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Thank you, Mr. Chairman.

Mr. HUGHES. Thank you. The gentleman from California, Mr. Berman.

Mr. BERMAN. Thank you, Mr. Chairman. I apologize for missing our colleagues' testimony and the testimony of this panel. Unfortunately, the Budget Committee and the Foreign Affairs Subcommittee are both meeting at the same time and I have to go back to those. I am not going to be able to stay very long.

I take it the issue is about whether section 110(5) and the legislation before us seeks to exempt music played at restaurants or bars from any coverage of a requirement that the proprietors of those establishments get licenses.

Mr. HUGHES. That is correct. The question is what is incidental use? It has created a lot of confusion and chaos. That is the focus of this hearing as part of the oversight of copyright generally.

Mr. BERMAN. This question of incidental use-I am sort of mulling this over in my own mind and sharing it with everybody here. In television programming, my guess is that television programmers could try to claim that the music that accompanies the television program, in some cases it is probably only a few minutes of the television show, is incidental to the show, and that people want to watch the show and the music isn't what's really causing them to watch that show, therefore, other than paying the people who made the music or paying for the recording that is used, why should they have to get a license for the music.

I am just wondering how one can claim it is incidental, and at the same time people feel enough need to want to use the music that they are either paying the license for or fighting to get an exemption from having to pay from the license rather than refraining from using the music?

Why, to some extent, isn't the marketplace a determiner of whether or not it is so incidental that it doesn't need to be used, or is not worth the price that is being charged for it? And with that rhetorical question I will yield back the balance of my time.

Mr. HUGHES. I thank the gentleman. The gentleman from California, the ranking Republican.

Mr. MOORHEAD. Thank you, Mr. Chairman. I want to apologize to the panel. I am the ranking member of the Energy and Commerce Committee, and I have been down there doing my work this morning, so I haven't been here.

But I cannot emphasize too strongly the importance of the parties involved here getting together. I know that none of you are going to get exactly what you want. You have to compromise, but I think there is a very, very great need to get together and try to work this out without having a legislative solution imposed on you.

There seems to be some lack of clarity in section 110(5) of the Code, and some difference of interpretation as to the size of the TV sets involved between BMI and ASCAP. That seems to be something you guys can work out together, I would think, without a whole lot of effort.

I can understand the feelings of the people that write this music, that they have a right that needs to be protected. I do not like legislation that disturbs that right, but I think there is enough of the

working details here that something can be worked out and must be worked out between the parties if it is at all possible.

I hope that for the next few months you will really work hard. Maybe a few months is too much; maybe the chairman doesn't want you to wait that long; he's given you 1 month, but do everything that you can to get together on this. It is always much better to work something out than it is to have Congress impose something

Mr. KOENIGSBERG. Congressman, we would avidly embrace your suggestion, and we can only hope that the good people on the other side would equally avidly embrace your suggestion.

Mr. MOORHEAD. Well, if one side is working on it and is serious about it, and the other side is not, it might very well affect the way we feel about it. I would hope that all of you on both sides will work together to try and work this thing out.

I would personally like to know if one side or the other is refusing to negotiate. That would be important to me.

Mr. BERENSON. May I just say, Mr. Moorhead. You did miss part of my presentation as you stated. BMI has been in negotiation with the New Jersey Restaurant Association and other State restaurant associations in an attempt to arrive at mutually acceptable master licenses which would obviate this problem.

I speak only for BMI, we have been attempting to do so and will continue to do so.

Mr. MOORHEAD. If the chairman has said a month, if you are within a couple of weeks of coming to a conclusion, I am sure he might give you 6 weeks, but I would like to know what progress you are making. Mr. Gould, If you would report back the progress that is being made 2 or 3 weeks from now, so that we can have some kind of idea if we are going to move forward. I have nothing further.

Mr. HUGHES. Thank you. I just have one additional question. Mr. Gould, on page 6 of your statement you mention that a bar or restaurant that does not think your fee is reasonable can go through the rate court in the Southern District of New York, in which case ASCAP bears the burden of proving its rates are reasonable.

How likely is it a restaurant owner in my area, southern New Jersey or in Wyoming or Arizona for that matter, would pay a lawyer to contest your decision to charge for a 36-inch television or any other fee? How many times have ASCAP's fees been challenged in the rate court by small food and restaurant establishments?

Mr. KOENIGSBERG. How likely is it that an individual establishment has the wherewithal to do it?

Mr. HUGHES. Do you think it is realistic to think that one of my tavern owners in southern New Jersey is going to go to New York, over a $300 or $400 fee, and contest it? Lawyers in my neck of the woods do not charge as much as the big city lawyers in New York, as I understand. I have been out of practice for a long time, but I think it is unrealistic to think that they would, don't you?

Mr. KOENIGSBERG. But, sir, trade associations certainly have the wherewithal to do that, and these things can be done quickly if both sides want to do it, and ASCAP always would like to do it quickly. So I do think that it can be done because if there is a concern here, it is not a concern of one bar owner, it is a concern of many bar owners, if it is a legitimate concern. Therefore, a trade association, such as the associations that are appearing before you in these hearings, or such as the New Jersey Association, certainly, could do so.

Mr. HUGHES. How many times has the New Jersey Restaurant Association brought suit?

Mr. KOENIGSBERG. To my knowledge, none. But there are users of music in this area who have come to court. I remember one time where a chain of fast food restaurants went to court contesting this sort of fee which amounted for them to about $150 to $200 a year per premises.

The judge who has jurisdiction over the consent decree requires that all parties come before him before they file a motion, which is a good way of seeing if things can be worked out. He said to them, well, obviously you can file your request for a fee determination, but when you are talking about $150 a year or $200 a year, how low, he said, can I make the fee?

The burden is going to be on ASCAP to prove that that's a reasonable fee.

Mr. HUGHES. Let me ask it another way. The Federal district courts are up to their eyeballs in civil cases today. Sometimes it takes 3 and 4 years to reach a case, not to mention lawyers. Even lawyers down my way, rural southern New Jersey, require a $4,000 or $5,000 retainer to go into Federal district court, and by the time they get into discovery, pay for that, you're talking about big dollars.

What would be wrong with developing a system of, let's say, court-annexed arbitration?

Mr. KOENIGSBERG. I must say, sir, that I am not sure that the scenario that you paint is really accurate. I do not think that it is that difficult for trade associations

Mr. HUGHES. You do not think it is accurate that lawyers down my way are requiring those retainers in Federal district court? Mr. KOENIGSBERG. That I would never contest, sir.

Mr. HUGHES. Because I have four kids that are lawyers in southern New Jersey.

Mr. KOENIGSBERG. I hope my kids follow in those footsteps too, but bringing such a proceeding does not have to be a big deal. It can be done quickly, and the district judge, Judge Conner, who is the judge over the ASCAP consent decree, always wants to move these things very quickly. It doesn't have to take 3 years.

Mr. HUGHES. What is wrong with an arbitration process? Why should this be something that clogs the district courts?

Mr. KOENIGSBERG. Sir, without answering that off the top of my head, let me think about that and talk to my client about that. That is the safe answer for a lawyer to give.

Mr. HUGHES. Good. You have been very, very helpful. Like my friend Carlos Moorhead here, I hope it is something that the industry can solve. That was music to my ears that you would want to sit down and try to work it out with the users because that is a far better approach.

I think that 110(5) just invites the kind of chaos that we've seen, so I am not adverse to modifying that, perhaps, even if the user community and societies can work it out more amicably to try to deal with the problem.

Certainly, having you folks talk with the users would be a far preferable way to try to resolve this issue, it seems to me, in the long pull.

Anyway, it has been very helpful. I do not think there are any questions, but there are so many things in intellectual property that are not relevant to changing times that we need to update our laws because I really believe Morton's remark in the early part of his statement about our commitment to maintaining the right balance.

With the technology that is ongoing that is changing the entire landscape, it is so important for

us to maintain that balance, to protect the rights of the creators' property.

I want to tell you something my restaurant folks told me. That they didn't even think that they should be paying for live music, which I told them was nonsense. I did not want to hear that because that does not anywhere near maintain the kind of balance we are talking about.

With incidental use, it is an area that is a thicket, and I think that we can sort it out and come up with something a lot more rational than we have today. I hope we can do that.

Thank you. You have been very helpful today.

Our second and final panel consists of Joe Johnson and Michael Leonard appearing on behalf of the National Licensed Beverage Association, and Henry John Deion and Guy Gregg representing the National Restaurant Association.

Mr. Johnson operates two restaurant businesses in New Jersey. He is the president of the Atlantic County Licensed Beverage Association, and is an executive board member of the New Jersey State Licensed Beverage Association.

Mr. Johnson's biography states that one of his establishments, Rod & Reel, has been the favorite watering hole of New Jersey sportsmen since 1936. I look forward to visiting you in the years ahead.

Mr. Leonard has been in the restaurant business for almost three decades. He now owns the Greenbaum & Gilhooley Restaurant in Wappinger Falls, NY, and is the executive vice president of the United Restaurant, Hotel, Tavern Association of New York State.

Mr. Gregg has been working in the restaurant business since 1975. He is the founder and owner of 3 Cheers, Inc., and Publick House Restaurant in Chester, NJ. He has been a member of the National Restaurant Association since 1979.

Since 1986, he has served on the board of directors of the New Jersey Restaurant Association and is currently vice president. Mr. Gregg holds a bachelor of arts in psychology from Monmouth College in Illinois.

Mr. Deion is also a member of the National Restaurant Association and owns, among other businesses, the Last Saloon in Providence, RI. He is a graduate of Colgate University.

On behalf of the members of this subcommittee, we welcome you here today. We have your statements, which we have read. We hope you can summarize for us, but we are going to let you proceed as you see fit. Your statements will be made a part of the record in full.

Why don't we begin with you, Mr. Johnson. Would you like to begin?

Mr. JOHNSON. Yes, I would. STATEMENT OF JOE JOHNSON, ROD & REEL TAVERN, BRIGAN.

TINE, NJ, AND PRESIDENT, ATLANTIC COUNTY CHAPTER, NEW JERSEY LICENSED BEVERAGE ASSOCIATION, ON BEHALF OF THE NATIONAL LICENSED BEVERAGE ASSOCIATION

Mr. JOHNSON. Mr. Chairman and members of the subcommittee, I am Joe Johnson. I am the owner of the Rod & Reel Tavern in Brigantine, NJ. I am the president of the Atlantic County Licensed Beverage Association. I am here today representing the National License Beverage Association. That is quite a mouthful.

In essence, I think what I am here doing is representing the little guys that we have been talking about. I would like to depart to say that some of the previous testimony bears out the inferences that we have made.

If you ask a composer a question, you get an answer from a lawyer, and that doesn't sit in terms of what they have been saying, their willingness to negotiate. If you ask question of a composer, you get an answer from a lawyer.

The other thing I really liked was the analogy that they used in the presentation of the loaf of bread or the baker in bringing in your bread. Of course, I have a baker. He does bring in my bread, and I gladly and happily pay him for the bread, but I certainly wouldn't expect that after the baker left that in the door would walk a man who said that he had the rights to the recipe for the bread, and he expected to be paid also after the baker had already paid him for the use of the recipe.

Essentially, as I see it, that is what we are talking about here today. I would like to thank Mr. Gould for the analogy.

I would like to compliment the members of the subcommittee including my Congressman, Representative Hughes, from my district. Unfortunately, I understand that is not going to continue, much to my chagrin, and I could say to the chagrin of most of your constituents after 20 years of service, admirable years of service I might add. I am very sorry to hear that you are not going to continue in the Congress of the United States.

I would like to thank you for having the foresight to hold these hearings on the rights of the societies. I believe that this is the first hearing to focus on the many problems that we in the hospitality industry face every day in dealing with the agents of the performing rights societies.

We recognize that all of our problems are not addressed in this legislation. We are, however, urging you to consider and to pass H.R. 3288, the Public Accommodations Exceptions Act.

In many cases, owners of establishments have no recourse but to pay fees or face litigation from the performing rights societies.

The problems include the total lack of information on song titles that each group claims it owns; the arbitrary imposition of fees based on a matrix of criteria that most small businessmen cannot

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