III. CRIMINAL REMEDIES FOR COPYRIGHT VIOLATIONS
A. CRIMINAL COPYRIGHT INFRINGEMENT: 17 U.S.C. § 506(a) AND 18 U.S.C.
(a) Whoever violates section 506(a) (relating to criminal offenses) of title 17 shall be punished as provided in subsection (b) of this section and such penalties shall be in addition to any other provisions of title 17 or any other law.
(b) Any person who commits an offense under subsection (a) of this section --
- (1) shall be imprisoned not more than 5 years, or fined in the amount set forth in this title, or both, if the offense consists of the reproduction or distribution, during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, with a retail value of more than $2,500;
- (2) shall be imprisoned not more than 10 years, or fined in the amount set forth in this title, or both, if the offense is a second or subsequent offense under paragraph (1); and
- (3) shall be imprisoned not more than 1 year, or fined in the amount set
- forth in this title, or both, in any other case.
See, e.g., United States v. Manzer, 69 F.3d 222, 227 (8th Cir. 1995) (infringement of computer
program used in satellite descrambler modules); United States v. Hux, 940 F.2d 314, 319
(8th Cir. 1991); United States v. Wise, 550 F.2d 1180 (9th Cir.), cert. denied 434 U.S. 929
(1977). Conspiracies to violate the Act can be prosecuted under 18 U.S.C. § 371.
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An employee identified specific tapes made in bulk under appellant's direction as
reproduced for local and out of state sale. The appellant sold pirate tapes,
solicited wholesale customers, and shipped large quantities of tapes out of state.
This evidence is sufficient to show that the tapes produced were made with the
intention to make a profit. It is not necessary that he actually made a profit. The
only requirement is that he engaged in business 'to hopefully or possibly make a
724 F.2d 1536, 1540 (11th Cir. 1984) (citing United States v. Wise, 550 F.2d 1180, 1195
(9th Cir. 1977), cert. denied, 434 U.S. 929 (1977)); United States v. Moore, 604 F.2d 1228
(9th Cir. 1979).
[T]he government can prove the absence of a first sale by showing that the [copy] in question was unauthorized, and it can establish this proof not only by evidence tracing the distribution of that [copy] but also by circumstantial evidence from which a jury could conclude beyond a reasonable doubt that the recording was never authorized and therefore never the subject of a first sale.
See also, United States v. Sachs, 801 F.2d 839, 843 (6th Cir. 1986); United States v. Drum,
733 F.2d 1503, (11th Cir.), cert. denied, 469 U.S. 1061 (1984); United States v. Whetzel,
589 F.2d 707, 711 (D.C. Cir. 1978).
all U.S. Attorneys should charge in indictments and informations as few separate counts as are reasonably necessary to prosecute fully and successfully and to provide for a fair sentence on conviction. To the extent reasonable, indictments and informations should be limited to fifteen counts or less, so long as such a limitation does not jeopardize successful prosecution or preclude a sentence appropriate to the nature and extent of the offenses involved.
the phrase 'of one or more copyrighted works' is intended to permit aggregation of different works of authorship to meet the required number of copies and retail value. For example, a defendant's reproduction of 5 copies of a copyrighted word processing computer program having a retail value of $1,300 and the reproduction of 5 copies of a copyrighted spreadsheet computer program also having a retail value of $1,300 would satisfy the requirement of reproducing 10 copies having a retail value of $2,500, if done within a 180 day period.
H.R. Rep. No. 997, 102 Cong. 2d Sess., at 6 (1992), reprinted in 1992 U.S. Code Cong. &
Admin. News 3569, 3574 (1992).
Thus, it is not appropriate to apply additional enhancements from the
commentary to § 2F1.1, notwithstanding that several would seem to often arise in the context of
intellectual property violations. See, e.g., U.S.S.G. § 2F1.1(b)(2)(A) (defendant's role involved
more than minimal planning); U.S.S.G. § 2F1.1(b)(3)(B) (offense involved a violation of an
existing judicial or administrative order).
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B. TRAFFICKING IN SOUND RECORDINGS OF LIVE MUSICAL PERFORMANCES:
C. OTHER TITLE 17 CRIMINAL PROVISIONS PROTECTING COPYRIGHTS
D. OTHER TITLE 18 OFFENSES
E. STATUTE OF LIMITATIONS
When any person is convicted of [criminal copyright infringement], the court in its judgment of conviction shall, in addition to the penalty therein prescribed, order the forfeiture and destruction or other disposition of all infringing copies or phonorecords and all implements, devices, or equipment used in the manufacture of such infringing copies or phonorecords. (Emphasis added.)
Note that this statutory language is mandatory and leaves the judge no discretion.
G. REPORTING REQUIREMENTS
H. ALTERNATIVE STATE REMEDIES
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29. The 1982 statute had made it a felony to reproduce or distribute, during any 180-day period, (1) at least 1000 phonorecords or copies infringing the copyright in one or more sound recordings or (2) at least 65 copies infringing the copyright in one or more motion pictures or other audiovisual works.
30. Note that 18 U.S.C. § 3571 increases potential penalties for certain categories of offenders; therefore, it is necessary to consult both §§ 2319 and 3571 in order to ascertain the maximum fine.
31. When amending the penalty provisions relating to criminal copyright infringement, Congress eliminated distinctions between types of copyrighted works, some of which, such as phonorecords and motion picture films, had been afforded higher protections. Now, copyrighted computer software and other forms of electronic intellectual property are protected to the same extent as records and motion picture films. These amendments also made criminal provisions more generally applicable to smaller commercial operations by lowering the felony threshold level to 10 copies valued at more than $2,500. See Pub. L. No. 102-561, 106 Stat. 4233 (1992).
32. A minority of courts also require that the government prove the absence of a first sale, and thus some cases refer to this as a fifth element. However, the majority position is that the defendant must raise the first sale as an affirmative defense, and that the lack of a first sale need not be alleged in the indictment. The doctrine, the uncertainty surrounding its use, and its role in criminal copyright prosecutions are discussed separately at "The first sale doctrine in criminal cases," infra p. 27.
33. "Copies" are defined as:
34. The Committee also noted:
Id. at 6, U.S. Code Cong. & Admin. News at 3574.
35. The drafting Committee left the term "retail value" "deliberately undefined, since in most cases it will
represent the price at which the work is sold through normal retail channels." H.R. Rep. No. 997, 102 Cong.,
2d Sess., at 6 (Oct. 3, 1992), reprinted in 1992 U.S. Code Cong. & Admin. News 3569, 3574 (1992).
36. 17 U.S.C. § 117 states:
37. This section provides in full as follows:
38. Throughout progressive revisions to the criminal copyright laws, Congress has been careful to emphasize that the heightened mens rea element "serves to leave outside the reach of the criminal law losing parties in ordinary business disputes such as those involving reverse engineering of computer programs or contract disputes over the scope of licenses. . . . In cases where civil liability is unclear -- whether because the law is unsettled, or because a legitimate business dispute exists -- the Committee does not intend to establish criminal liability." H.R. Rep. No. 997, 102 Cong, 2d Sess., at 5, reprinted in 6 U.S. Code Cong. & Admin. News 3569, 3573 (1992).
39. Even boards that do not overtly advertise a particular fee for access may advertise and collect fees covertly, or may have done so at some time in the past for a particular purpose. Some boards may allow access by the general public, but may operate "pirate areas," known as sub-boards, for the benefit of only a small subset of its subscribers. These privileged subscribers may obtain access to otherwise closely guarded pirate areas through payment of an access fee.
40. On computer bulletin boards, for example, a system operator may offer to subscribers a certain number of "download points" if the subscriber provides to the operator of the system (the "sysop") certain valued computer programs or information. The subscriber may then redeem his or her accumulated points for other programs or for general "download time." For purposes of prosecution, it should not be relevant whether the subscribers "pay" for access privileges in cash or in kind.
41. 17 U.S.C. § 106 provides:
42. The subsection, entitled "Limitations on exclusive rights: Effect of transfer of particular copy or phonorecord," provides in pertinent part:
43. The legislative history of the copyright statute supports the view that the first sale doctrine was intended as an affirmative defense to copyright infringement:
H.R. Rep. No. 1476, 94th Cong., 2d Sess. 1, 80-81, reprinted in 1976 U.S. Code Cong. & Admin. News 5659,
44. Drafting decisions are less critical, however, since the advent of the Sentencing Guidelines, as additional acts of infringement, whether charged in one or more counts, are likely to be taken into account as relevant conduct, however charged. See Sentencing Guidelines § 2F1.1 application note 6 ("The cumulative loss produced by a common scheme or course of conduct should be used in determining the offense level, regardless of the number of counts of conviction."). Nonetheless, uniformity in charging copyright infringement cases may avoid challenges to the indictment under theories of duplicity or multiplicity.
45. 17 U.S.C. § 101 defines a "collective work" as a "work, such as a periodical issue, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves are assembled into a collective whole."
46. The copyright statute defines a "compilation" as a "work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship. The term 'compilation' includes collective works." 17 U.S.C.
47. The copyright holder possesses not only the right to reproduce and distribute a given work, but also a limited right to control its distribution and reproduction. This includes protection against diminution in value of a copyrighted work caused by the mere appearance of infringing works in the marketplace. The value of a copyrighted work is diminished by counterfeit copies regardless of the price for the counterfeit item because the victim loses a share of the potential market. In addition, the copyright holder's market share is further diluted by subsequent reproduction and distribution of infringing products. Such harm, though perhaps provable and foreseeable, is not addressed by guidelines that focus on the initial prices charged or profits made by a defendant for infringing products. Last, the victim may also suffer substantial damage to his or her reputation by having inferior items marketed as genuine licensed products. Thus, it might be appropriate to consider not only the number of infringing items made available or sold, the price at which they were sold, and the normal retail price for non-infringing items, but also the nature of the market to which such infringing items were offered and the threat to potential damage for legitimate items.
48. Bootlegging occurs most frequently with sound recordings, and traditionally involves releasing copies of public performances not recorded by the copyright holder. However, no effort is made to "legitimize" the unauthorized recording. Consequently, the buyer usually knows exactly what he is purchasing.
49. Piracy involves the unauthorized reproduction or distribution of an existing copyrighted work. See Dowling v. United States 473 U.S. 207, 209 n.2 (1985). Pirated copies, like bootlegged copies, are generally marketed so their illegal nature is obvious to the public. Piracy is by far the most prevalent type of infringement, as it requires only the copying of an existing work through the use of readily available technology such as a tape recorder, videocassette recorder, or computer disk drive.
50. During the redrafting of § 2318 in 1981, the drafting committee expressed the position, shared by the Department of Justice, that counterfeiting is a more serious crime than traditional piracy. "Counterfeiting defrauds not only the . . . industries, but also the consumer by leading him to believe that he is purchasing an authentic product." S. Rep. 274, Pub. L. No. 97-180, at 8 (1981).
51. David Nimmer has suggested that by combining the Copyright Act's provision for impoundment of infringing articles, 17 U.S.C. § 503(a), with a request under the 1909 Supreme Court rules, and by invoking the All Writs Act, 28 U.S.C. § 1651(a), copyright plaintiffs may be able to obtain a truly ex parte seizure order. See Nimmer, supra note 18, at 10. Note, however, that the mere fact that an ex parte seizure may have been obtained by a victim should not necessarily preclude prosecution. Rather, such might present the opportunity for a relatively simple and cost effective prosecution, since the prosecutor need only subpoena the U.S. Marshal or other party in possession of the seized material to acquire evidence. Id.
52. In Internet and computer bulletin board cases, a relatively modest expenditure in a personal computer and a modem can result in the reproduction and distribution of hundreds or even thousands of exact duplications of copyrighted works.
53. A defendant may not assert double jeopardy for simultaneous prosecution of a criminal contempt and the underlying offense, even if same act or acts gives rise to both charges. The contempt is separately charged as an offense against the court's jurisdiction, while the underlying offense remains an offense against the laws of the United States. See, e.g., United States v. Mirra, 220 F. Supp. 361, 365-66 (S.D.N.Y. 1963) (defendant who threw chair at an Assistant United State Attorney during trial summarily held in criminal contempt, then later charged for same act with assault on a federal officer).
54. For a detailed discussion of the elements of money laundering and for Department of Justice policy see U.S.A.M. 9-105.000 and Money Laundering Federal Prosecution Manual, June 1994, Money Laundering Section, United States Department of Justice.
55. For a detailed discussion of RICO and Department of Justice policy see U.S.A.M. 9-110.00 et. seq.
56. The federal preemption provision, found at 17 U.S.C. § 301, essentially precludes states from enforcing penalties for copyright violations if the intellectual property at issue falls within the "subject matter of copyright" as defined by federal law and if the claimed property rights are "equivalent to" the exclusive rights provided by federal copyright law. However, state statutes that prohibit the sale of goods failing to bear the true name and address of the manufacturer are a possible alternative to federal enforcement. See "ALTERNATIVE STATE REMEDIES," infra
57. Note that by tying the severest sanction to copyright recidivists, 18 U.S.C. § 2319 introduces an additional element into plea negotiations. In cases involving individual and corporate defendants, prosecutors may wish to press for individual pleas, since those pleas could be used in subsequent prosecutions to enhance a defendant's sentence.
58. Effective November 1, 1993, the previous § 2B5.4 (Criminal Infringement of Trademark) was deleted in its entirety and consolidated with § 2B5.3, which now controls criminal infringement of a copyright or trademark. See Sentencing Guidelines Appendix C, amendments 481 and 482.
59. The narrow view of "loss" adopted in this portion of the Guidelines fails to recognize the losses suffered by legitimate sellers in the form of lost retail sales. Note that guidelines for similar offenses adopt a broader concept of "loss." See, e.g., U.S.S.G. § 2B1.1 (Larceny, Embezzlement, and Other Forms of Theft) (Commentary, Application Note 2) ("Where the market value is difficult to ascertain or inadequate to measure the harm to the victim, the court may measure loss in some other way, such as reasonable replacement cost to the victim."). See also United States v. Cianscewski, 894 F.2d 74 (3d Cir. 1990) (cost to victim of stolen check is full amount of check, not price at which stolen check is resold); United States v. Wilson, 900 F.2d 1350 (9th Cir. 1990) (stolen documents on black market).
60. The court noted, however, that it would be a different question "if the infringing items were of obviously inferior quality and were for that reason distributed to consumers who pay far less than the retail price for authentic items." Larracuente, 952 F.2d at 675. Although a witness for the defense testified that the tapes at issue normally sell for between $10 and $15, the trial court credited the prosecution's expert, "who testified that the retail price of the films copied . . . averaged just over $73." Id.
61. In Hernandez, the Court upheld defendants' convictions and sentences for conspiracy to traffic in counterfeit labels and goods, 18 U.S.C. §§ 371, 2318, 2320, and criminal infringement of a copyright, 17 U.S.C. § 506(a). Upon conviction, the district court arrived at a "probable" or "intended" loss of over $10,000,000, by multiplying the average market value of a counterfeited tape ($4) by the number of "J-cards" (2,613,600), used as inserts in the counterfeited tape boxes, that were found in defendants' warehouse. The sentencing court's use of this figure was upheld despite the fact that it greatly exceeded the profit lost by the recording industry. The Court of Appeals upheld defendants' sentences based at least partially on § 2F1.1, Application Note 7, which provides that, consistent with § 2X1.1, "if an intended loss that the defendant was intending to inflict can be determined, this figure will be used if it is greater than the actual loss."
62. Subsection U.S.S.G § 1B1.5(b)(2) provides in full:
63. 18 U.S.C. § 2319A(a) provides in pertinent part:
64. "A work is 'fixed' in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. A work consisting of sounds, images, or both, that are being transmitted, is 'fixed' for the purposes of this title if a fixation of the work is being made simultaneously with its transmission." 17 U.S.C. § 101. See "Fixed medium of expression," supra p. 8.
65. This subsection was intended to apply to unauthorized transmission of bootleg performances through radio or television and not to the unauthorized reproduction of previously recorded but unreleased performances, i.e., studio outtakes. The latter should be considered for prosecution under the criminal copyright law, 17 U.S.C.
§ 506(a) and 18 U.S.C. § 2319.
66. Prior to being amended, it was unclear whether § 2318 encompassed counterfeit labels affixed to computer software, since computer software is usually classified as a "literary work" under copyright law, Whelan Associates, Inc. v. Jaslow Dental Library, Inc., 797 F.2d 1222, 1234 (3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987). However, in some cases these programs may qualify as audiovisual works. They almost certainly qualify as such in the form of video games. See Red Baron-Franklin Park v. Taito Corp., 883 F.2d 275, 278 (4th Cir. 1989), cert. denied, 493 U.S. 1058 (1990).
67. This provision was intended to expand the reach of the statute beyond the "interstate and foreign commerce" jurisdictional base of the predecessor statute. The third clause was intended to facilitate pendent jurisdiction based upon related claims under the federal copyright law. Pub. L. No. 97-180, at 9-10 (1981).
68. McNally was superseded by 18 U.S.C. § 1346 on the narrow ground of theft of the intangible right of honest services, see United States v. Stoneman, 870 F.2d 102 (3rd Cir.), cert. denied, 493 U.S. 891 (1989));
United States v. Gray, 96 F.3d 769 (5th Cir. 1996). But see United States v. Brumley, 79 F.3d 1430 (5th Cir. 1996) (section 1346 inadequate to restore intangible right of honest and faithful service to purview of Mail and Wire Fraud statutes.)
69. The LaMacchia court reasoned that while the Wire Fraud statute does reach schemes to defraud someone of an intangible property right, such as a citizen's right to honest government, non-disclosure to the victim can only serve as the basis of a scheme when a defendant has a fiduciary or statutory duty to make an affirmative disclosure. Here, no fiduciary relationship existed between LaMacchia and the manufacturers whose software copyrights LaMacchia allegedly infringed. Additionally, there was no statutory duty of disclosure because there was no compulsory software licensing scheme similar to the compulsory licensing scheme of the Copyright Act, 17 U.S.C. § 115, which requires vendors to notify copyright owners of the intention to manufacture and distribute protected phonorecords. It was this duty to disclose that formed the basis of the defendant's conviction for fraud in Dowling. 871 F. Supp. at 542 - 43.
70. For a discussion concluding that LaMacchia was wrongly decided see Aaron Hoog, Note, Defrauding the Wire Fraud Statute: United States v. LaMacchia, 8 Harv.J.L. & Tech. 509 (1995).
71. Section 2320(e), as amended by the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, 110 Stat. 1386 (1996), provides as follows:
18 U.S.C. § 2320(e).