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I had to think long and hard about speaking out today against the copyright establishment. I know it could have ramifications. But I have faith in the system, which is why I'm here.

Madam Chair, thousands of small businesses have paid the piper for years. That's not the issue. The issue is whether we live under the rules of law that are clear and fair, or under arbitrary rules of ASCAP, BMI, and SESAC, who for all practical purposes are accountable to no one.

I thank you for the time, and I'd be happy to answer any questions.

[Mr. Tavenner's statement may be found in the appendix.)

Chair MEYERS. Thank you, Mr. Tavenner. We appreciate your testimony very much. There are a number of members who have asked to submit a statement for the record, and they have asked to keep the record open for additional questions to witnesses. So, without objection, the record will be held open, and all statements will be accepted for the record.

Chair MEYERS. At the beginning we heard from the author of this legislation, Mr. Sensenbrenner, and in the spirit of fairness, Mr. Bono is here and has asked to be heard. So, we'll probably start the lights on you Mr. Bono, and we will hear from you, and then we will go to questions.

Mr. LAFALCE. Do we have to pay to listen to Mr. Bono? Chair MEYERS. Yes, we do have to pay today. Ms. KELLY. Only if he sings. Mr. BONO. Thank you, Madam Chair. I would just like to—first of all, I've been a restaurant owner and had several, and I'm also a songwriter. So, I have never experienced these days of—or nights of horror that some of the other restaurant owners have experienced. I'm not saying that they haven't happened, but I've never experienced them in all the time I owned a restaurant.

Let me just explain what I think is getting very convoluted and complicated. I think, first of all, if I can ask you one question, Mr. Tavenner. When you say the “radio,” do you mean when you use the radio as entertainment in your restaurant that you shouldn't have to pay because the broadcasters are paying for that?

Mr. TAVENNER. Incidental use of the radio.
Mr. BONO. What about the songs?

Mr. TAVENNER. Well, if it's incidental, I don't think that we should have to pay. We already have a system like you probably had in your restaurant, Muzak or something like that, that we're paying the rate on that system.

Mr. BONO. Well, then basically what you're saying is if you use the radio for entertainment, you shouldn't have to pay for the song?

Mr. TAVENNER. For incidental use.
Mr. BONO. Well, what about the song?
Mr. TAVENNER. Well, we're already paying them on the Muzak.

Mr. BONO. You're contradicting yourself. You're paying on Muzak, so you shouldn't have to pay them on the radio, is what you're saying?

Mr. TAVENNER. No, I'm saying how many times do we have to pay for them? When the live band plays in any restaurant, I pay for that, I pay on my CD machine, I pay on my karioke machine; how many times do I have to pay?

I understand there's a finite number of times that

Mr. BONO. Let me see if I can clarify that. Let's say a song is like a painting, and somebody rents a painting right near you. They only use it at 6 o'clock at night, but they pay all day. So, it would be like saying, “Let me hang this in my place because you're paying for it, that way I don't have to pay the intellectual rights or royalties on that painting or the rent because it's here.

Or what about when you take a taxi cab from the airport and someone's going to the exact same destination and you share a cab with them. Both of you pay. It's the same ride. So, I don't understand the reasoning of when you say you don't have to pay for that entertainment, because the radio, the broadcasting company paid for that entertainment. But they didn't pay to give anyone the rights to pirate that. Now, we're saying right now that China can't pirate intellectual property or copyrights. We're up in arms because they seem to be pirating $2 billion worth. We have a contract with them, and they're not dealing with their contract.

Well, basically you're pirating the music from the radio, and you're justifying it by saying I paid for it over here. So, I just can't make that equation, even when I owned a restaurant.

Mr. TAVENNER. Well, I see what you're trying to get at if in my restaurant I'm playing the music four or five times

Mr. BONO. I understand that. You're playing it a sixth time with the radio

Mr. TAVENNER. I'm trying to feed into your example. If I was to pay for each time that I played it, that would be one thing. But that's not exactly the way we're charged, and you know that. We're charged on the square footage of our establishments and/or how much we paid for a blanket license

every year on cost of entertainment, on cost of CD's or cost of TV's, each one of those categorically.

Then they go and say when you play ASCAP songs 489 times in your restaurant and we're going to charge you for that. If, in fact, we use your example of your painting, it's one entity and if we paid that 489 times they wanted to charge us at, that would sure be a lot fairer. But to say to us, you have to pay for—we don't have any arbitration right to come and negotiate that with you, and that's a disadvantage to

Mr. BONO. I can't understand how—now let's get this straight. The radio paid the songwriters to broadcast that music. Now they didn't pay for anyone to take that music and use it commercially, that has never—the contract between the two. So, if you played that music then we are going to have to go to the broadcasters and say, "Well, your going to have to up the price to level that.”

Mr. TAVENNER. You and I right now are arbitrating—we're negotiating, and if we had to have access, that would by OK with me. If I could go to my local ASCAP guy and explain to him how I run my specific restaurant, which is an individual case I'll grant you, then at least I have a shot at this.

Mr. BONO. Now, ASCAP and BMI, I've been sitting with this for a year, have come to you and said, "All right. Forget the radio at a certain point.” And 7,500—so they had, virtually, bent over backwards to say, “OK.” So you do—let's come to something.

Now you guys are saying uh-uh, and I don't like the notion that we are saying you can pirate music off the radio, but you can't pirate their—where's the logic in that?

Mr. ZELIFF. Let me jump in

Mr. TAVENNER. I just want to say real quick, we're not saying uh-huh to them. We're saying we haven't gone far enough.

Mr. BONO. I-
Mr. TAVENNER. We have to have arbitration-

Mr. ZELIFF. I think this is a good healthy discussion, but we're going to have to end it. We're running out of time.

Mr. BONO. OK.

Mr. ZEL I'll just make one comment. You're missing a great opportunity to get everybody that's riding to work that has a radio, people in their homes that have a radio or TV.

Mr. BONO. That doesn't have anything to do with what we're talking about here.

Mr. LAFALCE. Mr. Tavenner, are you related to Mary Tavenner? Mr. TAVENNER. No, I'm not.

Mr. LAFALCE. Mr. Berenson, I was impressed with your agreement, that I guess you and ASCAP have ventured into with the National License Beverage Association. Now, as I understand it, you exempt any establishment, eating or drinking, with less than 3,500 gross leasable square feet; is that correct?

Mr. BERENSON. Yes, sir.

Mr. LAFALCE. Mr. Tavenner, what percentage of the restaurants belonging to the National Restaurant Association would be exempt from that agreement, if you would agree to go along with it?

Mr. TAVENNER. The numbers that Mr. Berenson's group uses don't exactly match the ones that we have.

Mr. LAFALCE. Well, I want your numbers, that's why I'm asking. Mr. TAVENNER. I have them right here for you.

Mr. LAFALCE. If you have 3,500 square feet, what percentage of your restaurants would be exempt?

Mr. TAVENNER. Approximately one-third would be affected positively

Mr. LAFALCE. Let me just ask this, rather than give a quantitative would be affected positively, how many of your restaurants belonging to the National Restaurant Association have 3,500 square feet or less?

Mr. TAVENNER. Well, we keep data up to 2,500 square feet, so our numbers show that approximately one-third of those restaurants would be affected positively.

Mr. LAFALCE. Well, one-third of the 2,500; is that correct?
Mr. TAVENNER. No, that's not correct.
Mr. LAFALCE. Surely.

Mr. TAVENNER. Well, for the record, approximately a third of restaurants would be affected by the 3,500 square feet or less, an agreement that was agreed to by NLBA.

Mr. LAFALCE. Do you or do you not keep data with respect to square footage above 2,500? Mr. TAVENNER. Yes, we do.

Mr. LAFALCE. Mr. Tavenner, why did you make a statement that you only keep it with respect to 2,500 or less?

Mr. TAVENNER. 3,500. I just misread my-I apologize.

Mr. LAFALCE. Very good. What about when you estimate about 70 percent of the eating and drinking establishments would be exempt under that proposal alone?

Mr. TAVENNER. Because in their study, they didn't ask 74 percent of the restaurants what their square footage was.

Mr. LAFALCE. They did a random sampling of only a quarter of the restaurants; is that what you're saying?

Mr. TAVENNER. That's the numbers we got

Mr. LAFALCE. I'm talking about—simply 25 percent to make an estimate, it's better than most polls.

Now, let's go on further. An establishment using six or fewer speakers with no more than four speakers in one room would also be exempt, so that's a—are you listening to me, or to your counsel?

Mr. TAVENNER. Yes, I am, sir. I'm sorry.

Mr. LAFALCE. Well, that's one more criteria. Now, on top of that, independently of that, if you have fewer than six speakers with no more than four speakers in a room, you're also exempt. Now

Mr. TAVENNER. If you think that's nice and generous-
Mr. LAFALCE. Well, I think so, but maybe I'm wrong.
Mr. TAVENNER. I think that's a nice start, but we're asking for

more.

Mr. LAFALCE. I think you hit the nail exactly on the head. It's a very generous exemption, but you still want more.

Mr. TAVENNER. We want

Mr. LAFALCE. Let me try to quantify this now. The restaurants I go to, I don't know how many of them use more than six speakers. Do you have any data on what percentage of your restaurants use more do you want to take a guess Mr. Tavenner?

Mr. TAVENNER. I couldn't-because I don't work for the National Restaurant Association. I work for Silo Inn, Incorporated.

Mr. LAFALCE. Well, all right.

Mr. TAVENNER. I would be stabbing at the dark, but we would be glad to submit to you any questions you have on those

Mr. LAFALCE. Well, I think it would be interesting, because if we-CRS is collecting—and if we're also going to-regardless of size, establishments of six or fewer speakers, with no more than four speakers in one room, it seems you're going to have more than 70, whether it's 71 or 95.

Mr. TAVENNER. I understand the question

Mr. LAFALCE. What about exempting any commercial establishment that's using three or fewer televisions of 55 inch screen size or smaller with no more than two TV's in one room, it would also be exempt.

Mr. TĀVENNER. Yes, sir. Mr. LAFALCE. So, that's going to increase the percentage that's already exempt. We have restaurants, according to CRS, and drinking establishments—somewhere in between the range of 70 to 100 percent would be exempt.

Mr. Berenson and Mr. Alger, if you assumed all three of those concessions that you agreed to, what percentage of eating and drinking establishments would be, in fact, exempt?

Mr. BERENSON. I don't have any such number, Congressman. As you said, it would certainly be greater than 70 percent, and somewhere less

Mr. LAFALCE. So, you're really talking about the bigger restaurants or drinking establishments, then it would be within this embrace. Those that would have more than six speakers, those that would have more than three TV screens larger than 55 inches, and those with more than 3,500 gross leasable square feet; is that correct?

Mr. BERENSON. That is correct, sir. What we are trying to do is accommodate the needs of the small businessman's complaints, not the large businessman. We're taking the property of the songwriter and giving it to a small businessman. Under these conditions, you can use it without payments.

Mr. LAFALCE. Complaint is a very important one too. As I understand, you've agreed to have determinations of fact reasonably reached throughout the country; is that correct?

Mr. BERENSON. Yes, sir. BMI, ASCAP, and SESAC have agreed that with the negotiations with the National Licensed Beverage Association and the National Restaurant Association, that we would agree to regional arbitration as to facts. Not to settle a fee rate, but in a determination as to where a restaurant would fall into, if there's a dispute amongst the facts, and if those facts would include also

Mr. LAFALCE. Subject to this regional arbitration, how often a song is or isn't being played, how often the music is or isn't being played, et cetera.

Is that a factual determination? Mr. BERENSON. The factual determination as to not necessarily which songs are being played, but how often they're being played, if the license fee is based upon the number of nights that the establishment—that would be a fact. So, yes.

Mr. LAFALCE. Now, with respect to regional arbitration that you've agreed to, how many regions have you agreed to, is this being worked out?

Mr. BERENSON. We were talking for a compromise, Congressman, probably about six or more.

Mr. LAFALCE. All right.
Chair MEYERS. Thank you, Mr. LaFalce. Mr. Zeliff.
Mr. ZELIFF. Thank you, Madam Chair

Chair MEYERS. If I could take just a second. The reason I am leaving and coming back is because I have a markup in another Committee. I apologize for all the disruption, but I find this extremely interesting. Mr. Zeliff.

Mr. ZELIFF. Thank you. Mr. Berenson, just a few questions. I want to make sure I understand you right. If we did this legislation and it was passed, you said that would threaten worldwide treaties, it would be against that; is that what you said?

Mr. BERENSON. No, I said that it could be construed as a violation of our commitments under Berne—the Berne Convention. We have had indications from the Irish Society that they would treat such as a violation and would retaliate through a doctrine which is referred to as “reciprocity.”

A foreign government will say if you're not going to collect and pay us for these performances, we're not going to pay America.

Now, copyrighted music, intellectual property, is one of those few areas where there is a definite positive balance of money coming

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