§ 2.05 Punishment for Criminal Copyright Infringement

• Jurisdiction: United States
• Publication year: 2020

§ 2.05 Punishment for Criminal Copyright Infringement

As with all federal crimes, the penalties are set out by statute and applied in accordance with the United States Sentencing Guidelines. In addition, to possible imprisonment and fines, the United States Code also provides for seizure and forfeiture of the infringing items.³⁴⁵ It is also a predicate offense for a charge of being a felon in possession of a firearm.³⁴⁶

[1] Statutory Penalties

Sections 506 and 2319 are summarized in the following tables:

Violations for Purposes of Commercial Advantage or Private Financial Gain (Section 506(a)):
Retail Value	Under $1,000	$1,000- $2,500	More than $2,500	Repeat Offenders
Number of Infringing Copies Required	1	1	10	N.A.
Criminal	Yes	Yes	Yes	Yes
Felony or misdemeanor?	Misdemeanor	Misdemeanor	Felony	Felony
Statutory Maximum	One year	One year	Five years	Ten years

Violations Involving the Reproduction or Distribution with No Evidence of Financial Motive:
Retail Value	Under $1,000	$1,000- $2,500	More than $2,500	Repeat Offenders
Number of Infringing Copies Required	1	1	10	N.A.
Criminal	No	Yes	Yes	Yes
Felony or Misdemeanor?	N.A.	Misdemeanor	Felony	Felony
Statutory Maximum	N.A.	One year	Three years	Six years

Violations Involving Distribution of Work Being Prepared for Commercial Distribution (17 U.S.C. § 506(a)(1)(C))
Committed for Purposes of Commercial Advantages/ Financial Gain	No	Yes	Repeat Offender—Not Committed For Financial Gain	Repeat Offender Committed For Financial Gain
Criminal	Yes	Yes	Yes	Yes
Felony or Misdemeanor	Felony	Felony	Felony	Felony
Statutory Maximum	Three years	Five Years	Six years	Ten years

Defendants who are convicted under Section 506(a)(1)(C) for the willful distribution of a copyrighted work prior to its public release are sentenced pursuant to Title 18, Section 2319(d) of the United States Code. The severity of the penalties under this subsection depends on whether the defendant was a first-time offender or whether the offense was committed for purposes of commercial advantage or private financial gain. First-time offenders may be imprisoned for not more than three years, fined or both,³⁴⁷ whereas, defendants who were previously convicted of such an offense may imprisoned for not more than five years, fined or both.³⁴⁸ Defendants who are convicted of engaging in the act for purposes of commercial advantage or private financial gain may be sentenced for up to six or ten years depending on whether they had previously been convicted for such an offense.³⁴⁹

[2] Forfeiture

The PRO-IP Act of 2008 created Title 18, Section 2323 of the United States Code, which expressly authorizes civil and criminal forfeiture for intellectual property offenses, including violations of Sections 2319 and 2320.³⁵⁰

[a] Civil

Section 2323(a)(1) makes three types of property subject to civil forfeiture: (A) "[a]ny article, the making of which is, prohibited under 17 U.S.C. § 506" (contraband items); (B) "[a]ny property used, or intended to be used in part to commit or facilitate the commission of a violation of 17 U.S.C. § 506" (property used to commit the offense); and (C) "[a]ny property constituting or derived from any proceeds obtained directly or indirectly as a result of the commission of a violation of 17 U.S.C. § 506" (proceeds).³⁵¹

There are also three types of forfeiture procedures: administrative, civil, and criminal. Administrative forfeiture occurs when a law enforcement agency forfeits property in an administrative, non-j udicial matter. Under this process, an agency seizes the property and then sends or publishes notice of the property within the prescribed deadlines. If no claim is filed, the property is then forfeited. On the other hand, if a claim is filed, the seizing agency must either return the property or seek forfeiture through a judicial procedure.³⁵²

[b] Civil vs. Criminal

Civil and criminal forfeiture proceedings require the involvement of the government and the courts. Civil and criminal forfeiture proceedings differ based, in part, on the entity against which the action is brought. Civil forfeiture is an in rem action against the property itself and, thus, the property can be owned by a third party if the government can prove that the property was derived from or used to commit a crime. The burden of proof is a preponderance of the evidence, and a criminal conviction or the filing of criminal charges is not a requirement for civil forfeiture proceedings.

In contrast, criminal forfeiture is an in personam proceeding that is based on a forfeiture allegation contained in the complaint and is then carried out as part of a defendant's sentence. It thus requires a conviction and is limited to property belonging to the defendant that was involved in the offense of conviction. Unlike civil forfeiture, criminal forfeiture does not reach a third party's property under any circumstances.

[3] Restitution

Title 18, Section 2323 of the United States Code also makes mandatory the payment of restitution by the defendant to the victim for violations of Sections 2319 and 2320, pursuant to the Mandatory Victims Restitution Act of 1996 (MVRA).³⁵³ There are two statutory exceptions to mandatory restitution under Section 3663A, if: "(A) the number of identifiable victims is so large as to make restitution impracticable; or (B) determining complex issues of fact related to the cause or amount of the victim's losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process."³⁵⁴

The MVRA defines the word "victim" as "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered."³⁵⁵ Thus, in criminal copyright and trafficking and counterfeit goods cases, there are potentially three classes of victims who may be entitled to restitution. First, copyright owners clearly are entitled to restitution since they were the parties most directly harmed by defendants' actions through lost profits.³⁵⁶ Second, at least one court has held that a distributor may qualify for restitution.³⁵⁷ Third, defrauded purchasers may be entitled to restitution.³⁵⁸

Restitution is not authorized for acts merely related to the offense for which the defendant has been convicted, such as acts that are within "relevant conduct" under the Sentencing Guidelines, but are outside the actual offense of conviction itself. A victim is "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered."³⁵⁹ This includes, in a case where the offense of conviction includes a scheme, conspiracy, or pattern of criminal activity, "any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern" of criminal activity.³⁶⁰

Further, the amount of restitution is not the same as "loss" as determined under the Sentencing Guidelines. Sentencing, unlike restitution, focuses on the criminal defendant, whereas restitution focuses on the victim, not the individual defendant. Thus, "restitution in a criminal copyright case must reflect the victim's actual losses, not the defendant's gain. In most cases, that will consist of the copyright owner's lost profits on sales that would have taken place if not for the infringing conduct. Moreover, the fact that a consumer purchased an infringing copy at a greatly reduced price is not sufficient, alone, to establish that the consumer would have purchased an authentic copy at full price."³⁶¹ Determining loss for the purposes of restitution also requires more precision than for Sentencing Guidelines purposes: "A back-of-the-envelope approach simply will not do."³⁶²

[4] Sentencing Guidelines

[a] Generally

Statutory maximums are limits on the sentence that may be imposed. Actual sentences for violations of 18 U.S.C. §§ 506 and 2319 are determined with reference to the U.S. Sentencing Guidelines (Guidelines) that were created in response to the Sentencing Reform Act of 1984. Until the Supreme Court decided United States v. Booker,³⁶³ in 2005, the Guidelines were mandatory in nature and courts generally were required to follow the sentenced imposed by the Guidelines. In Booker, the Supreme Court held that the mandatory nature of the Guidelines violates the Sixth Amendment of the constitution, and as a result the Guidelines must be applied in an advisory manner, although most district courts continue to adhere to the recommended Guideline sentence.³⁶⁴ Sentencing courts now follow a three-stage sentencing process: (1) calculate the sentencing guideline range under the Guidelines; (2) state on the record whether it is granting a departure (upwards or downwards) from the Guidelines and how that departure affects the Guidelines calculation; and (3) exercise its discretion and consider the goals of sentencing as established by Congress, and impose an appropriate sentence, whether or not it conforms to the Guidelines.

Individuals convicted of violating Title 18, Section 506 of the United States Code are sentenced pursuant to Section 2B5.3 of the United States Sentencing Guidelines, which sets the Base Offense Level for copyright violations at eight.³⁶⁵ The Base Offense Level previously had been six.

[b] Amount of Loss

As with the case with other criminal intellectual property violations, the single most imporlant lactor in determining the sentence under the Sentencing Guidelines is determining the amount of loss. In general terms, loss is the amount that the victim could have earned from the sale of the copyrighted goods, but for the actions of the defendant.

In the case of copyright violations, the critical issue in...