. It was[20] a prospective process, very distinct factually.[21] THE COURT: So that was the Sony and EMI?[22] MR. RICH: That's correct. That was in evidence there[23] through affidavit testimony. So, that was the extent of what[24] the court knew the marketplace then looked like, so it was an[25] aspirational marketplace for the most part at that moment. And

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[1] the court had that record in front of it and no evidence [2] comparable to the active, dynamic, ongoing, heavily-invested-in [3] marketplace that we are talking about here. [4] It's also evident from reading Muzak 2 that without a [5] record in front of him Judge Conner believed that there might [6] well be the need on a regular basis to come back to the court [7] to fashion adjusted fees. And what we now know, and what Judge [8] Stanton recognized from a similar trial record in the BMI case, [9] is that there is an easy mechanism, namely the one that our[10] clients propose there and had been implemented as to BMI, and[11] identical to the one here, where there is a seamless interface[12] between data gatherers like MRI and performing rights[13] organizations like BMI and ASCAP. The parallel here is to the[14] much more complex administratively per program system.[15] And so again there was a large apparent concern Judge[16] Conner had there, which is I don't want parties coming back to[17] me every so often saying, well, let's fix this fee. This is a[18] self-adjusting credit mechanism requiring no court[19] intervention. And I can represent to you, your Honor, that in[20] the BMI setting there have been no issues about how it works,[21] how the math works and how those should work.[22] The third and last point I would make as a point of[23] possible difference with Judge Conner -- apart from the[24] record -- is that Judge Conner felt that the protection, as it[25] were, for an entity like Muzak there, and presumably DMX here,



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[1] would be that you could execute short-term licenses with ASCAP. [2] With all respect, I think that's a highly inefficient process [3] that would invite instead of licenses out here until 2012 a [4] license, for example, say take a license through 2010 and we [5] will see your Honor next year, to update the totality of the [6] new licenses. It seems to us there is no need for it. [7] Administratively a simple credit mechanism seems to take care [8] of it, and on those bases we would suggest the pro-competitive [9] and administrative ease aspects of affording a dynamic license[10] make enormous sense.[11] THE COURT: I don't want to interrupt the structure of[12] your argument to me, but are you at some point going to address[13] the extent to which Judge Stanton's recent decision in BMI[14] should or shouldn't be applied here?[15] MR. RICH: Yes.[16] THE COURT: OK.[17] MR. RICH: Yes.[18] THE COURT: I will wait for that.[19] MR. RICH: I was just briefly going to say a few words[20] about the per segment license, your Honor. It only deserves a[21] few comments.[22] First, it's not a license that is sought by DMX, and[23] it's therefore not before the court for consideration as to its[24] suitability let alone fee setting.[25] Second, as conceded by Dr. Boyle at transcript 301,

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[1] DMX is entitled to either or both a blanket carve-out license [2] and a per segment license. ASCAP's posited either/or option is [3] not existent. [4] Third and last, the very reason that DMX is pursuing a [5] blanket carve-out and not a per segment license is the [6] inability of the per segment license to accommodate the manner [7] in which the direct licensing market operates in relation to [8] the background music industry. [9] Publishers offer catalog licenses. You heard from[10] Mr. Gertz all about how that works. And Muzak 1 makes clear[11] that such licenses are not properly definable as "segments"[12] within the meaning of AFJ2. Small wonder why ASCAP would[13] prefer DMX to be relegated to a form of license that ASCAP[14] knows is completely unsuited to DMX's needs.[15] Now, turning to ASCAP's proposed royalty rate. ASCAP[16] claims that the base blanket fees it seeks -- some $15,677,777[17] through 2009, and a per location rate of $49 adjusted for CPI[18] for the years 2010 through 2012 -- are based on the 2005 Muzak[19] agreement. The trial evidence demonstrated this not to be the[20] case.[21] The evidence establishes that the Muzak fee was an[22] annual flat fee agreed to with Muzak, pegged to an estimated[23] 165,000 starting locations which translated to an effective[24] rate of $41.21 a location. As your Honor is aware, it included[25] an 8 percent organic growth provision. And the testimony at

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[1] trial concerning this license indicated the following: That [2] the flat fee structure was one requested by Muzak, not by [3] ASCAP; and that such structure, Dr. Boyle, Mr. Candilora, Dr. [4] Candell all agreed, is consistent with an expectation of [5] growth. [6] In agreeing to the deal, ASCAP took into account -- [7] Dr. Boyle testified, as did Mr. Candilora -- the history of [8] Muzak's growth. And up on your screen as a demonstrative is a [9] depiction of the data appearing in AX-233 showing subscriber[10] growth for Muzak between 2001 and 2004 of some 49 percent,[11] which amounts to a compound annual growth rate of 14.3 percent.[12] In addition, ASCAP projected continued growth in terms[13] of Muzak's experience, as evidenced by its 2005 budget prepared[14] in December of 2004 under Mr. Candilora's supervision. That's[15] DX-307. And the extract appearing in the next demonstrative[16] shows ASCAP's projection of year-over-year location growth by[17] Muzak, and it assumes a steady location fee of 3.7 percent.[18] And at least as notably -- since your Honor will[19] recall that ASCAP viewed Muzak as a template for all other[20] industry licensing. That's transcript 107, 108 -- that same[21] document, if you drop to the bottom line of projections for[22] Muzak, DMX and Music Choice, projects a nearly 8 percent growth[23] between 2004 and 2005 across those three entities, the very 8[24] percent we have heard so much about.[25] Now, the only discordant note comes from Mr.

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[1] Candilora's testimony, partially recanted on the stand -- by [2] that I mean his written testimony -- that "ASCAP had an [3] expectation that Muzak's subs would decline." That was in [4] paragraph 56 of Mr. Candilora's written testimony. But Mr. [5] Candilora was unable to cite any contemporaneous documents to [6] support that supposition, and those just reviewed -- including [7] his own budget projections -- contradict it. [8] THE COURT: Well, it's very interesting, because [9] looking at your exhibit, as I remember his testimony, he was[10] talking about how the structure of the Muzak business he[11] thought would be the least successful in an increasingly[12] competitive market. And what this document shows is that the[13] expected growth rate, while ASCAP was projecting growth for[14] Muzak DMX and Music Choice, it was expecting Muzak's growth to[15] be the least of those three entities.[16] MR. RICH: I would agree that that would be a[17] reasonable reading of this document, but I think we have to[18] interpret ASCAP's mindset in the light of their expectation.[19] They were then going to take this base rate with an adjustment[20] out to the entire industry, and I think the record reasonably[21] supports the view that they were also looking simultaneously at[22] what people like Music Choice -- and by projection DMX -- might[23] be doing, and it would be reasonable to infer therefore that[24] they would have an expectation of what the economic[25] consequences of applying that organic growth adjustment might



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[1] be to these other players as well. [2] THE COURT: But it suggests that they did not expect [3] that accepting Muzak's request for a floor would create any -- [4] I should start again. [5] ASCAP did not expect that accepting Muzak's flat fee [6] request would present a problem with respect to any other major [7] player in the industry because they expected all of them to [8] grow. [9] MR. RICH: I would agree with that, your Honor.[10] THE COURT: And, two, that they ultimately settled on[11] the 8 percent would not present a problem because at least in[12] the short term they were projecting both DMX and Music Choice[13] to far exceed the 8 percent growth rate.[14] MR. RICH: I agree with that as well, your Honor.[15] The two points I'm trying to bring out -- and maybe[16] not very successfully or clearly -- is, number one, I think the[17] record as to Mr. Candilora's expectation that Muzak would in[18] fact be declining --[19] THE COURT: Well, I'm going to put that aside. I[20] reject that.[21] MR. RICH: OK. And, secondly, ASCAP says through Dr.[22] Greene and through Dr. Boyle all of our agreements in the[23] industry are consistent with our Muzak deal. And when one[24] looks and thinks about the economic implications of those, to[25] the extent, for example, Music Choice, ASCAP was anticipating

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[1] growth in fact exceeding that 8 percent, the issue is what [2] would that have done. And we now know what it did in terms of [3] the effective rates that were afforded Music Choice, supposedly [4] consistent with the Muzak deal in 2010, rates that drove it [5] much lower. [6] THE COURT: I am not getting your last point. [7] MR. RICH: OK. [8] THE COURT: So, I may have been distracted by [9] listening to you and looking at the document at the same time,[10] because the document is reflecting expectations in 2005.[11] MR. RICH: Yes, just for the next year.[12] THE COURT: And you skipped ahead to thinking of Muzak[13] choice retrospectively. They understood at the time of the[14] Music Choice deal what had happened.[15] MR. RICH: We are clearly all making a number of[16] assumptions as to reasonable behavior, and the principal[17] purpose of this demonstrative, not to overstate it, your Honor,[18] is that a suggestion that ASCAP was expecting fees at $41.21 or[19] north from this industry at the time it entered the Muzak deal[20] would seem inconsistent with data such as appears in this[21] budget in which it is anticipated that others who presumably[22] would be afforded the 8 percent growth allowance in addition to[23] Muzak were expected to take full advantage of that allowance,[24] meaning that it would drive their effective rates down below[25] $41.21, which we now know is in fact exactly how Music Choice

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[1] interpreted later on, looking back, the Muzak deal, and in fact [2] the economic benefit Music Choice extracted from it. [3] All I'm saying is I don't think that's just the [4] benefit of 20/20 hindsight. This document at least is [5] suggestive that ASCAP knew that significant industry players, [6] perhaps more so than Muzak itself, were likely to be in a [7] growth mode, and thinking about this template it was developing [8] for Muzak -- starting at an effective rate of 41.21 but [9] allowing significant yearly growth for no incremental fee --[10] strongly implies it would seem the expectation that the[11] effective rates for these other industry players over the[12] course of 2005 to 2009 would be lower and maybe significantly[13] lower than $41.21.[14] THE COURT: Give me one second, please. Thank you.[15] MR. RICH: Now, taking your Honor's point about the[16] level of prospective growth by Muzak, I do want to point out[17] that Dr. Candell's analysis demonstrates at least[18] mathematically that if Muzak had grown by the maximum allowable[19] organic growth it would have resulted in a per location fee of[20] $28.05 in the final year of the license. And over the entire[21] 2005 through 2009 term a growth at that rate would have[22] resulted in an average per location fee of $32.52. And her[23] figure 8 accompanying her testimony indicates that if you took[24] account of that potential growth, as well as the differing[25] music intensity of Muzak's and DMX's use of ASCAP music, one

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[1] could reasonably conclude that the Muzak agreement calls for [2] effective per location rates of between $26.84 viewed over the [3] 2005 through 2009 period and $31.83 over the entire 1999 to [4] 2009 period. [5] However one concludes what is most reasonable as to [6] Muzak, one has to note in contrast that Dr. Boyle testified [7] here that the import of the ASCAP fee proposal in this case is [8] to generate average per location fees for DMX of some $46 a [9] location over 2005 through 2009 and expressly calls for fees of[10] $49 or more per location from 2010 forward. Neither Dr. Boyle,[11] nor Mr. Candilora, nor Professor Greene, could justify that[12] disparity on any basis, let alone the putitive equal treatment[13] with Muzak.[14] Indeed, Dr. Boyle conceded that neither the[15] retroactive nor the prospective economic import of ASCAP's fee[16] proposal here has any precedential support in ASCAP's other[17] background music industry dealings from the 2005 period[18] forward. That's transcript pages 267 and 268.[19] ASCAP's DMX fee proposal stands alone at the top of[20] the background industry fee period. Indeed, calling as it does[21] for fees in excess of 11 percent of DMX's music service-related[22] revenues, this proposal may well stand at the very top of the[23] pyramid of all of ASCAP's prevailing fee arrangements, with the[24] vast multitude of other licensees barely visible beneath the[25] clouds.



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[1] Further compelling evidence of ASCAP's failure to [2] carry the burden of demonstrating the reasonableness of its fee [3] proposal is found in its 2010 Music Choice agreement, about [4] which we were just talking. [5] Dr. Greene conceded at trial there was no basis for [6] giving any less weight to this agreement than to ASCAP's [7] preferred Muzak benchmark. That's transcript 408. But yet by [8] no stretch does it support ASCAP's fee proposal here. [9] The Music Choice deal was agreed to this year in[10] comparison to the 2005 Muzak deal, although I think we had some[11] confusion on the stand from Dr. Greene as to when it in fact[12] occurred, or at least his knowledge of it. That agreement[13] enabled both parties to set fees for the 2005 to 2009 period[14] with the benefit of full economic information about the period[15] in question, something that was lacking at the time of the[16] Muzak deal.[17] Dr. Greene acknowledged that this fact makes the Music[18] Choice circumstance more analogous to that of DMX than the much[19] earlier Muzak deal. That's at transcript 409.[20] What is more, ASCAP viewed itself as providing Music[21] Choice with terms in line with the Muzak agreement. Multiple[22] ASCAP witnesses so testified. After extensive negotiations,[23] taking into account the 8 percent organic growth provision, the[24] parties agreed on terms that, as Dr. Candell explains,[25] translate into an effective per location fee as low as $29.89.

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[1] No evidence supports Dr. Greene's claim appearing at paragraph [2] 65 of his affidavit that this translates into an "about $40" [3] deal for the 2005-2009 period. [4] The math in paragraph 65 was shown to be demonstrably [5] wrong. It used an incorrect Music Choice location count for [6] 2009 and characterized what was shown at trial to be a weighted [7] per location average of less than $33 for that period as "about [8] $40". [9] Similarly, the math in paragraph 64 of Dr. Greene's[10] written testimony, purporting to calculate average per location[11] fees of around $40 for the inclusive period 1999 through 2009,[12] was shown to be the result of averaging averages, or to use Dr.[13] Greene's preferred terminology, averaging ratios, a methodology[14] that as demonstrated by Dr. Greene's own academic teaching,[15] yields a number of no statistical significance. And we show[16] briefly the admonition to his class: Don't average averages.[17] Dr. Candell's calculation, on the other hand, of that[18] period, using a properly weighted average, yields instead a per[19] location fee of $34.60.[20] Now, I note finally in this connection that Dr.[21] Greene's efforts at paragraphs 64 and 65 to justify the lower[22] per location effective rates reflected in the Music Choice[23] deal, as compared to those that can be inferred from the Muzak[24] deal, based on asserted differences in so-called 5A or 5B[25] rates, appears out of whole cloth in those paragraphs and is

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[1] untethered to any record evidence by any ASCAP witness or any [2] supporting documentation. [3] In sum, ASCAP and its experts attempt to bolster the [4] asserted support that the Muzak deal provides for its fee [5] proposal by reference to the Music Choice deal, and it fails on [6] the evidence. [7] If anything, correctly analyzed to take account of the [8] proper adjustment factors -- and here we did take fairly [9] account of the earlier period and even a music adjustment that[10] does not work in our client's favor -- the Music Choice[11] agreement sets per location rates as set forth in Candell[12] figure 9 from a low of $29.89 to a high of $37.69.[13] I would like to turn to DMX's counterproposal. As[14] noted in my opening, this is the first ever rate case in which[15] the normative goal of such a case to approximate fees that[16] reflect those that would be set in a competitive market need[17] not be obtained indirectly by reference to what Judge Dolinger[18] called very imperfect surrogates in the form of agreements[19] reached with ASCAP by other similarly situated entities, with[20] all of the adjustments needed to fit the applicant's particular[21] circumstances.[22] Instead, we have a robust body of data reflecting the[23] fees that individual ASCAP members large and small have agreed[24] to with DMX for licensing exactly the same performing rights[25] that ASCAP otherwise does on their behalf. This data comes

Page 832

[1] from many hundreds of direct licenses with music publishers, [2] now more than 850. [3] Dr. Jaffe, who has served as an economic expert in [4] various prior ASCAP and BMI licensing settings testified in [5] paragraph 29 of his affidavit, "These agreements collectively [6] constitute a foundation for determination of a reasonable fee [7] that is more compelling from an economic perspective than any [8] that I am aware of having been offered before for the licensing [9] of performances of musical works."[10] These transactions, the evidence conclusively[11] demonstrates, have taken place with often highly sophisticated[12] music publishers and their lawyers and agents, whose catalogs[13] include some of the world's most prominent music and span the[14] range of musical genres used by DMX in its product offerings.[15] As Mr. Candilora candidly admitted in disavowing the[16] unsupported proposition by his counsel in their pretrial[17] briefing, DMX's direct licenses with the likes of Hal David,[18] Rogers and Hammerstein, Irving Berlin and the publishers of[19] current hits by the likes of Taylor Swift, Beyonce and[20] countless others do not reflect the views of "marginal sellers[21] who value their performance rights the least". Transcript 167[22] to 170.[23] Currently nearly 30 percent of DMX's off-premise[24] transmissions constitute directly licensed music, as attested[25] to by Mr. Gertz, transcript 573. The licenses were developed



Page 833

[1] by music industry experts. [2] THE COURT: Excuse me one second. [3] MR. RICH: The licenses were developed by music [4] industry experts, Mr. Gertz, Mr. Knittel, with more than 75 [5] years of experience between them. The license agreements were [6] market tested with publishers whose works were actively used by [7] DMX and included publishers, in Mr. Gertz's words from [8] transcript 568, "who were more difficult to deal with for the [9] purpose of developing a good license form".[10] Mr. Gertz testified to the importance that the license[11] rates and terms be "fair, straight forward and transparent" so[12] as not to damage MRI's credibility or jeopardize its ongoing[13] relationships with many of these same publishers on behalf of[14] other Fortune 500 companies represented by MRI. That's Gertz[15] transcript 567.[16] In developing the license form, DMX and MRI took[17] feedback, altered license terms where appropriate, and read the[18] market's response to DMX's offering. The proposed $25 royalty[19] pool reflected DMX's and MRI's belief that it was a fair and[20] reasonable royalty rate.[21] Mr. Gertz testified that had MRI received feedback[22] that a different higher rate was market approximating, it would[23] have communicated that back to DMX for its consideration, but[24] he testified it never did receive such feedback. That's at[25] transcript 579 to 580.

Page 834

[1] On cross-examination, and again on questioning by the [2] court, Mr. Gertz attested that no publisher to his knowledge [3] ever said in so many words I won't agree to a $25 rate but I [4] will sign if you give me $30 or some other stated counter [5] offer. [6] Mr. Knittel's testimony was to like effect; it's not [7] undercut by the deposition excerpt which was read during cross [8] to Mr. Knittel which merely indicated that one or more [9] publishers may have inquired without more whether DMX was[10] willing to entertain a higher royalty rate.[11] To be sure, the license process contended with[12] important obstacles, particularly signing one or more of the[13] so-called majors. The uncontested testimony from Mr. Knittel,[14] Mr. Gertz, Ed Arrow of Universal Music, and ASCAP's CEO[15] Mr. LoFrumento, among others, established that major publishers[16] sit on the ASCAP board, that each receives tens of millions of[17] dollars in royalties annually from ASCAP and BMI -- both from[18] Mr. Knittel's written testimony at paragraph 36 -- that it's[19] difficult in these circumstances to get these publishers, in[20] Mr. Gertz's words at paragraph 21 of his affidavit, "to break[21] ranks" and sign direct licenses.[22] As Universal executive Ed Arrow candidly testified, in[23] response to direct license inquiries of the sort made by DMX,[24] "As a general policy" Universal "steers people to the[25] performing rights societies." This is because of concerns

Page 835

[1] about "the precedential effects" of entering into direct [2] licenses in terms of adverse impact on rates that the PROs [3] might otherwise secure through negotiations or in a rate court [4] proceeding. That's from pages 10 through 12 of his deposition. [5] While Universal's preference for licensing through the [6] PROs in his words "could have been mitigated by an [7] extraordinary offer from DMX," DMX's offer of a 150 percent [8] premium to Universal's royalties from ASCAP and BMI did not [9] qualify.[10] On the other hand, BMI's unconditional guarantee of[11] $1.875 million for Universal associated with ostensible[12] performances of BMI music by DMX, in return for Universal not[13] entering into a direct license, did meet Mr. Arrow's[14] extraordinary offer test. That his deposition at pages 39 to[15] 40.[16] Now, ASCAP and BMI for their part have been far from[17] passive in terms of influencing the majors' decision-making[18] process. ASCAP's CEO Mr. LoFrumento responded to a contact[19] from the CEO of Sony/ATV after it had received offers from DMX[20] by first attempting to demonstrate that Sony's combined[21] distributions from ASCAP and BMI warranted turning down DMX's[22] offer -- that's deposition at pages 60 and 63 of[23] Mr. LoFrumento -- having failed to demonstrate that proposition[24] by telling its CEO and later telling Universal's CEO on a[25] similar conversation that they "were making a mistake" going

Page 836

[1] forward with DMX. That's deposition at page 63 and 78. [2] LoFrumento stated that proceeding with DMX "was not in Sony's [3] long term interest" since the direct license might be used as [4] precedent and impact "the ultimate rate court determination". [5] Deposition 64 through 66. He explained, "I felt that it would [6] end up, if DMX prevailed, with all writers and all publishers [7] getting less going into the future." Deposition at 66. [8] BMI for its part, as noted, paid Universal an [9] unprecedented guarantee to forestal its entering into a direct[10] license with DMX that's recounted in DX-273 in evidence,[11] Mr. O'Neil's testimony at the trial of the BMI case.[12] Mr. O'Neil is the head of licensing for BMI, as it were,[13] Mr. Candilora's counterpart over there. This after trying on[14] BMI's part unsuccessfully to cobble together a similar package[15] to dissuade Sony/ATV from signing on with DMX.[16] Now, it's not surprising in light of the foregoing[17] that DMX determined that it needed to pay a premium to the[18] majors in hopes of breaking through this inertia, as[19] Mr. Knittel testifies at paragraph 36 of his written testimony.[20] While ASCAP argues that this premium accepted by one major,[21] Sony/ATV, reflects a greater inherent value in the underlying[22] performance rights than is reflected in the $25 per location[23] royalty pool offered to publishers, Mr. LoFrumento, ASCAP's[24] CEO, characterized this advance correctly. Sony he said, "got[25] a first mover advantage". Page 64 of his deposition.



Page 837

[1] Judge Stanton in his appraisal of similar evidence [2] concluded in his opinion in the BMI case that this payment was [3] "a cost of entry into the market". [4] BMI paid the price literally to try to break through [5] an ossified licensing system. [6] Now, Dr. Candell's calculations in figure 3 from this [7] $25 royalty pool lead the court to DMX's proposal for the [8] proper pricing of what we call the unbundled music fee, and, as [9] your Honor will recall, it entails two calculations: A 10[10] percent deduction for mechanical rights, and then an allocation[11] of ASCAP market share of 48 percent, produces an unbundled[12] music fee of $10.74.[13] Now, to account for ASCAP's argument that the Sony/ATV[14] agreement belies the reliability of the $25 royalty as a[15] benchmark, Dr. Candell performed an alternative calculation,[16] treating the entire amount over its term of the potentially[17] unrecouped Sony advance as if it constituted a royalty payment.[18] ASCAP, in an attempt to distract the court, has[19] analyzed the Sony agreement by looking only either at the first[20] half of it or only at the last two years of it. Tellingly, in[21] none of its demonstratives has ASCAP ever done what Dr. Candell[22] does, which is to present an analysis of the entirety of the[23] Sony agreement, spreading the full amount of the advance over[24] the entire 57 month term of the agreement. But that's exactly[25] what in her written testimony Dr. Candell has done. And as

Page 838

[1] this demonstrative indicates, what it does is result in an [2] unbundled music fee, looking at the Sony portion alone -- Sony [3] portion alone -- of $25.53. [4] One way to think about that, your Honor, is if the [5] only data point we had in the entire case for determining what [6] the fair market value from the direct license world would be, [7] and the only data point was the Sony advance properly analyzed, [8] as Dr. Candell has done, it would suggest an unbundled music [9] fee instead of $10.74 of $25.53 on the methodology that's[10] explicitly laid out in Dr. Candell's affidavit.[11] What the rest of this demonstrative shows, and what[12] her testimony reveals, is that we know, however, that Sony was[13] not the only data point here, that Sony was one licensor out of[14] more than 850. And weighting for the respective market shares,[15] the respective percentages of DMX music over the term of the[16] license, you get a weighting of $10.74 on behalf of the[17] remaining publishers, where there is no advance overhang issue,[18] and of the $25.53 of the Sony direct license -- assuming again[19] it's appropriate to go through that exercise; and for this[20] purpose we are assuming it is -- and what you yield is a[21] blended unbundled music fee portion of the ASCAP blanket[22] license of $17.92. And that's all laid out in again Dr.[23] Candell's testimony and in figure 4 to that testimony.[24] Now, your Honor, you asked about Judge Stanton's[25] opinion. I think it is important to note that -- let me just

Page 839

[1] back up and finish. Let me just finish the computation and I [2] will come to that. [3] We need the floor fee computation under our approach. [4] Dr. Candell calculates that floor fee based on ASCAP data as to [5] background industry-specific expenses and an appropriate [6] allocation of general overhead expenses, to arrive at a fee of [7] $3 a location, assuming no Sony-type adjustment is warranted, [8] or $3.47, assuming such an adjustment at its maximum is [9] warranted. And that's all set forth in figures 3, 4 and 5 of[10] Dr. Candell's affidavit.[11] So, if you put those together, as also depicted in[12] figures 3 and 4, you have a range of potential reasonable[13] outcomes in this case of on the low end $13.74 and on the high[14] end $21.39. And your Honor and I -- I certainly had a colloquy[15] with Dr. Jaffe yesterday about that range and the import of[16] Sony, and your Honor followed up with questions of him about[17] how one might think about it, and that obviously ultimately is[18] your Honor's decision where in this range the "best" or most[19] reasonable set of inferences takes one.[20] Now, with respect to BMI I think it's worth noting[21] that Judge Stanton's ruling in that case, on essentially[22] similar evidence to that which is in the record here, led the[23] court to arrive at a reasonable fee squarely within that range.[24] And while your Honor obviously must, and should, and will reach[25] your own determination from this record as to what is

Page 840

[1] appropriate, I do want to make one point, which is to remind [2] the court that Mr. Candilora testified here that the ASCAP and [3] BMI market shares as to DMX are "roughly equal". That's at 158 [4] of the transcript. He was then asked by Mr. Marks: "Do you [5] think that would be an appropriate way to set fees here if the [6] market shares are equal, to look at the BMI rates?" [7] His answer: "Yes, I do think that if given the market [8] share usage was equal it would be a proper way to determine the [9] fees, yes." Transcript 160.[10] Now, that doesn't of course mandate that we simply[11] photocopy and adopt the rates from Judge Stanton, but it's[12] another way analytically to think about the correlation and[13] what correlation might properly exist between the fees set[14] there as reasonable for BMI and for ASCAP.[15] We have ASCAP's head of licensing saying that to the[16] extent it is the case here -- and he agreed that it is the case[17] here -- that market shares are roughly equal, at least as a[18] matter of competitive parity and evident fairness from ASCAP's[19] standpoint it would be appropriate to set ASCAP's fees at the[20] level of the BMI fees. And what we do know from Judge[21] Stanton's ruling is where Judge Stanton set those fees.[22] I don't know if your Honor has further questions of me[23] about Judge Stanton's ruling.[24] THE COURT: Thank you.[25] MR. RICH: Now, ASCAP's economic attack --



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[1] THE COURT: If I set the fees lower or higher than [2] Judge Stanton, what is the impact of that? [3] (Continued on next page) [4]

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[1] THE COURT: I am going to ask the same question to [2] ASCAP. And this is significant. It's very interesting for me. [3] I feel like I could, based on this record, arrive at a [4] determination. [5] So the issue for me is, having independently, based on [6] this record, arrived at X determination, should I change that [7] because I have the BMI rate set by Judge Stanton? [8] MR. RICH: DMX's view is no. If you decide it should [9] be lower, you should set it lower, and even with respect to Mr.[10] Harrison being in the room, if you decide it should be higher,[11] you should set it higher.[12] THE COURT: I should do my own independent job on my[13] record and my understanding.[14] MR. RICH: Yes. That's our view.[15] THE COURT: There is an impact here for the parties.[16] The cost for the litigation, the level of uncertainty, the[17] impact on the competitive relationship between ASCAP and BMI,[18] things that you folks know far better than I the ramifications[19] beyond that.[20] I feel most comfortable, I must say, just calling it[21] like I see it and just doing my own thing based on this record,[22] but I don't want to be insensitive to this other result by a[23] respected jurist working within his own context.[24] MR. RICH: We of course think he got it generally[25] right. We tried that case. But neither party here has in its

Page 843

[1] briefing, to my knowledge, Mr. Glancy will speak for himself, [2] indicated, advocated or intimated that your decision should be [3] shaped in any particular way by that ruling. Apart from the [4] observation I have made about ASCAP's view of competitive [5] parity, I think we would be most comfortable, and I trust your [6] Honor would be, calling it as you see it. [7] Now, with one caveat which Mr. Marks has reminded me. [8] There is testimony in the record that it would be unduly [9] wasteful and inefficient for this Court to adopt materially[10] different reporting protocols in terms of data exchanges, and[11] subject to that condition, your Honor, my statement stands.[12] THE COURT: Yes. That would be a burden on DMX.[13] The reporting protocols haven't been challenged here.[14] MR. RICH: That's correct.[15] Now, I would like to turn to and end with a series of[16] ASCAP critiques leveled against the direct license.[17] Their economic attacks on the $25 royalty pool are[18] typical of those of a monopolist. Their principal critique is[19] that DMX transactions with the publishers are not reasonable[20] benchmarks because they made the publishers who signed them[21] worse off, comparing DMX royalties to date to certain interim[22] ASCAP distribution. Hence, ASCAP concludes, these agreements[23] must somehow be the product of information asymmetry, or worse,[24] deceitful practice and misinformation conveyance on DMX's part.[25] But as Dr. Jaffe testified at paragraphs 46 through 48

Page 844

[1] and amplified on the stand, "The conclusion follows from the [2] observation only if one ignores competition." He goes on to [3] explain in competitive markets -- this is not a quote, this is [4] my encapsulation of Dr. Jaffe's analysis. In competitive [5] markets, rational sellers will accept reduced prices for their [6] wares in the hopes of avoiding a diminution of their market [7] share or achieving greater volume, thereby eventually receiving [8] greater profits. In short, firms compete to increase their [9] market share including by lowering their prices.[10] The fact that in the end not everyone earns more or[11] receives a greater market share, in Dr. Jaffe's words, "does[12] not mean that the firms were irrational, were fooled, or had[13] some other motivation driving the decisions other than profit.[14] It just means that competition sometimes reduces profits."[15] That's from paragraph 47.[16] THE COURT: So how am I to understand the stream of[17] payments made by ASCAP for DMX music use when they were made[18] with no final agreement, and so I assume that this rate court[19] proceeding and the determination here could theoretically alter[20] ASCAP's obligation to pay for past years, and it could be in a[21] situation where it's reducing ongoing payments by giving a[22] credit for overpayments in the past? I mean, is that one[23] aspect of this that is relevant?[24] MR. RICH: Yes, your Honor. I think there were two[25] fundamental flaws in the apples to oranges comparisons that



Page 845

[1] were shown principally to Mr. Knittel. And one is what your [2] Honor identified, which is ASCAP, first of all, shouldn't have [3] been making any distributions to direct licensing publishers. [4] As we established, it was only doing it because of a [5] technicality. Some publishers hadn't given them notice. They [6] should have. [7] THE COURT: I don't think we can fault ASCAP. [8] MR. RICH: I am simply saying that's how the data was [9] generated. But more to your point, the distributions were[10] based on three different price points to date. $49.50 interim[11] fees, reduced in June of 2007 to $43 interim fees, reduced[12] sometime in '09, if I am remembering September, by agreement[13] after a visit to Judge Dolinger -- I won't disclose the number,[14] it's not relevant -- to something lower than $43, but certainly[15] significantly higher than the DMX $25 pool would have[16] generated.[17] So by definition, mathematically, if you simply look[18] at the available pool for distributing that went into the[19] column saying ASCAP distributions, by definition, it came from[20] numbers substantially higher than the allocable share of the[21] $25 pool that was the direct license. So right there it is an[22] artificial comparison because, if nothing else, at that level[23] those were interim fees. If your Honor were to reset fees at a[24] lower level, ASCAP will have to decide how to square its books,[25] something Dr. Boyle in his deposition wouldn't commit on, and I

Page 846

[1] am not saying he should have, it may be a complicated issue for [2] ASCAP, but that's an artificial distribution, it's not [3] meaningful, it's only a function of interim payments. That's [4] the first major flaw. [5] The second major flaw, which is even bigger, is that [6] it operates from an assumption, which is that those direct [7] license publishers would have their usage of their music [8] unaltered were they to refuse the direct license. And [9] everybody we asked at the trial from the other side conceded[10] that's not the reality. They recognize that's not how a[11] rational publisher would think about it, and you heard Dr.[12] Jaffe.[13] So that chart ultimately seems to us just a snapshot[14] of current practice reflecting tentative fees, that have not[15] been adjusted, but are subject to adjustment, and begs the[16] ultimate comparative question, which is, if I am a rational[17] publisher and DMX comes to me saying, if you license with me[18] day one you will get less per performance than you might have[19] had if I wasn't in this direct licensing program, but I am, but[20] if you don't license with me, there is a significant prospect[21] that you will see reduced use, so that even at a conceivable[22] higher per location payout from ASCAP or from BMI, you're not[23] going to be used much, that's a very low royalty. That[24] analysis was never undertaken by Dr. Greene, by Dr. Boyle or[25] anybody else.

Page 847

[1] THE COURT: I get that. [2] MR. RICH: Now, while Dr. Greene, your Honor, surmises [3] with no supporting evidence that publishers who sign direct [4] license agreements were acting irrationally and suffered from [5] information asymmetry, as Dr. Jaffe points out, including in [6] paragraph 48 of his written testimony, "Economists tend to [7] assume that real firms in real markets know what they are doing [8] and that they obtain information they need to make decisions." [9] Nothing stopped publishers from asking about the[10] license terms, as to which they may have been uncertain in[11] terms of the DMX license form, or from trying to negotiate more[12] favorable language. Some did just that. Mr. Gertz testified[13] as to Cherry Lane obtaining different MFN terms. That's at[14] transcript 584-585. And as to Disney obtaining different terms[15] in the so-called double payment clause. That's 587-588.[16] Similarly, the record makes plain that a simple call[17] to ASCAP or to BMI got publishers information on present and[18] projected PRO royalties. Indeed, they got a lot more. They[19] got a heavy dose of, shall we say, ASCAP and BMI perspective on[20] the whole subject.[21] Now, against this understanding of how competitive[22] markets operate, Mr. LoFrumento's plea to the majors to refrain[23] from direct licensing in their, quote, long-term interests can[24] be seen to reflect really, purely and simply, an effort to[25] stymie the incursion of competition into the marketplace, with

Page 848

[1] the prospect, the possibility that such competition might lead [2] to reduction in profits for some ASCAP members. Recognizing [3] that the role of AFJ2 is to promote competition in the music [4] performing rights marketplace, remembering the admonition of [5] the antitrust division in its brief to the Second Circuit in [6] AEI that "the most effective market-based constraint on PRO [7] pricing is the availability of direct licensing, since it [8] places an outside limit on the price that a PRO can charge for [9] the blanket license."[10] THE COURT: Where is that from?[11] MR. RICH: That is from the Second Circuit AEI filing.[12] That is an exhibit to Mr. Glancy's reply filing in pretrial[13] papers. The AEI submission of the antitrust division in the[14] Second Circuit, your Honor, 2001.[15] We can supply another copy.[16] THE COURT: I am sure we have it. Thank you.[17] MR. RICH: Recognizing that, ASCAP's tortured economic[18] logic attempting to marginalize DMX's direct licensing program[19] must be rejected.[20] Now, this recognition exposes the utter irrelevance of[21] the data presented by Dr. Greene purporting to demonstrate that[22] certain publishers have received higher payments form ASCAP[23] than they have from DMX in signing their direct licenses, the[24] colloquy we just had. Putting to one side Dr. Greene's[25] complete unfamiliarity with the methodology underlying the



Page 849

[1] chart, including how the 13 identified publishers were [2] selected, how the respective survey methodologies of DMX and [3] ASCAP compare, why data for a given publisher varied so widely, [4] the data failed completely to establish ASCAP's intended point [5] that the listed sellers must have been acting irrationally in [6] signing up for direct licenses. [7] As the testimony just discussed from Dr. Jaffe makes [8] plain, and as Dr. Boyle and Dr. Greene conceded at transcript [9] 228-229 and transcript 435, a rational publisher would not[10] simply act on the assumption that the decision whether or not[11] to enter a direct license would have no consequences for the[12] continued use of its catalogue. Rather, it would consider its[13] expected payments from DMX if it signed a direct license versus[14] what it might expect to earn from ASCAP if it refused to sign[15] the direct license. Only if one indulged the incorrect[16] assumption that refusing to sign a direct license would have no[17] effect on the frequency with which one's work would be[18] performed by DMX would ASCAP's chart have any conceivable[19] relevance.[20] DMX in fact made clear to all prospective licensors[21] exactly the opposite, that it intended to favor musical works[22] of direct licensing publishers over the remainder, and the[23] record evidence demonstrates that this is exactly what has been[24] occurring. Paragraph 23 of Mr. Gertz's affidavit indicates[25] that the majors who did not sign the direct licenses, those

Page 850

[1] three out of four, that their utilization by DMX has dropped [2] between 12 and 18 percent to date, while the one major who has [3] signed, Sony, has seen its share double since the time it [4] signed its direct license. Dr. Boyle conceded that neither he [5] nor Dr. Greene had taken this real world circumstance into [6] account in coming up with their chart. [7] Now, ASCAP attempted to drag lots of other red [8] herrings across the path of this litigation. All were shown at [9] trial to be just that, unsubstantiated efforts at distraction[10] in an attempt to blunt the unavoidable economic force of the[11] direct license experience and data. ASCAP presented not a[12] single live publisher witness to back up its speculative[13] assertions and "hunches," Dr. Greene's term, as to what[14] publishers knew, understood or could be expected to understand[15] in their dealings with DMX and with ASCAP. No testimony was[16] elicited by ASCAP from any publisher indicating that it had[17] been misled by DMX or its agent MRI during the licensing[18] process.[19] The several publisher depositions conducted by ASCAP[20] for the most part demonstrated the lack of substance to ASCAP's[21] conjecturing. The balance of these depositions showed at most[22] that out of the universe of some 850 marketplace actors, one or[23] two interpreted isolated provisions of the direct license form[24] in a particular fashion. ASCAP did nothing to demonstrate that[25] these deponents' views were in any way typical or

Page 851

[1] representative of those of the remaining direct licensors, and [2] the testimony from Mr. Gertz, who with his expert team [3] interacted with virtually all of them, is directly to the [4] contrary. [5] THE COURT: Well, I appreciate that. I do think it is [6] notable. However, this litigation is expensive, and we [7] couldn't have had a stream of 850 witnesses here. So it's fair [8] to take some sample and make some points. [9] MR. RICH: I understand, and I am going to deal with a[10] few of these right now.[11] Now, the issue about publishers not being told about[12] the Sony advance. ASCAP's argument that direct licensing[13] publishers were misled somehow by not being told that Sony had[14] received an advance to sign with DMX ignores industry practice.[15] As Mr. Gertz testified, transcript 538-41, the fact that a[16] major like Sony would be provided in advance would be no[17] surprise to an independent publisher. In fact, it would be[18] expected.[19] As DX-294 in evidence reveals, some 250 publishers[20] have signed direct licenses since the Sony advance was revealed[21] publicly during the DMX/BMI trial last January. Yet there is[22] no record evidence that any of those publishers asked DMX to[23] match that advance.[24] THE COURT: DX-294.[25] MR. RICH: 294. That's a listing by date of signing

Page 852

[1] licenses and it will show since January 250 new publishers. [2] Your Honor may have in mind a slightly different [3] question and answer in my colloquy with Mr. Gertz, which was, [4] since the time of the decision, there is something like 75 [5] additional publishers. [6] ASCAP failed, moreover, to demonstrate the relevance [7] of an independent publisher's state of knowledge as to the Sony [8] advance -- [9] THE COURT: Excuse me just one second.[10] Thank you.[11] MR. RICH: ASCAP failed, moreover, to demonstrate the[12] relevance of an independent publisher's state of knowledge as[13] to the Sony advance to that publisher's decision-making as to[14] whether to agree to sign a direct license.[15] As Dr. Jaffe testified in his colloquy with your[16] Honor, unless such publishers reasonably believed that the MFN[17] clauses of their contracts would entitle them to benefit from[18] such an advance in some fashion, their state of knowledge as to[19] these advances would be immaterial.[20] As far as the MFN clause itself is concerned, ASCAP[21] has failed to demonstrate that DMX had some duty to provide a[22] similar advance to other publishers to that given Sony under[23] the most favored nation clause in the contract. Simple reading[24] of the clause, as elucidated by Mr. Gertz at 532 to 534 of the[25] transcript, reveals that it applies only to rate calculation



Page 853

[1] methodology, not the royalty rate itself, and certainly not to [2] advances. [3] The Cherry Lane agreement, which involves the only [4] publisher who negotiated a different MFN clause, reflects a [5] clear acknowledgment that -- and that agreement applied [6] explicitly to the royalty rate as well as to the royalty [7] calculation methodology -- demonstrates that publishers knew [8] how to ask for it, understood the distinction, and indeed, at [9] least in the case of Cherry Lane, DMX was amenable to providing[10] that alteration when requested.[11] ASCAP is unable, your Honor, to point to a single[12] publisher from among the many hundreds who signed the license[13] containing the MFN clause in issue that in fact interpreted it[14] as covering an advance to another. Indeed, when asked by ASCAP[15] at their depositions, both Mr. Hirschland of Bug Music and[16] Mr. Cialdella of Cherry Lane testified that they did not view[17] the MFN as applying to advances. That's pages 49 to 51 of[18] Mr. Cialdella and pages 46 through 47 of Mr. Hirschland.[19] The double payment clause. ASCAP argues that this[20] clause would allow DMX to avoid paying a direct licensor[21] altogether, so long as it keeps its licenses with ASCAP and[22] BMI. Even if true, it's not clear how this should impact on[23] the rate making process here since the issue before the Court[24] is not the nature of DMX's ongoing contractual obligations with[25] publishers, but its entitlement to the payment structure under

Page 854

[1] a blanket license that it seeks. [2] In any event, that interpretation of the provision is [3] demonstrably inaccurate. As Mr. Gertz explained, the provision [4] is meant to apply only where a -- taking the words from him -- [5] "claim of royalties" has been made. In other words, where [6] there is a dispute over a particular song by a PRO where DMX [7] has claimed that it is the subject of a direct license [8] transaction. In that circumstance, and only that circumstance, [9] would DMX's privilege to not double pay the publisher be[10] invoked. That's transcript 499 to 501 and again at 512, and in[11] Mr. Gertz's testimony at paragraph 15E. It's not a basis, he[12] went on to make clear, for DMX simply to walk away from[13] contractual commitments, and the testimony is unequivocal that[14] DMX never has done so nor would it in the future. That's 568[15] to 569 of the transcript.[16] This represents another great example of ASCAP finding[17] only one licensor who appears to have read the contract[18] provision as they prefer -- that's Mr. Hirschland of Bug -- and[19] attempting, without any foundation, to generalize across the[20] universe of all direct licensors from that one singular, we[21] would argue, misinterpretation of that clause.[22] Alleged misrepresentations. These are cherry picked[23] by ASCAP from the thousands of e-mails and conversations that[24] passed between MRI and the publishers. There is no evidence[25] whatsoever of a pattern of misinformation, let alone that the

Page 855

[1] recipients relied on these alleged misrepresentations in [2] signing licenses with DMX. There is accordingly no evidence [3] that any publishers were misled by the rate formula example in [4] the early MRI solicitation. [5] To the contrary, Messrs. Cialdella and Hirschland in [6] their depositions explicitly disagreed with ASCAP's leading [7] questions seeking to elicit a contrary conclusion. There is no [8] evidence that the one publisher, who was told it would be paid [9] by PROs and Harry Fox, vaguely worded, in 18 to 30 months was[10] thereby misled into signing a license with DMX. There is no[11] evidence that the one publisher, who was mistakenly told that[12] the DMX direct license rate was the same as the rate DMX paid[13] to the PROs, was thereby misled into signing a direct license.[14] That's literally the sum total of these alleged[15] misrepresentations.[16] Finally, nonrenewals. ASCAP cites the fact that three[17] of the top seven direct license payees have failed to renew[18] their licenses with DMX. That's true if you want to simply[19] look at a universe of seven. If you look at a universe of ten,[20] top ten, we know that nine of those ten came up for renewal,[21] and six of those nine renewed. The one that hasn't come up is[22] Sony. If you want to look at the top 15 instead of the top[23] seven, we know that 11 of the top 15 have renewed. And if you[24] want to look at the universe, your Honor, we know that 78 out[25] of 92 publishers overall have renewed.

Page 856

[1] Now, let's look a little more closely at the three [2] cited by ASCAP. [3] First to be noted is that those three in combination [4] represented only 2.2 percent of fourth quarter plays by DMX [5] information, which is easily extracted from AX-265, 266 and [6] 277. [7] THE COURT: Fourth quarter? [8] MR. RICH: '09. [9] Cherry Lane is one of the entities that did not renew.[10] It's clear from both Mr. Cialdella's deposition and[11] Joint Exhibit 20 and DX-257 that BMI was behind their decision.[12] Mr. Cialdella testified to a series of telephone calls with[13] Mr. O'Neil of BMI, in which Mr. O'Neil, per DX-257, gave[14] Cialdella "some detail" on why Cherry Lane shouldn't renew its[15] license with DMX.[16] Among the reasons reported by Mr. Cialdella was that,[17] paraphrasing or characterizing Mr. O'Neil, the direct license[18] "sets a precedent at a rate that is below one third the market[19] rate." That's in JX-20, your Honor. And from this and other[20] importuning by Mr. O'Neil, Cherry Lane concludes that in the[21] future it shouldn't license performing rights directly, but[22] instead convey them through BMI. That's JX-20.[23] Now, the remaining two publishers, ABKCO and Disney,[24] the record is less developed as to why they decided not to[25] renew. Certainly, ASCAP's unsupported statements that it



Page 857

[1] reflected concerns about overpayment and undervalue have no [2] record citations to support them whatsoever. What we do know [3] from the record is Allison Smith's trial testimony at the BMI [4] trial, which is in evidence as DX-274. Ms. Smith is head of [5] member relations at BMI and is one who is regularly in touch [6] with publisher members of BMI. We do know from her testimony [7] that BMI was talking to each of ABKCO and Disney just as it was [8] with Cherry Lane in this time period. [9] Finally, Dr. Greene's hunch, in his words, that other[10] publishers are likely to follow these three by not renewing,[11] transcript 436, was just that, it's no form of evidence.[12] Your Honor, in conclusion, for all of these foregoing[13] reasons and on the basis of the entire transcript, on DMX's[14] behalf, we respectfully urge the Court to provide DMX with an[15] ASCAP blanket license that appropriately reflects and credits[16] it for its ongoing direct licensing of works in the ASCAP[17] repertory and sets the starting fee for that license at a level[18] that approximates the value of these performing rights, as now[19] established in a competitive marketplace, while also providing[20] ASCAP a fee to cover its reasonable costs of aggregating its[21] music performing rights.[22] On a personal note, I want to thank your Honor for all[23] your courtesies during the trial.[24] THE COURT: Thank you, Mr. Rich.[25] OK. So we are going to take our mid-morning recess

Page 858

[1] and then we will have ASCAP's summation. [2] Thank you. [3] (Recess) [4] MR. GLANCY: Thank you, your Honor. [5] Before I begin, I would like to hand up some [6] demonstratives that we intend to use in closing. [7] Now, your Honor, it struck me through the course of [8] this rate proceeding that this rate proceeding is about far [9] more than establishing rates for DMX. That this rate[10] proceeding is about for more than establishing rates for the[11] background music industry. This rate proceeding makes clear[12] that we have fundamentally different world views about ASCAP[13] and its blanket license and its operations. And it presents[14] this Court with several significant profound questions that go[15] to the heart of ASCAP's business. Questions about what ASCAP[16] is, how they should be permitted to operate, how they should be[17] permitted to charge for their service. Questions about the[18] interpretation of AFJ2 and questions about your Honor's role in[19] setting rates under AFJ2.[20] Now, the members of ASCAP have created something[21] significant, something of value. They have pooled their rights[22] together in ASCAP and created the blanket license. The blanket[23] license has value, and that value is in excess of the[24] copyrights that are owned by the individual members of ASCAP.[25] It creates an enormous economy of scale. As the Supreme Court

Page 859

[1] noted, it is a unique property. It allows the licensee [2] immediate use of covered compositions without the delay of [3] prior individual negotiations and great flexibility in the [4] choice of musical material. That's from BMI v. CBS, 401 U.S. [5] 1, at pages 21 and 22. [6] Now, DMX has clearly taken the position that it [7] doesn't want to pay any sort of premium for that value. Their [8] position in this case was laid out by Dr. Jaffe and it could [9] not be more clear. Their position is they should pay what the[10] value is to the underlying compositions, plus whatever costs[11] that ASCAP incurs in delivering its blanket license to DMX.[12] But I would submit that's not compensating ASCAP for[13] the service that it provides, and I would like to read for your[14] Honor a passage from BMI v. CBS, the Supreme Court's decision[15] that I think bears on this issue. There Justice White said,[16] "This substantial lowering of costs" -- referring to the[17] blanket license -- "this substantial lowering of costs, which[18] is of course potentially beneficial to both sellers and buyers,[19] differentiates the blanket license from individual use[20] licenses. The blanket license is composed of the individual[21] compositions plus the aggregating service. Here, the whole is[22] truly greater than the sum of its parts. It is to some extent[23] a different product." The Supreme Court and Justice White goes[24] on to state that many consumers clearly prefer the[25] characteristics and cost advantages of this marketable package,

Page 860

[1] and even small performing rights societies that have [2] occasionally arisen to compete with ASCAP and BMI are offered [3] blanket licenses. Thus, to the extent the blanket license is a [4] different product, ASCAP is not really a joint sales agency [5] offering the individual goods of many sellers, but is a [6] separate seller offering its blanket license of which the [7] individual compositions are raw material. [8] So the core question for this Court is whether or not [9] ASCAP is entitled to the fair market value of its blanket[10] license, which includes the value attributable to the[11] aggregation of the individual compositions, or whether ASCAP is[12] only entitled to recover its costs of delivering the services[13] and essentially a pass-through entity that operates on behalf[14] of its members to merely deliver the license on behalf of its[15] members?[16] THE COURT: Where is your valuation evidence of that[17] cost?[18] MR. GLANCY: Which cost?[19] THE COURT: This fair market value of the embodiment[20] of the blanket license.[21] MR. GLANCY: That's in the benchmark agreements that[22] we rely on in this case.[23] THE COURT: Well, that doesn't tease out the fair[24] market value of the creation of a blanket license. That[25] includes more than that. It also includes the pass-through of



Page 861

[1] the rights to publicly perform the music from the songwriters [2] and publishers. [3] MR. GLANCY: There is no separate valuation. I am [4] sorry if what I stated confused you. There is no separate [5] valuation of the additional value of the aggregation of rights [6] that ASCAP delivers. ASCAP sells a product. The product is a [7] single product, the blanket license. The fair market value of [8] that blanket license is determined with reference to benchmark [9] agreements.[10] THE COURT: Well, how do you confront then the[11] requirement of the consent decree in AFJ2 that you accommodate[12] direct licensing and not interfere with direct licensing?[13] MR. GLANCY: In fact, direct licensing acts in[14] conjunction with per-program or per-segment licensing or as an[15] alternative to blanket licensing.[16] THE COURT: What do you mean or as alternative to[17] blanket licensing?[18] MR. GLANCY: Many music users, they don't need a[19] license to an ASCAP repertory at all. They can directly[20] license or source license the music that they use if their[21] music use is limited. I am not suggesting that would be an[22] appropriate option for DMX. I am saying that that's why the[23] direct licensing is addressed in AFJ2.[24] THE COURT: So you in effect -- you will have your own[25] construction of AEI and Muzak 1, but you essentially are saying

Page 862

[1] that they do not require you to account for in a direct [2] licensing program under a blanket license fee. [3] MR. GLANCY: That's correct. [4] THE COURT: OK. Good. [5] Now moving on. [6] MR. GLANCY: I will address AEI and Muzak very [7] shortly. [8] Now, another question the Court has to -- [9] THE COURT: Sorry, Mr. Glancy. I just find ASCAP's[10] litigation strategy interesting.[11] MR. GLANCY: I assume you don't mean that as a[12] compliment.[13] THE COURT: It's like you have abandoned the field.[14] You chose not to play on the field. And so your proposals,[15] both the original and the alternative proposal, essentially[16] ignore the existence of a direct licensing program. And so you[17] gave no alternative that would accommodate a direct licensing[18] program and argue that this is how you would fairly price it[19] and operate it. And that's fine. Those are choices. But I[20] don't know why you would make that choice, why ASCAP would make[21] that choice, and particularly because BMI didn't.[22] Admittedly, I don't need to understand why parties[23] make their litigation choices. That's not my role. But,[24] nonetheless, it's hard not to wonder, just as a human being,[25] and I don't know if it's because ASCAP prides itself on being

Page 863

[1] more aggressive than BMI or what it is, but to just not engage [2] with the teaching of AEI and Muzak 1 and not present an [3] alternative for a direct licensing program and the pricing of a [4] blanket license in that context, I just find interesting. [5] MR. GLANCY: Maybe I can explain. I am not sure I am [6] going to convince you, but let me tell you what our thinking [7] is. [8] As I said in my opening, AEI never went so far as to [9] say that a blanket carve-out was reasonable. There was no[10] factual record before the court when that issue was decided by[11] Judge Stanton, when the district court originally issued its[12] opinion that BMI was not required to quote a fee in response to[13] Muzak's request or AEI's request for a blanket carve-out[14] license.[15] The Supreme Court had before it a case where the issue[16] was defined by DMX's counsel representing the applicants in[17] that case as "whether the district court erred in finding that[18] it did not have the authority under the BMI decree to fashion a[19] blanket license fee structure, which would vary to take account[20] of alternative license arrangements which may be made by AEI[21] and Muzak for their uses of certain works represented in BMI's[22] licensing repertory." Again, talking about the court's[23] authority under the consent decree.[24] Mr. Rich pulls from that that he is entitled to a[25] blanket license fee, when in fact before that court he argued

Page 864

[1] the opposite. Before the court, AEI submitted in its appeal [2] brief that the rate court in BMI plainly had the discretion to [3] determine the reasonableness of the blanket carve-out license [4] fee structure under AEI and Muzak. It's noted in page 6 of our [5] opposition brief and it's cited at page 17 of AEI's appeal [6] brief, which is appended to my declaration of September 22, [7] 2010. [8] He went on to say that it is up to the court in AEI, [9] exercising its Article 14 rate making powers, to determine[10] which of these proposals, the proposal for a blanket carve-out[11] and the proposal for a blanket license without a carve-out,[12] which of these proposals is more reasonable under all of the[13] relevant circumstances.[14] They never argued in that paper that they were legally[15] entitled to a blanket carve-out. They only argued that BMI's[16] consent decree did not prohibit or bar BMI from issuing such a[17] license.[18] That's the same situation in Muzak. Again, in Muzak[19] 1, Judge Conner faced the same situation. No factual record.[20] There was an early motion for a construction of the consent[21] decree. Muzak and DMX had proposed a per-segment license where[22] segment was defined as a music catalogue. This is three years[23] after AEI, where Mr. Rich says he is now entitled to a blanket[24] carve-out, and they come to ASCAP and they don't ask for one.[25] They ask instead for a per-segment license where segment is



Page 865

[1] defined as a music catalogue. [2] That issue gets briefed before Judge Conner, and in [3] the course of briefing, the Department of Justice weighs in [4] because the Department of Justice is a party to ASCAP's consent [5] decree. And the Department of Justice says, in a sense, that [6] the consent decree cannot be construed to require ASCAP to give [7] a per-segment license where a music catalogue is a segment. [8] However, it does not prohibit the issuance of a blanket license [9] that takes account of direct licensing. Again, that it doesn't[10] prohibit that.[11] Now, the DOJ went on to state in its briefing to Judge[12] Conner that AFJ2 does not require -- this is a quote from page[13] 6 of their brief, which is referenced on page 9 of our[14] opposition papers -- "AFJ2 does not require ASCAP automatically[15] to grant the license requested here." Then again, on page 2 of[16] DOJ's brief, "Applicants are not automatically entitled to[17] their requested fee structure under Section 7." And again, the[18] DOJ states on page 19, "Because the requested license is not a[19] per-segment license, they are not entitled to their preferred[20] payment structure." Then again on page 19, however, the court[21] may consider this alternative -- referring here to the blanket[22] license with a carve-out rate structure -- that the court may[23] consider this alternative in deciding whether ASCAP's proposed[24] methods of calculating a fee are reasonable.[25] Reasonableness was not at issue. It could not have

Page 866

[1] been at issue because there was no factual record on which [2] either court, AEI or Muzak 1, could have made that [3] determination. That was saved for another day when the factual [4] record could be examined, and now we have a factual record. [5] THE COURT: Can you give me just one second? [6] MR. GLANCY: Sure. [7] THE COURT: OK. [8] MR. GLANCY: And now we have a factual record. Now we [9] can actually see how this would work in practice, and we can[10] see whether or not it would be reasonable to implement. And[11] our position is that it is reasonable to implement only if it[12] is a transition to a per-segment license or to a cessation of[13] the blanket license. Because the per-segment license is the[14] alternative structure provided for in AFJ2. Which brings me[15] back to another core fundamental question I think the Court has[16] to answer, which is: What is AFJ2? And what is the Court's[17] role in interpreting AFJ2?[18] AFJ2, as you know, is a contract between ASCAP and the[19] government.[20] THE COURT: OK. Now, this takes us back a while to[21] our very first conference in August last year. That was my[22] first chance to meet with each of the parties engaged in[23] litigation before me in the ASCAP matter, and we had a series[24] of conferences largely over the course of a single week. And[25] at that time, Mr. Glancy, you told me that in formulating your

Page 867

[1] proposal for a blanket license that you would have to take [2] account of the direct licensing program. [3] MR. GLANCY: Yes, your Honor. And in fact we did. By [4] taking it into consideration, we followed the guidance of Judge [5] Conner. We did not just ignore it and say we don't have to [6] think about that. We looked at the direct licenses and we took [7] discovery on them. And it was when we took discovery, when we [8] actually dug down into the facts, into the weeds of this case, [9] which I am going to go through in more detail, when we actually[10] got those facts, then this program, this direct licensing[11] program, unfolded as something that is not reasonable to[12] compensate DMX for, for several significant reasons.[13] THE COURT: Then I don't want to distract you from[14] your planned presentation. If I have further questions, I will[15] hold them.[16] MR. GLANCY: Feel free, your Honor. I can jump back[17] and forth between the two if necessary.[18] As I was saying, AFJ2 is a bargain between ASCAP and[19] the Department of Justice representing the government. It is[20] in fact a contract, and it is a contract signed in settlement[21] of an antitrust lawsuit in 1941, and has since been amended[22] twice. And that contract imposes several significant burdens[23] and requirements on ASCAP, and by extension on its members, as[24] to what they can do when it comes to licensing public[25] performances, and we went through some of those with Professor

Page 868

[1] Jaffe. [2] Those restrictions include ASCAP can't say no to any [3] license applicant. ASCAP can't exclusively license any license [4] applicant. ASCAP cannot sell licenses to specific catalogues. [5] ASCAP cannot sell licenses to specific songs except with the [6] request of the member. ASCAP cannot price discriminate among [7] different customers. In fact, because of the rate court [8] mechanism, ASCAP has to give its applicants and licensees [9] discovery on the other deals that it has entered into so the[10] information advantage that the members otherwise would have if[11] they were licensing separately is neutralized. ASCAP must also[12] submit to the rate proceeding in which ASCAP has the burden of[13] proving the reasonableness of its proposal. These are just a[14] few. It must also offer a per-segment license if asked for[15] background music companies and Internet users and a per-program[16] license for broadcasters.[17] All of these restrictions would not be on the[18] individual publishing companies if the publishing companies[19] were licensing not through ASCAP. But in exchange for[20] accepting those restrictions, ASCAP is permitted to continue to[21] operate, so long as they are operating within the purview, the[22] boundaries of AFJ2.[23] Now, AFJ2 also provides this Court the opportunity to[24] set reasonable fees, and it puts the burden on ASCAP of proving[25] the reasonableness of its proposal, and if ASCAP fails to meet



Page 869

[1] that burden in any respect, then it's the Court's charge to [2] fashion what the Court thinks is a reasonable fee and fee [3] structure based on all the evidence of record. This is not a [4] contest between proposals. This is not you pick ASCAP's, and [5] if ASCAP loses, then they win. That's not the structure of [6] AFJ2. AFJ2 says that ultimately it's within your discretion [7] and your authority to decide, based on the record evidence, [8] what is a reasonable outcome in the circumstance. And as some [9] of the witnesses testified, in past rate proceedings, that's[10] exactly what the courts have done. Judge Conner and Judge[11] Dolinger didn't in past proceedings adopt either the[12] applicant's proposal or ASCAP's proposal. They fashioned[13] something in between, if you will, or what they thought was a[14] reasonable fee and fee structure.[15] Now, AFJ2, as I say, gives your Honor the authority to[16] fashion a reasonable fee. And ASCAP's position is that that is[17] done through the willing buyer, willing seller test, as we[18] assess the fair market value of the blanket license. But DMX[19] takes a different position. DMX takes the position that the[20] reasonable fee language of AFJ2 is meant to be implemented by[21] your Honor as a tool of public policy, that you're not to[22] implement it as a provision in a contract between two parties[23] who settled the litigation where no claim of an antitrust[24] violation was proved. Instead, you are to interpret the[25] reasonable fee language as a tool of public policy. Professor

Page 870

[1] Jaffe explained that, in his view, that's the purpose of AFJ2 [2] and that's the purpose that underlies his understanding of [3] DMX's proposal. [4] Now, I would submit that if, in fact, ASCAP and the [5] Department of Justice had an understanding that a reasonable [6] fee for a blanket license is as DMX proposes, basically the sum [7] of the two values, a reasonable fee for the component parts of [8] the license plus compensation for ASCAP's costs of delivering [9] those in a bundle, if that were the understanding of the[10] parties when they entered into the contract, that would be[11] spelled out in the contract, and we would see some sort of[12] provision about that, to make sure that ASCAP knew what it was[13] signing on to when it signed the contract. But it's nowhere[14] there. And there is no testimony, there is no citation to any[15] evidence extrinsic to that contract that says that that was the[16] parties' intent, that that's what the Department of Justice[17] understood a reasonable fee to be.[18] So this case really puts before your Honor a[19] significant question of, what is your role in implementing[20] AFJ2? Is it to construe a contract, which the courts say is[21] essentially what a consent decree is, a contract? Or is it[22] something more? Are you a tool or an implement of public[23] policy and that you're meant to use AFJ2 and this one specific[24] phrase in AFJ2 about reasonable fees, that you are to use your[25] discretion to implement a public policy that's not stated in

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[1] THE COURT: One could argue that there were other [2] provisions of AFJ2 that should be read together here: The [3] existence of a nonexclusive license and the recognition of [4] direct licensing. [5] MR. GLANCY: Yes, but neither one of those spell out [6] that the existence of direct licensing should form the basis [7] for a carve-out from the blanket license fee, which touches on [8] I think what is essentially the economic circumstances of these [9] direct licenses, which I will address in just a moment.[10] Now, regardless of whether or not -- oh, before I move[11] on, AFJ2 also does have a provision that defines what a blanket[12] license is, and it defines a blanket license as a license the[13] fee for which does not vary depending on the extent to which[14] the music user uses ASCAP music.[15] And Dr. Candell testified that is precisely the way in[16] which the DMX proposal works here, the fee does vary with the[17] extent to which ASCAP music is used. So, we would submit that[18] that is directly contrary to the plain language of the consent[19] decree.[20] Now, regardless of whether you are considering ASCAP's[21] proposal or DMX's proposal, one thing is I think clear, that[22] one task your Honor has is determining what the starting fee[23] would be for a blanket license in the absence of direct[24] licenses. If you are going to adopt a carve-out, you are first[25] going to need to establish what you are carving out from.



Page 873

[1] Now, here again the parties have starkly different [2] views on how to go about this. For decades the courts have set [3] the standard for determining the fair market value of the ASCAP [4] blanket license, and that is with reference to the willing [5] buyer/willing seller test. That test requires a court to look [6] at appropriate benchmark agreements between a willing buyer and [7] a willing seller, neither one under any compulsion to agree, [8] both being reasonably well informed of the relevant facts being [9] the nature of the asset and the market for that asset.[10] Music Choice 4, the Second Circuit opinion, sets out[11] four specific factors that the court should consider in[12] selecting a benchmark or altering a benchmark, and those[13] factors are: The similarity of the parties in the benchmark[14] agreement to the parties in the rate proceeding; the similarity[15] of the rights conveyed in the benchmark agreement to the rights[16] conveyed by the ASCAP blanket license; the economic[17] circumstances facing the parties who negotiated the benchmark[18] agreement; and the degree to which the benchmark agreement[19] arose in a competitive environment.[20] I would submit that on all four accounts DMX's[21] proposed benchmarks fail and that they are not appropriate[22] benchmarks because they are not willing buyer/willing seller[23] transactions between people who were reasonably informed.[24] I want to turn to DMX's proposed benchmarks in this[25] case before I address ASCAP's proposed benchmarks.

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[1] You heard professor Jaffe say that DMX is offering its [2] direct licenses as an aggregated benchmark, single benchmark [3] agreement, when in fact these are not a single agreement, these [4] are 800 separate agreements made with 800 separate sellers and [5] one buyer. This has never been done before in rate court, and [6] so far as I know it has never been done outside of rate court [7] either. And I think there is a good reason for that, because [8] the willing buyer willing/seller test says, oh, we have to [9] consider the economic circumstances of -- and Music Choice 4[10] says this as well -- we have to consider the economic[11] circumstances of the seller and the buyer; we have to figure[12] out what was their intention, what was the state of their[13] knowledge, were they reasonably well informed. And as to that[14] we know very little about what those 800 publishers knew when[15] they signed the agreement. And when we say "signed the[16] agreement," a company doesn't sign an agreement, a person signs[17] the agreement.[18] So, for example, yes, Hal David has a company called[19] House of David, but he didn't sign the agreement. And there is[20] no testimony about what that person knew or understand when[21] that person signed the agreement. The only evidence that we[22] have about what publishers knew or understood the agreement to[23] convey is evidence submitted by ASCAP in the form of the[24] deposition testimony.[25] We have the deposition of Mr. Kant from Sony/ATV. We

Page 875

[1] have the deposition of Mr. Hirschland, the president of Bug [2] Music. We have the deposition of Mr. Cialdella from Cherry [3] Lane. All three of those individuals signed the agreements. [4] We have the deposition testimony of Ms. Levin and Ms. Blugh. [5] And we also have the deposition testimony of two individuals [6] who did not sign the agreement but they represent two major [7] publishers: Ed Arrow of Universal and Mr. Roberts of [8] Warner/Chappell. So, we know from that testimony what their [9] take was on this agreement.[10] Now, as I said, your Honor has to consider the extent[11] to which these agreements arose in a competitive environment.[12] I submit that none of these agreements arose in anything like a[13] competitive environment. They arose in an artificial world[14] created or facilitated by AFJ2.[15] You have a situation, a world in which the publisher[16] and DMX are sitting down at the bargaining table, and DMX is[17] asking for public performance rights, and the publisher knows[18] that DMX already has those rights through ASCAP and BMI if it's[19] a BMI publisher.[20] So, the publisher -- and a license, by the way, is a[21] grant of rights to the licensee, and without those rights the[22] licensee can't do the thing that's covered by the grant of[23] rights. That's the nature of the bargain. So, can DMX do what[24] it wants with that music without the direct license?[25] Absolutely. Absolutely.

Page 876

[1] You heard Ms. Hillburn testify about the way in which [2] she programs music. She has a vast database of music, and she [3] goes into that database and picks the right songs to get the [4] right mix for her customers. And if any one of these direct [5] licensing publishers refused to sign a direct license [6] agreement, her day wouldn't change a bit. [7] THE COURT: Not quite true. [8] MR. GLANCY: They have the same rights, and she would [9] be -- except to the extent that she now favors directly[10] licensed music, I think you're referring to, correct.[11] THE COURT: Yes.[12] MR. GLANCY: But she testified that her first priority[13] is quality, the quality of the song and music. And to the[14] extent that it's interchangeable, she would prefer a directly[15] licensed work.[16] But there is no question about the fact that she has[17] the right to program that work. And if the publisher enters[18] into a directly sense, and then that direct license terminates[19] or expires, again she has the same right to program that music[20] on the system.[21] If this were a truly competitive market, it would be[22] one in which DMX negotiates with these publishers without the[23] blanket license, and where these publishers have all of their[24] rights that they gave up in the bargain with DOJ restored to[25] them, and that they can sit across the table with some



Page 877

[1] leverage, some bargaining strength, and say, you know, that's [2] not enough money to use my works, and if you don't want to pay [3] me more money, I'm going to walk away. [4] THE COURT: You know, this is very interesting. The [5] fungibility of the music in the background/foreground [6] environment I think, you know, puts this entire controversy in [7] a different light than maybe many of the licensing arrangements [8] that ASCAP normally sees, but it's not entirely clear to me [9] that actually a publisher would be empowered if it were[10] standing on its own without a blanket license arrangement, more[11] empowered vis-a-vis its negotiations with DMX. It's not[12] necessarily clear to me that that would be true.[13] MR. GLANCY: And, your Honor, we don't know what would[14] happen in that environment, because it is, as Judge Conner had[15] said in the Capital Cities case, perplexing in theory. The[16] positing of this hypothetical competitive market without PROs[17] is sort of a futile exercise. That's why we go to the[18] benchmark agreements. We don't know, frankly. And that market[19] power or that ability to leverage would no doubt depend on the[20] fungibility and the desirability of the catalog, which may[21] depend on the customer demand for specific types of songs or[22] specific songs, but it may also depend on the size of the[23] catalog.[24] So, if the four majors are controlling 75 percent of[25] the music, clearly Ms. Hillburn will have less leeway in

Page 878

[1] performing top quality music if DMX can only sign up one or [2] two. So, they would have a significant bargaining advantage [3] that they're deprived of in the current circumstances. They [4] gave it up in their exchange with the government. [5] Now, I would submit that there is little evidence in [6] the record about this fungibility of music and how it actually [7] plays out. We have heard some testimony that there is some [8] degree of substitutability but there is no empirical data to [9] say at what level that fungibility exists.[10] THE COURT: I'm not sure about that. First of all,[11] there was plenty of direct testimony about the fungibility. I[12] don't think it was focused on much in the cross, but the[13] increase and decrease of direct licensing shares I think is[14] evidence of the fungibility. If Sony's music share doubles[15] once it signs a direct license and the other majors plummet, I[16] mean I think that's evidence by itself.[17] MR. GLANCY: Of a certain degree of fungibility, I[18] agree. But we don't know at what level of fungibility that[19] exists within the DMX service. Everybody says it's fungible.[20] If it's fungible, you could just sign Sony and program all your[21] music. They have a wonderful catalog, as Mr. Knittel[22] testifies. But there is a degree to which they need a certain[23] critical mass of publishers out there in order to operate their[24] service at the level that they desire, which is to provide[25] their customers with first and foremost the top quality music

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[1] programming that they promise. [2] I will submit that if in fact it were that fungible, [3] that they could rely on just Sony or maybe a handful of [4] independent publishers, that DMX would have terminated its [5] blanket license long ago. But they don't want to give up the [6] benefit, the flexibility provided by the blanket license, and [7] the ability to deliver that top quality product to their [8] clients, which is a benefit that derives directly from the [9] blanket license.[10] So, if in fact DMX is not negotiating with a directly[11] licensing publisher for performance rights because they already[12] have them, what is DMX negotiating for? I think professor[13] Jaffe testified that one of the things they are negotiating for[14] is at least an option to terminate the blanket license. If[15] they achieve a critical mass of publishers, they can do that[16] and save a lot of money. But another is the ability to come[17] into this court with those agreements and say, your Honor, $25[18] is the new going rate for ASCAP's blanket license, and here is[19] our 800 agreements. But the problem with that argument is that[20] what they're doing is taking 30 percent of the music suppliers[21] who agree -- if we ignore all the criticisms of the direct[22] licenses, if we take 30 percent of the publishers and say if[23] you agree to $25, they're asking you to impose that rate on the[24] 70 percent of the publishers who didn't, and that's[25] fundamentally unfair. You are now asking the ASCAP publishers

Page 880

[1] to fight with both hands tied behind their back. Not only [2] can't they negotiate fairly by saying we will exclusively [3] license you or not, or refuse to license you, but now they [4] don't even have a say in this $25 rate because apparently that [5] market is being set by somebody else. [6] Let's take a closer look at that $25 rate, because I [7] think there is a lot of confusion about -- $25 is not the rate. [8] Can we put that slide up, please. [9] $25 is not the rate. Here we have a demonstrative[10] just showing the comparison between ASCAP's distribution based[11] on a $41.21 per location rate and DMX's distribution based on a[12] $25 rate. OK?[13] THE COURT: I'm sorry. I'm not capturing this right[14] away. Just give me a second.[15] MR. GLANCY: Sure.[16] THE COURT: I don't understand this.[17] MR. GLANCY: Hopefully I can explain it. It is a bit[18] confusing, I admit -- and I didn't want to crowd the[19] demonstrative with too much information -- but I think the[20] critical distinction I want to point out is that ASCAP makes a[21] distribution to its members of a percentage, pro rata share of[22] ASCAP music from that pie, that 41.21 pie. So, if I'm an ASCAP[23] publisher and I have a 10 percent share of ASCAP music that is[24] being played out on DMX's service, that translates to a 5[25] percent share under DMX's calculation, because DMX is paying



Page 881

[1] out as a percentage of all music use. So, if we assume that [2] DMX's pie -- [3] THE COURT: OK, OK. I like to think I'm fairly good [4] at picking up on these, but I am -- [5] MR. GLANCY: Your Honor, I sympathize. I had [6] struggled with this myself during discovery, and this is why we [7] think these agreements are difficult to comprehend and compare [8] to ASCAP. [9] THE COURT: Oh, OK. Is this because of the song[10] writer gets 5 percent?[11] MR. GLANCY: No.[12] THE COURT: Is this what you're trying to illustrate?[13] MR. GLANCY: No.[14] THE COURT: OK.[15] MR. GLANCY: Let's do this, because I have another[16] slide that might clarify it.[17] If DMX's $25 per location pool, if they distribute[18] from that based on a pro rata share of all music, and we assume[19] that ASCAP music represents half of DMX's music use and the[20] other half being BMI, SESAC and others, then what DMS is really[21] paying to ASCAP members is a pro rata share of a $12.50 pool.[22] So, if we want to compare apples to apples in terms of[23] royalty rates, we are not comparing $25 to 41.21, we are[24] comparing 12.50 to 41.21.[25] THE COURT: Yes. Yes. I mean no one disputes that.

Page 882

[1] You take off the 10 percent, you take 48 percent of that, and I [2] think nobody is disputing that. [3] MR. GLANCY: Yes, OK. People have been throwing [4] around the $25 rate as if that's a comparison between $25 and [5] 41.21 for an ASCAP publisher. An ASCAP publisher, who really [6] is aware of these facts, would be making a choice between 41.21 [7] and $12.50. [8] Now, there is a lot we don't know about these direct [9] license agreements and how they played out in the marketplace.[10] And, your Honor, we struggled with this, you know, how many[11] publishers can we march in here to demonstrate the points that[12] we need to make about these direct licenses. We think we got a[13] good representative sample of the publishers, the[14] representative in terms of the size. We have three of the four[15] majors. We have two large independents. And we have two small[16] independents. We think they are also representative in terms[17] of their take on the proposed license agreement and the[18] testimony that they give.[19] So, what was their take on the proposed financial[20] aspect of the direct licensing transaction? Mr. Cialdella from[21] Cherry Lane, one of the largest independent publishers out[22] there, testified in response to a question as to why he did not[23] renew direct license agreement that, "We didn't renew it[24] because we didn't feel it was in the best interests of our[25] clients to renew it." And he was asked was there anything

Page 883

[1] specific as to it not being in the best interests. And he [2] answered, "Based on the information available to us, it didn't [3] appear we would be securing the best rates and therefore [4] revenue to be earned by our clients." [5] This was two years into the deal that he came to the [6] realization that he wasn't getting the same rate he was getting [7] from ASCAP and BMI, and then he did not renew. [8] THE COURT: Now, that is an interim rate that he was [9] getting from ASCAP and BMI.[10] MR. GLANCY: Yes, but it is an interim rate that is[11] based on the historic rates that the industry has paid. And in[12] fact it is an interim rate that is related to the final fee[13] rates that were in effect at that time for at least at that[14] time Muzak and perhaps another one of the big majors. But[15] certainly the biggest player in the industry was paying final[16] fees at that point in time.[17] THE COURT: And with respect to Judge Stanton's[18] decision -- I know it may be appealed, maybe it's already on[19] appeal, may not stand up -- but with respect to the BMI rates[20] that then Cherry Lane was experiencing in their interim form,[21] are they in effect reduced by Judge Stanton's decision?[22] MR. GLANCY: Well, they are not reduced -- oh, the[23] interim rates? I believe Judge Stanton had an interim rate[24] decision that governed those rates.[25] THE COURT: No, but his final fee decision. In any

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[1] event, whatever analysis Cherry Lane made about rates with [2] respect to what it was receiving from ASCAP and BMI, those were [3] interim rates it was making that judgment on. [4] MR. GLANCY: Not entirely, your Honor. Muzak was a [5] final deal. This is Mr. Cialdella speaking about why he did [6] not renew the agreement in 2009. This is some years into a [7] final fee agreement that ASCAP has entered into Muzak in 2005, [8] the largest player in the industry. I think ASCAP -- [9] THE COURT: I'm sorry. I thought we were talking[10] about DMX.[11] MR. GLANCY: Cherry Lane did not renew its agreement[12] with DMX because it believed that the rate that DMX was[13] providing was lower than the rates that the PROs were[14] providing.[15] And your Honor made the suggestion that the PRO rates[16] were interim rates. Well, that's not true with respect to the[17] major player in the industry, Muzak. That was a final fee[18] rate, and it was in existence at the time Cherry Lane was[19] making this calculation.[20] So, assuming Cherry Lane was fully aware, had perfect[21] knowledge, I think it would be reasonable for a company to rely[22] on that, that that would be in fact a signal of what the going[23] rate would be in this industry.[24] So, Mr. Cialdella went on to testify in his[25] deposition -- and, by the way, the prior deposition cite was



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[1] pages 64 and 65 of his deposition transcript -- that "the $25 [2] per location rate is low in comparison to what other background [3] services are paying." That's at page 68. [4] We have testimony from Mr. Roberts from [5] Warner/Chappell who considered this agreement and turned it [6] down. And why did he turn it down? He did a financial [7] analysis and was asked about the conclusion he drew from that, [8] and he concluded that, "It's more beneficial for [9] Warner/Chappell to stay with the PRO rates as they currently[10] exist versus the offer that was made." That's at page 32 to 33[11] of his transcript.[12] And he goes on to state: I don't know looking at a[13] $25 per location fee and an average of over $40 per location[14] fee was the basis for his conclusion.[15] Now, this is one of the reasons why I wanted to[16] clarify that the difference between ASCAP and DMX is the[17] difference between 41.21 and 12.50. Mr. Roberts is testifying[18] about comparing it to $25, and he recognizes that the rates are[19] so vastly different that he shouldn't agree to this DMX deal.[20] He doesn't testify to a $12.50 rate.[21] Mr. Arrow similarly from Universal testified that he[22] reviewed the license agreement, he turned it down. And he was[23] asked his reaction to the $25 royalty provision, and he[24] testified, "The $25 per location royalty was the thing that[25] concerned me the most about what DMX was proposing." That's at

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[1] page 70. [2] Even Mr. Kant from Sony testified that he believed [3] that the $25 royalty rate was below, most likely below market [4] value. That's at page 80 of his transcript. [5] Now, what else do we know about these direct license [6] transactions? Well, there has been some testimony about what [7] we call the Sony signal. I think that we don't need to [8] speculate about what was in the minds of any publisher to [9] understand the Sony signal. The evidence from Mr. Knittel was[10] undisputed and clear. What were the terms? Sony got a $2.7[11] million check in exchange for a three year license to use its[12] repertory. There was a flat fee deal. And I would submit that[13] Mr. Knittel had no hope, had no expectation of ever recovering.[14] He never even did a calculation to figure out whether it was[15] likely that he would recoup, or what he would need to do in[16] terms of either growing his location count or growing his plays[17] of Sony music in order to recoup against that advance. And,[18] frankly, I'm not sure it's all that important, because after[19] all, no matter what, Sony gets to keep the $2.7 million. So,[20] it's only if that amount is exceeded that Sony would pay more.[21] THE COURT: You meant DMX would pay more.[22] MR. GLANCY: DMX would pay more. Sorry.[23] Now we showed Mr. Knittel various charts, and I want[24] to put them up here, the calculations he could have done to[25] determine what percentage. And it's very simple math; you can

Page 887

[1] do it in your head here. 75,000, multiply that by 25, and [2] figure out what percentage of Sony music that you need to play [3] in order to recoup $900,000 a year. [4] There is another way of looking at it which is: What [5] effective per location rate was Sony agreeing to at the time? [6] Now, at the time they had about 75,000 locations, and [7] at the time DMX was playing about 6 percent Sony music. But [8] let's assume that DMX could double that overnight and then [9] maintain that level of 12 percent throughout the entire three[10] years of the term. Again, you do the math, 100 times 75,000,[11] 7.5 million. And 12 percent of that is $900,000. So, an[12] effective rate off of those calculations is $100 per location.[13] So, is that what Sony was agreeing to back in 2007? Well, we[14] know that they took $2.7 million, and we know that DMX has[15] never been able to play more than 14 or so percent of Sony[16] music.[17] This chart shows the amount of Sony music that has[18] been played to date through the third quarter 2010, and you see[19] it has kind of leveled off. In fact their high at 14.03 was[20] last year. Since that time, just kind of sitting there around[21] 12, 13 percent. And as of October 1, 2010 they would need to[22] play 46.67 percent Sony music in order to fully recoup the[23] remaining balance of the advance. Those are the numbers behind[24] that calculation, which assumes that the full 2.7 million is[25] fully recoupable.

Page 888

[1] And this is the reverse calculation. If we assume [2] that Sony's share remains steady at 12 percent, or 13 percent, [3] 13.5 percent -- which is what it was in the last quarter -- [4] let's assume that DMX is not able to raise that, what is the [5] per location rate that we would need to calculate in order for [6] Sony to fully recoup the balance of the advance? Over $86. [7] Next slide. [8] And that's assuming that DMX's location count includes [9] the additional locations they got from Direct TV. You will[10] recall that earlier this year they had an infusion of[11] locations, 25,000. So, we are giving them that, and we're[12] saying let's assume that you are going to have that for the[13] remainder of the term of that agreement.[14] So, I would submit that faced with that data -- and[15] Mr. Knittel even to this day has not done these calculations --[16] but I would submit that in the face of this data, this[17] information, that it was never expected that Sony would recoup[18] its advance. And that being the case, I don't think it's fair[19] to use the Sony agreement as an agreement to a $25 royalty pool[20] rate.[21] In fact, Mr. Kant at one point proposed an alternative[22] to that $25 royalty pool rate. He proposed that it be either[23] $6.25 a quarter or a third, 33.33 percent, of service fee[24] revenue from that particular DMX location. And that's at page[25] 70 of his deposition transcript. That was turned down, and



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[1] ultimately Sony agreed to this bargain of $2.7 million. [2] Now, Mr. Knittel testifies in his affidavit that he [3] agreed to $2.7 million in reliance on a misrepresentation from [4] information he got from Sony, which was information Sony got [5] from BMI. But on cross-examination he admitted that he [6] understood that that was a wrong number, there was something [7] wrong with it. He also understood it was substantially [8] inflated, because if you took a look at the numbers the other [9] majors were providing they all added up to something more than[10] what DMX was paying BMI. And he even discussed this with his[11] general counsel, and yet he still went forward with the[12] agreement. He didn't rely on a misrepresentation. He knew it[13] was a misrepresentation, and he went forward anyway.[14] And I think it's a little ironic that DMX suggests[15] that the 800 or so publishers and administrators who signed[16] their catalog agreement somehow had perfect knowledge of the[17] alternative rates that ASCAP was getting paid, or the market[18] alternatives, or understood completely the unambiguous language[19] of the direct license agreement, and yet Mr. Knittel is here[20] negotiating a deal worth $2.7 million where he knows that a[21] foundation for that agreement is wrong. It's substantially[22] inflated, in his words. And he doesn't check his own files to[23] find out what the true figure would be, because he is working[24] with DMX; he knows how much DMX pays to BMI.[25] So, why would he do that? Why would he go forward

Page 890

[1] with a $2.7 million deal? Well, he needed Sony. His testimony [2] was he needed a major to add credibility to the catalog license [3] agreement, and that in fact this was an important inducement, [4] this was an important inducement for some publishers in signing [5] the license agreement, so in a sense they could go out and say [6] Sony signed this agreement, you should too. But at the same [7] time there is this confidentiality clause, a very curiously [8] crafted confidentiality clause, that allows DMX to go out into [9] the marketplace and say as loud as they want Sony signed this[10] agreement, you should too, but prevents Sony and DMX from[11] disclosing either the fact of the advance, or the amount of the[12] advance, or -- and this is significant -- how that advance was[13] calculated.[14] DMX went to Sony and said tell me what you make from[15] ASCAP and BMI, I'll double it, and I will give you 50 percent[16] premium. They never went to any of the other publishers who[17] signed those agreements with that same offer. Instead, they[18] went to those publishers with an agreement that had an MFN[19] provision.[20] Let's put that provision up on the screen.[21] Now, we heard testimony from Mr. Knittel and Mr. Gertz[22] about this provision, and their testimony was that this[23] provision, this most favored nations provision, doesn't apply[24] to the royalty pool rate, the $6.25 rate. Now, frankly that[25] took me aback, because frankly I don't see how you can

Page 891

[1] reasonably construct that. But that's their construction of [2] this agreement which is plainly contrary to the plain language [3] of this agreement. It just goes to show how muddled this [4] agreement truly is, if the two architects of this agreement [5] could not understand the applicability of this provision. [6] Now, why would they say that it doesn't apply to the [7] royalty pool rate? I submit it's because they want the court [8] to believe that publishers had an option, that they could have [9] asked for more and DMX would give them more, but they just[10] didn't because $25 just felt right.[11] A. Well, I think you are overstating, as I understand the[12] position, which is they are saying that publishers could ask[13] for more, but they didn't make a commitment since they didn't[14] have such a request as to how they would have responded.[15] MR. GLANCY: Well, this agreement -- first of all, no[16] publisher received anything more than $25. Second of all, we[17] know that publishers refused the agreement and that they[18] refused it in part because they felt the rate was too low.[19] And, thirdly, this agreement says that everyone who signs it is[20] going to get paid the same rate, and that rate is $6.25 a[21] quarter.[22] I think a reasonable publisher, faced with this[23] agreement and this provision, would conclude that it's a "take[24] it or leave it" deal; it's the $25 rate or you're out.[25] And this also factors into the representation that

Page 892

[1] Mr. Knittel made that it was contemplating phasing out the [2] blanket license. Because I would submit that it's a very [3] different negotiating position to have if you are saying to a [4] publisher you either get on board now or risk being frozen out [5] at the end of the year. So by the end of this year we are [6] phasing out the blanket license and by the end of the year you [7] will get nothing; so, you know, better to get a little [8] something than nothing. That's a very different negotiating [9] position than saying we're shifting our reliance to direct[10] licensing; we won't commit to how much we're going to shift,[11] but we are shifting our reliance to direct licensing; so you[12] can either get paid through us or you can get paid through[13] ASCAP.[14] Now the notion that publishers somehow had a choice,[15] that this was not a "take it or leave it" deal on the $25 rate,[16] I think is advanced to make it seem like this agreement is a[17] more competitive transaction than it really is, or that it was[18] somehow competitively negotiated.[19] THE COURT: So, with respect to your evidence that DMX[20] conveyed to the marketplace that it would phase out the blanket[21] license by the end of the year, what is your record evidence of[22] that?[23] MR. GLANCY: Well, we have the e-mail communication,[24] Mr. Knittel's confirmation that that was his belief in early[25] 2008. And we know that Mr. Knittel had telephone calls and



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[1] conversations with other people. If he held that belief in [2] early 2008, it is I think a reasonable inference that he would [3] have told other people as well. [4] We don't contend that he was lying, or he was making [5] it up, or using that as a bargaining tactic in 2008. We [6] contend that that's what he honestly believed, and that's what [7] he would have communicated to any publisher who asked. [8] So, did this work? [9] THE COURT: And did any of your depositions indicate[10] that that was conveyed to them?[11] MR. GLANCY: Yes, and I am going to get to that right[12] now.[13] THE COURT: OK.[14] MR. GLANCY: Did that work? Did the Sony signal[15] actually work? Let's take a look at that chart. Yes, you bet.[16] This shows the effect of the Sony agreement on the number of[17] direct licenses that were entered into. And we can see that[18] leading up to the end of 2007 DMX has a little over a hundred[19] licensors signed up, and then after the Sony agreement that[20] number shoots up precipitously.[21] Now, was that message conveyed? We have the[22] testimony; we don't need to speculate about that. We have the[23] testimony of Mr. Hirschland of Bug Music. Mr. Hirschland is[24] the president of Bug Music, and he signed the agreement.[25] Mr. Hirschland testified that he is a lawyer. Mr. Knittel

Page 894

[1] testifies in his affidavit that he spoke with Mr. Hirschland [2] several times about this agreement and went over the details of [3] this agreement. [4] Bug Music is the second largest publisher on DMX's [5] distribution list. Their earnings from royalties last quarter, [6] quarter, were $22,000. Bug Music has every financial incentive [7] to make sure they got it right. [8] And what did Mr. Hirschland testify about? He was [9] asked: Did Bug ask for a specific royalty amount or a[10] guarantee from DMX as to royalty amounts?[11] His response: My recollection is that I asked for and[12] was assured that the royalty would be paid on a most favored[13] nations basis with all other publishers. And that was[14] satisfactory to me.[15] And why was that satisfactory to you, he was asked?[16] His answer: As an independent publishing company with[17] a potential market share in the single digits, if I had the[18] same royalty rate that the major publishers were getting, then[19] I couldn't expect to get a better rate and would be satisfied[20] with that.[21] And he was asked: In your experience working at Bug,[22] is it generally a consideration that comes into play when[23] negotiating licenses, namely the fact that a major publisher[24] has entered into a deal with the music user?[25] His answer: Yes, it's a significant factor.

Page 895

[1] Now, there is some question, I think some suggestion [2] that somehow this information about the Sony deal is now out [3] there in the public because of the BMI decision earlier this [4] year. Well, there is no evidence whatsoever that any publisher [5] is aware of it by virtue of it appearing in a decision. There [6] is no press releases, no articles in the press, in the trade [7] press, from which we might construe or infer that these [8] publishers actually understood that information. We're only [9] asked to assume these publishers as a group are very interested[10] in what rate court determinations and the specifics of a rate[11] court determination, not just the final outcome, but that they[12] will actually go in and read the decision. And as interesting[13] as I think our jobs really are, I think that's quite[14] implausible.[15] Now, what else do we know about this agreement, the no[16] double payment clause? Let's put that up on the screen. This[17] is in every agreement, in every catalog agreement, and what[18] does it say? It says that notwithstanding anything to the[19] contrary in this agreement, DMX, the licensee, will have no[20] obligation to pay publisher with respect to the public[21] performance rights for any composition during any period of the[22] term where DMX has paid a music collection society for such[23] rights to such composition in such period.[24] That's the no double payment clause. Now, what is a[25] publisher to make of that? The plain language of that

Page 896

[1] agreement, well, we know that DMX has been making payments to [2] ASCAP for all compositions into ASCAP's repertory, including [3] the compositions that are controlled by publishers who are [4] signing this agreement. [5] THE COURT: That's under an interim fee agreement. [6] MR. GLANCY: Yes. But they are paying for the rights. [7] The rights are conveyed, and we can't withdraw them. And that [8] that occurred during the entire term of all of these [9] agreements. No one disputes that.[10] So, read literally on its face, what this sentence[11] says is if DMX is paying ASCAP for a blanket license, it has no[12] obligation to pay the publisher under this agreement for the[13] performance rights. That's a plain language reading of this[14] provision.[15] And Mr. Gertz and Mr. Knittel have come into court[16] with a new interpretation, and they ask the court to read[17] something new into that provision, something that says to the[18] effect that this provision only applies if there is a dispute[19] between ASCAP, or a PRO, and a publisher, and that's when this[20] provision would kick in. But I challenge you to find any[21] reference to a dispute in this provision.[22] THE COURT: They would point to the phrase they make a[23] claim.[24] MR. GLANCY: They may make a claim, but this is a[25] claim against DMX for payment, not a claim against a publisher.



Page 897

[1] Gertz and Knittel have testified the claim that they [2] think triggers this provision is a dispute between the PRO, [3] ASCAP, and the publisher. The most that can be read out of [4] this is that it would be applicable if there is a dispute [5] between the music collection society and DMX. And I think [6] judging by where we are today, there most certainly is a [7] dispute for payment of royalties for a public performance. [8] THE COURT: Do you anticipate then that DMX was [9] secretly plotting to try to get all of its direct licensors to[10] pay back the money that DMX paid them?[11] MR. GLANCY: No, I think as a practical matter that[12] would probably be impractical. But the fact of the matter is[13] if your Honor were to decide in our favor and say there is no[14] carve-out, DMX's obligation would stop under each one of these[15] contracts. They would have no further obligation to pay.[16] That's how that provision works.[17] And, in fact, again, do we need to speculate about how[18] publishers --[19] THE COURT: So, what would ASCAP be doing in that[20] circumstance?[21] MR. GLANCY: ASCAP would be paying its distribution to[22] its members.[23] THE COURT: And if DMX is paying to the direct[24] licensors, then --[25] MR. GLANCY: Well, we would have to figure out some

Page 898

[1] equitable way to handle that. The point being that ASCAP's [2] members should be fairly compensated. And this is the problem [3] -- [4] THE COURT: But if DMX continues to pay, you don't pay [5] them. You don't pay the Bug Musics of the world, the music [6] publishers. [7] MR. GLANCY: Well, what we do is -- you know, subject [8] to consultation obviously with my client, because this is sort [9] of the world in which we're faced, but this is the problem of[10] the mash-up of the blanket license and the direct licenses. It[11] creates this problem of how to fairly compensate ASCAP's[12] members. When they're separate it's much easier to say, well,[13] all right, the money we receive from that we're not going to[14] distribute to you. But the money we receive from the blanket[15] license from DMX is one, it's one thing. And so how ASCAP[16] would divide that pool equitably among its members, both[17] nondirectly licensing and directly licensing, I think is a[18] matter that has yet to be considered by ASCAP. And Dr. Boyle[19] will be doing that calculation. And certainly we would be[20] guided by whatever your Honor said on that subject.[21] Now, again, we don't need to speculate about how[22] publishers read this provision. We have again the testimony of[23] Mr. Hirschland of Bug Music, a sophisticated publisher with a[24] significant catalog, earning a significant amount of money, a[25] man who again has talked with Mr. Knittel several times and

Page 899

[1] spent several hours, one to two hours reviewing this agreement. [2] He was asked about his interpretation of the no double payment [3] provision, and his answer was: My understanding is that the [4] prior sentence carves out the overall royalty -- carves out of [5] the overall royalty pool we are to receive, royalties paid to [6] third parties such as PROs and Harry Fox. The sentence you [7] just read further -- and for completeness sake I will read you [8] the sentence that he is referring to: For the avoidance of [9] doubt, the parties agree that licensee shall not be required to[10] pay royalties hereunder where it would otherwise result in[11] double payment.[12] So, he says: The sentence you just read puts further[13] emphasis on that carve-out and explains that if a portion of[14] the royalties due Bug under the agreement is paid to one of[15] those third parties, it is not also an obligation of DMX to pay[16] that same royalty to Bug.[17] And he was asked to explain how that would work in[18] practice, and he testified: So, you have -- DMX has its rate[19] obligations to the societies. DMX takes the data, they figure[20] out how much gross revenue the Bug repertory has earned, they[21] take the amount from that total, the percentage amount that[22] they owe pursuant to their agreements with the societies --[23] meaning ASCAP -- and pay those societies, and deduct it from[24] the monies that they would otherwise have to pay Bug.[25] That was his understanding of the agreement, that

Page 900

[1] throughout the entire term he is just getting paid for [2] mechanicals and not for performance royalties. [3] Now, he also testified that it was his [4] understanding -- oh, and, by the way, the cite for that, the [5] transcript cite for that testimony I just read is pages 40 to [6] 41 from the transcript of Mr. Hirschland's testimony. [7] He also testified at page 111 that it was his [8] understanding that there were licenses in place between the [9] PROs and DMX and there was payments being made to the PROs.[10] So, that's the no double payment provision. What else[11] do we know about these agreements? We know that the amounts of[12] royalties that they actually generate for the vast majority of[13] publishers are relatively tiny and in many cases nonexistent.[14] You heard Mr. Marks actually ask Mr. Candilora about SEGAL, who[15] is an ASCAP member publisher. I looked and apparently this is[16] in the record that SEGAL signed an agreement in October 2009,[17] and they haven't been paid anything in the last three quarters,[18] nothing. So, if a publisher signs an agreement and never gets[19] paid, is that a reasonable benchmark for this court to rely on?[20] I don't think so.[21] But, as I said in my opening, we looked at the chart[22] of the dots -- which I put in front of you again -- to show[23] that in fact throughout this agreement the vast majority earned[24] nothing for zero to $25. Zero to $25 is not enough for DMX to[25] actually write a check. You have to earn more than $25 per



Page 901

[1] quarter or cumulatively over several quarters in order to get a [2] check. [3] Now, Mr. Rich in opening produced a nifty [4] demonstrative showing that as ASCAP too has many, many [5] publishers who receive very, very little. And ASCAP should [6] because ASCAP is enormous and has a lot of publishers whose [7] music is used. But the relevance of this is not to suggest [8] that somehow there are a few big publishers and there are a lot [9] of small publishers. The relevance of this is to understand[10] the economic circumstances facing the sellers in the[11] transaction with DMX. That's very different when you are[12] dealing with an economic circumstance where you are negotiating[13] for something of very little value or relatively little value[14] than when you are negotiating an agreement that is for millions[15] of dollars a year. The amount of time and effort that you[16] expend in terms of considering it, negotiating, it's just not[17] worth it if you are only going to get a couple hundred dollars.[18] You are not going to send it to your outside counsel for a[19] review and comment.[20] And so how do we know about the impact of the amounts[21] on the consideration of publishers? Well, we have testimony[22] again from Mr. Hirschland that he was asked about how much time[23] he spent negotiating the agreement, and he answered one to two[24] hours. This is at page 20 of his deposition. He was also[25] asked whether or not he did any kind of financial analysis to

Page 902

[1] determine, to compare the rates proposed in the agreement to [2] what Bug was getting from the PROs. And he did not. And [3] that's also page 20. [4] THE COURT: Page 20 did you say? I'm sorry. [5] MR. GLANCY: Page 20. [6] And then he was asked -- he was asked this question: [7] I don't recall if we talked about this, but during your [8] discussions with Mr. Knittel what were the issues that were [9] discussed between Bug and DMX as they relate to the prospective[10] catalog agreement issues?[11] His answer was: Well, I would say that. I mean what[12] you are asking me is to sort of characterize the discussion. I[13] would say it made sense to me to enter into a direct deal with[14] DMX for the purposes of potentially increasing the revenue from[15] that source. I felt like and still feel that it is a minor[16] part of our business, and it's a minor income stream, and[17] honestly didn't feel it necessary to discuss all the issues[18] surrounding a potential deal other than to make sure we had a[19] favored nations clause, make sure that the public performance[20] rights societies were dealt with. And other than that -- and[21] this is key -- I like and trusted and trust Barry Knittel. I[22] like and trust the entire staff at MRI and felt like we should[23] enter into the agreement, the details of which I either can't[24] recall or were not all that important to me, frankly.[25] And that is at page 30 to 34 of his deposition

Page 903

[1] transcript. And he also confirmed that when asked about the [2] amount of time he spent considering whether or not to renew, [3] his testimony was, "My sense is that it was a fairly quick [4] decision and not a lot of time was spent on it." [5] So, what do we know about the knowledge and [6] sophistication of other publishers? We know at least two. We [7] have Ms. Levin and Ms. Blugh who testified that they didn't [8] understand the agreements to be granting performance rights. [9] Mr. Gertz confirmed that in fact publishers aren't used to[10] negotiating agreements of this type, performance rights[11] agreements with music users in the background music industry.[12] There is certainly no evidence that any of these[13] publishers understood the nature of DMX's business, the value[14] that DMX would place on that deal, all things that ASCAP[15] understands when ASCAP enters into negotiations with the[16] industry leaders.[17] Now, we did the chart here as well, the dot chart we[18] will call it, and we have the carpet of green which represents[19] the publishers who got paid nothing or less than $25. And as[20] we showed, the vast majority are getting paid less than $25.[21] But if we account for some of the publishers we talked[22] about today, let's see what that chart looks like. If we get[23] rid of Sony, because we know Sony never agreed to a $25 deal[24] anyway, so they shouldn't be used as a benchmark for that rate.[25] Let's get rid of Bug Music, because we know Bug Music

Page 904

[1] had a different take on what this meant; didn't spend any time [2] reviewing the financials of it; relied on his trust of [3] Mr. Knittel and relied on the fact that Sony, another major, [4] had entered into the agreement. Let's take Bug Music off the [5] list. [6] We know that Cherry Lane didn't do any financial [7] analysis before it signed the agreement. And then two years [8] into it, when they are not getting paid anywhere near what they [9] were promised, they decide they will do a financial analysis,[10] and then they determine it's not really worth it, it's not[11] really a good agreement for us, so they don't renew. Take them[12] off.[13] We know that Disney didn't renew. Take them off.[14] We know that ABCO, another biggie, didn't renew. Take[15] them off.[16] And the chart diminishes. Now, we could have perhaps[17] brought in some of the other red dot publishers to talk to your[18] Honor about what their view is on this agreement, but we felt[19] that that group right there was fairly representative,[20] representative of the publishers who have a significant stake[21] and representative of all the rest.[22] Now, I want to turn briefly to ASCAP's benchmark[23] agreements. ASCAP has proposed as benchmark agreements, as we[24] said, all the final fee agreements in this industry with every[25] single player. I'm sorry?



Page 905

[1] THE COURT: Yes. I don't want to interrupt you in the [2] middle of a point, so you seem to be moving on to a new [3] section. Let's just talk a little bit. It's quarter to one. [4] About how much longer, Mr. Glancy? [5] MR. GLANCY: I would say maybe 15, 20 minutes. [6] THE COURT: OK. Then we will just go straight [7] through. [8] MR. GLANCY: Thank you. I appreciate that. [9] And I realize that sort of by necessity by relying on[10] deposition transcripts, you know, we find ourselves needing to[11] make some of these points in closing just so that it's clear[12] that that testimony is significant in our view. And the point[13] is that we brought to court the deposition testimony of seven[14] publishers, and DMX did not bring to court a single publisher[15] to explain what their thinking was on that agreement.[16] So, let's talk about just briefly ASCAP's benchmark[17] agreements. There is a wealth of evidence to support the[18] conclusion that those agreements were negotiated between well[19] informed buyers and sellers. You have agreements, decades-long[20] history of licensing in this area with ASCAP. You have[21] industry-wide negotiations and form agreements arising from[22] those negotiations in 1987 and 1994. You have companies that[23] are represented by attorneys, in-house counsel and outside[24] lawyers, who are knowledgeable and experienced in negotiating[25] with ASCAP. You have deals that are worth millions of dollars

Page 906

[1] in licensing fees for each year for the major players in the [2] industry. We have deals that were the result of lengthy [3] negotiations back and forth, where the rate wasn't "take it or [4] leave it," the rate was actually negotiated actively. We have [5] background music companies that know their alternatives. They [6] know they can come to rate court and ask for a reduction if [7] they think we're being unreasonable. In fact we have [8] background music companies that have availed themselves of that [9] opportunity. AEI and Muzak have gone to rate court against BMI[10] in the AEI case. DMX and Muzak were in rate court against[11] ASCAP in 2003 and 2004.[12] And most significantly we have parties that understand[13] that music is a vital input to DMX's business or to any[14] background music business, that as compared to the publishers[15] who sign these agreements it's not one part of a business that[16] relies on a lot of other income streams; that music, selling[17] music rights -- and essentially DMX acts as a mini PRO in the[18] marketplace, they tell the restaurant or the retail store we've[19] got you covered, we're extending our license to you. Music is[20] at the core of their business.[21] (Continued on next page)[22]

[23]

[24]

[25]

Page 907

[1] MR. GLANCY: We brought up in opening the effective [2] per location rates were five A locations. We corrected the one [3] erroneous CPI calculation. If your Honor is interested, the [4] CPI calculations were done using a CPI calculator made [5] available by the Bureau of Labor Statistics. But what this [6] shows is that the industry has for decades paid substantially [7] more than what ASCAP is asking for here, and that ASCAP's rates [8] over time, adjusted for inflation, have actually declined over [9] the years. That's, I would put to you, the consent decree at[10] work. That's what it is meant to do, it puts a check on ASCAP,[11] and we see the rates decline because they know they can go to[12] rate court.[13] Now, what happens in 2005? This is a point of a lot[14] of testimony. The essence of that is that in 2005 ASCAP struck[15] a deal with Muzak. And it wasn't a per location deal. It[16] wasn't a percentage of revenue deal. It was a flat fee of $6.8[17] million for 165,000 locations, which works out to 41.21 in year[18] one. But the structure of that agreement is not that we will[19] recalculate that effective rate as we go along. The structure[20] of the agreement as a flat fee is pay us $6.8 million a year.[21] We don't know care whether your locations go up or down, except[22] if they exceed 8 percent, in which case you have to pay us[23] more, and we will see you in five years and we will negotiate[24] the next one.[25] That's the structure of a flat fee agreement. And for

Page 908

[1] ASCAP flat fee agreements are great. You don't have to worry [2] about audits. You don't have to worry about reporting. It's [3] guaranteed income. But that was the essence of that deal. And [4] the suggestion somehow that that deal essentially is ASCAP [5] agreeing to some hypothetical effective per location rate that [6] at the end of the term drops all the way down to $28, because [7] under the assumption that Ms. Candell made that Muzak would [8] grow steadily to 242,000 locations, half of the entire [9] industry, and that they would do so organically is another[10] important point about this growth provision. The growth[11] provision is an organic growth provision. It is not an[12] acquisition growth provision. In fact, it is specifically[13] designed so that if Muzak acquires somebody else's business or[14] merges with DMX, the growth provision doesn't apply. This is[15] for the case where Muzak goes out into the marketplace and[16] signs up more customers.[17] So when Mr. Rich shows this chart, shows Muzak growing[18] from 2001 to 2004, there is no evidence in the record at all to[19] tell us whether or not that was organic growth or whether[20] Muzak -- there is evidence that Muzak has quite a few[21] affiliates who also pay at the same rates -- or whether Muzak[22] acquired one or more of its affiliates and merged, in which[23] case that growth provision would not apply. In fact, had we[24] known that they were going to make this argument, I think we[25] would have put that evidence in the record.



Page 909

[1] But what is clear is that in 2004, they are at [2] 163,000, and according to Mr. Gertz's chart, in 2004 ASCAP is [3] protecting not 8 percent growth, but 3.7 percent growth. So [4] the notion that ASCAP was looking at this to arrive at 3.7 [5] percent growth I think speaks for itself as how absurd that is. [6] Another aspect -- [7] THE COURT: OK. I am sorry. I think you were holding [8] up a chart, and is it the second demonstrative from today that [9] shows a 2001 to 2004 location count increase for Muzak?[10] MR. GLANCY: Right.[11] THE COURT: Now, I do think we have had examination at[12] trial about the -- I am trying to remember if it was Dr. Boyle[13] or who, but of an ASCAP witness about the understanding --[14] maybe it was Mr. Candilora -- about the understanding that[15] Muzak had had growth leading up to the year 2005. Am I[16] remembering that incorrectly?[17] MR. GLANCY: I think there was some testimony on that[18] subject, but there was never any inquiry as to whether or not[19] it was organic growth or through acquisition.[20] THE COURT: OK. Thank you.[21] MR. GLANCY: Now, the significance of this other[22] demonstrative chart, showing that ASCAP projected that others[23] would grow as well, is that this only shows three of the[24] players in the market. The essence of the Muzak agreement is[25] that if everyone takes it, in total ASCAP will receive the same

Page 910

[1] amount of license fees, because it's a flat fee deal, $6.8 [2] million, where everybody pays at the 2005 starting rate of [3] 41.21 per location. And then you figure out what the flat fee [4] is and you pay that for five years. So if everyone does that, [5] then ASCAP's license fees for the industry remain constant. [6] Now, for their own internal calculations, some of [7] these entities might say, well, that works out really well for [8] us if we grow a lot, and for some it works out really badly if [9] we don't grow, in fact we lose customers, and we concede that[10] application of that formula works out very badly for DMX, if[11] you're looking at it from an effective per location point of[12] view.[13] But what the Second Circuit advises us to do when we[14] are doing a willing buyer, willing seller analysis is to look[15] at what the parties reasonably expected at the beginning of the[16] term of the agreement. And if we look at what DMX reasonably[17] expected, Mr. Knittel was very clear, he reasonably expected[18] that he would grow from 75,000 locations to 100,000 locations[19] by the end of the Sony agreement in 2010.[20] THE COURT: OK. I do think we are switching. DMX[21] refused to sign the Muzak agreement.[22] MR. GLANCY: Right.[23] THE COURT: Now we are switching to a different issue,[24] which is at a different point in time, after DMX experienced[25] some significant losses for a variety of reasons --

Page 911

[1] MR. GLANCY: Right. [2] THE COURT: -- did it hope to grow and increase its [3] business locations? [4] MR. GLANCY: No. I am backing up to 2005 and 2006 and [5] saying Mr. Knittel testified that he expected that his location [6] count would grow over that term. So, therefore, to put [7] ourselves in the shoes of DMX and figure, what would they [8] reasonably accept? Would they accept the Muzak deal? [9] THE COURT: But they didn't.[10] MR. GLANCY: They didn't because they had their direct[11] licensing program and ASCAP would not include a carve-out for[12] the direct licensing. They didn't not take the deal because of[13] the financials of the 41.21 starting rate.[14] THE COURT: Do you have evidentiary record to -- OK.[15] I understand the argument. Thank you.[16] MR. GLANCY: Now, significant also is that in 2003[17] ASCAP had signed agreements with both PlayNetwork and Music[18] Choice that whatever emerged in the negotiation with Muzak[19] would be binding on both ASCAP and those parties. So it's[20] somewhat misleading to say that in 2010 ASCAP agreed to apply[21] the Muzak formula to Music Choice. That's not quite true. In[22] 2003, ASCAP agreed to apply the Music Choice formula to Music[23] Choice and it worked out -- again, looking at an effective per[24] location rate, it worked out to Music Choice's advantage by the[25] time you reached 2010.

Page 912

[1] But the deal with everybody in this industry was the [2] same. Figure out in 2005 what your starting point is. We will [3] figure out a flat fee for that year and then you pay us that [4] flat fee for five years. And if you grow by more than 8 [5] percent, you pay us more money. The deal was not a per [6] location rate, and you heard testimony that that was not a [7] consideration in the thinking of ASCAP when negotiating that [8] agreement. [9] Now, what is DMX's responses to all of these industry[10] agreements? It appears that their argument is that they are[11] all, quote unquote, infected with ASCAP's market power. Even[12] the agreements negotiated by the entire industry in 1987 and[13] 1994 are somehow infected with ASCAP's market power. Even the[14] Muzak deal, which is valued at $34 million. When Muzak signed[15] a five year deal for $6.8 million a year, it is worth $34[16] million. If Muzak thought it could save $5 million off of that[17] deal, they had every financial incentive to come to court and[18] argue that. In fact, with talented lawyers, they could perhaps[19] get a bigger discount off of that.[20] There was some suggestion as well that because Muzak[21] had insisted on the flat fee rather than the per location[22] structure, that that was some indication that Muzak expected[23] their location counts to increase so they could take advantage[24] of the flat fee structure. But I am going to offer you another[25] plausible interpretation of that. ASCAP gave a substantial



Page 913

[1] discount from its 2004 rate. $51.18 in 2004, ASCAP gave a $10 [2] cut to Muzak in order to get Muzak to sign a bargain with [3] ASCAP, but a bargain that would be applicable to at least two [4] other players in the industry. So Muzak may well have [5] considered that, well, even if our location counts go down, we [6] are still going to do better at the end of the day than what we [7] were paying last year. So, in a sense, there is no reason to [8] deduce that because Muzak accepted the flat fee deal, that they [9] expected their location counts to increase.[10] Now, I will talk just briefly about DMX's proposal,[11] the structure of it. You heard testimony from Professor Jaffe[12] about the floor fee and the pure music fee. In fact, these are[13] not things that are sold in the marketplace. These are not[14] things that one can trade. In fact, these are things that it[15] is not possible to sell independently. It's not possible to[16] sell a pure music right without an indemnification value[17] because that's what a license is, it's those two things put[18] together, and it's impossible to segregate them out and[19] separately price them.[20] He testified he knew of no counterpart in the[21] marketplace to this arrangement, but then on redirect he was[22] called to his own testimony about public utilities and how[23] that's separated. But the difference there is that there you[24] have actually separate things, things that are capable of being[25] separated. You have the provision of the power line, which has

Page 914

[1] its own cost structure, and then you have the generation of [2] electricity, which has its own cost structure. So it's [3] possible to take two separate things and figure out on a cost [4] basis what a reasonable rate of return would be for those two [5] separate things and then charge accordingly. But if we are to [6] take their structure in this case, we are entering uncharted [7] waters, in terms of pricing any commodity, any product at all, [8] much less the blanket license. [9] There was some suggestion that somehow ASCAP in its[10] papers referring to its publishers as marginal sellers was[11] deriding them. I think your Honor heard the testimony of Dr.[12] Greene as to what a marginal seller is. I just wanted to make[13] that clear. We did not mean that in a pejorative sense.[14] Briefly, I wanted to address the BMI decision. I[15] agree wholeheartedly with what Mr. Rich said. I think it's up[16] to your Honor to make your own independent determination based[17] on the record here. I will say that the record here is quite[18] different from what was before Judge Stanton, and we don't know[19] what Judge Stanton would do with the record that is before your[20] Honor. I would also point out that Judge Stanton's decision is[21] not a willing buyer, willing seller transaction. It's not a[22] deal. And that it is a district court case that is persuasive[23] authority to your Honor, to the extent you find it persuasive,[24] just as in every other case.[25] Another significant difference between BMI and ASCAP

Page 915

[1] is their consent decrees are fundamentally different. ASCAP [2] since 2001 has a per-segment license. They have that option [3] built into the consent decree and Trusonic has taken advantage [4] of it. BMI has no such provision in their consent decree. So [5] to the extent that that factors into the ability of BMI to [6] offer an alternative to the blanket license, that I think [7] diminishes the persuasive value of that decision. [8] BMI's consent decree also doesn't contain a definition [9] of blanket license, and that's another significant distinction.[10] Now, I guess in closing, your Honor, I want to bring[11] us back to sort of first principles, that your Honor's task, if[12] you find our proposal unreasonable in any respect, is to[13] fashion your own. You have before you a wide array of facts[14] and options. It could be a modification of our proposal that[15] includes a carve-out structure along the lines of what DMX has[16] suggested, but a base rate along the lines of what we have[17] suggested. You may think the 41.21 rate is too high, for[18] whatever reasons are in the evidence, and it's within your[19] discretion to adjust that however you see fit. But this is not[20] a competition between different proposals, where if our[21] proposal is unreasonable, that their proposal wins.[22] Again, coming back to the Supreme Court's decision[23] here, I think the fundamental threshold question that the Court[24] needs to answer is: What is ASCAP? What is ASCAP? Is it a[25] company that is selling, or a membership organization that is

Page 916

[1] selling a unique product that is valued by its customers in the [2] marketplace, for which it is asking reasonable compensation, [3] not just to cover its costs like the seller of wheat, but a [4] reasonable rate of return, if you will, for its members? Or is [5] ASCAP, as Justice White said ASCAP was not, is ASCAP really a [6] joint sales agency offering the individual goods of many [7] sellers? [8] I submit to you that the answer is the former and not [9] the latter, and I would ask your Honor to take all of this into[10] consideration when you're drafting your opinion, and I thank[11] you sincerely for your time.[12] THE COURT: Thank you, Mr. Glancy.[13] Rarely do I flinch from giving the opportunity to[14] exercise extraordinary power to fashion a reasonable solution,[15] but I must say I think it has to be tethered to the record, and[16] I know nobody is suggesting otherwise, and if I did something[17] unique and inventive here, I would feel, in fairness to the[18] parties, I would have to lay it out for you, give you some[19] chance to think about it and reflect on it and argue its[20] fairness and appropriateness.[21] So I agree that my task is to decide what a reasonable[22] rate is, but again, I express frustration that ASCAP chose not[23] to engage with the direct licensing program. And I understand[24] better, Mr. Glancy. Thank you for your summation. I guess[25] what you're trying to do is set this up for a confrontation



Page 917

[1] about more fundamental principles, and you didn't want to in [2] any way suggest that those were not so deeply held principles [3] that you could actually construct a reasonable rate for a [4] blanket license that took into effect the direct licensing [5] program in a reasonable way. [6] I beg to differ. I think the fact that you had [7] alternative proposals suggests that you understood there was a [8] mechanism for presenting your preferred alternative that would [9] have been based on the fact that you thought DMX should only[10] seek a per-segment license and had no right to a blanket[11] license with carve-outs. But that said, I think you should[12] have constructed an alternative that would have assumed that[13] you lost that legal argument and then came here with a well[14] constructed proposal for accepting the reality of a thriving[15] direct licensing program and what was fair in that[16] circumstance. And I say that particularly because of the[17] guidance given by AEI and Muzak 1. This isn't the first time a[18] court has had to think about these issues.[19] But that said, I will do my best, and I thank you all[20] for your efforts to educate me here.[21] Thank you.[22] (Adjourned)[23]

[24]

[25]

Page 917 (28) Min-U-Script® TRIAL


$

$1.875 835:11$10 913:1$10.74 837:12;838:9,16$100 887:12$12.50 881:21;882:7;885:20$13.74 839:13$15,677,777 822:16$17.92 838:22$2.7 886:10,19;887:14;889:1,3,20;890:1$21.39 839:14$22,000 894:6$230,000 817:3$25 833:18;834:3;836:22;837:7,14;843:17;845:15,21;879:17,23;880:4,6,7,9,12;881:17,23;882:4,4;885:1,13,18,23,24;886:3;888:19,22;891:10,16,24;892:15;900:24,24,25;903:19,20,23$25,000 817:1;818:20$25.53 838:3,9,18$26.84 828:2$28 908:6$28.05 827:20$29.89 829:25;831:12$3 839:7$3.47 839:8$30 834:4$31.83 828:3$32.52 827:22$33 830:7$34 912:14,15$34.60 830:19$37.69 831:12$40 830:2,8,11;885:13$41.21 822:24;826:18,25;827:13;880:11$43 845:11,14$46 828:8$49 822:17;828:10$49.50 845:10$5 912:16$51.18 913:1$6.25 888:23;890:24;891:20$6.8 907:16,20;910:1;912:15$75,000 816:20$86 888:6$900,000 887:3,11

0

09 845:12;856:8

1

1 813:18;816:8;822:10;859:5;861:25;863:2;864:19;866:2;887:21;917:1710 835:4;837:9;880:23;882:1100 887:10100,000 910:18107 823:20108 823:2011 828:21;855:23111 900:712 835:4;850:2;887:9,11,21;888:212.50 881:24;885:1713 849:1;887:21;888:213.5 888:314 864:9;887:1514.03 887:1914.3 823:1115 855:22,23;905:5150 835:7158 840:315E 854:11160 840:9163,000 909:2165,000 822:23;907:17167 832:2117 864:5170 832:2218 850:2;855:919 865:18,201941 867:211987 905:22;912:121994 905:22;912:131999 828:3;830:11

2

2 819:6;820:4;865:152.2 856:42.7 887:2420 856:11;901:24;902:3,4,5;905:520/20 827:42001 823:10;848:14;908:18;909:9;915:22003 906:11;911:16,222004 823:10,14,23;906:11;908:18;909:1,2,9;913:1,12005 816:15;822:18;823:13,23;826:10;827:12,21;828:3,9,17;829:10,13;884:7;907:13,14;909:15;910:2;911:4;912:22005-2009 830:32006 911:42007 845:11;887:13;893:182008 892:25;893:2,52009 816:15,24;822:17;827:12,21;828:3,4,9;

829:13;830:6,11;884:6;900:162010 816:23;821:4;822:18;826:4;828:10;829:3;864:7;887:18,21;910:19;911:20,252012 816:23;821:3;822:1821 834:20;859:522 859:5;864:6228-229 849:923 849:24242,000 908:825 887:125,000 888:11250 851:19;852:1266 856:5267 812:14;828:18268 828:18277 856:629 832:5294 851:25

3

3 837:6;839:9,123.4.3 814:223.7 823:17;909:3,430 815:24;832:23;855:9;879:20,22;902:25301 821:25304 815:8307 814:1432 885:1033 885:1033.33 888:2334 902:2536 834:18;836:1939 835:14

4

4 838:23;839:9,12;873:10;874:940 835:15;900:5401 859:4408 829:7409 829:1941 900:641.21 827:8;880:22;881:23,24;882:5,6;885:17;907:17;910:3;911:13;915:17425 817:11435 849:9436 857:1145 813:2146 843:25;853:1846.67 887:2247 844:15;853:1848 837:11;843:25;847:6;882:149 823:10;853:17499 854:10

5

5 839:9;880:24;881:1050 890:15500 833:14501 854:1051 853:17512 854:10532 852:24534 852:24538-41 851:1556 824:4567 833:15568 833:8;854:14569 854:1557 837:24573 832:25579 833:25580 833:25584-585 847:14587-588 847:155A 830:245B 830:24

6

6 864:4;865:13;887:760 835:2263 835:22;836:164 812:7;830:9,21;836:5,25;885:165 830:2,4,21;885:166 836:5,768 885:3

7

7 865:177.5 887:1170 879:24;886:1;888:2575 812:5;833:4;852:4;877:2475,000 887:1,6,10;910:1878 836:1;855:24

8

8 822:25;823:22,23;825:11,13;826:1,22;827:23;829:23;907:22;909:3;912:480 817:24;886:4800 874:4,4,14;879:19;889:1581 817:24850 812:19;832:2;838:14;850:22;851:7

9

9 831:12;865:1392 855:25

95 817:13

A

aback 890:25abandoned 862:13ABCO 904:14ability 877:19;879:7,16;915:5ABKCO 856:23;857:7able 887:15;888:4absence 872:23Absolutely 875:25,25absurd 909:5academic 830:14accept 844:5;911:8,8accepted 836:20;913:8accepting 825:3,5;868:20;917:14access 814:18accommodate 818:12;822:6;861:11;862:17accompanying 827:23according 909:2accordingly 855:2;914:5account 818:14;823:6;827:24;829:23;831:7,9;837:13;850:6;862:1;863:19;865:9;867:2;903:21accounts 873:20accurate 819:10achieve 818:8;879:15achieving 844:7acknowledged 817:12;829:17acknowledgment 853:5acquired 908:22acquires 908:13acquisition 908:12;909:19across 823:23;850:8;854:19;876:25act 849:10acting 847:4;849:5active 820:2actively 833:6;906:4activities 818:14activity 817:22;819:12actors 850:22acts 861:13;906:17actually 866:9;867:8,9;877:9;878:6;893:15;895:8,12;900:12,14,25;906:4;907:8;913:24;917:3add 812:13;890:2added 889:9addition 823:12;826:22additional 817:5;852:5;861:5;888:9address 819:6;821:12;862:6;872:9;873:25;914:14addressed 861:23Adjourned 917:22

TRIAL Min-U-Script® (1) $1.875 - Adjourned


adjust 915:19adjusted 816:25;817:3;820:7;822:17;846:15;907:8adjustment 818:12;824:19,25;831:8,9;839:7,8;846:15adjustments 831:20administrative 818:19;821:9administratively 820:14Administratively 821:7administrators 889:15admit 880:18admitted 832:15;889:5Admittedly 862:22admonition 830:16;848:4adopt 818:21;840:11;843:9;869:11;872:24adopts 814:3advance 836:24;837:17,23;838:7,17;851:12,14,16,20,23;852:8,13,18,22;853:14;886:17;887:23;888:6,18;890:11,12,12advanced 892:16advances 852:19;853:2,17advantage 826:23;836:25;868:10;878:2;911:24;912:23;915:3advantages 859:25adverse 835:2advises 910:13advocated 843:2AEI 813:18;816:8;848:6,11,13;861:25;862:6;863:2,8,20;864:1,4,8,23;866:2;906:9,10;917:17AEI's 863:13;864:5affidavit 813:21;817:24;819:23;830:2;832:5;834:20;838:10;839:10;849:24;889:2;894:1affiliates 908:21,22affirmative 817:7afforded 826:3,22affording 821:9affords 813:18AFJ2 813:22;816:10;822:12;848:3;858:18,19;861:11,23;865:12,14;866:14,16,17,18;867:18;868:22,23;869:6,6,15,20;870:1,20,23,24;872:2,11;875:14again 820:15;825:4;834:1;838:18,22;854:10;865:15,17,20;873:1;876:19;897:17;898:21,22,25;900:22;901:22;911:23;916:22Again 863:22;864:18;865:9;887:10;915:22

against 818:23;843:16;847:21;886:17;896:25,25;906:9,10Against 812:15agency 860:4;916:6agent 850:17agents 832:12aggregated 874:2aggregating 857:20;859:21aggregation 860:11;861:5aggregative 813:11aggressive 863:1ago 879:5agree 824:16;825:9,14;834:3;852:14;873:7;878:18;879:21,23;885:19;899:9;914:15;916:21agreed 812:7,9,12;822:22;823:4;829:9,24;831:23;840:16;889:1,3;903:23;911:20,22agreeing 823:6;887:5,13;908:5agreement 812:1;822:19;828:1;829:3,6,12,21;831:11;837:14,19,23,24;844:18;845:12;853:3,5;873:14,15,18,18;874:3,3,15,16,16,17,19,21,22;875:6,9;876:6;882:17,23;884:6,7,11;885:5,22;888:13,19,19;889:12,16,19,21;890:3,5,6,10,18;891:2,3,4,4,15,17,19,23;892:16;893:16,19,24;894:2,3;895:15,17,17,19;896:1,4,5,12;899:1,14,25;900:16,18,23;901:14,23;902:1,10,23;904:4,7,11,18;905:15;907:18,20,25;909:24;910:16,19,21;912:8agreements 812:23;813:24;825:22;831:18;832:5;833:5;843:22;847:4;860:21;861:9;873:6;874:4;875:3,11,12;877:18;879:17,19;881:7;882:9;890:17;896:9;899:22;900:11;903:8,10,11;904:23,23,24;905:17,18,19,21;906:15;908:1;911:17;912:10,12ahead 826:12alleged 855:1,14Alleged 854:22Allison 857:3allocable 845:20allocation 837:10;839:6allow 853:20allowable 827:18allowance 826:22,23

allowing 827:9allows 859:1;890:8alone 821:24;828:12,19;838:2,3;854:25along 907:19;915:15,16alter 844:19alteration 853:10altered 833:17altering 873:12alternative 816:7,10,14;817:8,17;818:12;837:15;861:15,16;862:15,17;863:3,20;865:21,23;866:14;888:21;889:17;915:6;917:7,8,12alternatives 889:18;906:5although 829:10altogether 853:21always 817:18amenable 853:9amended 867:21among 834:15;853:12;868:6;898:16Among 856:16amount 837:16,23;886:20;887:17;890:11;894:9;898:24;899:21,21;901:15;903:2;910:1amounts 813:6;823:11;894:10;900:11;901:20amplified 844:1analogous 829:18analysis 827:17;837:22;844:4;846:24;884:1;885:7;901:25;904:7,9;910:14analytically 840:12analyzed 831:7;837:19;838:7annual 822:22;823:11annually 834:17anomalous 815:6answered 883:2;901:23anticipate 897:8anticipated 826:21anticipating 825:25antitrust 848:5,13;867:21;869:23apart 820:23Apart 843:3apparent 820:15apparently 880:4;900:15appeal 864:1,5;883:19appealed 883:18appear 883:3appearing 815:8;823:9,15;830:1;895:5appears 826:20;830:25;854:17;912:10appended 864:6apples 844:25;881:22,22applicability 891:5applicable 897:4;913:3

applicant 868:3,4applicants 863:16;868:8applicant's 831:20;869:12Applicants 865:16application 910:10applied 821:14;853:5applies 852:25;896:18apply 854:4;890:23;891:6;908:14,23;911:20,22applying 824:25;853:17appraisal 837:1appreciate 851:5;905:8approach 839:3appropriate 833:17;838:19;839:5;840:1,5,19;861:22;873:6,21appropriately 857:15appropriateness 916:20approximate 812:1;831:15approximates 857:18approximating 833:22architects 891:4area 905:20argue 819:13;854:21;862:18;872:1;912:18;916:19argued 863:25;864:14,15argues 836:20;853:19argument 821:12;837:13;851:12;879:19;908:24;911:15;912:10;917:13arisen 860:2arising 817:21;905:21arose 873:19;875:11,12,13around 830:11;882:4;887:20arrangement 877:10;913:21arrangements 828:23;863:20;877:7array 915:13arrive 839:6,23;842:3;909:4arrived 842:6Arrow 834:14,22;875:7;885:21Arrow's 835:13Article 864:9articles 895:6artificial 845:22;846:2;875:13artificially-inflated813:2ASCAP 812:9,14,15,18,23;813:3,12,20,22,23;814:3,4,6,11,19,20,23;815:5,9,14,17;816:1,9,16,18,20;817:10,12,15,19;818:10,17,18,25;820:13;821:1;822:12,13,15;823:3,

6,12,19;824:2,13;825:5,21,25;826:18;827:5,25;828:7;829:20,22;831:1,3,19,23,25;832:4;834:16,17;835:8,16,21;836:20;837:11,18,21;838:21;839:4;840:2,14;842:2,17;843:16,22,22;844:17;845:2,7,19,24;846:2,22;847:17,19;848:2,22;849:3,14;850:7,11,15,16,19,24;852:6,11,20;853:11,14,19,21;854:16,23;855:16;856:2;857:15,16,20;858:12,15,20,22,24;859:11,12;860:2,4,9,11;861:6,6,19;862:20,25;864:24;865:6,14;866:18,23;867:18,23;868:2,3,4,5,6,8,11,12,19,20,24,25;869:5;870:4,12;872:14,17;873:3,16;874:23;875:18;877:8;879:25;880:20,22,22,23;881:8,19,21;882:5,5;883:7,9;884:2,7,8;885:16;889:17;890:15;892:13;896:2,11,19;897:3,19,21;898:15,18;899:23;900:15;901:4,5,6;903:14,15;904:23;905:20,25;906:11;907:7,10,14;908:1,4;909:2,4,13,22,25;911:11,17,19,20,22;912:7,25;913:1,3;914:9,25;915:1,24,24;916:5,5,5,22ASCAP's 812:5,25;813:15,17;814:15,22;815:2;816:2,3,7;817:17,24;822:2,15;823:16;824:18;828:15,16,19,23;829:1,6,8;834:14;835:18;836:23;837:13;840:15,18,19,25;843:4;844:20;848:17;849:4,18;850:20;851:12;855:6;856:25;858:1,15;862:9;865:4,23;869:4,12,16;870:8;872:20;873:25;879:18;880:10;896:2;898:1,11;904:22;905:16;907:7;910:5;912:11,13aside 825:19aspect 844:23;882:20;909:6aspects 821:9aspirational 819:25asserted 814:18;830:24;831:4assertions 850:13assess 869:18asset 873:9,9associated 835:11assume 844:18;847:7;862:11;881:1,18;887:8;888:1,4,12;895:9

adjust - assume (2) Min-U-Script® TRIAL


assumed 917:12assumes 823:17;887:24assuming 816:23;838:18,20;839:7,8;884:20;888:8assumption 846:6;849:10,16;908:7assumptions 815:23;826:16assured 894:12asymmetry 843:23;847:5attack 840:25attacks 813:5;843:17attempt 831:3;837:18;850:10attempted 850:7attempting 835:20;848:18;854:19attested 832:24;834:2attorneys 905:23attributable 860:10audits 908:2August 866:21authority 863:18,23;869:7,15;914:23automatically 865:14,16availability 848:7available 816:13;845:18;883:2;907:5availed 906:8average 827:22;828:8;830:7,10,16,18;885:13averages 830:12,16averaging 830:12,13avoid 814:9;853:20avoidance 899:8avoiding 844:6aware 822:24;832:8;882:6;884:20;895:5away 854:12;877:3;880:14AX-131 814:23AX-233 823:9AX-265 856:5

B

back 812:23;820:6,16;827:1;833:23;839:1;850:12;866:15,20;867:16;880:1;887:13;897:10;906:3;915:11,22background 812:12;822:8;828:17,20;839:5;858:11;868:15;885:2;903:11;906:5,8,14background/foreground877:5backing 911:4badly 910:8,10balance 850:21;887:23;888:6bar 864:16

barely 828:24bargain 867:18;875:23;876:24;889:1;913:2,3bargaining 875:16;877:1;878:2;893:5Barry 902:21base 822:16;824:19;915:16based 822:18;830:24;839:4;842:3,5,21;845:10;869:3,7;880:10,11;881:18;883:11;914:16;917:9Based 883:2bases 821:8basically 870:6basis 812:6,8;814:3;818:16;820:6;828:12;829:5;854:11;857:13;872:6;885:14;894:13;914:4bears 859:15beg 917:6begin 858:5beginning 910:15begs 846:15behalf 814:2;819:16;831:25;833:13;838:16;857:14;860:13,14behavior 826:16behind 856:11;880:1;887:23belief 833:19;892:24;893:1belies 837:14below 826:24;856:18;886:3,3benchmark 829:7;837:15;860:21;861:8;873:6,12,12,13,15,17,18;874:2,2;877:18;900:19;903:24;904:22,23;905:16benchmarks 812:5;843:20;873:21,22,24,25beneath 828:24beneficial 859:18;885:8benefit 814:13;827:2,4;829:14;852:17;879:6,8Berlin 832:18best 839:18;882:24;883:1,3;917:19bet 893:15better 818:6;842:18;892:7;894:19;913:6;916:24Beyonce 832:19beyond 817:3;842:19big 883:14;901:8bigger 846:5;912:19biggest 883:15biggie 904:14binding 911:19bit 876:6;880:17;905:3black 813:25blanket 812:23;813:14,19,23;814:4,8;815:3;

817:13;818:24;822:1,5,16;838:21;848:9;854:1;857:15;858:13,22,22;859:11,17,19,20;860:3,3,6,9,20,24;861:7,8,15,17;862:2;863:4,9,13,19,25;864:3,10,11,15,23;865:8,21;866:13;867:1;869:18;870:6;872:7,11,12,23;873:4,16;876:23;877:10;879:5,6,9,14,18;892:2,6,20;896:11;898:10,14;914:8;915:6,9;917:4,10blended 838:21Blugh 875:4;903:7blunt 850:10BMI 820:8,10,13,20;821:13;832:4;834:17;835:8,12,16,21;836:8,11,12;837:2,4;839:20;840:3,6,14,20;842:7,17;846:22;847:17,19;853:22;856:11,13,22;857:3,5,6,7;859:4,14;860:2;862:21;863:1,12,18;864:2,16;875:18,19;881:20;883:7,9,19;884:2;889:5,10,24;890:15;895:3;906:9;914:14,25;915:4,5BMI's 835:10;836:14;863:21;864:15;915:8board 834:16;892:4body 831:22bolster 831:3book 815:22books 845:24borrow 816:12both 822:1;825:12;829:13;834:17;853:15;856:10;859:18;862:15;873:8;880:1;898:16;911:17,19bottom 823:21boundaries 868:22Boyle 812:11;814:10,17;815:8,16,21;817:12;821:25;823:3,7;825:22;828:6,10,14;845:25;846:24;849:8;850:4;898:18;909:12Boyle's 813:21break 834:20;837:4breaking 836:18brief 848:5;864:2,5,6;865:13,16briefed 865:2briefing 832:17;843:1;865:3,11briefly 821:19;830:16;904:22;905:16;913:10Briefly 914:14bring 825:15;905:14;915:10brings 866:14

broadcasters 868:16brought 904:17;905:13;907:1budget 823:13;824:7;826:21Bug 853:15;854:18;875:1;893:23,24;894:4,6,9,21;898:5,23;899:14,16,20,24;902:2,9;903:25,25;904:4built 915:3built-in 816:3bundle 870:9burden 829:2;843:12;868:12,24;869:1burdens 867:22Bureau 907:5business 818:5;824:10;858:15;902:16;903:13;906:13,14,15,20;908:13;911:3buyer 818:2,8;869:17;873:6;874:5,8,11;910:14;914:21buyer/willing 873:5,22buyers 859:18;905:19

C

calculate 830:10;888:5calculated 818:24;890:13calculates 839:4calculating 865:24calculation 830:17;837:15;852:25;853:7;880:25;884:19;886:14;887:24;888:1;898:19;907:3calculations 837:6,9;886:24;887:12;888:15;907:4;910:6calculator 907:4call 813:9;837:8;847:16;886:7;903:18called 813:13;831:18;874:18;913:22calling 828:20;842:20;843:6calls 828:1,9;856:12;892:25came 812:15;819:1;845:19;855:20;883:5;917:13can 817:9;820:19;830:23;845:7;847:23;848:8,15;861:19;863:5;866:9,9;867:16,24;875:23;876:25;878:1;879:15;880:17;882:11;886:25;890:25;892:12,12;893:17;897:3;906:6;907:11;913:14Can 866:5;880:8Candell 813:9;823:4;829:24;831:11;837:15,21,25;838:8;839:4;872:15;

908:7Candell's 827:17;830:17;837:6;838:10,23;839:10candidly 832:15;834:22Candilora 823:3,7;824:5;828:11;832:15;840:2;900:14;909:14Candilora's 823:14;824:1,4;825:17;836:13capable 913:24Capital 877:15capturing 880:13care 821:7;907:21carpet 903:18carry 829:2cartel 818:1cartel's 818:3carve-out 818:13,18,21;822:1,5;863:9,13;864:3,10,11,15,24;865:22;872:7,24;897:14;899:13;911:11;915:15carve-outs 917:11carves 899:4,4carving 872:25case 814:4;818:10;820:8;822:20;828:7;831:14,15;836:11;837:2;838:5;839:13,21;840:16,16;842:25;853:9;859:8;860:22;863:15,17;867:8;870:18;873:25;877:15;888:18;906:10;907:22;908:15,23;914:6,22,24cases 900:13catalog 813:24;822:9;877:20,23;878:21;889:16;890:2;895:17;898:24;902:10catalogs 812:20;832:12catalogue 849:12;864:22;865:1,7catalogues 868:4caveat 843:7CBS 859:4,14CEO 834:14;835:18,19,24,24;836:24certain 843:21;848:22;863:21;878:17,22certainly 839:14;845:14;853:1;883:15;897:6;898:19;903:12Certainly 856:25cessation 866:12challenge 896:20challenged 843:13chance 866:22;916:19change 842:6;876:6characteristics 859:25characterize 902:12characterized 830:6;836:24characterizing 856:17

TRIAL Min-U-Script® (3) assumed - characterizing


charge 848:8;858:17;869:1;914:5chart 846:13;849:1,18;850:6;887:17;893:15;900:21;903:17,17,22;904:16;908:17;909:2,8,22charts 886:23check 886:11;889:22;900:25;901:2;907:10cherry 854:22Cherry 847:13;853:3,9,16;856:9,14,20;857:8;875:2;882:21;883:20;884:1,11,18,20;904:6choice 826:13;859:4;862:20,21;882:6;892:14Choice 812:10;823:22;824:14,22;825:12,25;826:3,14,25;827:2;829:3,9,18,21;830:5,22;831:5,10;873:10;874:9;911:18,21,22,23choices 862:19,23Choice's 911:24choose 815:5chooses 815:12chose 862:14;916:22Cialdella 853:16,18;855:5;856:12,14,16;875:2;882:20;884:5,24Cialdella's 856:10circle 813:1Circuit 848:5,11,14;873:10;910:13circumstance 829:18;850:5;854:8,8;869:8;897:20;901:12;917:16circumstances 831:21;834:19;864:13;872:8;873:17;874:9,11;878:3;901:10citation 870:14citations 857:2cite 824:5;884:25;900:4,5cited 856:2;864:5cites 855:16Cities 877:15claim 830:1;854:5;869:23;896:23,24,25,25;897:1claimed 854:7claims 822:16clarify 881:16;885:16class 830:16clause 847:15;852:20,23,24;853:4,13,19,20;854:21;890:7,8;895:16,24;902:19clauses 852:17clear 822:10;849:20;853:5,22;854:12;856:10;858:11;859:9;872:21;877:8,12;886:10;905:11;909:1;910:17;914:13clearly 825:16;826:15;

859:6,24;877:25client 898:8clients 820:10;879:8;882:25;883:4client's 831:10closely 815:23;856:1closer 880:6closing 858:6;905:11;915:10cloth 830:25clouds 828:25cobble 836:14collected 815:18collection 895:22;897:5collectively 832:5colloquy 815:7;839:14;848:24;852:3,15column 845:19combination 856:3combined 813:10;816:21;835:20combining 813:6comfortable 842:20;843:5coming 820:16;850:6;915:22comment 901:19comments 821:21commit 845:25;892:10commitment 891:13commitments 854:13commodity 914:7communicated 833:23;893:7communication 892:23companies 833:14;868:15,18,18;905:22;906:5,8company 874:16,18;884:21;894:16;915:25comparable 820:2comparative 846:16compare 849:3;881:7,22;902:1compared 830:23;906:14comparing 843:21;881:23,24;885:18comparison 829:10;845:22;880:10;882:4;885:2comparisons 844:25compelling 829:1;832:7compensate 867:12;898:11compensated 898:2compensating 859:12compensation 870:8;916:2compete 844:8;860:2competing 818:5,8competition 818:4,6;844:2,14;847:25;848:1,3;915:20competitive 812:2,17;

813:3;818:2;824:12;831:16;840:18;842:17;843:4;844:3,4;847:21;857:19;873:19;875:11,13;876:21;877:16;892:17competitively 892:18competitors 812:24complete 848:25completely 822:14;849:4;889:18completeness 899:7complex 820:14complicated 846:1compliment 862:12component 870:7composed 859:20composition 895:21,23compositions 859:2,10,21;860:7,11;896:2,3compound 823:11comprehend 881:7compulsion 873:7computation 839:1,3concede 910:9conceded 812:11;821:25;828:14;829:5;846:9;849:8;850:4conceivable 846:21;849:18concern 820:15concerned 852:20;885:25concerning 823:1concerns 834:25;857:1conclude 828:1;891:23concluded 837:2;885:8concludes 828:5;843:22;856:20conclusion 844:1;855:7;857:12;885:7,14;905:18conclusively 832:10condition 843:11conducted 850:19conference 866:21conferences 866:24confidentiality 890:7,8confirmation 892:24confirmed 903:1,9confront 861:10confrontation 916:25confused 861:4confusing 880:18confusion 829:11;880:7conjecturing 850:21conjunction 861:14connection 830:20Conner 819:10;820:5,16,23,24;864:19;865:2,12;867:5;869:10;877:14consent 861:11;863:23;864:16,20;865:4,6;870:21;872:18;907:9;915:1,3,4,8consequences 824:25;

849:11consider 818:11;849:12;865:21,23;873:11;874:9,10;875:10consideration 821:23;833:23;867:4;894:22;901:21;912:7;916:10considered 885:5;898:18;913:5considering 872:20;901:16;903:2consistent 823:4;825:23;826:4constant 910:5constitute 832:6,24constituted 837:17constraint 848:6construct 891:1;917:3constructed 917:12,14construction 861:25;864:20;891:1construe 870:20;895:7construed 865:6consultation 898:8consumers 859:24contact 835:18contain 915:8containing 853:13contemplating 892:1contemporaneous824:5contend 893:4,6contended 834:11contest 869:4context 842:23;863:4continue 868:20continued 814:18;823:12;849:12Continued 841:3;871:2;906:21continues 818:3;898:4contract 852:23;854:17;866:18;867:20,20,22;869:22;870:10,11,13,15,20,21;871:1contracts 852:17;897:15contractual 853:24;854:13contradict 824:7contrary 813:25;851:4;855:5,7;872:18;891:2;895:19contrast 828:6controlled 896:3controlling 877:24controversy 877:6conversation 835:25conversations 854:23;893:1convey 856:22;874:23conveyance 814:7;843:24conveyed 814:24;873:15,

16;892:20;893:10,21;896:7convince 863:6copy 848:15copyright 814:25copyrights 858:24core 860:8;866:15;906:20corrected 907:2correctly 831:7;836:24correlation 840:12,13cost 837:3;842:16;859:25;860:17,18;914:1,2,3costs 818:19;819:1;857:20;859:10,16,17;860:12;870:8;916:3counsel 832:16;863:16;889:11;901:18;905:23count 830:5;886:16;888:8;909:9;911:6counter 834:4counterpart 836:13;913:20counterproposal 831:13countless 832:20counts 912:23;913:5,9couple 819:3;901:17course 827:12;840:10;842:24;858:7;859:18;865:3;866:24court 813:10,13;816:9;818:11,21;819:11,15,24;820:1,6,18;821:23;834:2;835:3;836:4;837:7,18;839:23;840:2;844:18;863:10,11,17,25;864:1,2,8;865:20,22;866:2;868:7;873:5,11;874:5,6;879:17;891:7;895:10,11;896:15,16;900:19;905:13,14;906:6,9,10;907:12;912:17;914:22;917:18Court 843:9;853:23;857:14;858:14,25;859:23;860:8;862:8;863:15;866:15;868:23;869:2;915:23COURT 819:5,9,21;821:11,16,18;824:8;825:2,10,19;826:6,8,12;827:14;833:2;840:24;841:1;842:1,12,15;843:12;844:16;845:7;847:1;848:10,16;851:5,24;852:9;856:7;857:24;860:16,19,23;861:10,16,24;862:4,9,13;866:5,7,20;867:13;872:1;876:7,11;877:4;878:10;880:13,16;881:3,9,12,14,25;883:8,17,25;884:9;886:21;892:19;893:9,13;896:5,22;897:8,19,23;898:4;902:4;905:1,6;909:7,11,20;910:20,23;911:2,9,14;916:12

charge - COURT (4) Min-U-Script® TRIAL


courtesies 857:23courts 869:10;870:20;873:2court's 863:22Court's 859:14;866:16;869:1;915:22cover 857:20;916:3covered 814:8;859:2;875:22;906:19covering 812:20;853:14CPI 822:17;907:3,4,4crafted 890:8create 825:3created 858:20,22;875:14creates 858:25;898:11creation 860:24credibility 833:12;890:2credit 820:18;821:7;844:22credits 813:18;818:15,23;857:15critical 878:23;879:15;880:20criticisms 813:4;879:21critique 843:18critiques 843:16cross 834:7;878:12cross-examination834:1;889:5crowd 880:18cumulatively 901:1curiously 890:7current 832:19;846:14;878:3currently 885:9Currently 832:23customer 877:21customers 868:7;876:4;878:25;908:16;910:9;916:1cut 913:2

D

damage 833:12data 813:8;820:12;823:9;826:20;831:22,25;838:5,7,13;839:4;843:10;845:8;848:21;849:3,4;850:11;878:8;888:14,16;899:19database 876:2,3date 843:21;845:10;850:2;851:25;887:18David 832:17;874:18,19day 846:18;866:3;876:6;888:15;913:6deal 815:5;823:6;825:23;826:4,14,19;827:1;829:9,10,16,19;830:3,23,24;831:4,5;833:8;851:9;883:5;884:5;885:19;886:12;889:20;890:1;891:24;892:15;894:24;895:2;902:13,18;903:14,23;

907:15,15,16;908:3,4;910:1;911:8,12;912:1,5,14,15,17;913:8;914:22dealing 901:12dealings 828:17;850:15deals 814:20;868:9;905:25;906:2dealt 902:20decades 873:2;907:6decades-long 905:19deceitful 843:24December 823:14decide 842:8,10;845:24;869:7;897:13;904:9;916:21decided 856:24;863:10deciding 865:23decision 821:13;839:18;843:2;849:10;852:4;856:11;859:14;883:18,21,24,25;895:3,5,12;903:4;914:14,20;915:7,22decision-making835:17;852:13decisions 844:13;847:8declaration 864:6decline 824:3;907:11declined 907:8declining 825:18decrease 878:13decree 861:11;863:18,23;864:16,21;865:5,6;870:21;872:19;907:9;915:3,4,8decrees 915:1deduce 913:8deduct 899:23deduction 837:10deeply 917:2definable 822:11defined 863:16;864:22;865:1defines 872:11,12definition 845:17,19;915:8degree 814:5;815:4;873:18;878:8,17,22delay 859:2deliver 860:14;879:7delivering 859:11;860:12;870:8delivers 861:6demand 877:21demonstrably 830:4;854:3demonstrate 835:20,23;848:21;850:24;852:6,11,21;882:11demonstrated 822:19;830:14;850:20demonstrates 819:14;827:17;832:11;849:23;853:7demonstrating 829:2demonstrative 815:21,

25;823:8,15;826:17;838:1,11;880:9,19;901:4;909:8,22demonstratives 837:21;858:6Department 865:3,4,5;867:19;870:5,16depend 877:19,21,22depending 872:13depicted 839:11depiction 823:9deponents' 850:25deposition 834:7;835:4,14,22;836:1,25;845:25;856:10;874:24,25;875:1,2,4,5;884:25,25;885:1;888:25;901:24;902:25;905:10,13Deposition 836:5,7depositions 850:19,21;853:15;855:6;893:9deprived 878:3deriding 914:11derives 879:8deserves 821:20designed 908:13desirability 877:20desire 814:12;878:24despite 816:15detail 856:14;867:9details 894:2;902:23determination 832:6;836:4;839:25;842:4,6;844:19;866:3;895:11;914:16determinations 895:10determine 840:8;864:3,9;886:25;902:1;904:10determined 836:17;861:8determining 838:5;872:22;873:3developed 832:25;833:3;856:24developing 827:7;833:9,16differ 917:6difference 820:23;885:16,17;913:23;914:25differences 830:24different 833:22;843:10;845:10;847:13,14;852:2;853:4;858:12;859:23;860:4;868:7;869:19;873:1;877:7;885:19;892:3,8;901:11;904:1;910:23,24;914:18;915:1,20differentiates 859:19differing 827:24difficult 833:8;834:19;881:7digits 894:17diminishes 904:16;915:7diminution 844:6

direct 812:1,19;813:5;814:20,23;815:10,12,17;816:4,18,21,22,24;817:1,3,14,19,19,22;818:13,14,15;822:7;832:1,17;834:21,23;835:1,13;836:3,9;838:6,18;843:16;845:3,21;846:6,8,19;847:3,23;848:7,18,23;849:6,11,13,15,16,22,25;850:4,11,23;851:1,12,20;852:14;853:20;854:7,20;855:12,13,17;856:17;857:16;861:12,12,13,23;862:1,16,17;863:3;865:9;867:2,6,10;872:4,6,9,23;874:2;875:24;876:4,5,18;878:11,13,15;879:21;882:8,12,20,23;886:5;889:19;892:9,11;893:17;897:9,23;898:10;902:13;911:10,12;916:23;917:4,15Direct 888:9directly 815:19,24;816:16;817:9,9,16;832:24;851:3;856:21;861:19;872:18;876:9,14,18;879:8,10;898:17disagreed 855:6disavowing 832:15disclose 845:13disclosing 890:11discordant 823:25discount 813:22;912:19;913:1discovery 867:7,7;868:9;881:6discredit 812:25discretion 864:2;869:6;870:25;915:19discriminate 868:6discuss 902:17discussed 849:7;889:10;902:9discussion 902:12discussions 902:8disincentive 816:3Disney 847:14;856:23;857:7;904:13disparity 828:12dispute 854:6;896:18,21;897:2,4,7disputes 881:25;896:9disputing 882:2dissuade 836:15distinct 813:11;819:20distinction 853:8;880:20;915:9distract 837:18;867:13distracted 826:8distraction 850:9distribute 881:17;898:14distributed 815:18distributing 845:18

distribution 843:22;846:2;880:10,11,21;894:5;897:21distributions 815:2;835:21;845:3,9,19district 863:11,17;914:22divide 898:16division 848:5,13DMS 881:20DMX 812:14,15,18;813:18,22,23;814:4,6,11,12;815:18,20,25;816:5,19,23,25;817:2,4,8,16,18;818:15;819:1;820:25;821:22;822:1,4,13;823:22;824:14,22;825:12;828:8,19;829:18;831:24;832:14;833:7,16,23;834:9,23;835:7,12,19;836:1,2,6,10,15,17;838:15;840:3;843:12,19,21;844:17;845:15;846:17;847:11;848:23;849:2,13,18,20;850:1,15,17;851:14,22;852:21;853:9,20;854:6,12,14;855:2,10,12,12,18;856:4,15;857:14;858:9;859:6,11;861:22;864:21;867:12;869:18,19;870:6;872:16;874:1;875:16,16,18,23;876:22;877:11;878:1,19;879:4,10,12;880:25;884:10,12,12;885:16,19,25;886:21,22;887:7,8,14;888:4,24;889:10,14,24,24;890:8,10,14;891:9;892:19;893:18;894:10;895:19,22;896:1,11,25;897:5,8,10,23;898:4,15;899:15,18,19;900:9,24;901:11;902:9,14;903:14;905:14;906:10,17;908:14;910:10,16,20,24;911:7;915:15;917:9DMX/BMI 851:21DMX's 812:1;817:14,22;818:14;822:14;827:25;828:21;831:13;832:17,23;833:18,19;835:7,21;837:7;842:8;843:24;848:18;853:24;854:9;857:13;863:16;870:3;872:21;873:20,24;880:11,24,25;881:2,17,19;888:8;894:4;897:14;903:13;906:13;912:9;913:10document 823:21;824:12,17;826:9,10;827:4documentation 831:2documents 824:5DOJ 865:11,18;876:24DOJ's 865:16Dolinger 816:12;831:17;

TRIAL Min-U-Script® (5) courtesies - Dolinger


845:13;869:11dollar 817:5dollars 834:17;901:15,17;905:25done 826:2;837:21,25;838:8;854:14;869:10,17;874:5,6;886:24;888:15;907:4dose 847:19dot 903:17;904:17dots 900:22double 815:9;847:15;850:3;853:19;854:9;887:8;890:15;895:16,24;899:2,11;900:10doubles 878:14doubt 877:19;899:9down 826:24;835:21;867:8;875:16;885:6,6,22;888:25;907:21;908:6;913:5Dr 812:11;813:8,9,21;814:10,17;815:8,16,21;817:6,12,23;821:25;823:3,3,7;825:21,22;827:17;828:6,10,14;829:5,11,17,24;830:1,9,12,14,17,20;832:3;837:6,15,21,25;838:8,10,22;839:4,10,15;843:25;844:4,11;845:25;846:11,24,24;847:2,5;848:21,24;849:7,8,8;850:4,5,13;852:15;857:9;859:8;872:15;898:18;909:12;914:11drafting 916:10drag 850:7dramatically 816:17drew 885:7drive 826:24driving 844:13drop 823:21dropped 850:1drops 908:6drove 826:4due 899:14dug 867:8during 834:7;850:17;851:21;857:23;881:6;895:21;896:8;902:7duty 852:21DX-257 856:11,13DX-273 836:10DX-274 857:4DX-294 851:19,24DX-307 823:15dynamic 818:13,18,21;820:2;821:9

E

earlier 812:9;816:9;829:19;831:9;888:10;895:3early 855:4;864:20;

892:24;893:2earn 816:1;849:14;900:25earned 883:4;899:20;900:23earning 898:24earnings 894:5earns 844:10ease 821:9easier 898:12easily 856:5easy 820:9economic 817:8;824:24;825:24;827:2;828:15;829:14;832:3,7;840:25;843:17;848:17;850:10;872:8;873:16;874:9,10;901:10,12economically 817:21economics 813:7Economists 847:6economy 858:25Ed 834:14,22;875:7educate 917:20effect 834:6;849:17;861:24;883:13,21;893:16;896:18;917:4effective 812:6,8;822:23;826:3,24;827:8,11;828:2;829:25;830:22;848:6;887:5,12;907:1,19;908:5;910:11;911:23effects 835:1effort 812:25;813:2;814:1;847:24;901:15efforts 816:9;830:21;850:9;917:20either 822:1;837:19;866:2;869:11;874:7;886:16;888:22;890:11;892:4,12;902:23either/or 822:2electricity 914:2elicit 855:7elicited 850:16eliminate 818:7eliminates 818:1else 845:22;846:25;880:5;886:5;895:15;900:10else's 908:13elucidated 852:24e-mail 892:23e-mails 854:23embarked 817:1embodiment 860:19emerged 911:18EMI 819:21emphasis 899:13empirical 812:16;813:1,8;878:8empowered 877:9,11enabled 829:13encapsulation 844:4end 836:6;839:13,14;

843:15;844:10;892:5,5,6,21;893:18;908:6;910:19;913:6engage 863:1;916:23engaged 816:21;866:22enormous 821:10;858:25;901:6enough 817:10;877:2;900:24ensures 817:17entails 837:9enter 849:11;902:13,23entered 826:19;868:9;870:10;884:7;893:17;894:24;904:4entering 835:1,13;836:9;914:6enters 876:17;903:15entertain 834:10entire 818:10;824:20;827:20;828:3;837:16,24;838:5;857:13;877:6;887:9;896:8;900:1;902:22;908:8;912:12entirely 817:11;877:8;884:4entirety 837:22entities 816:5;823:23;824:15;831:19;856:9;910:7entitle 852:17entitled 822:1;860:9,12;863:24;864:15,23;865:16,19entitlement 853:25entity 812:18;820:25;860:13entry 837:3environment 873:19;875:11,13;877:6,14equal 828:12;840:3,6,8,17equation 815:2equitable 898:1equitably 898:16erred 863:17erroneous 813:20;907:3essence 819:12;907:14;908:3;909:24essentially 839:21;860:13;861:25;862:15;870:21;872:8;906:17;908:4establish 849:4;872:25established 834:15;845:4;857:19establishes 822:21establishing 858:9,10estimate 813:10estimated 822:22estimates 818:19even 812:13;831:9;842:9;846:5,21;860:1;880:4;886:14;888:15;889:10;913:5Even 812:4;853:22;886:2;

912:11,13event 854:2;884:1eventually 844:7everybody 846:9;910:2;912:1Everybody 878:19everyone 844:10;891:19;909:25;910:4evidence 812:16,21;813:1,5;815:23;818:22;819:22;820:1;822:19,21;829:1;830:1;831:1,6;832:10;836:10;837:1;839:22;847:3;849:23;851:19,22;854:24;855:2,8,11;857:4,11;860:16;869:3,7;870:15;874:21,23;878:5,14,16;886:9;892:19,21;895:4;903:12;905:17;908:18,20,25;915:18evidenced 823:13evident 820:4;840:18evidentiary 911:14exactly 817:25;826:25;831:24;837:24;849:21,23;869:10examination 909:11examined 866:4examining 812:4example 815:24;821:4;825:25;854:16;855:3;874:18exceed 825:13;907:22exceeded 886:20exceeding 826:1except 868:5;876:9;907:21excerpt 834:7excess 828:21;858:23exchange 868:19;878:4;886:11exchanges 843:10exclusively 868:3;880:2Excuse 833:2;852:9execute 821:1executive 834:22exercise 838:19;877:17;916:14exercising 864:9exhibit 824:9;848:12Exhibit 856:11exist 840:13;885:10existence 862:16;872:3,6;884:18existent 822:3exists 878:9,19expect 819:6;825:2,5;849:14;894:19expectation 823:4;824:3,18,24;825:17;827:10;886:13expectations 826:10expected 824:13;825:7;

826:23;849:13;850:14;851:18;888:17;910:15,17,17;911:5;912:22;913:9expecting 824:14;826:18expend 901:16expenditures 816:24;817:14expenses 839:5,6expensive 851:6experience 812:2;823:13;833:5;850:11;894:21experienced 905:24;910:24experiencing 883:20expert 832:3;851:2experts 813:12;831:3;833:1,4expires 876:19explain 844:3;863:5;880:17;899:17;905:15explained 836:5;854:3;870:1explains 829:24;899:13explicitly 838:10;853:6;855:6exposes 848:20express 916:22expressly 814:24;828:9extending 906:19extension 867:23extensive 829:22extent 817:2;819:23;821:13;825:25;840:16;859:22;860:3;872:13,17;875:10;876:9,14;914:23;915:5extract 823:15extracted 827:2;856:5extraordinary 835:7,14;916:14extrinsic 870:15

F

face 812:5;813:17;888:16;896:10faced 864:19;888:14;891:22;898:9facilitated 875:14facing 873:17;901:10fact 825:18;826:1,25;827:1;829:11,17;844:10;849:20;851:15,17;853:13;855:16;861:13;863:25;867:3,20;868:7;870:4;874:3;876:16;879:2,10;883:12;884:22;887:19;888:21;890:3,11;894:23;897:12,17;900:23;903:9;904:3;906:7;908:12,23;910:9;912:18;913:12,14;917:6,9

dollar - fact (6) Min-U-Script® TRIAL


factor 894:25factors 831:8;873:11,13;891:25;915:5facts 867:8,10;873:8;882:6;915:13factual 863:10;864:19;866:1,3,4,8factually 819:20fail 812:1;873:21failed 835:23;849:4;852:6,11,21;855:17fails 831:5;868:25failure 812:15;829:1fair 833:11,19;838:6;851:7;860:9,19,23;861:7;869:18;873:3;888:18;917:15fairly 831:8;862:18;880:2;881:3;898:2,11;903:3;904:19fairness 840:18;916:17,20fall 812:23falls 816:8far 813:14;825:13;835:16;842:18;852:20;858:8;863:8;874:6fashion 820:7;850:24;852:18;863:18;869:2,16;915:13;916:14fashioned 869:12fault 845:7favor 831:10;849:21;897:13favorable 847:12favored 818:1;852:23;890:23;894:12;902:19favors 876:9feature 816:2fee 813:9,13,16,17,19,23;814:9,15;815:13;816:3,7,10,14,18,19;817:14,21;818:22,24;820:17;821:24;822:21,22;823:2,17;825:5;827:9,19,22;828:7,15,19,20,23;829:2,8,25;830:19;831:4;832:6;837:8,12;838:2,9,21;839:3,4,6,23;857:17,20;862:2;863:12,19,25;864:4;865:17,24;869:2,2,14,14,16,20,25;870:6,7,17;872:7,13,16,22;883:12,25;884:7,17;885:13,14;886:12;888:23;896:5;904:24;907:16,20,25;908:1;910:1,3;912:3,4,21,24;913:8,12,12feedback 833:17,21,24feel 842:3,20;882:24;902:15,17;916:17Feel 867:16fees 812:7,9,13;813:14;816:20;820:7;822:16;

826:18;828:8,9,21;829:13;830:11;831:15,23;840:5,9,13,19,20,21;841:1;845:11,11,23,23;846:14;868:24;870:24;883:16;906:1;910:1,5felt 820:24;836:5;891:10,18;902:15,22;904:18few 821:19,21;851:10;868:14;901:8;908:20field 862:13,14fight 880:1figure 827:23;831:12;837:6;838:23;874:11;886:14;887:2;889:23;897:25;899:19;910:3;911:7;912:3;914:3Figure 912:2figures 839:9,12files 889:22filing 848:11,12final 812:12;827:20;844:18;883:12,15,25;884:5,7,17;895:11;904:24finally 830:20Finally 855:16;857:9financial 882:19;885:6;894:6;901:25;904:6,9;912:17financials 904:2;911:13find 862:9;863:4;889:23;896:20;905:10;914:23;915:12finding 854:16;863:17fine 862:19finish 839:1,1firms 844:8,12;847:7first 812:16;813:8;831:14;835:20;836:25;837:19;845:2;846:4;866:21,22;872:24;876:12;878:25;891:15;915:11;917:17First 821:22;856:3;878:10fit 831:20;915:19five 907:2,23;910:4;912:4,15fix 820:17flat 818:19;822:22;823:2;825:5;886:12;907:16,20,25;908:1;910:1,3;912:3,4,21,24;913:8flaw 846:4,5flaws 844:25flexibility 859:3;879:6flies 813:17flinch 916:13floor 813:13;825:3;839:3,4;913:12focused 878:12folks 842:18follow 857:10followed 839:16;867:4following 816:15;823:1

follows 844:1fooled 844:12force 850:10forces 813:3forego 817:19foregoing 836:16;857:12foremost 878:25forestal 836:9form 812:19;814:11;818:13;822:13;831:18;833:9,16;847:11;848:22;850:23;857:11;872:6;874:23;883:20;905:21former 916:8forms 816:10,12formula 855:3;910:10;911:21,22formulas 816:11formulating 866:25forth 831:11;839:9;867:17;906:3forthright 817:6Fortune 833:14forward 812:15;828:10,18;833:11;836:1;889:11,13,25found 815:6;829:3foundation 832:6;854:19;889:21four 850:1;873:11,20;877:24;882:14fourth 856:4Fourth 856:7Fox 855:9;899:6frankly 877:18;886:18;890:24,25;902:24free 867:16frequency 849:17front 820:1,5;900:22frozen 892:4frustration 916:22full 813:19;814:5,19;817:13;818:24;826:23;829:14;837:23;887:24fully 884:20;887:22,25;888:6function 846:3functions 813:11fundamental 844:25;866:15;915:23;917:1fundamentally 858:12;879:25;915:1fungibility 877:5,20;878:6,9,11,14,17,18fungible 878:19,20;879:2further 840:22;867:14;897:15;899:7,12Further 829:1futile 877:17future 836:7;854:14;856:21

G

gatherers 820:12gave 856:13;862:17;876:24;878:4;912:25;913:1general 834:24;839:6;889:11generalize 854:19generally 842:24;894:22generate 828:8;900:12generated 845:9,16generation 914:1generations 813:4genres 832:14Gertz 819:15;822:10;832:25;833:4,10,14,21;834:2,14;847:12;851:2,15;852:3,24;854:3;890:21;896:15;897:1;903:9Gertz's 833:7;834:20;849:24;854:11;909:2gets 865:2;881:10;886:19;900:18given 818:15;840:7;845:5;849:3;852:22;917:17gives 869:15giving 829:6;844:21;888:11;916:13Glancy 843:1;862:9;866:25;905:4;916:12,24GLANCY 858:4;860:18,21;861:3,13,18;862:3,6,11;863:5;866:6,8;867:3,16;872:5;876:8,12;877:13;878:17;880:15,17;881:5,11,13,15;882:3;883:10,22;884:4,11;886:22;891:15;892:23;893:11,14;896:6,24;897:11,21,25;898:7;902:5;905:5,8;907:1;909:10,17,21;910:22;911:1,4,10,16Glancy's 848:12goal 831:15goals 813:15goes 812:21;844:2;859:23;876:3;885:12;891:3;908:15good 833:9;874:7;881:3;882:13;904:11Good 862:4goods 860:5;916:6governed 883:24government 866:19;867:19;878:4grant 865:15;875:21,22granting 903:8great 854:16;859:3;908:1greater 836:21;844:7,8,11;859:22green 903:18Greene 817:6,6;825:22;

828:11;829:5,11,17;846:24;847:2;848:21;849:8;850:5;914:12Greene's 830:1,9,13,14,21;848:24;850:13;857:9gross 899:20grounded 813:20group 895:9;904:19grow 825:8;908:8;909:23;910:8,9,18;911:2,6;912:4growing 886:16,16;908:17grown 827:18growth 822:25;823:5,8,10,11,12,16,22;824:13,13,14,25;825:13;826:1,22;827:7,9,16,19,21,24;829:23;908:10,10,11,12,14,19,23;909:3,3,5,15,19guarantee 816:19;835:10;836:9;894:10guaranteed 908:3guess 915:10;916:24guesstimate 818:20guidance 867:4;917:17guided 898:20

H

Hal 832:17;874:18half 837:20;881:19,20;908:8Hammerstein 832:18hand 814:19;830:17;835:10;858:5handful 879:3handle 898:1hands 880:1happen 877:14happened 826:14happens 907:13hard 862:24Harrison 842:10Harry 855:9;899:6head 836:12;840:15;857:4;887:1hear 819:6heard 822:9;823:24;846:11;874:1;876:1;878:7;890:21;900:14;912:6;913:11;914:11heart 812:21;858:15heavily-invested-in820:2heavy 847:19held 893:1;917:2Hence 843:22hereunder 899:10herrings 850:8high 831:12;839:13;887:19;915:17higher 812:6,8;833:22;834:10;841:1;842:10,11;

TRIAL Min-U-Script® (7) factor - higher


845:15,20;846:22;848:22highly 821:2;832:11Hillburn 876:1;877:25himself 843:1hindsight 827:4Hirschland 853:15,18;854:18;855:5;875:1;893:23,23,25;894:1,8;898:23;901:22Hirschland's 900:6historic 883:11history 823:7;905:20hits 832:19hold 867:15holding 909:7honestly 893:6;902:17Honor 814:11;819:8;820:19;821:5,20;822:24;823:18;825:9,14;826:17;837:9;838:4,24;839:14,16,24;840:22;843:6,11;844:24;845:2,23;847:2;848:14;852:2,16;853:11;855:24;856:19;857:12,22;858:4,7;859:14;867:3,16;869:15,21;870:18;872:22;875:10;877:13;879:17;881:5;882:10;884:4,15;897:13;898:20;904:18;907:3;914:11,16,20,23;915:10;916:9Honor's 827:15;839:18;858:18;915:11hope 886:13;911:2Hopefully 880:17hopes 836:18;844:6hours 899:1,1;901:24House 874:19human 862:24hunch 857:9hunches 850:13hundred 893:18;901:17hundreds 832:1;853:12hypothesize 812:22hypothetical 877:16;908:5

I

identical 820:11identified 845:2;849:1ignore 862:16;867:5;879:21ignores 844:2;851:14illusory 816:13illustrate 815:22;881:12immaterial 852:19immediate 859:2impact 835:2;836:4;841:2;842:15,17;853:22;901:20imperfect 831:18implausible 895:14

implement 866:10,11;869:22;870:22,25implemented 819:17;820:10;869:20implementing 870:19implications 825:24implies 827:10import 828:7,15;839:15importance 833:10important 834:12;838:25;886:18;890:3,4;902:24;908:10importuning 856:20impose 879:23imposes 867:22impossible 913:18impractical 897:12inability 822:6inaccurate 854:3incentive 817:9;818:1;894:6;912:17include 832:13;868:2;911:11included 822:24;833:7includes 860:10,25,25;888:8;915:15including 824:6;844:9;847:5;849:1;896:2inclusive 830:11income 902:16;906:16;908:3inconsequential 816:2inconsistency 814:16inconsistent 826:20incorrect 830:5;849:15incorrectly 909:16increase 844:8;878:13;909:9;911:2;912:23;913:9increased 817:2increasing 902:14increasingly 824:11incremental 827:9incurs 859:11incursion 847:25indeed 853:8Indeed 828:14,20;847:18;853:14indemnification 913:16independent 842:12;851:17;852:7,12;879:4;882:21;894:16;914:16independently 842:5;913:15independents 882:15,16indicate 893:9indicated 819:13,15;823:1;834:8;843:2indicates 827:23;838:1;849:24indicating 850:16indication 912:22indirectly 831:17individual 831:23;

858:24;859:3,19,20;860:5,7,11;868:18;916:6individuals 875:3,5inducement 890:3,4indulged 849:15industry 812:4,24;822:8;823:20;824:20;825:7,23;826:19;827:5,11;828:17,20;833:1,4;851:14;858:11;883:11,15;884:8,17,23;903:11,16;904:24;906:2;907:6;908:9;910:5;912:1,9,12;913:4industry-specific 839:5industry-wide 905:21inefficient 821:2;843:9inequity 814:9inertia 836:18inexorable 816:14infected 912:11,13infer 824:23;895:7inference 893:2inferences 839:19inferred 830:23inflated 889:8,22inflation 816:25;817:4;907:8influencing 835:17information 829:14;843:23;847:5,8,17;856:5;868:10;880:19;883:2;888:17;889:4,4;895:2,8informed 873:8,23;874:13;905:19informs 812:2infusion 888:10inherent 836:21in-house 905:23input 906:13inquired 834:9inquiries 834:23inquiry 909:18insensitive 842:22insisted 912:21instead 815:18;821:3;830:18;838:9;855:22;856:22;864:25Instead 831:22;869:24;890:17insulated 813:3;817:20intend 858:6intended 849:4,21intensity 827:25intent 870:16intention 874:12interacted 851:3interchangeable 876:14interest 836:3interested 895:9;907:3interesting 824:8;842:2;862:10;863:4;877:4;895:12interests 847:23;882:24;883:1

interface 820:11interfere 861:12interim 843:21;845:10,11,23;846:3;883:8,10,12,20,23,23;884:3,16;896:5internal 910:6Internet 868:15interpret 824:18;869:24interpretation 854:2;858:18;896:16;899:2;912:25interpreted 819:11;827:1;850:23;853:13interpreting 866:17interrupt 821:11;905:1intervention 820:19intimated 843:2into 813:9,12;823:6;829:23,25;830:2;835:1,13;836:7,9;837:3;845:18;847:25;850:5;855:10,13;867:4,8,8;868:9;870:10;876:3,18;879:17;883:5;884:6,7;890:8;891:25;893:17;894:22,24;896:2,15,17;902:13,23;903:15;904:4,8;908:15;915:3,5;916:9;917:4invented 815:3inventive 916:17invite 821:3invoked 854:10involves 853:3ironic 889:14irrational 844:12irrationally 847:4;849:5irrelevance 848:20irrespective 814:5;815:4Irving 832:18isolated 850:23issuance 865:8issue 826:1;838:17;842:5;846:1;851:11;853:13,23;859:15;863:10,15;865:2,25;866:1;910:23issued 863:11issues 820:20;902:8,10,17;917:18issuing 864:16

J

Jaffe 813:8;817:23;832:3;839:15;843:25;846:12;847:5;849:7;852:15;859:8;868:1;870:1;874:1;879:13;913:11Jaffe's 844:4,11January 851:21;852:1jeopardize 833:12job 842:12jobs 895:13joint 860:4;916:6

Joint 856:11Judge 816:12;819:10;820:5,7,15,23,24;821:13;831:17;837:1;838:24;839:21;840:11,20,21,23;841:2;842:7;845:13;863:11;864:19;865:2,11;867:4;869:10,10;877:14;883:17,21,23;914:18,19,20judging 897:6judgment 884:3jump 867:16June 845:11jurist 842:23Justice 859:15,23;865:3,4,5;867:19;870:5,16;916:5justification 814:17justify 816:9;828:11;830:21JX-20 856:19,22

K

Kant 874:25;886:2;888:21keep 886:19keeps 853:21key 902:21kick 896:20kind 887:19,20;901:25knew 819:24;827:5;850:14;853:7;870:12;874:14,20,22;889:12;913:20Knittel 833:4;834:8,13;836:19;845:1;878:21;886:9,13,23;888:15;889:2,19;890:21;892:1,25;893:25;896:15;897:1;898:25;902:8,21;904:3;910:17;911:5Knittel's 834:6,18;892:24knowledge 829:12;834:2;843:1;852:7,12,18;874:13;884:21;889:16;903:5knowledgeable 905:24known 908:24knows 822:14;875:17;889:20,24

L

Labor 907:5lack 850:20lacking 829:15laid 838:10,22;859:8Lane 847:13;853:3,9,16;856:9,14,20;857:8;875:3;882:21;883:20;884:1,11,18,20;904:6language 847:12;869:20,25;872:18;889:18;891:2;895:25;896:13

highly - language (8) Min-U-Script® TRIAL


large 820:15;831:23;882:15largely 866:24largest 882:21;884:8;894:4last 820:22;822:4;826:6;837:20;851:21;866:21;887:20;888:3;894:5;900:17;913:7later 819:7;827:1;835:24latter 916:9law 813:25lawsuit 867:21lawyer 893:25lawyers 832:12;905:24;912:18lay 916:18lead 837:7;848:1leaders 903:16leading 855:6;893:18;909:15least 823:18;824:11,15;825:11;827:4,17;829:12;832:21;840:17;853:9;879:14;883:13;903:6;913:3leave 817:4;891:24;892:15;906:4led 839:22leeway 877:25legal 917:13legally 864:14lengthy 906:2less 817:13;829:6;830:7;836:7;846:18;856:24;877:25;903:19,20;914:8letter 813:25level 816:24;817:14;827:16;840:20;842:16;845:22,24;857:17;878:9,18,24;887:9leveled 813:5;843:16;887:19levels 812:13;813:2;816:19leverage 877:1,19Levin 875:4;903:7license 812:1,7,13,23;813:5,14,19,23;814:2,4,5,8,9,11,13;815:4,10,12;816:4,10,24;817:9,10,10,13,17,18,19,21;818:11,14,21,23,24;819:1,4,11,12;821:4,4,9,20,22;822:1,2,5,6,13;823:1;827:20;833:5,9,10,16,17;834:11,23;835:13;836:3,10;838:6,16,18,22;843:16;845:21;846:7,8,17,20;847:4,10,11;848:9;849:11,13,15,16;850:4,11,23;852:14;853:12;854:1,7;855:10,12,13,17;856:15,17,21;857:15,17;858:13,22,23;

859:11,17,19,20;860:3,6,10,14,20,24;861:7,8,19,20,20;862:2;863:4,14,19,20,25;864:3,11,17,21,25;865:7,8,15,18,19,22;866:12,13,13;867:1;868:3,3,3,14,16;869:18;870:6,8;872:3,7,12,12,12,23;873:4,16;875:20,24;876:5,18,23;877:10;878:15;879:5,6,9,14,18;880:3,3;882:9,17,23;885:22;886:5,11;889:19;890:2,5;892:2,6,21;896:11;898:10,15;906:19;910:1,5;913:17;914:8;915:2,6,9;917:4,10,11licensed 812:18;815:20,24;816:16;817:16;832:24;876:10,15licensee 812:12;859:1;875:21,22;895:19;899:9licensees 828:24;868:8licenses 812:19;817:15;819:16;821:1,3,6;822:9,11;832:1,17,25;833:3;834:21;835:2;848:23;849:6,25;851:20;852:1;853:21;855:2,18;859:20;860:3;867:6;868:4,5;872:9,24;874:2;879:22;882:12;893:17;894:23;898:10;900:8licensing 814:21,23;815:17;816:22;817:2,3,19,20,22;818:13,16;822:7;823:20;831:24;832:4,8;835:5;836:12;837:5;840:15;845:3;846:19;847:23;848:7,18;849:22;850:17;851:12;857:16;861:12,12,13,14,15,17,23;862:2,16,17;863:3,22;865:9;867:2,10,24;868:11,19;872:4,6;876:5;877:7;878:13;879:11;882:20;892:10,11;898:17,17;905:20;906:1;911:11,12;916:23;917:4,15licensor 838:13;853:20;854:17licensors 816:18,21;849:20;851:1;854:20;893:19;897:9,24light 824:18;836:16;877:7likely 827:6;857:10;886:3,15likes 832:17,19limit 848:8limited 861:21line 823:21;829:21;913:25lines 915:15,16lip 816:8list 894:5;904:5

listed 849:5listening 826:9listing 851:25literally 837:4;855:14;896:10litigation 815:3;842:16;850:8;851:6;862:10,23;866:23;869:23little 856:1;874:14;878:5;889:14;892:7;893:18;901:5,13,13;905:3live 850:12location 812:6,8;822:17,24;823:16,17;827:19,22;828:2,8,9,10;829:25;830:5,7,10,19,22;831:11;836:22;839:7;846:22;880:11;881:17;885:2,13,13,24;886:16;887:5,12;888:5,8,24;907:2,15;908:5;909:9;910:3,11;911:5,24;912:6,21,23;913:5,9locations 822:23;887:6;888:9,11;907:2,17,21;908:8;910:18,18;911:3LoFrumento 834:15;835:18,23;836:2,23LoFrumento's 847:22logic 848:18long 836:3;853:21;868:21;879:5longer 905:4long-term 847:23look 840:6;845:17;855:19,19,22,24;856:1;873:5;880:6;889:8;893:15;910:14,16looked 819:24;867:6;900:15,21looking 824:9,21;826:9;827:1;837:19;838:2;885:12;887:4;909:4;910:11;911:23looks 825:24;903:22lose 910:9loses 869:5losses 910:25lost 917:13lot 813:6;847:18;879:16;880:7;882:8;901:6,8;903:4;906:16;907:13;910:8lots 850:7loud 890:9low 829:25;831:12;839:13;846:23;885:2;891:18lower 816:17;818:5;826:5;827:12,13;830:21;841:1;842:9,9;845:14,24;884:13lowering 844:9;859:16,17lying 893:4

M

maintain 887:9maintained 816:24major 825:6;834:15;836:20;846:4,5;850:2;851:16;875:6;884:17;890:2;894:18,23;904:3;906:1majority 900:12,23;903:20majors 834:13;836:18;847:22;849:25;877:24;878:15;882:15;883:14;889:9majors' 835:17makes 822:10;829:17;847:16;849:7;858:11;880:20making 813:15;826:15;835:25;845:3;853:23;864:9;882:6;884:3,19;893:4;896:1man 898:25mandate 813:18;840:10mandated 816:10manner 822:6many 832:1;833:13;834:3;853:12;859:24;860:5;877:7;882:10;900:13;901:4,4;916:6Many 861:18march 882:11marginal 832:20;914:10,12marginalize 848:18market 819:18;822:7;824:12;831:16;833:6,22;837:3,11;838:6,14;840:3,6,7,17;844:6,9,11;856:18;860:9,19,24;861:7;869:18;873:3,9;876:21;877:16,18;880:5;886:3;889:17;894:17;909:24;912:11,13marketable 859:25market-based 848:6marketplace 812:3,17;819:24,25;820:3;847:25;848:4;850:22;857:19;882:9;890:9;892:20;906:18;908:15;913:13,21;916:2markets 844:3,5;847:7,22market's 833:18Marks 840:4;843:7;900:14mash-up 898:10mass 878:23;879:15match 851:23material 859:4;860:7materially 843:9math 816:14;820:21;

830:4,9;886:25;887:10mathematically 818:7;827:18;845:17matter 816:17;817:14,15;840:18;866:23;886:19;897:11,12;898:18maximum 827:18;839:8may 815:5;817:16;826:8;828:22;834:9;846:1;847:10;852:2;863:20;865:21,22;877:20,22;883:18,19;896:24;913:4;915:17maybe 825:15;827:12;877:7;879:3;883:18;905:5;909:14Maybe 863:5mean 824:2;844:12,22;861:16;862:11;878:16;881:25;902:11;914:13meaning 822:12;826:24;899:23meaningful 817:21;846:3meaningfully 814:13means 818:15;844:14meant 854:4;869:20;870:23;886:21;904:1;907:10measuring 818:15mechanical 837:10mechanicals 900:2mechanism 818:6,12;820:9,18;821:7;868:8;917:8meet 835:13;866:22;868:25member 857:5;868:6;900:15members 813:3;814:2,6,21,23;815:3,5,9,17;816:1,4;817:20;818:3;831:23;848:2;857:6;858:20,24;860:14,15;867:23;868:10;880:21;881:21;897:22;898:2,12,16;916:4membership 915:25merely 834:8;860:14merged 908:22merges 908:14message 893:21Messrs 855:5methodologies 849:2methodology 830:13;838:9;848:25;853:1,7methods 865:24MFN 847:13;852:16,20;853:4,13,17;890:18middle 905:2mid-morning 857:25might 818:5,8;820:5;824:22,25;835:3;836:3;839:17;840:13;846:18;848:1;849:14;881:16;

TRIAL Min-U-Script® (9) large - might


895:7;910:7million 835:11;886:11,19;887:11,14,24;889:1,3,20;890:1;907:17,20;910:2;912:14,15,16,16millions 834:16;901:14;905:25mind 852:2minds 886:8mindset 824:18mini 906:17minor 902:15,16minutes 905:5mirrors 813:6misinformation 843:24;854:25misinterpretation854:21misleading 911:20misled 850:17;851:13;855:3,10,13misrepresentation889:3,12,13misrepresentations854:22;855:1,15mistake 835:25mistakenly 855:11mitigated 835:6mix 876:4mode 827:7modification 915:14moment 819:25;872:9money 877:2,3;879:16;897:10;898:13,14,24;912:5monies 815:16;899:24monopolist 843:18month 837:24months 855:9more 813:14;815:16;816:8,12,20;817:1,18;820:14;827:6;828:10;829:18,20;832:2,7;833:4,8;834:8,9,12;838:14;844:10;845:9;847:11,18;856:1;858:9,10;859:9;860:25;863:1;864:12;867:9;870:22;877:3,10;885:8;886:20,21,22;887:15;889:9;891:9,9,13,16;892:17;900:25;907:7,23;908:16,22;912:4,5;917:1moreover 852:6,11most 819:25;828:5;832:13;839:18;842:20;843:5;848:6;850:20,21;852:23;885:25;886:3;890:23;894:12;897:3,6;906:12motion 864:20motivation 844:13move 872:10mover 836:25moving 862:5;905:2

MRI 820:12;833:14,16,21;850:17;854:24;855:4;902:22MRI's 833:12,19much 812:5,7;820:14;823:24;826:5;829:18;846:23;878:12;880:19;889:24;892:10;898:12;899:20;901:22;905:4;914:8muddled 891:3Multiple 829:21multiply 887:1multitude 828:24music 812:12,17,19,20,20;813:9;818:17;822:8;827:25,25;828:17,21;831:9;832:1,12,13,24;833:1,3;835:12;837:8,12;838:2,8,15,21;844:17;846:7;848:3;857:21;858:11;861:1,18,20,21;864:22;865:1,7;868:15;872:14,14,17;875:24;876:2,2,10,13,19;877:5,25;878:1,6,14,21,25;879:20;880:22,23;881:1,18,19,19;886:17;887:2,7,16,17,22;894:24;895:22;897:5;898:5;901:7;903:11,11;906:5,8,13,14,16,17;913:12,16Music 812:9;823:22;824:14,22;825:12,25;826:3,14,25;827:2;829:3,9,17,20;830:5,22;831:5,10;834:14;853:15;873:10;874:9;875:2;893:23,24;894:4,6;898:23;903:25,25;904:4;906:19;911:17,21,22,22,24musical 832:9,14;849:21;859:4Musics 898:5must 814:5;839:24;842:20;843:23;848:19;849:5;868:11,14;916:15Muzak 812:4,7;813:18;816:8;819:6;820:4,25;822:10,18,21,22;823:2,10,17,19,22;824:10,14;825:17,23;826:4,12,19,23;827:1,6,8,16,18;828:1,6,13;829:7,10,16,19,21;830:23;831:4;861:25;862:6;863:2,21;864:4,18,18,21;866:2;883:14;884:4,7,17;906:9,10;907:15;908:7,13,15,17,20,20,21;909:9,15,24;910:21;911:8,18,21;912:14,14,16,20,22;913:2,2,4,8;917:17Muzak's 819:16;823:8,13;824:3,14;825:3,5;827:25;

863:13myself 881:6

N

namely 814:17;820:9;894:23nation 852:23nations 890:23;894:13;902:19nature 853:24;873:9;875:23;903:13near 812:13;904:8nearly 823:22;832:23necessarily 877:12necessary 867:17;902:17necessity 905:9need 812:22;820:6;821:6;831:16;839:3;847:8;861:18;862:22;872:25;878:22;882:12;886:7,15;887:2,21;888:5;893:22;897:17;898:21needed 831:20;836:17;890:1,2needing 905:10needs 822:14;915:24negotiate 847:11;880:2;907:23negotiated 816:17;819:16;853:4;873:17;892:18;905:18;906:4;912:12negotiates 876:22negotiating 879:10,12,13;889:20;892:3,8;894:23;901:12,14,16,23;903:10;905:24;912:7negotiation 911:18negotiations 829:22;835:3;859:3;877:11;903:15;905:21,22;906:3neither 828:14;842:25;850:4;872:5;873:7Neither 828:10neutralized 868:11new 821:6;852:1;879:18;896:16,17;905:2next 821:5;823:15;826:11;841:3;871:2;906:21;907:24Next 888:7nifty 901:3nine 855:20,21nobody 882:2;916:16nondirect 817:20nondirectly 898:17none 837:21;875:12nonetheless 862:24nonexclusive 814:3;872:3nonexistent 900:13nonrenewals 855:16nor 828:11,11,15;850:5;

854:14normally 877:8normative 831:15north 826:19notable 851:6notably 823:18note 823:25;828:6;830:20;838:25;857:22noted 831:14;836:8;856:3;859:1;864:4notice 845:5noting 839:20notion 815:3;892:14;909:4notwithstanding 895:18nowhere 815:6;870:13nullify 814:1number 825:16;826:15;830:15;845:13;889:6;893:16,20numbers 845:20;887:23;889:8

O

obligation 814:1;815:13;844:20;895:20;896:12;897:14,15;899:15obligations 853:24;899:19observation 843:4;844:2obstacles 834:12obtain 847:8obtained 831:17obtaining 847:13,14obviously 839:17,24;898:8occasionally 860:2occur 818:7occurred 819:14;829:12;896:8occurring 849:24October 887:21;900:16off 843:21;882:1;887:12,19;904:4,12,13,15;912:16,19offer 813:22;822:9;834:5;835:7,7,14,22;868:14;885:10;890:17;912:24;915:6offered 814:17;832:8;836:23;860:2offering 833:18;860:5,6;874:1;916:6offerings 832:14offers 818:9;835:19off-premise 832:23often 820:17;832:11OK 819:9;821:16;825:21;826:7;857:25;862:4;866:7,20;880:12;881:3,3,9,14;882:3;893:13;905:6;909:7,20;910:20;911:14

once 816:12;878:15one 814:19;815:5;820:9,11;823:2;825:16,23;827:14,25;828:5,6;833:2;834:8,12;836:20;838:13;839:17,19;840:1;843:7;844:2,22;845:1;846:18;848:24;849:15;850:2,22;852:9;854:17,20;855:8,11,21;856:9,18;857:5;864:24;866:5;870:23;872:5,21,22;873:7;874:5;876:4,22;878:1;879:13;881:25;882:21;883:14;885:15;888:21;896:9;897:14;898:15,15;899:1,14;901:23;905:3;906:15;907:2,18,24;908:22;913:14One 838:4;872:1O'Neil 836:12;856:13,13,17,20O'Neil's 836:11one's 849:17ongoing 818:14;820:2;833:12;844:21;853:24;857:16only 813:10;814:2;821:20;823:25;837:19,20;838:5,7,13;844:2;845:4;846:3;852:25;853:3;854:4,8,17;856:4;860:12;864:15;866:11;874:21;878:1;880:1;886:20;895:8;896:18;901:17;909:23;917:9Only 849:15opening 819:13;831:14;863:8;900:21;901:3;907:1operate 847:22;858:16;862:19;868:21;878:23operates 822:7;846:6;860:13operating 868:21operation 819:18operations 858:13opinion 837:2;838:25;863:12;873:10;916:10opportunity 868:23;906:9;916:13opposite 849:21;864:1opposition 864:5;865:14option 822:2;861:22;879:14;891:8;915:2options 915:14oranges 844:25order 878:23;886:17;887:3,22;888:5;901:1;913:2organic 822:25;824:25;827:19;829:23;908:11,19;909:19organically 908:9organization 915:25

million - organization (10) Min-U-Script® TRIAL


organizations 820:13original 862:15originally 863:11ossified 837:5ostensible 835:11others 826:21;832:20;834:15;881:20;909:22otherwise 818:8,17;831:25;835:3;868:10;899:10,24;916:16ought 818:23,24ourselves 905:10;911:7out 817:22;821:3;824:20;825:15;827:16;830:25;838:10,13,22;847:5;850:1,22;855:24;859:8;860:23;870:11;872:5,25;873:10;874:12;878:7,23;880:20,24;881:1;882:9,21;886:14;887:2;889:23;890:5,8;891:24;892:1,4,6,20;895:2;897:3,25;899:4,4,20;907:17;908:15;910:3,7,8,10;911:23,24;912:2,3;913:18;914:3,20;916:18outcome 815:7;869:8;895:11outcomes 839:13outlays 817:2out-of-pocket 817:4outside 848:8;874:6;901:18;905:23over 827:11,20;828:2,3,9;836:13;837:16,23;838:15;849:22;854:6;866:24;885:13;893:18;894:2;901:1;907:8,8;911:6Over 888:6overall 855:25;899:4,5overhang 838:17overhead 839:6overnight 887:8overpayment 857:1overpayments 844:22overstate 826:17overstating 891:11owe 899:22owing 813:20own 813:16;824:7;830:14;839:25;842:12,21,23;861:24;877:10;889:22;910:6;913:22;914:1,2,16;915:13owned 858:24

P

package 836:14;859:25page 836:1;841:3;864:4,5;865:12,13,15,18,20;871:2;885:3,10;886:1,4;888:24;900:7;901:24;902:3,25;906:21

Page 836:25;902:4,5pages 828:18;835:4,14,22;853:17,18;859:5;885:1;900:5paid 814:6;815:1;836:8;837:4;855:8,12;883:11;889:17;891:20;892:12,12;894:12;895:22;897:10;899:5,14;900:1,17,19;903:19,20;904:8;907:6panacea 819:3paper 864:14papers 848:13;865:14;914:10paragraph 813:21;824:4;830:1,4,9;832:5;834:18,20;836:19;844:15;847:6;854:11Paragraph 849:24paragraphs 817:24;830:21,25;843:25parallel 815:23;820:13paraphrasing 856:17parcel 814:1parity 840:18;843:5part 814:1;817:12;818:2;819:25;835:16;836:8,14;843:24;850:20;891:18;902:16;906:15partially 824:1particular 831:20;843:3;850:24;854:6;888:24particularly 834:12;862:21;917:16parties 820:16;829:13,24;842:15;862:22;866:22;869:22;870:10;873:1,13,14,17;899:6,9,15;906:12;910:15;911:19;916:18parties' 870:16parts 859:22;870:7party 842:25;865:4passage 859:14passed 854:24passive 835:17pass-through 860:13,25past 819:12;844:20,22;869:9,11patent 814:15path 850:8pattern 854:25pay 812:12;814:5;816:8,19;817:18;819:18;836:17;844:20;854:9;859:7,9;877:2;886:20,21,22;895:20;896:12;897:10,15;898:4,4,5;899:10,15,23,24;907:20,22;908:21;910:4;912:3,5payees 855:17paying 853:20;880:25;881:21;883:15;885:3;889:10;896:6,11;897:21,

23;913:7payment 837:2,17;847:15;853:19,25;865:20;895:16,24;896:25;897:7;899:2,11;900:10payments 813:23;814:23;815:9;819:19;844:17,21;846:3;848:22;849:13;896:1;900:9payout 846:22pays 889:24;910:2pegged 822:22pejorative 914:13penalize 815:12people 824:22;834:24;873:23;893:1,3People 882:3per 812:6,8;814:13;819:4;820:14;821:20;822:2,5,6,17;827:19,22;828:2,8,10;829:25;830:7,10,18,22;831:11;836:22;846:18,22;856:13;880:11;881:17;885:2,13,13,24;887:5,12;888:5;900:25;907:2,15;908:5;910:3,11;911:23;912:5,21percent 812:6,8;815:24;817:13;822:25;823:10,11,17,22,24;825:11,13;826:1,22;828:21;829:23;832:23;835:7;837:10,11;850:2;856:4;877:24;879:20,22,24;880:23,25;881:10;882:1,1;887:7,9,11,15,21,22;888:2,2,3,23;890:15;907:22;909:3,3,5;912:5percentage 815:24;816:16;817:15;818:16;880:21;881:1;886:25;887:2;899:21;907:16percentages 838:15perfect 884:20;889:16perform 861:1performance 812:18;814:7,25;832:21;836:22;846:18;875:17;879:11;895:21;896:13;897:7;900:2;902:19;903:8,10performances 832:9;835:12;867:25performed 813:12;837:15;849:18performing 816:20;820:12;831:24;834:25;848:4;856:21;857:18,21;860:1;878:1perhaps 827:6;883:14;904:16;912:18period 816:15,23;828:3,4,17,20;829:13,14;830:3,7,11,18;831:9;857:8;895:21,23

permitted 858:16,17;868:20perplexing 877:15per-program 861:14;868:15per-segment 861:14;864:21,25;865:7,19;866:12,13;868:14;915:2;917:10person 874:16,20,21personal 857:22perspective 832:7;847:19persuasive 914:22,23;915:7phase 892:20phasing 892:1,6photocopy 840:11phrase 870:24;896:22pick 869:4picked 854:22picking 881:4picks 876:3pie 880:22,22;881:2place 819:18;832:11;900:8;903:14places 848:8plain 814:9;847:16;849:8;872:18;891:2;895:25;896:13plainly 813:20;815:25;864:2;891:2planned 867:14plausible 912:25play 862:14;887:2,15,22;894:22played 880:24;882:9;887:18player 825:7;883:15;884:8,17;904:25players 825:1;827:5,11;906:1;909:24;913:4playing 887:7PlayNetwork 911:17plays 856:4;878:7;886:16plea 847:22please 827:14;880:8plenty 878:11plotting 897:9plummet 878:15plus 859:10,21;870:8point 815:22;820:22,22;821:12;826:6;827:15,16;838:5,7,13;840:1;845:9;849:4;853:11;880:20;883:16;888:21;896:22;898:1;905:2,12;907:13;908:10;910:11,24;912:2;914:20points 825:15;845:10;847:5;851:8;882:11;905:11policy 834:24;869:21,25;870:23,25

pool 833:19;836:23;837:7;843:17;845:15,18,21;881:17,21;888:19,22;890:24;891:7;898:16;899:5pooled 858:21portion 838:2,3,21;899:13posited 822:2positing 877:16position 814:3;859:6,8,9;866:11;869:16,19,19;891:12;892:3,9possibility 818:4;848:1possible 820:23;913:15,15;914:3potential 827:24;839:12;894:17;902:18potentially 837:16;859:18;902:14power 877:19;912:11,13;913:25;916:14powers 864:9practical 897:11practically 816:13practice 843:24;846:14;851:14;866:9;899:18precedent 836:4;856:18precedential 828:16;835:1precipitously 893:20precisely 872:15prefer 822:13;854:18;859:24;876:14preference 835:5preferred 829:7;830:13;865:19;917:8premise 813:21premium 816:5;835:8;836:17,20;859:7;890:16prepared 823:13present 825:6,11;837:22;847:17;863:2presentation 867:14presented 848:21;850:11presenting 917:8presents 858:13president 875:1;893:24press 895:6,6,7presumably 820:25;826:21pretrial 832:16;848:12prevailed 836:6prevailing 816:18;828:23prevents 890:10price 814:5;818:12;837:4;845:10;848:8;862:18;868:6;913:19prices 812:17;818:5;844:5,9pricing 816:11;817:25;818:2;837:8;848:7;863:3;914:7prides 862:25

TRIAL Min-U-Script® (11) organizations - prides


primary 813:17;814:3,15;816:2principal 826:16;843:18principally 845:1principles 915:11;917:1,2prior 832:4;859:3;884:25;899:4priority 876:12privilege 854:9pro 880:21;881:18,21PRO 847:18;848:6,8;854:6;884:15;885:9;896:19;897:2;906:17probably 897:12probative 812:25problem 825:6,11;879:19;898:2,9,11proceeding 835:4;836:2;844:19;858:8,8,10,11;868:12;873:14proceedings 869:9,11process 812:22;813:15;819:20;821:2;834:11;835:18;850:18;853:23pro-competitive 821:8produced 901:3produces 837:11product 832:14;843:23;859:23;860:4;861:6,6,7;879:7;914:7;916:1products 818:2professor 874:1;879:12Professor 817:6;828:11;867:25;869:25;913:11profit 844:13profits 844:8,14;848:2profound 858:14program 820:14;846:19;848:18;862:2,16,18;863:3;867:2,10,11;876:17,19;878:20;911:11;916:23;917:5,15programming 879:1programs 876:2prohibit 864:16;865:8,10projected 823:12;847:18;909:22projecting 824:13;825:12projection 823:16;824:22projections 823:21;824:7projects 823:22prominent 832:13promise 879:1promised 904:9promote 848:3proof 812:15proper 831:8;837:8;840:8properly 822:11;830:18;838:7;840:13property 859:1proposal 812:5;813:16,17,20;814:16;815:13,15;

816:3,7,14,19,25;817:8,17,23;828:7,16,19,22;829:3,8;831:5;837:7;862:15;864:10,11;867:1;868:13,25;869:12,12;870:3;872:16,21,21;913:10;915:12,14,21,21;917:14proposals 818:11,22;862:14;864:10,12;869:4;915:20;917:7propose 820:10proposed 817:24;822:15;833:18;864:21;865:23;873:21,24,25;882:17,19;888:21,22;902:1;904:23proposes 870:6proposing 885:25proposition 817:7;832:16;835:23PROs 835:2,6;855:9,13;877:16;884:13;899:6;900:9,9;902:2prospect 846:20;848:1prospective 819:20;827:16;828:15;849:20;902:9protect 813:2protecting 909:3protection 820:24protocols 818:18;843:10,13proved 869:24provide 813:13;852:21;857:14;878:24provided 813:10;851:16;866:14;879:6provides 831:4;859:13;868:23providing 819:1;829:20;853:9;857:19;884:13,14;889:9proving 868:13,24provision 822:25;829:23;854:2,3,18;869:22;870:12;872:11;885:23;890:19,20,22,23,23;891:5,23;896:14,17,18,20,21;897:2,16;898:22;899:3;900:10;908:10,11,11,12,14,23;913:25;915:4provisions 850:23;872:2public 867:24;869:21,25;870:22,25;875:17;895:3,20;897:7;902:19;913:22publicly 851:21;861:1publisher 814:2;834:2;846:11,17;849:3,9;850:12,16,19;851:17;853:4,12;854:9;855:8,11;857:6;875:15,17,19,20;876:17;877:9;879:11;880:23;882:5,5;886:8;891:16,22;892:4;893:7;894:4,23;

895:4,20,25;896:12,19,25;897:3;898:23;900:15,18;905:14publishers 812:20;813:24;815:19;817:9;819:17,19;832:1,12,18;833:6,7,13;834:9,15,19;836:6,23;838:17;843:19,20;845:3,5;846:7;847:3,9,17;848:22;849:1,22;850:14;851:11,13,19,22;852:1,5,16,22;853:7,25;854:24;855:3,25;856:23;857:10;861:2;874:14,22;875:7;876:5,22,23;878:23;879:4,15,22,24,25;882:11,13,21;889:15;890:4,16,18;891:8,12,17;892:14;894:13,18;895:8,9;896:3;897:18;898:6,22;900:13;901:5,6,8,9,21;903:6,9,13,19,21;904:17,20;905:14;906:14;914:10publisher's 852:7,12,13Publishers 822:9publishers' 812:20publishing 868:18,18;894:16pulls 863:24pure 913:12,16purely 847:24purporting 830:10;848:21purpose 826:17;833:9;838:20;870:1,2purposes 902:14pursuant 813:24;899:22pursuing 818:8;822:4purview 868:21put 815:7;825:19;839:11;880:8;886:24;890:20;895:16;900:22;907:9;908:25;911:6;913:17putitive 812:4;828:12puts 868:24;870:18;877:6;899:12;907:10Putting 848:24pyramid 828:23

Q

qualify 835:9quality 876:13,13;878:1,25;879:7quarter 856:4,7;887:18;888:3,23;891:21;894:5,6;901:1;905:3quarters 900:17;901:1quick 903:3quite 876:7;895:13;908:20;911:21;914:17quote 813:21;844:3;847:23;863:12;865:12;

912:11

R

raise 888:4ramifications 842:18range 813:14;832:14;839:12,15,18,23rank 813:7ranks 834:21Rarely 916:13rata 880:21;881:18,21rate 812:6,8;813:15;814:4;816:9;822:15,17,24;823:11;824:13,19;825:13;827:8,21;831:14;833:20,22;834:3,10;835:3;836:4;842:7;844:18;852:25;853:1,6,23;855:3,12,12;856:18,19;858:8,8,9,11;864:2,9;865:22;868:7,12;869:9;873:14;874:5,6;879:18,23;880:4,6,7,9,11,12;882:4;883:6,8,10,12,23;884:12,18,23;885:2,20;886:3;887:5,12;888:5,20,22;890:24,24;891:7,18,20,20,24;892:15;894:18,19;895:10,10;899:18;903:24;906:3,4,6,9,10;907:12,19;908:5;910:2;911:13,24;912:6;913:1;914:4;915:16,17;916:4,22;917:3rate-making 812:21rates 826:3,4,24;827:11;828:2;830:22,25;831:11;833:11;835:2;840:6,11;858:9,10,19;881:23;883:3,11,13,19,23,24;884:1,3,13,15,16;885:9,18;889:17;902:1;907:2,7,11;908:21rather 912:21Rather 849:12rational 844:5;846:11,16;849:9ratios 830:13raw 860:7reach 839:24reached 831:19;911:25reaction 885:23read 833:17;834:7;854:17;859:13;872:2;895:12;896:10,16;897:3;898:22;899:7,7,12;900:5reading 820:4;824:17;852:23;896:13real 847:7,7;850:5reality 816:11;846:10;917:14realization 883:6realize 905:9really 813:1,6;847:24;860:4;870:18;881:20;

882:5;892:17;895:13;904:10,11;910:7,8;916:5reason 822:4;874:7;913:7reasonable 813:11,14;818:25;824:17,23;826:16;828:5;832:6;833:20;839:12,19,23;840:14;843:19;857:20;863:9;864:12;865:24;866:10,11;867:11;868:24;869:2,8,14,16,20,25;870:5,7,17,24;884:21;891:22;893:2;900:19;914:4;916:2,4,14,21;917:3,5reasonableness 829:2;864:3;868:13,25Reasonableness 865:25reasonably 824:20;828:1;852:16;873:8,23;874:13;891:1;910:15,16,17;911:8reasons 856:16;857:13;867:12;885:15;910:25;915:18recalculate 907:19recall 823:19;837:9;888:10;902:7,24recanted 824:1receive 817:13;833:24;898:13,14;899:5;901:5;909:25received 819:19;833:21;835:19;848:22;851:14;891:16receives 834:16;844:11receiving 844:7;884:2recent 821:13recess 857:25Recess 858:3recipients 855:1recognition 848:20;872:3recognize 846:10recognized 820:8recognizes 814:24;885:18Recognizing 848:2,17recollection 894:11record 813:4;814:20;815:23;819:14;820:1,5,8,24;824:20;825:17;831:1;839:22,25;842:3,6,13,21;843:8;847:16;849:23;851:22;856:24;857:2,3;863:10;864:19;866:1,4,4,8;869:3,7;878:6;892:21;900:16;908:18,25;911:14;914:17,17,19;916:15recounted 836:10recoup 886:15,17;887:3,22;888:6,17recoupable 887:25recover 860:12

primary - recover (12) Min-U-Script® TRIAL


recovering 886:13red 850:7;904:17redirect 913:21reduced 844:5;845:11,11;846:21;883:21,22reduces 844:14reducing 815:13;844:21reduction 848:2;906:6reductions 817:21reference 831:5,17;861:8;873:4;896:21referenced 865:13referring 859:16;865:21;876:10;899:8;914:10reflect 831:16;832:20;847:24;916:19reflected 815:7;830:22;833:19;836:22;857:1reflecting 826:10;831:22;846:14reflects 813:1;836:21;853:4;857:15refrain 847:22refuse 846:8;880:3refused 849:14;876:5;891:17,18;910:21refusing 849:16regardless 872:10,20regular 820:6regularly 857:5regulation 814:22reimbursed 818:25reject 825:20rejected 848:19relate 902:9related 883:12relation 816:18;822:7relations 857:5relationship 842:17relationships 833:13relatively 900:13;901:13releases 895:6relegated 822:13relevance 849:19;852:6,12;901:7,9relevant 844:23;845:14;864:13;873:8reliability 837:14reliance 889:3;892:9,11relied 855:1;904:2,3relies 906:16rely 860:22;879:3;884:21;889:12;900:19relying 905:9remain 910:5remainder 849:22;888:13remaining 815:19;816:1;838:17;851:1;856:23;887:23remains 888:2remember 824:9;909:12remembering 845:12;848:4;909:16

remind 840:1reminded 843:7renew 855:17;856:9,14,25;882:23,23,25;883:7;884:6,11;903:2;904:11,13,14renewal 855:20renewed 855:21,23,25renewing 857:10repertory 814:19;857:17;861:19;863:22;886:12;896:2;899:20reply 848:12reported 818:24;856:16reporting 818:17;843:10,13;908:2represent 820:19;875:6representation 891:25representative 851:1;882:13,14,16;904:19,20,21represented 819:4;833:14;856:4;863:21;905:23representing 863:16;867:19represents 854:16;881:19;903:18request 825:3,6;863:13,13;868:6;891:14requested 814:12;823:2;853:10;865:15,17,18require 813:22;819:11;862:1;865:6,12,14required 863:12;899:9requirement 861:11requirements 867:23requires 873:5requiring 820:18reset 845:23resort 816:10respect 821:2;825:6;839:20;842:9;869:1;883:17,19;884:2,16;892:19;895:20;915:12respected 842:23respectfully 857:14respective 838:14,15;849:2responded 835:18;891:14responding 817:7response 814:10;833:18;834:23;863:12;882:22;894:11responses 912:9responsive 813:15rest 838:11;904:21restaurant 906:18rested 818:10restored 876:24restrictions 868:2,17,20result 812:2;816:25;830:12;838:1;842:22;

899:10;906:2resulted 827:19,22retail 906:18retroactive 828:15retrospectively 826:13return 835:12;914:4;916:4revealed 851:20reveals 813:4;814:20;838:12;851:19;852:25revenue 883:4;888:24;899:20;902:14;907:16revenues 816:1;828:22reverse 888:1review 901:19reviewed 824:6;885:22reviewing 899:1;904:2reward 815:9rewarded 816:5Rich 857:24;863:24;864:23;901:3;908:17;914:15RICH 819:8,10,22;821:15,17,19;824:16;825:9,14,21;826:7,11,15;827:15;833:3;840:25;842:8,14,24;843:14;844:24;845:8;847:2;848:11,17;851:9,25;852:11;856:8rid 817:10;903:23,25right 812:21;819:8;842:25;845:21;851:10;876:3,4,17,19;880:13;891:10;893:11;894:7;898:13;904:19;913:16;917:10Right 909:10;910:22;911:1rights 812:18;814:7;815:1;816:4,20;820:12;831:24;832:21;834:25;836:22;837:10;848:4;856:21;857:18,21;858:21;860:1;861:1,5;873:15,15;875:17,18,21,21,23;876:8,24;879:11;895:21,23;896:6,7,13;902:20;903:8,10;906:17risk 892:4Roberts 875:7;885:4,17robust 831:22Rogers 832:18role 848:3;858:18;862:23;866:17;870:19room 842:10roughly 840:3,17royalties 816:6,17;834:17;835:8;843:21;847:18;854:5;894:5;897:7;899:5,10,14;900:2,12royalty 822:15;833:18,20;834:10;836:23;837:7,14,17;843:17;846:23;853:1,6,

6;881:23;885:23,24;886:3;888:19,22;890:24;891:7;894:9,10,12,18;899:4,5,16rules 814:22ruling 839:21;840:21,23;843:3

S

sake 899:7sales 818:8;860:4;916:6same 814:7;823:20;826:9;831:24;833:13;842:1;855:12;864:18,19;876:8,19;883:6;890:6,17;891:20;894:18;899:16;908:21;909:25;912:2sample 851:8;882:13satisfactory 894:14,15satisfied 894:19save 879:16;912:16saved 866:3savings 818:7saying 820:17;827:3;840:15;845:8,19;846:1,17;861:22,25;867:18;880:2;888:12;891:12;892:3,9;911:5scale 858:25scope 819:11screen 815:8,22;823:8;890:20;895:16seamless 820:11second 827:14;833:2;846:5;852:9;866:5;880:14;894:4;909:8Second 821:25;848:5,11,14;873:10;891:16;910:13secondly 825:21secretly 897:9section 905:3Section 814:22;865:17secure 835:3securing 883:3seek 814:11;818:2;917:10seeking 855:7seeks 812:14;822:16;854:1seem 826:20;827:10;892:16;905:2seems 821:6,7;846:13sees 877:8SEGAL 900:14,16segment 814:13;819:4;821:20;822:2,5,6;864:22,25;865:7segments 822:11segregate 913:18selected 849:2selecting 873:12self-adjusting 820:18sell 868:4,5;913:15,16seller 860:6;869:17;

873:5,7,22;874:11;910:14;914:12,21;916:3sellers 818:4;832:20;844:5;849:5;859:18;860:5;874:4;901:10;905:19;914:10;916:7selling 906:16;915:25;916:1sells 861:6send 901:18sense 821:10;865:5;876:18;890:5;902:13;903:3;913:7;914:13sentence 896:10;899:4,6,8,12separate 860:6;861:3,4;874:4,4;898:12;913:24;914:3,5separated 913:23,25separately 814:6,25;815:6;868:11;913:19September 845:12;864:6series 843:15;856:12;866:23served 832:3service 812:12;816:8;858:17;859:13,21;878:19,24;880:24;888:23service-related 828:21services 860:12;885:3SESAC 881:20set 829:13;831:11,16;839:9,19;840:5,13,19,21;841:1;842:7,9,11;868:24;873:2;880:5;916:25sets 831:11;856:18;857:17;873:10setting 819:15;820:20;821:24;858:19settings 832:4settled 825:10;869:23settlement 867:20seven 855:17,19,23;905:13several 850:19;858:14;867:12,22;894:2;898:25;899:1;901:1shall 847:19;899:9shaped 843:3share 837:11;840:8;844:7,9,11;845:20;850:3;878:14;880:21,23,25;881:18,21;888:2;894:17shares 838:14;840:3,6,17;878:13shift 892:10shifting 892:9,11shoes 911:7shoots 893:20short 817:17;825:12;844:8shortly 862:7short-term 821:1

TRIAL Min-U-Script® (13) recovering - short-term


show 830:15;852:1;891:3;900:22showed 815:21,25;850:21;886:23;903:20showing 812:16;823:9;880:10;901:4;909:22shown 813:13;816:3,7;830:4,6,12;845:1;850:8shows 823:16;824:12;838:11;887:17;893:16;907:6;908:17,17;909:9,23side 815:2;846:9;848:24sign 834:4,21;847:3;849:14,16,25;851:14;852:14;874:16,19;875:6;876:5;878:1,20;906:15;910:21;913:2signal 884:22;886:7,9;893:14signed 843:20;849:13;850:3,4;851:20;853:12;867:20;870:13;874:15,15,21;875:3;889:15;890:6,9,17;893:19,24;900:16;904:7;911:17;912:14significance 830:15;909:21significant 816:16;827:5,9;842:2;846:20;858:14,21;867:12,22;870:19;878:2;890:12;894:25;898:24,24;904:20;905:12;910:25;911:16;914:25;915:9significantly 827:12;845:15;906:12signing 834:12;836:15;848:23;849:6;851:25;855:2,10,13;870:13;890:4;896:4signs 874:16;878:15;891:19;900:18;908:16similar 820:8;835:25;836:14;837:1;839:22;852:22similarity 873:13,14similarly 831:19;885:21Similarly 830:9;847:16simple 821:7;847:16;886:25Simple 852:23simply 840:10;845:8,17;847:24;849:10;854:12;855:18simultaneously 824:21sincerely 916:11single 850:12;853:11;861:7;866:24;874:2,3;894:17;904:25;905:14singular 854:20sit 834:16;876:25sitting 875:16;887:20situated 831:19situation 844:21;864:18,

19;875:15six 855:21size 877:22;882:14skipped 826:12slide 880:8;881:16;888:7slightly 852:2small 831:23;860:1;882:15;901:9Small 822:12Smith 857:4Smith's 857:3smoke 813:6snapshot 819:12;846:13so-called 830:24;834:13;847:15societies 834:25;860:1;899:19,22,23;902:20society 895:22;897:5sold 913:13sole 818:22solicitation 855:4solution 916:14somebody 880:5;908:13somehow 843:23;851:13;889:16;892:14,18;895:2;901:8;908:4;912:13;914:9sometime 845:12sometimes 844:14somewhat 911:20song 854:6;876:13;881:9songs 868:5;876:3;877:21,22songwriters 861:1Sony 819:21;836:24;837:17,19,23;838:2,2,7,12,13,18;839:16;850:3;851:12,13,16,20;852:7,13,22;855:22;878:20;879:3;886:2,7,9,10,17,19,20;887:2,5,7,13,15,17,22;888:6,17,19;889:1,4,4;890:1,6,9,10,14;893:14,16,19;895:2;903:23,23;904:3;910:19Sony/ATV 835:19;836:15,21;837:13;874:25Sony's 835:20;836:2;878:14;888:2Sony-type 839:7sophisticated 832:11;898:23sophistication 903:6sorry 861:4;880:13;884:9;902:4;904:25;909:7Sorry 862:9;886:22sort 834:23;859:7;870:11;877:17;898:8;902:12;905:9;915:11sought 821:22source 861:20;902:15span 832:13speak 843:1speaking 884:5

speaks 909:5specific 868:4,5;870:23;873:11;877:21,22;883:1;894:9specifically 908:12specifics 895:10speculate 886:8;893:22;897:17;898:21speculation 813:7speculative 850:12spell 872:5spelled 870:11spend 904:1spending 816:25spent 817:5;899:1;901:23;903:2,4spoke 894:1spreading 837:23square 845:24squarely 839:23staff 902:22stake 904:20stand 816:1;819:2;824:1;828:22;829:11;844:1;883:19standard 873:3standing 877:10standpoint 840:19stands 828:19;843:11Stanton 820:8;837:1;840:11,21;841:2;842:7;863:11;883:23;914:18,19Stanton's 821:13;838:24;839:21;840:21,23;883:17,21;914:20starkly 873:1start 825:4starting 822:23;827:8;857:17;872:22;910:2;911:13;912:2state 852:7,12,18;859:24;865:11;874:12;885:12stated 834:4;836:2;861:4;870:25statement 843:11statements 856:25states 865:18statistical 830:15Statistics 907:5stay 885:9steadily 908:8steady 823:17;888:2steers 834:24still 815:17;889:11;902:15;913:6stop 897:14stopped 847:9stops 814:23store 906:18straight 833:11;905:6strategy 862:10stream 844:16;851:7;902:16

streams 906:16strength 877:1stretch 829:8strongly 827:10struck 858:7;907:14structure 814:10;817:25,25;818:22;821:11;823:2,3;824:10;853:25;863:19;864:4;865:17,20,22;866:14;869:3,5,14;907:18,19,25;912:22,24;913:11;914:1,2,6;915:15structured 818:23structures 816:11struggled 881:6;882:10stymie 847:25subject 843:11;846:15;847:20;854:7;898:7,20;909:18submission 848:13submit 859:12;868:12;870:4;872:17;873:20;875:12;878:5;879:2;886:12;888:14,16;891:7;892:2;916:8submitted 864:1;874:23subs 824:3subscriber 823:9substance 850:20substantial 812:16;859:16,17;912:25substantially 845:20;889:7,21;907:6substitutability 878:8successful 824:11successfully 825:16suffered 847:4suggest 821:8;838:8;901:7;917:2suggested 915:16,17suggesting 861:21;916:16suggestion 826:18;884:15;895:1;908:4;912:20;914:9suggestive 827:5suggests 825:2;889:14;917:7suitability 821:24sum 831:3;855:14;859:22;870:6summation 858:1;916:24supervision 823:14suppliers 879:20supply 848:15support 824:6;828:16;829:8;831:4;857:2;905:17supporting 831:2;847:3supports 824:21;830:1supposed 818:4;819:3supposedly 826:3supposition 824:6Supreme 858:25;859:14,

23;863:15;915:22sure 818:6;834:11;848:16;863:5;870:12;878:10;886:18;894:7;902:18,19Sure 866:6;880:15surmises 847:2surprise 851:17surprising 836:16surrogates 831:18surrounding 902:18survey 849:2surveyed 815:19Swift 832:19switching 910:20,23sympathize 881:5system 818:18;819:18;820:14;837:5;876:20

T

table 875:16;876:25tactic 893:5talented 912:18talk 904:17;905:3,16;913:10talked 898:25;902:7;903:21talking 820:3;824:10;829:4;857:7;863:22;884:9task 872:22;915:11;916:21Taylor 832:19teaching 830:14;863:2team 851:2tease 860:23technicality 845:5technically 816:13telephone 856:12;892:25telling 835:24,24Tellingly 837:20template 823:19;827:7ten 855:19,20,20tend 847:6tens 834:16tentative 846:14term 817:18;825:12;827:21;836:3;837:16,24;838:15;850:13;887:10;888:13;895:22;896:8;900:1;908:6;910:16;911:6terminate 879:14terminated 879:4terminates 876:18terminology 830:13terms 823:12;826:2;829:21,24;833:11,17;835:2,17;843:10;847:10,11,13,14;881:22;882:14,16;886:10,16;901:16;914:7test 835:14;869:17;873:5,5;874:8tested 833:6

show - tested (14) Min-U-Script® TRIAL


testified 814:10;815:16;823:7;828:6;829:22;832:4;833:10,21,24;834:22;840:2;843:25;847:12;851:15;852:15;853:16;856:12;869:9;872:15;876:12;879:13;882:22;885:21,24;886:2;893:25;897:1;899:18;900:3,7;903:7;911:5;913:20testifies 836:19;878:22;889:2;894:1testify 876:1;884:24;885:20;894:8testifying 885:17testimony 819:23;822:25;824:1,2,4,9;827:23;830:10;834:6,13,18;836:11,19;837:25;838:12,23,23;843:8;847:6;849:7;850:15;851:2;854:11,13;857:3,6;870:14;874:20,24;875:4,5,8;878:7,11;882:18;885:4;886:6;890:1,21,22;893:22,23;898:22;900:5,6;901:21;903:3;905:12,13;907:14;909:17;912:6;913:11,22;914:11tethered 916:15theoretically 844:19theory 877:15thereby 844:7;855:10,13therefore 815:1;816:2;821:23;824:23;883:3;911:6thinking 826:12;827:7;863:6;905:15;912:7third 820:22;856:18;887:18;888:23;899:6,15Third 822:4thirdly 891:19thought 824:11;869:13;884:9;912:16;917:9thousands 854:23three 823:23;824:15;845:10;850:1;855:16;856:1,3;857:10;864:22;875:3;882:14;886:11;887:9;900:17;909:23threshold 915:23thriving 917:14throughout 817:18;887:9;900:1,23throwing 882:3Thus 860:3tied 880:1times 887:10;894:2;898:25tiny 900:13today 897:6;903:22;909:8together 836:14;839:11;858:22;872:2;913:18told 851:11,13;855:8,11;866:25;893:3

took 812:19;823:6;827:23;833:16;867:6,7;887:14;889:8;890:25;917:4tool 869:21,25;870:22top 828:19,22;855:17,20,22,22,23;878:1,25;879:7tortured 848:17total 816:20;855:14;899:21;909:25totality 821:5touch 857:5touches 872:7trade 895:6;913:14tradition 816:9transaction 854:8;882:20;892:17;901:11;914:21transactions 832:10;843:19;873:23;886:6transcript 812:14;814:14;815:8;821:25;823:20;828:18;829:7,19;832:25;833:8,15,25;840:4;847:14;849:8,9;851:15;852:25;854:10,15;857:11,13;885:1,11;886:4;888:25;900:5,6;903:1Transcript 817:11;832:21;840:9transcripts 905:10transition 866:12translate 829:25translated 813:8,12;822:23translates 830:2;880:24transmissions 818:17;832:24transmitted 817:16transparent 833:11treating 837:16treatment 828:12trial 812:11;813:4,13;814:17,19;816:7;817:6;819:1,12,14;820:8;822:19;823:1;829:5;830:6;836:11;846:9;850:9;851:21;857:3,4,23;909:12tried 842:25triggers 897:2true 853:22;855:18;876:7;877:12;884:16;889:23;911:21truly 859:22;876:21;891:4Trusonic 915:3trust 843:5;902:21,22;904:2trusted 902:21try 837:4;897:9trying 825:15;836:13;847:11;881:12;909:12;916:25turn 831:13;843:15;873:24;885:6;904:22

turned 885:5,22;888:25turning 822:15;835:21TV 888:9twice 815:1;867:22two 818:10;819:16,17;825:10,15;837:9,20;844:24;850:23;856:23;867:17;869:22;870:7;875:5,6;878:2;882:15,15;883:5;891:4;899:1;901:23;903:6;904:7;913:3,17;914:3,4type 903:10types 877:21typical 843:18;850:25

U

ultimate 836:4;846:16ultimately 825:10;839:17;846:13;869:6;889:1unable 824:5;853:11unaltered 815:4;846:8unambiguous 889:18unavoidable 850:10unbearing 814:18unbundled 813:9;837:8,11;838:2,8,21uncertain 847:10uncertainty 842:16uncharted 914:6unconditional 835:10uncontested 834:13under 812:7;815:13;817:7;818:18;823:14;839:3;852:22;853:25;858:19;862:2;863:18,23;864:4,12;865:17;873:7;880:25;896:5,12;897:14;899:14;908:7Under 814:22;815:15undercut 834:7underlies 870:2underlying 836:21;848:25;859:10underscored 814:16understands 903:15understood 819:15;826:13;850:14;853:8;870:17;874:22;889:6,7,18;895:8;903:13;917:7undertaken 846:24undervalue 857:1Undeterred 813:25undisputed 886:10unduly 843:8unequivocal 854:13unfair 879:25unfamiliarity 848:25unfolded 867:11unique 859:1;916:1,17Universal 834:14,22,24;835:11,12;836:8;875:7;

885:21Universal's 835:5,8,24universe 850:22;854:20;855:19,19,24unless 817:9;852:16unopposed 819:2unprecedented 836:9unquote 912:11unreasonable 906:7;915:12,21unreasonableness814:15unrecouped 837:17unsound 813:6unsubstantiated 850:9unsuccessfully 836:14unsuited 822:14unsupported 832:16;856:25untethered 831:1up 815:7;823:8;836:6;839:1,16;849:6;850:6,12;855:20,21;858:5;864:8;876:24;878:1,4;879:5;880:8;881:4;883:19;886:24;889:9;890:20;893:5,18,19,20;895:16;907:1,21;908:16;909:8,15;911:4;914:15;916:25update 821:5urge 857:14usage 840:8;846:7use 827:25;830:12;844:17;846:21;849:12;858:6;859:2,19;861:20,21;870:23,24;877:2;881:1,19;886:11;888:19used 830:5;832:14;833:6;836:3;846:23;872:17;901:7;903:9,24user 815:12;872:14;894:24users 815:5;861:18;868:15;903:11uses 863:21;872:14using 815:22;830:18;893:5;907:4utilities 913:22utilization 850:1utter 848:20

V

vaguely 855:9valuation 860:16;861:3,5value 812:5,25;813:11;814:18,25;815:4;832:21;836:21;838:6;857:18;858:21,23,23;859:7,10;860:9,10,19,24;861:5,7;869:18;873:3;886:4;901:13,13;903:13;913:16;915:7

valued 912:14;916:1values 870:7varied 849:3variety 910:25various 832:4;886:23vary 863:19;872:13,16vast 828:24;876:2;900:12,23;903:20vastly 885:19versus 849:13;885:10view 824:21;842:8,14;843:4;853:16;870:1;904:18;905:12;910:12viewed 823:19;828:2;829:20views 832:20;850:25;858:12;873:2violation 869:24virtually 851:3virtue 818:3;895:5vis-a-vis 877:11visible 828:24visit 845:13vital 906:13volume 844:7voluntarily 813:23

W

wagons 813:1wait 821:18walk 854:12;877:3wants 814:4;875:24wares 844:6Warner/Chappell 875:8;885:5,9warranted 835:21;839:7,9wasteful 843:9waters 914:7way 838:4;840:5,8,12;843:3;850:25;872:15;875:20;876:1;884:25;887:4;898:1;900:4;908:6;917:2,5wealth 905:17weeds 867:8week 866:24weighs 865:3weight 829:6weighted 830:6,18weighting 838:14,16whatsoever 813:19;854:25;857:2;895:4wheat 916:3White 859:15,23;916:5whole 830:25;847:20;859:21wholeheartedly 914:15whose 832:12;833:6;901:6wide 915:13widely 849:3

TRIAL Min-U-Script® (15) testified - widely


willing 834:10;869:17,17;873:4,6,7,22;874:8;910:14,14;914:21,21willing/seller 874:8win 869:5windfall 815:25wins 915:21withdraw 896:7withheld 815:16within 822:12;839:23;842:23;868:21;869:6;878:19;915:18without 820:4;834:9;854:19;859:2;864:11;875:21,24;876:22;877:10,16;913:16witness 831:1;850:12;909:13witnesses 829:22;851:7;869:9wonder 822:12;862:24wonderful 878:21worded 855:9words 819:3;821:19;833:7;834:3,20;835:6;844:11;854:4,5;857:9;889:22work 820:21;831:10;849:17;866:9;876:15,17;893:8,14,15;899:17;907:10worked 911:23,24working 842:23;889:23;894:21works 815:20,24;816:16;817:15;820:20,21;822:10;832:9;833:6;849:21;857:16;863:21;872:16;877:2;897:16;907:17;910:7,8,10world 838:6;850:5;858:12;875:13,15;898:5,9world's 832:13worry 908:1,2worse 843:21,23worth 839:20;889:20;901:17;904:10;905:25;912:15write 900:25writer 814:2;881:10writers 815:19;836:6written 824:2,4;830:10;834:18;836:19;837:25;847:6wrong 830:5;889:6,7,21

Y

year 812:9;817:1,3;821:5;826:11;827:20;829:9;866:21;886:11;887:3,20;888:10;892:5,5,6,21;895:4;901:15;906:1;907:17,20;909:15;912:3,15,15;913:7

yearly 827:9year-over-year 823:16years 822:18;833:5;837:20;844:20;864:22;883:5;884:6;887:10;904:7;907:9,23;910:4;912:4yesterday 839:15yield 838:20yields 812:17;830:15,18

Z

zero 900:24Zero 900:24

willing - Zero (16) Min-U-Script® TRIAL

· IN RE: APPLICATION OF THE CAPSTAR November 23, 2010 Page 809 0bn7usa1 [1] UNITED STATES...

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Transcript of · IN RE: APPLICATION OF THE CAPSTAR November 23, 2010 Page 809 0bn7usa1 [1] UNITED STATES...