U.S. Department of Justice

Executive Office for United States Attorneys

PROSECUTING

INTELLECTUAL

PROPERTY CRIMES

Third Edition

Computer Crime and

Intellectual Property Section

Criminal Division September 2006
Michael Battle

Director, EOUSA

Michael W. Bailie

Director, OLE

OLE 

Litigation 

Series

Ed Hagen

Assistant Director

OLE

James D. Donovan

Assistant Director

OLE

Michael M. DuBose 

Deputy Chief for

Intellectual Property

CCIPS

Criminal Division 

Managing Editor

PROSECUTING

INTELLECTUAL

PROPERTY

CRIMES

Third Edition

Published by the

Office of Legal Education

Executive Office for

United States Attorneys

The Office of Legal Education intends that this

Manual be used by Federal Prosecutors for training

and law enforcement purposes.

The contents of this book provide internal

suggestions to Department of Justice attorneys. 

Nothing in it is intended to create any substantive or

procedural rights, privileges, or benefits enforceable

in any administrative, civil, or criminal matter by

any prospective or actual witnesses or parties. See

United States v. Caceres, 440 U.S. 741 (1979).
iii

Table of Contents

Preface and Acknowledgments

List of Chapters

I. Intellectual Property—An Introduction 

II. Criminal Copyright Infringement—17 U.S.C. § 506 and

18 U.S.C. § 2319 

III. Trafficking In Counterfeit Trademarks, Service Marks, and

Certification Marks—18 U.S.C. § 2320

IV. Theft of Commercial Trade Secrets—18 U.S.C. §§ 1831-1839

V. Digital Millennium Copyright Act—17 U.S.C. §§ 1201-1205 

VI. Counterfeit and Illicit Labels, Counterfeit Documentation and

Packaging—18 U.S.C. § 2318

VII. Patent 

VIII. Penalties, Restitution, and Forfeiture 

IX. Charging Decisions 

X. Victims of Intellectual Property Crimes—Ethics and Obligations

Appendices

A. Commonly Charged Intellectual Property Crimes

B-F. Indictments and Jury Instructions 

G. Intellectual Property Contact List 

H. Victim Referral and Witness Interview Forms

I. Maximum Statutory Penalties, Forfeiture, and Restitution 

J. Examples of Traditional Assistance and Gifts to

Law Enforcement

Index
iv Prosecuting Intellectual Property Crimes

Detailed Listing

I. Intellectual Property—An Introduction

I.A. Why Is Intellectual Property Enforcement Important? ...... 1

I.B. What Is Intellectual Property? ........................ 3

I.B.1. Copyright .................................. 3

I.B.2. Trademarks and Service Marks .................. 4

I.B.3. Patents .................................... 4

I.B.4. Trade Secrets ............................... 5

I.C. Why Criminal Enforcement? .......................... 5

II. Criminal Copyright Infringement—17 U.S.C. § 506 and

18 U.S.C. § 2319

II.A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.A.1. What Copyright Law Protects . . . . . . . . . . . . . . . . . . 12

II.A.2. Legal Basis for Copyright and Related Laws . . . . . . . 13

II.A.3. Relevance of Civil Cases to Criminal Prosecutions . . 14

II.A.4. Federal Preemption . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.A.5. When Copyright Protection Begins and Ends . . . . . . 15

II.A.6. The Rights Protected by Copyright . . . . . . . . . . . . . . 15

II.A.7. When Infringement is Criminal . . . . . . . . . . . . . . . . . 16

II.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

II.B.1. Existence of a Copyright . . . . . . . . . . . . . . . . . . . . . . 19

II.B.1.a. Copyrightability . . . . . . . . . . . . . . . . . . . . . . . . . 19

II.B.1.a.i. Original Work Fixed in a Tangible Medium . 19

II.B.1.a.ii. Short Phrases Are Not Copyrightable . . . . . . 20

II.B.1.a.iii. Expression of an Idea vs. Idea Itself . . . . . . . 20

II.B.1.b. Copyrights vs. Registrations vs. Certificates . . . . 20

II.B.1.c. New Procedure for “Preregistration” . . . . . . . . . . 21

II.B.1.d. Whether Registration or Preregistration is

Required to Prosecute . . . . . . . . . . . . . . . . . . . . . 22

II.B.1.d.i. Liability for Infringement Committed Prior

to Registration . . . . . . . . . . . . . . . . . . . . . . . . 24

II.B.1.d.ii. Unpublished or Pre-Release Works . . . . . . . . 25

II.B.1.d.iii. Registration of Particular Versions of a Work

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

II.B.1.e. Proof of Copyright at Trial . . . . . . . . . . . . . . . . . 27

II.B.1.f. Copyright Notice . . . . . . . . . . . . . . . . . . . . . . . . . 28

II.B.2. The Defendant Acted “Willfully” . . . . . . . . . . . . . . . 29

II.B.2.a. Legal Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

II.B.2.b. Proof at Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Table of Contents v

II.B.3. Infringement of the Copyright . . . . . . . . . . . . . . . . . . 34

II.B.3.a. Infringement by Reproduction or Distribution . . 36

II.B.3.a.i. Reproduction . . . . . . . . . . . . . . . . . . . . . . . . 38

II.B.3.a.ii. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 40

II.B.3.b. Infringement of at Least 10 Copies of 1 or More

Copyrighted Works With a Total Retail Value

Exceeding $2,500 Within a 180-Day Period . . . . 45

II.B.3.b.i. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

II.B.3.b.ii. Definition of “Retail Value” in this Context . 46

II.B.3.c. Distribution of a Work Being Prepared for

Commercial Distribution, by Making It Available

on a Publicly-Accessible Computer Network, if

the Defendant Knew or Should Have Known

the Work Was Intended for Commercial

Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

II.B.3.c.i. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 50

II.B.3.c.ii. Making the Work Available on a Computer

Network Accessible to Members of the Public 50

II.B.3.c.iii. Work Being Prepared for Commercial

Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 51

II.B.3.c.iv. The Defendant Knew or Should Have Known

that the Work Was Intended for Commercial

Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 52

II.B.4. Additional Element for Enhanced Sentence: Purpose of

Commercial Advantage or Private Financial Gain . . . 53

II.B.4.a. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

II.B.4.b. Legal Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

II.B.5. Misdemeanor Copyright Infringement . . . . . . . . . . . 57

II.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

II.C.1. Statute of Limitations: 5 years . . . . . . . . . . . . . . . . . . 58

II.C.2. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

II.C.3. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

II.C.4. The First Sale Doctrine—17 U.S.C. § 109 . . . . . . . . 60

II.C.4.a. Operation of the Doctrine . . . . . . . . . . . . . . . . . . 60

II.C.4.b. Affirmative Defense or Part of the Government's

Case-in-Chief? . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

II.C.4.c. Disproving First Sale at Trial . . . . . . . . . . . . . . . . 63

II.C.4.d. Special Rules for Rental, Lease, and Lending . . . 64

II.C.5. Fair Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

II.C.5.a. Unpublished Works . . . . . . . . . . . . . . . . . . . . . . 67

II.C.5.b. Fair Use in Criminal Cases . . . . . . . . . . . . . . . . . 68

II.C.6. “Archival Exception” for Computer Software—

17 U.S.C. § 117 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
vi Prosecuting Intellectual Property Crimes

II.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

II.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

II.E.1. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . 72

II.E.2. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . 72

II.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

III. Trafficking In Counterfeit Trademarks, Service Marks, and

Certification Marks—18 U.S.C. § 2320

III.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

III.A.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

III.A.2. Why Criminal Law Protects Trademarks, Service 

Marks, and Certification Marks . . . . . . . . . . . . . . . . . 85

III.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

III.B.1. The Trademark Counterfeiting Crime in General . . . 87

III.B.2. Relevance of Civil Trademark Law in Criminal Cases 89

III.B.3. Intentionally Trafficked or Attempted to Traffic in

Goods or Services [after March 16, 2006: or Labels,

Documentation, or Packaging for Goods or Services] 90

III.B.3.a. Intentionally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

III.B.3.b. Trafficked or Attempted to Traffic . . . . . . . . . . . 90

III.B.3.b.i. General Definition . . . . . . . . . . . . . . . . . . . 90

III.B.3.b.ii. Consideration vs. Commercial Advantage and

Private Financial Gain . . . . . . . . . . . . . . . . 92

III.B.3.b.iii. Making and Obtaining Counterfeits vs.

Possession with Intent to Traffic . . . . . . . . 92

III.B.3.b.iv. Importing and Exporting Related to

Transporting . . . . . . . . . . . . . . . . . . . . . . . . 93

III.B.3.c. Goods and Services [after March 16, 2006: and

Labels, Patches, Stickers, Wrappers, Badges,

Emblems, Medallions, Charms, Boxes, Containers,

Cans, Cases, Hangtags, Documentation, or

Packaging of Any Type or Nature] . . . . . . . . . . . 94

III.B.4. The Defendant Used a “Counterfeit Mark” On or In 

Connection With Those Goods or Services [after March

16, 2006: or a Counterfeit Mark Was Applied to Labels,

Documentation, or Packaging for Those Goods or

Services] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

III.B.4.a. Definition of Counterfeit Mark Generally: Not

Genuine or Authentic . . . . . . . . . . . . . . . . . . . . . 96

III.B.4.b. The Counterfeit Mark Must Be Identical to or

Indistinguishable from a Genuine Mark Owned

by Another . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Table of Contents vii

III.B.4.c. The Genuine Mark Must Be Federally Registered on

the U.S. Patent and Trademark Office's Principal

Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

III.B.4.d. The Genuine Mark Must Have Been in Use by the

Mark-Holder or Its Licensee . . . . . . . . . . . . . . . 102

III.B.4.e. Use of the Counterfeit Mark “On or In Connection

With” Goods or Services . . . . . . . . . . . . . . . . . . 104

III.B.4.f. The Counterfeit Mark Must Have Been Used for the

Same Type of Goods or Services for Which the

Genuine Mark Was Registered . . . . . . . . . . . . . 105

III.B.4.g. Likelihood of Confusion, Mistake, or Deception

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

III.B.5. The Defendant Used the Counterfeit Mark “Knowingly”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

III.B.6. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

III.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

III.C.1. Authorized-Use Defense: Overrun Goods . . . . . . 114

III.C.2. Authorized-Use Defense: Gray Market Goods . . . 117

III.C.3. Repackaging Genuine Goods . . . . . . . . . . . . . . . . . 118

III.C.4. Lanham Act Defenses . . . . . . . . . . . . . . . . . . . . . . 121

III.C.5. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . 122

III.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

III.D.1. High-Quality and Low-Quality Counterfeits . . . . . 123

III.D.2. Counterfeit Goods with Genuine Trademarks . . . 124

III.D.3. Selling Fakes While Admitting That They Are Fakes

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

III.D.4. Selling Another's Trademarked Goods As One's Own

(Reverse Passing-Off) . . . . . . . . . . . . . . . . . . . . . . 124

III.D.5. Mark-Holder's Failure to Use ® Symbol . . . . . . . . 124

III.D.6. Storage Costs and Destruction . . . . . . . . . . . . . . . 125

III.D.7. Units of Prosecution . . . . . . . . . . . . . . . . . . . . . . . 126

III.D.8. Olympic Symbols . . . . . . . . . . . . . . . . . . . . . . . . . 127

III.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

III.E.1. Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

III.E.2. Imprisonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.3. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.4. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

III.E.5. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . 131

III.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . 133
viii Prosecuting Intellectual Property Crimes

IV. Theft of Commercial Trade Secrets—18 U.S.C. §§ 1831-1839

IV.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

IV.B. The Economic Espionage Act of 1996,

18 U.S.C. §§ 1831-1839 . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

IV.B.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

IV.B.2. Relevance of Civil Cases . . . . . . . . . . . . . . . . . . . . . 142

IV.B.3. Elements Common to 18 U.S.C. §§ 1831, 1832 . . . 142

IV.B.3.a. The Information Was a Trade . . . . . . . . . . . . . 143

IV.B.3.a.i. Generally . . . . . . . . . . . . . . . . . . . . . . . . . 143

IV.B.3.a.ii. Employee’s General Knowledge, Skill, or

Abilities Not Covered . . . . . . . . . . . . . . . . 144

IV.B.3.a.iii. Specification of Trade Secrets . . . . . . . . . 145

IV.B.3.a.iv. Novelty . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

IV.B.3.a.v. Secrecy . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

IV.B.3.a.vi. Disclosure’s Effects . . . . . . . . . . . . . . . . . . 147

IV.B.3.a.vii. Reasonable Measures to Maintain Secrecy

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

IV.B.3.a.viii. Independent Economic Value . . . . . . . . . . 152

IV.B.3.a.ix Example: Customer Lists . . . . . . . . . . . . . 153

IV.B.3.b. Misappropriation . . . . . . . . . . . . . . . . . . . . . . . . 154

IV.B.3.b.i. Types of Misappropriation . . . . . . . . . . . . 154

IV.B.3.b.ii. Memorization Included . . . . . . . . . . . . . . 154

IV.B.3.b.iii. Lack of Authorization . . . . . . . . . . . . . . . . 155

IV.B.3.b.iv. Misappropriation of Only Part of a

Trade Secret . . . . . . . . . . . . . . . . . . . . . . . 155

IV.B.3.b.v. Mere Risk of Misappropriation Not

Prosecutable, but Attempts and

Conspiracies Are . . . . . . . . . . . . . . . . . . . . 156

IV.B.3.c. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

IV.B.4. Additional 18 U.S.C. § 1831 Element: Intent to

Benefit a Foreign Government, Foreign

Instrumentality, or Foreign Agent . . . . . . . . . . . . . . 157

IV.B.5. Additional 18 U.S.C. § 1832 Elements . . . . . . . . . . 158

IV.B.5.a. Economic Benefit to a Third Party . . . . . . . . . . 158

IV.B.5.b. Intent to Injure the Owner of the Trade Secret

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

IV.B.5.c. Product Produced for or Placed in Interstate or 

Foreign Commerce . . . . . . . . . . . . . . . . . . . . . . 159

IV.B.6. Attempts and Conspiracies, Including the

Impossibility Defense . . . . . . . . . . . . . . . . . . . . . . . 161

IV.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

IV.C.1. Parallel Development . . . . . . . . . . . . . . . . . . . . . . 163

IV.C.2. Reverse Engineering . . . . . . . . . . . . . . . . . . . . . . . 163
Table of Contents ix

IV.C.3. Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

IV.C.4. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 164

IV.C.5. Claim of Right—Public Domain and

Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . 165

IV.C.6. The First Amendment . . . . . . . . . . . . . . . . . . . . . . 165

IV.C.7. Void-for-Vagueness . . . . . . . . . . . . . . . . . . . . . . . . 166

IV.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

IV.D.1. Civil Injunctive Relief for the United States . . . . . 168

IV.D.2. Confidentiality and the Use of Protective Orders

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

IV.D.3. Extraterritoriality . . . . . . . . . . . . . . . . . . . . . . . . . . 172

IV.D.4. Department of Justice Oversight . . . . . . . . . . . . . . 172

IV.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

IV.E.1. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . 173

IV.E.1.a. Imprisonment and Fines . . . . . . . . . . . . . . . . . . 173

IV.E.1.b. Criminal Forfeiture . . . . . . . . . . . . . . . . . . . . . . 173

IV.E.1.c. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

IV.E.2. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . 175

IV.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . 175

V. Digital Millennium Copyright Act—17 U.S.C. §§ 1201-1205

V.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

V.A.1. DMCA's Background and Purpose . . . . . . . . . . . . . 184

V.A.2. Key Concepts: Access Controls vs. Copy Controls,

Circumvention vs. Trafficking . . . . . . . . . . . . . . . . . 185

V.A.2.a. Access Controls vs. Copy/Use Controls . . . . . . . 186

V.A.2.b. Circumvention vs. Trafficking in Circumvention

Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

V.A.3. Differences Between the DMCA and Traditional

Copyright Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

V.A.4. Other DMCA Sections That Do Not Concern Prosecutors

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

V.B. Elements of the Anti-Circumvention and Anti-Trafficking

Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

V.B.1. Circumventing Access Controls—

17 U.S.C. §§ 1201(a)(1) and 1204 . . . . . . . . . . . . 192

V.B.1.a. Circumventing . . . . . . . . . . . . . . . . . . . . . . . . . . 193

V.B.1.b. Technological Measures That Effectively Control

Access (“Access Control”) . . . . . . . . . . . . . . . . . 195

V.B.1.c. To a Copyrighted Work . . . . . . . . . . . . . . . . . . 196

V.B.1.d. How Congress Intended the Anti-Circumvention

Prohibition to Apply . . . . . . . . . . . . . . . . . . . . . 197
x Prosecuting Intellectual Property Crimes

V.B.1.e. Regulatory Exemptions to Liability Under 

§ 1201(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

V.B.2. Trafficking in Access Control Circumvention Tools and

Services—17 U.S.C. §§ 1201(a)(2) and 1204 . . . . . 200

V.B.2.a. Trafficking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

V.B.2.b. In a Technology, Product, Service, or Part Thereof

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

V.B.2.c. Purpose or Marketing of Circumvention Technology

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

V.B.2.c.1. Primarily Designed or Produced . . . . . . . . . 203

V.B.2.c.2. Limited Commercially Significant Purpose Other

Than Circumvention . . . . . . . . . . . . . . . . . . 203

V.B.2.c.3. Knowingly Marketed for Circumvention . . 204

V.B.3. Trafficking in Tools, Devices, and Services to

Circumvent Copy Controls—17 U.S.C. §§ 1201(b)(1)

and 1204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

V.B.3.a. Circumventing . . . . . . . . . . . . . . . . . . . . . . . . . . 205

V.B.3.b. Technological Measure That Effectively Protects a

Right of a Copyright Owner Under This Title

(“Copy Control”) . . . . . . . . . . . . . . . . . . . . . . . . 206

V.B.4. Alternate § 1201(b) Action—Trafficking in Certain

Analog Videocassette Recorders and Camcorders . . 207

V.B.5. Falsifying, Altering, or Removing Copyright

Management Information—17 U.S.C. § 1202 . . . . 208

V.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

V.C.1. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . 209

V.C.2. Librarian of Congress Regulations . . . . . . . . . . . . . . 209

V.C.3. Certain Nonprofit Entities . . . . . . . . . . . . . . . . . . . . 209

V.C.4. Information Security Exemption . . . . . . . . . . . . . . . 210

V.C.5. Reverse Engineering and Interoperability of Computer

Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210

V.C.6. Encryption Research . . . . . . . . . . . . . . . . . . . . . . . . 213

V.C.7. Restricting Minors' Access to the Internet . . . . . . . . 214

V.C.8. Protection of Personally Identifying Information . . 215

V.C.9. Security Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215

V.C.10. Constitutionality of the DMCA . . . . . . . . . . . . . . 216

V.C.10.a. Congress's Constitutional Authority to Enact § 1201

of the DMCA . . . . . . . . . . . . . . . . . . . . . . . . . . 216

V.C.10.b. The First Amendment . . . . . . . . . . . . . . . . . . . . 218

V.C.10.b.i. Facial Challenges . . . . . . . . . . . . . . . . . . . 219

V.C.10.b.ii. “As Applied” First Amendment Challenges to

the DMCA . . . . . . . . . . . . . . . . . . . . . . . . 220

V.C.10.c. Vagueness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Table of Contents xi

V.C.10.d. Fair Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

V.D. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

VI. Counterfeit and Illicit Labels, Counterfeit Documentation and

Packaging—18 U.S.C. § 2318

VI.A. Distinguished from Trademark and Copyright Statutes . . . 226

VI.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

VI.B.1. The Defendant Acted “Knowingly” . . . . . . . . . . . . 228

VI.B.2. The Defendant Trafficked . . . . . . . . . . . . . . . . . . . 229

VI.B.3. Trafficking in Labels Affixed to, Enclosing, or

Accompanying (or Designed to be Affixed to, Enclose, or

Accompany) a Phonorecord, Computer Program, Motion

Picture or Other Audiovisual Work, Literary, Pictorial,

Graphic, or Sculptural Work, or Work of Visual Art, or

Documentation or Packaging for Such Works (i.e.,

Trafficked Either in Documentation or Packaging for

Such Works Itself, or in Labels for Such Documentation

or Packaging) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231

VI.B.4. The Labels, Documentation, or Packaging Materials Are

Counterfeit or Illicit . . . . . . . . . . . . . . . . . . . . . . . . 232

VI.B.5. Federal Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 234

VI.B.6. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

VI.C. Defenses: Statute of Limitations . . . . . . . . . . . . . . . . . . . . . 236

VI.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

VI.D.1. Electronic Copies of Labels, Documentation, 

or Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

VI.D.2. Advantages of Charging a § 2318 Offense . . . . . . 237

VI.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

VI.E.1. Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

VI.E.2. Imprisonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

VI.E.3. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

VI.E.4. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

VI.E.5. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . 238

VI.E.5.a. Retail Value of Copyrighted Goods vs. Counterfeit

Labels, Documentation, and Packaging . . . . . . . 238

VI.E.5.b. Number of Infringing Copyrighted Goods vs.

Number of Labels, Documents, or Packaging Items240

VI.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . 240

VII. Patent

VII.A. Overview of Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

VII.B. Forgery of Letters Patent—18 U.S.C. § 497 . . . . . . . . . . . 245

VII.C. False Marking of Patent—35 U.S.C. § 292 . . . . . . . . . . . . 245
xii Prosecuting Intellectual Property Crimes

VII.D. No Prosecution for Interstate Transportation or Receipt of

Stolen Property—18 U.S.C. §§ 2314, 2315 . . . . . . . . . . . . 248

VIII. Penalties, Restitution, and Forfeiture

VIII.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

VIII.B. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

VIII.C. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

VIII.C.1. Offenses Involving Copyright (Including Bootleg

Music, Camcorded Movies, and the Unauthorized

Use of Satellite, Radio, and Cable Communications),

Trademark, Counterfeit Labeling, and the DMCA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253

VIII.C.1.a. Applicable Guideline is § 2B5.3 . . . . . . . . . 253

VIII.C.1.b. Base Offense Level . . . . . . . . . . . . . . . . . . . 255

VIII.C.1.c. Adjust the Offense Level According to the

“Infringement Amount”—U.S.S.G. §

2B5.3(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 255

VIII.C.1.c.i. Formula . . . . . . . . . . . . . . . . . . . . . . . . . 255

VIII.C.1.c.ii. Number of Infringing Items . . . . . . . . . 256

VIII.C.1.c.iii. Retail Value . . . . . . . . . . . . . . . . . . . . . 257

VIII.C.1.c.iv. Determining Amounts and

Values—Reasonable Estimates Allowed 261

VIII.C.1.c.v. Cross-Reference to Loss Table in 

U.S.S.G. § 2B1.1 . . . . . . . . . . . . . . . . . . 263

VIII.C.1.d. Pre-Release Piracy Increases the Offense Level by

2—U.S.S.G. § 2B5.3(b)(2) . . . . . . . . . . . . . 263

VIII.C.1.e. Manufacturing, Importing, or Uploading

Infringing Items Increases the Offense Level by

2—U.S.S.G. § 2B5.3(b)(3) [before October 24,

2005: § 2B5.3(b)(2)] . . . . . . . . . . . . . . . . . . 264

VIII.C.1.f. Offense Not Committed for Commercial

Advantage or Private Financial Gain Reduces the

Offense Level by 2—U.S.S.G. § 2B5.3(b)(4)

[before October 24, 2005: § 2B5.3(b)(3)] . 266

VIII.C.1.g. Offense Involving Risk of Serious Bodily Injury

or Possession of a Dangerous Weapon Increases

the Offense Level by 2—U.S.S.G. § 2B5.3(b)(5)

[before October 24, 2005: § 2B5.3(b)(4)] . 266

VIII.C.1.h. Decryption or Circumvention of Access Controls

Increases the Offense Level—U.S.S.G. § 3B1.3267

VIII.C.1.i. Upward Adjustment for Harm to Copyright or

Mark-Owner's Reputation, Connection with

Organized Crime, or Other Unspecified Grounds 267
Table of Contents xiii

VIII.C.1.j. Vulnerable Victims—U.S.S.G. § 3A1.1(b) . 267

VIII.C.1.k. No Downward Departure for the Victim's

Participation in Prosecution . . . . . . . . . . . . 268

VIII.C.2. Offenses Involving the Economic Espionage Act 268

VIII.C.2.a. Applicable Guideline is § 2B1.1 Except for

Attempts and Conspiracies . . . . . . . . . . . . . 268

VIII.C.2.b. Base Offense Level—U.S.S.G. § 2B1.1(a) . . 269

VIII.C.2.c. Loss—U.S.S.G. § 2B1.1(b)(1) . . . . . . . . . . . 269

VIII.C.2.c.i. Use Greater of Actual or Intended Loss . . 269

VIII.C.2.c.ii. Reasonable Estimates Acceptable . . . . . . . 269

VIII.C.2.c.iii. Methods of Calculating Loss . . . . . . . . 269

VIII.C.2.d. Intent to Benefit a Foreign Government,

Instrumentality, or Agent—U.S.S.G. §

2B1.1(b)(5) . . . . . . . . . . . . . . . . . . . . . . . . . 277

VIII.C.2.e. Sophisticated Means—U.S.S.G. § 2B1.1(b)(9)(C)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

VIII.C.2.f. Upward Departure Considerations— 

U.S.S.G. § 2B1.1 cmt. n.19(A) . . . . . . . . . . 278

VIII.C.2.g. Downward Departure Considerations— 

U.S.S.G. § 2B1.1 cmt. n.19(C) . . . . . . . . . . 278

VIII.C.2.h. Abuse of a Position of Trust—U.S.S.G. § 3B1.3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278

VIII.C.2.i. Use of Special Skill—U.S.S.G. § 3B1.3 . . . . 278

VIII.C.2.j. No Downward Departure for Victim's

Participation in Developing the Case . . . . . 279

VIII.D. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

VIII.D.1. Restitution is Available—and Often Required—in 

Intellectual Property Prosecutions . . . . . . . . . . . 280

VIII.D.2. Victims Include Owners of Intellectual Property and

Consumers Who Were Defrauded . . . . . . . . . . 284

VIII.D.3. Determining a Restitution Figure . . . . . . . . . . . 288

VIII.E. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

VIII.E.1. Property Subject to Forfeiture . . . . . . . . . . . . . . . . 293

VIII.E.2. Overview of Forfeiture Procedures . . . . . . . . . . . . 293

VIII.E.2.a. Administrative Forfeiture Proceedings . . . . 293

VIII.E.2.b. Civil and Criminal Proceedings . . . . . . . . . . 294

VIII.E.2.c. Table of Forfeiture Provisions Arranged by

Criminal IP Statute . . . . . . . . . . . . . . . . . . . 295

VIII.E.3. Choosing a Forfeiture Procedure . . . . . . . . . . . . . . 298

VIII.E.4. Civil Forfeiture in IP Matters . . . . . . . . . . . . . . . . 299

VIII.E.4.a. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

VIII.E.4.b. Infringing Items, Other Contraband, and

Facilitating Property . . . . . . . . . . . . . . . . . . 300
xiv Prosecuting Intellectual Property Crimes

VIII.E.4.c. Innocent Owner Defense . . . . . . . . . . . . . . 301

VIII.E.4.d. Victims' Ability to Forfeit Property . . . . . . . 302

VIII.E.5. Criminal Forfeiture in IP Matters . . . . . . . . . . . . . 302

VIII.E.5.a. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

VIII.E.5.b. Infringing Items, Other Contraband, and

Facilitating Property . . . . . . . . . . . . . . . . . . 304

IX. Charging Decisions

IX.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

IX.B. The Federal Interest in Intellectual Property Crimes . . . . . . 306

IX.B.1. Federal Law Enforcement Priorities . . . . . . . . . . . . . 306

IX.B.2. The Nature and Seriousness of the Offense . . . . . . . 307

IX.B.3. The Deterrent Effects of Prosecution . . . . . . . . . . . 309

IX.B.4. The Individual's History of Criminal Offenses and

Civil Intellectual Property Violations . . . . . . . . . . . 309

IX.B.5. The Individual's Willingness to Cooperate in the

Investigation or Prosecution of Others . . . . . . . . . . 310

IX.C. Whether a Person is Subject to Prosecution in

Another Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310

IX.D. The Adequacy of Alternative Non-Criminal Remedies . . . . 311

IX.E. Special Considerations in Deciding Whether to Charge

Corporations and Other Business Organizations . . . . . . . . . 312

X. Victims of Intellectual Property Crimes—Ethics and Obligations

X.A. Victims' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

X.B. The Victim's Role in the Criminal Prosecution . . . . . . . . . . 317

X.B.1. Reporting an Intellectual Property Crime . . . . . . . . 317

X.B.2. Ethical Concerns When the Criminal Prosecution

Results in an Advantage in a Civil Matter . . . . . . . . 318

X.B.2.a. Victims Who Seek Advantage by Threats of

Criminal Prosecution . . . . . . . . . . . . . . . . . . . . . 318

X.B.2.b. Global Settlement Negotiations . . . . . . . . . . . . 319

X.B.3. Parallel Civil Suits . . . . . . . . . . . . . . . . . . . . . . . . . . 320

X.B.3.a. Private Civil Remedies . . . . . . . . . . . . . . . . . . . . 321

X.B.3.b. Advantages and Disadvantages of Parallel Civil and

Criminal Proceedings . . . . . . . . . . . . . . . . . . . . . 321

X.B.3.c. Stays and Protective Orders to Delay Civil

Proceedings During Criminal Prosecution . . . . . 323

X.C. Offers of Assistance From Victims and Related Parties . . . . 324

X.C.1. Gift Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

X.C.1.a. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 325

X.C.1.b. Distinction Between “Assistance” and “Gifts” . 326

X.C.1.b.i. Assistance from Victims and Related Parties

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
Table of Contents xv

X.C.1.b.ii. Private Investigators . . . . . . . . . . . . . . . . . . 328

X.C.1.b.iii. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

X.C.1.b.iv. Storage Costs in Counterfeit or Infringing

Products Cases . . . . . . . . . . . . . . . . . . . . . . 330

X.C.1.b.v. Resources Donated for Ongoing Use by Law

Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 330

X.C.1.b.vi. Assistance from Private Third Parties . . . . . 331

X.C.1.c. Departmental Procedures for the Solicitation and

Acceptance of Gifts and Assistance . . . . . . . . . . 333

X.C.1.c.i. Consultative Process for Acceptance of

Assistance and Gifts . . . . . . . . . . . . . . . . . . 333

X.C.1.c.ii. Solicitation of Gifts . . . . . . . . . . . . . . . . . . . 333

X.C.1.c.iii. Acceptance of Gifts . . . . . . . . . . . . . . . . . . . 333

X.C.2. Professional Responsibility Issues . . . . . . . . . . . . . . 335

X.C.3. Strategic and Case-Related Issues . . . . . . . . . . . . . . 336

X.C.4. Help and Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
xvii

Preface and Acknowledgments

This Manual builds on the success of the editions published in 2001

and 1997 by giving much broader and deeper treatment to all subject

areas, while also adding several new topics. To say that this publication

is simply an "updated version" of the 2001 manual would seriously

understate the nature and scope of the changes. The 2006 Manual was

restructured to present the material in a more consistent format that is

easier to use; all the chapters were rewritten to add broader and more

in-depth coverage of all areas; recent changes to the case law, statutes, and

sentencing guidelines are addressed; and new chapters were added to

address the Digital Millennium Copyright Act, patent law, and victim

issues. Throughout, we try to present material in a way that will be of the

most practical use to prosecutors.

This publication is the result of a tremendous amount of work by

many individuals in the Computer Crime and Intellectual Property

Section. Although it is undeniably a group effort, no one deserves more

credit than Senior Counsel Scott Garland. Scott had primary

responsibility for the project, wrote portions of various chapters, and

assumed chief editing duties. Many other CCIPS attorneys made

significant writing and editing contributions as well, including in

alphabetical order: Lily Chinn (on detail), Jason Gull, Eric Klumb,

Marie-Flore Kouame, Marc Miller, Jay Prabhu, Jason Reichelt, Andrea

Sharrin, Corbin Weiss, and John Zacharia. Former CCIPS attorneys

whose efforts also contributed include Michael O'Leary and Ken

Doroshow. CCIPS supervisory paralegal specialist Kathleen Baker

deserves special mention for her superior editing and proofing

contributions. Other paralegals and summer interns who contributed to

this publication over the past few years include: Jennifer Freundlich,

Michael Radosh, Douglas Bloom, Myles Roberts, Tara Swaminatha,

Meghan McGovern, and Rebecca Bolin. 

Finally, we are grateful to Ed Hagen, Nancy Bowman, and others at

the Office of Legal Education for putting this Manual into final form

worthy of publication.

This Manual is intended as assistance, not authority. The research,

analysis, and conclusions herein reflect current thinking on difficult areas

of the law; they do not represent the official position of the Department

of Justice or any other agency. This Manual has no regulatory effect,

confers no rights or remedies, and does not have the force of law or a U.S.
xviii Prosecuting Intellectual Property Crimes

Department of Justice directive. See United States v. Caceres, 440 U.S.

741 (1979). 

If you have questions about anything in this book, we invite you to

call the Computer Crime and Intellectual Property Section at (202)

514-1026. Attorneys are on duty every day for the specific purpose of

answering such calls and providing support to U.S. Attorney's Offices

nationwide. 

Michael M. DuBose, 

Deputy Chief

Computer Crime & Intellectual Property Section

Criminal Division

Department of Justice
1

I.

Intellectual Property—

An Introduction

I.A. Why Is Intellectual Property Enforcement Important? . . . . 1

I.B. What Is Intellectual Property? . . . . . . . . . . . . . . . . . . . . . . . 3

I.B.1. Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

I.B.2. Trademarks and Service Marks . . . . . . . . . . . . . . . . . . . 4

I.B.3. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I.B.4. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

I.C. Why Criminal Enforcement? . . . . . . . . . . . . . . . . . . . . . . . . 5

I.A. Why Is Intellectual Property

Enforcement Important?

Intellectual property (“IP”) is critical to the vitality of today's

economy. IP is an engine of growth, accounting for an increasing share of

jobs and trade. In 2002, the core copyright industries alone were

estimated to account for 6% or more of U.S. GDP, and in 2005 the

overall value of the “intellectual capital” of U.S. businesses—including

copyrights, trademarks, patents, and related information assets—was

estimated to account for a third of the value of U.S. companies, or about

$5 trillion. Stephen Siwek, Copyright Industries in the U.S. Economy:

The 2004 Report 11 (Oct. 2004) (core copyright industries statistic),

available at http://www.iipa.com/pdf/2004_SIWEK_FULL.pdf; Robert J.

Shapiro & Kevin A. Hassett, The Economic Value of Intellectual Property

18 (Oct. 2005) (overall value of intellectual property statistic), available

at http://www.usaforinnovation.org/news/ip_master.pdf.

Intellectual property rights create incentives for entrepreneurs, artists,

firms and investors to commit the necessary resources to research, develop

and market new technology and creative works. As one court observed,

“[t]he future of the nation depends in no small part on the efficiency of
2 Prosecuting Intellectual Property Crimes

industry, and the efficiency of industry depends in no small part on the

protection of intellectual property.” Rockwell Graphic Sys., Inc. v. DEV

Indus., Inc., 925 F.2d 174, 180 (7th Cir. 1991). Therefore, effective

protection of intellectual property rights is essential to fostering creativity

and to supporting our economic and financial infrastructure. 

This is a pivotal time for intellectual property enforcement. Market

and technological developments have converged to create an environment

in which the distribution of both legitimate and illegitimate goods

flourishes as never before. As economic freedom expands to more and

more countries, their manufacturers and consumers are increasingly

interconnected due to advances in telecommunication networks,

integrated financial markets, and global advertising. 

This interconnected global economy creates unprecedented business

opportunities to market and sell intellectual property worldwide.

Geographical borders present no impediment to international distribution

channels. Consumers enjoy near-immediate access to almost any product

manufactured in the United States or abroad, and they are accustomed

to using the international credit card system and online money brokers

(such as PayPal) to make payment a virtually seamless process worldwide.

If the product can not be immediately downloaded to a home PC, it can

be shipped to arrive by next day air. 

However, the same technology that benefits rights-holders and

consumers also benefits IP thieves seeking to make a fast, low-risk buck.

Total global losses to United States companies from copyright piracy

alone in 2005 were estimated to be $30-$35 billion, not counting

significant losses due to Internet piracy, for which meaningful estimates

were not yet available. See International Intellectual Property Alliance

Submission to the U.S. Trade Representative for the 2006 Special 301

Report on Global Copyright Protection and Enforcement, at 21 (Feb. 13,

2006), available at http://www.iipa.com/pdf/2006SPEC301COVER

LETTERwLTRHD.pdf.

Trafficking in counterfeit merchandise presents economic

consequences no less severe. It has been estimated that between 5% and

7% of world trade is in counterfeit goods, which is equivalent to

approximately $512 billion in global lost sales. U.S. Chamber of

Commerce, What Are Piracy and Counterfeiting Costing the American

Economy? 2 (2005), available at http://www.uschamber.com/ncf/

initiatives/counterfeiting.htm (following links re “Scope of the Problem”).

Counterfeit products are not limited to bootleg DVDs or fake “designer”

purses; they include prescription drugs, automobile and airline parts, food

products, and insecticides. See Stop Counterfeiting in Manufactured
I. Introduction 3

Goods Act, Pub. L. No. 109-181 § 1(a)(2) (“Findings”), 120 Stat. 285,

285 (2006). As a result, the trade in counterfeit merchandise threatens

the health and safety of millions of Americans and costs manufacturers

billions of dollars each year. 

Whether sold via the Internet or at sidewalk stands on New York's

famous Canal Street, the harm to the U.S. economy from IP theft is

substantial. Total losses suffered by U.S. industries due to their products

being counterfeited is estimated at between $200 and $250 billion per

year, costing 750,000 American jobs. U.S. Chamber of Commerce, What

Are Piracy and Counterfeiting Costing the American Economy? 2 (2005).

Strong enforcement, both civil and criminal, is therefore essential to

fostering creativity and protecting our economic security.

I.B. What Is Intellectual Property?

Similar to the way the law recognizes ownership rights in material

possessions such as cars and homes, it also grants rights in intangible

property, such as the expression of an idea or an invention. Federal law

protects intellectual property in four distinct areas: copyright, trademark,

patent, and trade secrets.

I.B.1. Copyright

The law of copyright is designed to foster the production of creative

works and the free flow of ideas by providing legal protection for creative

expression. Copyright provides protection against the infringement of

certain exclusive rights in “original works of authorship fixed in any

tangible medium of expression,” including computer software; literary,

musical, and dramatic works; motion pictures and sound recordings; and

pictorial, sculptural, and architectural works. See 17 U.S.C. § 102(a).

These exclusive rights include the rights of reproduction, public

distribution, public performance, public display, and preparation of

derivative works. 17 U.S.C. § 106. Legal protection exists as soon as the

work is expressed in tangible form. Copyright law protects the physical

expression of an idea, but not the idea itself.

Although civil law protects all the copyright owner's exclusive rights,

criminal law primarily focuses on the rights of distribution and

reproduction. See 17 U.S.C. § 506(a) and 18 U.S.C. § 2319. Those

convicted of criminal copyright infringement face up to five years'

imprisonment and a $250,000 fine. Id.
4 Prosecuting Intellectual Property Crimes

I.B.2. Trademarks and Service Marks

The federal law of trademarks and service marks protects a

commercial identity or brand used to identify a product or service to

consumers. The Lanham Act, 15 U.S.C. §§ 1051-1127, prohibits the

unauthorized use of a trademark, which is defined as “any word, name,

symbol, or device” used by a person “to identify and distinguish his or her

goods, including a unique product, from those manufactured or sold by

others and to indicate the source of the goods.” 15 U.S.C. § 1127. By

registering trademarks and service marks with the U.S. Patent and

Trademark Office, the owner is granted the exclusive right to use the

marks in commerce in the United States, and can exclude others from

using the mark, or a comparable mark, in a way likely to cause confusion

in the marketplace. A protected mark might be the name of the product

itself, such as “Pfizer” or “L.L. Bean”; a distinguishing symbol, such as the

Nike “swoosh” or the MGM lion; or a distinctive shape and color, such

as the blue diamond shape of a Viagra tablet. Certain symbols like the

Olympic rings also receive like protection.

Legal protections for trademarks and service marks not only help

protect the goodwill and reputation of mark-owners, but also promote fair

competition and the integrity of markets, and protect consumers by

helping to ensure they receive accurate information about the origins of

products and services.

Federal criminal law has long prohibited trafficking in goods or

services that bear a counterfeit mark. 18 U.S.C. § 2320. As discussed

more fully in subsequent chapters, in March 2006 the criminal trademark

statute was amended to also prohibit trafficking in labels or packaging

bearing a counterfeit mark, even when the label or packaging is

unattached to the underlying good. Individuals convicted of § 2320

offenses face up to 10 years' imprisonment and a $2,000,000 fine. 

I.B.3. Patents

Patents protect the world of inventions. In its simplest form, a patent

is a property right for an invention granted by the government to the

inventor. A patent gives the owner the right to exclude others from

making, using, and selling devices that embody the claimed invention. See

35 U.S.C. § 271(a). Patents generally protect products and processes, not

pure ideas. Thus, Albert Einstein could not have received a patent for his

theory of relativity, but methods for using this theory in a nuclear power

plant are patentable. Inventors must file for patent protection with the

U.S. Patent and Trademark Office. 
I. Introduction 5

There are three types of patents: utility, design, and plant. Utility

patents are the most common form and are available for inventions that

are novel, non-obvious, and useful; that is, “any new and useful process,

machine, manufacture, or composition of matter, or any new and useful

improvement thereof.” 35 U.S.C. § 101. Examples of utility patents

include the ingredients of Silly Putty (1949) and the diagnostic x-ray

system known as the CAT-Scan (1975). 

Unlike copyright and trademark infringement, there are no

criminal—only civil—penalties for committing patent infringement.

However, there are some criminal and quasi-criminal penalties for certain

conduct related to patents. 

I.B.4. Trade Secrets

A trade secret is any secret formula, pattern, device or compilation of

information used in a business that has some independent economic value

and which is used to obtain an advantage over competitors who do not

know or use it. See 18 U.S.C. § 1839(3). One of the most famous trade

secrets is the formula for manufacturing Coca-Cola. Coca-Cola was

accorded trade secret protection in 1920 because the recipe had been

continuously maintained as a trade secret since the company's founding

in 1892, and it apparently exists to this day. See Coca-Cola Bottling Co.

v. Coca-Cola Co., 269 F. 796 (D. Del. 1920) (holding that Coca-Cola

retained legal title to its formula upon entering a bottling contract because

it kept the formula secret).

Trade secrets are broader in scope than patents, and include scientific

and business information (e.g., market strategies). However, the

information can be freely used if it is obtained or learned through

legitimate means, such as reverse engineering. Moreover, if the trade

secret is publicly disclosed, it loses its legal protection.

The theft of trade secrets is punishable by up to fifteen years'

imprisonment and a $500,000 fine if done to benefit a foreign

government or agent, 18 U.S.C. § 1831, and up to ten years'

imprisonment and a $250,000 fine in other cases.

I.C. Why Criminal Enforcement?

Although civil remedies may help compensate victimized intellectual

property rights-holders, criminal sanctions are often warranted to punish

and deter the most egregious violators: repeat and large-scale offenders,
6 Prosecuting Intellectual Property Crimes

organized crime groups, and those whose criminal conduct threatens

public health and safety. Indeed, because many violations of intellectual

property rights involve no loss of tangible property and, for infringement

crimes, do not even require direct contact with the rights-holder, the

intellectual property owner often does not know that it is a victim until

an infringer's activities are investigated and prosecuted.

The Department pursues a three-front approach to ensure aggressive

and effective prosecution. First, the Criminal Division's Computer Crime

and Intellectual Property Section (“CCIPS”), based in Washington, D.C.,

provides a core team of expert intellectual property prosecutors who

investigate, prosecute, and coordinate national and international cases of

intellectual property theft. This group of specialists helps develop and

execute the Department's overall intellectual property enforcement

strategy, and provides training and 24/7 support to Assistant U.S.

Attorneys nationally. This Manual, for instance, is one of the training

tools that CCIPS provides.

Second, because primary responsibility for prosecution of federal

crimes generally—and intellectual property offenses specifically—falls to

the 94 U.S. Attorneys' Offices across the United States and its territories,

the Justice Department has designated at least one, and oftentimes more,

Computer Hacking and Intellectual Property (“CHIP”) Coordinator in

every U.S. Attorney's Office in the country. CHIP Coordinators are

Assistant U.S. Attorneys with specialized training in prosecuting

intellectual property and computer crime who serve as subject-matter

experts within their districts. As of this writing, there are approximately

230 CHIP prosecutors designated to handle both computer crime and

intellectual property matters nationwide. 

Third, CHIP Units augment the extensive network of CHIP

prosecutors. Each CHIP Unit consists of a concentrated number of

trained Assistant U.S. Attorneys in the same office. CHIP Units are

strategically located in districts that experience a higher incidence of

intellectual property and cyber-crime, or where such crimes have the

highest economic impact. These specialized squads focus on prosecuting

intellectual property offenses such as trademark violations, copyright

infringement, and thefts of trade secrets. In addition, they prosecute hightechnology offenses including computer hacking, virus and worm

proliferation, Internet fraud, and other attacks on computer systems.

CHIP Unit attorneys are also actively involved in regional training of

other prosecutors and federal agents regarding high-tech investigations,

and they work closely with victims of intellectual property theft and

cyber-crime on prevention efforts. There are currently 25 CHIP Units
I. Introduction 7

consisting of approximately 80 Assistant U.S. Attorneys, in addition to

the approximately 150 CHIP prosecutors in the remaining districts and

Justice Department divisions. 

The combined prosecution efforts of the CHIP network, CHIP Units,

and CCIPS create a formidable three-front enforcement attack against

intellectual property thieves and counterfeiters. These enforcement efforts

will be even more necessary in the future, as advancing technology and

changing economies continue to present new challenges.
1

I.

Intellectual Property—

An Introduction

I.A. Why Is Intellectual Property Enforcement Important? . . . . 1

I.B. What Is Intellectual Property? . . . . . . . . . . . . . . . . . . . . . . . 3

I.B.1. Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

I.B.2. Trademarks and Service Marks . . . . . . . . . . . . . . . . . . . 4

I.B.3. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I.B.4. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

I.C. Why Criminal Enforcement? . . . . . . . . . . . . . . . . . . . . . . . . 5

I.A. Why Is Intellectual Property

Enforcement Important?

Intellectual property (“IP”) is critical to the vitality of today's

economy. IP is an engine of growth, accounting for an increasing share of

jobs and trade. In 2002, the core copyright industries alone were

estimated to account for 6% or more of U.S. GDP, and in 2005 the

overall value of the “intellectual capital” of U.S. businesses—including

copyrights, trademarks, patents, and related information assets—was

estimated to account for a third of the value of U.S. companies, or about

$5 trillion. Stephen Siwek, Copyright Industries in the U.S. Economy:

The 2004 Report 11 (Oct. 2004) (core copyright industries statistic),

available at http://www.iipa.com/pdf/2004_SIWEK_FULL.pdf; Robert J.

Shapiro & Kevin A. Hassett, The Economic Value of Intellectual Property

18 (Oct. 2005) (overall value of intellectual property statistic), available

at http://www.usaforinnovation.org/news/ip_master.pdf.

Intellectual property rights create incentives for entrepreneurs, artists,

firms and investors to commit the necessary resources to research, develop

and market new technology and creative works. As one court observed,

“[t]he future of the nation depends in no small part on the efficiency of
2 Prosecuting Intellectual Property Crimes

industry, and the efficiency of industry depends in no small part on the

protection of intellectual property.” Rockwell Graphic Sys., Inc. v. DEV

Indus., Inc., 925 F.2d 174, 180 (7th Cir. 1991). Therefore, effective

protection of intellectual property rights is essential to fostering creativity

and to supporting our economic and financial infrastructure. 

This is a pivotal time for intellectual property enforcement. Market

and technological developments have converged to create an environment

in which the distribution of both legitimate and illegitimate goods

flourishes as never before. As economic freedom expands to more and

more countries, their manufacturers and consumers are increasingly

interconnected due to advances in telecommunication networks,

integrated financial markets, and global advertising. 

This interconnected global economy creates unprecedented business

opportunities to market and sell intellectual property worldwide.

Geographical borders present no impediment to international distribution

channels. Consumers enjoy near-immediate access to almost any product

manufactured in the United States or abroad, and they are accustomed

to using the international credit card system and online money brokers

(such as PayPal) to make payment a virtually seamless process worldwide.

If the product can not be immediately downloaded to a home PC, it can

be shipped to arrive by next day air. 

However, the same technology that benefits rights-holders and

consumers also benefits IP thieves seeking to make a fast, low-risk buck.

Total global losses to United States companies from copyright piracy

alone in 2005 were estimated to be $30-$35 billion, not counting

significant losses due to Internet piracy, for which meaningful estimates

were not yet available. See International Intellectual Property Alliance

Submission to the U.S. Trade Representative for the 2006 Special 301

Report on Global Copyright Protection and Enforcement, at 21 (Feb. 13,

2006), available at http://www.iipa.com/pdf/2006SPEC301COVER

LETTERwLTRHD.pdf.

Trafficking in counterfeit merchandise presents economic

consequences no less severe. It has been estimated that between 5% and

7% of world trade is in counterfeit goods, which is equivalent to

approximately $512 billion in global lost sales. U.S. Chamber of

Commerce, What Are Piracy and Counterfeiting Costing the American

Economy? 2 (2005), available at http://www.uschamber.com/ncf/

initiatives/counterfeiting.htm (following links re “Scope of the Problem”).

Counterfeit products are not limited to bootleg DVDs or fake “designer”

purses; they include prescription drugs, automobile and airline parts, food

products, and insecticides. See Stop Counterfeiting in Manufactured
I. Introduction 3

Goods Act, Pub. L. No. 109-181 § 1(a)(2) (“Findings”), 120 Stat. 285,

285 (2006). As a result, the trade in counterfeit merchandise threatens

the health and safety of millions of Americans and costs manufacturers

billions of dollars each year. 

Whether sold via the Internet or at sidewalk stands on New York's

famous Canal Street, the harm to the U.S. economy from IP theft is

substantial. Total losses suffered by U.S. industries due to their products

being counterfeited is estimated at between $200 and $250 billion per

year, costing 750,000 American jobs. U.S. Chamber of Commerce, What

Are Piracy and Counterfeiting Costing the American Economy? 2 (2005).

Strong enforcement, both civil and criminal, is therefore essential to

fostering creativity and protecting our economic security.

I.B. What Is Intellectual Property?

Similar to the way the law recognizes ownership rights in material

possessions such as cars and homes, it also grants rights in intangible

property, such as the expression of an idea or an invention. Federal law

protects intellectual property in four distinct areas: copyright, trademark,

patent, and trade secrets.

I.B.1. Copyright

The law of copyright is designed to foster the production of creative

works and the free flow of ideas by providing legal protection for creative

expression. Copyright provides protection against the infringement of

certain exclusive rights in “original works of authorship fixed in any

tangible medium of expression,” including computer software; literary,

musical, and dramatic works; motion pictures and sound recordings; and

pictorial, sculptural, and architectural works. See 17 U.S.C. § 102(a).

These exclusive rights include the rights of reproduction, public

distribution, public performance, public display, and preparation of

derivative works. 17 U.S.C. § 106. Legal protection exists as soon as the

work is expressed in tangible form. Copyright law protects the physical

expression of an idea, but not the idea itself.

Although civil law protects all the copyright owner's exclusive rights,

criminal law primarily focuses on the rights of distribution and

reproduction. See 17 U.S.C. § 506(a) and 18 U.S.C. § 2319. Those

convicted of criminal copyright infringement face up to five years'

imprisonment and a $250,000 fine. Id.
4 Prosecuting Intellectual Property Crimes

I.B.2. Trademarks and Service Marks

The federal law of trademarks and service marks protects a

commercial identity or brand used to identify a product or service to

consumers. The Lanham Act, 15 U.S.C. §§ 1051-1127, prohibits the

unauthorized use of a trademark, which is defined as “any word, name,

symbol, or device” used by a person “to identify and distinguish his or her

goods, including a unique product, from those manufactured or sold by

others and to indicate the source of the goods.” 15 U.S.C. § 1127. By

registering trademarks and service marks with the U.S. Patent and

Trademark Office, the owner is granted the exclusive right to use the

marks in commerce in the United States, and can exclude others from

using the mark, or a comparable mark, in a way likely to cause confusion

in the marketplace. A protected mark might be the name of the product

itself, such as “Pfizer” or “L.L. Bean”; a distinguishing symbol, such as the

Nike “swoosh” or the MGM lion; or a distinctive shape and color, such

as the blue diamond shape of a Viagra tablet. Certain symbols like the

Olympic rings also receive like protection.

Legal protections for trademarks and service marks not only help

protect the goodwill and reputation of mark-owners, but also promote fair

competition and the integrity of markets, and protect consumers by

helping to ensure they receive accurate information about the origins of

products and services.

Federal criminal law has long prohibited trafficking in goods or

services that bear a counterfeit mark. 18 U.S.C. § 2320. As discussed

more fully in subsequent chapters, in March 2006 the criminal trademark

statute was amended to also prohibit trafficking in labels or packaging

bearing a counterfeit mark, even when the label or packaging is

unattached to the underlying good. Individuals convicted of § 2320

offenses face up to 10 years' imprisonment and a $2,000,000 fine. 

I.B.3. Patents

Patents protect the world of inventions. In its simplest form, a patent

is a property right for an invention granted by the government to the

inventor. A patent gives the owner the right to exclude others from

making, using, and selling devices that embody the claimed invention. See

35 U.S.C. § 271(a). Patents generally protect products and processes, not

pure ideas. Thus, Albert Einstein could not have received a patent for his

theory of relativity, but methods for using this theory in a nuclear power

plant are patentable. Inventors must file for patent protection with the

U.S. Patent and Trademark Office. 
I. Introduction 5

There are three types of patents: utility, design, and plant. Utility

patents are the most common form and are available for inventions that

are novel, non-obvious, and useful; that is, “any new and useful process,

machine, manufacture, or composition of matter, or any new and useful

improvement thereof.” 35 U.S.C. § 101. Examples of utility patents

include the ingredients of Silly Putty (1949) and the diagnostic x-ray

system known as the CAT-Scan (1975). 

Unlike copyright and trademark infringement, there are no

criminal—only civil—penalties for committing patent infringement.

However, there are some criminal and quasi-criminal penalties for certain

conduct related to patents. 

I.B.4. Trade Secrets

A trade secret is any secret formula, pattern, device or compilation of

information used in a business that has some independent economic value

and which is used to obtain an advantage over competitors who do not

know or use it. See 18 U.S.C. § 1839(3). One of the most famous trade

secrets is the formula for manufacturing Coca-Cola. Coca-Cola was

accorded trade secret protection in 1920 because the recipe had been

continuously maintained as a trade secret since the company's founding

in 1892, and it apparently exists to this day. See Coca-Cola Bottling Co.

v. Coca-Cola Co., 269 F. 796 (D. Del. 1920) (holding that Coca-Cola

retained legal title to its formula upon entering a bottling contract because

it kept the formula secret).

Trade secrets are broader in scope than patents, and include scientific

and business information (e.g., market strategies). However, the

information can be freely used if it is obtained or learned through

legitimate means, such as reverse engineering. Moreover, if the trade

secret is publicly disclosed, it loses its legal protection.

The theft of trade secrets is punishable by up to fifteen years'

imprisonment and a $500,000 fine if done to benefit a foreign

government or agent, 18 U.S.C. § 1831, and up to ten years'

imprisonment and a $250,000 fine in other cases.

I.C. Why Criminal Enforcement?

Although civil remedies may help compensate victimized intellectual

property rights-holders, criminal sanctions are often warranted to punish

and deter the most egregious violators: repeat and large-scale offenders,
6 Prosecuting Intellectual Property Crimes

organized crime groups, and those whose criminal conduct threatens

public health and safety. Indeed, because many violations of intellectual

property rights involve no loss of tangible property and, for infringement

crimes, do not even require direct contact with the rights-holder, the

intellectual property owner often does not know that it is a victim until

an infringer's activities are investigated and prosecuted.

The Department pursues a three-front approach to ensure aggressive

and effective prosecution. First, the Criminal Division's Computer Crime

and Intellectual Property Section (“CCIPS”), based in Washington, D.C.,

provides a core team of expert intellectual property prosecutors who

investigate, prosecute, and coordinate national and international cases of

intellectual property theft. This group of specialists helps develop and

execute the Department's overall intellectual property enforcement

strategy, and provides training and 24/7 support to Assistant U.S.

Attorneys nationally. This Manual, for instance, is one of the training

tools that CCIPS provides.

Second, because primary responsibility for prosecution of federal

crimes generally—and intellectual property offenses specifically—falls to

the 94 U.S. Attorneys' Offices across the United States and its territories,

the Justice Department has designated at least one, and oftentimes more,

Computer Hacking and Intellectual Property (“CHIP”) Coordinator in

every U.S. Attorney's Office in the country. CHIP Coordinators are

Assistant U.S. Attorneys with specialized training in prosecuting

intellectual property and computer crime who serve as subject-matter

experts within their districts. As of this writing, there are approximately

230 CHIP prosecutors designated to handle both computer crime and

intellectual property matters nationwide. 

Third, CHIP Units augment the extensive network of CHIP

prosecutors. Each CHIP Unit consists of a concentrated number of

trained Assistant U.S. Attorneys in the same office. CHIP Units are

strategically located in districts that experience a higher incidence of

intellectual property and cyber-crime, or where such crimes have the

highest economic impact. These specialized squads focus on prosecuting

intellectual property offenses such as trademark violations, copyright

infringement, and thefts of trade secrets. In addition, they prosecute hightechnology offenses including computer hacking, virus and worm

proliferation, Internet fraud, and other attacks on computer systems.

CHIP Unit attorneys are also actively involved in regional training of

other prosecutors and federal agents regarding high-tech investigations,

and they work closely with victims of intellectual property theft and

cyber-crime on prevention efforts. There are currently 25 CHIP Units
I. Introduction 7

consisting of approximately 80 Assistant U.S. Attorneys, in addition to

the approximately 150 CHIP prosecutors in the remaining districts and

Justice Department divisions. 

The combined prosecution efforts of the CHIP network, CHIP Units,

and CCIPS create a formidable three-front enforcement attack against

intellectual property thieves and counterfeiters. These enforcement efforts

will be even more necessary in the future, as advancing technology and

changing economies continue to present new challenges.
9

II.

Criminal Copyright

Infringement—

17 U.S.C. § 506 and

18 U.S.C. § 2319

II.A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.A.1. What Copyright Law Protects . . . . . . . . . . . . . . . . . . . 12

II.A.2. Legal Basis for Copyright and Related Laws . . . . . . . . . 13

II.A.3. Relevance of Civil Cases to Criminal Prosecutions . . . . 14

II.A.4. Federal Preemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

II.A.5. When Copyright Protection Begins and Ends . . . . . . . 15

II.A.6. The Rights Protected by Copyright . . . . . . . . . . . . . . . 15

II.A.7. When Infringement is Criminal . . . . . . . . . . . . . . . . . . 16

II.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

II.B.1. Existence of a Copyright . . . . . . . . . . . . . . . . . . . . . . . 19

II.B.1.a. Copyrightability . . . . . . . . . . . . . . . . . . . . . . . . . . 19

II.B.1.a.i. Original Work Fixed in a Tangible Medium . 19

II.B.1.a.ii. Short Phrases Are Not Copyrightable . . . . . 20

II.B.1.a.iii. Expression of an Idea vs. Idea Itself . . . . . . 20

II.B.1.b. Copyrights vs. Registrations vs. Certificates . . . . . 20

II.B.1.c. New Procedure for “Preregistration” . . . . . . . . . . . 21

II.B.1.d. Whether Registration or Preregistration is Required to

Prosecute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

II.B.1.d.i. Liability for Infringement Committed Prior

to Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

II.B.1.d.ii. Unpublished or Pre-Release Works . . . . . . . 25
10 Prosecuting Intellectual Property Crimes

II.B.1.d.iii. Registration of Particular Versions of a Work

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

II.B.1.e. Proof of Copyright at Trial . . . . . . . . . . . . . . . . . . 27

II.B.1.f. Copyright Notice . . . . . . . . . . . . . . . . . . . . . . . . . 29

II.B.2. The Defendant Acted “Willfully” . . . . . . . . . . . . . . . . . 29

II.B.2.a. Legal Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

II.B.2.b. Proof at Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

II.B.3. Infringement of the Copyright . . . . . . . . . . . . . . . . . . . 34

II.B.3.a. Infringement by Reproduction or Distribution . . . 36

II.B.3.a.i. Reproduction . . . . . . . . . . . . . . . . . . . . . . . . 38

II.B.3.a.ii. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 40

II.B.3.b. Infringement of at Least 10 Copies of 1 or More

Copyrighted Works With a Total Retail Value Exceeding

$2,500 Within a 180-Day Period . . . . . . . . . . . . . . . . 46

II.B.3.b.i. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

II.B.3.b.ii. Definition of “Retail Value” in this Context 46

II.B.3.c. Distribution of a Work Being Prepared for Commercial

Distribution, by Making It Available on a Publicly-Accessible

Computer Network, if the Defendant Knew or Should Have

Known the Work Was Intended for Commercial Distribution

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

II.B.3.c.i. Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 50

II.B.3.c.ii. Making the Work Available on a Computer

Network Accessible to Members of the Public . . . . 50

II.B.3.c.iii. Work Being Prepared for Commercial

Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

II.B.3.c.iv. The Defendant Knew or Should Have Known that

the Work Was Intended for Commercial Distribution52

II.B.4. Additional Element for Enhanced Sentence: Purpose of

Commercial Advantage or Private Financial Gain . . . . . . . 53

II.B.4.a. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

II.B.4.b. Legal Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
II. Criminal Copyright Infringement 11

II.B.5. Misdemeanor Copyright Infringement . . . . . . . . . . . . . 57

II.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

II.C.1. Statute of Limitations: 5 years . . . . . . . . . . . . . . . . . . . 58

II.C.2. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

II.C.3. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

II.C.4. The First Sale Doctrine—17 U.S.C. § 109 . . . . . . . . . . 60

II.C.4.a. Operation of the Doctrine . . . . . . . . . . . . . . . . . . 60

II.C.4.b. Affirmative Defense or Part of the Government's

Case-in-Chief? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

II.C.4.c. Disproving First Sale at Trial . . . . . . . . . . . . . . . . 63

II.C.4.d. Special Rules for Rental, Lease, and Lending . . . . 64

II.C.5. Fair Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

II.C.5.a. Unpublished Works . . . . . . . . . . . . . . . . . . . . . . . 67

II.C.5.b. Fair Use in Criminal Cases . . . . . . . . . . . . . . . . . . 68

II.C.6. “Archival Exception” for Computer Software—

17 U.S.C. § 117 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

II.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

II.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

II.E.1. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

II.E.2. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . 72

II.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . . 73

Willful copyright infringement is criminalized by 17 U.S.C. § 506(a)

which defines what conduct is prohibited, and 18 U.S.C. § 2319, which

sets the punishment. Felony penalties attach when the violation consists

of the reproduction or distribution of at least ten copies that are valued

together at more than $2,500, or, under amendments enacted in 2005,

when the violation involves distribution of a work being prepared for

commercial distribution over a publicly-accessible computer network.

This Chapter provides an overview of copyright law, an analysis of the

elements of copyright infringement, a review of the defenses to the crime,

and a summary of the statutory penalties arising from convictions. Finally,
12 Prosecuting Intellectual Property Crimes

this chapter explores some of the novel copyright infringement issues

presented by new technologies. Forms providing sample indictments and

jury instructions for criminal copyright infringement are provided in

Appendix B.

Prosecutors may also wish to consult Nimmer on Copyright, a leading

treatise on copyright law, with many of its sections being cited by courts

as if they were black-letter law, including a chapter on criminal offenses.

See Melville B. Nimmer & David Nimmer, Nimmer on Copyright (2005).

Other major treatises and articles that may be instructive include William

F. Patry, Copyright Law and Practice (1994 & Supps. 1995-2000); Patry

on Copyright (West Publishing, forthcoming 2006); Sylvia Albert et al.,

Intellectual Property Crimes, 42 Am. Crim. L. Rev. 631 (2005); Michael

Coblenz, Intellectual Property Crimes, 9 Alb. L.J. Sci. & Tech. 235

(1999).

II.A. Overview

II.A.1. What Copyright Law Protects

Copyright law has two goals: to protect the rights of authors, and,

thereby, to foster development of more creative works for the benefit of

the public. The Constitution, in granting Congress the power to enact

intellectual property laws, describes both these goals and the means to

achieve it: “To promote the Progress of Science and useful Arts, by

securing for limited Times to Authors and Inventors the exclusive Right

to their respective Writings and Discoveries.” U.S. Const., art. I, § 8, cl.

8. Maintaining an appropriate balance between protecting works and

incentives for creators of works, on the one hand, and disseminating

knowledge and information to the public, on the other, is a constant

theme throughout the history of copyright law. See Twentieth Century

Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).

The creator of an original work of expression, fixed in a tangible

medium, is granted for a limited time a copyright, which is the exclusive

right to copy, distribute, and make certain other uses of the work.

Copyright law protects all “original works of authorship fixed in any

tangible medium of expression, now known or later developed, from

which they can be perceived, reproduced, or otherwise communicated,

either directly or with the aid of a machine or device.” 17 U.S.C. § 102(a)

(emphasis added). “Originality” in copyright law is a low threshold: the

work need only have been independently created by the author, as
II. Criminal Copyright Infringement 13

opposed to copied from another, previous work, and it must possess only

a minimal degree of creativity. See Section II.B.1.a. of this Chapter.

 An important limitation of copyright is that it protects only the

creative expression of an idea, but not the idea itself. See Section II.B.1.a.

of this Chapter. Novel ideas, methods, and processes may enjoy

protection under patent law (or other areas of law, such as trade secret

protection), but are not copyrightable. For example, consider a

microbiologist who invents a new technique for modifying particular genes

in a cell, then writes an article for a magazine that describes the

technique. The article may be protected by copyright as the author's

original expression of his or her ideas regarding this new technique. The

technique itself, however, would not be copyrightable, although it may be

patentable.

Copyrights are also distinct from trademarks, which protect the

exclusive use of certain names, pictures, and slogans in connection with

goods or services. They are discussed in Chapter III of this Manual.

Trademarks need not be original or creative. Moreover, many trademarks

consist of short single words or short phrases that are ineligible for

copyright protection. See Section II.B.1.a.ii. of this Chapter. Despite the

differences between copyrights and trademarks, some items may be both

copyrighted and trademarked, such as the image of Disney's Mickey

Mouse.

II.A.2. Legal Basis for Copyright and Related Laws

The Constitution grants Congress the power to regulate copyright:

“[t]o Promote the Progress of Science and useful Arts, by securing for

limited Times to Authors and Inventors the exclusive Right to their

respective Writings and Discoveries,” U.S. Const., art. I, § 8, cl. 8.

Congress also derives authority to regulate some copyright-related issues

from the Commerce Clause, U.S. Const. art. I, § 8, cl. 3.

Copyright protection is principally statutory. Sony Corp. v. Universal

City Studios, Inc., 464 U.S. 417, 429-31 (1984). Federal copyright

statutes are found primarily in Title 17 of the U.S. Code, of which

sections 101 through 1101 are called the “Copyright Act,” and the

penalties for criminal infringement are set forth in 18 U.S.C. § 2319.

A number of important copyright provisions that were originally

devised by courts, such as the doctrines of fair use and first sale, are now

codified in Title 17. E.g., 17 U.S.C. §§ 107, 109. And courts often

interpret copyright law in light of new events and technological

developments, which in turn creates significant judge-made law that might
14 Prosecuting Intellectual Property Crimes

not otherwise be obvious from the statutes. E.g., Metro Goldwyn-Mayer

Studios, Inc. v. Grokster, Ltd., 545 U. S. __, 125 S. Ct. 2764 (2005);

Sony, 464 U.S. 417.

II.A.3. Relevance of Civil Cases to Criminal Prosecutions

In applying the criminal copyright statutes, civil precedents are often

helpful. The vast majority of copyright case law is civil, rather than

criminal, and often civil cases provide the only judicial authority available

in criminal prosecutions. See United States v. Wise, 550 F.2d 1180, 1189

n.14 (9th Cir. 1977) (noting “general principle in copyright law of looking

to civil authority for guidance in criminal cases”); United States v.

Manzer, 69 F.3d 222, 227 (8th Cir. 1995) (same); United States v. Cross,

816 F.2d 297, 303 (7th Cir. 1987) (same, with respect to jury

instructions); Kelly v. L.L. Cool J., 145 F.R.D. 32, 39 (S.D.N.Y. 1992)

(noting that conduct that does not support a civil action for infringement

cannot constitute criminal infringement); 4 Nimmer on Copyright

§ 15.01.

But what makes a good civil case does not necessarily make a good

criminal case. Civil and criminal copyright law sometimes differ sharply.

For example, a defendant can be civilly liable for copyright infringement

as a matter of strict liability, with no intent to copy. See Bright Tunes

Music Corp. v. Harrisongs Music, Ltd., 420 F. Supp. 177 (S.D.N.Y.

1976) (finding infringement where composer “subconsciously” copied

earlier song). By contrast, a criminal copyright defendant can be convicted

only if he infringed willfully. See Section II.B.2. of this Chapter.

II.A.4. Federal Preemption

In addition to being primarily statutory, copyright law is also

primarily a matter of federal law. For most of the history of the United

States, state- and common-law copyright protections coexisted with

federal copyright laws. See, e.g., Wheaton v. Peters, 33 U.S. 591, 597-98

(1834). But the Copyright Act of 1976 amended Title 17 to preempt

state laws that provide rights “equivalent to” rights granted under federal

copyright law. 17 U.S.C. § 301(a).

Despite this preemption, copyright law continues to be intertwined

with state law in certain cases, such as those involving license agreements

and other contracts governing ownership and use of copyrighted works.

E.g., Storage Technology Corp. v. Custom Hardware Eng'g & Consulting,

Inc., 421 F.3d 1307 (Fed. Cir. 2005). State copyright law also continues

to apply to sound recordings recorded before 1972, because sound

recordings were not protected by federal copyright law until 1972.
II. Criminal Copyright Infringement 15

Consequently, pre-1972 sound recordings may still be protected by state

copyrights until 2067. See La Cienega Music Co. v. ZZ Top, 53 F.3d 950

(9th Cir. 1995); 17 U.S.C. § 301(c).

II.A.5. When Copyright Protection Begins and Ends

A work is protected by copyright law from the moment it is created,

even if it is not registered. See 17 U.S.C. §§ 101-102(a), 408(a). Although

registration with the Register of Copyrights is not a prerequisite to

copyright protection, it generally is a prerequisite to civil enforcement and

to some remedies. Registration is generally a prerequisite to a copyright

holder's civil suit for infringement. See 17 U.S.C. § 411. If the work was

registered only after infringement, the plaintiff may still collect actual

damages for infringement committed prior to registration, but generally

cannot collect statutory damages or attorneys' fees. See 17 U.S.C. § 412.

The Department's position that registration is not a prerequisite to

criminal enforcement, including CCIPS's recommendation that

prosecutors obtain registration certificates before trial, is discussed in

Section II.B.1. of this Chapter.

Works created in 1978 or later are protected by copyright for the life

of the author plus 70 years. See 17 U.S.C. § 302(a). For a work with one

or more joint authors, the life of the surviving author is used. § 302(b).

Works made for hire (e.g., works made by or at the behest of a

corporation) and anonymous works are protected for 95 years from the

date of first publication, or 120 years from creation (whichever comes

first). 17 U.S.C. § 302(c). Most pre-1978 works are protected for 95 years

from the date that copyright was first secured (generally their date of

publication). 17 U.S.C. § 304.

II.A.6. The Rights Protected by Copyright

Copyrighted law grants copyright holders six exclusive rights to their

works: (1) reproduction, (2) preparation of derivative works based upon

the original copyrighted work, (3) public distribution, (4) public

performance of certain types of works, (5) public display of certain types

of works, and (6) performance of sound recordings by means of digital

audio transmission. See 17 U.S.C. § 106(1)-(6); 17 U.S.C. § 101 (defining

“sound recording” to exclude audiovisual works); 17 U.S.C. § 114(j)(5)

(excluding transmission of audiovisual works from the definition of

“digital audio transmission”); 17 U.S.C. § 114(d) (limitations including

exemptions for certain broadcast transmissions, subscription

transmissions, and licensed transmissions).
16 Prosecuting Intellectual Property Crimes

The exclusive rights set forth in 17 U.S.C. § 106 are subject to a

number of exceptions and limitations in §§ 107-122, such as the right to

make limited or “fair use” of a work, to resell one's personal copy of a

work, and to reproduce computer software that one owns as an essential

step in using it, or to make an archival copy. Those exceptions are

addressed throughout this Chapter.

Exercising one of the exclusive rights under § 106 without the

copyright holder's authorization or other legal authority is infringement.

17 U.S.C. § 501. But not every unlicensed use constitutes an

infringement. “An unlicensed use of the copyright is not an infringement

unless it conflicts with one of the specific exclusive rights conferred by the

copyright statute.” Sony Corp. v. Universal City Studios, Inc., 464 U.S.

417, 447 (1984) (citation omitted); see also Benjamin Kaplan, An

Unhurried View of Copyright 57 (1967) (“The fundamental [is] that 'use'

is not the same thing as 'infringement,' that use short of infringement is

to be encouraged ....”).

II.A.7. When Infringement is Criminal

Not every infringement is a criminal offense. Criminal copyright

penalties have always been the exception rather than the rule. Although

criminal copyright law has greatly expanded the scope of the conduct it

penalizes over the past century, criminal sanctions continue to apply only

to certain types of infringement—generally when the infringement is

particularly serious, the infringer knows the infringement is wrong, or the

type of case renders civil enforcement by individual copyright owners

especially difficult.

Copyright infringement is a crime if the defendant acted willfully and

either (1) for commercial advantage or private financial gain, (2) by

reproducing or distributing infringing copies of works with a total retail

value of over $1,000 over a 180-day period, or (3) by distributing a “work

being prepared for commercial distribution” by making it available on a

publicly-accessible computer network. 17 U.S.C. § 506(a)(1). Copyright

infringement is a felony only if the infringement involved reproduction or

distribution of at least 10 copies of copyrighted works worth more than

$2,500 in a 180-day period, or involved distribution of a “work being

prepared for commercial distribution” over a publicly-accessible computer

network. See id.; 18 U.S.C. § 2319.
II. Criminal Copyright Infringement 17

II.B. Elements

There are three essential copyright crimes:

1. Willful infringement “for purposes of commercial advantage or

private financial gain,” 17 U.S.C. § 506(a)(1)(A) (formerly

§ 506(a)(1), before the Family Entertainment and Copyright Act

of 2005, Pub. L. No. 109-9 § 103, 119 Stat 218, 220-21 (Apr.

27, 2005) amendments)

2. Willful infringement not for profit, but with “the reproduction or

distribution, including by electronic means, during any 180-day

period, of 1 or more copies or phonorecords of 1 or more

copyrighted works, which have a total retail value of more than

$1,000,” 17 U.S.C. § 506(a)(1)(B) (formerly § 506(a)(2) before

the Apr. 27, 2005 amendments)

3. Pre-release piracy, i.e., willful infringement “by the distribution of

a work being prepared for commercial distribution, by making it

available on a computer network accessible to members of the

public, if such person knew or should have known that the work

was intended for commercial distribution,” 17 U.S.C.

§ 506(a)(1)(C) (newly enacted with the Apr. 27, 2005

amendments)

The common factors are that (1) there must be a copyright, (2) there

must be an infringement, and (3) the infringement must be willful. Some

courts also require that the government prove an extra element, that the

infringing items at issue were not permissible “first sales,” but other courts

hold first sale to be an affirmative defense. See Section II.C.4. of this

Chapter.

Determining the elements to prove a felony (versus a misdemeanor)

is slightly more involved. For-profit infringement, § 506(a)(1)(A), is a fiveyear felony if:

• The defendant infringed by means of “the reproduction or

distribution, including by electronic means,” AND

• “during any 180-day period, of at least 10 copies or

phonorecords, of 1 or more copyrighted works, which have a total

retail value of more than $2,500.” 18 U.S.C. § 2319(b)(1).

• Otherwise—if the offense violated rights other than reproduction

or distribution or the offense did not satisfy the monetary or
18 Prosecuting Intellectual Property Crimes

numerical thresholds—it is a misdemeanor. 18 U.S.C. § 2319(b)(3).

Non-profit infringement, § 506(a)(1)(B), is a three-year felony if

• the defendant infringed by means of “the reproduction or

distribution of 10 or more copies or phonorecords of 1 or more

copyrighted works, which have a total retail value of $2,500 or

more.” 18 U.S.C. § 2319(c)(1).

• Otherwise—if the offense did not satisfy the monetary and

numerical thresholds—it is a misdemeanor. 18 U.S.C.

§ 2319(c)(3).

Pre-release infringement over a publicly-accessible computer network,

17 U.S.C. § 506(a)(1)(C), is always a felony, but the penalties increase if

it is done for commercial advantage or private financial gain. 18 U.S.C.

§ 2319(d)(1),(2).

In other words, there are four essential elements to a charge of felony

copyright infringement:

1. A copyright exists (see Section II.B.1. of this Chapter)

2. The defendant acted willfully (Section II.B.2.)

3. It was infringed by the defendant by reproduction or distribution

of the copyrighted work, or (for violations of 17 U.S.C.

§ 506(a)(1)(C)), by distribution (Section II.B.3.a.)

4. The infringement consisted of either of the following: 

(a) the defendant infringed at least 10 copies of one or more

copyrighted works with a total retail value of more than $2,500

within a 180-day period (Section II.B.3.b.); OR

(b) the defendant infringed by

(i) the distribution

(ii) by making available on a computer network accessible to

members of the public

(iii) of a “work being prepared for commercial distribution”

(iv) the defendant knew or should have known the work was

being prepared for commercial distribution (Section II.B.3.c.)

Repeat felonies garner increased penalties. See 18 U.S.C.

§ 2319(b)(2), (c)(2), (d)(3)-(4).
II. Criminal Copyright Infringement 19

Amendments to the criminal copyright statutes in 1997 and 2005

significantly changed the elements of felony copyright infringement. See

No Electronic Theft Act (NET) Act, Pub. L. No. 105-147, 111 Stat. 2678

(1997); Family Entertainment and Copyright Act of 2005 (FECA), Pub.

L. No. 109-9 § 103, 119 Stat. 218, 220-21 (2005). Cases predating these

statutes should not necessarily be relied upon for delineating the elements

of current copyright offenses, but they remain useful in interpreting the

current law's elements.

II.B.1. Existence of a Copyright

Under 17 U.S.C. § 506(a), the initial element of criminal copyright

infringement is that a valid copyright exists in the work or works in

question. While on its face this element may appear the simplest to prove,

a number of issues can add considerable complexity.

II.B.1.a. Copyrightability

Copyright law protects all “original works of authorship fixed in any

tangible medium of expression....” 17 U.S.C. § 102(a) (emphasis added).

II.B.1.a.i. Original Work Fixed in a Tangible Medium

The subject matter of copyright is defined by two requirements,

originality and fixation: a work must be an original, creative expression of

an idea or concept, and it must be recorded in tangible form. Thus

copyright law protects a novel or poem written on paper or typed in a

computer, a song recorded in a studio or written on sheet music, a

sculpture modeled in clay or bronze, or a computer program on a PC's

hard disk.

For copyright purposes, “original” has two requirements. First, the

work must have been independently created by the author, as opposed to

copied from another, previous work. A work can be original even if it

closely resembles another work, “so long as the similarity is fortuitous, not

the result of copying.” Feist v. Rural Telephone Co., 499 U.S. 340, 345-

46 (citing Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 54 (2d

Cir. 1936) (noting that identical poems created by different poets

ignorant of one another would both be original and copyrightable)). In

practice, the odds against an artist or author or musician creating a new

work identical to an existing one, without knowing of the earlier work, are

remote, and in cases involving suspiciously-similar works, where the later

artist had access or opportunity to learn of the earlier work, courts have

found the subsequent work infringing rather than original. See, e.g.,

Bright Tunes v. Harrisongs Music, 420 F. Supp. 177 (S.D.N.Y. 1976).
20 Prosecuting Intellectual Property Crimes

Second, the work must also possess “at least some minimal degree of

creativity.” Feist, 499 U.S. at 345. The amount of creativity required for

originality is extremely low; “a slight amount” of “creative spark” is all

that is necessary, “no matter how crude, humble or obvious.” Id. (citing

1 Nimmer on Copyright §§ 2.01[A], [B] (1990)). What qualifies as

“original” for copyright purposes may not be considered “original” by, for

example, those assessing the item's artistic, literary, or academic merit.

Nor should “originality” be confused with “novelty,” which is the

touchstone of patent law, not copyright. See Chapter VII of this Manual.

A work must also be “fixed,” meaning it is recorded in some tangible

medium by the author. So a song that is composed onto sheet music or

recorded to tape is fixed and thus copyrightable, but a live performance

of the song that is not recorded by the performer (or someone authorized

by the performer) would not be fixed, and thus not copyrightable,

although the performance might still enjoy protection under other laws.

See the discussion of 18 U.S.C. § 2319A in Section II.F. of this Manual.

II.B.1.a.ii. Short Phrases Are Not Copyrightable

Short single words, short phrases, and familiar symbols and designs

cannot be copyrighted. 37 C.F.R. § 202.1(a) (2004). They may, however,

be trademarked and thus protected under 18 U.S.C. § 2320; see Chapter

III of this Manual.

II.B.1.a.iii. Expression of an Idea vs. Idea Itself

An important limitation of copyright is that it protects only the

creative expression of an idea—but not the idea itself. 17 U.S.C. § 102(b)

(“In no case does copyright protection ... extend to any idea, procedure,

process, system, method of operation, concept, principle, or

discovery ....”); see also Feist, 499 U.S. at 344-45 (1991); Whelan Assoc.

v. Jaslow Dental Lab., 797 F.2d 1222 (3d Cir. 1986). Novel ideas,

methods, and processes may enjoy protection under patent or trade secret

law, but are not copyrightable. See Chapters IV and VII of this Manual.

For example, consider a new technique for modifying genes in a cell,

which is described in a magazine article. Although the article might be

copyrightable—as an original expression of the author's ideas about this

new technique—the technique itself would not. The technique might,

however, be patentable.

II.B.1.b. Copyrights vs. Registrations vs. Certificates

The notion of having a valid copyright is easily confused with the

issue of whether the work is registered with the Copyright Office, or with
II. Criminal Copyright Infringement 21

possession of a valid copyright certificate issued by the Copyright Office.

Throughout much of U.S. history, copyright protection was predicated on

certain formal requirements, such as the need to register published works

with the Copyright Office, deposit copies with the Library of Congress,

and mark copies of the work with a copyright notice. However, major

revisions to copyright law in the 1970s and 1980s now protect a

copyrightable work regardless of whether these formalities have been

observed. See La Resolana Architects, PA v. Clay Realtors Angel Fire, 416

F.3d 1195, 1198-1205 (10th Cir. 2005). For a work created on or after

January 1, 1978, copyright subsists from the moment an original work of

authorship is created by “fix[ing it] in any tangible medium of

expression.” 17 U.S.C. § 102(a); see also id. § 302(a). That is, a work is

copyrighted the moment it is created, regardless of whether it has been

registered or bears a copyright notice.

A copyright is the author's legal entitlement to the exclusive rights

granted under 17 U.S.C. § 106. Neither a copyright registration nor a

registration certificate is equivalent to a copyright. A registration

certificate signifies the Copyright Office's decision to register the work,

which is a limited administrative decision that the work is copyrightable

and that the application is proper. See 17 U.S.C. § 408(a). That decision

to register and the certificate of registration can, however, have legal

significance at trial. See Sections II.B.1.d.-e. of this Chapter.

II.B.1.c. New Procedure for “Preregistration”

The Family Entertainment and Copyright Act of 2005 created a new

procedure, known as “preregistration,” intended to address some problems

with works that are pirated before their lawful publication or official

release by the copyright owner. See Pub. L. No. 109-9 § 104, 119 Stat.

218, 221-22 (Apr. 27, 2005); 17 U.S.C. §§ 408(f) (setting forth basic

rules for preregistration), 411(a) (preregistration or registration necessary

to institute infringement action in most cases); 37 C.F.R. § 202.16

(Copyright Office rules for preregistration); see also Copyright Office

Preregistration web page, available at http://www.copyright.gov/prereg/.

Preregistration is available for certain types of work judged by the

Copyright Office to be especially vulnerable to piracy before their lawful

release or publication. See 37 C.F.R. § 202.16. These include movies,

musical compositions and sound recordings, computer software and video

games, literary works, and “advertising and marketing photographs.” Id.

A copyright owner can preregister these types of works if they are

unpublished, but “being prepared for commercial distribution,” meaning

that the copyright owner has a reasonable expectation that the work will

be commercially distributed to the public, and the work, if not finished,
22 Prosecuting Intellectual Property Crimes

has at least been commenced. Id. § 202.16(b)(2). Upon submission of an

application and fee, the Copyright Office will undertake a limited review

of the work, and if approved, it will preregister the work and issue a

certificate, much as in the case of copyright registration. Id. § 202.16(c).

But preregistration is not a complete substitute for registration.

Although preregistration allows an “action for infringement” to be

“instituted” under 17 U.S.C. § 411(a), preregistration, unlike registration,

involves only a cursory review by the Copyright Office and consequently

preregistration will not serve as prima facie evidence of the validity or

ownership of a copyright. 37 C.F.R. § 202.16(c)(6), (7), (13). See

Sections II.B.1.d.-e. of this Chapter.

II.B.1.d. Whether Registration or Preregistration is Required

to Prosecute

Section 411 of Title 17 provides that “no action for infringement of

the copyright of any United States work shall be instituted until

preregistration or registration of the copyright claim has been made in

accordance with this title.” Because either registration or the

“preregistration” process satisfies § 411(a), the term “registration” is used

below to refer to both registration and preregistration, except as otherwise

noted. The term “pre-registration,” including a hyphen, is used to refer to

events occurring before registration. Also, § 411 applies only to “United

States works,” meaning works first published domestically, or works

created by U.S. nationals or “habitual residents.” See 17 U.S.C. §§ 101,

411(a). Thus, registration is not required for civil or criminal cases

involving foreign works.

The Department contends that the registration/preregistration

requirement in § 411 applies only to civil lawsuits, not criminal

prosecutions. Section 411 refers only to “actions,” a term used elsewhere

in the Copyright Act to refer to civil actions, not criminal prosecutions.

See, e.g., 17 U.S.C. § 507 (using the term “civil action” in contrast to the

term “criminal proceedings”) and does not explicitly refer to criminal

prosecutions. Cf. United States v. Cleveland, 281 F. 249, 253 (S.D. Ala.

1922) (holding statutory provision governing “action” not applicable to

criminal case because “action” is not ordinarily used to describe criminal

prosecution). But see United States v. Backer, 134 F.2d 533, 535-36 (2d

Cir. 1943) (interpreting substantially identical language in the 1909

Copyright Act to require registration as a precondition to any action for

infringement, whether civil or criminal because “action” includes both

criminal and civil actions in other contexts); 4 Nimmer on Copyright

§ 15.01[A][2](citing Backer); see also Mason v. United States, 1 F.2d 279
II. Criminal Copyright Infringement 23

(7th Cir. 1924) (non-copyright case); Singleton v. United States, 290 F.

130 (4th Cir. 1923) (non-copyright case).

The criminal copyright provisions are silent on the issue of

registration. Section 507 of Title 17, which sets forth the statutes of

limitation for both criminal and civil cases, is entitled “Limitations on

Actions,” although § 507(a) refers to “Criminal Proceedings,” not

“actions.” 

The Department's position is supported by legislative history and

dicta from the Supreme Court. Although the Copyright Act's legislative

history is largely silent on the question, the Senate Judiciary Committee

observed in 1988 that “registration is not a statutory precondition for

criminal enforcement of copyright.” S. Rep. No. 100-352 (1988),

reprinted in 1988 U.S.C.C.A.N. 3706, 3743 (emphasis added). Although

this isolated legislative statement came long after the registration

requirement was first imposed, the legislative history appears to contain

no other statements that are directly contrary. Instead, other legislative

statements are at best inconclusive. See, e.g., 151 Cong. Rec. S450-01,

494 (daily ed. Jan. 25, 2005) (statement of Sen. Hatch) (stating that the

Family Entertainment and Copyright Act “will create a pre-registration

system that will permit criminal penalties and statutory-damage awards

[and] also provide a tool for law enforcement officials.”) Moreover, that

registration is not required for criminal prosecution seems to be the

position of at least some past members of the Supreme Court. See Sony

Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 493 n.44

(1984) (Blackmun, J., dissenting on other grounds; Powell, J., Marshall,

J., and Rehnquist, J. joining).

The Department's position is also supported by public policy.

Admittedly, requiring registration before a civil suit encourages authors to

register their works. But that incentive is attenuated in criminal cases

because prosecutions are brought by the government, which has no power

to register works on behalf of authors. See 17 U.S.C. §§ 106, 408.

Moreover, criminal copyright prosecutions protect the public interest in

preventing infringement. And infringement of an unregistered copyrighted

work is infringement nonetheless. See 17 U.S.C. § 408(a) (“[R]egistration

is not a condition of copyright protection.”); id. § 501 (“Anyone who

violates any of the exclusive rights of the copyright owner ... is an infringer

of copyright”); id. § 506(a)(1) (“Any person who willfully infringes a

copyright shall be punished ....”) (emphasis added). Making registration

a prerequisite to criminal prosecution could impede criminal prosecution

for the public benefit due to a victim's delay or neglect in completing a

ministerial task intended primarily to promote administrative efficiency.
24 Prosecuting Intellectual Property Crimes

Cf. Nadel & Sons Toy Corp. v. William Shaland Corp., 657 F. Supp. 133,

136 (S.D.N.Y. 1987) (“Registration of a copyright is essentially

ministerial in nature ....”) (citation omitted); Douglas Y'Barbo, On Section

411 of the Copyright Code and Determining the Proper Scope of a

Copyright Registration, 34 San Diego L. Rev. 343, 353 (1997) (“The

purpose of section 411(a) is essentially to facilitate judicial resolution of

the ownership issue ....”).

As a practical matter, however, the Department generally recommends

that prosecutors introduce certificates of registration at trial. Certificates

of registration are the simplest way to prove a copyright's validity and

ownership. Even assuming registration is not required, without it

prosecutors will have to prove these elements “from scratch” through

testimony and other evidence. See Section II.B.1.e. of this Chapter.

Prosecutors should therefore ensure, to the extent possible, that any

copyrights on which a prosecution is sought are registered or

“preregistered” before the prosecution is commenced. If registration is

needed for pending litigation, it can often be expedited for completion

within a week. See U.S. Copyright Office, Information Circular 10,

“Special Handling,” available at http://www.copyright.gov/circs/

circ10.html.

This is not to say, however, that copyright registrations are needed

earlier than trial. The government can obtain search warrants, grand jury

subpoenas, and even indictments before it has certificates of registration

in hand, if only because search warrants and grand jury proceedings are

based on findings of probable cause.

Although a lack of registration (which may be a mere oversight, or a

conscious choice to delay registration until a work is ready for

publication) should not bar a criminal prosecution, the circumstances

surrounding the absence of registration may militate against the choice to

prosecute. A copyright-holder's refusal to register his copyright even when

necessary for trial may indicate—or be interpreted—as the victim's intent

to allow others to copy the work. The Copyright Office's refusal to register

a work may indicate a weak claim of copyrightability or ownership.

If a court requires registration as a prerequisite to a criminal

prosecution for infringement, a number of other questions arise, which are

discussed below.
II. Criminal Copyright Infringement 25

II.B.1.d.i. Liability for Infringement Committed Prior to

Registration

If a court requires registration, one question prosecutors may face is

whether criminal charges may be based on infringement committed prior

to registration. While Title 17 clearly allows for civil infringement actions

(and recovery of damages) based on pre-registration infringement, and

nothing in the statute indicates a contrary intent with respect to criminal

prosecutions, in the only reported criminal case on point a district court

held that a criminal copyright prosecution cannot be based on preregistration infringement. See United States v. Gallo, 599 F. Supp. 241,

245 n.1 (W.D.N.Y. 1984) (holding, however, that “[e]vidence as to

activities involving PENGO before the registration date could perhaps be

relevant to other matters, but not to show copyright infringement or

wrongful distribution of PENGO”). The Gallo court assumed that “there

can be no infringement” until the work in question has been registered—a

conclusion that was almost certainly wrong. See Montogomery v. Noa,

168 F.3d 1282, 1288 (11th Cir. 1999) (noting that “after 1977, copyright

automatically inheres in the work at the moment it is created without

regard to whether it is ever registered”); 17 U.S.C. § 302 (1988)

(providing copyright protection at the time the work is created); 17

U.S.C. §§ 411-412 (providing registration as prerequisite to initiation of

lawsuit and certain types of damages); 2 Nimmer on Copyright

§ 7.16[A][1]; 4 Nimmer on Copyright § 15.01[A][2], at 15-4 & n.24

(characterizing Gallo as “erroneously assuming that registration is a

condition precedent to obtaining copyright rather than to bringing an

infringement action”). Moreover, the Gallo court's ruling contrasts sharply

with well-settled civil precedents holding that an infringement action may

be based on conduct that predates the victim's copyright registration. See,

e.g., Chuck Blore & Don Richman Inc. v. 20/20 Advertising Inc., 674 F.

Supp. 671 (D. Minn. 1987); 2 Nimmer on Copyright § 7.16[B][1][a], at

7-153; Washingtonian Pub. Co. v. Pearson, 306 U.S. 30, 39 (1939).

Given the Gallo's court's confusing statement, the lack of other

relevant criminal case law, and the general principle of applying civil

copyright law in criminal copyright cases, the authorities cited above

support the Department's position that even if a court requires

registration as a prerequisite to prosecution, defendants can still be held

criminally liable for pre-registration acts of infringement.

II.B.1.d.ii. Unpublished or Pre-Release Works

Infringement before registration often involves infringement before

lawful publication. Cf. Salinger v. Random House, Inc., 811 F.2d 90 (2d
26 Prosecuting Intellectual Property Crimes

Cir. 1987) (biographer included plaintiff's unregistered and unpublished

letters in biography of plaintiff, after which plaintiff registered letters and

sued). A typical case for prosecutors might involve pre-release piracy,

where the defendant obtains and distributes on the Internet a copy of a

new movie before it has been released in theaters, or a new video game

before it has been legitimately distributed to the public. See, e.g., United

States v. Gonzalez (S.D.N.Y. 2004) (criminal conviction for posting

advance copy of movie “The Hulk” on the Internet) (press release

available at http://www.usdoj.gov/criminal/cybercrime/gonzalezPlea.htm).

Although an unpublished work is protected by copyright, a plaintiff

in a civil case may not recover attorneys fees or statutory damages for

“any infringement of copyright in an unpublished work commenced

before the effective date of its registration.” 17 U.S.C. § 412(1). Given

that civil penalties are limited in such cases, a criminal defendant might

argue that criminal penalties for infringement of an unpublished work

before registration should similarly be foreclosed. To date, no court

appears to have addressed such an argument.

The preregistration procedure available under the Family

Entertainment and Copyright Act was designed to address the piracy of

certain types of unpublished works, but unfortunately does not resolve

whether registration or preregistration of unpublished works is a

prerequisite to criminal prosecution for infringement of such works.

Nevertheless, the preregistration procedures provides a relatively quick

and simple way for a copyright-holder in an unpublished work to satisfy

17 U.S.C. § 411(a). Therefore, prosecutors handling a case involving

infringement of unpublished and unregistered works should consider

whether preregistration is an option.

II.B.1.d.iii. Registration of Particular Versions of a Work

Should a court hold that registration is a prerequisite to criminal

prosecution, the question might arise whether the registration of one

version of a work satisfied § 411 if the infringement involved a different,

unregistered edition of the work. For instance, computer software is

frequently revised and republished in new versions, some registered, some

not. If the victim registered version 1.0 but not version 1.5, can the

government still pursue a criminal case for infringement of version 1.5?

Or, if the circumstances are reversed and the victim registered version 1.5

but not 1.0, can a case be brought for infringement of version 1.0?

Although there is no reported criminal case law on the issue, civil

authority suggests that registering a different version of a work will often

satisfy § 411. This is especially true if a later version was registered, but
II. Criminal Copyright Infringement 27

earlier versions had not, which is sometimes referred to as a “backwardlooking” registration. In those cases, courts generally have allowed a case

to proceed based on infringement of the earlier (though unregistered)

version. See Murray Hill Publ'ns v. ABC Commc'ns, 264 F.3d 622, 650

(6th Cir. 2001); Streetwise Maps v. VanDam, Inc., 159 F.3d 739, 747

(2d Cir. 1998).

On the other hand, if an early version had been registered, but

subsequent versions were not (“forward-looking” registration), courts have

been less consistent about whether to allow claims for infringement of the

later, unregistered versions. Compare Montgomery v. Noga, 168 F.3d

1282, 1292-93 & n.17 (11th Cir. 1999); Liu v. Price Waterhouse LLP,

182 F. Supp. 2d 666, 675 (N.D. Ill. 2001) (“No registration is necessary

for a derivative work, so long as the underlying original work is

registered”); Central Point Software, Inc. v. Nugent, 903 F. Supp. 1057,

1060 & n.5 (E.D. Tex. 1995) (allowing infringement claim where

plaintiffs registered copyrights in earlier versions of software and

defendants copied subsequent versions derived from registered works);

and Video Pipeline v. Buena Vista Home Entertainment, 275 F. Supp. 2d

543, 556 (D.N.J. 2003) (holding court had jurisdiction over infringement

counterclaim where infringement of unregistered derivative work also

infringed element of original, registered work) with Johnson v. Gordon,

409 F.3d 12, 20 (1st Cir. 2005) (holding claims based on “new elements”

present in later, unregistered, “long version” of song could not proceed);

Well-Made Toy Mfg. Corp. v. Goffa, 354 F.3d 112 (2d Cir. 2003)

(holding registration for earlier, 20“ version of doll did not grant

jurisdiction for claim of infringement of later, 48” version).

If there is a consistent rule for “forward-looking” registration cases, it

appears to be that courts will likely allow an action for infringement of a

later, unregistered work that incorporates significant portions of an earlier,

registered work if the same entity owns both copyrights and the defendant

infringed elements that were present in the old registered version as well

as the newer one. See 2 Nimmer on Copyright § 7.16[B][2]; see also

Montgomery, 168 F.2d at 1292.

II.B.1.e. Proof of Copyright at Trial

At trial, the government typically proves the existence of a valid

copyright by introducing a certificate of registration. The certificate's

probative value depends on whether the work was registered earlier or

later than five years after the work was published. A certificate of

registration “made before or within five years after first publication of the

work shall constitute prima facie evidence of the validity of the
28 Prosecuting Intellectual Property Crimes

copyright.” 17 U.S.C. § 410(c) (emphasis added); see also United States

v. Taxe, 540 F.2d 961, 966 (9th Cir. 1976); United States v. Moore, 604

F.2d 1228, 1234 (9th Cir. 1979). Once the certificate of registration is

introduced by the government and accepted as authentic by the court, the

burden shifts to the defendant to prove that the copyright is not valid or

that the registration was obtained fraudulently, see, e.g., Autoskill, Inc. v.

National Educ. Support Sys., Inc., 994 F.2d 1476, 1487 (10th Cir. 1993),

after which the prosecutor may rebut with evidence showing that the

certificate is genuine, the registration was properly obtained, or otherwise

that the copyright is valid. If the work was registered more than five years

after its first publication, the certificate's probative value is left to the

court's discretion. See 17 U.S.C. § 410(c); Religious Tech. Ctr. v. Netcom

On-Line Comm. Servs., Inc., 923 F. Supp. 1231, 1241 (N.D. Cal. 1995);

Koontz v. Jaffarian, 617 F. Supp. 1108, 1111-12 (E.D. Va. 1985), aff'd,

787 F.2d 906 (4th Cir. 1986).

Certificates of registration should be obtained from the victim. The

Copyright Office has an online database of certifications and can provide

certified copies. See http://www.copyright.gov/records/; U.S. Copyright

Office, Information Circular No. 6, “Obtaining Access to and Copies of

Copyright Office Records and Deposits,” available at

http://www.copyright.gov/circs/circ6.html. But copyright owners may be

able to respond faster, since they should have retained their registration

certificates in the ordinary course of their business. 

Although producing a copyright certificate is the preferred method of

proving validity and ownership of a valid copyright, it is not the only way

to do so. The parties can stipulate to the copyrights' validity. E.g., United

States v. Sherman, 576 F.2d 292, 296 (10th Cir. 1978). Courts may also

take judicial notice of a work's copyright registration. Island Software and

Computer Service, Inc. v. Microsoft Corp., 413 F.3d 257, 261 (2d Cir.

2005). See also United States v. Hux, 940 F.2d 314, 318 (8th Cir. 1991)

(allowing introduction of copyright certificates the morning of trial, but

noting other evidence previously given to defense provided ample basis for

plaintiff to establish, and defendant to challenge, existence of copyright),

overruled on other grounds by United States v. Davis, 978 F.2d 415 (8th

Cir. 1992); La Resolana Architects, PA v. Clay Realtors Angel Fire, 416

F.3d 1195, 1208 (10th Cir. 2005); see also United States v. Backer, 134

F.2d 533, 535-36 (2d Cir. 1943) (allowing civil proceeding where

Copyright Office had provided plaintiff with certificate due to error;

technical irregularities in the registration process should not invalidate an

otherwise proper registration). For instance, the government could

introduce testimony regarding the copyright owner's creation and fixation
II. Criminal Copyright Infringement 29

of the work, evidence that the work is original, and that it was not a work

for hire created for someone else.

II.B.1.f. Copyright Notice

Prosecutors should confirm that the copyright in any work did not

lapse for failure to include a copyright notice when the work was first

published. The effect of publishing a copyrighted work without a

copyright notice depends on whether the work was first published before

or after March 1, 1989. For works published on or after March 1, 1989,

their publication without a copyright notice is of no moment. See Berne

Convention Implementation Act of 1988 (“BCIA”), Pub. L. No. 100-568,

102 Stat. 2853 (enacted October 31, 1988). For works published before

March 1, 1989, however, initial publication without a copyright notice

would have extinguished their copyright and consigned them to the public

domain. See 17 U.S.C. §§ 10, 19 et seq. (1909 Act); 17 U.S.C.

§ 405(a)(2) (1976 Act). Their loss of copyright protection would persist

to the present day, and thus preclude criminal prosecution for their

infringement today. See 2 Nimmer on Copyright §§ 7.02[C][1]-[3], at 7-

16 to 7-17.

As noted in the following Section, copyright notice on an infringed

work may be useful in proving a defendant's willfulness.

II.B.2. The Defendant Acted “Willfully”

II.B.2.a. Legal Standard

To establish criminal intent, the government must prove that the

defendant infringed the copyright willfully. See 17 U.S.C. § 506(a) (“Any

person who willfully infringes a copyright shall be punished ....”)

(emphasis added). “[E]vidence of reproduction or distribution of a

copyrighted work, by itself, shall not be sufficient to establish willful

infringement.” 17 U.S.C. § 506(a)(2). This was intended to require proof

of more than general intent and to ensure that, for instance, “an educator

who in good faith believes that he or she is engaging in a fair use of

copyrighted material could not be prosecuted under the bill.” 143 Cong.

Rec. 26,420-21 (1997).

The Supreme Court has recognized that “willful ... is a word of many

meanings, its construction often being influenced by its context.” Spies v.

United States, 317 U.S. 492, 497 (1943). This was reflected in

Congressional debate over the NET Act amendments to the Copyright

Act. Senator Hatch, the Chairman of the Senate Judiciary Committee,

advocated that in copyright crimes “'willful' ought to mean the intent to
30 Prosecuting Intellectual Property Crimes

violate a known legal duty,” 143 Cong. Rec. 26,420 (1997), because a

lower mens rea could cause “the net” of criminal sanctions “[to] be cast

too widely.” Id. Senator Hatch cited several cases in which the Supreme

Court had construed “willfulness” in this fashion when the substantive

law was complex, such as Cheek v. United States, 498 U.S. 192 (1991),

in which the Court held that the general principle that “ignorance of the

law or a mistake of law is no defense to criminal prosecution,” must yield

given the complexity of federal criminal tax statutes. In other words, the

defendant's good-faith misunderstanding of the legal duties imposed on

him by the tax laws would negate a finding of willfulness. Id. at 199. This

reasoning has been applied in other contexts as well. E.g., Ratzlaf v.

United States, 510 U.S. 135 (1994) (failure to report cash transactions

in excess of $10,000).

A lower standard for “willfulness” was advanced by Representatives

Goodlatte and Coble, who introduced and sponsored the bill in the

House. They rejected the notion that defendant must be familiar with the

copyright code and what constitutes infringement. Rather than require

“knowledge” of a legal duty not to infringe, they interpreted willfulness to

require only that a defendant have “reckless disregard” for copyrights:

The Government should not be required to prove that the defendant

was familiar with the criminal copyright statute or violated it

intentionally. Particularly in cases of clear infringement, the

willfulness standard should be satisfied if there is adequate proof that

the defendant acted with reckless disregard of the rights of the

copyright holder. In such circumstances, a proclaimed ignorance of

the law should not allow the infringer to escape conviction. 

143 Cong. Rec. 24,325 (1997).

Aside from clarifying that evidence of infringement, by itself, does not

prove willfulness, see supra, Congress has left the term's definition to the

courts. See 143 Cong. Rec. 26,422 (remarks of Sen. Leahy) (“This

clarification does not change the current interpretation of the word

'willful' as developed by case law and as applied by [the Department of

Justice], nor does it change the definition of 'willful' as it is used elsewhere

in the Copyright Act.”); H.R. Rep. No. 102-997, at 4-5, reprinted in 1992

U.S.C.C.A.N. 3569, 3572-73 (discussion of Copyright Felony Act, Pub.

L. No. 102-561, 106 Stat. 4233 (1992)).

Most courts that have interpreted “willfulness” in criminal copyright

cases have adopted the more stringent standard advocated by Senator

Hatch: the intentional violation of a known legal duty. See 4 Nimmer on

Copyright § 15.01[A][2], at 15-6 to 15-7; United States v. Cross, 816
II. Criminal Copyright Infringement 31

F.2d 297, 300-01 (7th Cir. 1987) (approving without comment a jury

instruction that an act is willful when it is committed “voluntarily, with

knowledge that it was prohibited by law, and with the purpose of violating

the law, and not by mistake, accident or in good faith,” and affirming

conviction because the record amply demonstrated that the defendant

“knowingly and voluntarily violated the copyright laws”); United States

v. Moran, 757 F. Supp. 1046, 1049 (D. Neb. 1991) (holding that willful

infringement means a “'voluntary, intentional violation of a known legal

duty'”) (quoting Cheek v. United States, 498 U.S. 192, 200 (1991)); see

also United States v. Sherman, 576 F.2d 292, 297 (10th Cir. 1978)

(upholding jury's verdict because jury “apparently either disbelieved the

genuineness of this contract [which defendants claimed had licensed their

conduct], or believed that defendants were not innocent of knowledge

that the tapes provided were copies from the original artists' records”, and

noting that “willfulness” required proof of specific intent, but without

clarifying whether that required proof that the defendants knew their

conduct was unlawful, or merely knowledge that they were selling copies).

Cf. United States v. Heilman, 614 F.2d 1133, 1138 (7th Cir. 1980)

(holding that the government had proved willfulness because the

defendant “chose to persist in conduct which he knew had 'a high

likelihood of being held by a court of competent jurisdiction to be a

violation of a criminal statute'”) (quoting trial court).

A minority of courts in criminal copyright cases have apparently

applied “willfulness” to set a lower bar for prosecution. United States v.

Backer, 134 F.2d 533, 535 (2d Cir. 1943) is frequently cited as applying

the lower standard, that of merely having the intent to carry out the

activities of infringement without knowledge that they constituted

infringement. In that case, the defendant had arranged for a manufacturer

to duplicate a copyrighted figurine as closely as possible without, in the

defendant's words, “copyright trouble.” Id. at 535. The Second Circuit

found the evidence sufficient to support willful infringement, noting there

could not “be any fair doubt that the appellant deliberately had the copies

made and deliberately sold them for profit.” Id. Some commentators have

characterized Backer as representing a circuit split. E.g., 4 Nimmer on

Copyright § 15.01[A][2] at 15-6; Mary Jane Saunders, Criminal

Copyright Infringement and the Copyright Felony Act, 71 Denv. U. L.

Rev. 671, 688 (1994); Sylvia N. Albert et al., Intellectual Property

Crimes, 42 Am. Crim. L. Rev. 631, 656-57 (2005).

It is not clear, however, that Backer represents a circuit split. The case

can also be read as holding the defendant's mention of “copyright trouble”

to be sufficient evidence of his knowledge of a legal duty not to infringe.

Moreover, more recent civil copyright cases suggest that the Second
32 Prosecuting Intellectual Property Crimes

Circuit interprets willfulness to require either actual knowledge that the

infringement violated the law, or perhaps “constructive knowledge” shown

by reckless disregard for whether the conduct violated copyright. Twin

Peaks Prods., Inc. v. Publ'ns Int'l, Ltd., 996 F.2d 1366, 1382 (2d Cir.

1993) (holding standard for willfulness to be “whether the defendant had

knowledge that its conduct represented infringement or perhaps recklessly

disregarded the possibility”); Fitzgerald Publ'g Co. v. Baylor Publ'g Co.,

807 F.2d 1110, 1115 (2d Cir. 1986) (same); Lydia Pallas Loren,

Digitization, Commodification, Criminalization: The Evolution of

Criminal Copyright Infringement and The Importance of the Willfulness

Requirement, 77 Wash. U. L.Q. 835, 879 (1999) (arguing that the

Second Circuit is actually not in disagreement with other circuits). This

approach is consistent the Seventh Circuit's ruling in United States v.

Heilman, a criminal copyright case holding that the government proved

willfulness because the defendant “chose to persist in conduct which he

knew had a high likelihood of being held by a court of competent

jurisdiction to be a violation of a criminal statute.” 614 F.2d at 1138

(citation and internal quotation marks omitted); see also 2 Paul

Goldstein, Copyright § 11.4.1, at 11:51-11:52 (2d ed. Supp. 1999)

(stating that the government must “prove that the defendant knew that

his acts constituted copyright infringement or, at least, knew that there

was a high probability that his acts constituted copyright infringement.”).

The majority rule in criminal copyright cases for a higher standard of

willfulness is also consistent with civil copyright cases, which likewise hold

that willfulness is not just an intent to copy, but rather an intent to

infringe. 4 Nimmer on Copyright § 14.04[B][3][a]; e.g., Twin Peaks

Prods., Inc., 996 F.2d at 1382; Danjaq, L.L.C. v. Sony Corp., 263 F.3d

942, 959 (9th Cir. 2001); RSO Records, Inc. v. Peri, 596 F. Supp. 849,

859 (S.D.N.Y. 1984) (holding, in civil action, that defendant's earlier

guilty plea to two counts of criminal copyright infringement sufficed to

show he knew similar conduct was unlawful). The issue arises in civil cases

when plaintiffs attempt to recover increased statutory damages, which are

available only for willful infringement. 17 U.S.C. § 504(c). Congress's use

of the term “willfulness” in closely proximate sections 504 and 506 of the

Copyright Act suggests that the term should be interpreted similarly in

both criminal and civil cases.

Given that willfulness requires an intent to infringe, or at least

constructive knowledge of infringement plus a reckless disregard of the

victim's rights, a finding of willfulness may be precluded if the defendant

acted with a good-faith belief that he was not infringing. See Section

II.B.2.b. of this Chapter.
II. Criminal Copyright Infringement 33

II.B.2.b. Proof at Trial

“Willfulness is rarely provable by direct evidence, and most often can

be proven only by inference from the evidence introduced.” United States

v. Sherman, 576 F.2d at 297. Certain types of evidence in criminal

copyright cases have been found particularly relevant to determine the

defendant's intent:

• The defendant's acknowledgment that his or her conduct was

improper. See United States v. Manzer, 69 F.3d 222, 227-28 (8th

Cir. 1995) (defendant's admission in a published interview that

selling or giving away copyrighted computer chips was illegal, and

software program and packaging bore copyright notice); United

States v. Drebin, 557 F.2d 1316, 1324 (9th Cir. 1977)

(defendant's warning customers of FBI investigation and

recommending that customers “really be careful”); United States

v. Hux, 940 F.2d 314, 319 (8th Cir. 1991) (defendant's

admission to FBI that he knew modifying copyrighted

descrambler chips was infringement), overruled on other grounds

by United States v. Davis, 978 F.2d 415 (8th Cir. 1992); United

States v. Taxe, 540 F.2d 961, 968-69 (9th Cir. 1976)

(defendant's solicitation of attorney to lie about legality of tapes).

• Actual notice to the defendant that his own conduct was illegal.

See United States v. Cross, 816 F.2d 297, 300-01 (7th Cir. 1987)

(defendant's sale of pirated videotapes after FBI agents told him

that selling and renting unauthorized tapes was illegal).

• Notice to the defendant that another person's similar conduct

constituted infringement. See United States v. Heilman, 614 F.2d

1133, 1138 (7th Cir. 1980) (defendant's awareness that

government was prosecuting individuals engaged in conduct

similar to his own and that conduct had been ruled illegal by four

federal and three state courts).

• The defendant's past manufacture and distribution of pirated

works. See United States v. Whetzel, 589 F.2d 707, 712 (D.C.

Cir. 1978), abrogated on other grounds, Dowling v. United

States, 473 U.S. 207 (1985).

• The defendant's statement to Postal Service employee that others

were selling illegal DVDs in the area. United States v. Draper,

No. 7-05 CR 0004, 2005 WL 2746665, at *2 (W.D. Va. 2005).

• The defendant's frivolous or bad-faith claim of compliance with

copyright laws, which demonstrates a knowledge of copyright
34 Prosecuting Intellectual Property Crimes

laws. Cf. United States v. Gardner, 860 F.2d 1391, 1396 (7th

Cir. 1988) (holding that when seller of “black boxes” for receiving

unauthorized cable TV gave buyers a “Notice of Warning” that

disclaimed liability for illegal uses, it was “establish[ed] that he

was well aware that his actions were unlawful”).

Conversely, other factors may be relevant to finding an absence of

“willfulness”:

• Evidence of the defendant's good-faith belief that his conduct was

lawful, coupled with rational attempts to comply with the

copyright law as supposedly understood by the defendant.

Compare United States v. Moran, 757 F. Supp. 1046, 1051-53

(D. Neb. 1991) (court in bench trial finding police officer who

operated a “mom-and-pop” video rental business not guilty,

because he made single copies of lawfully purchased videos and

rented the copies only to prevent vandalism of original tapes, and

because his activities were “conducted in such a way as not to

maximize profits, which one assumes would have been his

purpose if he had acted willfully”) with United States v. Sherman,

576 F.2d 292, 297 (10th Cir. 1978) (affirming conviction of

defendants who claimed a good-faith belief that pirated tapes

they manufactured and sold were “sound-a-likes,” and thus

noninfringing). See also Danjaq, L.L.C. v. Sony Corp., 263 F.3d

942, 959 (9th Cir. 2001) (stating that one who has been notified

that his conduct constitutes copyright infringement, but who

reasonably and in good faith believes the contrary, has not acted

willfully)(citing 4 Nimmer on Copyright § 14.04).

• Acting pursuant to legal counsel, even if the advice was erroneous,

if the defendant disclosed all relevant circumstances to his

attorney and followed the attorney's advice in good faith. See 4

Nimmer on Copyright § 14.04[B][3][a]; David M. Nissman,

Proving Federal Crimes §§ 27.07-.08 (Corpus Juris Publishing

2004).

Possible alternative charges that require lower mens rea standards are

discussed in Section II.F. of this Chapter.

II.B.3. Infringement of the Copyright

The next element is that the defendant infringed a copyright. See 17

U.S.C. § 506(a). “Infringement” refers to the violation of one or more of

the exclusive rights granted to a copyright owner at 17 U.S.C. § 106.

Infringement is implicitly defined in 17 U.S.C. § 501(a):
II. Criminal Copyright Infringement 35

Anyone who violates any of the exclusive rights of the copyright

owner as provided by [17 U.S.C. §§ 106-122] or of the author as

provided by [17 U.S.C. § 106A], or who imports copies or

phonorecords into the United States in violation of [17 U.S.C.

§ 602], is an infringer of the copyright.

Consequently, infringement may include more than violation of the

rights enumerated in § 106 (and also include violations of the rights to

exclude imports under § 602, or the rights of certain authors to

attribution and integrity defined in § 106A), and at the same time, may

not extend to all violations of the rights in § 106 (because the rights

enumerated in § 106 are “subject to [the limitations of] §§ 107 through

122”). See § 106. For purposes of criminal enforcement, the relevant

types of infringement are those enumerated in § 106. (An author's rights

to attribution and integrity under § 106A(a) are not enforceable

criminally. See 18 U.S.C. § 506(f).)

Section 106 of Title 17 sets out the copyright owner's exclusive rights.

These rights consist of the rights “to do and to authorize” the following:

• to reproduce a work in copies or phonorecords, § 106(1)

• to prepare derivative works, § 106(2)

• to distribute copies or phonorecords of the work to the public,

§ 106(3)

• to perform the work publicly (for certain types of works),

§ 106(4), (6)

• to display a work publicly (for certain types of works), § 106(5)

Sections 107 through 122 limit these rights, the most notable

limitations being, for criminal enforcement purposes, the public's right to

fair use, the first sale doctrine, limitations on rental of software and

musical sound recordings, and exceptions for installing and backing up

software, all of which are discussed in detail in Section II.C. of this

Chapter.

Felony penalties apply only to infringement of the reproduction or

distribution rights. See 17 U.S.C. § 506(a). Specifically, felony penalties

apply only if the infringement involved either “reproduction and

distribution” of a minimum number and value of works, see 17 U.S.C.

§ 506(a)(1)(A) (numbered § 506(a)(1) before the Apr. 27, 2005

amendments) and 18 U.S.C. § 2319(b)(1); 17 U.S.C. § 506(a)(1)(B)

(numbered § 506(a)(2) before the Apr. 27, 2005 amendments) and 18

U.S.C. § 2319(c)(1), or if the infringement involved “distribution of a
36 Prosecuting Intellectual Property Crimes

work being prepared for commercial distribution,” by making it available

on a publicly-accessible computer network. See 17 U.S.C. § 506(a)(1)(C)

(enacted Apr. 27, 2005), 18 U.S.C. § 2319(d)(1). See Section II.B.4.c. of

this Chapter.

Misdemeanor penalties apply to infringement by reproduction or

distribution that meet a lower numeric and monetary threshold—one or

more copies of one or more copyrighted works, having a total retail value

of more than $1,000. See 17 U.S.C. § 506(a)(1)(B), 18 U.S.C.

§ 2319(c)(3). Misdemeanor penalties also cover willful infringement of

any of the exclusive rights under § 106, if committed for commercial

advantage or private financial gain. See 17 U.S.C. § 506(a)(1)(A), 18

U.S.C. § 2319(b)(3), and the discussion in Section II.B.4. of this Chapter.

Criminal prosecutions mainly focus on reproduction and distribution,

because these are generally the most serious infringements and they incur

the most significant penalties. This is not to say, however, that the

Department would not or could not investigate and prosecute copyright

misdemeanors for a profit-motivated public performance, public display,

or derivative work.

II.B.3.a. Infringement by Reproduction or Distribution

Felony penalties are provided for willful infringement committed “by

the reproduction or distribution” of ten or more copies (or phonorecords)

of one or more copyrighted works, with a total retail value of $2,500 or

more. There are actually two separate combinations of statutory

provisions that provide felony penalties for this type of conduct.

Infringement committed with or without the purpose of commercial

advantage or private financial gain can fall under 17 U.S.C.

§ 506(a)(1)(B) (numbered § 506(a)(2) before the Apr. 27, 2005

amendments), if the willful infringement was committed “by the

reproduction or distribution, including by electronic means, during any

180-day period, of 1 or more copies or phonorecords of 1 or more

copyrighted works, which have a total retail value of more than $1000.”

For these offenses, 18 U.S.C. § 2319(c)(1) provides felony penalties “if

the offense consists of the reproduction or distribution of 10 or more

copies or phonorecords of 1 or more copyrighted works, which have a

total retail value of $2,500 or more.” The statutory maximum penalty is

3 years' imprisonment, 6 for repeat offenders. See § 2319(c).

Infringement committed for commercial advantage or private financial

gain can also fall under 17 U.S.C. § 506(a)(1)(A) (numbered § 506(a)(1)

before the Apr. 27, 2005 amendments), which is a felony if the offense
II. Criminal Copyright Infringement 37

“consists of the reproduction or distribution, including by electronic

means, during any 180-day period, of at least 10 copies or phonorecords,

of 1 or more copyrighted works, which have a total retail value of more

than $2,500.” 18 U.S.C. § 2319(b)(1).The statutory maximum penalty

is 5 years' imprisonment, 10 for repeat offenders.

There is a slight variation in language between the two provisions that

set forth a $2,500 felony threshold: 18 U.S.C. § 2319(c)(1) requires a

total retail value of “$2,500 or more,” whereas § 2319(b)(1) requires

“more than $2,500.” It is unclear whether this variation was intentional.

In addition to the felony penalties discussed in the prior paragraphs,

there are also felony penalties in 17 U.S.C. § 506(a)(1)(C) (enacted Apr.

27, 2005) for distribution over a computer network accessible by the

public. See Section II.B.3.b. of this Chapter.

The reproduction and distribution rights are set forth in 17 U.S.C.

§ 106(1) (exclusive right “to reproduce the copyrighted work in copies or

phonorecords”) and § 106(3) (exclusive right “to distribute copies or

phonorecords of the copyrighted work to the public by sale or other

transfer of ownership, or by rental, lease, or lending”).

• Definition of Copies and Phonorecords

The term “copies” is often used to refer generically to any material

object in which a copyrighted work has been fixed. However, the

Copyright Act reserves the term “copies” only for works other than sound

recordings. “Copies” are defined as “material objects, other than

phonorecords, in which a work is fixed by any method now known or later

developed, and from which the work can be perceived, reproduced, or

otherwise communicated, either directly or with the aid of a machine or

device.” 17 U.S.C. § 101. “Phonorecords are what we think of as copies

of sound recordings, and are defined as ”material objects in which sounds,

other than those accompanying a motion picture or other audiovisual

work, are fixed by any method now known or later developed, and from

which the sounds can be perceived, reproduced, or otherwise

communicated, either directly or with the aid of a machine or device.'” Id.

Thus, examples of a “phonorecord” would include an audio tape or CD,

or an MP3 file. Examples of “copies” would include a book, a painting, a

piece of sheet music, or a sculpture. A software program on disc or in a file

on a computer, or a movie on DVD or videotape, would also be “copies,”

even though these objects might also include an audio sound track.

Somewhat confusingly, the terms “copy” and “phonorecord” can also

refer to the original object in which the copyrighted work was fixed, such
38 Prosecuting Intellectual Property Crimes

as a handwritten manuscript, or original studio tapes for a sound

recording. 

• “Stealing”

Infringement is often referred to as a form of theft. For example, 18

U.S.C. § 2319 is located in a chapter of the criminal code entitled, “Stolen

Property.” Yet infringement is distinct from common-law theft, and

requires no showing that the defendant “stole” or deprived another person

of a physical copy of a work. Making additional copies of a book, movie,

or other work may constitute infringement, even if the defendant

obtained his original source for additional copies lawfully. Likewise,

although publicly distributing copies that were stolen from the copyright

owner could constitute infringement, it is not always necessary to show

that copies were “stolen” in order to show infringing distribution.

II.B.3.a.i. Reproduction

Reproduction encompasses a wide array of conduct, ranging from a

novelist's plagiarizing substantial portions of someone else's book or a

musician's sampling several notes from a previously-recorded song, to

using a computer to rip an audio track into MP3 format or making a bitfor-bit copy of a movie on DVD. In most criminal cases, infringing

reproduction involves the production of exact, or nearly-exact, duplicates

through digital means, as with computer programs and movies on DVD.

Copying need not be so blatant or literal to qualify as infringement, but

criminal cases rarely involve defendants who have copied only a small

portion of a copyrighted work. Disputes over whether one song sounds

too alike another, or whether a movie screenplay copies dialogue or

characters from an earlier screenplay, are generally best left to civil

lawsuits. Nevertheless, some cases of less-than-wholesale, verbatim

copying of an entire work may deserve criminal prosecution.

• Proof of Infringement by Reproduction

The best evidence of infringement by reproduction is direct evidence

that the defendant copied the victim's work, including (for example)

eyewitness testimony, or even computer logs indicating the copying of

particular discs or files. Typically, criminal copyright cases will involve

complete, verbatim copying of many copyrighted works, and defendants

are generally unlikely to challenge this issue credibly. In fact, defendants

often even advertise or otherwise mark the infringing copies as being

copies. However, when the copies alleged to be infringing are not

essentially identical to the original work, prosecutors may need to prove

infringement in greater depth.
II. Criminal Copyright Infringement 39

Direct evidence of copying is best, but circumstantial evidence may

suffice. The circumstantial test is whether (1) the defendant had access to

the copyrighted work and (2) that defendant's work is “substantially” or

“probatively” similar to the copyrighted material. See Taylor Corp. v. Four

Seasons Greetings, LLC, 403 F.3d 958 (8th Cir. 2005); Dam Things from

Denmark v. Russ Berrie & Co., 290 F.3d 548, 562 (3d Cir. 2002);

Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 532 (5th

Cir. 1994).

The test of “substantial” or “probative similarity” is whether,

considering the two works as a whole, including both the copyrightable

elements and the uncopyrightable ones (such as basic ideas or publicdomain expressions that are not eligible for copyright), a reasonable

person would conclude that the defendant had actually copied the work

from the original. See Positive Black Talk Inc. v. Cash Money Records,

Inc., 394 F.3d 357, 370 n.9 (5th Cir. 2004); McCulloch v. Albert E. Price,

Inc., 823 F.2d 316, 318-19 (9th Cir. 1987), disagreed with on other

grounds, Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994); Atari, Inc. v.

North American Philips Consumer Elec. Corp., 672 F.2d 607, 614 (7th

Cir. 1982). This standard focuses on the works' similarities rather than

their differences. Thus, “[i]t is enough that substantial parts [of a

copyrighted work] were lifted; no plagiarist can excuse the wrong by

showing how much of his work he did not pirate.” United States v.

O'Reilly, 794 F.2d 613, 615 (11th Cir. 1986) (affirming conviction for

infringement of copyright in video games where approximately 70% of

defendant's code was identical to copyrighted original) (quoting Sheldon

v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 56 (2d Cir. 1936) (L.

Hand, J.)).

Note that this test is designed to determine whether copying occurred,

not necessarily whether that copying constituted infringement. If the

court determines that actual copying has occurred, only then does it assess

whether the copying was substantial enough to constitute infringement.

Unfortunately, many courts also refer to this test as one of “substantial

similarity,” which can lead to confusion. See, e.g., Sid & Marty Krofft

Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1164-65

(9th Cir. 1977) (referring to the test of whether copying occurred as an

“extrinsic” test of substantial similarity, while calling the test of whether

infringement occurred, i.e., whether copyrightable elements were copied,

an “intrinsic” test of substantial similarity). To avoid this confusion, many

courts prefer to use the term “probative” similarities to show “actual

copying,” and “substantial similarity” to show “actionable copying.” See

Positive Black Talk Inc. v. Cash Money Records, Inc., 394 F.3d 357, 370

(5th Cir. 2004); Dam Things from Denmark, 290 F.3d at 562 & n. 19.
40 Prosecuting Intellectual Property Crimes

If the copyrighted work and the defendant's work are “strikingly

similar,” the first element of access may be assumed without proof (at

least in civil copyright cases), especially when the copyrighted work was

widely available. See, e.g., Playboy Enters. v. Frena, 839 F. Supp. 1552,

1556 (M.D. Fla. 1993) (holding proof of access unnecessary when

defendant made “essentially exact” copies of copyrighted photos that

appeared in nationally-circulated magazine).

In practice, the government demonstrates “substantial” or “probative”

similarity, as well as infringement, by comparing the suspect copy side-byside against an authentic original. Although it is generally better to

compare against the original maintained on file at the Register of

Copyrights, it is not absolutely necessary—an authenticated duplicate of

the original work will suffice. See O'Reilly, 794 F.2d at 615; United States

v. Shabazz, 724 F.2d 1536, 1539 (11th Cir. 1984). Victims may assist the

government with these comparisons. See Chapter X of this Manual; cf.

United States v. Sherman, 576 F.2d 292, 295 (10th Cir. 1978)

(mentioning that suspected pirated tapes were checked by record

company before search warrant issued).

• Statutory Exceptions for Reproduction

As noted above, copyright owners' rights are limited in 17 U.S.C.

§§ 107-122. Several of these provisions particularly limit the reproduction

right, including § 107 (“fair use”), § 108 (certain copying by libraries and

archives), § 115 (compulsory license for making phonorecords of musical

works), and § 117 (certain limited copying of software). See Section II.C.

of this Chapter.

II.B.3.a.ii. Distribution

Section 106(3) of Title 17 grants copyright owners the exclusive right

“to distribute copies or phonorecords of the copyrighted work to the

public by sale or other transfer of ownership, or by rental, lease, or

lending.” 17 U.S.C. § 106(3). The distribution right is implicated by a

wide variety of conduct, including the sale of books at a bookstore, used

CDs at a garage sale, and pirated DVDs at a flea market; the lending of

books by a library; and transferring pirated software to users from “warez”

websites on the Internet. Distribution is not limited to sales, but also

includes other transfers of ownership such as gifts or barter. Ford Motor

Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 299 (3d Cir. 1991)

(citing H.R. Rep. No. 94-1476, reprinted in 1976 U.S.C.C.A.N. 5659,

5675-76 and 17 U.S.C.A. § 106 (West 1997) (historical note)).
II. Criminal Copyright Infringement 41

• “To the Public”

Although often referred to merely as “distribution,” the right

protected by § 106 is the right to distribute copies or phonorecords of the

work “to the public.” § 106(3) (emphasis added). Giving a single copy of

a work to a family member or close friend may not qualify as a

“distribution” for copyright purposes, although courts have found under

some circumstances that even the giving of a single copy to one person

may constitute “distribution to the public.” Ford Motor Co., 930 F.2d at

299-300.

The Copyright Act does not expressly define “distribution” or

“public,” except through definitions of other closely-related terms. The

term “publication” is defined in § 101, and is often used interchangeably

with distribution, and courts have noted that the two terms are “for all

practical purposes synonymous.” Ford Motor Co., 930 F.2d at 299; see

also Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 552

(1985); 2 Nimmer on Copyright § 8.11[A], at 8-148 to 8-149. Section

101 also defines the term “publicly,” with respect to performances and

display of works, as referring to “place[s] open to the public or any place

where a substantial number of persons outside of a normal circle of a

family and its social acquaintances is gathered.” “Distribution” is not

limited to sales, but also includes other transfer of ownership such as gifts

or barter. Ford Motor Co., 930 F.2d at 299 citing H. Rep. 94-1476, 94th

Cong., 2d Sess. 62, reprinted in 1976 U.S. Code Cong. & Admin. News

5659, 5675-76).

For cases discussing whether distribution “to the public” in several

contexts, such as computer networks and subscription based services, see

Section II.B.3.c.ii. of this Chapter.

• Importation

Infringing articles are often manufactured overseas and then shipped

into the United States for distribution. Under 17 U.S.C. § 602,

importation of infringing copies into the United States without

permission of the copyright owner generally constitutes infringement of

the distribution right. Although § 602 specifies that unauthorized

importation is “actionable under § 501,” it does not mention criminal

actions under § 506. In cases involving importation, prosecutors may also

consider charging the defendant with bringing goods into the United

States by false statements, 18 U.S.C. § 542, or with smuggling goods, 18

U.S.C. § 545.
42 Prosecuting Intellectual Property Crimes

• Making Works Available Without Transferring Them

It is unclear whether a defendant who merely makes copyrighted

material available to others has infringed the distribution right without

any evidence of an actual transfer of infringing works. This question might

arise if a defendant on a peer-to-peer file-sharing network made

copyrighted movies, music, or software available to the public by placing

them in a shared area of his networked desktop computer, but his

computer contained no records of whether or how many times these files

were downloaded by others. If there is no evidence that the copyrighted

works the defendant “made available” were actually transferred to another

computer (or indeed, if there is evidence that no such transfers actually

occurred, despite the defendant's having made the files available), has the

defendant nevertheless infringed the distribution right in the works?

Several civil cases addressing online infringement state, or at least

suggest, that the distribution right is infringed at the point when the

defendant makes a file publicly available. See A&M Records v. Napster,

239 F.3d 1004, 1014 (9th Cir. 2001) (noting that “Napster users who

upload file names to the search index for others to copy violate plaintiffs'

distribution rights. Napster users who download files containing

copyrighted music violate plaintiffs' reproduction rights.”); Playboy

Enters. v. Chuckleberry Publ'g, Inc., 939 F. Supp. 1032, 1039 (S.D.N.Y.

1996) (uploading content on Internet and inviting users to download it

violates exclusive publication right); Playboy Enters. v. Russ Hardenburgh,

Inc., 982 F. Supp. 503, 513 (N.D. Ohio 1997) (“Defendants

disseminated unlawful copies of PEI photographs to the public by

adopting a policy in which RNE employees moved those copies to the

generally available files instead of discarding them.”); Getaped.Com, Inc.

v. Cangemi, 188 F. Supp. 2d 398, 402 (S.D.N.Y. 2002) (holding that

material on website was published when it was placed on website and

available for viewing or downloading).

A case frequently cited for the proposition that “making available”

violates the distribution right is Hotaling v. Church of Jesus Christ of

Latter-Day Saints, 118 F.3d 199, 203 (4th Cir. 1997). At issue in

Hotaling was whether a church library open to the public had distributed

the plaintiff's work by having it in its collection and listing it in its card

catalog, even though no evidence indicated that the work had actually

been borrowed or viewed by library patrons. The defendant argued that

holding the work in its collection constituted a mere offer to distribute,

at most, not an actual distribution. The court sided with the plaintiffs:

When a public library adds a work to its collection, lists the work in

its index or catalog system, and makes the work available to the
II. Criminal Copyright Infringement 43

borrowing or browsing public, it has completed all the steps necessary

for distribution to the public. At that point, members of the public

can visit the library and use the work. Were this not to be considered

distribution within the meaning of § 106(3), a copyright holder would

be prejudiced by a library that does not keep records of public use,

and the library would unjustly profit by its own omission.

Id. at 203. At least one court considering Hotaling focused on the

opinion's concern with potential prejudice from a library that kept no

records, and suggested that the same logic might apply in online cases

where no records are kept. In Arista Records, Inc. v. MP3Board, Inc., No.

00CIV.4660(SHS), 2002 WL 1997918, at *4 (S.D.N.Y. Aug. 29, 2002)

(citing Hotaling, 118 F.3d at 204), the court considered that “a copyright

holder may not be required to prove particular instances of use by the

public when the proof is impossible to produce because the infringer has

not kept records of public use,” but declined to find that an actual

distribution had occurred based on the facts before it (in which

investigators for the record industry had determined that hyperlinks on

the defendant's website pointed to infringing audio files). Id.

Only one criminal decision has addressed this question, albeit in the

context of deciding whether state court charges were preempted by federal

copyright law: “Posting software on a bulletin board where others can

access and download it is distribution ..... which is governed by the

[federal] copyright laws.” State v. Perry, 697 N.E.2d 624, 628 (Ohio

1998).

The Copyright Office states that U.S. copyright law includes a

“making available” right that covers making files available on the Internet.

See U.S. Copyright Office, DMCA Section 104 Report , at 93-95 (August

2001). This, however, does little to resolve the issue for criminal cases,

because the Copyright Office characterizes this “making available right”

as resulting from a combination of the distribution, reproduction, public

display, and public performance rights. Id. at 94. Because the felony

copyright provisions apply only to infringement of the distribution and

reproduction rights, it is unclear whether “making available” (as the

Copyright Office interprets it) can support a felony charge.

Moreover, a number of federal courts have held that no distribution

occurs unless and until an infringing copy is actually disseminated. See

Obolensky v. G.P. Putnam's Sons, 628 F. Supp. 1552, 1555 (S.D.N.Y.)

(directing verdict for defendants after jury trial because the right to

distribute is not violated “where the defendant offers to sell copyrighted

materials but does not consummate a sale” or “where there is copying, but

no sale of the material copied”), aff'd, 795 F.2d 1005 (2d Cir. 1986);
44 Prosecuting Intellectual Property Crimes

accord Paramount Pictures Corp. v. Labus, No. 89-C-797-C, 1990 WL

120642, at *4 (W.D. Wis. Mar. 23, 1990); National Car Rental Sys., Inc.

v. Computer Assocs. Int'l, Inc., 991 F.2d 426, 430 (8th Cir. 1993)

(holding that distribution requires the transfer of an actual copy, as

§ 106(3) grants the copyright owner the “exclusive right publicly to sell,

give away, rent or lend any material embodiment of his work”) (quoting

2 Nimmer on Copyright § 8.11[A], at 8-123 (emphasis added by National

Car Rental)) cf. In re: Aimster Copyright Litig., 252 F. Supp. 2d 634, 643

(N.D. Ill. 2002) (noting, without analysis, that a peer-to-peer user “with

copyrighted music files on his hard drive available for download can [once

another user searches for and locates a file on the first user's computer]

thereafter become an unauthorized distributor of that copyrighted music

as soon as another Aimster user initiates a transfer of that file.”) aff'd, 334

F.3d 693 (7th Cir. 2003) (_____ discussing point). The leading copyright

treatise also supports this view. See 2 Nimmer on Copyright § 8.11[A] at

8-149 (“Infringement of [the right to distribute] requires an actual

dissemination of either copies or phonorecords.”).

To date, the only case to squarely address “making available” in the

context of peer-to-peer networks and the new “making available” offense

in 17 U.S.C. § 506(a)(1)(C) is In re Napster, Inc. Copyright Litig., 377

F. Supp. 2d 796 (N.D. Cal. 2005). In that opinion, the court considered

the plaintiffs' motion for summary judgment on their claims that Napster

had directly infringed the plaintiffs' copyrights by creating and

maintaining an indexing system that allowed users to upload and

download infringing music files. Id. at 802. The key question was

“whether the Copyright Act requires proof of the actual dissemination of

a copy or phonorecord in order to establish the unlawful distribution of

a copyrighted work in violation of 17 U.S.C. § 160(3).” Id. The court

concluded that distribution did not include the mere offer to distribute a

copyrighted work, given the plain meaning and legislative history of the

terms “distribution” and “publication.” See id. at 803-04. The court

concluded that “to the extent Hotaling suggests that a mere offer to

distribute a copyrighted work gives rise to liability under section 106(3),

that view is contrary to the weight of [the] above-cited authorities.” Id. at

803 (citations omitted). Finally, the court rejected the argument that the

“making available” language in the new offense at 17 U.S.C.

§ 506(a)(1)(C), discussed in Section II.B.3.c.ii. of this Chapter, evinced

Congress's intent that “making available” was a type of distribution,

concluding that § 506(a)(1)(C) made willful copyright infringement and

“making available” two separate elements. Napster, 377 F. Supp. 2d at

805.
II. Criminal Copyright Infringement 45

Given this backdrop, courts deciding criminal cases would likely

require proof of actual dissemination of copies, as opposed to evidence

that the defendant merely “made [infringing works] available,” if only to

satisfy the rule of lenity. See United States v. Wiltberger, 18 U.S. 76, 95

(1820); Dowling v. United States, 473 U.S. 207, 213, 228-29 (1985)

(applying rule of lenity to construe stolen property laws narrowly in light

of copyright law). Moreover, courts might consider Congress's choice not

to punish attempts in § 506 as further evidence that distribution, in

criminal cases, requires an actual transfer of an infringing copy to the

public.

 Some of the civil cases in which proof of actual dissemination has not

been required suggest an alternative rule—that where, due to the

defendant's actions, no records exist of actual transfers, the court may

infer or presume that actual dissemination took place. See Hotaling, 118

F.3d 199; Arista Records, 2002 WL 1997918. That rule, however, might

not be adopted in criminal cases, in which infringing distribution must be

proven beyond a reasonable doubt.

As a practical matter, evidence of actual infringing transfers

strengthens other aspects of the case. Even if a theory of distribution

without dissemination were accepted by the court, a jury might

nevertheless reject it—either in sympathy toward a defendant who

ostensibly copied nothing, or by concluding that the defendant could not

have understood that his conduct constituted infringement sufficiently to

establish willful behavior. See the discussion of willfulness in Section

II.B.2. of this Chapter.

When proving that the defendant actually distributed infringing

copies, distributions to law enforcement officers or to agents working for

the victim should suffice, as a matter of law. See Gamma Audio & Video

v. Ean-Chea, No. 91-11615-2, 1992 WL 168186 at *3 n.5 (D. Mass. July

3, 1992), rev'd in part on other grounds, 11 F.3d 1106 (1st Cir. 1993);

Paramount v. Labus, 1990 WL 120642 at *5.

The government need not prove an actual dissemination if the charge

is conspiracy to violate the criminal copyright laws by means of

distribution. Conspiracy is an inchoate crime, so the government need not

prove that the underlying crime of distribution was completed.

• First Sale

Under 17 U.S.C. § 109, it is not an infringement for the owner of a

particular, lawfully-acquired copy or phonorecord of a work to sell or

otherwise dispose of that copy. This exception is often referred to as the

“first sale” doctrine. So, for example, a person who purchases a book at a
46 Prosecuting Intellectual Property Crimes

bookstore may later resell the book at a yard sale or donate it to a library,

without the copyright-holder's permission. Although first sale is treated as

a defense in civil cases, some criminal copyright cases have held that the

government must plead and prove the absence of a first sale as an element

of the offense. See Section II.C.4.c. of this Chapter.

II.B.3.b. Infringement of at Least 10 Copies of 1 or More

Copyrighted Works With a Total Retail Value Exceeding

$2,500 Within a 180-Day Period

II.B.3.b.i. Generally

The final element for felony offenses under 17 U.S.C. § 506(a)(1)(A)

and (B) (numbered § 506(a)(1),(2) before the Apr. 27, 2005

amendments) is that the infringement consisted of the “reproduction or

distribution, including by electronic means, during any 180-day period,

of at least 10 copies or phonorecords, of 1 or more copyrighted works,

which have a total retail value of more than $2,500.” 18

U.S.C. § 2319(b)(1); see also 18 U.S.C. § 2319(c)(1) (alternative felony

provision, applying when value is “$2,500 or more”). For definition of

“copies” and “phonorecords,” see Section II.B.3.a. of this Chapter

(discussing 17 U.S.C. § 101).

Congress reserved felony penalties for those who copy or distribute a

minimum of 10 copies to exclude from felony prosecution low-level

infringement such as “children making copies for friends as well as other

incidental copying of copyrighted works having a relatively low retail

value,” and also to avoid having the criminal provisions used as a “tool of

harassment” in business disputes involving issues such as reverse

engineering or the scope of licenses. H.R. Rep. No. 102-997, at 6 (1992),

reprinted in 1992 U.S.C.C.A.N. 3569, 3574.

Congress used the phrase “of one or more copyrighted works” as a

way “to permit aggregation of different works of authorship to meet the

required number of copies and retail value.” Id. Congress gave as an

example a defendant who reproduces 5 copies of a copyrighted wordprocessing computer program with a retail value of $1,300 and 5 copies

of a copyrighted spreadsheet computer program also with a retail value of

$1,300. Aggregating these reproductions “would satisfy the requirement

of reproducing 10 copies having a retail value of at least $2,500, if done

within a 180-day period.” Id.
II. Criminal Copyright Infringement 47

II.B.3.b.ii. Definition of “Retail Value” in this Context

Congress 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.” Id.

Under both the plain meaning of the statutory text and the legislative

history of the 1992 Copyright Felony Act, “retail value” in this provision

was intended to refer to the retail value of the infringed item, i.e., the

authentic item that was infringed, in the market in which it is sold. By

contrast, the sentencing guidelines use either the value of the “infringed

item” or the “infringing item” to compute the sentencing offense level,

depending on the circumstances of the crime. See the discussion of

U.S.S.G. § 2B5.3 cmt. n.2(C) in Section VIII.C.1.c.iii. of this Manual.

Determining the retail value of a pre-release work can be challenging

because pre-release works have no legitimate retail value. Congress

acknowledged the problem and offered several solutions:

At the same time, the Committee recognizes that copyrighted works

are frequently infringed before a retail value has been established, and

that in some cases, copyrighted works are not marketed through

normal retail channels. Examples include motion pictures [sic] prints

distributed only for theatrical release, and beta-test versions of

computer programs. In such cases, the courts may look to the

suggested retail price, the wholesale price, the replacement cost of the

item, or financial injury caused to the copyright owner.

H.R. Rep. No. 102-997, at 7 (1992) (emphasis added), reprinted in 1992

U.S.C.C.A.N. 3569, 3575. If the infringed item has no retail value, the

important consideration is the harm to the copyright owner, rather than

the (presumably smaller value of) profits to the infringer. See id., 1992

U.S.C.C.A.N. at 3574-75 (statement of Sen. Hatch); 138 Cong. Rec.

34,371 (1992). Although the Family Entertainment and Copyright Act

(“FECA”) created a new felony offense to address piracy of “work[s] being

prepared for commercial distribution” when committed online, the Act

does not specify how the “retail value” of such works should be

determined (and although the new offense at 17 U.S.C. § 506(a)(1)(C)

does not require proof of a minimum value, pre-release piracy may still be

charged under the other felony copyright provisions in § 506(a)(1)(A),(B),

which, in conjunction with 18 U.S.C. § 2319, do).

By way of comparison, the sentencing guidelines now specify that prerelease works—“work[s] being prepared for commercial distribution,” in

the guideline's parlance—should be valued for sentencing purposes at the

anticipated retail value of legitimate works upon legitimate commercial
48 Prosecuting Intellectual Property Crimes

release. See U.S.S.G. § 2B5.3 cmt. n.2(A)(vi) (amended Oct. 24, 2005).

However, in pre-release cases the guidelines also provide for a 2-level

enhancement. See id. § 2B5.3(b)(2) (amended Oct. 24, 2005). See

Section VIII.C.1.c.iii. of this Manual.

Calculating a work's retail value can be more complicated when the

work has been published in multiple versions—which often occurs with

software—especially if the court determines that registration or

preregistration is a precondition to criminal prosecution. See Section

II.B.1.d. of this Chapter. As noted there, civil actions for infringement are

permitted only for registered works. Courts addressing the infringement

of an unregistered version of a software program of which earlier versions

had been registered, have allowed damages only to the extent that the

infringed material consists of material from earlier, registered versions.

The theory behind this limitation is that an unauthorized copy of the

unregistered version is, in reality, not an infringement of the unregistered

version itself, but rather an infringement of the earlier registered version

through the copying of the unregistered version. See, e.g., Montgomery

v. Noga, 168 F.3d 1282, 1292 (11th Cir. 1999); Well-Made Toy Mfg.

Corp. v. Goffa Intern. Corp., 210 F. Supp. 2d 147, 158 (E.D.N.Y. 2002);

2 Nimmer on Copyright § 7.16[B][2].

On the other hand, the Eleventh Circuit in Montgomery v. Noga

upheld a jury instruction that permitted the jury to calculate the plaintiff's

actual damages by considering the market value of the unregistered

version:

Having held that the defendants infringed Montgomery's registered

copyright in VPIC 2.9a by placing VPIC 4.3 on FLD discs, ... it

follows that the jury properly could consider evidence of the injury

that the defendants' infringement caused to the value of subsequent

unregistered VPIC versions derived from version 2.9a—such as VPIC

4.3—in order to determine the extent of the injury to the value of

Montgomery's registered copyright at the time of infringement.

* * * 

Obviously, Montgomery's damages could not adequately be measured

solely by reference to the market value of VPIC 2.9a as a stand-alone

computer program; this value presumably was quite low at the time

of the infringement given that revised versions of the program were

then available.

168 F.3d at 1294-95. Although the court reviewed the instruction under

the highly deferential “plain error” standard because the defendants had

not objected to it at trial, see id., the holding should nevertheless support
II. Criminal Copyright Infringement 49

the analogous proposition that if the infringed work is an unregistered

version of software that had been derived from an earlier registered

version, the appropriate measure for purposes of 18 U.S.C. § 2319 should

be the value of the unregistered version.

To charge a criminal copyright violation as a felony, the government

must also prove that the total retail value of the infringing copies exceeded

$2,500. This threshold has one minor complication: the felony threshold

is “more than $2,500” when the defendant acted with a profit motive, 18

U.S.C. § 2319(b)(1), but only “$2,500 or more” when the defendant

acted without a profit motive, 18 U.S.C. § 2319(c)(1). To be safe, each

felony indictment should simply charge a value greater than $2,500.

These technical requirements are sometimes difficult to prove. For

example, if a defendant operated a video store that rented only pirated

videos, but kept no records that describe who did what and at what time,

it might be difficult to prove that the defendant himself reproduced or

distributed the videos, or that he did so within a particular 180-day

period. If faced with such a case, the government may wish to consider

alternative charges—such as conspiracy to commit felony criminal

copyright infringement; misdemeanor copyright infringement (which

reduces the number of copies to 1 and the retail value threshold to

$1,000; see Section II.B.5. of this Chapter); 18 U.S.C. § 2318 (counterfeit

or illicit labels, documentation, or packaging for copyrighted works); or 18

U.S.C. § 2320 (trafficking in goods, services, labels, documentation, or

packaging with counterfeit marks)—that have no numerical or monetary

thresholds. Section 2320 also has the advantage of punishing attempts,

which can be proved when the government lacks records of the completed

crime

II.B.3.c. Distribution of a Work Being Prepared for

Commercial Distribution, by Making It Available on a

Publicly-Accessible Computer Network, if the Defendant Knew

or Should Have Known the Work Was Intended for

Commercial Distribution

 Effective April 27, 2005, Congress added an additional felony offense

to address the online infringement of pre-release works. See Family

Entertainment and Copyright Act of 2005 (FECA), Pub. L. No. 109-9

§ 103, 119 Stat 218, 220-21 (Apr. 27, 2005) (codified at 17 U.S.C.

§ 506(a)(1)(C)). (This provision is part of Title I of FECA, also known as

the “Artists Rights and Theft Prevention Act of 2005” or the “ART Act.”)

Congress enacted this provision to target two phenomena that it deemed

particularly harmful to copyright-holders, especially in combination—
50 Prosecuting Intellectual Property Crimes

“pre-release” piracy and Internet piracy (especially peer-to-peer filesharing). See, e.g., Remarks on Introduction of Bill in Senate, 151 Cong.

Rec. S494 (daily ed. Jan. 25, 2005); Judiciary Committee Report, H.R.

Rep. No. 109-33(I), at 4, reprinted in 2005 U.S.C.C.A.N. 220. Section

506(a)(1)(C) makes it a felony to willfully infringe “[i] by the distribution

of [ii] a work being prepared for commercial distribution, [iii] by making

it available on a computer network accessible to members of the public,

[iv] if such person knew or should have known the work was intended for

commercial distribution.” 17 U.S.C. § 506(a)(1)(C) (small Roman

numerals added for purposes of illustration).

The new offense eliminates the government's need to prove monetary

and numeric thresholds for the copies involved if the defendant

distributed pre-release works on a computer network.

II.B.3.c.i. Distribution

The offense defined under 17 U.S.C. § 506(a)(1)(C) applies only to

infringement by distribution (as opposed to the copyright felonies in 17

U.S.C. § 506(a)(1)(A),(B) that apply to infringement by distribution or

reproduction). For discussion of proving distribution, see Section

II.B.3.a.ii. of this Chapter.

Section § 506(a)(1)(C)'s use of the term “making available” does not

resolve the issue of whether “distribution” requires an actual

dissemination of infringing copies. As of this writing, the only reported

case that has discussed this issue, a civil copyright case, stated that

“distribution” and “making available on a publicly-accessible computer

network” are two separate elements of the § 506(a)(1)(C) offense. See In

re Napster, Inc. Copyright Litig., 377 F. Supp. 2d 796, 805 (N.D. Cal.

2005). The inclusion of “making available” did not, according to this

court, redefine distribution to include making available. See Section

II.B.E.A.ii and the following Section of this Chapter.

II.B.3.c.ii. Making the Work Available on a Computer Network

Accessible to Members of the Public

The next element is “making [the work] available on a computer

network accessible to members of the public.” See 17 U.S.C.

§ 506(a)(1)(C).

Although the statute does not define “computer network” or

“accessible to members of the public,” the bill was clearly intended to

address piracy over the Internet. See H.R. Rep. No. 109-33(I), reprinted

in 2005 U.S.C.C.A.N. 220; 151 Cong. Rec. S499-500 (daily ed. Jan. 25,
II. Criminal Copyright Infringement 51

2005) (statement of Sen. Cornyn). Clear examples of “making the work

available on a computer network accessible to members of the public”

would include posting the work on a website or placing it in a desktop

computer's shared file directory so that peer-to-peer users around the

world could access and download it.

“[A] computer network accessible to the public” should be read to

include large networks available to substantial numbers of people, even if

the network is not immediately accessible to all members of the public,

such as a university's campus-wide network, a large but proprietary service

like AOL, or a password-protected site on the Internet. This would be

consistent with the right at issue (“distribution to the public”), and the

statutory definition of “publicly” in the context of displays and

performances, which refers to “any place where a substantial number of

persons outside of a normal circle of a family and its social acquaintances

is gathered.” See 17 U.S.C. § 101; Playboy Enters., Inc. v. Frena, 839 F.

Supp. 1552, 1557 (M.D. Fla. 1993) (holding that displaying infringing

photographs over a computer bulletin board to audience limited to paying

subscribers constituted display “to the public”); accord Video Pipeline,

Inc. v. Buena Vista Home Entm't, Inc., 192 F. Supp. 2d 321, 332 (D.N.J.

2002), aff'd on other grounds, 342 F.3d 191 (3d Cir. 2003); Video

Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 275 F. Supp. 2d 543,

554 (D.N.J. 2003). See also Section II.B.3.a.ii. of this Chapter (discussing

“to the public”). But cf. Andersen Consulting LLP v. UOP, 991 F. Supp.

1041, 1042-43 (N.D. Ill. 1998) (discussing meaning of electronic

communications service “to the public” under the Electronic

Communications Privacy Act); Konop v. Hawaiian Airlines, Inc., 302 F.3d

868, 875 (9th Cir. 2002) (same).

II.B.3.c.iii. Work Being Prepared for Commercial Distribution

The next element of an offense under § 506(a)(1)(C) is that the

infringed work must be a “work being prepared for commercial

distribution,” which is defined as:

(A) a computer program, a musical work, a motion picture or other

audiovisual work, or a sound recording, if, at the time of unauthorized

distribution—

(i) the copyright owner has a reasonable expectation of

commercial distribution; and

(ii) the copies or phonorecords of the work have not been

commercially distributed; or
52 Prosecuting Intellectual Property Crimes

(B) a motion picture, if, at the time of unauthorized distribution, the

motion picture—

(i) has been made available for viewing in a motion picture

exhibition facility; and

(ii) has not been made available in copies for sale to the general

public in the United States in a format intended to permit

viewing outside a motion picture exhibition facility.

17 U.S.C. § 506(a)(3). Thus, the definition includes only four types of

works: software, musical works, audiovisual works such as movies, and

sound recordings. Although these categories make up most of the works

pirated online, other types that could also be infringed online—such as

books, photographs and other works of visual art—are not included. 

When Congress created these provisions, it also created the

“preregistration” process discussed in Section II.B.1.c. of this Chapter.

The preregistration process sets forth a basic framework and directs the

Copyright Office to establish specific rules for preregistration of “works

being prepared for commercial distribution.” See Family Entertainment

and Copyright Act, Pub. L. No. 109-9 § 104(a) (amending 17 U.S.C.

§ 408(f)). However, prosecutors should be aware that the scope of the

term “works being prepared for commercial distribution” is narrower for

purposes of the criminal offense under § 506(a)(1)(C) than the scope that

term was given by the Copyright Office in its preregistration regulations.

First, as of this writing, the Copyright Office's interim rules for

preregistration cover not only movies, music, and software, but also

literary works and advertising or marketing photographs. See 37 C.F.R.

§ 202.16 (2005). This is broader than the four classes specified by 17

U.S.C. § 506(a)(3). Second, the Copyright Office allows for the

preregistration of a work if the work has only been started: for example,

for motions pictures, filming must have commenced, and for a computer

program, at least some of the computer code must have been fixed. See 37

C.F.R. § 202.16(b)(2) (2005). Although these standards may suffice for

preregistration, prosecutors should generally exercise caution in situations

that concern works that are substantially incomplete. Cases involving a

mere fragment of a work or a substantially incomplete work are more

likely to face difficulties in proving copyrightability and infringement, as

well as proving “retail value” and perhaps willfulness as well.

Although the pre-release offense and the preregistration process were

enacted at the same time, the plain language of 17 U.S.C. § 506(a)(1)(C)

does not require that the “work being prepared for commercial

distribution” be preregistered before an infringer can be prosecuted. Nor
II. Criminal Copyright Infringement 53

does the legislative history indicate that Congress intended

§ 506(a)(1)(C) to apply only to “preregistered” works. Therefore, the

FECA amendments do not appear to have foreclosed the government's

power to prosecute infringement that occurs before preregistration or

registration of a work.

II.B.3.c..iv. The Defendant Knew or Should Have Known that

the Work Was Intended for Commercial Distribution

A 17 U.S.C. § 506(a)(1)(C) offense requires proof of a lower degree

of mens rea as to the defendant's awareness that the work was “being

prepared for commercial distribution” than the other elements of the

offense, which require proof of “willfulness.” Under § 506(a)(1)(C), the

government need not demonstrate that a defendant had actual knowledge

that the infringed work was a pre-release work, but rather, need only show

that the defendant “knew or should have known” that the work was

“intended for commercial distribution,” which is essentially a negligence

standard.

II.B.4. Additional Element for Enhanced Sentence: Purpose of

Commercial Advantage or Private Financial Gain

Proving that the defendant acted “for purposes of commercial

advantage or private financial gain” is often either a primary element of

the crime or a secondary element that can enhance the defendant's

maximum sentence. These issues are covered in Sections II.B. (setting out

elements) and VIII.C.1.f. (sentencing factors) of this Manual.

II.B.4.a. History

Before 1997, the government had to prove the defendant's intent to

seek commercial advantage or private financial gain in every criminal

copyright prosecution. In United States v. LaMacchia, 871 F. Supp. 535,

539-40 (D. Mass. 1994), the court noted that the government could not

have charged the defendant with criminal copyright infringement because

he had operated his Internet site for trading pirated works without a

profit motive.

But Congress found this unacceptable. When LaMacchia was decided,

times had already changed. Now, as then, the Internet allows people to

engage in large-scale electronic piracy with little expense, time or

complexity. The ease of Internet piracy reduces (and perhaps eliminates)

infringers' need for a financial return even as it significantly affects the

market for legitimate goods. See Committee Report on No Electronic

Theft Act, H.R. Rep. No. 105-339, at 4 (1997). Willful infringers can act
54 Prosecuting Intellectual Property Crimes

out of a variety of motives unrelated to profit—including a rejection of the

copyright laws, anti-corporate sentiments, or bragging rights in the piracy

community—yet cause substantial financial harm regardless of their

motive. Id.

To close what was called the Lamacchia “loophole,” Congress passed

the No Electronic Theft Act, Pub. L. No. 105-147, 111 Stat. 2678

(1997), which, among other things, eliminated the government's

requirement to prove “commercial advantage or private financial gain” for

a felony conviction. See 143 Cong. Rec. 24,324 (1997) (remarks of Rep.

Coble); H.R. Rep. No. 105-339, at 4-5 (1997). By enacting what was then

17 U.S.C. § 506(a)(2) (renumbered § 506(a)(1)(B) by the Apr. 27, 2005

amendments), Congress created a felony that only requires proof of willful

infringement above certain monetary and numerical thresholds.

Even though a profit motive is no longer required in all cases, it

should nonetheless be charged when possible because it increases the

defendant's maximum statutory sentence (by turning a 17 U.S.C.

§ 506(a)(1)(B) offense into a § 506(a)(1)(A) offense with its higher

penalties, or by increasing the sentence for a § 506(a)(1)(C) offense),

increases his guideline sentencing range, increases jury appeal, and can

help defeat baseless claims of fair use. See Sections II.C.5., II.E.1, and

VIII.C.1.f. of this Manual.

II.B.4.b. Legal Standard

Essentially, a defendant acts for commercial advantage and private

financial gain if he sought a profit. Cf. 4 Nimmer on Copyright

§ 15.01[A][2] (discussing legislative history to copyright statute).

“Financial gain” is broadly defined to include not only a monetary

transaction, but also the “receipt, or expectation of receipt, of anything of

value, including the receipt of other copyrighted works.” 17 U.S.C. § 101.

Bartering schemes are included, where people trade infringing copies of a

work for other items, including computer time or copies of other works.

Congress added this definition of financial gain in the NET Act

specifically to address bartering. See No Electronic Theft Act (NET) Act,

Pub. L. No. 105-147, 111 Stat. 2678 (1997); 143 Cong. Rec. 24,421

(1997) (statement of Sen. Hatch); 143 Cong. Rec. 24,326 (1997)

(statement of Rep. Goodlatte). For example, federal prosecutors have

successfully charged “commercial advantage or private financial gain” in

cases where defendants ran a closed peer-to-peer file-trading network that

required new users to contribute pirated material in order to join. See,

e.g., Department of Justice Press Release, Final Guilty Plea in Operation

Digital Gridlock, First Federal Peer-to-Peer Copyright and Piracy
II. Criminal Copyright Infringement 55

Crackdown (May 31, 2005), available at http://www.usdoj.gov/criminal/

cybercrime/tannerPlea.htm.

Although courts have had few occasions to consider the scope of

“commercial advantage,” the plain meaning of the term and case-law in

other areas suggest that “commercial advantage” includes not only

obtaining payment for infringing products, but also using infringing

products in a business internally to obtain an advantage over a

competitor. This is true even if the defendant charged nothing for the

infringing copies. See Herbert v. Shanley Co., 242 U.S. 591, 593-94

(1917) (Holmes, J.) (holding that the performance of a copyrighted

musical composition in a restaurant or hotel without charge for admission

to hear it infringes the exclusive right of the owner of the copyright to

perform the work publicly for profit); A&M Records v. Napster, 239 F.3d

1004, 1023 (9th Cir. 2001) (holding that “[f]inancial benefit exists where

the availability of infringing material acts as a draw for customers,” even

when the infringing material is offered for free) (internal quotation marks

and citation omitted), aff'g in pertinent part 114 F. Supp. 2d 896, 921

(N.D. Cal. 2000) (noting that Napster anticipated deriving revenues from

users by offering copyrighted music for free); Twentieth Century Music

Corp. v. Aiken, 356 F. Supp. 271, 275 (W.D. Pa. 1973) (holding that a

business that merely plays background music to relax its employees so

that they will be efficient is infringing for profit), rev'd on other grounds,

500 F.2d 127 (3d Cir. 1974), aff'd 422 U.S. 151, 157 (1975) (assuming

that restaurant owner acted for profit); Associated Music Publishers v.

Debs Mem'l Radio Fund, 141 F.2d 852 (2d Cir. 1944) (holding that a

radio station that without permission broadcasts a copyrighted work for

free in order to get, maintain, and increase advertising revenue has done

so for profit). Examples of infringement for commercial advantage include

an engineering firm's using pirated drafting software to keep overhead low,

a website that offers free pirated software to generate advertising revenue

when down loaders visit the site, and a business that gives away

counterfeit goods to draw in customers to whom it then sells legitimate

services. In these cases, although the infringer may not expect to receive

money or other items of value in exchange for the infringing copies, the

infringement saves the business the money it would have spent on

authorized copies or licenses. The savings allow the infringer to gain a

commercial advantage over competitors who use only licensed copies of

copyrighted works.

Whether a defendant actually makes a profit is beside the point: what

matters is that he intended to profit. See 17 U.S.C. § 101 (defining

“financial gain” to include “expectation of receipt” of anything of value);

id. § 506(a)(1)(A) (“for purposes of commercial advantage or private
56 Prosecuting Intellectual Property Crimes

financial gain”) (emphasis added); 18 U.S.C. § 2319(d)(2) (same); United

States v. Taxe, 380 F. Supp. 1010, 1018 (C.D. Cal. 1974) (“'Profit'

includes the sale or exchange of the infringing work for something of value

in the hope of some pecuniary gain. It is irrelevant whether the hope of

gain was realized or not.”), aff'd in part and vacated in part on other

grounds, 540 F.2d 961 (9th Cir. 1976); United States v. Shabazz, 724

F.2d 1536, 1540 (11th Cir. 1984) (same); United States v. Moore, 604

F.2d 1228, 1235 (9th Cir. 1979) (holding that acting “for profit,” as

required by earlier version of Copyright Act, includes giving infringing

work to a prospective buyer to evaluate for free before purchasing);

United States v. Cross, 816 F.2d 297, 301 (7th Cir.1987); Herbert v.

Shanley, 242 U.S. at 595 (Holmes, J.) (holding that under the copyright

statute the performance of a copyrighted work at a hotel or restaurant was

for profit, even if customers did not pay specifically for the performance,

because “[w]hether it pays or not, the purpose of employing it is profit

and that is enough”).

Prosecutors should generally refrain from alleging that a defendant

obtained financial gain by getting free or discounted infringing works

solely as a result of copying or downloading works for himself. This

benefit is common to all infringement, and to hold that mere infringement

equals private financial gain would convert every infringement case into

one for private financial gain and thus erase important distinctions in the

civil and criminal copyright statutes. Although there are apparently no

reported opinions on this question in criminal copyright cases, a number

of courts have followed this reasoning in interpreting a related statute

with criminal and civil penalties for using and trafficking in unauthorized

satellite and cable television decoders “for purposes of commercial

advantage or private financial gain.” 47 U.S.C. § 553(b)(2). These courts

held that the mere purchase and use of such a device for the defendant's

own benefit and that of his family and friends does not constitute “gain”

within the meaning of that statute. See, e.g., Comcast Cable Commc'n v.

Adubato, 367 F. Supp. 2d 684, 693 (D.N.J. 2005) (holding that to

qualify as commercial advantage or private financial gain, the defendant

must have used the device “to further some commercial venture or

profited in some way from the device beyond simply sitting by himself or

with his family and friends around a television set using the illegal device

to watch programs for which payment should have been made”);

American Cablevision of Queens v. McGinn, 817 F. Supp. 317, 320

(E.D.N.Y. 1993) (holding that “private financial gain” should not be read

to encompass defendant's “gain” from receiving broadcasts himself: such

an interpretation would render “gain” enhancement superfluous because

all violations would result in gain). But see Charter Commc'ns Entm't I,
II. Criminal Copyright Infringement 57

LLC v. Burdulis, 367 F. Supp. 2d 16 (D. Mass. 2005) (holding that

defendant who violated § 553 to receive unauthorized cable broadcasts

did so for purposes of “financial gain” within the statute); Cablevision

Sys. New York City Corp. v. Lokshin, 980 F. Supp. 107, 113 (E.D.N.Y.

1997) (same).

A profit motive can be proved by circumstantial evidence. See United

States v. Cross, 816 F.2d 297, 301 (7th Cir. 1987) (“[T]he presence of

these seventeen second-generation videocassettes on [the defendant's]

business premises may rationally give rise to the inference that they were

maintained for commercial advantage or private financial gain.”).

II.B.5. Misdemeanor Copyright Infringement

To obtain a misdemeanor conviction under 17 U.S.C. § 506(a) and

18 U.S.C. § 2319, the government must demonstrate that: 

1. A copyright exists;

2. It was infringed by the defendant;

3. The defendant acted willfully; and 

4. The infringement was done EITHER 

(a) for purposes of commercial advantage or private financial gain,

17 U.S.C. § 506(a)(1)(A) (numbered § 506(a)(1) before the Apr.

27, 2005 amendments); 18 U.S.C. § 2319(b)(3); OR 

(b) by reproduction or distribution of one or more copyrighted

works with a total retail value of more than $1,000 within a 180-

day period, 17 U.S.C. § 506(a)(1)(B) (numbered § 506(a)(2)

before the Apr. 27, 2005 amendments); 18 U.S.C. § 2319(c)(3).

Although the misdemeanor and felony crimes share some

elements—all require proving willful infringement—the need to prove

scope or scale is lessened for misdemeanors. In cases without commercial

advantage or private financial gain that involve the reproduction or

distribution of infringing copies, the threshold number of copies and

monetary value for a misdemeanor are lower than those required for a

felony under 18 U.S.C. §§ 2319(b)(1) or (c)(1): all that is required is one

or more copies, with a total retail value of $1,000 or more. And in cases

of for-profit infringement, the misdemeanor has no numerical or monetary

prosecutorial thresholds. 18 U.S.C. § 2319(b)(3). Thus, misdemeanor

copyright infringement can be charged when a defendant clearly profited

or intended to profit, but where the government cannot prove the exact
58 Prosecuting Intellectual Property Crimes

volume or value of the infringement due to a lack of business records or

computer logs.

A misdemeanor charge can also apply to willful, for-profit,

infringement of rights other than reproduction or distribution, such as the

performance right or digital audio transmissions. Although the felony

penalties are reserved for infringing reproduction and distribution, the

misdemeanor provisions apply “in any other case,” see 18 U.S.C.

§ 2319(b)(3), such as the infringement of the other rights.

II.C. Defenses

II.C.1. Statute of Limitations: 5 years

The criminal copyright statute has a five-year statute of limitations.

17 U.S.C. § 507(a). The five-year limitations period was first established

by the NET Act, Pub. L. No. 105-147 § 2(c), 111 Stat. 2678 (1997),

before which the limitations period had been three years, the same as for

civil copyright claims. See Copyright Act of 1976, Pub. L. No. 94-553, 90

Stat. 2541 (1976).

II.C.2. Jurisdiction

U.S. copyright law generally has no extraterritorial effect. Although

many foreign countries protect United States copyrights against

infringement in foreign lands, and domestic law similarly protects foreign

copyrighted works against infringement within the United States, 17

U.S.C. § 411(a), U.S. law generally “cannot be invoked to secure relief for

acts of [copyright] infringement occurring outside the United States.”

Palmer v. Braun, 376 F.3d 1254, 1258 (11th Cir. 2004); see also

Subafilms, Ltd. v. MGM-Pathe Communc'ns, 24 F.3d 1088, 1091 (9th

Cir. 1994) (en banc); Update Art, Inc. v. Modiin Pub'g, Ltd., 843 F.2d 67,

73 (2d Cir. 1988) (“It is well established that copyright laws generally do

not have extraterritorial application.”).

This means that some copyright cases cannot be brought in the

United States, even when the victims are U.S. companies or nationals and

the infringed works are copyrighted in the United States. For example,

U.S. law does not grant U.S. courts jurisdiction over a manufacturing

plant in southeast Asia that produces pirated DVDs for sale in Europe, if

the infringing conduct occurs solely abroad. See Palmer, 376 F.3d at

1258.
II. Criminal Copyright Infringement 59

In addition, in civil copyright cases, most courts hold that a defendant

in the United States who authorizes acts of reproduction or distribution

that occur outside the country, standing alone, does not violate United

States copyright law sufficient to grant United States courts subjectmatter jurisdiction. See Subafilms, 24 F.3d at 1091; Armstrong v. Virgin

Records, Ltd., 91 F. Supp. 2d 628, 634 (S.D.N.Y. 2000) (reviewing cases

and concluding that the Subafilms position is more accepted). But see

Curb v. MCA Records, Inc., 898 F. Supp. 586, 593 (M.D. Tenn. 1995);

Expediters Int'l of Washington, Inc. v. Direct Line Cargo Mgmt. Servs.,

Inc., 995 F. Supp. 468, 476 (D.N.J. 1998).

However, these rules do not bar a United States copyright case if an

infringing act does occur in the United States in whole or in part. Palmer,

376 F.3d at 1258; Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d

45, 52 (2d Cir. 1939) (holding that court had power over profits made

from showing a copied film outside the country, because negatives from

which the film was printed were made in the United States); P & D Int'l

v. Halsey Pub'g Co., 672 F. Supp. 1429, 1432-33 (S.D. Fla.1987) (finding

subject-matter jurisdiction over copyright action because complaint

alleged that defendant copied U.S.-copyrighted film in Florida and then

showed the film in international waters aboard cruise ship) (citing 3

Nimmer on Copyright § 17.02, at 17-5).

Although no reported criminal cases address this issue, the cases cited

above provide a sound legal basis for prosecuting criminal infringement

domestically when at least a part of the defendant's infringing conduct

occurred within the U.S. Charging conspiracy also gives domestic

jurisdiction over criminal copyright co-conspirators located outside the

United States if their co-conspirators act inside the country. See, e.g.,

Ford v. United States, 273 U.S. 593, 624 (1927) (holding that a

conspiracy charge need not rely on extraterritorial principles if its object

crime is in the U.S. and a co-conspirator commits an act in the U.S. to

further the conspiracy); United States v. Winter, 509 F.2d 975, 982 (5th

Cir. 1975).

For more on the lack of extraterritorial application of U.S. copyright

law, see United States Copyright Office, Project Looking Forward

Sketching the Future of Copyright in a Networked World, Final Report,

1998 WL 34336436, at *132 (1998).

II.C.3. Venue

Crimes “begun in one district and completed in another, or

committed in more than one district, may be inquired of and prosecuted

in any district in which such offense was begun, continued, or completed.”
60 Prosecuting Intellectual Property Crimes

18 U.S.C. § 3237(a). Few reported cases have directly addressed this issue

in criminal copyright prosecutions. See United States v. Tucker, 495 F.

Supp. 607, 618 (E.D.N.Y. 1980) (holding that although defendant

resided outside district, venue was proper for grand jury investigation into

defendant's sales of counterfeit sound recordings because “middleman” in

defendant's scheme resided, and purchaser was headquartered, in district).

Cases addressing venue in analogous cases suggest that venue would be

proper in any district where reproduction or distribution occurred, or

through which pirated works were shipped. Cf. United States v. DeFreitas,

92 F. Supp. 2d 272, 276-77 (S.D.N.Y. 2000) (holding in criminal

trademark case involving importation and distribution of counterfeit

“Beanie Babies” that offense was a continuing offense and thus venue was

proper in any district where the offense was begun, continued, or

completed, i.e., where products entered the U.S., were shipped, or sold);

United States v. Rosa, 17 F.3d 1531, 1541 (2d Cir.1994) (holding that

in conspiracy to transport stolen goods, venue was proper where the

agreement was entered into, or where any overt act in furtherance of the

conspiracy was committed).

II.C.4. The First Sale Doctrine—17 U.S.C. § 109

II.C.4.a. Operation of the Doctrine

A common defense to a claim of infringement of the distribution right

is the “first sale” doctrine, codified in 17 U.S.C. § 109, which provides

that “[n]otwithstanding the provisions of section 106(3), the owner of a

particular copy or phonorecord lawfully made under this title, or any

person authorized by such owner, is entitled, without the authority of the

copyright owner, to sell or otherwise dispose of the possession of that

copy or phonorecord.” In other words, once a copyright-holder sells or

gives a specific copy to another person, the copyright-holder generally

cannot control how that particular copy is subsequently sold or

transferred. See United States v. Moore, 604 F.2d 1228, 1232 (9th Cir.

1979); see also 2 Nimmer on Copyright § 8.12[B] (discussing first sale);

4 Nimmer on Copyright § 15.01[A][2] (discussing application of “first

sale” in criminal cases). Putting it in terms of the purchaser's rights, the

first purchaser and any subsequent purchaser of that specific copy may

further distribute or dispose of that particular copy without the copyrightholder's permission.

The first sale doctrine does not grant the purchaser or anyone else the

right to make additional copies of the work he has. Making unauthorized

copies of a lawfully-obtained work still violates the law. 4 Nimmer on

Copyright § 15.01[A][2], at 15-10. Consequently, the first sale doctrine
II. Criminal Copyright Infringement 61

is a defense only against an allegation of infringement by means of

distribution.

Moreover, the first sale doctrine may be invoked by a defendant only

for the distribution of lawfully-made copies. If copies were pirated, the

first sale doctrine does not apply. See United States v. Drum, 733 F.2d

1503, 1507 (11th Cir. 1984) (citing Moore, 604 F.2d at 1232); United

States v. Powell, 701 F.2d 70, 72 (8th Cir. 1983). Additionally, a person

may not sell or give away his lawful copy while retaining a backup copy,

even a backup copy of software that is authorized by 17 U.S.C. § 117. See

17 U.S.C. § 117(a)(2) (requiring destruction of archival copies if

continued possession of original copy ceases to be rightful); see also 17

U.S.C. § 117(b) (allowing transfer of exact archival copies only with a

complete transfer of rights in the original copy). An unlawfully retained

backup copy can be an infringing reproduction. See Section II.C.6. of this

Chapter for a discussion of the “archival” exception codified at 17

U.S.C. § 117(a)(2).

The first sale doctrine protects a defendant only if he owned his copy,

not if he merely borrowed or rented it. In fact, the first sale doctrine does

not “extend to [protect] any person who has acquired possession of the

copy or phonorecord from the copyright owner, by rental, lease, loan, or

otherwise, without acquiring ownership of it.” 17 U.S.C. § 109(d)

(emphasis added). This is an important distinction for works such as

motion picture film reels, which are typically distributed to movie theaters

under a lease or similar arrangement, and business software, which is

often distributed subject to a licensing agreement.

It is not always clear, however, whether a commercial transaction of

copyrighted works is legally a sale or a licensing agreement, which can

make or break a first sale defense. How the parties characterize the

transaction to themselves or others may not be controlling as a matter of

law. When a computer user “purchases” a copy of software through a

retail channel or other means, the licensing agreement may actually assert

that the arrangement is not an outright purchase of a copy but merely a

license to use the work. Were these licensing agreements the last word on

the subject, § 109 would not allow the licensee to resell his software. Yet

many courts have recharacterized a software publisher's shrinkwrap

licensing agreement as a sale when the publisher distributes its software

through retail channels. See Softman Prods. Co. v. Adobe Sys., Inc., 171

F. Supp. 2d 1075 (C.D. Cal. 2001); Novell, Inc. v. Network Trade Ctr.,

Inc., 25 F. Supp. 2d 1218, 1230 (D. Utah 1997), vacated in part on other

grounds, 187 F.R.D. 657 (D. Utah 1999); ProCD, Inc. v. Zeidenberg, 908

F. Supp. 640 (W.D. Wis. 1996), rev'd on other grounds, 86 F.3d 1447
62 Prosecuting Intellectual Property Crimes

(7th Cir. 1996); see also Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir.

2005); Mark Lemley, Intellectual Property and Shrinkwrap Licenses, 68

S. Cal. L. Rev. 1239, 1244 n.23 (1995) (discussing cases). Other courts

have taken the opposite position, however, holding that a copy of

software obtained subject to license is not subject to the first sale doctrine

or other benefits of “ownership.” See Adobe Sys., Inc. v. Stargate Software

Inc., 216 F. Supp. 2d 1051, 1058 (N.D. Cal. 2002); Adobe Sys. Inc. v.

One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1089 (N.D. Cal. 2000);

Microsoft Corp. v. Software Wholesale Club, Inc., 129 F. Supp. 2d 995,

1002 (S.D. Tex. 2000) (citing Microsoft Corp. v. Harmony Computers &

Elec., Inc., 846 F. Supp. 208 (E.D.N.Y. 1994)); see also Lemley, 68 S.

Cal. L. Rev. at 1244 n.23.

Although no reported criminal cases to date appear to have addressed

this issue, the question may yet arise in cases involving “repackaged”

software, in which some elements of the software package are genuine,

while others are copied or altered. See, e.g., Adobe Systems, Inc. v.

Stargate Software Inc., 216 F. Supp. 2d at 1058 (rejecting argument that

first sale doctrine should apply to academic versions of software

repackaged and sold as retail versions). In such cases, prosecutors may

wish to consider other charges, such as 18 U.S.C. § 2318 (counterfeit or

illicit labels, documentation, or packaging for copyrighted works).

II.C.4.b. Affirmative Defense or Part of the Government's

Case-in-Chief?

Courts disagree as to whether the government must prove absence of

“first sale” as part of its case-in-chief in a criminal case. See 4 Nimmer on

Copyright § 15.01[A][2], at 15-8 to 15-9. In civil cases, “first sale” is an

affirmative defense. See 2 Nimmer on Copyright § 8.12[A]; H.R. Rep. No.

94-1476, at 81 (1976) (“It is the intent of the Committee, therefore, that

in an action to determine whether a defendant is entitled to the privilege

established by section 109(a) and (b), the burden of proving whether a

particular copy was made or acquired should rest on the defendant.”),

reprinted in 1976 U.S.C.C.A.N. 5659, 5695.

The better rule is to apply the civil rule in criminal cases. See, e.g.,

United States v. Larracuente, 952 F.2d 672, 673-74 (2d Cir. 1992);

United States v. Goss, 803 F.2d 638, 643-44 (11th Cir. 1986); United

States v. Drum, 733 F.2d 1503, 1507 (11th Cir.), cert. denied sub nom.,

McCullock v. United States, 469 U.S. 1061 (1984). There is no good

reason for shifting an affirmative defense in civil cases to an element of

the offense in criminal cases, given that the government must already

prove that the defendant engaged in infringement willfully. Yet several
II. Criminal Copyright Infringement 63

cases state the opposite, that in criminal cases the government must

negate first sale as an element of the offense. See, e.g., United States v.

Cohen, 946 F.3d 430, 434 (6th Cir. 1991); United States v. Sachs, 801

F.2d 839, 842 (6th Cir. 1986); United States v. Powell, 701 F.2d 70, 72

(8th Cir. 1983); United States v. Moore, 604 F.2d 1288, 1232 (9th Cir.

1979); United States v. Wise, 550 F.2d 1180, 1191-92 (9th Cir. 1977);

United States v. Atherton, 561 F.2d 747, 749 (9th Cir. 1977); United

States v. Drebin, 557 F.2d 1316, 1326 (9th Cir. 1977); United States v.

Wells, 176 F. Supp. 630, 633 (S.D. Tex.1959).

II.C.4.c. Disproving First Sale at Trial

The easiest way to negate the first sale doctrine is to introduce

evidence of reproduction of unauthorized copies. Two types of

circumstantial proof typically suffice. First, the government can introduce

evidence that the defendant obtained his copies illegitimately. See United

States v. Moore, 604 F.2d 1228, 1232 (9th Cir. 1979) (holding that

government may establish absence of first sale by circumstantial evidence,

as well as by tracing distribution); United States v. Whetzel, 589 F.2d

707, 711-12 (D.C. Cir. 1978) (holding that tapes' illicit origin was shown

by labels on tapes listing a manufacturer with a non-existent address,

tapes' low price, and the circumstances of their sale), abrogated on other

grounds, Dowling v. United States, 473 U.S. 207 (1985). Factors

indicating that copies were obtained illicitly include the sale of copies at

a price far below the legitimate market value, the distribution of copies of

inferior quality, the existence of copies with identical serial numbers, and

the presence of false information on the copies, such as a false address for

the manufacturer, fictitious labels, or sales under suspicious

circumstances. See, e.g., United States v. Drum, 733 F.2d 1503, 1507

(11th Cir. 1984) (rebuttal of first sale defense included direct and

circumstantial evidence concerning fictitious labels, low prices, and

clandestine sale); Whetzel, 589 F.2d at 712 (sale of copies of tapes from

the back of a van in a parking lot).

Second, the government can introduce evidence that the copyright

holder never sold copies of the work at all, which shows that the

defendant could not have obtained ownership of legitimate copies. See

United States v. Sachs, 801 F.2d 839 (6th Cir. 1986) (holding that

government negated the first sale doctrine with respect to movie

videotapes with evidence that the original movies had never been sold

legitimately in same format); United States v. Drebin, 557 F.2d 1316 (9th

Cir. 1977) (holding that government proved the absence of first sale

through evidence that copyrighted movies had never been sold or

transferred and that licenses transferring limited rights for distribution
64 Prosecuting Intellectual Property Crimes

and exhibition of the films for a limited time were not “sales” for purposes

of the first sale doctrine). But see United States v. Atherton, 561 F.2d

747 (9th Cir. 1977) (holding that government failed to prove the absence

of first sale because, although the copyright owner never “sold” film

copies, it permitted a major television network to permanently retain

copies and sold scrap film to salvage company for consideration, all of

which fell within the definition of first sale and could have been the

defendant's source).

The government need not account for the distribution of every copy

of a work. See, e.g., Moore, 604 F.2d at 1232 (“[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 . . . 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 Sachs, 801 F.2d at 843 (holding that the

government need not trace every single copy to its origins, because “[t]he

other recognized method of satisfying [the first sale] doctrine is for the

government to. . .show that the copies in question have illegitimate

origins”); Drum, 733 F.2d at 1507 (“The government may prove the

absence of a first sale by direct evidence of the source of the pirated

recordings or by circumstantial evidence that the recording was never

authorized.”) (citations omitted); Whetzel, 589 F.2d at 711 (“It was not

required to disprove every conceivable scenario in which appellant would

be innocent of infringement.”).

II.C.4.d. Special Rules for Rental, Lease, and Lending

Although the first sale doctrine extends to almost all types of

copyrighted works, it has some limitations with respect to some types of

sound recordings and computer programs, which generally may be resold

or given away but cannot be rented, leased, or loaned without the

copyright-owner's permission. See 17 U.S.C. § 109(a), (b)(1)-(2)

(describing exception and the types of computer programs that do not

qualify for the exception); but see § 109(b)(2)(A) (providing that this

does not apply to the rental, lease, or loan of a phonorecord for nonprofit

purposes by a nonprofit library or educational institution). Regardless, the

unauthorized (and thus infringing) rental or lending of sound recordings

and computer programs is not subject to criminal penalties. See

§ 109(b)(4).

Although unauthorized rental or leasing of certain types of works is

not directly subject to criminal sanctions, businesses that advertise or

engage in this type of conduct might still be subject to criminal copyright
II. Criminal Copyright Infringement 65

infringement penalties. For example, assume that a business rents CDs

containing music and tells its customers to “burn it and return it,” i.e., to

make a copy before bringing it back. Would the above rules exempt this

business from criminal prosecution? On the one hand, the answer appears

to be “yes,” since 17 U.S.C. § 109(b)(4) states that the unauthorized

rental of sound recordings “shall not be a criminal offense.” On the other

hand, this conduct may extend beyond mere “unauthorized rental” to

active solicitation, aiding-and-abetting, or conspiracy to commit criminal

copyright infringement. No published cases have yet addressed this issue.

II.C.5. Fair Use

The fair use doctrine allows people in certain circumstances to use

copyrighted material in ways the copyright owner has not authorized and

might even forbid if asked. Fair uses are generally limited uses for useful

or beneficial purposes with minimal impact on the market for the work.

Codified at 17 U.S.C. § 107, the fair use doctrine allows people to

reproduce or otherwise use copyrighted works “for purposes such as

criticism, comment, news reporting, teaching ..., scholarship, or research”

and other, unspecified, purposes and uses.

Fair use is designed to ensure that the rights of authors are balanced

with the interest of the public in the free flow of information. See, e.g.,

Pierre Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1103, 1110

(1990). Congress has noted that fair use is the most important limitation

on the exclusive rights granted copyright owners, H.R. Rep. No. 94-1476,

at 66 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5680, and the

Supreme Court has characterized fair use as one of copyright law's built-in

accommodations to the First Amendment. See Eldred v. Ashcroft, 537

U.S. 186, 219-20 (2003).

By design, the fair use doctrine is fluid and applies not according to

definite rules, but rather according to a multi-factor balancing test. See

H.R. Rep. 94-1476, at 66 (1976), reprinted in 1976 U.S.C.C.A.N. 5659,

5680. The statute cites four non-exclusive factors:

(1) the purpose and character of the use, including whether such

use is of a commercial nature or is for nonprofit educational

purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation

to the copyrighted work as a whole; and 
66 Prosecuting Intellectual Property Crimes

(4) the effect of the use upon the potential market for or value of

the copyrighted work.

17 U.S.C. § 107. Other unspecified factors may be appropriate. It would

be difficult to articulate a more determinate set of fair use rules, given the

variety of copyrighted works, their uses, and the situations in which they

can be used. Consequently, both through case law and statutory

codification, fair use has historically been decided on a case-by-case basis

looking at the totality of the facts at hand. See H.R. Rep. No. 94-1476,

at 65-66 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5679. Although

the fair use doctrine has developed primarily in civil cases, those cases

have precedential weight in criminal cases too. 

The first listed factor to consider is the purpose and character of the

use. 17 U.S.C. § 107(1). A commercial use is presumptively unfair,

whereas for a noncommercial, nonprofit activity, “[t]he contrary

presumption is appropriate.” Sony Corp. v. Universal Studios, 464 U.S.

417, 449 (1984). Nevertheless, “the mere fact that a use is educational

and not for profit does not insulate it from a finding of infringement, any

more than the commercial character of a use bars a finding of fairness.”

Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 584 (1994). Another

consideration is whether the use is “transformative, ”or adds something

new or different beyond a mere repackaging or restatement of the original:

“Although such transformative use is not absolutely necessary for a

finding of fair use, the goal of copyright, to promote science and the arts,

is generally furthered by the creation of transformative works.” AcuffRose, 510 U.S. at 579 (citation omitted); see also Leval, 103 Harv. L.

Rev. at 1111 (“The use must be productive and must employ the quoted

matter in a different manner or for a different purpose from the original.

A quotation of copyrighted material that merely repackages or republishes

the original is unlikely to pass the test.”). If a work is transformative,

other factors that normally weigh against finding of fair use, such as the

commercial nature of the use, bear less weight. See Acuff-Rose, 510 U.S.

at 579.

The second listed factor is the nature of the copyrighted work. See 17

U.S.C. § 107(2). “This factor calls for recognition that some works are

closer to the core of intended copyright protection than others.” AcuffRose, 510 U.S. at 586. Fair use is more difficult to establish in the use of

fictional or purely creative or fanciful works, as opposed to more factual

or historical (yet still copyrightable) works, such as recollections of public

figures, or depictions of newsworthy events. See id. at 586. “The law

generally recognizes a greater need to disseminate factual works than
II. Criminal Copyright Infringement 67

works of fiction or fantasy.” Harper & Row, Publishers, Inc. v. Nation

Enters., 471 U.S. 539, 563 (1985).

The third factor is the amount and substantiality of the use in relation

to the copyrighted work as a whole. See 17 U.S.C. § 107(3). A defense of

fair use is less likely to succeed if the portion of the copyrighted material

used is substantial in quantity or importance. See Harper & Row, 471

U.S. at 564-66 (holding news magazine's 300-word excerpt of book not

to be fair use because quoted sections were key passages). However, a use

can be fair even if it copies the entire work. See Online Policy Group v.

Diebold, Inc., 337 F. Supp. 2d 1195 (N.D. Cal. 2004) (granting summary

judgment to group that had published voting machine manufacturer's

entire e-mail archive to publicly expose machines' flaws); Kelly v. Arriba

Soft Corp., 336 F.3d 811 (9th Cir. 2003) (holding defendant's copying of

entire images to create online searchable database of “thumbnails” was

fair use).

The fourth factor is how substantially the use affects the potential

market for the copyrighted work or the work's actual value. See 17

U.S.C. § 107(4). “[T]o negate fair use one need only show that if the

challenged use 'should become widespread, it would adversely affect the

potential market for the copyrighted work.' This inquiry must take

account not only of harm to the original but also of harm to the market

for derivative works.” Harper & Row, 471 U.S. at 568 (citations omitted).

The Supreme Court has emphasized the importance of this factor in cases

of noncommercial use. Sony, 464 U.S. at 451 (“A challenge to a

noncommercial use of a copyrighted work requires proof either that the

particular use is harmful, or that if it should become widespread, it would

adversely affect the potential market for the copyrighted work.”). See

Harper & Row, 471 U.S. at 540-41 (finding that harm to potential

market was indicated by fact that magazine cancelled its contract to

reprint segment of book after defendant published article quoting

extensively from book).

Again, these are non-exclusive factors that may be supplemented as

technology and circumstances require. See 17 U.S.C. § 107.

II.C.5.a. Unpublished Works

A defendant's use of an unpublished copyrighted work may qualify as

a fair use. Earlier decisions focused on the fact that a work was

unpublished (or not yet published) in finding against fair use. The

Supreme Court then held that the unpublished nature of work is a “'key,

though not necessarily determinative, factor' tending to negate a defense

of fair use.” Harper & Row, 471 U.S. at 552-54 (quoting S. Rep. No. 94-
68 Prosecuting Intellectual Property Crimes

473 at 54 (1976)). In 1992, however, Congress amended 17 U.S.C. § 107

to make explicit that “[t]he fact that work is unpublished shall not itself

bar a finding of fair use if such finding is made upon consideration of all

the above factors [in § 107(1)-(4)].” Act of Oct. 24, 1992, Pub. L. No.

102-492, 106 Stat. 3145 (1992). In fact, this act's sole purpose was to

amend 17 U.S.C. § 107 with this provision. The act's legislative history

repeatedly underscores that Congress intended there to be no per se rule

barring the fair use of unpublished works. H.R. Rep. No. 102-836, at 1

(1992), reprinted in 1992 U.S.C.C.A.N. 2553, 2553. This was primarily,

but not exclusively, out of concern for the needs of biographers,

historians, and publishers concerned with court decisions that suggested

that they could not use unpublished material of historical interest—such

as the unpublished letters and diaries of major authors or public

figures—in books or other serious treatments of historical figures and

events. See H.R. Rep. No. 102-836 (citing Salinger v. Random House,

Inc., 650 F. Supp. 413 (S.D.N.Y. 1986), rev'd, 811 F.2d 90 (2d Cir.), cert.

denied, 484 U.S. 890 (1987); New Era Publ'ns Int'l, ApS v. Henry Holt

& Co., 684 F. Supp. 808 (S.D.N.Y. 1988); New Era Publ'ns Int'l, ApS v.

Henry Holt & Co., 695 F. Supp. 1493 (S.D.N.Y. 1988), aff'd on other

grounds, 873 F.2d 576 (2d Cir. 1990)). Congress heeded this testimony

and thereafter amended the fair use statute to include the fair use of

unpublished works, not limiting it to works of historic value.

II.C.5.b. Fair Use in Criminal Cases

Although the fair use doctrine has been developed mainly through

civil cases, it is a defense to a charge of infringement, and thus a

legitimate defense in criminal cases too. However, fair use has rarely been

developed in criminal cases, most likely because prosecutors are reluctant

to prosecute where fair use is a serious issue. A fair use is not an infringing

use, and without an infringement there are no grounds for copyright

prosecution. See 17 U.S.C. § 107 (“[T]he fair use of a copyrighted work ...

is not an infringement of copyright.”); 17 U.S.C. § 506(a) (specifying

grounds for prosecuting “[a]ny person who infringes a copyright”)

(emphasis added). Moreover, a defendant who believed in good faith that

he was engaging in fair use has a complete defense to the mens rea

element, which requires the government to prove that the defendant

infringed willfully. See Section II.B.2.a. of this Chapter. (As indicated in

Section II.B.2.b., a bad-faith claim of fair use, on the other hand, might

help establish willfulness.) Prosecutors are—and generally should

be—reluctant to seek charges where the defendant acted “for purposes

such as criticism, comment, news reporting, teaching ..., scholarship, or
II. Criminal Copyright Infringement 69

research” or any other use with a beneficial public purpose. See 17 U.S.C.

§ 107.

When the defendant is charged with violating 17 U.S.C.

§ 506(a)(1)(A)—infringement for purposes of commercial advantage or

private financial gain—fair use will ordinarily not be a defense because

commercial uses are presumptively unfair. Sony, 464 U.S. at 449. On the

other hand, some commercial uses, such as commercial parodies of other

works, have been found to be fair. See Acuff-Rose, supra.

Because of the fair use doctrine's concern with noncommercial uses,

fair use is more likely to pose a significant defense in criminal cases that

do not allege a profit motive, such as large-scale infringement under

§ 506(a)(1)(B) and certain § 506(a)(1)(C) offenses. However, at least one

court has rejected fair use arguments in a civil case against peer-to-peer

file-traders who had no direct commercial motive. See BMG Music v.

Gonzalez, 430 F.3d 888, 890 (7th Cir. 2005) (finding that a peer-to-peer

user who downloaded at least 30 and as many as 1300 songs, and kept

them, did “not engage[] in a nonprofit use” for purposes of fair use

analysis).

That said, there is a wide gulf between the typical criminal copyright

case and the typical case in which fair use is a legitimate defense. In most

criminal cases, the defendant does not even arguably act “for purposes

such as criticism, comment, news reporting, teaching ..., scholarship, or

research.” See 17 U.S.C. § 107. Furthermore, many criminal prosecutions

involve the wholesale piracy of commercially popular works, in which a

fair use defense would be undercut by the fair use factors concerning “the

amount and substantiality of the portion used in relation to the

copyrighted work as a whole,” and “the effect of the use upon the

potential market for or value of the copyrighted work.” § 107(3),(4). The

works are generally copied in their entirety, and the wide availability of

the free, pirated copies (which suffer no degradation in quality in digital

form) can have a drastic effect on the potential market for legitimate

works. A strong showing on these factors will help overcome the

presumption that noncommercial use is fair.

II.C.6. “Archival Exception” for Computer Software—

17 U.S.C. § 117

Section 117 of Title 17 provides a limited exception to the blanket

rule against copying, by allowing one who owns a copy of a computer

program to copy the program as necessary to use the program or do

machine maintenance or repair, and as an archival backup, subject to

certain limitations. Specifically, § 117(a) provides that “it is not an
70 Prosecuting Intellectual Property Crimes

infringement of copyright for the owner of a copy of a computer program

to make or authorize the making or adaptation of that computer program”

under two circumstances. The first is if the making of the copy or

adaptation is “an essential step in the utilization of the computer program

in conjunction with a machine, and that [the copy] is used in no other

manner.” 17 U.S.C. § 117(a)(1). Essentially, this allows the lawful owner

of a piece of software to install it on his machine, even if doing so requires

copying the program from a CD-ROM to the hard drive or loading it from

the hard drive into RAM, both of which are considered reproduction

under copyright law. See Micro-Sparc, Inc., v. Amtype Corp., 592 F.

Supp. 33 (D. Mass. 1984) (holding that purchasers of programs sold in

printed form do not infringe copyright by typing code into computer in

order to use the programs); Summit Tech., Inc. v. High-Line Med.

Instruments Co., 922 F. Supp. 299 (C.D. Cal. 1996) (holding that owners

of opthamological laser system did not infringe copyright by turning on

system to use it, causing copy of manufacturer's data table to be loaded

into system RAM). Cf. MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d

511 (9th Cir. 1993) (holding that loading of copyrighted software into

RAM by service company constitutes reproduction).

The second circumstance in which § 117 allows copying is if the copy

is “for archival purposes only and that all archival copies are destroyed in

the event that continued possession of the computer program should

cease to be rightful.” 17 U.S.C. § 117(a)(2). This provision allows one

who owns a piece of software to make a backup copy for safekeeping, but

requires him to destroy his backup copies if he sells or otherwise transfers

his original copy or if his ownership otherwise ceases to be rightful.

A third subsection of Section 117 provides it is not an infringement

for a machine's owner or lessee to make or authorize the making of a copy

of a computer program if the copy is made solely as a result of the

activation of a machine containing a lawful copy of the software, and the

copy is used solely to repair or maintain the machine, and is destroyed

immediately thereafter. 17 U.S.C. § 117(c); see also Storage Tech. Corp.

v. Custom Hardware Eng'g & Consulting, Inc., 431 F.3d 1374, 1375 (Fed.

Cir. 2005).

Section 117's exceptions benefit the “owner of a copy of a computer

program” or, in the case of machine repair and maintenance, “the owner

or lessee of a machine.” 17 U.S.C. § 117(a),(c). However, because most

computer software is distributed subject to a license, rather than a

conventional outright sale, the question arises (in much the same way as

it does in the context of “first sale” under § 109) whether § 117 allows

copying by a person who has legally obtained a copy of a computer
II. Criminal Copyright Infringement 71

program, but licenses rather than “owns” the software. See the discussion

of first sale in Section II.C.4. of this Chapter. As with the analogous first

sale question, courts are split on the issue. Compare Krause v. Titleserv,

Inc., 402 F.3d 119 (2d Cir. 2005) (holding client to be an “owner,” for

§ 117(a) purposes, of copies of computer programs written for it by

consultant despite lack of formal title in copies, because it had paid

consultant to develop programs for its sole benefit, copies were stored on

client's server, and client had right to use or discard copies as it saw fit)

with CMAX/Cleveland, Inc. v. UCR, Inc., 804 F. Supp. 337 (M.D. Ga.

1992) (holding that licensee of copyrighted computer software system and

its employees were not entitled to computer program owner's defense to

copyright-holder's copyright infringement action, because the licensee and

employees never “owned” copy of the program, and there was evidence

that the licensee was going to market its program); cf. ISC-Bunker Ramo

Corp. v. Altech, Inc., 765 F. Supp. 1310 (N.D. Ill. 1990) (holding

defendant not entitled to § 117 exception because it acquired copy from

competitor and possession was unauthorized).

Some sellers of pirated software display a disclaimer or other notice

claiming that their distribution of unauthorized copies is somehow

permitted under 17 U.S.C. § 117. Such claims are baseless. Although

there are no reported criminal cases addressing this defense, courts have

interpreted § 117 narrowly. See, e.g., Micro-Sparc, Inc., 592 F. Supp. at

35 (while § 117 allowed owners of written copy of source code to type it

in to their own computers, it did not permit third-party business to type

in source code and sell it on diskette). Moreover, the fact that a defendant

was sufficiently aware of copyright issues to make a frivolous or bad-faith

claim of compliance with § 117 may help establish willfulness. Cf. United

States v. Gardner, 860 F.2d 1391, 1396 (7th Cir. 1988) (holding “Notice

of Warning” by seller of “black boxes” for receiving unauthorized cable

television, disclaiming liability for any illegal uses, “establish[es] that he

was well aware that his actions were unlawful”); United States v. Knox,

32 F.3d 733, 753 (3d Cir. 1994) (rejecting argument that disclaimers in

brochure stating that child pornography videos were legal disproved the

mens rea element and because “[i]f anything, the need to profess legality

should have alerted [defendant] to the films' dubious legality”); Rice v.

Palladin Enters., Inc., 128 F.3d 233, 254 (4th Cir. 1997) (holding that

jury could find the “For academic study only!” disclaimer in promotional

sales catalog for “Hit Man” book “to be transparent sarcasm designed to

intrigue and entice”).
72 Prosecuting Intellectual Property Crimes

II.D. Special Issues

Most of the special issues in criminal copyright law concerning

registration, Internet piracy, and pre-release piracy have been addressed

throughout the substantive sections of this chapter. Prosecutors who

encounter special issues that are not otherwise addressed in this chapter

should contact CCIPS at (202) 514-1026 to suggest them for an update

to be published in the electronic edition of this Manual.

II.E. Penalties

II.E.1. Statutory Penalties

Whereas the substantive crime of copyright infringement is set forth

at 17 U.S.C. § 506(a), the penalties for that conduct are set forth at 18

U.S.C. § 2319. See 17 U.S.C. § 506(a) (“Any person who infringes a

copyright willfully ... shall be punished as provided under section 2319 of

title 18, United States Code.”).

A misdemeanor carries a sentence of up to one year of imprisonment

and a $100,000 fine or twice the monetary gain or loss. See 18

U.S.C. §§ 2319(b)(3),(c)(3), 3571(b)(5). For the crimes that qualify as

misdemeanors, see Section II.B.5. of this Chapter.

A first-time felony conviction under 17 U.S.C. § 506(a)(1)(A)

(numbered § 506(a)(1) before the April 27, 2005 amendments) carries a

five-year maximum sentence of imprisonment and a fine up to $250,000

or twice the monetary gain or loss; repeat offenders face the same fine and

ten years of imprisonment. 18 U.S.C. §§ 2319(b)(1),(2), 3571(b)(3),(d)

(specifying fines for Title 18 offenses where the fine is otherwise

unspecified).

A first-time felony conviction under 17 U.S.C. § 506(a)(1)(B)

(numbered § 506(a)(2) before the April 27, 2005 amendments) carries a

three-year maximum sentence of imprisonment and a fine up to $250,000

or twice the monetary gain or loss; repeat offenders face the same fine and

six years' imprisonment. 18 U.S.C. §§ 2319(c)(1),(2), 3571(b)(3),(d).

A first-time felony conviction under 17 U.S.C. § 506(a)(1)(C) (newly

enacted on April 27, 2005) carries a three-year maximum sentence—five

years if the offense was committed for purposes of commercial advantage

or private financial gain—and a fine of $250,000 or twice the monetary

gain or loss; repeat offenders face the same fine and twice the jail time (six
II. Criminal Copyright Infringement 73

or ten years, depending on whether the offense was committed for

purposes of profit. 18 U.S.C. §§ 2319(d), 3571(b)(3), (d).

II.E.2. Sentencing Guidelines

All sentencing guideline issues concerning the criminal copyright

statute are covered in Chapter VIII of this Manual.

II.F. Other Charges to Consider

Prosecutors may wish to consider the following crimes in addition to

or in lieu of criminal copyright charges.

• Aiding-and-abetting, inducement, and conspiracy

Prosecutors may, for the usual strategic reasons, wish to bring

accessory charges, such as aiding-and-abetting or inducement, 18 U.S.C.

§ 2, or conspiracy, 18 U.S.C. § 371. See, e.g., United States v. Sachs, 801

F.2d 839 (6th Cir. 1986) (affirming conviction for aiding-and-abetting,

and conspiring to infringe, in motion picture copyright infringement case);

United States v. Allan, No. 95-CR-578-01, 2001 WL 1152925 (E.D. Pa.

Sept. 18, 2001) (denying motion to vacate sentence on defendant's

convictions for, among other things, copyright infringement, aiding-andabetting, and conspiracy).

Aiding-and-abetting or inducement of criminal copyright infringement

under 18 U.S.C. § 2 are similar to the “inducement” theory of secondary

liability the Supreme Court recently endorsed in MGM v. Grokster, 545

US __, 125 S. Ct. 2764 (2005). Although Grokster is a civil case, further

decisions in the case on remand, as well as subsequent civil litigation on

the same topic, will likely provide further guidance on how an inducement

theory may be applied in criminal copyright cases.

• Trafficking in recordings of live musical performances,

18 U.S.C. § 2319A

As discussed in Section II.B.1.a. of this Chapter, a work must be fixed

in a tangible medium in order to enjoy copyright protection. Thus, live

musical performances are not protected by copyright unless they are

“fixed” by an audio recording authorized by the performer. However, the

law provides copyright-like protections for live musical performances by

prohibited unauthorized recordings of such performances, and trafficking

in such recordings. See 17 U.S.C. § 1101 (providing civil remedies); 18

U.S.C. § 2319A (criminal sanctions). These protections were enacted in
74 Prosecuting Intellectual Property Crimes

1994 in part to comply with obligations under international copyright

treaties that require protection for musical performances. See Uruguay

Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994).

Specifically, 18 U.S.C. § 2319A(a) subjects to criminal sanctions 

[w]hoever, without the consent of the performer or performers

involved, knowingly and for purposes of commercial advantage or

private financial gain - (1) fixes the sounds or sounds and images of

a live musical performance in a copy or phonorecord, or reproduces

copies or phonorecords of such a performance from an unauthorized

fixation; (2) transmits or otherwise communicates to the public the

sounds or sounds and images of a live musical performance; or (3)

distributes or offers to distribute, sells or offers to sell, rents or offers

to rent, or traffics in any copy or phonorecord fixed as described in

paragraph (1), regardless of whether the fixations occurred in the

United States.

Although some unauthorized recordings or trade in unauthorized

recordings might be prosecuted as infringement of the underlying musical

composition performed in the recording, § 2319A specifically targets the

making and distribution of these so-called “bootlegged” musical

recordings.

Each of § 2319A's three subsections protects a different right of the

performing artist. Paragraph (a)(1) prohibits fixing the sounds or images

of a live musical performance in a tangible medium. See 17 U.S.C. § 101

(defining fixation). But see United States v. Moghadam, 175 F.3d 1269,

1274 (11th Cir. 1999) (declining to decide whether a live performance is

fixed at the time of performance). Paragraph (a)(2) prohibits transmitting

the sounds or images of a live musical performance to the public. This

subsection was intended to apply to the unauthorized transmission of

bootleg performances through radio or television, and not to the

unauthorized reproduction of previously recorded but unreleased

performances, i.e., studio out-takes. The latter should be considered for

prosecution as criminal copyright infringement or, if labeled, trafficking

in counterfeit labels, documentation, or packaging. See Chapter VI of this

Manual. Paragraph (a)(3) prohibits distributing to the public or

trafficking in any fixed recording of a live musical performance.

Under each subsection, the government must also prove that the

defendant acted: (1) without authorization from the performer involved;

(2) knowingly; and (3) for purposes of commercial advantage or private

financial gain. See Section II.B.4. of this Chapter for a detailed discussion

of the commercial motivation element.
II. Criminal Copyright Infringement 75

Section 2319A is a five-year felony (ten years for repeat offenders)

with a fine of $250,000 or twice the monetary gain or loss, see 18 U.S.C.

§§ 2319A(a), 3571(b)(3),(d), and is sentenced under the same guideline

as are copyright crimes, U.S.S.G. § 2B5.3. The statute provides for

mandatory forfeiture and destruction of all infringing items upon a

defendant's conviction. See 18 U.S.C. § 2319A(b),(c). Further, a violation

of § 2319A is listed in 18 U.S.C. § 1961(1)(B) as a RICO predicate. It

was inserted into RICO by the Anticounterfeiting Consumer Protection

Act, Pub. L. No. 104-153 § 3, 110 Stat. 1386 (1996).

The constitutionality of 18 U.S.C. § 2319A (and the related civil

statute, 17 U.S.C. § 1101) has been challenged on the basis that, in the

area of copyright, Congress may regulate only “writings” and only for

“limited times,” see U.S. Const., art. I, § 8, cl. 8, and that § 2319A (which

has no time limit and applies to live performances) exceeds those limits.

See Moghadam, 175 F.3d at 1274-77; United States v. Martignon, 346

F. Supp. 2d 413, 430 (S.D.N.Y. 2004); KISS Catalog, Ltd. v. Passport

Int'l Prods., Inc., 405 F. Supp. 2d 1169 (C.D. Cal. 2005). The cases have

reached different results. In Moghadam, the court rejected the defendant's

claim that § 2319A was invalid because it regulated performances that

were not “writings,”and upheld the constitutionality of § 2319A as a valid

exercise of Congress's Commerce Clause power. See 175 F.3d at 1282.

However, the court also acknowledged without deciding (because the

question was not preserved on appeal) that the statute may face “another

constitutional problem under the Copyright Clause,” which allows

Congress to protect works only for “limited times.” Id. at 1274 n.9, 1281.

The Martignon court held the statute unconstitutional, concluding that

Congress may not exercise its Commerce Clause power to enact a

“copyright-like” statute not subject to the constitutional restrictions on

copyright laws. Martignon, 346 F. Supp. 2d at 422. In Kiss Catalog, the

district court initially found 17 U.S.C. § 1101 unconstitutional, citing

Martignon, but on rehearing vacated its decision and upheld the statute,

relying on Moghadam. See KISS Catalog v. Passport Int'l Prods., 350 F.

Supp. 2d 823, 837 (C.D. Cal. 2004); Kiss Catalog, 405 F. Supp. 2d at

1172-73.

Various states also criminalize trafficking in bootleg recordings.

• Unauthorized recording of motion pictures in a motion picture

exhibition facility (“Camcording”), 18 U.S.C. § 2319B

The Family Entertainment and Copyright Act, Pub. L. No. 109-9, 119

Stat. 218 (enacted April 27, 2005), created a new criminal offense that

targets “camcording,” the use of camcorders and similar devices to record

movies playing in public movie theaters. “Camcorded” copies of movies
76 Prosecuting Intellectual Property Crimes

are a significant source of pirated movies, and sales of camcorded copies

of movies can be especially harmful to copyright owners, because they

typically are created and distributed when the movie is available only in

theaters and not on DVD or other formats. H.R. Rep. No. 109-33(I),

reprinted in 2005 U.S.C.C.A.N. 220.

The elements of an offense under 18 U.S.C. § 2319B are that the

defendant (1) knowingly, and (2) without the authorization of the

copyright owner, (3) used or attempted to use an audiovisual recording

device, (4) to transmit or make a copy of a motion picture or other

audiovisual work protected under Title 17, (5) from a performance of

such work in a motion picture exhibition facility. 18 U.S.C. § 2319B(a).

The maximum punishment for the offense is three years (six years for

repeat offenders). Id.

Section 2319B's mens rea requirement is lower than the “willfulness”

requirement for criminal copyright offenses: a § 2319B defendant need

only act “knowingly.” Additionally, it is not necessary to show

infringement of a copyright. Rather, the government need only show that

the defendant was transmitting or copying (or attempting to transmit or

copy) a copyrighted motion picture without the copyright owner's

permission. Although the defenses to infringement set forth in Title 17

would not apply to a prosecution under 18 U.S.C. § 2319B, the statute's

legislative history indicates that Congress intended prosecutors to avoid

prosecuting cases that would be deemed “fair use” under copyright law.

See H.R. Rep. No. 109-33(I), at 4, reprinted in 2005 U.S.C.C.A.N. 220,

223.

An “audiovisual recording device” is defined as a “digital or analog

photographic or video camera, or any other technology or device capable

of enabling the recording or transmission of a copyrighted motion picture

or other audiovisual work, or any part thereof, regardless of whether

audiovisual recording is the sole or primary purposes of the device.” 18

U.S.C. § 2319B(g)(2). This would appear to apply to camera-phones,

PDA phones, and digital cameras (especially those capable of recording

video). Congress, however, intended that the offense should not cover

incidental uses of these devices in a theater, even though such uses could

violate other statutes (such as the copyright laws). See H.R. Rep. No. 109-

33(I), at 2-3, reprinted in 2005 U.S.C.C.A.N. 221-22.

The offense applies only to camcording in a “motion picture

exhibition facility,” which is defined by reference to that same term in 17

U.S.C. § 101: “a movie theater, screening room, or other venue that is

being used primarily for the exhibition of a copyrighted motion picture,

if such exhibition is open to the public or is made to an assembled group
II. Criminal Copyright Infringement 77

of viewers outside of a normal circle of family and its social

acquaintances.” The term includes commercial movie theaters and may

also apply to generally non-public or quasi-public spaces such as a

university auditorium, but only when such a venue is being used as a

“public” exhibition facility at the time of the offense. See H.R. Rep. No.

109-33(I), at 3, reprinted in 2005 U.S.C.C.A.N. 222 (stating that “open

to the public” is intended to refer to the particular exhibition rather than

the venue generally). 

• Trafficking in counterfeit and illicit labels, and counterfeit

documentation and packaging, 18 U.S.C. § 2318

This is covered in Chapter VI of this Manual.

• Trafficking in goods and services with counterfeit trademarks,

service marks, and certification marks, 18 U.S.C. § 2320

See Chapter III of this Manual.

• Digital Millennium Copyright Act (DMCA),

17 U.S.C. §§ 1201-1204

The DCMA provides criminal penalties for dismantling the electronic

locks that are intended to prevent people from accessing or copying

copyrighted works without permission, for trafficking in “electronic

lockpicks,” and for falsifying or removing copyright management

information. See Chapter V of this Manual.

• Unauthorized reception of cable and satellite service,

47 U.S.C. §§ 553, 605 and 18 U.S.C. § 2511

• Economic Espionage Act, 18 U.S.C. §§ 1831-1839

For stealing trade secrets, whether copyrighted or not. See Chapter IV

of this Manual.

• Mail and wire fraud, 18 U.S.C. §§ 1341, 1343, 1346

Although fraud schemes can involve copyrighted works, prosecutors

should be wary of charging mail or wire fraud as a substitute for a criminal

copyright charge in the absence of evidence of any misrepresentation or

scheme to defraud. In one copyright case, in which a wire fraud charge

was brought because the facts were insufficient to support a criminal

copyright charge, no misrepresentation was alleged, and the district court

dismissed the charge. See United States v. LaMacchia, 871 F. Supp. 535

(D. Mass. 1994). The judge in LaMacchia reasoned that the bundle of

rights conferred by copyright is unique and carefully defined, precluding

prosecution under the general wire fraud statute, at least when there is no
78 Prosecuting Intellectual Property Crimes

fraudulent conduct on the part of the defendant. Id. at 544-45. The court

in LaMacchia relied heavily on the Supreme Court's decision in Dowling

v. United States, 473 U.S. 207 (1985). In Dowling, the Court overturned

the defendant's conviction for interstate transportation of stolen property

under 18 U.S.C. § 2314 because it found Congress' actions to be

preemptive. See Dowling, 473 U.S. at 207; see also 4 Nimmer on

Copyright § 15.05[A] at 15-34 (1999) (“Dowling's lesson is that Congress

has finely calibrated the reach of criminal copyright liability, and

therefore, absent clear indication of Congressional intent, the criminal

laws of the United States do not reach copyright-related conduct.”).

While LaMacchia suggests that courts are unlikely to be receptive to

a wire or mail fraud charge brought as a substitute for a criminal copyright

charge in a case where some element of the criminal copyright charges is

missing, wire or mail fraud charges may still be viable and appropriate in

infringement cases that involve actual misrepresentations or schemes to

defraud. Cf. United States v. Manzer, 69 F.3d 222, 226 (8th Cir. 1995)

(holding that sale to a third party of illegal cable television descrambling

devices violated federal fraud statutes); United States v. Coyle, 943 F.2d

424, 427 (4th Cir. 1991) (holding sale of cable television descramblers to

be a scheme to defraud “because it wronged the cable companies in their

'property rights by dishonest methods or schemes'”) (quoting United

States v. McNally, 483 U.S. 350, 358 (1987)). Nevertheless, in the

absence of strong evidence of misrepresentation, prosecutors should avoid

a wire or mail fraud charge if an infringement crime can be proved.

For a more detailed discussion of 18 U.S.C. §§ 1341 and 1343, refer

to USAM Chapter 9-43.000. The Criminal Division's Fraud Section at

(202) 514-7023 can provide further information and guidance.

• Interstate transportation and receipt of stolen property or

goods, 18 U.S.C. §§ 2314-2315

The Interstate Transportation of Stolen Property Act (“ITSP”)

punishes “[w]hoever transports, transmits, or transfers in interstate or

foreign commerce any goods, wares, merchandise, securities or money, of

the value of $5,000 or more, knowing the same to have been stolen,

converted or taken by fraud,” 18 U.S.C. § 2314, and “[w]hoever receives,

possesses, conceals, stores, barters, sells, or disposes” stolen property that

has crossed a state or federal boundary, 18 U.S.C. § 2315.

Although ITSP can be used under certain circumstances to prosecute

theft of proprietary information or other types of intellectual property, the

Supreme Court has rejected the use of the ITSP statute to prosecute

copyright infringement cases, at least when the infringement does not
II. Criminal Copyright Infringement 79

involve the actual theft of a tangible good. Dowling v. United States, 473

U.S. 207 (1985). In Dowling, the Court reversed a conviction for the

interstate transportation of infringing copies of Elvis Presley records,

holding that Congress did not intend § 2314 to criminalize copyright

infringement. The Court reasoned that a copyright infringer neither

assumed physical control over the copyright nor wholly deprived the

owner of its use. The statute “seems clearly to contemplate a physical

identity between the items unlawfully obtained and those eventually

transported, and hence [requires] some prior physical taking of the subject

goods.” Dowling, 473 U.S. at 216.

Despite Dowling, an ITSP charge may be appropriate for acts of

infringement that involve the actual transportation of tangible objects

across state lines. For more on these issues, see Section IV.F. of this

Manual.

• Racketeer Influenced and Corrupt Organizations Act (RICO),

18 U.S.C. §§ 1961-1968

The criminal copyright and bootleg recordings of live music

performances offenses are RICO predicates. See 18 U.S.C. § 1961(1)(B).

RICO charges must be approved by the Department's Organized Crime

and Racketeering Section, which can be reached at (202) 514-3594.

• Money laundering, 18 U.S.C. § 1956

Criminal copyright infringement is a specified unlawful activity for

purposes of the money laundering statute. See 18 U.S.C. § 1956(c)(7)(D).
81

III.

Trafficking In

Counterfeit Trademarks,

Service Marks, and

Certification Marks—

18 U.S.C. § 2320

III.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

III.A.1. Overview of the Chapter . . . . . . . . . . . . . . . . . . . . . . . 83

III.A.2. Why Criminal Law Protects Trademarks, Service Marks, and

Certification Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

III.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

III.B.1. The Trademark Counterfeiting Crime in General . . . . 87

III.B.2. Relevance of Civil Trademark Law in Criminal 

Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

III.B.3. Intentionally Trafficked or Attempted to Traffic in Goods or

Services [after March 16, 2006: or Labels, Documentation,

or Packaging for Goods or Services]

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

III.B.3.a. Intentionally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

III.B.3.b. Trafficked or Attempted to Traffic . . . . . . . . . . . 90

III.B.3.b.i. General Definition . . . . . . . . . . . . . . . . . . . 90

III.B.3.b.ii. Consideration vs. Commercial Advantage and

Private Financial Gain . . . . . . . . . . . . . . . . . . . . . . 92

III.B.3.b.iii. Making and Obtaining Counterfeits vs.

Possession with Intent to Traffic . . . . . . . . . . . . . . 93

III.B.3.b.iv. Importing and Exporting Related to Transporting

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

III.B.3.c. Goods and Services [after March 16, 2006: and Labels,

Patches, Stickers, Wrappers, Badges, Emblems, Medallions,
82 Prosecuting Intellectual Property Crimes

Charms, Boxes, Containers, Cans, Cases, Hangtags,

Documentation, or Packaging of Any Type or Nature] 94

III.B.4. The Defendant Used a "Counterfeit Mark" On or In

Connection With Those Goods or Services [after March 16,

2006: or a Counterfeit Mark Was Applied to Labels,

Documentation, or Packaging for Those Goods or Services]

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

III.B.4.a. Definition of Counterfeit Mark Generally: Not Genuine

or Authentic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

III.B.4.b. The Counterfeit Mark Must Be Identical to or

Indistinguishable from a Genuine Mark Owned by Another

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

III.B.4.c. The Genuine Mark Must Be Federally Registered on the

U.S. Patent and Trademark Office's Principal Register

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

III.B.4.d. The Genuine Mark Must Have Been in Use by the

Mark-Holder or Its Licensee . . . . . . . . . . . . . . . . . . . . 103

III.B.4.e. Use of the Counterfeit Mark "On or In Connection

With" Goods or Services . . . . . . . . . . . . . . . . . . . . . . 104

III.B.4.f. The Counterfeit Mark Must Have Been Used for the

Same Type of Goods or Services for Which the Genuine

Mark Was Registered . . . . . . . . . . . . . . . . . . . . . . . . . 105

III.B.4.g. Likelihood of Confusion, Mistake, or Deception

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

III.B.5. The Defendant Used the Counterfeit Mark "Knowingly"

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

III.B.6. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

III.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

III.C.1. Authorized-Use Defense: Overrun Goods . . . . . . . . . 114

III.C.2. Authorized-Use Defense—Gray Market Goods . . . . . 117

III.C.3. Repackaging Genuine Goods . . . . . . . . . . . . . . . . . . . 118

III.C.4. Lanham Act Defenses . . . . . . . . . . . . . . . . . . . . . . . . 121

III.C.5. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . 122

III.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
III. Counterfeit Marks 83

III.D.1. High-Quality and Low-Quality Counterfeits . . . . . . . 123

III.D.2. Counterfeit Goods with Genuine Trademarks . . . . . . 124

III.D.3. Selling Fakes While Admitting That They Are Fakes

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

III.D.4. Selling Another's Trademarked Goods As One's Own (Reverse

Passing-Off) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

III.D.5. Mark-Holder's Failure to Use ® Symbol . . . . . . . . . . 125

III.D.6. Storage Costs and Destruction . . . . . . . . . . . . . . . . . 125

III.D.7. Units of Prosecution . . . . . . . . . . . . . . . . . . . . . . . . . 126

III.D.8. Olympic Symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

III.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.1. Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.2. Imprisonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.3. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

III.E.4. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

III.E.5. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . 131

III.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . 133

III.A. Introduction

III.A.1. Overview

Trademarks and service marks are part of the fabric of American

society. They are on our clothes, our cars, and nearly everything else we

buy, and are advertised on the street, in magazines, on television and

websites, and especially in stores. They are protected not only by civil law,

but also by the criminal counterfeit marks statute, 18 U.S.C. § 2320.

A trademark is “any word, name, symbol, or device, or any

combination thereof ... used by a person ... to identify and distinguish his

or her goods ... from those manufactured or sold by others and to indicate

the source of the goods.” 15 U.S.C. § 1127. A service mark, by contrast,

identifies the source of services rendered or offered, such as athletic

events, television shows, restaurant services, telecommunications services,

or retail business services, rather than goods. Id. Examples of well-known
84 Prosecuting Intellectual Property Crimes

trademarks include Kodak®, Apple®, Microsoft®, Coca-Cola®, GE®,

Life-Savers®, USA Today®, KLEENEX®, the color pink for

Owens-Corning fiberglass, and the NBC chime. Well-known service marks

include Merry Maids®, Greyhound®, Wal-Mart®, Taco Bell®, Burger

King®, and McDonald's®.

Two other types of marks are protected by 18 U.S.C. § 2320:

certification and collective marks. A certification mark is used to certify

regional or other origin, material, mode of manufacture, quality, accuracy,

or other characteristics of goods or services, or that the work or labor on

the goods or services was performed by members of a union or other

organization. 15 U.S.C. §1127. Examples of certification marks include

Underwriters Laboratories' UL® mark, which certifies the safety standards

of electrical cable equipment, and the Woolmark® symbol, which certifies

that certain laundry products can wash and dry wool and wool-blend

products without damage. These marks indicate that authorized persons

will manufacture the products in accordance with the mark-holder's

processes. A collective mark is a trademark or service mark used by an

association, union, or other group either to identify the group's products

or services, or to signify membership in the group. Id. PGA®, Realtor®,

and AFL-CIO® are examples of collective marks.

As is discussed in more detail below, the law protects marks from

infringement because they are important to businesses and for consumer

protection. Americans rely on the brands these marks represent when

deciding which goods and services to purchase and use. This gives

companies a strong incentive to control the quality of their goods and

services and invest heavily in their brands. One who infringes a mark

often misleads consumers, steals businesses' sales, and misrepresents to

the public the quality of the marked products and services. Criminal

prosecution is appropriate for the most egregious infringers.

This Chapter first discusses the functions protected by trademarks,

service marks, and certification marks, and then discusses the criminal

counterfeiting statute and the elements of the crime, common defenses,

issues unique to this crime, and related statutory penalties. Forms

providing sample indictments and jury instructions are provided in

Appendix C.

The criminal counterfeit marks statute, 18 U.S.C. § 2320, was

amended effective March 16, 2006, pursuant to the Stop Counterfeiting

in Manufactured Goods Act, Pub. L. No. 109-181, § 1, 120 Stat. 285,

285-88 (2006), and the Protecting American Goods and Services Act of

2005, Pub. L. No. 109-181, § 2, 120 Stat. 285, 288 (2006). Discussion

of these amendments is integrated throughout this Chapter,
III. Counterfeit Marks 85

sometimes—but not always—by means of bracketed text. Prosecutors

should consult the text carefully to ensure that they are applying the law

in effect at the time of the offense.

In addition to this Chapter, prosecutors may refer to the leading

treatise on trademark law, J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition (2005), as well as other helpful law

review articles such as Sylvia N. Albert et al., Intellectual Property Crimes,

42 Am. Crim. L. Rev. 631 (2005); Louis Altman, Callmann on Unfair

Competition, Trademarks and Monopolies, 4 Callmann on Unfair Comp.,

T. & Mono. § 22:53 (2003); Debra D. Peterson, Criminal Counterfeiting

and Component Parts: Closing the Perceived “Label Loophole,” 30 AIPLA

Q.J. 457 (2002); Michael Coblenz, Intellectual Property Crimes, 9 Alb.

L.J. Sci. & Tech. 235 (1999); and David J. Goldstone & Peter J. Toren,

The Criminalization of Trademark Counterfeiting, 31 Conn. L. Rev. 1

(1998).

Although § 2320 criminalizes the infringement of trademarks, service

marks, and certification marks, for ease of discussion this Manual often

refers primarily to trademarks and sales of goods. The legal analysis

should, however, apply equally to services, service marks, and certification

marks as well.

III.A.2. Why Criminal Law Protects Trademarks, Service

Marks, and Certification Marks

Trademarks and service marks serve at least four functions: 

1. They identify a particular seller's goods or services and

distinguish them from those sold by others

2. They signify that all goods or services bearing the mark come

from or are controlled by a single source

3. They signify that all goods or services bearing the same mark

are of an equal level of quality

4. They serve as a primary method to advertise and sell goods and

services

See 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair

Competition § 3.2 (2005). A trademark or service mark also serves as an

important “objective symbol of the good will that a business has built up.

Without the identification function performed by trademarks, buyers

would have no way of returning to buy products that they have used and

liked.” Id. Certification marks are intended to “certify regional or other
86 Prosecuting Intellectual Property Crimes

origin, material, mode of manufacture, quality, accuracy or other

characteristics of such person's goods or services.” 15 U.S.C. § 1127.

Because “penalties under [the civil Lanham] Act have been too small,

and too infrequently imposed, to deter counterfeiting significantly,” much

of the conduct that formerly had been subject only to civil penalties was

criminalized through the enactment of the Trademark Counterfeiting Act

of 1984, Pub. L. No. 98-473, 98 Stat. 2178 (1984), (codified at 18

U.S.C. § 2320). See S. Rep. No. 98-526, at 5 (1984), reprinted in 1984

U.S.C.C.A.N. 3627, 3631.

The criminalization of trademark counterfeiting serves at least four

important purposes:

1. Protecting a mark-holder's intellectual property from theft or

dilution

Stealing a company's name or brand name is a type of corporate

identity theft. See H. Rep. 109-68, at 8 n.2 (“Congress was concerned ...

that counterfeiters can earn enormous profits by capitalizing on the

reputations, development costs, and advertising efforts of honest

manufacturers at little expense to themselves.”) (alterations in original

and internal quotation marks omitted) (legislative history to Stop

Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181, § 1,

120 Stat. 285 (2006)) (citing United States v. Hon, 904 F.2d 803, 806

(2d Cir. 1990) and S. Rep. 98-526, at 4-5 (1984), reprinted in 1984

U.S.C.C.A.N. at 3630-31). A counterfeiter should no more be able to steal

a company's good name (and the profits associated with its name) than

the company's money or other assets. Diane Kiesel, Battling the Boom in

Bogus Goods, 71-MAR A.B.A.J. 60 (1985). Also, by selling inferior

products, the counterfeiter may devalue a mark-holder's good name even

while profiting from it. Id.

2. Protecting consumers from fraud

When consumers decide what goods to buy, they should be able to

rely on individual goods' trademarks and the quality those marks purport

to represent. See H. Rep. 109-68, at 8 n.2 (“Congress was concerned not

only that trademark counterfeiting defrauds purchasers, who pay for

brand-name quality and take home only a fake...”) (alterations in original

and internal quotation marks omitted) (citing United States v. Hon, 904

F.2d 803, 806 (2d Cir. 1990) and S. Rep. 98-526, at 4-5, reprinted in

1984 U.S.C.C.A.N. at 3630-31); Note, Badwill, 116 Harv. L. Rev. 1845

(2003). Counterfeit marks can mislead consumers. They give the ring of

authenticity to goods of lower quality. They can even mask serious health

or safety risks to consumers, as in the cases of counterfeit food products,
III. Counterfeit Marks 87

batteries, prescription drugs, or automotive parts. S. Rep. No. 98-526, at

4-5 (1984), reprinted in 1984 U.S.C.C.A.N. 3627, 3630-31. Trademark

counterfeiting can also be difficult to regulate civilly. With a large number

of victims across a potentially large geographic region—especially in the

case of goods offered online—and small losses per victim, a large-scale

counterfeiter can often evade civil sanctions.

3. Protecting the safety of non-purchasing users

Sales of counterfeit products can hurt not only the trademark holder

and the initial purchaser, but also third parties who use the goods or

services after the initial purchase. For example, airline passengers are

victims of counterfeit airplane parts, coronary patients are victims of

counterfeit heart pumps, and children are victims of counterfeit infant

formula, even though in each case the counterfeit goods were purchased

for those consumers' benefit by another person. These are the types of

situations that Congress sought to eradicate by criminalizing trademark

infringement. See H.R. Rep. No. 104-556, at 3 (1996), reprinted in 1996

U.S.C.C.A.N. 1074, 1076; S. Rep. No. 98-526, at 4 (1984), reprinted in

1984 U.S.C.C.A.N. 3627, 3630-31.

4. Enforcing market rules

Just as counterfeiting money and forging financial instruments

undermine fundamental rules of the marketplace, counterfeiting

trademarks weakens modern commercial systems. David J. Goldstone &

Peter J. Toren, The Criminalization of Trademark Counterfeiting, 31

Conn. L. Rev. 1, 17-19 (1998).

III.B. Elements 

III.B.1. The Trademark Counterfeiting Crime in General

The Trademark Counterfeiting Act, 18 U.S.C. § 2320(a), states:

Whoever intentionally traffics or attempts to traffic in goods or

services and knowingly uses a counterfeit mark on or in connection

with such goods or services[, or intentionally traffics or attempts to

traffic in labels, patches, stickers, wrappers, badges, emblems,

medallions, charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging of any type or nature, knowing that a

counterfeit mark has been applied thereto, the use of which is likely

to cause confusion, to cause mistake, or to deceive,] shall, if an

individual, be fined not more than $2,000,000 or imprisoned not
88 Prosecuting Intellectual Property Crimes

more than 10 years, or both, and, if a person other than an individual,

be fined not more than $5,000,000.

The bracketed language was inserted by the Stop Counterfeiting in

Manufactured Goods Act, Pub. L. No. 109-181, § 1(b)(1), 120 Stat. 285,

285 (Mar. 16, 2006), and thus applies only to offenses arising after its

enactment.

Selling just one counterfeit item can be a felony. United States v.

Foote, 413 F.3d 1240, 1246 (10th Cir. 2005). There is no misdemeanor

provision.

To establish a criminal offense under 18 U.S.C. § 2320, the

government must prove the following elements (presented here with subelements for clarity):

1. The defendant intentionally trafficked or attempted to traffic in

goods or services [after March 16, 2006: or labels, documentation

or packaging for goods or services]

2. The defendant used a counterfeit mark on or in connection with

those goods or services [after March 16, 2006: or a counterfeit

mark was applied to labels, documentation, or packaging for those

goods or services]

a. The counterfeit mark was not genuine or authentic

b. The counterfeit mark was identical to or indistinguishable

from a genuine mark owned by another

c. The genuine mark was registered on the principal register in

the United States Patent and Trademark Office

d. The genuine mark had been in use by the mark-holder or its

licensee

e. The counterfeit mark was used “on or in connection with” the

defendant's goods or services [after March 16, 2006: the

counterfeit mark was “applied to or used in connection with”

the goods or services or was “applied to or consist[ed] of”

labels, documentation, or packaging “of any type or nature”]

f. The counterfeit mark was used “in connection with” the type

of goods and services for which the protected mark was

registered [after March 16, 2006: or the counterfeit labels,

documentation, or packaging were “designed, marketed, or

otherwise intended to be used on or in connection with the

goods or services for which the mark [was] registered”]
III. Counterfeit Marks 89

g. The counterfeit mark was used in a manner “likely to cause

confusion, to cause mistake, or to deceive”

3. The defendant knowingly used the mark and knew that the mark

was counterfeit

The bracketed language was inserted or amended by the Stop

Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181, § 1,

120 Stat. 285, 285-87 (Mar. 16, 2006). The government must also

choose an appropriate venue. These elements are discussed in detail

below.

III.B.2. Relevance of Civil Trademark Law in Criminal Cases

Before discussing the elements, it is important to note that when

Congress drafted § 2320, it relied on the “concepts and definitions of the

Lanham Act,” the civil trademark statute codified at 15 U.S.C. §§ 1051-

1127. See H.R. Rep. No. 98-997, at 4-5 (1984). The Lanham Act's

defenses and limitations on remedies are specifically incorporated into

§ 2320. See 18 U.S.C. § 2320(c), (e)(3), and the discussion in Section

III.C.4. of this Chapter. Moreover, Congress repeatedly indicated that the

Lanham Act was the background against which § 2320 should be

interpreted. See, e.g., Joint Statement on Trademark Counterfeiting

Legislation, 130 Cong. Rec. 31,675-77 (1984) (hereinafter “Joint

Statement”) (“No conduct will be criminalized by this act that does not

constitute trademark infringement under the Lanham Act.”). 

Given this legislative history, courts deciding criminal cases under

§ 2320 have often turned to civil opinions decided under the Lanham Act.

For example, the Ninth Circuit affirmed one defendant's § 2320

conviction by relying not only on the criminal statute's legislative history,

but also on two civil Lanham Act cases, noting that the “definition of the

term 'counterfeit mark' in the Lanham Act is nearly identical to the

definition [of counterfeit mark] under Section 2320, suggesting that

Congress intended to criminalize all of the conduct for which an

individual may be civilly liable.” United States v. Petrosian, 126 F.3d

1232, 1234 (9th Cir. 1997); see also 15 U.S.C. §§ 1116(d) (defining

“counterfeit mark” in civil actions), 1127 (defining “counterfeit”).

Similarly, the Eleventh Circuit held that the “likely to cause confusion,

mistake or deceive” test within the definition of counterfeit mark at 18

U.S.C. § 2320(e)(1)(A)(iii) extends beyond direct purchasers to

encompass the purchasing public and potential purchasers, based on the

“identical language” in the Lanham Act and the legislative history. United

States v. Torkington, 812 F.2d 1347, 1351-52 (11th Cir. 1987)

(“Congress ... manifested its intent that [§ 2320] be given the same
90 Prosecuting Intellectual Property Crimes

interpretation as is given the identical language in [§ 1114(1)] of the

Lanham Act”).

Despite the civil and criminal laws' many similarities, some courts

have held that their differences sometimes merit distinction. See United

States v. Hanafy, 302 F.3d 485, 488 (5th Cir. 2002) (holding that

Lanham Act cases “should not be used as authoritative in interpreting a

criminal statute”); United States v. Giles, 213 F.3d 1247, 1249-50 (10th

Cir. 2000) (declining to follow a civil case in part because § 2320, as a

criminal statute, must be construed more narrowly); Torkington, 812 F.2d

at 1350 (noting that § 2320 is “narrower in scope” than the Lanham Act).

III.B.3. Intentionally Trafficked or Attempted to Traffic in Goods

or Services [after March 16, 2006: or Labels,

Documentation, or Packaging for Goods or Services]

Section 2320(a) requires the government to prove that the defendant

“intentionally” trafficked in goods or services [after March 16, 2006: or

in “labels, patches, stickers, wrappers, badges, emblems, medallions,

charms, boxes, containers, cans, cases, hangtags, documentation, or

packaging of any type or nature”] or attempted to do so. 18 U.S.C.

§ 2320(a); see Stop Counterfeiting in Manufactured Goods Act, Pub. L.

No. 109-181, § 1, 120 Stat. 285, 285-87 (Mar. 16, 2006). 

III.B.3.a. Intentionally

The term “intentionally” modifies “traffics or attempts to traffic in

goods or services.” Id.; see United States v. Baker, 807 F.2d 427, 429 (5th

Cir. 1986) (quoting legislative history's breakdown of § 2320's two mens

rea elements). It means “that the defendant trafficked in the goods or

services in question deliberately, or 'on purpose.'” See Joint Statement,

130 Cong. Rec. 31,674 (1984).

The government need not prove that the defendant specifically

intended to violate 18 U.S.C. § 2320 or even that he knew his conduct

was illegal. Baker, 807 F.2d at 427-30; United States v. Gantos, 817 F.2d

41, 42-43 (8th Cir. 1987) (affirming district court's refusal to instruct jury

that § 2320 required proof that defendant knew that his act violated the

law).

III.B.3.b. Trafficked or Attempted to Traffic

III.B.3.b.i. General Definition

Before March 16, 2006, “traffic” was defined in 18 U.S.C.

§ 2320(e)(2) to mean “transport, transfer, or otherwise dispose of, to
III. Counterfeit Marks 91

another, as consideration for anything of value, or make or obtain control

of with intent so to transport, transfer, or dispose of.”

That definition was broad, covering all aspects of commercial activity

from initial manufacture to distribution and sale, but was not intended to

cover purchases for personal use. See Joint Statement, 130 Cong. Rec.

31,675 (1984); S. Rep. 98-526 (1984), reprinted in 1984 U.S.C.C.A.N.

3627; David J. Goldstone et al., The Criminalization of Trademark

Counterfeiting, 31 Conn. L. Rev. 1 (1998). A defendant who did not

personally “transport[], transfer[], or otherwise dispose[]” of the goods

but who aided and abetted a co-conspirator who did traffic could be

convicted as an aider-and-abettor. See United States v. Guerra, 293 F.3d

1279, 1287 (11th Cir. 2002) (affirming § 2320 conspiracy and aidingand-abetting convictions for defendants who made labels that a coconspirator attached to fake Cuban cigars he sold).

Yet this broad definition arguably regulated too narrow a swath of

commercially-motivated conduct, and it generally did not explain how to

deal with cases in which the defendant was caught possessing counterfeits

with the intent to traffic in them. See Sections III.B.3.b.ii.-iii. of this

Chapter.

These problems were fixed by the Protecting American Goods and

Services Act of 2005, enacted March 16, 2006. It defines “traffic” as

follows:

(e)(2) the term “traffic” means to transport, transfer, or otherwise

dispose of, to another, as consideration for anything of value [for

purposes of commercial advantage or private financial gain], or [to]

make[, import, export,] or obtain control of[, or possess,] with intent

to so transport, transfer, or otherwise dispose of;

for which

(e)(3) [the term 'financial gain' includes the receipt, or expected

receipt, of anything of value].

Pub. L. No. 109-181, § 2, 120 Stat. 285, 288 (2006) (amending 18

U.S.C. § 2320(e)(2), (3) (adding brackets and strikethrough to show

amendment from prior law). These issues are discussed below.

III.B.3.b.ii. Consideration vs. Commercial Advantage and

Private Financial Gain

Under the prior definition of “traffic,” the thing “of value” that a

defendant had to receive as consideration did not need to be a financial

payment, but rather could be anything that had value. See United States
92 Prosecuting Intellectual Property Crimes

v. Koehler, 24 F.3d 867, 870-71 (6th Cir. 1994) (affirming § 2320

conviction based on acceptance of air conditioner compressors in lieu of

financial payment). That rule survived the 2006 amendments, in which

“consideration” was replaced with “for purposes of commercial advantage

or private financial gain,” § 2320(e)(2) (as amended), with “financial

gain” defined as including “the receipt, or expected receipt, of anything of

value,” § 2320(e)(3) (as amended) (emphasis added).

The “consideration” requirement may have been too narrow to

capture some types of commercially-motivated counterfeiting conduct: at

least one court held that the term must be interpreted in the contractual

sense as the product of a bargained-for exchange between parties. See

United States v. Habegger, 370 F.3d 441, 444-45 (4th Cir. 2004). In

Habegger, the Fourth Circuit held that a free sample of counterfeit goods

sent to a potential customer did not constitute “trafficking” under

§ 2320(e)(2), even if the samples had been sent to maintain the

customer's good will, because there had been no agreement to purchase

goods. Id. at 445. The court might have decided differently, however, had

there been “more than a mere hope on the part of the sender that the

recipient [would] purchase goods in the future,” such as if the recipient

had “promised to pay for the socks, to buy additional socks if he found

the samples acceptable, or even to examine the socks and consider

purchasing more.” Id.

To avoid problems like this, Congress replaced “consideration” with

“for purposes of commercial advantage or financial gain,” a phrase which

has a long-standing meaning within the copyright and criminal codes. It

covers a wider variety of profit-related infringement, regardless of whether

the defendant infringed for a direct quid pro quo or actually made a

profit. For a detailed discussion of how to apply the commercial advantage

or financial gain element, see Section II.B.4. of this Manual. The cases

discussed there should be persuasive in counterfeit mark cases arising after

the 2006 amendments.

One type of conduct that the term “traffic” does not include, however,

is consumers' knowing acquisition of counterfeit items solely for personal

use. This was true under the prior version of “traffic.” See Joint

Statement, 130 Cong. Rec. 31,675 (1984). It is also true after the 2006

amendments, given that “commercial advantage and private financial

gain” does not include acquiring infringing items for personal use. See

Section II.B.4. of this Manual.
III. Counterfeit Marks 93

III.B.3.b.iii. Making and Obtaining Counterfeits vs. Possession

with Intent to Traffic

At first glance, possession of contraband with intent to traffic—which

the old definition did not explicitly cover—appears coextensive with

making or obtaining control of contraband with intent to traffic—both of

which the old and new definitions explicitly included. See 18 U.S.C.

§ 2320(e)(2) (“[T]he term 'traffic' means to transport, transfer, or

otherwise dispose of, to another, [for purposes of commercial advantage

or private financial gain], or [to] make[, import, export,] obtain control

of[, or possess,] with intent to so transport, transfer, or otherwise dispose

of [-]”) (showing 2006 amendments); United States v. DeFreitas, 92 F.

Supp. 2d 272, 277 (S.D.N.Y. 2000) (holding that purchasing counterfeit

items in China for transportation to and sale in the United States

constituted an illegal act of “obtaining control” for purposes of § 2320).

Yet there is a subtle—but important—distinction between “obtaining

control” with intent to traffic and “possession” with intent to traffic.

Consider a warehouse full of counterfeits, with no records indicating when

the counterfeits were made, obtained, or transported. Under the old

definition of trafficking, the defendant might argue that although the

government could show that he possessed counterfeits in commercial

quantities, it could not prove when he made them or obtained control of

them—the old definition's operative verbs. In the same vein, the

defendant might argue that without records to prove when the defendant

made or obtained control of the counterfeits, a fortiori the government

could not prove that these events occurred within the statute of

limitations. If, however, the government need only prove that the

defendant possessed the contraband with the intent to traffic in it, then

the government can establish that that action occurred on the date it

found the warehouse full of counterfeits; it need not prove when the

defendant acquired or produced the contraband. Thus, Congress amended

the definition of trafficking explicitly to include possession with intent to

traffic.

III.B.3.b.iv. Importing and Exporting Related to Transporting

Congress added importing and exporting to the new definition of

trafficking in 2006 to make clear that both acts violate § 2320. The prior

definition of “traffic” covered both importing and exporting counterfeits:

importing and exporting are forms of transporting goods, and the old

definition explicitly covered transportation. See 18 U.S.C. § 2320(e)(2)

(“[T]he term 'traffic' means to transport, transfer, or otherwise dispose of,

to another ...”) (emphasis added) (pre-2006 amendments); United States
94 Prosecuting Intellectual Property Crimes

v. DeFreitas, 92 F. Supp. 2d 272, 276-77 (S.D.N.Y. 2000) (holding that

importing counterfeit items from China into the United States for sale

constituted trafficking under § 2320). The 2006 amendments make it

even more clear that the acts of importing and exporting counterfeits

violate § 2320.

III.B.3.c. Goods and Services [after March 16, 2006: and

Labels, Patches, Stickers, Wrappers, Badges, Emblems,

Medallions, Charms, Boxes, Containers, Cans, Cases,

Hangtags, Documentation, or Packaging of Any Type or

Nature]

What may the defendant not traffic in? Before the March 16, 2006

amendments in the Stop Counterfeiting in Manufactured Goods Act, Pub.

L. No. 109-181, § 1, 120 Stat. 285, 285-88 (2006), the list included only

goods or services.

 “Goods and services” are defined by neither § 2320 nor the Lanham

Act. Section 2320's legislative history, however, provides some guidance

regarding the meaning of “goods,” given Congress's focus there on the

damage done by various types of counterfeit goods such as drugs,

automobile parts, cosmetics, fertilizers, computer parts, and medical

devices. H.R. Rep. No. 98-997, at 5 (1984). With regard to “services,”

however, the legislative histories for § 2320 and the Lanham Act are

silent. See In re Advertising & Marketing Dev., Inc., 821 F.2d 614, 618

(Fed. Cir. 1987) (discussing Lanham Act's legislative history). Although

courts have not defined “services” under § 2320, in Lanham Act cases the

courts have defined the term broadly to include “the performance of labor

for the benefit of another.” In re Canadian Pac. Ltd., 754 F.2d 992, 995

(Fed. Cir. 1985); Morningside Group Ltd. v. Morningside Capital Group,

L.L.C., 182 F.3d 133, 137-38 (2d Cir. 1999).

The difficulty with punishing defendants for using counterfeit marks

only in connection with goods and services for which the genuine mark

was registered was that it created a potential loophole for trafficking in

labels, documentation, and packaging with counterfeit marks. Labels,

documentation, and packaging that bore counterfeit trademarks but

which were unattached to other goods or services, ran the possibility of

not being considered “goods” under § 2320 if the mark-holder had not

registered the marks for use on labels, documentation, and packaging.

This was the holding of the Tenth Circuit in United States v. Giles,

213 F.3d 1247, 1253 (10th Cir. 2000) (“Section 2320 does not clearly

penalize trafficking in counterfeit labels which are unattached to any

goods.”). In Giles, the defendant sold patches bearing counterfeit Dooney
III. Counterfeit Marks 95

& Burke trademarks. The patches could be attached to generic handbags

and luggage to make them counterfeit, but Dooney & Burke had

registered the marks for use on handbags and luggage, not on patches, and

the defendant did not sell the fake handbags and luggage to which the

patches were to be attached. The Tenth Circuit concluded that the

patches were labels, not goods, and that the defendant could not be

convicted under § 2320 for trafficking in unattached labels. The court

indicated, however, that the case might have been decided differently had

the marks been registered for use on patches, or if the defendant had been

charged with aiding-and-abetting trafficking in counterfeit goods. Id. at

1251 n.6, 1252 & n.7. If the defendant used a counterfeit mark but did

not provide the good or service himself, then he generally had to be

charged under § 2320 in conjunction with conspiracy or aiding-andabetting. Id. at 1251 n.6; United States v. Guerra, 293 F.3d 1279, 1286-

87 & n.4 (11th Cir. 2002) (affirming conviction on these grounds). See

Section III.B.4.f. of this Chapter.

Dissatisfied with the Giles decision, Congress amended § 2320 to

criminalize trafficking in counterfeit labels, documentation, and packaging

directly:

Whoever intentionally traffics or attempts to traffic in goods or

services and knowingly uses a counterfeit mark on or in connection

with such goods or services[, or intentionally traffics or attempts to

traffic in labels, patches, stickers, wrappers, badges, emblems,

medallions, charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging of any type or nature, knowing that a

counterfeit mark has been applied thereto, the use of which is likely

to cause confusion, to cause mistake, or to deceive,] shall, if an

individual, be fined not more than $2,000,000 or imprisoned not

more than 10 years, or both, and, if a person other than an individual,

be fined not more than $5,000,000.

18 U.S.C. § 2320(a) (bracketed language inserted by the Stop

Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181,

§ 1(b)(1), 120 Stat. 285, 285 (Mar. 16, 2006)); see H. Rep. No. 109-68,

at 7 (“This modification is intended to overrule the holding in the case

United States v. Giles ....”). Thus, after March 16, 2006, defendants can

be charged with trafficking in labels, documentation, and packaging with

counterfeit marks under § 2320 without resort to aiding-and-abetting or

conspiracy charges.

Despite the focus on labels, documentation, or packaging that bear

inauthentic marks, repackaging authentic goods with inauthentic labels
96 Prosecuting Intellectual Property Crimes

is criminal only in a limited set of circumstances. See Sections III.C.E. and

III.D.2.-3. of this Chapter.

A defendant can be convicted for trafficking in a single good, service,

label, piece of documentation or packaging. See United States v. Foote,

413 F.3d 1240, 1246-47 (10th Cir. 2005) (holding that § 2320's use of

“goods” in the plural does not preclude prosecution of a person who

traffics in a single counterfeit good).

Whether the things that the defendant trafficked in consist of “goods”

or “services”—or as labels, documentation, or packaging intended to be

used with goods or services—is governed by the victim's certificate of

registration with the United States Patent and Trademark Office. That

certificate will indicate whether the mark in question had been registered

for goods or for services, and also for what type of good or service. See

Section III.B.4.c. of this Chapter.

III.B.4. The Defendant Used a “Counterfeit Mark” On or In

Connection With Those Goods or Services [after March

16, 2006: or a Counterfeit Mark Was Applied to Labels,

Documentation, or Packaging for Those Goods or Services]

The government must prove that the defendant knowingly used a

counterfeit mark on or in connection with goods or services, or, after the

2006 amendments, that a counterfeit mark was applied to the labels,

documentation, or packaging. 18 U.S.C. § 2320(a).

III.B.4.a. Definition of Counterfeit Mark Generally: Not

Genuine or Authentic

“Counterfeit mark” is a term of art that is defined as follows:

(A) a spurious mark—

(i) that is used in connection with trafficking in [any] goods[,]

services[, labels, patches, stickers, wrappers, badges, emblems,

medallions, charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging of any type or nature]; 

(ii) that is identical with, or substantially indistinguishable from,

a mark registered on the principal register in the United States

Patent and Trademark Office and in use, whether or not the

defendant knew such mark was so registered;

[(iii) that is applied to or used in connection with the goods or

services for which the mark is registered with the United States

Patent and Trademark Office, or is applied to or consists of a
III. Counterfeit Marks 97

label, patch, sticker, wrapper, badge, emblem, medallion, charm,

box, container, can, case, hangtag, documentation, or packaging

of any type or nature that is designed, marketed, or otherwise

intended to be used on or in connection with the goods or

services for which the mark is registered in the United States

Patent and Trademark office; and] 

(iv) the use of which is likely to cause confusion, to cause

mistake, or to deceive.

18 U.S.C. § 2320(e)(1)(A), (as amended by the Stop Counterfeiting in

Manufactured Goods Act, Pub. L. No. 109-181, § 1(b)(3), 120 Stat. 285,

286-87 (Mar. 16, 2006)) (brackets and strikethrough added to show

amendments).

A “spurious” mark is one that is “not genuine or authentic.” Joint

Statement, 130 Cong. Rec. 31,675 (1984). 

Although this definition indicates that what must be counterfeit is the

mark itself, not the goods or services [or, after March 16, 2006, the labels,

documentation, or packaging], a genuine or authentic mark becomes

counterfeit when it is used in connection with something else that is

counterfeit. See 4 J. Thomas McCarthy, McCarthy on Trademarks and

Unfair Competition § 25:15 (4th ed. 2006). In United States v. Petrosian,

126 F.3d 1232 (9th Cir. 1997), the defendant, who filled genuine

Coca-Cola bottles with a substitute carbonated beverage and sold it as

Coca-Cola, contended that his Coca-Cola marks were not counterfeit

because his genuine bottles bore genuine marks. The Ninth Circuit

disagreed, holding that “[w]hen a genuine trademark is affixed to a

counterfeit product, it becomes a spurious mark.... The Coca-Cola mark

became spurious when [defendant] affixed it to the counterfeit cola

because the mark falsely indicated that Coca-Cola was the source of the

beverage in the bottles and falsely identified the beverage in the bottles

as Coca-Cola.” Id. at 1234 (citations omitted). See also Section III.C.3.

of this Chapter concerning the repackaging of authentic goods. This rule

should apply equally to services, labels, documentation, and packaging.

The definition of “counterfeit mark” in § 2320(e)(1)(B) also includes

designations protected by the Olympic Charter Act. See Section III.D.8.

of this Chapter.

Separate laws punish the counterfeit use of emblems, insignias, and

names of:

• military medals and designations.

• veterans' organizations.
98 Prosecuting Intellectual Property Crimes

• cremation urns for military use.

• the seals of the United States President, Vice President, Senate,

House of Representatives, and Congress.

• federal agencies.

• the Department of Interior's golden eagle insignia.

• police badges.

• the Red Cross.

• the 4-H club.

• the Swiss Confederation.

• Smokey the Bear.

• Woodsy the Owl.

See 18 U.S.C. §§ 700-716.

III.B.4.b. The Counterfeit Mark Must Be Identical to or

Indistinguishable from a Genuine Mark Owned by Another

Under 18 U.S.C. § 2320(e)(1)(A), a counterfeit mark is a spurious

mark that is “identical with, or substantially indistinguishable from,” a

federally registered mark. This standard is based on the same standard set

forth in the Lanham Act, 15 U.S.C. § 1127. The legislative history

suggests that the civil and criminal standards should be interpreted the

same. See Joint Statement, 130 Cong. Rec. 31,675-76 (1984) (noting that

the civil and criminal standards “differ slightly in their terms, but [] are

identical in substance,” and citing civil cases to explain both standards'

operation). If the criminal and civil standards diverge at all—and the

legislative history suggests otherwise, notwithstanding a statement to the

contrary in United States v. Guerra, 293 F.3d 1279, 1288 (11th Cir.

2002)—the criminal standard should be interpreted more narrowly only

in cases at the outer margins, Id. (citing Joint Statement, 130 Cong. Rec.

31,675 (1984) (stating that § 2320 is not intended to criminalize what

would have been “arguable” cases of civil trademark infringement before

the criminal act's passage)). Note, however, that the criminal and civil

standards are the same or virtually identical with respect to what

constitutes a “counterfeit.” Civil law also prohibits the unauthorized use

of a “colorable imitation of a registered mark,” see 15 U.S.C.

§ 1114(1)(b), which by its terms falls short of being counterfeit.

The phrase “substantially indistinguishable from” is intended to

prevent a counterfeiter from escaping liability by modifying a protected
III. Counterfeit Marks 99

trademark in trivial ways; however, it is not intended to cover cases in

which the infringement is arguable, less than clear, or merely “reminiscent

of” protected trademarks. Joint Statement, 130 Cong. Rec. 31, 676

(1984).

[A] mark need not be absolutely identical to a genuine mark in order

to be considered counterfeit. Such an interpretation would allow

counterfeiters to escape liability by modifying the registered

trademarks of their honest competitors in trivial ways. However, the

sponsors do not intend to treat as counterfeiting what would formerly

have been arguable, but not clear-cut, cases of trademark

infringement.

Guerra, 293 F.3d at 1288 (quoting Joint Statement, 130 Cong. Rec.

31,676 (1984)). Thus, the use of the mark “Prastimol” for a medication

that is the functional equivalent of the product sold under the trademark

“Mostimol” would not be a crime. Id. Nor would a 'P' superimposed over

a 'V' on a fleur-de-lis pattern be substantially indistinguishable from an 'L'

superimposed over a 'V' over the same pattern, or using “Amazonas”

rather than “Amazon,” or “Bolivia” rather than “Bulova.” See Montres

Rolex, S.A. v. Snyder, 718 F.2d 524, 531-32 (2d Cir. 1983) (noting that

these examples might create a likelihood of confusion without being

substantially indistinguishable, in case interpreting Customs's power to

seize counterfeits), cited with approval in Joint Statement, 130 Cong. Rec.

at 31,675-76. However, a counterfeiter who sells a look-alike with an

altered brand name can still be convicted if his look-alike reproduces other

registered trademarks. See United States v. Yi, __F.3d__, 2006 WL

2294854, at *1 n.1, *3 n.4 (5th Cir. Aug. 10, 2006) (holding that even

though defendant’s batteries were named “Dinacell” rather than

“Duracell,” the batteries were still counterfeit because they used

Duracell’s copper-top and black-body trademark).

In the end, what constitutes a “substantially indistinguishable”

difference “will need to be elaborated on a case-by-case basis by the

courts.” Joint Statement, 130 Cong. Rec. 31,675 (1984).

Prosecutors should pay special attention to word marks. A trademark

can consist of a symbol, a picture, or a stylized depiction of a word (such

as the distinctive Coca-Cola® cursive mark). A trademark can also consist

of a simple word. A word mark registered in a neutral font and all capital

letters “covers all design features and is not limited to any special form or

lettering.” Sally Beauty Co. v. Beautyco, Inc., 304 F.3d 964, 970 (10th

Cir. 2002) (emphasis added) (citations omitted); J. Thomas McCarthy,

McCarthy on Trademarks and Unfair Competition § 19:58 (4th ed. &

June 2002 database update) (“'Registrations with typed drawings are not
100 Prosecuting Intellectual Property Crimes

limited to any particular rendition of the mark and, in particular, are not

limited to the mark as it is used in commerce.'”) (quoting Cunningham v.

Laser Golf Corp., 222 F.3d 943, 950 (Fed. Cir. 2000)); see also

Cunningham, 222 F.3d at 949-50; 37 C.F.R. § 2.52 (May 13, 2004). In

other words, there is a strong argument that a mark registered in this

manner is counterfeited by any infringing use of the mark, whether in the

font used by the mark-holder or not, because the infringing word mark is

substantially indistinguishable from the word mark itself.

When trying to determine which trademarks the defendant infringed,

prosecutors and agents should consult with the victim. Although the

government itself can search for trademarks on the United States Patent

and Trademark Office's website, these searches can be cumbersome. Given

the range of perceptible elements that can be registered as marks—witness

the color pink for Owens-Corning fiberglass, the NBC chime, the Burberry

plaid, and the shape of the Coca-Cola bottle (respectively U.S. Trademark

Reg. Nos. 1439132 and 2380742, 0916522, 2022789, and

1057884)—the victim is best suited to identify which elements were

registered as marks and which may have been counterfeited.

Section 2320 does not specify the procedure for establishing at trial

that the counterfeit mark is identical with or substantially

indistinguishable from a genuine registered mark. See Guerra, 293 F.3d

at 1288. In Guerra, the Eleventh Circuit rejected the defendant's

contention at trial that the government must 1) introduce genuine

trademarks affixed to genuine goods, 2) introduce the testimony of a

representative from the mark-holder, and 3) rely on investigative agents

who are experts in the counterfeited product or service. Id. Instead, the

court ruled that introducing registered trademark designs and labels

produced by authorized licensees was sufficient. Id. Other courts have

approved the government's use of expert testimony and a comparison

between counterfeit and genuine goods. See United States v. Yamin, 868

F.2d 130, 135 (5th Cir. 1989); United States v. McEvoy, 820 F.2d 1170,

1172 (11th Cir. 1987) (same). In civil cases, courts have also allowed

evidence of actual confusion, such as customers who were fooled, and

trademark surveys. 3 J. Thomas McCarthy, McCarthy on Trademarks and

Unfair Competition §§ 23:2.1; :13, :63. Market surveys are often used in

civil cases, but can raise evidentiary issues. See, e.g., 5 McCarthy on

Trademarks and Unfair Competition §§ 32:158, :170; Citizens Fin. Group

v. Citizens Nat'l Bank of Evans City, 383 F.3d 110 (3d Cir. 2004). As of

the writing of this Manual, no reported cases address the admissibility of

market surveys in criminal trademark prosecutions.
III. Counterfeit Marks 101

The procedures and analysis for comparing counterfeit and legitimate

marks are also addressed in Section III.B.4.g. of this Chapter, which

discusses how to prove likelihood of confusion.

Proving that two marks are likely to be confused is not always

sufficient to prove that they are identical or substantially

indistinguishable. Likelihood of confusion is a lower hurdle. See Montres

Rolex, S.A., 718 F.2d at 531-32 (noting examples of marks that were

likely to cause confusion, but which were not substantially

indistinguishable from the real thing: a 'P' superimposed over a 'V' on a

fleur-de-lis pattern vs. an 'L' superimposed over a 'V' over the same

pattern; “Amazonas” vs. “Amazon”; and “Bolivia” vs. “Bulova”). For

actual comparisons of marks that were alleged to be confusingly similar,

see 3 McCarthy on Trademarks and Unfair Competition §§ 23.21 - .40,

keeping in mind the potential differences between civil and criminal cases

(see Section III.B.2. of this Chapter), and the difference between

likelihood of confusion and being substantially indistinguishable.

III.B.4.c. The Genuine Mark Must Be Federally Registered on

the U.S. Patent and Trademark Office's Principal Register

The victim's mark must have been registered on the principal register

in the United States Patent and Trademark Office (“USPTO”), 18 U.S.C.

§ 2320(e)(1)(A)(ii), unless the case involves the Olympic symbols; see

Section III.D.8. of this Chapter.

Federal registration is a jurisdictional element. Thus, § 2320 cannot

be charged if the victim's mark was only registered on the USPTO's

supplemental register, recorded with Customs, registered with state

agencies, or protected at common law. However, if a § 2320 charge is

unavailable because the mark was not registered on USPTO's principal

register, alternate charges such as mail fraud, wire fraud, or state or local

trademark charges may still be available. See Section III.F. of this

Chapter.

Proving the mark's registration is usually straightforward. Generally,

the government will simply offer a certified copy of the certificate of

registration. The court may take judicial notice of registration certificates.

See Fed. R. Evid. 201(b); Omega S.A. v. Omega Eng'g, 228 F. Supp. 2d

112, 120 & n.26 (D. Conn. 2002); Duluth News-Tribune v. Mesabi

Publ'g Co., 84 F.3d 1093, 1096 n.2 (8th Cir. 1996); cf. Island Software

and Computer Serv. v. Microsoft Corp., 413 F.3d 257, 261 (2d Cir.

2005) (approving judicial notice of copyright registration certificates).

Unofficial registration information can be searched on the USPTO's

website: http://www.uspto.gov/main/trademarks.htm. Formal, certified
102 Prosecuting Intellectual Property Crimes

copies of the registration certificates can be obtained directly from

USPTO. The Department of Justice has no special method for expediting

delivery of certificates from USPTO, beyond perhaps a grand jury or trial

subpoena, which should be discouraged. The usual method is to obtain

certified copies of certificates from the victims themselves.

Registration may also be proved through other means, such as

testimony of the mark-holder and other circumstantial evidence. For

example, in United States v. DeFreitas, 92 F. Supp. 2d 272, 278

(S.D.N.Y. 2000), the court allowed the jury to conclude that a mark was

registered based on testimony of the mark-holder for Beanie Babies along

with samples of genuine Beanie Babies with tags bearing registered tags,

the mark-holder's catalogue containing a statement that the trademark

was registered, and testimony of the mark-holder's CEO. In United States

v. Park, 165 Fed. Appx 584,85-86 (9th Cir. 2006), the Ninth Circuit

found that the government had proved registration by introducing a civil

complaint against the defendant in a prior suit that she had settled, in

which the complaint stated that the trademarks were registered; by

introducing testimony of the defendant's civil attorney in that case, who

testified that the victims were trademark owners at the time of the prior

civil action; and by introducing testimony of an FBI agent who testified

that the items seized at the defendant's business were identical to items

registered as trademarks in the United States Patent Office.

Registration is prima facie evidence that the registrant owns the mark

and that the registration is valid. 15 U.S.C. § 1057(b). In criminal

prosecutions, the genuine mark is usually treated as “incontestable” if it

has been registered on the principal register for more than five consecutive

years. See 15 U.S.C. § 1065 (setting out conditions for

“incontestability”). A federal trademark registration may, however, be

canceled in whole or part in a civil judicial or administrative proceeding.

See 15 U.S.C. § 1064.

The government need not prove that the defendant was aware that

the mark was registered. 18 U.S.C. § 2320(e)(1)(A)(ii) (stating that a

counterfeit mark is one that is “identical with, or substantially

indistinguishable from” a registered mark “whether or not the defendant

knew such mark was so registered”) (pre- and post-2006 amendments).

See also United States v. Sung, 51 F.3d 92, 93-94 (7th Cir. 1995)

(holding that § 2320(e)(1)(A)(ii) imposes on defendants “the duty to

inquire about the [registration] status of the mark”) (citations omitted).
III. Counterfeit Marks 103

III.B.4.d. The Genuine Mark Must Have Been in Use by the

Mark-Holder or Its Licensee

The genuine mark must also be “in use,” presumably by the mark

holder or his licensee, 18 U.S.C. § 2320(e)(1)(A)(ii) (both pre- and post2006 amendments), except in cases involving protected Olympic symbols,

as discussed in Section III.D.8. of this Chapter.

What “in use” means cannot be found in the statute, its legislative

history, or case law. The Lanham Act, however, defines a trademark's “use

in commerce” as “the bona fide use of a mark in the ordinary course of

trade, and not made merely to reserve a right in a mark.” 15 U.S.C.

§ 1127. See also ConAgra, Inc. v. George A. Hormel, & Co., 990 F.2d

368, 371-72 (8th Cir. 1993) (affirming district court's finding that the

trademark application was based on actual sales and not a “sham use”).

Civil cases have held that “in use” means use in the United States, not in

other nations. See Marshak v. Treadwell, 240 F.3d 184 (3d Cir. 2001);

Rivard v. Linville, 133 F.3d 1446, 1448-49 (Fed. Cir. 1998).

To prove that the genuine mark was in use during the offense, the

government may not rely solely on a certification of registration that

shows that the victim registered the trademark before the date of the

offense. Registration merely requires a mark-holder to have a bona fide

intent to use the mark, which does not translate into actual use. United

States v. Foote, 238 F. Supp. 2d 1271, 1278 (D. Kan. 2002), aff'd, 413

F.3d 1240, 1248 (10th Cir. 2005); United States v. Guerra, 293 F.3d

1279, 1290 (11th Cir. 2002). Nor may the government establish use by

relying on the jurors' probable experience with the trademark at issue,

since the jurors' experience is not legal evidence. Foote, 238 F. Supp. 2d

at 1279 n.11. 

What will suffice, however, is proof of registration in conjunction with

evidence of the first use by the mark-holder and testimony by a

representative of the mark-holder that the mark appears on every good

produced. Foote, 413 F.3d at 1248, aff'g 238 F. Supp. 2d at 1279; a

magazine showing the genuine trademarked goods for sale at the time of

offense, Guerra, 293 F.3d at 1291; or a civil complaint from a civil action

alleging that the victim used the mark before the criminal offense in

conjunction with testimony that the trademark owners had protected

their marks during the criminal offense, United States v. Park, 164 Fed.

Appx. 584, 585-86 (9th Cir. 2006).

Although § 2320(e)(1)(A)(ii) does not specify when the registered

mark must have been “in use,” courts have held that it must have been in

use during the defendant's alleged offense. See Park, 164 Fed. Appx. at
104 Prosecuting Intellectual Property Crimes

585 (stating that “registration and use at the time of [a trademark]

conspiracy can be indirectly established if the government provides

evidence that trademarks for the relevant items were registered and used

prior to and after the conspiracy was formed, as long as the evidence of

preceding and subsequent registration and use is reasonably close to the

time of the actual conspiracy”); Foote, 238 F. Supp. 2d at 1278 n.8

(holding that without a temporal limit “the statute would allow a

prosecution for trafficking in products with trademarks that the

trademark owner did not begin to use until trial”), aff'd, 413 F.3d at

1248; Guerra, 293 F.3d at 1290-91. The government should prove that

the victim used his genuine mark as early as when the defendant first used

his counterfeit mark, if not earlier, and that the victim continued using

the genuine mark throughout the offense. Foote, 238 F. Supp. 2d at 1274

n.4, 1277-79. Proving that the mark was in use at the time of trial may

not suffice to prove that it was in use during the offense. Id. at 1278.

III.B.4.e. Use of the Counterfeit Mark “On or In Connection

With” Goods or Services

Before the March 16, 2006 amendments, the government had to

prove that the defendant used the counterfeit mark “on or in connection

with” goods or services. 18 U.S.C. § 2320(a). After March 16, 2006, the

government must similarly prove that the defendant used the counterfeit

mark “on or in connection with” goods or services (just as before), or, in

the case of labels, documentation, packaging, and the like, that the

counterfeit mark was “applied thereto.” 18 U.S.C. § 2320(a) (as amended

by the Stop Counterfeiting in Manufactured Goods Act, Pub L. No. 109-

181, § 1, 120 Stat. 285 (Mar. 16, 2006)). In addition, the government

must prove that the counterfeit mark “is applied to or used in connection

with the goods or services” or “is applied to or consists of” a label,

documentation, packaging, or the like—in which case the label,

documentation, or packaging must be “designed, marketed, or otherwise

intended to be used on or in connection with the goods or services for

which the mark is registered.” § 2320(e)(1)(A)(iii) (as amended Mar. 16,

2006) (emphasis added). The changes will largely be insignificant, except

in cases involving labels, documentation, or packaging.

The new term from the 2006 amendments, “applied to,” is

presumably synonymous with “on,” but was included because § 2320 was

expanded to cover things like labels, documentation, and packaging,

which can either be applied to goods and services or have a counterfeit

mark applied to them.
III. Counterfeit Marks 105

The 2006 amendments also recognize that the counterfeit mark might

not just be applied to or used in connection with labels, documentation,

and packaging, but might even “consist[] of” a label, documentation, or

packaging component, as was discussed in United States. v. Giles, 213

F.3d 1247, 1252 n.7 (10th Cir. 2000). See Section III.B.3.c. of this

Chapter.

Presumably, “in connection with” has a broader meaning than “on.”

For example, a defendant who uses a counterfeit mark to advertise a

name-brand good or service and then provides an unmarked, off-brand or

no-brand good or service can be said to have used a counterfeit mark “in

connection with” the good or service, even if he did not use it “on” the

good or service. This conduct should therefore be covered by § 2320.

Even before the 2006 amendments, a person who trafficked in labels,

documentation, or packaging—unattached to the underlying goods—may

have been prosecuted, albeit only under a theory of conspiracy or aidingand-abetting. See Section III.B.3.c. of this Chapter. The 2006

amendments, however, allow such a defendant to be charged under

§ 2320 directly, without resort to theories of secondary liability and in

cases where the defendant acted alone. Now, the government need only

show that the labels, documentation, or packaging were “designed,

marketed, or otherwise intended to be used on or in connection with the

goods or services.” § 2320(e)(1)(A)(iii) (as amended Mar. 16, 2006).

III.B.4.f. The Counterfeit Mark Must Have Been Used for the

Same Type of Goods or Services for Which the Genuine Mark

Was Registered

Before the March 16, 2006 amendments, § 2320's definition of a

“counterfeit mark” allowed prosecution only if the defendant's mark was

“used in connection with trafficking in goods or services [and was]

identical with, or substantially indistinguishable from, a mark registered

for those goods and services on the principal register in the United States

Patent and Trademark Office.” 18 U.S.C. § 2320(e)(1)(A)(i)-(ii)

(emphasis added) (but see Section III.D.8. of this Chapter concerning

cases involving Olympic symbols). Congress intended this requirement as

an important and explicit distinction between criminal and civil

trademark infringement cases. “[A] plaintiff with a Federal registration

for ... [a mark] on typewriters might have a [civil] Lanham Act remedy

against a defendant who used that mark to identify typing paper, even

though the plaintiff had not registered that mark for use in connection

with typing paper. Under [§ 2320], however, the use of the mark ... on

typing paper would not count as the use of a 'counterfeit mark.'” Joint
106 Prosecuting Intellectual Property Crimes

Statement, 130 Cong. Rec. 31,676 (1984). Prosecutors therefore should

be careful to ensure that the goods and services the defendant trafficked

in match the goods and services for which the victim's mark was

registered.

But what about when the defendant uses the mark on labels,

documentation, or packaging that are for—but unattached to—the goods

or services indicated on the registration certificate, and not directly on the

underlying goods or services themselves? Before the 2006 amendments,

this scenario exposed a loophole in the law. In United States. v. Giles, 213

F.3d 1247, 1251 (10th Cir. 2000), the Tenth Circuit reversed a § 2320

conviction because, among other reasons, the victim had registered its

trademark for use on purses and handbags, but not for use on

patches—which the defendant sold with counterfeit marks for customers

to attach to purses and handbags. See the discussion in Section III.B.3.c.

of this Chapter, and also compare Playboy Enters., Inc. v. Universal TelA-Talk, Inc., No. CIV. A. 96-CV-6961, 1998 WL 288423 (E.D. Pa. June

3, 1998) (holding that Playboy failed to state an actionable civil claim

because its marks had not been registered for use on Internet Web sites).

Such conduct could have been prosecuted under § 2320 in certain

circumstances—perhaps on the theory that the marks were used “in

connection with” the goods and services for which the mark was

registered, or under conspiracy or aiding-and-abetting charges (see Section

III.B.4.e. of this Chapter)—but a potential loophole complicated such

prosecutions.

The 2006 amendments addressed this issue by amending § 2320 to

allow the prosecution of traffickers in counterfeit labels, documentation,

and packaging directly under § 2320. See Stop Counterfeiting in

Manufactured Goods Act, Pub. L. No. 109-181, § 1, 120 Stat. 285 (Mar.

16, 2006). See also Section III.B.3.c. of this Chapter. In doing so,

Congress did not relax the requirement of matching the defendant's goods

and services to those on the registration certificate. Instead, Congress

adapted the requirement for labels, documentation, and packaging cases

so that the government must prove that those items were “designed,

marketed, or otherwise intended to be used on or in connection with the

goods or services for which the mark is registered in the United States

Patent and Trademark Office.” § 2320(e)(1)(A)(iii) (as amended by the

Stop Counterfeiting in Manufactured Goods Act, Pub L. No. 109-181,

§ 1, 120 Stat. 285, 287 (Mar. 16, 2006)). Note that the 2006

amendments moved this requirement from § 2320(e)(1)(A)(ii) to

(e)(1)(A)(iii). Id.
III. Counterfeit Marks 107

The class of goods or services for which a particular mark was

registered can be found on the mark's registration certificate. For

information on obtaining these certificates, see Section III.B.4.c. of this

Chapter.

III.B.4.g. Likelihood of Confusion, Mistake, or Deception

The government must prove that the counterfeit mark is “likely to

cause confusion, to cause mistake, or to deceive.” 18 U.S.C.

§ 2320(e)(1)(A)(iii) (pre-2006 amendments); § 2320(e)(1)(A)(iv) (as

amended by the Stop Counterfeiting in Manufactured Goods Act, Pub L.

No. 109-181, § 1, 120 Stat. 285, 286-87 (Mar. 16, 2006).) (For the

standards in cases involving protected Olympic symbols, see Section

III.D.8. of this Chapter.) Although courts and commentators routinely

focus only on the counterfeit mark's propensity to confuse, the statute

also allows for proof of mistake or deception, and all three should be

charged in the indictment.

The government does not have to prove that the defendant's conduct

resulted in actual confusion, because “[t]he statute expressly requires only

likelihood of confusion.” United States v. Yamin, 868 F.2d 130, 133 (5th

Cir. 1989) (emphasis added).

Defendants often argue that their conduct raised no likelihood of

confusion because the purchaser knew that the goods were counterfeit,

because the fake goods were priced comparatively low, or because the

defendant specifically told the purchaser that the goods were counterfeit.

Courts have uniformly rejected these arguments. See, e.g., United States

v. Foote, 413 F.3d 1240, 1246 (10th Cir. 2005); United States v. Hon,

904 F.2d 803, 808 (2d Cir. 1990); Yamin, 868 F.2d at 133; United States

v. Torkington, 812 F.2d 1347, 1352 (11th Cir. 1987); United States v.

Gantos, 817 F.2d 41, 43 (8th Cir. 1987). For example, in Foote, because

the defendant “openly advertised that he sold counterfeit merchandise”

and “informed each customer that his merchandise was fake,” he argued

that his actions did not meet the confusion requirement in § 2320. Foote,

413 F.3d at 1245. The Tenth Circuit rejected this argument because the

confusion requirement is “not restricted to instances in which direct

purchasers are confused or deceived by the counterfeit goods.” Id.

(internal quotation marks omitted) (citing Yamin, 868 F.2d at 132).

Rather, the plain language of the statute indicates that it is “the

defendant's use of the product in commerce (i.e., the sale of the

counterfeit product) that is likely to cause confusion, mistake, or

deception in the public in general.” Foote, 413 F.3d at 1246. 
108 Prosecuting Intellectual Property Crimes

 The doctrine that supports a finding of confusion in such cases is that

of “secondary” or “post-sale” confusion, i.e., the confusion of the direct

purchaser's downstream customers or even of non-purchasers who could

be confused by seeing the counterfeit merchandise on the street. See, e.g.,

Foote, 413 F.3d at 1245; Yamin, 868 F.2d at 133. “A trademark holder's

ability to use its mark to symbolize its reputation is harmed when

potential purchasers of its goods see unauthentic goods and identify these

goods with the trademark holder.” Torkington, 812 F.2d at 1353

(emphasis added) (citations omitted). See also S. Rep. No. 98-526

(1984), reprinted in 1984 U.S.C.C.A.N. 3627. This doctrine was

originally developed by courts in interpreting the identical confusion

provision in the Lanham Act. See 3 J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition § 23:7 (4th ed. 2005).

Courts adopted the post-sale confusion doctrine in criminal cases

because to hold otherwise would undermine the goals of trademark

protection. Section 2320 was “not just designed for the protection of

consumers,” but also for “the protection of trademarks themselves and for

the prevention of the cheapening and dilution of the genuine product.”

Hon, 904 F.2d at 806; see also Torkington, 812 F.2d at 1352-53; see

also H. Rep. 109-68, at 8 n.2 (“Congress was concerned not only that

trademark counterfeiting defrauds purchasers, ... but also that

counterfeiters can earn enormous profits by capitalizing on the ... efforts

of honest manufacturers at little expense to themselves.”) (citations,

alterations in original, and internal quotation marks omitted) (legislative

history to Stop Counterfeiting in Manufactured Goods Act, Pub. L. No.

109-181, § 1, 120 Stat. 285 (2006)). Interpreting “section 2320's

confusion requirement to include the non-purchasing public advances the

important purpose underlying the trademark laws of protecting the

trademark owner's investment in the quality of the mark and his product's

reputation, one that is independent of the goal of preventing consumer

deception.” Hon, 904 F.2d at 806. This is the same reason why the

government need not demonstrate that the counterfeit product is of lesser

quality than the genuine product. Even if the consumer is not defrauded,

the counterfeiter is still trading off another's name without his

authorization. See Section III.D.1. of this Chapter.

Because the government need only prove the likelihood of confusion,

it need not prove that the defendant intended to defraud or mislead

purchasers. See United States v. Brooks, 111 F.3d 365, 372 (4th Cir.

1997) (rejecting defense that defendants did not use counterfeit marks

“for the purpose of deception or to cause confusion or mistake”); Yamin,

868 F.2d at 132 (holding that the statute's application is not restricted to

instances in which direct purchasers are confused or deceived by the
III. Counterfeit Marks 109

counterfeit goods); Gantos, 817 F.2d at 42-43 (affirming conviction even

though defendant disclosed to his immediate customers that Rolex

watches were copies); Torkington, 812 F.2d at 1353 n.7 (noting that

Congress eliminated from § 2320 a mens rea element consisting of an

intent to deceive or defraud). 

Likelihood of confusion can be proved with a variety of evidence, such

as the testimony of customers who mistakenly bought fakes, experts on

market confusion, or victim representatives who can discuss the fake and

real goods' similarities. See, e.g., 3 J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition §§ 23:2.1, :13, :17, :63. Although

evidence of actual confusion is not necessary, it can often be very

persuasive. See United States v. McEvoy, 820 F.2d 1170, 1172 (11th Cir.

1987) (affirming conviction based on, inter alia, expert testimony that

customers often confuse fake and genuine watches and on a defense

witness's inability to distinguish between fake and genuine watches).

To determine likelihood of confusion in criminal cases, the Eleventh

Circuit has applied a test that was developed in civil cases. See

Torkington, 812 F.2d at 1354. The relevant factors are:

1. Type of trademark

2. Similarity of design

3. Similarity of product

4. Identity of retail outlets and purchasers

5. Similarity of advertising media used

6. Defendant's intent

7. Actual confusion

Id. No one factor is essential; all seven are weighed in an equitable

determination by the fact finder. Id. This test was originally developed

under civil law to determine whether infringement had occurred when the

underlying goods are different. Hon, 904 F.2d at 808. But when the goods

are “identical and the jury has concluded that the [government] has met

the two-pronged mens rea standard of section 2320, a requirement that

confusion among actual or potential purchasers be shown is unnecessary.”

Id. See also Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d

Cir. 1961) (test often used in civil cases, unless goods are identical and

directly competitive). See generally 3 McCarthy on Trademarks and

Unfair Competition § 23.19 (discussing multi-factor tests for likelihood

of confusion). In any event, criminal jury instructions need not set forth
110 Prosecuting Intellectual Property Crimes

this seven-factor test, because it is not contained in the statute. See

McEvoy, 820 F.2d at 1172.

As to how the comparison should be made between the counterfeit

and legitimate products at trial, civil law suggests three principles. First,

counterfeit and genuine marks should “be compared in their entireties”

and “should not be dissected or split up into [] component parts [with]

each part then compared with corresponding parts,” because “[i]t is the

impression that the mark as a whole creates on the average reasonably

prudent buyer and not the parts thereof, that is important.” 3 McCarthy

on Trademarks § 23:41 (4th ed. 2005) (footnote omitted); see also id.

§ 23:42. Second, because the average purchaser focuses on two marks'

similarities rather than their differences, the fact finder should do the

same. 3 McCarthy on Trademarks § 23:41. Third, whether the

counterfeit and genuine marks should be compared side by side or serially

depends on how the average consumer would encounter them in the

market: “Where products in the relevant market are not typically

displayed in the same locations, centering on whether they are likely to be

distinguished when viewed simultaneously is incorrect, and will result in

a faulty likelihood-of-confusion analysis.” Louis Vuitton Malletier v.

Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 534 (2d Cir.

2005) (Calabresi, J.) (discussing likelihood of confusing handbags); see

also 3 McCarthy on Trademarks §§ 23:58-:59. But see Louis Vuitton

Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 112 (2d Cir. 2006)

(suggesting that side-by-side comparison may be acceptable to determine

whether goods are identical). Finally, in a criminal case, even if some of

the markings on the defendant’s goods deviate from those on the original

and his goods are of noticeably poor quality, they are counterfeit so long

as his goods bear at least one trademark identical to or substantially

indistinguishable from the original. See United States v. Yi, __F.3d__,

2006 WL 2294854, at *1 n.1, *3 n.4, 9 & n.14 (5th Cir. Aug. 10, 2006).

III.B.5. The Defendant Used the Counterfeit Mark “Knowingly”

The final element required for a § 2320 offense is that the defendant

“knowingly” used the counterfeit mark on or in connection with the

trafficked goods or services. After the 2006 amendments, in cases

involving counterfeit marks on labels, documentation, or packaging, the

government must prove that the defendant trafficked in such items

“knowing that a counterfeit mark has been applied thereto, the use of

which is likely to cause confusion, to cause mistake, or to deceive.”

§ 2320(a) (as amended by the Stop Counterfeiting in Manufactured

Goods Act, Pub L. No. 109-181, § 1, 120 Stat. 285 (Mar. 16, 2006)).
III. Counterfeit Marks 111

To prove this element, the government must present evidence that the

defendant had “an awareness or a firm belief” that the mark used was

counterfeit. See Joint Statement, 130 Cong. Rec. 31,674 (1984).

Knowledge can also be proved with evidence that the defendant acted

with willful blindness, conscious avoidance, or deliberate ignorance, which

means the defendant “deliberately closed his eyes to what otherwise

would have been obvious to him concerning the fact in question.” See

United States v. Brodie, 403 F.3d 123, 148 (3d Cir. 2005) (quotations

and citation omitted). “[I]f the prosecution proves that the defendant was

'willfully blind' to the counterfeit nature of the mark, it will have met its

burden of showing 'knowledge.'” Joint Statement, 130 Cong. Rec. 31,674

(1984) (citing United States v. Jewell, 532 F.2d 697 (9th Cir. 1976)

(other citations omitted). See also United States v. Hiltz, 14 Fed. Appx.

17, 19 (1st Cir. 2001); United States v. Hamamoto, 2000 WL 1036199,

at *2 (9th Cir. July 27, 2000); cf. Tal S. Benschar et al., Proving

Willfulness in Trademark Counterfeiting Cases, 27 Colum. J.L. & Arts

121, 125 (2003). Although certain circuits may be generally reticent to

allow proof of willful blindness to satisfy actual knowledge in criminal

cases, Congress's specific intent with respect to § 2320(a) should trump

that reluctance in these cases.

On the other hand, “a manufacturer who believes in good faith that

he or she has a prior right to use a particular mark, or that a mark does

not infringe a registered mark, could not be said to 'know' that the mark

is counterfeit.” Joint Statement, 130 Cong. Rec. 31,674 (1984).

The government may prove the defendant's knowledge or willful

blindness of a counterfeit mark through direct or circumstantial evidence.

Circumstantial evidence could include evidence that:

• the defendant purchased or sold goods after notice of potential

infringement.

• the defendant knew that the victim distributed its goods only

through authorized dealers, when the defendant and his supplier

were not authorized dealers.

• the goods came from a questionable supplier.

• the defendant or his source used coded invoices for branded

merchandise.

• the goods were of inferior quality.

• the goods were bought or sold for an unusually low price.
112 Prosecuting Intellectual Property Crimes

Cf. Tal S. Benschar et al., Proving Willfulness in Trademark

Counterfeiting Cases, 27 Colum. J.L. & Arts 121, 130-35 (2003)

(discussing civil cases).

For more case examples, see United States v. Jewell, 532 F.2d 697,

699-702 (9th Cir. 1976) (cited in § 2320's legislative history) (upholding

willful blindness instruction when defendant had declined to buy drugs

from a stranger but then agreed to drive the stranger's car from Mexico to

the United States for $100, while he suspected there was something

wrong or illegal with the car and examined the car but avoided

investigating an apparently hidden compartment in the trunk that was

later found to contain drugs); United States v. Hamamoto, No. 99-10019,

2000 WL 1036199, at *1 (9th Cir. July 27, 2000) (bribes to defendant,

a customs agent in Guam, to clear airway bills for goods imported from

Korea, a primary source of counterfeit goods to Guam); United States v.

Rodriguez, Nos. 88-1125, 88-1127, 1989 WL 69934, at *2 (9th Cir. June

23, 1989) (citing defendant's own distinction between “phony” and “real”

Rolex watches, defendant's inability to sell the counterfeits at work, and

defendant's admission that she had to be quiet about selling them);

United States v. McEvoy, 820 F.2d 1170, 1172-73 (11th Cir. 1987)

(rejecting defendants' contention that § 2320 was unconstitutionally

vague, because defendants appeared to know “that their actions in selling

the watches violated the law,” particularly when defendants admitted that

the watches seized by the government contained trademarks virtually

identical to registered trademarks for Rolex, Piaget, and Gucci); United

States v. Guerra, 293 F.3d 1279, 1288 (11th Cir. 2002) (citing

defendant's knowledge that the counterfeit labels he produced were not

all being sold to authorized dealers of Cuban cigars and that the

purchasers of defendant's counterfeit labels did not purport to be

authorized dealers themselves); United States v. Sung, 51 F.3d 92, 93-94

(7th Cir. 1995) (holding that although the victim's genuine mark was not

always identified with the ® symbol, defendant's knowledge that the

“marks were on the bottles, caps, and boxes” of the counterfeit shampoo

he sold sufficed because § 2320(e)(1)(A)(ii) imposes on the defendant

“the duty to inquire about the status of the mark”); United States v. Park,

164 Fed. Appx. 584, 585-86 (9th Cir. 2006) (holding that government

demonstrated knowing use of a counterfeit mark by introducing

settlement agreement from an earlier civil action between defendant and

victim in which she had agreed not to sell identical merchandise with

which she was caught in criminal case) (unpublished); United States v. Yi,

__F.3d__, 2006 WL 2294854, at *3-*4 (5th Cir. Aug. 10, 2006) (holding

that jury could conclude that defendant knew the marks were counterfeit,

notwithstanding his numerous factual counterarguments, in light of the
III. Counterfeit Marks 113

defendant’s admissions, attempt to bribe a Customs agent, receipt of

cease-and-desist letters, and the counterfeit goods’ poor quality).

For a case in which circumstantial evidence was insufficient, consider

United States v. Sultan, 115 F.3d 321 (5th Cir. 1997). In Sultan, the

defendant shared a warehouse with an auto parts dealer who obtained remanufactured auto parts and altered them to make them look new. Id. at

323-24. Although the two businesses were kept separate, the defendant

purchased a large amount of merchandise from the auto parts dealer. Id.

at 324. In holding that the government failed to show that the defendant

knew that he was selling counterfeit parts, the Fifth Circuit largely

rejected the government's circumstantial evidence of knowledge,

including:

• the defendant's penchant for thriftiness and knowledge of market

prices. Id. at 326.

• the defendant's inconsistent statements to investigators (because

he may have made these statements for non-criminal reasons). Id.

• the defendant shared the warehouse space with the auto parts

dealer (which alone was not sufficient because the defendant's

mere presence in a climate of criminal activity could not serve as

a basis for conviction). Id. at 328.

• the counterfeit parts' low prices (which alone were not sufficient

evidence of knowledge when there were legal ways to obtain

goods at this price range and the defendant was paying 80% to

90% of the market price for legitimate distributors). Id. at 329.

• evidence of the defendant's knowledge regarding legitimate

packaging (because there was no evidence that the defendant was

aware that the packaging materials stored by the auto parts dealer

were counterfeit, particularly when one witness never saw the

defendant in the counterfeit room and another witness testified

that the defendant kept his inventory separate from the auto

parts dealer). Id. at 329-30.

Holding that this circumstantial evidence required the jury to go “beyond

making reasonable inferences” by “making unreasonable leaps,” the court

reversed the conviction on the ground that there was insufficient evidence

to support the jury's finding that the defendant knowingly used a

counterfeit mark beyond a reasonable doubt. Id. at 330.

The government need not prove that the defendant knew that the

mark he counterfeited was registered with the United States Patent and

Trademark Office. See Section III.B.4.c. of this Chapter. Nor must the
114 Prosecuting Intellectual Property Crimes

government prove that the defendant knew that his conduct constituted

a crime. Hamling v. United States, 418 U.S. 87, 123 (1974); United

States v. Baker, 807 F.2d 427, 428-30 (5th Cir. 1986).

III.B.6. Venue

An interesting case involving venue and foreign purchases of

counterfeit trademarked goods is United States v. DeFreitas, 92 F. Supp.

2d 272 (S.D.N.Y. 2000). In DeFreitas, the defendant imported

counterfeit Beanie Babies from China to New Jersey via New York for

eventual sale in New Jersey. Id. at 276. The defendant challenged his

conviction under §§ 2320 and 371 (conspiracy) on the basis of improper

venue in New York, arguing that the substantive offense under § 2320 did

not begin until he received the counterfeit goods in New Jersey. The court

rejected his argument by holding that trafficking is a continuing offense

beginning with obtaining control over the counterfeit goods, continuing

with transport, and ending with the transfer or disposal of the goods. Id.

at 277. Because the offense began when the defendant purchased the

counterfeit goods in China and directed that they be shipped to New

Jersey, venue was proper at any point through which the goods traveled

after they entered the United States, including the Southern District of

New York. Id. 

III.C. Defenses

Many general defenses, such as the absence of proper venue or

jurisdiction, are available in every criminal case and their application

needs no further elaboration here. The following discussion addresses

defenses specific to § 2320.

III.C.1. Authorized-Use Defense: Overrun Goods 

The authorized-use defense excludes from the definition of counterfeit

mark any mark that is

used in connection with goods or services[, or a mark or designation

applied to labels, patches, stickers, wrappers, badges, emblems,

medallions, charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging of any type or nature used in connection

with such goods or services,] of which the manufacturer or producer

was, at the time of the manufacture or production in question[,]

authorized to use the mark or designation for the type of goods or
III. Counterfeit Marks 115

services so manufactured or produced, by the holder of the right to

use such mark or designation.

18 U.S.C. § 2320(e)(1)(B). The bracketed language was inserted by the

Stop Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181,

§ 1(b)(3), 120 Stat. 285, 287 (Mar. 16, 2006), and thus applies only to

offenses arising after that time.

The authorized-use defense applies to “overrun” goods or services,

that is, goods or services that an authorized manufacturer or producer

makes and sells on the side without the mark-holder or licensor's

knowledge or approval. For instance, consider a trademark licensee who

is authorized to make 500,000 umbrellas bearing the licensor's trademark

but who manufactures without authorization an additional 500,000

umbrellas bearing that mark during the course of the license. Because the

trademark owner in this situation can protect himself through

“contractual and other civil remedies,” Congress felt that it was

“inappropriate to criminalize such practices.” Joint Statement, 130 Cong.

Rec. 31,676 (1984) (internal quotation marks and citation omitted).

Thus, “[i]f a licensee manufactures overruns during the course of the valid

license, the marks on those goods will remain noncounterfeit for the

purposes of this act.” Id.

The overrun goods defense attaches to the overrun goods themselves,

not just to the party who produced them. This follows from

§ 2320(e)(1)(B)'s specification that overrun goods are not counterfeit.

Consequently, any overrun goods that are produced and completed during

the course of the license remain noncounterfeit even after the license runs

out, Joint Statement, 130 Cong. Rec. 31,676 (1984), and the defense is

available to any party who traffics in overrun goods downstream of the

manufacturer.

The overrun goods defense does not, however, allow counterfeiters to

escape criminal liability by attaching real or overrun labels to counterfeits.

As discussed in Section III.B.4.a. of this Chapter (citing 4 J. Thomas

McCarthy, McCarthy on Trademarks and Unfair Competition § 25:15

(4th ed. 2006) and United States v. Petrosian,126 F.3d 1232, 1234 (9th

Cir. 1997)), it is standard trademark law—both civilly and

criminally—that a genuine or authentic mark becomes counterfeit when

it is used in connection with something else that is counterfeit. As revised,

the authorized-use exception provides that a counterfeit mark “does not

include any mark or designation used in connection with goods or

services, or a mark or designation applied to labels, ... documentation, or

packaging of any type or nature used in connection with such goods or

services, of which the manufacturer or producer was, at the time of the
116 Prosecuting Intellectual Property Crimes

manufacture or production in question, authorized to use the mark or

designation for the type of goods or services so manufactured or produced,

by the holder of the right to use such mark or designation.”

§ 2320(e)(1)(B) (emphasis added). The 2006 amendments reworded the

authorized-use exception to retain its focus on whether the goods and

services are overrun, rather than whether the labels, documentation, or

packaging themselves are overrun. As before, the text focuses on the

authorization of the manufacturer or producer of the goods and services,

not the manufacturer or producer of the labels, documentation, or

packaging. Interpreting the amendment differently would cause a major

change in trademark law, one which Congress would have signaled in

much clearer terms had the change been intended. Given that the 2006

amendments were intended to strengthen the government's ability to

prosecute cases concerning counterfeit labels, documentation, and

packaging, and the legislative history indicates nothing to the contrary,

the authorized-use exception should still allow the government to

prosecute those who use or traffic in real or overrun labels,

documentation, or packaging to turn inauthentic goods into counterfeits.

The overrun defense does, however, have a few limits. First, “the

overrun exemption does not apply if a licensee produces a type of goods

in connection with which he or she was not authorized to use the

trademark in question.” Id. at 31,676-77. For example, “if a licensee is

authorized to produce 'Zephyr' trench coats, but without permission

manufactures 'Zephyr' wallets, the overrun exception would not apply.”

Id. at 31,677. In this example, the licensee could be prosecuted for

producing the wallets only if the 'Zephyr' mark was registered for use on

wallets as well as trench coats. See also Section III.B.4.f. of this Chapter.

Second, the overrun goods defense is limited to goods or services for

which authorization existed “during the entire period of production or

manufacture.” United States v. Bohai Trading Co., 45 F.3d 577, 580 (1st

Cir. 1995). In Bohai, Stride Rite authorized the defendant to arrange for

the manufacture of 200,000 pairs of its KEDS trademarked sneakers in

China in 1987 and 1988. Id. at 578. Stride Rite terminated the

defendant's license in the spring of 1989, after which the defendant

arranged for the Chinese factory to manufacture an additional 100,000

pairs of KEDS and to backdate the shoes as being produced in 1988. Id.

at 578-79. The defendant then imported the shoes to the United States

and sold them as genuine KEDS. Id. at 579. On appeal from its

conviction, the defendant argued that § 2320 was unconstitutionally

vague because it did not define the meaning of “production” within the

authorized-use exception, and thus the defendant could not discern

whether its conduct was illegal. The First Circuit disagreed, holding that
III. Counterfeit Marks 117

the statute's plain language clearly indicates that the licensee must have

a valid trademark license at all stages of manufacture or production. Id.

at 580-81. Stride Rite's permission to assemble materials and train

Chinese factory workers in 1988 (which the defendant argued was

“production” within the meaning of § 2320) did not authorize him to

apply the KEDS trademark to shoes in 1989 after his license was

terminated. Id.

The use of a licensee's rejected irregular goods was addressed in

United States v. Farmer, 370 F.3d 435 (4th Cir.), cert. denied, 125 S. Ct.

676 (2004). In Farmer, the defendant purchased irregular garments

without trademarks from legitimate manufacturers' authorized factories,

and had different companies sew or silk-screen on the manufacturers'

trademarks. Id. at 437-38. On appeal, the defendant argued that he had

not “confuse[d] customers about the source of his goods” because the

garments had been manufactured to the trademark holders' specifications

by factories from which the trademark holders themselves purchased. Id.

at 440. The First Circuit disagreed, reasoning that § 2320 focuses not on

the quality of the counterfeit goods but on the counterfeit trademark

attached to those goods and the right of trademark holders to control the

manufacturing and sale of goods with their trademarks. Id. Although the

decision did not specifically discuss the overrun goods defense, that

defense likely would have been rejected because the garments had not

been fully manufactured or produced until the marks were placed on them

by the companies the defendant hired, which were not authorized by the

trademark holders. Had the defendant instead purchased garments from

authorized factories with the trademarks already on them, the overrun

goods defense might have prevailed.

The defendant bears the burden of proving “that the goods or services

in question fall within the overrun exclusion, under both the criminal and

civil provisions” by a preponderance of the evidence. Joint Statement, 130

Cong. Rec. 31,676 (1984).

III.C.2. Authorized-Use Defense: Gray Market Goods

“Gray market goods,” also known as “parallel imports,” are

“trademarked goods legitimately manufactured and sold overseas, and

then imported into the United States” through channels outside the

trademark owner's traditional distribution channels. Joint Statement, 130

Cong. Rec. 31,676 (1984) (citing Bell & Howell: Mamiya Co. v. Masel

Supply Co., 719 F.2d 42 (2d Cir. 1983)). As with overrun goods, the

marks on gray market goods are placed there with the mark-holder's
118 Prosecuting Intellectual Property Crimes

authorization. What the mark-holder has not authorized is the sale of

those foreign goods within the United States.

Just as with overrun goods (discussed in Section III.C.1 of this

Chapter), the authorized-use defense excludes parallel imports and gray

market goods from the definition of a counterfeit mark because such a

mark is “placed there with the consent of the trademark owner.” Joint

Statement, 130 Cong. Rec. 31,676 (1984). Congress carefully considered

“gray market” goods and intended that those who traffic in them not be

prosecuted. Id.; S. Rep. No. 98-526, at 11 (1984), reprinted in 1984

U.S.C.C.A.N. 3627, 3637.

Additionally, as with the overrun goods defense, the gray market

goods defense is available not just to the party who produced the goods,

but also to any party who traffics in them downstream, because

§ 2320(e)(1) declares that such goods are not counterfeit. The burden of

proof on this issue, as with overrun goods, is placed on the defendant.

 This defense does not apply if the gray market goods were

subsequently modified or remarked in a manner that made the new mark

counterfeit. See Section III.C.3. of this Chapter.

III.C.3. Repackaging Genuine Goods

When the defendant's goods themselves are genuine and bear the

trademark of the rights-holder but have been repackaged by the

defendant, whether the defendant's repackaging is criminal depends on

whether he deceived the public or damaged the mark-owner's good will.

This rule ran through the cases, and was written into § 2320 by the Stop

Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181, § 1,

120 Stat. 285 (Mar. 16, 2006).

The case of United States v. Hanafy, 302 F.3d 485 (5th Cir. 2002),

established the first half of the rule, that a defendant cannot be

prosecuted under 18 U.S.C. § 2320 for repackaging genuine goods with

reproduced trademarks if the defendant did so without deceiving or

confusing others. In Hanafy, the defendants purchased individual cans of

infant formula from various convenience stores and other sources and

then repackaged the cans into trays for resale. Id. at 486. The defendants

marked the shipping trays with reproductions of the can manufacturers'

trademarks and resold the trays to other wholesalers. Id. Although the

cans had not been packaged by the original manufacturers for resale in

this form, the defendants' goods were genuine, unadulterated, and were

sold within the “sell by” date. Id. The district court ruled that the

unauthorized use of a reproduction of a mark in connection with genuine
III. Counterfeit Marks 119

goods (that is, what the mark represents the goods to be) does not violate

§ 2320. Id. at 487-88. In so ruling, the court concluded that the

repackaging rule of Prestonettes, Inc. v. Coty, 264 U.S. 359, 368-69

(1924), which applies to actions brought under the Lanham Act, does not

apply to criminal prosecutions under § 2320. Hanafy, 302 F.3d at 488.

Affirming the district court, the Fifth Circuit held that the shipping

trays did not qualify as counterfeit under § 2320. Id. at 488-89. Although

repackaging the goods without the manufacturer's approval or control

might violate civil trademark law, attaching a mark to trays containing the

“genuine unadulterated, unexpired products associated with that mark

does not give rise to criminal liability under section 2320.” Id. at 489. The

court distinguished Petrosian, which involved fake Coca-Cola in real Coke

bottles, because the infant formula in this case was genuine. Id.; see also

the discussion of Petrosian in Section III.B.4.a. of this Chapter. Thus,

under Hanafy, a person usually cannot be prosecuted under § 2320 for

repackaging goods with reproductions of the original trademark if the

goods themselves are genuine and in the same condition that they would

have been had the rights-holder distributed them itself.

The case of United States v. Milstein, 401 F.3d 53, 62-63 (2d Cir.

2005), confirmed the second half of the rule, that the defendant can be

prosecuted under § 2320 if he repackages genuine goods to defraud

consumers, such as by presenting fraudulent information. In Milstein, the

defendant obtained drugs manufactured for foreign markets and

repackaged them with false lot numbers and other markings to make the

drugs appear as if they had been approved by the FDA for sale in the

United States. Milstein, 401 F.3d at 59-60. The repackaged drugs were

not identical to the drugs manufactured for U.S. markets. Id. On appeal,

the defendant cited Hanafy to argue that his repackaging did not violate

§ 2320. Id. at 62. The Second Circuit distinguished Hanafy because

“[w]hile the cans in Hanafy were 'merely being repackaged, such that

consumers could be sure of the goods' quality and source,' ... the drugs

here were repackaged so that consumers would believe foreign versions of

the drug were in fact domestic, FDA-approved versions.” Id. (quoting

Hanafy, 302 F.3d at 486). The critical distinction was that Hanafy's false

marks “contained no more information than that which was carried on

the cans themselves,” whereas “Milstein sold [drugs] in forged packaging

bearing false lot numbers.” Id. (internal quotation marks and alterations

omitted). See also United States v. Lexington Wholesale Co., 71 Fed.

Appx. 507, 508 (6th Cir. 2003) (affirming restitution for a § 2320

conviction based on repackaging of loose cans of infant formula into cases

that did not accurately reflect the “use by” date).
120 Prosecuting Intellectual Property Crimes

In amending § 2320 in 2006, Congress essentially wrote Hanafy and

Milstein into the newly-enacted § 2320(f): “Nothing in this section shall

entitle the United States to bring a criminal cause of action under this

section for the repackaging of genuine goods or services not intended to

deceive or confuse.” § 2320(f) (as amended Mar. 16, 2006)). The

legislative history confirms that Congress intended to codify Hanafy. See

H. Rep. No. 109-68, at 8 & n.1 (2005). “Because the bill amends the

definition of a counterfeit trademark to include packaging and labeling

formats, which can be used lawfully by a variety of businesses, this

language is intended to clarify that repackaging activities such as

combining single genuine products into gift sets, separating combination

sets of genuine goods into individual items for resale, inserting coupons

into original packaging or repackaged items, affixing labels to track or

otherwise identify genuine products, [and] removing genuine goods from

original packaging for customized retail displays are not intended to be

prosecuted as counterfeiting activities under the amended title 18 U.S.C.

§ 2320.” Id. at 8.

The newly-enacted language also, however, codifies the rule set in

Milstein of allowing prosecution of those who repackage genuine goods

in a manner that defrauds consumers. In determining whether to

prosecute such a case, the government is expected to “consider evidence

tending to show an intent to deceive or confuse such as altering,

concealing, or obliterating expiration dates, or information important to

the consumer['s] use of the product such as safety and health information

about the quality, performance, or use of the product or service;

statements or other markings that a used, discarded, or refurbished

product is new; or statements or other markings that the product meets

testing and certification requirements.” Id. “Also relevant ... would be a

meaningful variance from product testing and certification requirements,

placing seals on product containers that have been opened and the

original manufacturer's seal has been broken, or altering or otherwise

adulterating the genuine product.” Id. at 9.

Although the above cases concern consumables such as food and

drugs, similar issues arise in other industries. See, e.g., United States

Attorney's Office, Eastern District of New York, New York Electronic

Crimes Task Force Arrests Two Individuals on Charges of Trafficking in

Counterfeit Computer Chips and Software (June 22, 2000) (computer

chips remarked to indicate ability to operate at a higher speed than the

manufacturer's rating),available at http://www.cybercrime.gov/

platinum.htm; Intel Corp. v. Terabyte Int'l, Inc., 6 F.3d 614, 616, 620

(9th Cir. 1993) (holding defendants liable for infringement for purchasing
III. Counterfeit Marks 121

and later distributing computer chips from a distributor who had relabeled

the chips with a model number signifying a higher processing speed).

Section 2320(f) does not preempt the prosecution of deceptionless

repackaging under statutes other than § 2320: “Nothing in this section

shall entitle the United States to bring a criminal cause of action under

this section for the repackaging of genuine goods or services not intended

to deceive or confuse.” § 2320(f) (as amended) (emphasis added). For

instance, repackaging cases that involve consumer products such as food,

drugs, medical devices, cosmetics, and other items designed for consumers

to use in the household, might be prosecuted under the product

tampering statute, 18 U.S.C. § 1365, which addresses tampering with

labels and communicating false information that a consumer product was

tainted, or under the Food, Drug, and Cosmetics Act, 21

U.S.C. §§ 331(a), 333, 343, 352, 362, which punishes trafficking in

misbranded food, drugs and cosmetics. See Section III.F. of this Chapter.

III.C.4. Lanham Act Defenses

The Lanham Act's civil defenses have been incorporated as defenses

against criminal charges brought under § 2320. “All defenses, affirmative

defenses, and limitations on remedies that would be applicable in an

action under the Lanham Act [for trademark infringement] shall be

applicable in a prosecution under this section.” 18 U.S.C. § 2320(c).

However, “only those defenses, affirmative defenses, and limitations on

relief [in the Lanham Act] that are relevant under the circumstances will

be applicable.” Joint Statement, 130 Cong. Rec. 31,675 (1984). In

addition, “any affirmative defense under the Lanham Act will remain an

affirmative defense under this [section], which a defendant must prove by

a preponderance of the evidence.” Id. 

Statutory defenses under the Lanham Act primarily address the

incontestability of a mark once it has been registered for five years. 15

U.S.C. § 1115(b). The defenses to incontestability include: 1) fraud by

the mark-holder in obtaining the registration; 2) abandonment of the

mark by its owner; 3) the registered mark's use by or with the registrant

to misrepresent the source of the goods or services on or in connection

with which the mark is used; 4) use of the name, term, or device charged

to be an infringement is a use of the defendant's individual name in his

own business, or of someone in privity with that party, or a term that is

used in good faith to describe the goods or services of such party or their

geographic origin; 5) innocent and continuous prior use of the mark

without registration by the defendant; 6) the defendant's innocent prior

use of the mark with registration; 7) use by the mark-holder of a
122 Prosecuting Intellectual Property Crimes

trademark in violation of the antitrust laws; 8) the mark is functional; and

9) equitable defenses, such as laches, estoppel, and acquiescence. 15

U.S.C. § 1115 (b). Other Lanham Act defenses or limitations mentioned

prominently in the legislative history are those limitations on actions

against printers and newspapers in 15 U.S.C. § 1114(2). For instance, the

owner of an infringed mark is limited to an injunction against future

printing under 15 U.S.C. § 1125(a). See Joint Statement, 130 Cong. Rec.

31,675 (1984). For an extensive discussion of these defenses, see David

J. Goldstone & Peter J. Toren, The Criminalization of Trademark

Counterfeiting, 31 Conn. L. Rev. 1, 43-65 (1998).

The applicability of the Lanham Act's statute of limitations (or lack

thereof) is discussed in Section III.C.5. of this Chapter.

Civil cases decided under the Lanham Act may prove instructive when

applying the Lanham Act defenses in criminal cases, but those defenses

should not be applied mechanically in a criminal case. For example,

although an “unclean hands” defense may deny relief to a plaintiff markholder in a civil case, 15 U.S.C. § 1115(b)(3), (9); 37 C.F.R.

§ 2.114(b)(1) (Oct. 6, 2005), the mark-holder's unclean hands are less

relevant in a criminal case, where the mark-holder is not a party and the

prosecutors act in the public's interest rather than exclusively the markholder's interest. Thus, application of this Lanham Act defense in a

criminal case might not serve the public interest.

At this writing, few criminal cases address the Lanham Act defenses.

See, e.g., United States v. Milstein, 401 F.3d 53, 63-64 (2d Cir. 2005)

(holding laches defense unavailable in § 2320 prosecutions); United

States v. Sung, 51 F.3d 92, 94 (7th Cir. 1995) (discussing how 15 U.S.C.

§ 1111's limitations on remedies in civil cases applies to criminal cases);

United States v. Sheng, 26 F.3d 135 (9th Cir. 1994) (unpublished)

(affirming denial of defendant's motion for discovery concerning antitrust

defense, due to defendant's failure to make a prima facie case for

discovery); United States v. Shinyder, 888 F.2d 1387 (4th Cir. 1989) (per

curiam) (unpublished) (holding that defendant failed to demonstrate

ineffective assistance of counsel because defendant gave his attorney no

information regarding purported invalidity of victim's mark due to its

prior use by defendant); United States v. Almany, 872 F.2d 924 (9th Cir.

1989) (appeal based on evidentiary issues related to Lanham Act

defenses).

III.C.5. Statute of Limitations

Under 18 U.S.C. § 3282(a), the statute of limitations for almost all

non-capital federal crimes is five years unless otherwise expressly provided
III. Counterfeit Marks 123

by law. Because § 2320 does not specify a limitations period itself,

violations of § 2320 are subject to the general five-year limitations period.

See United States v. Foote, 413 F.3d 1240, 1247 (10th Cir. 2005);

United States v. Milstein, No. CR 96-899 (RJD), 2000 WL 516784, at

*1 (E.D.N.Y. 2000).

Defendants, however, sometimes seek a shorter statute of limitations

by arguing that the courts should apply the limitations period applicable

to civil trademark violations. In Foote, for instance, the defendant argued

that the statute of limitations should be determined by state law because

§ 2320(c) incorporates “[a]ll defenses, affirmative defenses, and

limitations on remedies that would be applicable under the Lanham Act,”

and courts apply state statutes of limitations to Lanham Act cases since

the federal civil statute does not contain an express limitation period.

Foote, 413 F.3d at 1247. The Tenth Circuit disagreed, holding that the

lack of an “express statute of limitations in either the Counterfeit

Trademark Act or the Lanham Act” means that the general criminal

limitations period in § 3282(a) applies. Id. See also United States v.

Foote, 238 F. Supp. 2d 1271, 1276-77 (D. Kan. 2002) (containing an

extended policy discussion of this issue).

III.D. Special Issues

III.D.1. High-Quality and Low-Quality Counterfeits

Defense counsel often argue that it is inappropriate to charge a § 2320

offense if the counterfeit goods are of very low or, conversely, very high

quality, arguing that nobody is fooled by low-quality counterfeits and that

nobody is harmed or deceived by high-quality counterfeits. Both

arguments are misguided. See, e.g., United States v. Farmer, 370 F.3d 435

(4th Cir.) (affirming conviction under § 2320 for irregular garments

purchased from factories that manufactured garments to trademark

holder's specifications), cert. denied, 125 S. Ct. 676 (2004); United States

v. Gonzalez, 630 F. Supp. 894, 896 (S.D. Fla.1986) (denying motion to

dismiss § 2320 indictment because the counterfeits' low price did not

preclude finding that they could cause confusion, mistake or deception).

The government's response lies in the plain language of the statute:

Subsection 2320(a) and (e) focus on whether the counterfeit mark is

likely to cause confusion, cause mistake, or to deceive, and make no

mention of the counterfeit item's quality. See United States v. Foote, 413

F.3d 1240, 1246 (10th Cir. 2005) (“[T]he correct test is whether the

defendant's use of the mark was likely to cause confusion, mistake or
124 Prosecuting Intellectual Property Crimes

deception in the public in general.”). As discussed in Section III.B.4.g. of

this Chapter, § 2320 was “not just designed for the protection of

consumers,” but also for “the protection of trademarks themselves and for

the prevention of the cheapening and dilution of the genuine product.”

United States v. Hon, 904 F.2d 803, 806 (2d Cir. 1990) (internal

quotation marks and citations omitted). In this vein, “[o]ne of the rights

that a trademark confers upon its owner is the 'right to control the quality

of the goods manufactured and sold' under that trademark. For this

purpose the actual quality of the goods is irrelevant; it is the control of

quality that a trademark holder is entitled to maintain.” Farmer, 370 F.3d

at 441 (internal quotation marks and citations omitted) (emphasis

added).

Because both high-quality and low-quality counterfeit goods affect the

intellectual property rights of the trademark holder, a § 2320 charge can

be appropriate in either circumstance. See also Section III.B.4.g. of this

Chapter.

III.D.2. Counterfeit Goods with Genuine Trademarks

Although the definition of “counterfeit mark” in § 2320(e) indicates

that the mark itself must be counterfeit, not the good to which it is

attached, a genuine or authentic mark becomes counterfeit when it is

applied to counterfeit goods. See the discussion of United States v.

Petrosian, 126 F.3d 1232 (9th Cir. 1997), in Section III.B.4.a. of this

Chapter.

 Genuine trademarks can also become counterfeit when they are

applied to genuine product in a manner that misrepresents the genuine

product's quality. See Section III.C.3 of this Chapter.

III.D.3. Selling Fakes While Admitting That They Are Fakes

Defendants who disclose to consumers that their merchandise is

counterfeit may not argue that no criminal liability should attach because

their customers were not deceived into thinking they were purchasing

genuine goods. See Section III.B.4.g. of this Chapter.

III.D.4. Selling Another's Trademarked Goods As One's Own

(Reverse Passing-Off)

Agents sometimes inquire whether a target can be prosecuted for

criminal trademark infringement if he sells another's goods as his own

under his own trademark, such as selling stolen Marlboro cigarettes as his

own Acme brand cigarettes. This conduct, called “reverse passing-off,” is
III. Counterfeit Marks 125

civilly actionable under the Lanham Act. See, e.g., Dastar Corp. v. 20th

Century Fox Film Corp., 539 U.S. 23, 32-37 (2003); Web Printing

Controls Co. v. Oxy-Dry Corp., 906 F.2d 1202 (7th Cir. 1990); Arrow

United Indus., Inc. v. Hugh Richards, Inc., 678 F.2d 410, 416 (2d Cir.

1982); Smith v. Montoro, 648 F.2d 602, 606 & n.5 (9th Cir. 1981).

Reverse passing-off is not a crime under § 2320, however, because it does

not involve the use of a counterfeit mark as defined in § 2320(e). The

defendant's own Acme mark is, in fact, a genuine mark.

III.D.5. Mark-Holder's Failure to Use ® Symbol

The trademark code requires the holder of a federally registered mark

to give others notice of registration by displaying the mark with the words

“Registered in U.S. Patent and Trademark Office”, “Re. U.S. Pat. & Tm.

Off.”, or the familiar ® symbol. Without this notice next to its mark on

its goods and services, the mark-holder cannot recover its profits or

damages against an infringer unless the infringer had actual notice of the

registration. 15 U.S.C. § 1111. The commonly-seen TM and SM symbols do

not give notice of federal registration; they can be used with unregistered

marks. 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair

Competition § 19:148 (4th ed. 2005).

The victim's intentional or inadvertent failure to use the statutory

means of notice mentioned above does not preclude the defendant's

prosecution under § 2320. U.S. v. Sung, 51 F.3d 92, 93-94 (7th Cir.

1995). Section 2320 criminalizes counterfeiting “whether or not the

defendant knew [the victim's] mark was so registered.” 18 U.S.C.

§ 2320(e)(1)(A)(ii); Sung, 51 F.3d at 93-94. Moreover, the notice

provisions in 15 U.S.C. § 1111 do not create a defense that excuses

infringement, but rather they only limit the mark-holder's remedies. Sung,

51 F.3d at 94; see also 3 McCarthy on Trademarks and Unfair

Competition § 19:144 (“Failure to use the statutory symbol does not

create a defense: it is merely a limitation on remedies.”) (footnote

omitted). For a discussion of how these remedies are limited in criminal

cases, see Section III.E.3. of this Chapter.

III.D.6. Storage Costs and Destruction

Unlike many other intellectual property crimes, criminal trademark

infringement frequently generates a substantial quantity of physical

evidence. Although large intellectual property seizures can be a problem

to store, storage is the safest option. (Chapter X of this Manual discusses

whether victims may assist with storage.) If storage is not feasible, part of

the evidence probably can be destroyed after a hearing if the seized
126 Prosecuting Intellectual Property Crimes

property is counterfeit. Destruction of the evidence, however, carries its

own complications with respect to making evidence available for

defendants and jurors to inspect, and employing sound procedures for

taking representative samples.

The decision to allege all or only a part of the seized intellectual

property in the indictment and at trial must be made on a case-by-case

basis. In most cases, it should be possible either to indict for all seized

goods and present evidence of a representative sample to prove the whole

at trial, or to indict and present evidence of only some of the goods, using

evidence of the full quantity as relevant conduct only at sentencing.

(Chapter VIII's discussion of determining the infringement amount

considers the justification for and methods of estimation.) Charging a

subset for trial and proving the remainder at sentencing may also have

some tactical advantages, such as streamlining the trial and deferring loss

calculations to the sentencing phase.

Because these issues can become quite complex, prosecutors should

consider them early on, even before the search is conducted. If the

prosecutor wants all the evidence to be available for trial, it is important

to coordinate with the seizing agency to ensure that any forfeited material

is not destroyed or is at least destroyed only after a sound procedure for

taking representative samples is completed. (Of course, destruction is not

permissible until the items have been forfeited.)

Prosecutors can discuss these issues with the Computer Crime and

Intellectual Property Section at (202) 514-1026.

III.D.7. Units of Prosecution

Because a defendant often traffics in numerous counterfeit

trademarks, drafting an indictment that reflects the defendant's actions

is not always easy. The United States Department of Justice's Criminal

Resource Manual 215, available at http://www.usdoj.gov/usao/eousa/

foia_reading_room/usam/title9/crm00215.htm, advises that “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”, and generally recommends

charging no more than fifteen counts. But trademark counterfeiters of any

significant size will often have infringed numerous trademarks in

numerous transactions.

The charging determination is subject to the rule of reason, and

generally the best approach is to organize charges around specific courses

of conduct in order to keep the case as straightforward as possible for the
III. Counterfeit Marks 127

jury. Counts may be organized by the mark infringed, the identity of the

mark-holder, or the date upon which the infringing goods were obtained,

manufactured, distributed, or seized. Indictments charging counterfeiting

schemes can be unified through a conspiracy count under 18

U.S.C. § 371.

If the defendant infringed only one trademark, the defendant can be

charged with a single count. However, separate sales of goods bearing the

same counterfeit mark have sometimes been charged in separate counts.

See, e.g., United States v. Gantos, 817 F.2d 41, 42 (8th Cir. 1987)

(defendant charged and convicted on four counts, each for separate sales

of counterfeit Rolex watches).

If the defendant counterfeited multiple marks, the indictment may

also contain separate counts for each separate genuine mark. For example,

in United States v. Song, 934 F.2d 105 (7th Cir. 1991), the court upheld

the defendant's conviction on five separate counts “because she was

trafficking in goods bearing five different counterfeit marks.” Id. at 109.

The court relied on the plain language of § 2320, which punishes someone

who “'intentionally traffics or attempts to traffic in goods or services and

knowingly uses a counterfeit mark' on such goods or services.” Id. at 108

(quoting 18 U.S.C. § 2320(a)) (emphasis in original) (footnote omitted).

The courts have not yet addressed several sentencing issues that will

continue to arise in trademark prosecutions:

• Whether a single sale of multiple items that infringe multiple

trademarks may be charged in a single counterfeiting count. The

issue is whether such a charge would be duplicitous—i.e., charging

two or more distinct offenses in a single count—or rather just an

allegation that multiple means were used to commit a single

offense. Prosecutors who confront this issue should consult the

Department's manual, Federal Grand Jury Practice § 11.29

(2000) (“Duplicitous indictments”).

• How multiple counterfeit trademarks on a single good should be

charged in a criminal indictment: as one count, using the

counterfeit good as the unit of prosecution, or as multiple counts,

using each mark as a unit of prosecution.

• Whether a defendant who traffics in a counterfeit sneaker

wrapped in counterfeit packaging may be charged in one count

that covers both the sneaker and packaging, and/or whether

charging the sneaker and packaging separately in multiple counts

is necessary or permissible, now that § 2320 (as amended Mar.

16, 2006) criminalizes trafficking in counterfeit labels,
128 Prosecuting Intellectual Property Crimes

documentation, and packaging in addition to counterfeit goods

and services.

III.D.8. Olympic Symbols

The definition of “counterfeit mark” in § 2320(e)(1)(B) includes

designations protected by the Olympic Charter Act, such as the five

interlocking rings of the Olympic games. See also 36 U.S.C.

§ 220506(a)(2) (giving the United States Olympic Committee exclusive

rights to the symbol of the International Olympic Committee, consisting

of 5 interlocking rings, the symbol of the International Paralympic

Committee, consisting of 3 TaiGeuks, and the symbol of the PanAmerican Sports Organization, consisting of a torch surrounded by

concentric rings).

Some of the rules that apply to prosecutions involving other marks do

not apply to cases involving the Olympic symbols:

• The mark need not have been registered on the principal register

in the United States Patent and Trademark Office (“USPTO”).

Section 2320(e)(1)(A)'s registration requirements do not apply to

cases dealing with criminal trademark infringement of Olympic

symbols. Compare 18 U.S.C. § 2320(e)(1)(A)(ii) with

§ 2320(e)(1)(B); see also 36 U.S.C. § 220506; Joint Statement,

130 Cong. Rec. 31,675 (1984) (explicitly exempting cases

involving Olympic symbols from the registration requirement).

See also the discussion of registration in Section III.B.4.c. of this

Chapter.

• Section 2320(e)(1)(A)(ii)'s use requirement does not apply to

cases involving protected Olympic symbols. See also the

discussion of use in Section III.B.4.d. of this Chapter.

• The requirement that the defendant have used the counterfeit

mark in connection with the goods or services for which the mark

had been registered does not apply to cases involving protected

Olympic symbols. See also Section III.B.4.f. of this Chapter.

• In cases involving protected Olympic symbols, the mark is

counterfeit under 18 U.S.C. § 2320(e)(1)(B) if the defendant's

counterfeit symbols are “identical with or substantially

indistinguishable” from the genuine symbols. No further proof of

likely confusion, mistake, or deception is required. See also

Section III.B.4.g. of this Chapter.
III. Counterfeit Marks 129

The other rules discussed in this Chapter apply equally to cases

involving Olympic symbols.

III.E. Penalties

III.E.1. Fines

An individual defendant can be fined a maximum of $2,000,000 for

a first offense or $5,000,000 for subsequent convictions, or twice the

monetary loss or gain. See 18 U.S.C. §§ 2320(a) (trademark fines),

3571(b), (d). A corporate defendant can be fined a maximum fine of

$5,000,000 for a first offense or $15,000,000 for subsequent convictions,

or twice the monetary gain or loss. See 18 U.S.C. §§ 2320(a), 3571(c),

(d). 

III.E.2. Imprisonment

The maximum term of imprisonment is 10 years for a first offense and

20 years for subsequent convictions. A defendant can be fined and/or

imprisoned. 18 U.S.C. § 2320(a). A challenge to incarceration, probation,

and supervised release, on the ground that these remedies are not present

in the civil Lanham Act, was rejected in United States v. Foote, No. CR.A.

00-20091-01KHV, 2003 WL 22466158, at *2-3 (D. Kan. 2003), aff'd in

part on other grounds, 413 F.3d 1240 (10th Cir. 2005).

III.E.3. Restitution

Before the 2006 amendments, § 2320 contained no express provision

for restitution, but restitution was properly awarded in § 2320 cases under

18 U.S.C. § 3663A(c)(1)(A)(ii), which provides mandatory restitution to

victims of crimes against property in Title 18, and under Section 5E1.1

of the Sentencing Guidelines, which provides restitution when there is an

identifiable victim and restitution is authorized under 18 U.S.C. § 3663A.

See, e.g., United States v. Lexington, 71 Fed. Appx. 507, 508 (6th Cir.

2003) (affirming contested restitution order under 18 U.S.C. § 3663 and

U.S.S.G. § 5E1.1 following a § 2320 conviction); United States v. Hanna,

No. 02 CR.1364-01 (RWS), 2003 WL 22705133, at *3 (S.D.N.Y. Nov.

17, 2003) (including restitution in sentence for § 2320 conviction). See

also Chapter VIII of this Manual.

The 2006 amendments made the right to restitution explicit. Newlyamended § 2320(b)(4) now provides that “[w]hen a person is convicted

of an offense under this section, the court, pursuant to sections 3556,
130 Prosecuting Intellectual Property Crimes

3663A, and 3664, shall order the person to pay restitution to the owner

of the mark and any other victim of the offense as an offense against

property referred to in section 3663A(c)(1)(A)(ii).” 18 U.S.C.

§ 2320(b)(4) (as amended Mar. 16, 2006). This provision does not mean

that restitution will be proper in every § 2320 case, but rather that

restitution shall be ordered under 18 U.S.C. § 3663A(c)(1)(A)(ii) if there

is a victim who was harmed in a manner that would entitle him to

restitution as the victim of a property crime. A “victim” is defined in

newly-enacted § 2320(b)(5) as having “the meaning given that term in

section 3663A(a)(2),” which defines a victim as “a person directly and

proximately harmed as a result of the commission of an offense for which

restitution may be ordered.” There is some question whether a markholder qualifies for restitution if the defendant's conduct did not diminish

the mark-holder's sales. See also Chapter VIII of this Manual.

In § 2320 cases, the victim's right to restitution may be subject to an

important qualification: the Lanham Act's limitation on remedies in 15

U.S.C. § 1111. In civil cases, 15 U.S.C. § 1111 prohibits a plaintiff from

recovering monetary damages from a defendant who lacked actual notice

that the plaintiff's mark was registered. One court has ruled that 15

U.S.C. § 1111 limits restitution in a § 2320 prosecution because

§ 2320(c) incorporates civil Lanham Act defenses: “[R]estitution in a

criminal case is the counterpart to damages in civil litigation,” and thus

“restitution payable to the trademark owner is proper only if the goods

contained the proper notice or the infringer had actual knowledge of the

registration.” United States v. Sung, 51 F.3d 92, 94 (7th Cir. 1995). In

Sung, the Seventh Circuit held that specific findings on these

points—proper notice or actual knowledge of the registration—must be

made by the sentencing court on the record before ordering restitution.

Id. See the discussion of what constitutes proper notice in Section III.D.5.

of this Chapter. For cases addressing how to prove notice or the

defendant's actual knowledge of registration, see United Srvs. Auto. Ass'n

v. National Car Rental Sys., No. Civ. A.SA00CA1370G, 2001 WL

1910543, at *4 (W.D. Tex. Sept. 26, 2001) (holding that “actual notice

requirement is met when a party receives information portraying a

registered trademark bearing a ® symbol,” including a letter asking the

defendant to cease and desist); Schweitzz Dist. Co. v. P & K Trading, No.

93 CV 4785, 1998 WL 472505 (E.D.N.Y. July 16, 1998) (holding that

defendant's testimony that it was aware of plaintiff's use of the ® symbol

on the open market sufficed to prove notice).

Even if other courts follow the Seventh Circuit's holding in Sung, two

points are worth noting. First, the defendant's knowledge or notice of the

registration is not a defense to a criminal conviction; it is only a limitation
III. Counterfeit Marks 131

on remedies. See Sung, 51 F.3d at 93-94. See also Section III.D.5. of this

Chapter. Second, the rule should not limit restitution to any consumers

whom the defendant defrauded. Sung's holding was stated only in terms

of restitution to the mark-holder, and its rationale should not be extended

to consumers, who have no say in whether the mark-holder gave the

defendant notice. See Sung, 51 F.3d at 94 (“First, as a form of money

damages, restitution payable to the trademark owner is proper only if ...”)

(emphasis added); cf. United States v. Foote, 413 F.3d 1240, 1252 (10th

Cir. 2005) (holding Sung inapplicable to criminal fines, because “[t]he

court's conclusion in Sung was based on its reasoning that restitution is

a form of money damages payable to the trademark owner. Unlike

restitution [to the trademark owner], fines are a form of criminal

punishment rather than a form of damages, and are payable to the

government rather than to the trademark owner.”)

For a more in-depth discussion of restitution in intellectual property

crimes, such as whether a trademark-holder can be awarded restitution

even if the defendant did not cost the trademark-holder any sales, see

Chapter VIII of this Manual.

III.E.4. Forfeiture

Forfeiture is covered in Chapter VIII of this Manual.

III.E.5. Sentencing Guidelines

The applicable sentencing guideline is U.S. Sentencing Guidelines

Manual § 2B5.3. It is covered in Chapter VIII of this Manual.

One of the most difficult issues in sentencing § 2320 offenses

concerns how to compute the infringement amount of goods in the

defendant's possession to which he had not yet applied a counterfeit

mark. If the defendant had not completed applying the counterfeit mark

to the goods at issue (such as in cases of attempt or aiding-and-abetting

where the defendants produced counterfeit labels or packaging), and the

prosecution wants to obtain a sentence based on those uncompleted

goods, the government must establish with a “reasonable certainty” that

the defendant intended to complete and traffic in those goods. See United

States v. Guerra, 293 F.3d 1279, 1293-94 (11th Cir. 2002) (“There is no

support for the proposition that the number of 'infringing items' may be

based on the number of seized articles that have the mere potential of

ultimately forming a component of a finished counterfeit article, without

a determination as to the extent to which defendants had a reasonable

likelihood of actually completing the goods.”); United States v. Sung, 51

F.3d 92, 94-95 (7th Cir. 1995) (remanding for resentencing because the
132 Prosecuting Intellectual Property Crimes

district court did not find with reasonable certainty that Sung intended

to sell 240,000 counterfeit shampoo bottles where the only evidence of

intent was the possession of counterfeit trademarked shipping cartons

that could hold 240,000 bottles, and defendant had liquid to fill only

17,600 bottles). Further, if the counterfeit label was not attached to the

good, the counterfeit item's value might be determined by whether the

counterfeit label itself has a market value separate from the value of the

infringing item for which it was intended. Compare United States v. Bao,

189 F.3d 860, 862-63 (9th Cir. 1999) (holding that the most appropriate

retail value to use in sentencing under 18 U.S.C. § 2318 for trafficking in

counterfeit computer software manuals was that of the genuine computer

manual, not the total software package) with Guerra, 293 F.3d at 1292

(distinguishing Bao in § 2320 conviction because the cigar labels had no

retail value apart from being attached to the cigars).

Nevertheless, when the government can show with reasonable

certainty that the defendant would likely have attached the unattached

counterfeit labels or packaging to actual product, it should include these

items in the infringement amount. Thus, for a defendant caught with

counterfeit purses along with generic, no-name purses and labels intended

to turn the generic items into counterfeits, the infringement amount may

include the number of generic purses or counterfeit labels—whichever is

lower. And the infringement amount may also include the excess generic

purses (purses for which there was no corresponding counterfeit label) or

excess counterfeit labels (labels for which there was no corresponding

generic purse) if the evidence of past or potential future sales suggests that

the defendant would have acquired the missing elements, completed the

manufacture, and attempted to sell these wares.

All these issues are likely to be settled more definitely in the second

half of 2006, during the next round of amendments to the Sentencing

Guidelines. On March 16, 2006, Congress directed the Sentencing

Commission to determine whether the guidelines are “adequate to address

situations in which the defendant has been convicted of [a § 2320

offense] and the item in which the defendant trafficked was not an

infringing item but rather was intended to facilitate infringement, ... or

the item in which the defendant trafficked was infringing and also was

intended to facilitate infringement in another good or service, such as a

counterfeit label, documentation, or packaging, taking into account cases

such as U.S. v. Sung, 87 F.3d 194 (7th Cir. 1996).” Stop Counterfeiting

in Manufactured Goods Act, Pub. L. No. 109-181, § 1, 120 Stat. 285,

287 (Mar. 16, 2006). This review of the guidelines will hopefully help

resolve how to value uncompleted goods and how to value counterfeit

labels, documentation, and packaging.
III. Counterfeit Marks 133

In the meantime, one principle to bear in mind is that before the Stop

Counterfeiting in Manufactured Goods Act was awarded, the appropriate

guideline for addressing an uncompleted good to which a counterfeit mark

had yet to apply counterfeit labels, documentation, or packaging might

have been U.S.S.G. § 2B5.3 in conjunction with U.S.S.G. § 2X1.1

(Conspiracies, Attempts, Solicitations), see Sung, 51 F.3d at 94-95, but

only because trafficking in counterfeit labels, documentation, and

packaging was not a completed crime. Now that the Stop Counterfeiting

in Manufactured Goods Act has made trafficking in unattached

counterfeit labels, documentation, and packaging a crime on its own,

there is some question whether U.S.S.G. § 2X1.1 will apply to such cases.

III.F. Other Charges to Consider

When confronted with a case that implicates counterfeit trademarks,

service marks, or certification marks, prosecutors may consider the

following crimes in addition to or in lieu of § 2320 charges if § 2320's

elements cannot be met:

• Conspiracy and aiding-and-abetting, 18 U.S.C. §§ 2, 371

Consider these charges if the defendant only supplied counterfeit

labels or packaging that were attached by another person. See Section

III.B.3.c. of this Chapter.

• Mail and wire fraud, 18 U.S.C. §§ 1341, 1343

 These charges can be filed if the defendant used the mail (or other

interstate carrier) or wires (including the Internet) in a scheme to defraud

purchasers, whether direct or indirect purchasers. Mail and wire fraud may

be especially appropriate when there are foreign victims and domestic

jurisdiction under § 2320 is difficult to establish. See Pasquantino v.

United States, 544 U.S. 349, 125 S. Ct. 1766 (2005) (affirming wire

fraud conviction where victim was the Canadian government); United

States v. Trapilo, 130 F.3d 547, 552 (2d Cir. 1997) (“The [wire fraud]

statute reaches any scheme to defraud involving money or property,

whether the scheme seeks to undermine a sovereign's right to impose

taxes, or involves foreign victims and governments.”) (emphasis in

original) (citations omitted).

Mail and wire fraud charges may be available if the defendant told his

direct purchasers that his goods were counterfeit, so long as he and his

direct purchasers intended to defraud the direct purchasers' customers. If,

however, all the participants intended that the goods be sold to the
134 Prosecuting Intellectual Property Crimes

ultimate customers as admitted “replicas,” then mail and wire fraud

charges will likely be unavailable.

• Copyright infringement, 17 U.S.C. § 506, 18 U.S.C. § 2319

Consider these charges if the underlying goods are not only

trademarked or service marked, but also contain copyrighted contents,

such as books, movies, music, or software. See Chapter II of this Manual.

• Trafficking in counterfeit labels, illicit labels, or counterfeit

documentation or packaging, 18 U.S.C. § 2318

Consider charging § 2318 if the labels, documentation, or packaging

were intended to be used with copyrighted works. See Chapter VI of this

Manual.

• Trafficking in misbranded food, drugs and cosmetics 

See Food, Drug, and Cosmetics Act and Title 21 provisions, including

21 U.S.C. §§ 331(a) (prohibitions on misbranding), 333 (criminal

penalties), 343 (misbranded food), 352 (misbranded drugs and devices),

362 (misbranded cosmetics) and, 841(a)(2) (prohibiting distribution of

counterfeit controlled substances).

• Tampering with consumer products, 18 U.S.C. § 1365

Tampering with labels and communicating false information that a

consumer product has been tainted.

• Trafficking in mislabeled wool, fur and textile fiber products

Title 15 U.S.C. §§ 68a, 68h (prohibiting commercial dealing in

misbranded wool products), 69a, 69i (prohibiting commercial dealing in

misbranded fur products); 70a, 70i (prohibiting commercial dealing in

misbranded textile fiber products).

• Racketeer Influenced and Corrupt Organizations (RICO), 18

U.S.C. §§ 1961-1968

Consider RICO if the intellectual property crimes are committed by

organizations. Counterfeit labeling, 18 U.S.C. § 2318; criminal copyright

infringement, 18 U.S.C. § 2319; trafficking in recordings of live musical

performances, 18 U.S.C. § 2319A; and trademark counterfeiting, 18

U.S.C. § 2320, are all predicate offenses for a racketeering charge under

18 U.S.C. § 1961(1)(B). A RICO charge requires prior approval from the

Organized Crime and Racketeering Section of the Criminal Division. See

USAM 9-110.101, 9-110.320.
III. Counterfeit Marks 135

• Money laundering, 18 U.S.C. §§ 1956, 1957

Section 2320 is a predicate offense for a money laundering charge. 18

U.S.C. § 1956(c)(7)(D). See, e.g., United States v. Bohai Trading Co., 45

F.3d 577, 579 (1st Cir. 1995) (charging § 2320 and § 1957 offenses).

Those seeking additional information on enforcing criminal provisions

designed to protect consumers should contact the Justice Department's

Office of Consumer Litigation at (202) 616-0219.

Congress has also provided civil remedies for violations of its

prohibitions on misbranded goods and has established agencies to enforce

those laws, such as the Federal Trade Commission and the Food and Drug

Administration. Cases appropriate for civil enforcement may be referred

to the appropriate agency. The Federal Trade Commission's Marketing

Practices Section, which is part of the Consumer Protection Bureau, may

be reached at (202) 326-3779. The Federal Trade Commission's website

is www.ftc.gov, and their general information telephone number is (202)

326-2222. The Food and Drug Administration's website is www.fda.gov,

they may be reached by telephone at 1-888-INFO-FDA (1-888-463-

6322).
137

IV.

Theft of Commercial

Trade Secrets—

18 U.S.C. §§ 1831-1839

IV.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

IV.B. The Economic Espionage Act of 1996,

18 U.S.C. §§ 1831-1839 . . . . . . . . . . . . . . . . . . . . . . . . . . 140

IV.B.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

IV.B.2. Relevance of Civil Cases . . . . . . . . . . . . . . . . . . . . . . . 142

IV.B.3. Elements Common to 18 U.S.C. §§ 1831, 1832 . . . . 143

IV.B.3.a. The Information Was a Trade Secret . . . . . . . . 143

IV.B.3.a.i. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 143

IV.B.3.a.ii. Employee’s General Knowledge, Skill, or Abilities

Not Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

IV.B.3.a.iii. Specification of Trade Secrets . . . . . . . . . 145

IV.B.3.a.iv. Novelty . . . . . . . . . . . . . . . . . . . . . . . . . . 146

IV.B.3.a.v. Secrecy . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

IV.B.3.a.vi. Disclosure’s Effects . . . . . . . . . . . . . . . . . 147

IV.B.3.a.vii. Reasonable Measures to Maintain Secrecy

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

IV.B.3.a.viii. Independent Economic Value . . . . . . . . 153

IV.B.3.A.ix. Example: Customer Lists . . . . . . . . . . . . 153

IV.B.3.b. Misappropriation . . . . . . . . . . . . . . . . . . . . . . . 154

IV.B.3.b.i. Types of Misappropriation . . . . . . . . . . . . 154

IV.B.3.b.ii. Memorization Included . . . . . . . . . . . . . . 155

IV.B.3.b.iii. Lack of Authorization . . . . . . . . . . . . . . . 155
138 Prosecuting Intellectual Property Crimes

IV.B.3.b.iv. Misappropriation of Only Part of a

Trade Secret . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

IV.B.3.b.v. Mere Risk of Misappropriation Not Prosecutable,

but Attempts and Conspiracies Are

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

IV.B.3.c. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

IV.B.4. Additional 18 U.S.C. § 1831 Element: Intent to Benefit a

Foreign Government, Foreign Instrumentality, or Foreign

Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

IV.B.5. Additional 18 U.S.C. § 1832 Elements . . . . . . . . . . . 159

IV.B.5.a. Economic Benefit to a Third Party . . . . . . . . . . 159

IV.B.5.b. Intent to Injure the Owner of the Trade Secret

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

IV.B.5.c. Product Produced for or Placed in Interstate or Foreign

Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

IV.B.6. Attempts and Conspiracies, Including the Impossibility

Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

IV.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

IV.C.1. Parallel Development . . . . . . . . . . . . . . . . . . . . . . . . . 163

IV.C.2. Reverse Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . 163

IV.C.3. Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

IV.C.4. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

IV.C.5. Claim of Right—Public Domain and

Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

IV.C.6. The First Amendment . . . . . . . . . . . . . . . . . . . . . . . . 166

IV.C.7. Void-For-Vagueness . . . . . . . . . . . . . . . . . . . . . . . . . . 167

IV.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

IV.D.1. Civil Injunctive Relief for the United States . . . . . . . 169

IV.D.2. Confidentiality and the Use of Protective Orders

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

IV.D.3. Extraterritoriality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

IV.D.4. Department of Justice Oversight . . . . . . . . . . . . . . . . 173
IV. Theft of Commercial Trade Secrets 139

IV.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

IV.E.1. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

IV.E.1.a. Imprisonment and Fines . . . . . . . . . . . . . . . . . . 173

IV.E.1.b. Criminal Forfeiture . . . . . . . . . . . . . . . . . . . . . . 174

IV.E.1.c. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

IV.E.2. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . 175

IV.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . 175

IV.A. Introduction

“A trade secret is really just a piece of information (such as a customer

list, or a method of production, or a secret formula for a soft drink) that

the holder tries to keep secret by executing confidentiality agreements

with employees and others and by hiding the information from outsiders

by means of fences, safes, encryption, and other means of concealment,

so that the only way the secret can be unmasked is by a breach of contract

or a tort.” ConFold Pac. v. Polaris Indus., 433 F.3d 952, 959 (7th Cir.

2006) (Posner, J.) (citations omitted). Or, as Judge Posner could have

pointed out, it can be unmasked by a criminal act.

Until 1996, no federal statute explicitly criminalized the theft of

commercial trade secrets. Some statutes could punish trade secret theft in

limited situations: 18 U.S.C. § 1905 for the unauthorized disclosure of

government information, including trade secrets, by a government

employee; 18 U.S.C. § 2314 for the interstate transportation of stolen

property, including trade secrets; and 18 U.S.C. §§ 1341, 1343, and 1346

for the use of mail or wire communications in a scheme to use information

in violation of a confidential or fiduciary relationship. See Section IV.F.

of this Chapter.

In 1996, Congress acted to correct the occasional mismatch between

then-existing statutes and commercial trade secret theft by enacting the

Economic Espionage Act of 1996, Pub. L. No. 104-294, 110 Stat. 3489

(1996) (codified at 18 U.S.C. §§ 1831-1839).

This Chapter considers a number of issues arising under the Economic

Espionage Act in depth. A sample indictment and jury instructions appear

at Appendix D. In addition to this Chapter, prosecutors may wish to

consult the following treatises or law review articles: Uniform Trade
140 Prosecuting Intellectual Property Crimes

Secrets Act §§ 1 et seq. (1985); Roger M. Milgrim, Milgrim on Trade

Secrets (1994); J. Michael Chamblee, Validity, Construction, and

Application of Title I of Economic Espionage Act of 1996 (18 U.S.C.A.

§§ 1831 et seq.), 177 A.L.R. Fed. 609 (2002); James M. Fischer, Note, An

Analysis of the Economic Espionage Act of 1996, 25 Seton Hall Legis. J.

239 (2001); Louis A. Karasik, Under the Economic Espionage Act:

Combating Economic Espionage is No Longer Limited to Civil Actions to

Protect Trade Secrets, 48-OCT Fed. Law. 34 (2001); Marc J. Zwillinger

& Christian S. Genetski, Calculating Loss Under the Economic Espionage

Act of 1996, 9 Geo. Mason L. Rev. 323 (2000); Michael Coblenz,

Intellectual Property Crimes, 9 Alb. L.J. Sci. & Tech. 235 (1999); Sylvia

N. Albert et al., Intellectual Property Crimes, 42 Am. Crim. L. Rev. 631

(2005); James H.A. Pooley, Mark A. Lemley & Peter J. Toren,

Understanding the Economic Espionage Act of 1996, 5 Tex. Intell. Prop.

L.J. 177 (1997).

IV.B. The Economic Espionage Act of

1996, 18 U.S.C. §§ 1831-1839

IV.B.1. Overview

The Economic Espionage Act of 1996 (“EEA”) criminalizes two types

of trade secret misappropriation in Title 18. Section 1831punishes the

theft of a trade secret to benefit a foreign government, instrumentality, or

agent:

(a) In general.—Whoever, intending or knowing that the offense will

benefit any foreign government, foreign instrumentality, or foreign

agent, knowingly—

(1) steals, or without authorization appropriates, takes, carries

away, or conceals, or by fraud, artifice, or deception obtains a

trade secret;

(2) without authorization copies, duplicates, sketches, draws,

photographs, downloads, uploads, alters, destroys, photocopies,

replicates, transmits, delivers, sends, mails, communicates, or

conveys a trade secret;

(3) receives, buys, or possesses a trade secret, knowing the same

to have been stolen or appropriated, obtained, or converted

without authorization;
IV. Theft of Commercial Trade Secrets 141

(4) attempts to commit any offense described in any of

paragraphs (1) through (3); or

(5) conspires with one or more other persons to commit any

offense described in any of paragraphs (1) through (3), and one

or more of such persons do any act to effect the object of the

conspiracy, 

shall, except as provided in subsection (b), be fined not more than

$500,000 or imprisoned not more than 15 years, or both.

18 U.S.C. § 1831(a) (emphasis added).

Section 1832, in contrast, punishes the commercial theft of trade

secrets carried out for economic advantage, whether or not it benefits a

foreign government, instrumentality, or agent:

(a) Whoever, with intent to convert a trade secret, that is related to

or included in a product that is produced for or placed in interstate or

foreign commerce, to the economic benefit of anyone other than the

owner thereof, and intending or knowing that the offense will injure

any owner of that trade secret, knowingly—

(1) steals, or without authorization appropriates, takes, carries

away, or conceals, or by fraud, artifice, or deception obtains such

information;

(2) without authorization copies, duplicates, sketches, draws,

photographs, downloads, uploads, alters, destroys, photocopies,

replicates, transmits, delivers, sends, mails, communicates, or

conveys such information;

(3) receives, buys, or possesses such information, knowing the

same to have been stolen or appropriated, obtained, or converted

without authorization;

(4) attempts to commit any offense described in paragraphs (1)

through (3); or

(5) conspires with one or more other persons to commit any

offense described in paragraphs (1) through (3), and one or more

of such persons do any act to effect the object of the conspiracy,

shall, except as provided in subsection (b), be fined under this title or

imprisoned not more than 10 years, or both.

18 U.S.C. § 1832(a) (emphasis added).
142 Prosecuting Intellectual Property Crimes

Although § 1831 (foreign economic espionage) and § 1832

(commercial economic espionage) define separate offenses, they are

nevertheless related. Both require the government to prove beyond a

reasonable doubt that: (1) the defendant misappropriated information (or

conspired or attempted to do so); (2) the defendant knew or believed that

this information was a trade secret; and (3) the information was in fact a

trade secret (unless, as is discussed below, the crime charged is a

conspiracy or an attempt). See 18 U.S.C. §§ 1831(a), 1832(a). Both

sections criminalize not only the misappropriation of a trade secret, but

also the knowing receipt, purchase, destruction, or possession of a stolen

trade secret. See 18 U.S.C. §§ 1831(a)(3), 1832(a)(3).

To establish foreign economic espionage under 18 U.S.C. § 1831, the

government must also prove that the defendant knew the offense would

benefit or was intended to benefit a foreign government or a foreigngovernment instrumentality or agent.

If a foreign connection does not exist or cannot be proved, the

government may still establish a violation of 18 U.S.C. § 1832 by proving,

in addition to the first three elements described above, that: (4) the

defendant intended to convert the trade secret to the economic benefit of

anyone other than the owner; (5) the defendant knew or intended that

the owner of the trade secret would be injured; and (6) the trade secret

was related to or was included in a product that was produced or placed

in interstate or foreign commerce.

The EEA can be applied to a wide variety of criminal conduct. It

criminalizes attempts and conspiracies to violate the EEA and certain

extraterritorial conduct. See Sections IV.B.6. and IV.D.3. of this Chapter.

The EEA also provides several remedies that are unusual in a criminal

statute: civil injunctive relief against violations, to be obtained by the

Attorney General, 18 U.S.C. § 1836, and confidentiality orders to

maintain the trade secret’s secrecy throughout the prosecution. See

Section IV.D. of this Chapter.

For a discussion of the Department of Justice’s oversight of EEA

prosecutions, see Section IV.D.4.

IV.B.2. Relevance of Civil Cases

 The EEA’s definition of a trade secret, 18 U.S.C. § 1839(3), is based

on the trade secret definition in the Uniform Trade Secrets Act. See H.R.

Rep. 104-788, at 12 (1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4031.

Cases that address trade secrets outside the EEA should, in most cases, be

relevant in EEA prosecutions.
IV. Theft of Commercial Trade Secrets 143

IV.B.3. Elements Common to 18 U.S.C. §§ 1831, 1832

The elements for completed offenses are discussed in the ensuing

Sections. Attempts and conspiracies are discussed in Section IV.B.6. of

this Chapter.

IV.B.3.a. The Information Was a Trade Secret

IV.B.3.a.i. Generally

As mentioned in the introduction, “[a] trade secret is really just a

piece of information (such as a customer list, or a method of production,

or a secret formula for a soft drink) that the holder tries to keep secret ...,

so that the only way the secret can be unmasked is by [unlawful

activity].” ConFold Pac. v. Polaris Indus., 433 F.3d 952, 959 (7th Cir.

2006) (Posner, J.) (citations omitted). Whether particular information is

a trade secret is a question of fact. 4 Roger M. Milgrim, Milgrim on Trade

Secrets § 15.01[1][a][i].

The EEA’s definition of a trade secret is very broad. As defined at 18

U.S.C. § 1839, a trade secret includes generally all types of information,

regardless of the method of storage or maintenance, that the owner has

taken reasonable measures to keep secret and that itself has independent

economic value:

(3) the term “trade secret” means all forms and types of financial,

business, scientific, technical, economic, or engineering information,

including patterns, plans, compilations, program devices, formulas,

designs, prototypes, methods, techniques, processes, procedures,

programs, or codes, whether tangible or intangible, and whether or

how stored, compiled, or memorialized physically, electronically,

graphically, photographically, or in writing if —

(A) the owner thereof has taken reasonable measures to keep such

information secret; and

(B) the information derives independent economic value, actual

or potential, from not being generally known to, and not being

readily ascertainable through proper means by, the public.

18 U.S.C. § 1839(3). As mentioned above, the EEA’s definition of a trade

secret, 18 U.S.C. § 1839(3), comes from civil law, so cases that address

trade secrets outside the EEA should, in most cases, be relevant in EEA

prosecutions. See Section IV.B.2. of this Chapter.

Examples of trade secrets include:
144 Prosecuting Intellectual Property Crimes

• a computer software system used in the lumber industry.

Rivendell Forest Prods., Ltd. v. Georgia-Pacific Corp., 28 F.3d

1042, 1046 (10th Cir. 1994).

• measurements, metallurgical specifications, and engineering

drawings to produce an aircraft brake assembly. United States v.

Lange, 312 F.3d 263 (7th Cir. 2002).

• information involving zinc recovery furnaces and the tungsten

reclamation process. Metallurgical Indus. Inc. v. Fourtek, Inc.,

790 F.2d 1195, 1202 (5th Cir. 1986).

• information concerning pollution control chemicals and related

materials. Apollo Techs. Corp. v. Centrosphere Indus. Corp., 805

F. Supp. 1157, 1197 (D.N.J. 1992).

• information regarding contact lens production. Syntex

Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677, 684 (7th Cir.

1983).

• pizza recipes. Magistro v. J. Lou, Inc., 703 N.W.2d 887, 890-91

(Neb. 2005).

For an extensive collection of cases analyzing whether specific types of

information constitute a trade secret, see 1 Milgrim on Trade Secrets

§ 1.09.

In cases alleging attempt and conspiracy, the government need not

prove that the information actually was a trade secret. See Section IV.B.6.

of this Chapter.

IV.B.3.a.ii. Employee’s General Knowledge, Skill, or Abilities

Not Covered

The EEA does not apply “to individuals who seek to capitalize on the

personal knowledge, skill, or abilities they may have developed” in moving

from one job to another. H.R. Rep. No. 104-788, at 7 (1996), reprinted

in 1996 U.S.C.C.A.N. 4021, 4026. “The statute is not intended to be

used to prosecute employees who change employers or start their own

companies using general knowledge and skills developed while employed.”

Id. Section 1832(a) “was not designed to punish competition, even when

such competition relies on the know-how of former employees of a direct

competitor. It was, however, designed to prevent those employees (and

their future employers) from taking advantage of confidential information

gained, discovered, copied, or taken while employed elsewhere.” United

States v. Martin, 228 F.3d 1, 11 (1st Cir. 2000) (emphasis in original). “It

is not enough to say that a person has accumulated experience and
IV. Theft of Commercial Trade Secrets 145

knowledge during the course of his or her employ. Nor can a person be

prosecuted on the basis of an assertion that he or she was merely exposed

to a trade secret while employed. A prosecution that attempts to tie skill

and experience to a particular trade secret should not succeed unless it can

show that the particular material was stolen or misappropriated.” 142

Cong. Rec. 27, 117 (1996).

These principles are often cited when the purported trade secret is one

the defendant remembered only casually. For example, one court held that

a terminated agent cannot be prohibited from using skills that he

acquired, or casually remembered information that he acquired, while

employed by the principal. Apollo Techs. Corp. v. Centrosphere Indus.

Corp., 805 F. Supp. 1157, 1200 (D.N.J. 1992) (quoting Restatement

(Second) of Agency § 396 comments b, h). In another case, a court ruled

that “[r]emembered information as to specific needs and business habits

of particular customers is not confidential.” Tactica Int’l, Inc. v. Atlantic

Horizon Int’l, Inc., 154 F. Supp. 2d 586, 606 (S.D.N.Y. 2001) (citations

omitted). In Tactica, the court cited two reasons for finding that

remembered information concerning customer preferences was not a trade

secret. First, no evidence was offered that the defendants intentionally

memorized information, or that they stole it in any other way. Id. at 606-

07 (citing Levine v. Bochner, 517 N.Y.S.2d 270, 271 (N.Y. App. Div.

1987) (“The use of information about an employer’s customers which is

based on casual memory is not actionable.”)). Second, the information in

question could easily be recalled or obtained subsequently by the

defendants. Id. at 607.

Moreover, an employee who changes employers or starts his own

company cannot be prosecuted under the EEA merely on the ground that

he was exposed to a trade secret while employed. Rather, the government

must establish that he actually stole or misappropriated a particular trade

secret, or at least that he conspired or attempted to do so. 

IV.B.3.a.iii. Specification of Trade Secrets

The government should ascertain which specific information the

victim claims as a trade secret early on. “[A] prosecution under [the EEA]

must establish a particular piece of information that a person has stolen

or misappropriated.” 142 Cong. Rec. 27, 117 (1996). This will help avoid

the defendant’s defense that he was merely relying on his general

knowledge, skills, and abilities along, perhaps, with legitimate reverseengineering (see Section IV.C.2. of this Chapter).

The defense, however, has no right to take pre-trial depositions of the

government’s expert witnesses to determine what the government will
146 Prosecuting Intellectual Property Crimes

claim is a trade secret and why. See United States v. Ye, 436 F.3d 1117

(9th Cir. 2006).

IV.B.3.a.iv. Novelty

Unlike patents or copyrights, which require higher degrees of novelty,

trade secrets must possess only “minimal novelty.” Kewanee Oil Co. v.

Bicron Corp., 416 U.S. 470, 476 (1974) (quoting Comment, The Stiffel

Doctrine and the Law of Trade Secrets, 62 Nw. U. L. Rev. 956, 969

(1968)); see also Arco Indus. Corp. v. Chemcast Corp., 633 F.2d 435, 442

(6th Cir. 1980) (same).

In other words, a trade secret must contain some element that is not

known and that sets it apart from what is generally known. “While we do

not strictly impose a novelty or inventiveness requirement in order for

material to be considered a trade secret, looking at the novelty or

uniqueness of a piece of information or knowledge should inform courts

in determining whether something is a matter of general knowledge, skill

or experience.” 142 Cong. Rec. 27, 117 (1996). See, e.g., Buffets, Inc. v.

Klinke, 73 F.3d 965, 968 (9th Cir. 1996) (holding that plaintiff’s recipes

were not trade secrets in part because they lacked the requisite novelty).

IV.B.3.a.v. Secrecy

The key attribute of a trade secret is that the underlying information

“not be[] generally known to ... the public” and that it “not be[] readily

ascertainable through proper means by [] the public.” 18

U.S.C. § 1839(3)(B). The “public” may not necessarily mean the general

public. “[E]ither the phrase ‘readily ascertainable’ or the phrase ‘the

public’ must be understood to concentrate attention on either potential

users of the information, or proxies for them (which is to say, persons who

have the same ability to ‘ascertain’ the information).” United States v.

Lange, 312 F.3d 263, 268 (7th Cir. 2002) (Easterbrook, J.). But see id. at

271-72 (Ripple, J., concurring) (suggesting that this holding is dictum).

In other words, information will not necessarily be a trade secret just

because it is not readily ascertainable by the general public. Under the

Seventh Circuit’s view, the information will not be a trade secret if it is

readily ascertainable by those within the information’s field of specialty.

If a scientist could ascertain a purported trade secret formula only by

gleaning information from publications and then engaging in many hours

of laboratory testing and analysis, the existence of such publications

would not necessarily disqualify the formula as a trade secret under the

EEA, since the scientist’s work would probably not qualify as “readily

ascertainable by the public.” See 18 U.S.C. § 1839(3)(B). But the formula
IV. Theft of Commercial Trade Secrets 147

would not be a trade secret if it could be ascertained or reverse-engineered

within a relatively short time. See Lange, 312 F.3d at 269 (EEA case)

(“Such measurements could not be called trade secrets if ... the assemblies

in question were easy to take apart and measure.”); Marshall v. Gipson

Steel, 806 So.2d 266, 271-72 (Miss. 2002) (holding that company’s bid

estimating system was readily ascertainable by using simple math applied

to data on past bids, and thus was not a trade secret); Weins v. Sporleder,

569 N.W.2d 16, 20-21 (S.D. 1997) (holding formula of cattle feed

product not a trade secret because the ingredients could be determined

through chemical or microscopic analysis in four or five days, at most, and

for about $27); Buffets, Inc. v. Klinke, 73 F.3d 965, 968 (9th Cir. 1996)

(holding restaurant chain’s recipes not to be trade secrets because,

although innovative, the recipes were readily ascertainable by others).

A trade secret can include elements that are in the public domain if

the trade secret itself constitutes a unique, “effective, successful and

valuable integration of the public domain elements.” Rivendell Forest

Prods., Ltd. v. Georgia-Pacific Corp., 28 F.3d 1042, 1046 (10th Cir.

1994); accord Metallurgical Indus., Inc. v. Fourtek, Inc., 790 F.2d 1195,

1202 (5th Cir. 1986); Apollo Techs. Corp. v. Centrosphere Indus., 805

F. Supp. 1157, 1197 (D.N.J. 1992). In fact, “[a] trade secret can exist in

a combination of characteristics and components, each of which, by itself,

is in the public domain, but the unified process, design and operation of

which, in unique combination, affords a competitive advantage and is a

protectable secret.” Metallurgical Indus., 790 F.2d at 1202 (quoting

Imperial Chem., Ltd. v. National Distillers & Chem. Corp., 342 F.2d 737,

742 (2d Cir. 1965)); accord Syntex Ophthalmics, Inc. v. Tsuetaki, 701

F.2d 677, 684 (7th Cir. 1983); Rivendell Forest Prods., 28 F.3d at 1046.

For example, in Metallurgical Industries, when the company modified a

generally-known zinc recovery process, the modified process could be

considered a trade secret even though the original process and the

technologies involved were publicly known, because the details of the

modifications were not. 790 F.2d at 1201-03.

IV.B.3.a.vi. Disclosure’s Effects

A trade secret can lose its protected status through disclosure. To

prove secrecy, the government often has the difficult burden of proving

a negative, i.e., that the information was not generally available to the

public. For this reason, the prosecutor should ascertain early on whether

the purported trade secret was ever disclosed and to what extent those

disclosures affect the information’s status as a trade secret. These issues

are covered thoroughly in Donald M. Zupanec, Annotation, Disclosure of

Trade Secret as Abandonment of Secrecy, 92 A.L.R.3d 138 (2005) and
148 Prosecuting Intellectual Property Crimes

1 Roger M. Milgrim, Milgrim on Trade Secrets §§ 1.05-1.06 (2005). The

following is an overview. 

• Disclosure Through the Patent and Copyright Processes

Information that has been disclosed in a patent application can

nevertheless qualify as a trade secret between the times of the

application’s submission and the patent’s issuance, as long as the patent

application itself is not published by the patent office. Scharmer v.

Carrollton Mfg. Co., 525 F.2d 95, 99 (6th Cir. 1975) (citing Grant v.

Raymond, 31 U.S. 218, 242 (1832)). The patented process or device is

no longer a trade secret once the application is published or the patent is

issued, because publication of the application or patent makes the process

publicly available for all to see. Id. (citing A.O. Smith Corp. v. Petroleum

Iron Works Co., 73 F.2d 531, 537 (6th Cir. 1934)); 37 C.F.R. § 1.14, 35

U.S.C.A. App. I, at 653); see also On-Line Techs. v. Perkin-Elmer Corp.,

253 F. Supp. 2d 313, 323-27 (D. Conn. 2003). In return for the

disclosure, the owner enjoys patent protection against other companies’

use of the technology. See Chapter VII of this Manual. A subsequent

refinement or enhancement to the patented technology may be a trade

secret if it is not reasonably ascertainable from the published patent itself.

See United States v. Hsu, 185 F.R.D. 192, 200 (E.D. Pa. 1999).

Substantially the same analysis applies to information that has been

submitted to the United States Copyright Office for registration.

Submitting material to the Copyright Office can render it open to public

examination and viewing, thus destroying the information’s value as a

trade secret, unless the material is submitted under special procedures to

limit trade secret disclosure. See Tedder Boat Ramp Sys. v. Hillsborough

County, Fla., 54 F. Supp. 2d 1300, 1303-04 (M.D. Fla. 1999); Religious

Tech. Ctr. v. Netcom On-Line Communication Servs., 923 F. Supp. 1231,

1255 n.28 (N.D. Cal. 1995); 1 Milgrim on Trade Secrets § 1.06[6]-[9].

But see Compuware Corp. v. Serena Software Int’l, 77 F. Supp. 2d 816

(E.D. Mich. 1999) (holding that material could continue to be a trade

secret even after its owner submitted it to the Copyright Office without

redaction, because the owner had taken other steps to keep it secret and

there was no evidence that it had become known outside the owner’s

business).

• Disclosure Through Industry Publications or Conferences

Information can also lose protection as a trade secret through

accidental or intentional disclosure by an employee at a conference or

trade show, or in technical journals or other publications. See, e.g., Mixing

Equip. Co. v. Philadelphia Gear, Inc., 436 F.2d 1308, 1311 n.2 (3d Cir.
IV. Theft of Commercial Trade Secrets 149

1971) (holding that industrial mixing equipment charts and graphs lost

trade secret status through publication in trade journals).

• Disclosure to Licensees, Vendors, and Third Parties

Information that has been disclosed to licensees, vendors, or third

parties for limited purposes can remain a trade secret under certain

circumstances. See, e.g., United States v. Lange, 312 F.3d 263, 266 (7th

Cir. 2002) (EEA case); Rockwell Graphic Sys., Inc. v. DEV Indus., Inc.,

925 F.2d 174, 177 (7th Cir. 1991). For the security measures the trade

secret owner must take to maintain secrecy during those disclosures, see

Section IV.B.3.a.vii. of this Chapter.

• Disclosure Through Internet Postings

A trade secret can lose its protected status after it is posted

anonymously on the Internet, even if the trade secret was originally

gathered through improper means. See Religious Tech. Ctr. v. Netcom

On-Line Communication Servs., 923 F. Supp. 1231 (N.D. Cal. 1995). If

the Internet posting causes the information to fall into the public domain,

a person who republishes the information is not guilty of misappropriating

a trade secret, even if he knew that the information was originally

acquired by improper means. DVD Copy Control Ass’n Inc. v. Bunner, 10

Cal. Rptr. 3d 185, 194 (Cal. Ct. App. 2004). “[T]hat which is in the

public domain cannot be removed by action of the states under the guise

of trade secret protection.” Id. at 195.

Disclosure over the Internet does not, however, strip away a trade

secret’s protection automatically. For example, in United States v.

Genovese, the court held that a trade secret could retain its secrecy

despite a brief disclosure over the Internet: “[A] trade secret does not lose

its protection under the EEA if it is temporarily, accidentally or illicitly

released to the public, provided it does not become ‘generally known’ or

‘readily ascertainable through proper means.’” 409 F. Supp. 2d 253, 257

(S.D.N.Y. 2005) (citing 18 U.S.C. § 1839(3)(B)). Publication on the

Internet does not destroy the trade secret’s status “if the publication is

sufficiently obscure or transient or otherwise limited so that it does not

become generally known to the relevant people, i.e., potential competitors

or other persons to whom the information would have some economic

value.” DVD Copy Control Ass’n, 10 Cal. Rptr. 3d at 192-93.

• Disclosure During Law Enforcement Investigations

Disclosures to the government to assist an investigation or

prosecution of an EEA case should not waive trade secret protections. See

United States v. Yang, 1999 U.S. Dist. LEXIS 7130 (N.D. Ohio Mar. 18,
150 Prosecuting Intellectual Property Crimes

1999) (holding that victim’s disclosure of trade secret to government for

use in a sting operation under oral assurances that the information would

not be used or disclosed for any purpose unrelated to the case did not

vitiate trade secret status). Disclosure to the government is essential for

the investigation and prosecution of illegal activity and is expressly

contemplated by the EEA. First, 18 U.S.C. § 1833(2) specifically

encourages disclosures to the government, stating: “[the EEA] does not

prohibit ... the reporting of a suspected violation of law to any

governmental entity of the United States ... if such entity has lawful

authority with respect to that violation.” Second, 18 U.S.C. § 1835

authorizes the court to “enter such orders and take such other action as

may be necessary and appropriate to preserve the confidentiality of trade

secrets, consistent with the requirements of the Federal Rules of Criminal

and Civil Procedure ... and all other applicable laws.” See also

infra Section IV.D.2. Section 1835 gives “a clear indication from Congress

that trade secrets are to be protected to the fullest extent during EEA

litigation.” United States v. Hsu, 155 F.3d 189, 197 (3d Cir. 1988).

Together, these sections demonstrate Congress’s intent to encourage the

reporting of an EEA violation.

Laws other than the EEA similarly limit the Department of Justice’s

disclosure of trade secrets without the consent of the trade secret owner

or the express written authorization of senior officials at the Department.

See, e.g., 28 C.F.R. § 16.21 (2005).

Information does not lose its status as a trade secret if the government

discloses it to the defendant as “bait” during a sting operation. See United

States v. Hsu, 185 F.R.D. 192, 199 (E.D. Pa. 1999). “[T]o hold that

dangling such bait waives trade secret protection would effectively

undermine the Economic Espionage Act at least to the extent that the

Government tries ... to prevent an irrevocable loss of American technology

before it happens.” Id.

• Disclosure by the Original Misappropriator or His

Co-Conspirators

The person who originally misappropriates a trade secret cannot

immunize himself from prosecution by disclosing it into the public

domain. Although disclosure of a trade secret may cause it to lose tradesecret status after the disclosure, disclosure does not destroy trade-secret

status retroactively. Consequently, one who initiates the disclosure may

be prosecuted, whereas one who distributes the information postdisclosure may not, unless he was working in concert with the original

misappropriator. Cf. Underwater Storage, Inc. v. United States Rubber

Co., 371 F.2d 950, 955 (D.C. Cir. 1966) (“We do not believe that a
IV. Theft of Commercial Trade Secrets 151

misappropriator or his privies can ‘baptize’ their wrongful actions by

general publication of the secret.”); Religious Tech. Ctr. v. Netcom OnLine Communication Servs., 923 F. Supp. at 1256.

IV.B.3.a.vii. Reasonable Measures to Maintain Secrecy

Trade secrets are fundamentally different from other forms of

property in that a trade secret’s owner must take reasonable measures

under the circumstances to keep the information confidential. See 18

U.S.C. § 1839(3)(A); United States v. Lange, 312 F.3d 263, 266 (7th Cir.

2002). This requirement is generally not imposed upon those who own

other types of property. For example, a thief can be convicted for stealing

a bicycle the victim left unlocked in a public park, whereas a thief cannot

be convicted (at least under the EEA) for stealing the bicycle’s design

plans if the victim left the plans in a public park.

For these reasons, prosecutors should determine what measures the

victim used to protect the trade secret. These protections will be a critical

component of the case or the decision not to prosecute.

Typical security measures include:

• keeping the secret physically secure in locked drawers, cabinets,

or rooms

• restricting access to those with a need to know

• restricting visitors to secret areas

• requiring recipients to sign confidentiality, nondisclosure, or

noncompetition agreements

• marking documents as confidential or secret

• encrypting documents

• protecting computer files and directories with passwords

• splitting tasks among people or entities to avoid concentrating

too much information in any one place

See 1 Roger M. Milgrim, Milgrim on Trade Secrets § 1.04 (2005); Lange,

312 F.3d at 266 (EEA case concerning aircraft brake assemblies); MAI

Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 521 (9th Cir. 1993)

(discussing steps to safeguard computer system manufacturer’s trade

secrets from computer servicing company); Reingold v. Swiftships, Inc.,

126 F.3d 645, 650 (5th Cir. 1997) (discussing steps to protect shipbuilder’s mold for fiberglass boat hulls).
152 Prosecuting Intellectual Property Crimes

The owner’s security measures need not be absolutely airtight. Rather,

they must be reasonable under the facts of the specific case. See H.R. Rep.

No. 104-788, reprinted in 1996 U.S.C.C.A.N. 4021, 4026, 4031; Lange,

312 F.3d at 266. See also 1 Milgrim on Trade Secrets § 1.04; Pioneer HiBred Int’l v. Holden Found. Seeds, Inc., 35 F.3d 1226, 1235-36 (8th Cir.

1994) (discussing steps to safeguard genetic messages of genetically

engineered corn); Gates Rubber Co. v. Bando Chem. Indus., 9 F.3d 823,

848-49 (10th Cir. 1993) (discussing steps to protect industrial belt

replacement software); K-2 Ski Co. v. Head Ski Co., 506 F.2d 471, 473-

74 (9th Cir. 1974) (discussing steps to protect design and manufacture

specifications of high performance skis); Elm City Cheese Co. v. Federico,

752 A.2d 1037, 1049-53 (Conn. 1999) (holding that victim’s failure to

require defendant employee to sign a confidentiality, nondisclosure, or

noncompetition agreement was reasonable “in light of the close personal

relationship enjoyed over the years” by the parties).

Information might not qualify as a trade secret if any low-level

employee in a large company could access it. The theft of relatively

unprotected information might, however, be prosecuted under a different

statute. See Section IV.F. of this Chapter.

If the trade secret was disclosed to licensees, vendors, or third parties

for limited purposes, those disclosures do not waive trade secret

protections so long as the trade secret owner took reasonable security

measures before and during disclosure, such as requiring non-disclosure

agreements from all recipients. See, e.g., Quality Measurement Co. v.

IPSOS S.A., 56 Fed. Appx. 639, 647 (6th Cir. 2003); MAI Sys. Corp.,

991 F.2d at 521; Religious Tech. Ctr., 923 F. Supp. at 1254. However,

where the trade secret owner “rel[ies] on deeds (the splitting of tasks)

rather than promises to maintain confidentiality,” it is “irrelevant that

[the victim] does not require vendors to sign confidentiality agreements.”

Lange, 312 F.3d at 266 (emphasis in original).

As is discussed above, information does not lose its status as a trade

secret if it is disclosed to the government for purposes of investigation or

prosecution. For this reason, federal prosecutors and law enforcement

agents need not sign protective orders with victims before accepting trade

secret information.

A defendant who was unaware of the victims’ security measures can

be convicted under the EEA if he was aware that the misappropriated

information was proprietary. United States v. Krumrei, 258 F.3d 535,

538-39 (6th Cir. 2001) (rejecting void-for-vagueness argument against

EEA); accord United States v. Genovese, 409 F. Supp. 2d 258 (S.D.N.Y

2005) (rejecting void-for-vagueness challenge to EEA indictment). But see
IV. Theft of Commercial Trade Secrets 153

id. (noting that the defendant could argue that he was unaware of the

victim’s security measures at trial).

IV.B.3.a.viii. Independent Economic Value

The trade secret must derive “independent economic value, actual or

potential, from not being generally known to and not being readily

ascertainable by the public.” 18 U.S.C. § 1839(3)(B). Although the EEA

does not require the government to prove a specific jurisdictional level of

value, the government must prove that the secret had some value.

Economic value “speaks to the value of the information to either the

owner or a competitor; any information which protects the owner’s

competitive edge or advantage.” US West Communications v. Office of

Consumer Advocate, 498 N.W.2d 711, 714 (Iowa 1993) (citations

omitted). “[I]nformation kept secret that would be useful to a competitor

and require cost, time and effort to duplicate is of economic value.” Id.

(citation omitted).

The secret’s economic value can be demonstrated by the

circumstances of the offense, such as the defendant’s acknowledgment

that the secret is valuable; the defendant’s asking price, or an amount of

time or money the defendant’s buyers would have required to replicate

the information. See Lange, 312 F.3d at 269; Genovese, 409 F. Supp. 2d

at 257. For more on methods of proving a trade secret’s specific value, see

Section VIII.C.2. of this Manual.

Not all of a business’s confidential information is valuable in a

competitor’s hands. For example, in Microstrategy v. Business Objects,

331 F. Supp. 2d 396, 421 (E.D. Va. 2004), the court found that a

company-wide e-mail concerning the firm’s financial problems and plans

for survival was not a trade secret because it was unclear what economic

value it would have had to anyone outside the company. See also US

West Communications, 498 N.W.2d at 714 (finding no evidence of

economic value without evidence that disclosure would have harmed the

victim).

IV.B.3.a.ix. Example: Customer Lists

Some information that a company deems proprietary will not qualify

as a trade secret. For example, under the Uniform Trade Secrets

Act—which defines trade secrets in a manner similar to the EEA—a

customer list is generally a trade secret only if the customers are not

known to others in the industry, and could be discovered only by

extraordinary efforts, and the list was developed through a substantial

expenditure of time and money. See ATC Distribution Group v.
154 Prosecuting Intellectual Property Crimes

Whatever It Takes Transmissions & Parts, 402 F.3d 700, 714-15 (6th

Cir. 2005); Conseco Fin. Servicing Corp. v. North Am. Mortgage Co., 381

F.3d 811, 819 & n.6 (8th Cir. 2004) (holding customer files of thousands

of customers nationwide who were identified through a complex computer

system to be trade secrets); Electro Optical Indus., Inc. v. White, 90 Cal.

Rptr. 2d 680, 684 (Cal. Ct. App. 1999); Leo Silfen, Inc. v. Cream, 278

N.E.2d 636, 639-41 (N.Y. 1972). Conversely, a customer list is less likely

to be considered a trade secret if customers’ identities are readily

ascertainable to those outside the list-owner’s business and the list was

compiled merely through general marketing efforts. See ATC Distribution

Group, 402 F.3d at 714-15 (affirming that customer list of transmission

parts customers was not a trade secret because names of purchasers could

“be ascertained simply by calling each shop and asking”); Standard

Register Co. v. Cleaver, 30 F. Supp. 2d 1084, 1095 (N.D. Ind. 1998)

(holding that customer list was not a trade secret where owner’s

competitors knew customer base, knew other competitors quoting the

work, and were generally familiar with the customers’ needs); Nalco

Chem. Co. v. Hydro Techs., Inc., 984 F.2d 801, 804 (7th Cir. 1993)

(holding that customer lists were not a trade secret when base of potential

customers was neither fixed nor small).

IV.B.3.b. Misappropriation

IV.B.3.b.i. Types of Misappropriation

Under either § 1831 or § 1832, the defendant must have

misappropriated the trade secret through one of the acts prohibited in

§ 1831(a)(1)-(5) or § 1832(a)(1)-(5). Misappropriation covers a broad

range of acts. It includes not only traditional methods of theft in which

a trade secret is physically removed from the owner’s possession, but also

less traditional methods of misappropriation and destruction such as

copying, duplicating, sketching, drawing, photographing, downloading,

uploading, altering, destroying, photocopying, replicating, transmitting,

delivering, sending, mailing, communicating, or conveying the

information. See 18 U.S.C. §§ 1831(a)(1) (2), 1832(a)(1)-(2). Although

many of these means of misappropriation leave the original property in

the hands of its owner, they reduce or destroy the trade secret’s value

nonetheless. Congress prohibited all types of misappropriation “to ensure

that the theft of intangible information is prohibited in the same way that

the theft of physical items is punished.” H.R. Rep. No. 104-788, at 11

(1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4030.
IV. Theft of Commercial Trade Secrets 155

Misappropriation also includes the knowing receipt, purchase, or

possession misappropriated trade secrets. See 18 U.S.C. §§ 1831(3),

1832(3).

IV.B.3.b.ii. Memorization Included

The above types of misappropriation include not only manipulating

a physical object, but also conveying or using intangible information that

has been memorized. The EEA defines a trade secret as “all forms and

types of financial, business, scientific, technical, economic, or engineering

information, ... whether tangible or intangible, and whether or how

stored.” 18 U.S.C. § 1839(3) (emphasis added). The statute also prohibits

not only actions taken against a trade secret’s physical form, such as

“steal[ing], ...tak[ing], [and] carr[ying] away”, 18 U.S.C. §§ 1831(a)(1),

1832(a)(1), but also actions that can be taken against a trade secret in a

memorized, intangible form, such as “sketch[ing], draw[ing], ...

download[ing], upload[ing], ..., transmit[ting], ... communicat[ing], [and]

convey[ing],” 18 U.S.C. §§ 1831(a)(2), 1832(a)(2). See James H.A.

Pooley et al., Understanding the Economic Espionage Act of 1996, 5 Tex.

Intell. Prop. L.J. 177 (1997). In this respect, as in others, the EEA echoes

civil law and some pre-EEA caselaw. See, e.g., 4 Roger M. Milgrim,

Milgrim on Trade Secrets § 15.01[e]; Stampede Tool Warehouse v. May,

651 N.E.2d 209, 217 (Ill. App. Ct. 1995) (“A trade secret can be

misappropriated by physical copying or by memorization.”) (citations

omitted). Trade secret cases to the contrary that do not involve the EEA

are thus not persuasive authority on this point.

This is not to say, however, that any piece of business information

that can be memorized is a trade secret. As noted, the EEA does not apply

to individuals who seek to capitalize on their lawfully developed

knowledge, skill, or abilities. When the actions of a former employee are

unclear and evidence of theft has not been discovered, it may be advisable

for a company to pursue its civil remedies and make another criminal

referral if additional evidence of theft is developed.

Where available, tangible evidence of theft or copying is helpful in all

cases to overcome the potential problem of prosecuting the defendant’s

“mental recollections” and a defense that “great minds think alike.”

IV.B.3.b.iii. Lack of Authorization

The crux of misappropriation is that the defendant acted “without

authorization” from the trade secret’s owner. The necessary

“authorization is the permission, approval, consent or sanction of the
156 Prosecuting Intellectual Property Crimes

owner” to obtain, destroy, or convey the trade secret. 142 Cong. Rec.

27,116 (1996). Thus, although an employee may be authorized to possess

a trade secret during his employment, he would violate the EEA if he

conveyed it to a competitor without his employer’s permission.

IV.B.3.b.iv. Misappropriation of Only Part of a Trade Secret

The defendant can be prosecuted even if he misappropriated only part

of the trade secret. Using only part of the secret, so long as it too is secret,

qualifies as misappropriation. Mangren Research and Dev. Corp. v.

National Chem. Co., 87 F.3d 937, 943-44 (7th Cir. 1996); cf. United

States v. Pemberton, 904 F.2d 515, 517 (9th Cir. 1990) (rejecting

argument of defendant convicted for receiving 30 stolen technical

landscape and irrigation drawings for a commercial development “that the

incomplete nature of the drawings rendered them worthless,” because

evidence established that “some of the drawings would have been useful

to the developer, even though not entirely finished,” and the developer

might have been willing to adjust the price for the drawings’ incomplete

nature); United States v. Inigo, 925 F.2d 641, 653-54 (3d Cir. 1991)

(Hobbs Act conviction) (rejecting defendant’s argument that the victim

should not have feared economic loss because, inter alia, he possessed less

than five percent of the confidential documents on a subject, and that

“what matters is how important the documents [the defendant] had were

to [the defendant], not their number”).

IV.B.3.b.v. Mere Risk of Misappropriation Not Prosecutable,

But Attempts and Conspiracies Are

However, a former employee cannot be prosecuted just because she

was exposed to a trade secret at her former job and has now moved to a

competitor. The government must establish that she actually stole or

misappropriated a particular trade secret or that she attempted or

conspired to do so.

IV.B.3.c. Knowledge

The first mens rea element in an EEA case is that the defendant

misappropriated the trade secret “knowingly.” Section 1831(a) applies to

anyone who misappropriates a trade secret “knowingly.” Section 1832(a),

by contrast, applies to “[w]hoever, with intent to convert a trade secret,”

engages in misappropriation. This is a distinction without a difference,

because knowing misappropriation is equivalent to the intent to convert.

“A knowing state of mind with respect to an element of the offense

is (1) an awareness of the nature of one’s conduct, and (2) an awareness
IV. Theft of Commercial Trade Secrets 157

of or a firm belief in or knowledge to a substantial certainty of the

existence of a relevant circumstance, such as whether the information is

proprietary economic information as defined by this statute.” S. Rep. No.

104-359, at 16 (1996). Because criminal statutes covering the theft of

tangible property generally require the government to prove that the

defendant “[knew] that the object he [stole was] indeed a piece of

property that he [had] no lawful right to convert for his personal use,” the

government generally must show that the defendant knew or had a firm

belief that the information he or she was taking was a trade secret in an

EEA case as well. 142 Cong. Rec. 27,117 (1996) (EEA legislative history).

See United States v. Genovese, 409 F. Supp. 2d 253, 258 (S.D.N.Y.

2005) (discussing alleged circumstances that would indicate that EEA

defendant knew the information was a trade secret).

Ignorance of the law is no defense. The government need not prove

that the defendant himself had concluded that the information he took

fit the legal definition of a “trade secret” set forth in 18 U.S.C. § 1839(3).

If the government had to prove this, EEA violations would be nearly

impossible to prosecute and Congress’s intent would be contravened: 

This [knowledge] requirement should not prove to be a great barrier

to legitimate and warranted prosecutions. Most companies go to

considerable pains to protect their trade secrets. Documents are

marked proprietary; security measures put in place; and employees

often sign confidentiality agreements.

142 Cong. Rec. 27,117 (1996). Based on this legislative history, the

government should be able to establish that the defendant knew that the

information was a trade secret by proving that he was aware that the

information was protected by proprietary markings, security measures,

and confidentiality agreements. Id. More generally, the government could

simply prove that the defendant knew or had a firm belief that the

information was valuable to its owner because it was not generally known

to the public, and that its owner had taken measures to protect it, that is,

the information had the attributes of a trade secret described in 18

U.S.C. § 1839(3). Cf. Genovese, 409 F. Supp. 2d at 258 (discussing

alleged circumstances that would indicate that EEA defendant knew the

information was a trade secret). On the other hand, a person cannot be

prosecuted under the EEA if “he [took] a trade secret because of

ignorance, mistake, or accident.” 142 Cong. Rec. 27,117 (1996). Nor

could he be prosecuted if “he actually believed that the information was

not proprietary after [he took] reasonable steps to warrant such belief.”

Id.
158 Prosecuting Intellectual Property Crimes

IV.B.4. Additional 18 U.S.C. § 1831 Element: Intent to Benefit a

Foreign Government, Foreign Instrumentality, or Foreign

Agent

Under 18 U.S.C. § 1831, the second mens rea requirement is that the

defendant intended or knew that the offense would “benefit” a “foreign

government, foreign instrumentality, or foreign agent.” A “foreign

instrumentality” is “any agency, bureau, ministry, component, institution,

association, or any legal, commercial, or business organization,

corporation, firm, or entity that is substantially owned, controlled,

sponsored, commanded, managed, or dominated by a foreign

government.” 18 U.S.C. § 1839(1). A “foreign agent” is “any officer,

employee, proxy, servant, delegate, or representative of a foreign

government.” 18 U.S.C. § 1839(2). Thus, the government must show that

the defendant knew or had a firm belief that misappropriation would

benefit an entity tied to a foreign government. See Section IV.B.3.c. of

this Chapter. If this “entity” is not a government entity per se, such as a

business, there must be “evidence of foreign government sponsored or

coordinated intelligence activity.” 142 Cong. Rec. 27,116 (1996).

The “benefit” to the foreign entity should be interpreted broadly. It

is not limited to an economic benefit, but rather also includes a

“reputational, strategic, or tactical benefit.” H.R. Rep. No. 104-788, at 11

(1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4030. 

The requirement that the benefit accrue to a foreign government,

instrumentality, or agent should be analyzed very carefully. To establish

that the defendant intended to benefit a “foreign instrumentality,” the

government must show that the entity was “substantially owned,

controlled, sponsored, commanded, managed, or dominated by a foreign

government.” 18 U.S.C. § 1839(1) (emphasis added). The EEA does not

define “substantially,” but its use suggests that the prosecution need not

prove complete ownership, control, sponsorship, command, management,

or domination: 

Substantial in this context, means material or significant, not

technical or tenuous. We do not mean for the test of substantial

control to be mechanistic or mathematical. The simple fact that the

majority of the stock of a company is owned by a foreign government

will not suffice under this definition, nor for that matter will the fact

that a foreign government only owns 10 percent of a company exempt

it from scrutiny. Rather the pertinent inquiry is whether the activities

of the company are, from a practical and substantive standpoint,

foreign government directed.
IV. Theft of Commercial Trade Secrets 159

142 Cong. Rec. 27,116 (1996).

Thus, § 1831 does not apply to a foreign corporation that acted

without the sponsorship of, or “coordinated intelligence activity” by, a

foreign government. Id. In such an instance, however, the foreign

corporation could still be properly charged under 18 U.S.C. § 1832.

For questions concerning charges under § 1831, contact the

Department’s Counterespionage Section at (202) 514-1187 or CCIPS at

(202) 514-1026.

IV.B.5. Additional 18 U.S.C. § 1832 Elements

IV.B.5.a. Economic Benefit to a Third Party

Under 18 U.S.C. § 1832, the government must prove that the

defendant’s misappropriation was intended for the “economic benefit of

anyone other than the owner thereof.” 18 U.S.C. § 1832(a). The recipient

of the intended benefit can be the defendant, a competitor of the victim,

or some other person or entity.

One who misappropriates a trade secret but who does not intend for

anyone to gain economically from the theft cannot be prosecuted under

18 U.S.C. § 1832. This requirement differs from foreign-government

economic espionage under 18 U.S.C. § 1831, for which the economic or

non-economic nature of the misappropriation is immaterial. Compare 18

U.S.C. § 1831(a) with § 1832(a).

IV.B.5.b. Intent to Injure the Owner of the Trade Secret

Beyond demonstrating in a § 1832 case that the defendant both knew

that the information he took was proprietary and that he intended the

misappropriation to economically benefit someone other than the rightful

owner, the government must also prove that the defendant intended to

“injure” the owner of the trade secret. See 18 U.S.C. § 1832(a). This

provision “does not require the government to prove malice or evil intent,

but merely that the actor knew or was aware to a practical certainty that

his conduct would cause some disadvantage to the rightful owner.” H.R.

Rep. No. 104-788, at 11-12 (1996), reprinted in 1996 U.S.C.C.A.N.

4021, 4030. 

By definition, for a trade secret to have value, it must confer a

commercial advantage to its owner. See 18 U.S.C. § 1839(3)(B); H.R.

Rep. No. 104-788, at 4 (1996), reprinted in 1996 U.S.C.C.A.N. 4021,

4023. The trade secret loses its value once it is disclosed to another

person for the recipient’s benefit. See H.R. Rep. No. 104-788, at 11
160 Prosecuting Intellectual Property Crimes

(1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4030 (“[M]isappropriation

effectively destroys the value of what is left with the rightful owner.”).

Most employees understand that their misappropriation will injure the

victim once he loses the exclusive use of his trade secret.

IV.B.5.c. Product Produced for or Placed in Interstate or

Foreign Commerce

On a charge of domestic economic espionage under 18 U.S.C. § 1832,

the government must prove that the trade secret was “related to or

included in a product that is produced for or placed in interstate or

foreign commerce.” 18 U.S.C. § 1832; compare 18 U.S.C. § 1831

(containing no explicit language about being included in or related to a

product).

The defendant need not have known that the trade secret was related

to or included in a product that was produced for or placed in interstate

or foreign commerce. The nexus to interstate or foreign commerce appears

to have been intended merely to allow federal jurisdiction. The statute’s

plain text confirms this. The jurisdictional language quoted above is set

off in the statute by commas to qualify which types of trade secrets fall

under the statute. It precedes the word “knowingly,” thus putting it

outside the elements the government must prove the defendant knew.

The phrase “a product produced for or placed in interstate or foreign

commerce” includes trade secrets developed for existing products and for

future products. In the case of an existing product, this nexus can usually

be satisfied by evidence of the trade secret’s connection to the current

product and the product’s current or potential interstate or foreign sales.

By contrast, if the product is still being developed, § 1832 would

merely require proof that the trade secret was “related to ... a product that

is produced for ... interstate or foreign commerce.” 18 U.S.C. § 1832(a).

A defendant might argue that a product still in the research and

development stage is not yet being “produced for ... interstate commerce,”

18 U.S.C. § 1832, because the prototype itself is not being “produced” for

sale. But this argument would withhold the EEA’s protection when it was

most needed. The research and development phase is often when a trade

secret is most valuable. Once the final product embodying the trade secret

is released to the public, the trade secret’s value can be lost because of its

availability to competitors who can examine the product legitimately and

obtain or deduce the trade secret for themselves.

To prove that the product was produced for interstate or foreign

commerce, the government need only show the victim’s intent to
IV. Theft of Commercial Trade Secrets 161

distribute the product or utilize the process under development for a

product. This can be demonstrated through evidence of the project’s

goals.

At this writing, the only published case concerning these issues is

United States v. Yang, 281 F.3d 534, 551 & n.4 (6th Cir. 2002), which

held that a patent application had a sufficient nexus to interstate

commerce because it involved a product that generated $75-100 million

in sales the previous year and it was related to products produced and sold

in the United States and Canada; and also because the victim also had

sought patents for the product in Europe.

This element implicitly distinguishes between the misappropriation

of trade secrets related to products—which is punishable under

§ 1832—and trade secrets related to services—which is not. For criminal

charges to consider when the trade secret is related to services, see Section

IV.F. of this Chapter.

Distinguishing when a trade secret relates to a product and when it

relates to a service is sometimes easier said than done. Although the

“product” requirement is not discussed in the legislative history, the

term’s plain meaning appears to exclude pure services such as technical

skills and know-how that are not embodied in or related to a saleable,

transportable good. Consider a chiropractor’s secret technique to treat

back pain by manipulating a patient’s spine. If the chiropractor is not

developing and has not developed a medical product that uses or

embodies the secret, but instead merely uses the technique in private

practice, the technique’s theft by a coworker or common thief would not

violate § 1832. By contrast, cellular telephone companies sell services that

are accompanied by a “free” cellular phone or require the purchase of a

compatible phone. If a cellular company develops a trade secret relating

to the technical operation of its cellular network, the fact that the essence

of what the company provides is a service should not necessarily preclude

a prosecution under the EEA, given that the secret could be categorized

as being “related to ... a product [the phone] that is produced for or

placed in interstate or foreign commerce.” §1832(a).

IV.B.6. Attempts and Conspiracies, Including the Impossibility

Defense

As noted, the EEA—both foreign and domestic—punishes attempts

and conspiracies to misappropriate trade secrets. 18 U.S.C. §§ 1831(a)(4)-

(5), 1832(a)(4)-(5). For an attempt, the defendant must (1) have the

intent needed to commit a crime defined by the EEA, and (2) perform an

act amounting to a “substantial step” toward the commission of that
162 Prosecuting Intellectual Property Crimes

crime. United States v. Hsu, 155 F.3d 189, 202 (3d Cir. 1998). For a

conspiracy, the defendant must agree with one or more people to commit

a violation, and one or more of the co-conspirators must commit an overt

act to effect the object of the conspiracy. 18 U.S.C. §§ 1831(a)(5),

1832(a)(5).

In Hsu, the Sixth Circuit ruled that to convict a defendant under the

EEA of attempt or conspiracy, the government need not prove that the

information the defendant sought actually constituted a trade secret. Hsu,

155 F.3d at 204.

The defendants were charged with attempting and conspiring to steal

the techniques for manufacturing an anti-cancer drug from Bristol-Meyers

Squibb. The district court compelled the government to disclose to the

defendants the trade secrets at issue, on the grounds that the defendants

were entitled to demonstrate that the materials were not trade secrets in

fact. United States v. Hsu, 982 F. Supp. 1022, 1024 (E.D. Pa. 1997). The

Third Circuit disagreed, holding that to prove an attempt or conspiracy

under the EEA, the government need not prove the existence of an actual

trade secret, but, rather, that the defendants believed that the information

was a trade secret—regardless of whether the information was truly a

trade secret or not—and that they conspired in doing so. Hsu, 155 F.3d

at 203-04.

The government need not prove the existence of an actual trade

secret, because “a defendant’s culpability for a charge of attempt depends

only on ‘the circumstances as he believes them to be,’ not as they really

are.” Id. at 203. Thus, to prove an attempt, the government need only

prove “beyond a reasonable doubt that the defendant sought to acquire

information which he or she believed to be a trade secret, regardless of

whether the information actually qualified as such.” Id.

The Third Circuit also rejected the defendants’ contention that the

government had to disclose the trade secrets so the defendants could

prepare a potential defense of legal impossibility. Although elsewhere the

Third Circuit generally allowed the common-law defense of legal

impossibility in cases charging attempt, it found that the EEA evidenced

Congress’s intent to foreclose an impossibility defense. Hsu, 155 F.3d at

202 (“[T]he great weight of the EEA’s legislative history evinces an intent

to create a comprehensive solution to economic espionage, and we find it

highly unlikely that Congress would have wanted the courts to thwart that

solution by permitting defendants to assert the common law defense of

legal impossibility.”). The court found it significant that “[t]he EEA was

drafted in 1996, more than twenty-five years after the National

Commission on Reform of the Federal Criminal Laws had concluded that
IV. Theft of Commercial Trade Secrets 163

the abolition of legal impossibility was already ‘the overwhelming modern

position.’” Id. Lastly, the court noted that if legal impossibility were “a

defense to the attempted theft of trade secrets, the government would be

compelled to use actual trade secrets during undercover operations.” Id.

This would “have the bizarre effect of forcing the government to disclose

trade secrets to the very persons suspected of trying to steal them, thus

gutting enforcement efforts under the EEA.” Id. Therefore, the court held

that “legal impossibility is not a defense to a charge of attempted

misappropriation of trade secrets in violation of 18 U.S.C. § 1832(a)(4).”

Id. 

Nor is legal impossibility a defense to a charge of conspiracy to violate

the EEA. Because the basis of a conspiracy charge is the “conspiratorial

agreement itself and not the underlying substantive acts,” the

impossibility of achieving the conspiracy’s goal is irrelevant See Hsu, 155

F.3d at 203 (citing United States v. Jannotti, 673 F.2d 578, 591 (3d

Cir.1982) (en banc)); see also United States v. Wallach, 935 F.2d 445,

470 (2d Cir. 1991); United States v. LaBudda, 882 F.2d 244, 248 (7th

Cir. 1989); United States v. Petit, 841 F.2d 1546, 1550 (11th Cir. 1988);

United States v. Everett, 692 F.2d 596, 599 (9th Cir. 1982).

Hsu’s reasoning has been adopted by the Sixth Circuit in United

States v. Yang, 281 F.3d 534, 542-45 (6th Cir. 2002), cert. denied, 537

U.S. 1170 (2003), and the Seventh Circuit in United States v. Lange, 312

F.3d 263, 268-69 (7th Cir. 2002).

IV.C. Defenses

IV.C.1. Parallel Development

According to the EEA’s legislative history, the owner of a trade secret,

unlike the holder of a patent, does not have “an absolute monopoly on

the information or data that comprises a trade secret.” 142 Cong. Rec.

27,116 (1996). Other companies and individuals have the right to

discover the information underlying a trade secret through their own

research and hard work; if they do, there is no misappropriation under the

EEA. Id.

IV.C.2. Reverse Engineering

Similarly, a person may legally discover the information underlying a

trade secret by “reverse engineering,” that is, the practice of taking

something apart to determine how it works or how it was made or
164 Prosecuting Intellectual Property Crimes

manufactured. See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,

476 (1974) (holding that the law does not protect the owner of a trade

secret from “discovery by fair and honest means, such as by independent

invention, accidental disclosure, or by so-called reverse engineering”);

ConFold Pac., Inc. v. Polaris Indus., 433 F.3d 952, 959 (7th Cir. 2006)

(“[I]t is perfectly lawful to ‘steal’ a firm’s trade secret by reverse

engineering.”) (Posner, J.) (citations omitted).

Although the EEA does not expressly address when reverse

engineering is a valid defense, its legislative history states that “[t]he

important thing is to focus on whether the accused has committed one of

the prohibited acts of this statute rather than whether he or she has

‘reverse engineered.’ If someone has lawfully gained access to a trade

secret and can replicate it without violating copyright, patent, or this law,

then that form of ‘reverse engineering’ should be fine.” 142 Cong. Rec.

27,116 (1996).

The mere fact that a particular secret could have been reverseengineered after a time-consuming and expensive laboratory process does

not provide a defense for someone who intended to avoid that time and

effort by stealing the secret, unless the information was so apparent as to

be deemed “readily ascertainable,” and thus not a trade secret. See 4

Roger M. Milgrim, Milgrim on Trade Secrets § 15.01[d][iv]; Alcatel USA,

Inc. v. DGI Techs., Inc., 166 F.3d 772, 784-85 (5th Cir. 1999) (holding

that a competitor could not assert reverse engineering defense after it had

first unlawfully obtained a copy of the software and then used the copy

to reverse engineer); Pioneer Hi-Bred Int’l v. Holden Found. Seeds, Inc.,

35 F.3d 1226, 1237 (8th Cir. 1994) (stating that fact “that one ‘could’

have obtained a trade secret lawfully is not a defense if one does not

actually use proper means to acquire the information”); Telerate Sys., Inc.

v. Caro, 689 F. Supp. 221, 233 (S.D.N.Y. 1988) (“[T]he proper focus of

inquiry is not whether an alleged trade secret can be deduced by reverse

engineering but rather, whether improper means are required to access

it.”).

To counter a defense of reverse engineering, prosecutors should

establish how the defendant obtained the trade secret. Proving

misappropriation should refute a claim of reverse engineering.

IV.C.3. Impossibility

The defense of impossibility has largely been rejected by courts in

EEA prosecutions. See Section IV.B.6. of this Chapter.
IV. Theft of Commercial Trade Secrets 165

IV.C.4. Advice of Counsel

“There is no such thing as an ‘advice of counsel’ defense.” United

States v. Urfer, 287 F.3d 663, 666 (7th Cir. 2002) (Posner, J.) (charges

of willfully injuring federal property). Rather, “if a criminal statute

requires proof that the defendant knew he was violating the statute in

order to be criminally liable for the violation, and it is unclear whether the

statute forbade his conduct, the fact that he was acting on the advice of

counsel is relevant because it bears on whether he knew that he was

violating the statute.” Id. In other words, advice of counsel is a defense

only if it negates the mens rea needed to prove a violation.

Advice of counsel could conceivably negate an EEA defendant’s mens

rea in several ways. As is discussed Section IV.B.3.c. of this Chapter, the

defendant cannot be convicted unless he knew that he was

misappropriating a trade secret. Thus, the defendant’s mens rea might be

negated if counsel advised him either that the information in question was

not a trade secret or that it was a trade secret to which he could claim

ownership. See Section IV.C.5.

To rely on advice of counsel at trial, the defendant must first provide

“independent evidence showing (1) the defendant made full disclosure of

all material facts to his or her attorney before receiving the advice at issue;

and (2) he or she relied in good faith on the counsel’s advice that his or

her course of conduct was legal.” Covey v. United States, 377 F.3d 903,

908 (8th Cir. 2004) (citations and alterations omitted); see also United

States v. Butler, 211 F.3d 826, 833 (4th Cir. 2000) (same).

IV.C.5. Claim of Right—Public Domain and Proprietary Rights

As is discussed in Section IV.B.3.c. of this Chapter, the defendant

cannot be convicted unless he knew that he was misappropriating a trade

secret. Thus, the defendant’s mens rea might be negated if he believed in

good faith that he had a right to use the information, either because it was

in the public domain or because it belonged to him.

The former situation, information in the public domain, is discussed

Section IV.B.3.a.vi. (discussing how disclosure affects trade secret status).

The latter situation, when the accused acts under a proprietary claim

of right, can occur when two parties have a legitimate dispute over who

owns the trade secret. This type of dispute is most likely to occur after the

parties developed technology together and their respective ownership

interests are unclear. In these circumstances, one party’s unilateral action

with regard to the trade secret might precipitate a criminal referral from

the other party. Such cases are rarely appropriate for criminal prosecution,
166 Prosecuting Intellectual Property Crimes

especially if the putative defendant acted on the advice of counsel. See

Section IV.C.4. of this Chapter. Notwithstanding the passage of the EEA,

many disputes about trade secrets are still best resolved in a civil forum.

IV.C.6. The First Amendment

The First Amendment is no defense when the defendant’s speech

itself is the very vehicle of the crime. See, e.g., United States v. Morison,

844 F.2d 1057, 1068 (4th Cir. 1988) (rejecting defendant’s First

Amendment defense and upholding a conviction for a violation of 18

U.S.C. § 793 for stealing secret government documents, noting that “[w]e

do not think that the First Amendment offers asylum ... merely because

the transmittal was to a representative of the press”); United States v.

Rowlee, 899 F.2d 1275 (2d Cir. 1990) (rejecting First Amendment

defense against charges of tax evasion conspiracy). In a prosecution similar

to the theft of trade secrets under the EEA, the First Amendment was held

to provide no defense to a charge under 18 U.S.C. § 2314 for the

interstate transportation of stolen computer files:

In short, the court finds no support for [the defendant’s] argument

that the criminal activity with which he is charged ... is protected by

the First Amendment. Interpreting the First Amendment as shielding

[the defendant] from criminal liability would open a gaping hole in

criminal law; individuals could violate criminal laws with impunity

simply by engaging in criminal activities which involve speech-related

activity. The First Amendment does not countenance that kind of end

run around criminal law.

United States v. Riggs, 743 F. Supp. 556, 560-61 (N.D. Ill. 1990).

In most instances, if the government can establish that the defendant

intended his misappropriation to benefit a third party economically, he

should have a hard time claiming that his disclosure of the trade secret

was protected by the First Amendment. In other words, where the

defendant’s motivation was pecuniary, the defendant’s argument that he

disclosed the trade secret as a public service or to educate the public

should be significantly undermined. See DVD Copy Control Ass'n v.

Bunner, 75 P.3d 1, 19 (Cal. 2003) (“We merely hold that the preliminary

injunction does not violate the free speech clauses of the United States

and California Constitutions, assuming the trial court properly issued the

injunction under California's trade secret law. On remand, the Court of

Appeal should determine the validity of this assumption.”).
IV. Theft of Commercial Trade Secrets 167

Because the First Amendment does not protect speech that is

criminal, the government should seek to exclude evidence regarding that

defense through an appropriate motion in limine.

IV.C.7. Void-for-Vagueness

Several defendants have challenged the EEA on grounds that it is

vague or otherwise unconstitutional. Thus far, all such challenges have

been rejected.

In United States v. Hsu, 40 F. Supp. 2d 623 (E.D. Pa. 1999), the

defendant was charged with, among other things, conspiracy to steal trade

secrets in violation of 18 U.S.C. § 1832(a)(5) and attempted theft of

trade secrets in violation of 18 U.S.C. § 1832(a)(4). Hsu moved to

dismiss, arguing that the EEA was unconstitutionally vague on numerous

grounds.

In denying Hsu’s motion to dismiss, the court noted that a statute is

not unconstitutionally vague just because “Congress might, without

difficulty, have chosen ‘clearer and more precise language’ equally capable

of achieving the end which it sought.” Hsu, 40 F. Supp. 2d at 626

(quoting United States v. Powell, 423 U.S. 87, 94 (1975) (citation

omitted)). Because the First Amendment was not implicated, Hsu’s voidfor-vagueness challenge could succeed only if the EEA were vague as

applied to his conduct and as applied to “the facts of the case at hand.”

Id. at 626-27. Hsu argued that the First Amendment was implicated

because the Bristol-Meyers Squibb “employee who aided the Government

‘sting’ operation by posing as a corrupt employee [had] a right freely to

express himself and exchange information with the defendant, or with

anyone else he [thought was] a potential employer.” Id. at 627. The court

disagreed. It noted first that Hsu lacked standing to raise the victim’s

employee’s purported First Amendment rights. Id. And even if Hsu had

standing, the court said, the employee had knowingly participated in a

government sting operation, not in a job interview with a potential

employer. Id. Therefore, no First Amendment interests were implicated.

Id. 

The court also rejected Hsu’s argument that the term “related to or

included in a product that is produced for or placed in interstate or

foreign commerce” is unacceptably vague. Id. Prior First Amendment

decisions disapproving of the term “related” had no bearing on the use of

“related to or included in” in the EEA, which the court found “readily

understandable to one of ordinary intelligence, particularly here, where

the defendant appears to be well versed as to [the nature of the

technology at issue].” Id. 
168 Prosecuting Intellectual Property Crimes

The court also concluded that the EEA’s definition of “trade secret”

was not unconstitutionally vague as applied to Hsu. As to the requirement

that the owner take “reasonable measures” to keep the information secret,

the mere use of the word “reasonable” or “unreasonable” does not render

a statute vague. Id. at 628. The court further noted that these terms were

taken “with only minor modifications” from the Uniform Trade Secrets

Act, which had been adopted in forty states and the District of Columbia

and had also withstood a void-for-vagueness attack. Id.

Also preventing Hsu’s void-for-vagueness challenge was his own

knowledge of the facts at the time of the offense. Hsu knew that BristolMeyers Squibb had taken many steps to keep its technology secret. He

had been told on several occasions that the technology was proprietary to

Bristol-Meyers Squibb, could not be acquired through a license or joint

venture, and could be obtained only through an allegedly corrupt

employee. The court therefore held that he could not contend that the

term “reasonable measures” was vague as applied to him. Id.

Finally, the Hsu court concluded that the EEA was not void for

vagueness in qualifying that the information not be “generally known to”

or “readily ascertainable by” the public. The court concluded that the

EEA’s use of those terms was problematic because “what is ‘generally

known’ and ‘readily ascertainable’ about ideas, concepts, and technology

is constantly evolving in the modern age.” Id. at 630. Nonetheless, Hsu’s

e-mails, telephone calls, and conversations together showed that he

believed that the information he sought could not be acquired through

legal or public means. Therefore, the court concluded that the EEA’s

definition of trade secret was not unconstitutionally vague as applied to

Hsu.

Subsequent courts have ruled similarly. See United States v. Yang,

281 F.3d 534, 544 n.2 (6th Cir. 2002) (rejecting defendants’ argument

that the EEA would be unconstitutionally vague if attempt and conspiracy

charges need not be based on actual trade secrets, because “[w]e have

every confidence that ordinary people seeking to steal information that

they believe is a trade secret would understand that their conduct is

proscribed by the statute”); United States v. Genovese, 409 F. Supp. 2d

253 (S.D.N.Y. 2005) (denying motion to dismiss indictment as vague by

defendant who argued that, having found confidential source code on the

Internet, he could not know whether the code was generally known to the

public or whether the code’s owners took reasonable measures to keep it

secret, and ruling that the government’s allegations established that the

defendant was on notice that the code was proprietary and any protective

measures had been circumvented). But see id. at 258 (stating further that
IV. Theft of Commercial Trade Secrets 169

the defendant could argue that he could not have known the victim’s

protective measures at a later stage of the proceedings).

IV.D. Special Issues

IV.D.1. Civil Injunctive Relief for the United States

The EEA authorizes the government to file a civil action seeking

injunctive relief. See 18 U.S.C. § 1836(a). Prosecutors should consider

seeking injunctive relief to prevent further disclosure of a trade secret by

the defendant or third parties during a criminal investigation, or as part

of the judgment at the end of the case.

Prosecutors may even seek injunctive relief in matters that do not

warrant criminal prosecution if the victim is unable to do so. Note,

however, that most victims can obtain injunctive and monetary relief on

their own through state-law statutory and common-law remedies. For an

extensive discussion of injunctive relief in civil cases, see 4 Roger M.

Milgrim, Milgrim on Trade Secrets § 15.02[1].

The civil remedy in § 1836 can be enforced only by the government.

Neither that section nor any other section of the EEA creates a private

right of action that can be enforced by private citizens. Cooper Square

Realty v. Jensen, No. 04 Civ. 01011 (CSH), 2005 WL 53284 (S.D.N.Y.

Jan. 10, 2005); Barnes v. J.C. Penney Co., No. 3-04-CV-577-N, 2004 WL

1944048 (N.D. Tex. Aug. 31, 2004), magistrate’s findings adopted, 2004

WL 2124062 (N.D. Tex. Sept. 22, 2004).

IV.D.2. Confidentiality and the Use of Protective Orders

Victims of trade secret theft are often conflicted about whether to

report these thefts to law enforcement authorities. They want the thief to

be punished, but worry that their trade secret would be disclosed during

discovery or trial.

Congress resolved this dilemma by giving the government measures

to preserve the confidentiality of trade secrets throughout the prosecution.

142 Cong. Rec. 27,105 (1996). The EEA provides that the court “shall

enter such orders and take such other action as may be necessary and

appropriate to preserve the confidentiality of trade secrets, consistent with

the requirements of the Federal Rules of Criminal and Civil Procedure,

the Federal Rules of Evidence, and all other applicable laws." 18

U.S.C. § 1835. The government has the right to an interlocutory appeal

from an order authorizing a trade secret’s disclosure. Id.; see also United
170 Prosecuting Intellectual Property Crimes

States v. Ye, 436 F.3d 1117, 1120-24 (9th Cir. 2006) (discussing extent

and limits to interlocutory appeal 18 U.S.C. § 1835 and when mandamus

relief in an EEA discovery dispute may be ordered under 28 U.S.C.

§ 1651).

Prosecutors are therefore strongly encouraged to move the court to

take such actions as necessary and appropriate to prevent the trade

secret’s harmful disclosure. There are a number of ways to accomplish

this. Protective orders can limit the amount or degree of disclosure in

discovery, permit in camera review by the court prior to disclosure, allow

or require the submission of redacted documents and sealed exhibits, and

allow or require the use of courtroom video monitors to display

documents to counsel, the court, and the jury, but not to the public. See,

e.g., Burlington N.R.R. Co. v. Omaha Pub. Power Dist., 888 F.2d 1228,

1232 (8th Cir. 1989) (reviewing contract in camera without revealing

trade secret); Canal Refining Co. v. Corrallo, 616 F. Supp. 1035, 1045

(D.D.C. 1985) (granting plaintiff’s motion for protective order to seal

separate portions of affidavit designated as exhibit); Skolnick v. Altheimer

& Gray, 730 N.E. 2d 4, 14 (Ill. 2000) (holding that trial court abused its

discretion by refusing to modify a protective order that allowed parties to

designate information disclosed in discovery as “confidential”).

The use of protective orders was endorsed in United States v. Hsu,

155 F.3d 189, 197 (3d Cir. 1998). In the district court, the government

moved under 18 U.S.C. § 1835 and Fed. R. Crim. P. 16(d)(1) for a

protective order to limit the government’s production of documents used

in the sting operation to redacted copies of documents relating to the

trade secrets at issue. United States v. Hsu, 982 F. Supp. 1022, 1023

(E.D. Pa. 1997). The defendants wanted unredacted copies, but were

willing to stipulate that they would use the documents only in the

criminal litigation and would return or destroy the documents at the

case’s end. The district court agreed with the defendants’ need for

unredacted documents. Id. at 1029-30. 

On the government’s interlocutory appeal, the Third Circuit held that

18 U.S.C. § 1835 clearly demonstrates Congress’s intent to protect the

confidentiality of trade secrets to the fullest extent possible under the law.

Hsu, 155 F.3d at 197. While recognizing that such protection does not

abrogate criminal defendants’ constitutional and statutory rights, the

court held that the government’s proposed order to produce only redacted

copies of the targeted documents did not violate the defendants’

constitutional rights because “a defendant’s culpability for a charge of

attempt depends only on ‘the circumstances as he believes them to be,’

not as they really are,” and the actual trade secret documents were
IV. Theft of Commercial Trade Secrets 171

irrelevant to that inquiry. Id. at 203. Because the indictment did not

charge a completed theft, the Third Circuit refrained from addressing the

district court’s conclusion that in a case charging a completed offense,

actual trade secrets must be disclosed to defendants. The Third Circuit

characterized this question as “complex,” noting that the EEA’s definition

of trade secret “raises an issue as to whether the information or formula

itself is in fact material to the existence of the trade secret.” Id. at n.15.

Thus, the limits of the government’s ability to restrict disclosure in a

criminal case concerning a completed offense have not yet been addressed.

As to the defendants’ claim that they needed to see the trade secrets

to prepare their other defenses, including entrapment and outrageous

government conduct, the Third Circuit skeptically remanded these issues

to the district court. Id. at 205. On remand, the district court held that

the defendants were not entitled to receive unredacted trade secret

documents under Fed. R. Crim. P. 16(a)(1)(C), and found the unredacted

documents to be irrelevant to the defenses of entrapment and outrageous

government conduct. United States v. Hsu, 185 F.R.D. 192, 198 n.19

(E.D. Penn. 1999). Just as a drug defendant needs no access to the drugs

to allege entrapment, neither does an EEA defendant need access to the

trade secrets to do the same. Id.

The court similarly rejected the defendants’ arguments for full

disclosure based on the defenses of document integrity and chain of

custody. Id. at 199 (concluding that those defenses could “be resolved at

a later date without the defense viewing the redacted information ... just

as chain of custody questions in drug or gun prosecutions can be resolved

without having to touch the objects themselves” as well as the claims that

the government and Bristol-Meyers waived the confidentiality of the trade

secrets when they showed the documents voluntarily during the sting

operation).

Finally, the court disagreed that the unredacted documents could help

the defendants prove that the documents’ information was in the public

domain. After in camera review by a court-appointed technical advisor

who had taken an oath of confidentiality, the court concluded that the

largest category of redactions, consisting of “specific examples of

experimental conditions,” satisfied the statutory definition of a trade

secret contained in 18 U.S.C. § 1839(3). After reviewing this category of

redactions in camera and consulting with the expert, the court held that

the redactions were proper to avoid disclosure of trade secrets. Id. at 200.

The court did, however, order the disclosure of certain redacted

information that fell outside the EEA’s definition of a trade secret. Id.
172 Prosecuting Intellectual Property Crimes

Taken together, the appellate and trial courts’ opinions in Hsu suggest

that courts will recognize and respect Congress’s directive to preserve the

confidentiality of trade secrets throughout the criminal process.

Before trial, the defense has no right to take depositions of the

government’s expert witnesses to determine what the government will

claim is a trade secret and why. See United States v. Ye, 436 F.3d 1117

(9th Cir. 2006).

During trial, courts can limit the public disclosure of information

without violating the defendant’s right to a public trial under the Sixth

Amendment. The right to a public criminal trial is not absolute and may

be limited in certain circumstances. See Richmond Newspapers, Inc. v.

Virginia, 448 U.S. 555, 599-600 (1980) (Stewart, J. concurring); see also

Gannett v. DePasquale, 443 U.S. 368, 419-33 (1979) (Blackmun, J.,

concurring in part and dissenting in part) (tracing the history of the right

to a public trial and citing cases where that right has been limited); State

ex rel. La Crosse Tribune v. Circuit Court, 340 N.W.2d 460, 466-67

(Wis. 1983) (discussing court’s inherent power to limit the public nature

of trials).

Before requesting that a courtroom be sealed, prosecutors should

comply with the procedures in the federal regulations and Department of

Justice guidelines requiring the Deputy Attorney General’s prior approval.

See 28 C.F.R. § 50.9; USAM 9-5.150. The regulations create a strong

presumption against sealing courtrooms and provide for such action “only

when a closed proceeding is plainly essential to the interests of justice.”

28 C.F.R. § 50.9. A prosecutor who wants to close a judicial proceeding

in a case or matter under the supervision of the Criminal Division should

contact the Criminal Division’s Policy and Statutory Enforcement Unit,

Office of Enforcement Operations at (202) 305-4023. In cases or matters

supervised outside of the Criminal Division, the prosecutor should contact

the supervising division. USAM 9-5.150.

For a helpful discussion of the use of protective orders in civil cases

and a collection of relevant cases, see 3 Roger M. Milgrim, Milgrim on

Trade Secrets § 14.02[5]-[7].

IV.D.3. Extraterritoriality

Federal criminal laws are generally presumed not to apply to conduct

outside the United States or its territories unless Congress indicates

otherwise. See, e.g., United States v. Corey, 232 F.3d 1166, 1170 (9th

Cir. 2000). Congress made an exception for the EEA. The EEA expressly

applies to conduct outside the United States if (1) the offender is a citizen
IV. Theft of Commercial Trade Secrets 173

or permanent resident alien of the United States, or an organization

organized under the laws of the United States or a State or political

subdivision thereof; or (2) an act in furtherance of the offense was

committed in the United States. 18 U.S.C. § 1837.

IV.D.4. Department of Justice Oversight

Before Congress passed the EEA, the Attorney General promised that

all EEA prosecutions during the EEA’s first five years would be approved

by the Attorney General, the Deputy Attorney General, or the Assistant

Attorney General of the Criminal Division. This requirement was codified

at 28 C.F.R. § 0.64-5 and applied to the filing of complaints, indictments,

and civil proceedings, but not to search warrant applications or other

investigative measures.

The approval requirement for § 1832 prosecutions lapsed after the

five-year period expired on October 11, 2001, so federal prosecutors may

now prosecute 18 U.S.C. § 1832 offenses without prior approval.

However, the Attorney General strongly urges consultation with the

Computer Crime and Intellectual Property Section (CCIPS) before filing

§ 1832 charges because of CCIPS’s experience in handling these complex

cases and its access to valuable information and resources. CCIPS can be

reached at (202) 514-1026.

In contrast, the Attorney General renewed the prior approval

requirement for initiating prosecutions under 18 U.S.C. § 1831. Approval

must be obtained from the Assistant Attorney General for the Criminal

Division, through the Counterespionage Section. USAM 9-2.400,

9-59.000. The Counterespionage Section can be reached at (202) 514-

1187..

IV.E. Penalties

IV.E.1. Statutory Penalties

IV.E.1.a. Imprisonment and Fines

Reflecting the more serious nature of economic espionage sponsored

by a foreign government, the maximum sentence for a defendant

convicted under 18 U.S.C. § 1831 is 15 years’ imprisonment and a fine

of $500,000 or twice the monetary gain or loss, or both, whereas the

maximum sentence for a defendant convicted under 18 U.S.C. § 1832 is

10 years’ imprisonment and a fine of $250,000 or twice the monetary

gain or loss, or both. See 18 U.S.C. §§ 1831(a)(4), 1832(a)(5). Similarly,
174 Prosecuting Intellectual Property Crimes

organizations can be fined up to $10 million for violating § 1831 or $5

million for violating § 1832. 18 U.S.C. §§ 1831(b), 1832(b).

IV.E.1.b. Criminal Forfeiture

The EEA provides criminal forfeiture. It directs that the sentencing

court

shall order ... that the person forfeit to the United States—

(1) any property constituting, or derived from, any proceeds the

person obtained, directly or indirectly, as the result of such

violation; and 

(2) any of the person's property used, or intended to be used, in

any manner or part, to commit or facilitate the commission of

such violation, if the court in its discretion so determines, taking

into consideration the nature, scope, and proportionality of the

use of the property in the offense.

18 U.S.C. § 1834(a). Forfeiture of proceeds is mandatory, while forfeiture

of instrumentalities is discretionary. 18 U.S.C. § 1834(a)(1)-(2).

As a procedural matter, the government should allege forfeiture in the

indictment. For additional discussion of forfeiture in intellectual property

infringement cases, see Chapter VIII of this Manual.

IV.E.1.c. Restitution

The Mandatory Victims Restitution Act of 1996 (“MVRA”), codified

at 18 U.S.C. § 3663A, requires the court to order restitution in all

convictions for, among others, any “offense against property, including

any offense committed by fraud and deceit,” and “in which an identifiable

victim or victims has suffered a physical injury or pecuniary loss.” See 18

U.S.C. § 3663A(c)(1)(A)(ii), (B). For cases involving “damage to or loss

or destruction of property of a victim of the offense,” the MVRA requires

that the defendant return the property to its owner. If return of the

property is “impossible, impracticable, or inadequate,” the MVRA requires

the defendant to pay an amount equal to the property’s value on the date

of its damage, destruction, or loss, or its value at the time of sentencing,

whichever is greater, less the value of any part of the property that is

returned. See 18 U.S.C. § 3663A(b)(1).

 The theft of trade secrets meets § 3663A’s definition of property

offenses that require restitution. Section 3663A’s legislative history

indicates that restitution is required in “violent crimes, property and fraud

crimes under title 18, product tampering, and certain drug crimes.” S.
IV. Theft of Commercial Trade Secrets 175

Rep. No. 104-179, at 14 (1995), reprinted in 1996 U.S.C.C.A.N. 924,

927 (emphasis added). The misappropriation of trade secrets is essentially

the theft of property. Cf. Carpenter v. United States, 484 U.S. 19, 28

(1987) (holding that newspaper's confidential information qualified as

“property”); Matter of Miller, 156 F.3d 598, 602 (5th Cir. 1998)

(defining misappropriation of proprietary information as the “wrongful

taking and use of another’s property”); Westinghouse Elec. Corp. v. U.S.

Nuclear Regulatory Comm’n, 555 F.2d 82, 95 (3d Cir. 1977) (describing

“property in the form of its proprietary information”). Accordingly, the

theft of trade secrets should qualify as an “offense against property” under

§ 3663A for which the defendant must make restitution.

As noted, the mandatory restitution statute also applies to any offense

where “an identifiable victim has suffered a physical injury or a pecuniary

loss.” 18 U.S.C. § 3663A(c)(1)(B). Restitution must be ordered “to each

victim in the full amount of each victim’s losses as determined by the

court and without consideration of the economic circumstances of the

defendant.” 18 U.S.C. § 3664(f)(1)(A). Thus, to the extent a court has

already calculated the loss or injury actually suffered by a victim of trade

secret theft in determining the offense level under U.S.S.G. § 2B1.1, the

same amount could be used for restitution under the MVRA. For

additional discussion of restitution in intellectual property infringement

cases, see Chapter VIII of this Manual.

IV.E.2. Sentencing Guidelines

Issues concerning the sentencing guidelines are covered in Chapter

VIII of this Manual.

IV.F. Other Charges to Consider

When confronted with a case that implicates confidential proprietary

information, prosecutors may wish to consider the following crimes in

addition to or in lieu of EEA charges:

• Disclosing government trade secrets, 18 U.S.C. § 1905, which

punishes government employees and contractors who, inter alia,

“divulge” or “disclose” government trade secrets. United States v.

Wallington, 889 F.2d 573 (5th Cir. 1989) (affirming defendant’s

conviction for running background checks on several people

whom the defendant’s friend suspected of dealing drugs).

Defendants face a fine, a year in prison, and removal from office

or employment.
176 Prosecuting Intellectual Property Crimes

• Unlawfully accessing or attempting to access a protected

computer to obtain information, 18 U.S.C. § 1030(a)(2), (b), for

access to a computer used for interstate or foreign commerce or

by or for a financial institution or the United States government,

18 U.S.C. § 1030(e)(2). The term “information” is to be

construed broadly and need not be confidential or secret in

nature. S. Rep. No. 104-357, pt. IV(1)(B), at 7 (1996).

“‘[O]btaining information’ includes merely reading it. There is no

requirement that the information be copied or transported.” Id.

A violation is a misdemeanor unless it was committed for

commercial advantage or private financial gain, to further any

tortious or criminal act, or if the information’s value exceeds

$5,000. See 18 U.S.C. § 1030(c)(2).

• Unlawfully accessing or attempting to access a protected

computer to commit fraud, 18 U.S.C. §1030(a)(4), (b), where the

defendant “knowingly and with intent to defraud,” accessed or

attempted to access a protected computer without authorization,

or in excess of authorized access, and by means of such conduct

furthered the intended fraud and obtained anything of value,

“unless the object of the fraud and the thing obtained” was

computer time worth less than $5,000. What constitutes “fraud”

under § 1030(a)(4) is defined broadly. See 132 Cong. Rec. 7,189

(1986) (“The acts of ‘fraud’ that we are addressing in proposed

section 1030(a)(4) are essentially thefts in which someone uses

a [protected computer] to wrongly obtain something of value

from another”); see also Shurgard Storage Centers, Inc., v.

Safeguard Self Storage, Inc. 119 F. Supp. 2d 1121, 1126 (W.D.

Wash. 2000) (holding that the word “fraud” as used in

§ 1030(a)(4) simply means “wrongdoing” and does not require

proof of the common-law elements of fraud). EEA charges, which

generally involve some level of deception and knowing

wrongdoing, will often qualify as fraud. Harming a victim’s

“goodwill and reputation” provides a defendant with something

of “value.” See, e.g., In re America Online, Inc., 168 F. Supp. 2d

1359, 1380 (S.D. Fla. 2001).

• Mail or wire fraud, 18 U.S.C. §§ 1341, 1343, 1346, for schemes

that use the mail or wires to defraud another of property or to

deprive them of the intangible right of honest services, which

often cover the misappropriation of confidential and proprietary

information. See, e.g., United States v. Martin, 228 F.3d 1, 16-19

(1st Cir. 2000) (affirming mail and wire fraud convictions for
IV. Theft of Commercial Trade Secrets 177

schemes to obtain confidential business information under both

theories).

First, a scheme to defraud another of property includes intangible

property, such as confidential, nonpublic, prepublication, and

proprietary information. Carpenter v. United States, 484 U.S. 19

(1987) (holding that financial journalist’s trading on information

gathered for his newspaper column defrauded the newspaper of

its right to the exclusive use of the information); United States v.

Wang, 898 F. Supp. 758, 760 (D. Colo. 1995) (holding that 18

U.S.C. § 1343 applies not just to physical goods, wares, or

merchandise, but also to confidential computer files transmitted

by wire); United States v. Seidlitz, 589 F.2d 152 (4th Cir. 1978)

(holding that data the defendant downloaded from his former

employer’s computer system qualified as property under the wire

fraud statute and a trade secret).

Second, a scheme to defraud may include the defendant’s

deprivation of the victim’s intangible right to the defendant’s

honest services, under 18 U.S.C. § 1346. Under § 1346, the

defendant is charged not with fraudulently obtaining proprietary

information, but rather with breaching his fiduciary duty of

loyalty to his employer by misappropriating the proprietary

information. Id. The government need not, however, prove that

the defendant realized financial gain from the theft or attempted

theft. See, e.g., United States v. Kelly, 507 F. Supp. 495 (E.D. Pa.

1981) (holding that a private employee may be convicted for mail

fraud for failing to render honest and faithful services to his

employer if he devises a scheme to deceive, mislead, or conceal

material information, in case where the defendants violated their

employer’s policy by extensively using the employer’s computer

facilities for their own gain and had attempted to conceal their

actions from the employer). Section 1346 covers all employees,

not just those who work for a government. See United States v.

Martin, 228 F. 3d 1, 17 (1st Cir. 2000); United States v. Frost,

125 F.3d 346, 365 (6th Cir. 1997).

Mail and wire fraud convictions stemming from the theft of trade

secrets have been upheld even when charges under the National

Transportation of Stolen Property Act, 18 U.S.C. §§ 2314-15, see

infra, were rejected. See, e.g., Abbott v. United States, 239 F.2d

310 (5th Cir. 1956) (affirming § 1341 conviction, but finding

insufficient evidence to sustain conviction under 18 U.S.C.

§ 2314 because government failed to prove market value of map
178 Prosecuting Intellectual Property Crimes

or how or who caused the map to be transported). The mail and

wire fraud statute’s broader scope results from its concern for the

theft of “property” generally, as compared to the NTSP Act’s

focus on the arguably narrower class of “goods, wares and

merchandise” used in § 2314 and § 2315. See, e.g., Wang, 898 F.

Supp. at 760 (holding that 18 U.S.C. § 1343 applies to items

other than physical goods, wares, and merchandise).

For a more detailed discussion of 18 U.S.C. §§ 1341 and 1343,

refer to Title 9, Chapter 43 of the U.S. Attorneys’ Manual, and

contact the Fraud Section of the Criminal Division at (202) 514-

7023 for further information and guidance.

• Criminal copyright infringement, 17 U.S.C. § 506 and 18 U.S.C.

§ 2319, when the defendant stole and reproduced or distributed

copyrighted information. The Copyright Act does not preempt

trade secret or related charges if the defendant stole confidential

copyrighted material. SeeWang, 898 F. Supp. at 760-61 (holding

that Copyright Act did not preempt wire fraud prosecution for

stealing confidential copyrighted material); Association of Am.

Med. Colls. v. Princeton Review, Inc., 332 F. Supp. 2d 11, 22-24

(D.D.C. 2004) (analyzing issue and collecting cases).

• Interstate transportation and receipt of stolen property or goods,

the International Transportation of Stolen Property Act

(hereinafter “ITSP Act”), which punishes “[w]hoever transports,

transmits, or transfers in interstate or foreign commerce any

goods, wares, merchandise, securities or money, of the value of

$5,000 or more, knowing the same to have been stolen, converted

or taken by fraud,” 18 U.S.C. § 2314, and “[w]hoever receives,

possesses, conceals, stores, barters, sells, or disposes” stolen

property that has crossed a state or federal boundary after being

stolen, 18 U.S.C. § 2315.

At least one court has held that the ITSP Act does not apply to

the theft of trade secrets or other proprietary and confidential

information unless the information is of a type bought, sold, or

transferred in a legitimate or black market. In an unpublished

district court opinion, the court held that “goods,” “wares,” and

“merchandise” do not include every item “related to commerce,”

but rather only “those things that are bought and sold in the

marketplace.” United States v. Kwan, No. 02 CR.241 (DAB),

2003 WL 22973515, at *6 (S.D.N.Y. Dec. 17, 2003). Because

the government had not proved that the victim’s travel industry

“proprietary information includ[ing] hotel contact lists, hotel rate
IV. Theft of Commercial Trade Secrets 179

sheets, travel consortium contact lists, travel consortium rate

sheets, and cruise operator rate sheets,” were the type of goods,

wares, or merchandise that were ever bought, sold, or traded in a

market, “legal or otherwise,” the Kwan court vacated the

defendant’s ITSP conviction. Id. at *1, *6.

Assuming that particular stolen items qualify as goods, wares, or

merchandise, the courts agree that sections 2314 and 2315 apply

when a defendant steals a tangible object—for example, a piece of

paper or a computer disk—that contains intellectual property.

See, e.g., United States v. Martin, 228 F.3d 1, 14-15 (1st Cir.

2000); United States v. Walter, 43 M.J. 879, 884 (N.M. Ct.

Crim. App. 1996) (“[C]ourts will include intangible property

under the [ITSP] act when tied to tangible property and when the

intangible property possesses some business value.”); United

States v. Brown, 925 F.2d 1301, 1308 n.14 (10th Cir. 1991)

(holding that even though § 2314 does not apply to theft of

intangible property through intangible means, § 2314 would

apply to the theft of a piece of paper bearing a chemical formula,

even if the paper’s intrinsic value were insignificant and the item’s

overall value was almost wholly derived from the intangible

intellectual property contained in the chemical formula) (citing

United States v. Stegora, 849 F.2d 291, 292 (8th Cir. 1988))

(dictum); United States v. Lyons, 992 F.2d 1029, 1033 (10th Cir.

1993) (holding that the defendant’s theft of “software in

conjunction with the theft of tangible hardware distinguishes this

case from Brown. Brown recognizes that the theft of intangible

intellectual property in conjunction with the theft of tangible

property falls within the ambit of § 2314.”); United States v.

Lester, 282 F.2d 750 (3d Cir. 1960) (holding that originals and

copies of geophysical maps made by defendants on the victim’s

own copying equipment, with the victim’s own supplies, are

covered under § 2314); United States v. Seagraves, 265 F.2d 876

(3d Cir. 1959) (facts similar to Lester); United States v.

Greenwald, 479 F.2d 320 (6th Cir. 1973) (original documents

containing trade secrets about fire retardation processes); cf.

Hancock v. Decker, 379 F.2d 552, 553 (5th Cir. 1967) (holding

that state conviction for theft of 59 copies of a computer program

was supported by similar federal court rulings under § 2314)

(citing Seagraves, 265 F.2d at 876).

Courts are divided, however, on whether the ITSP Act applies to

a defendant who transfers intangible property through intangible

means, such as electronic data transmission or copying from one
180 Prosecuting Intellectual Property Crimes

piece of paper to another. One view is that it does not. In Brown,

the defendant was charged with transporting (by means

unknown) the source code of a computer program from Georgia

to New Mexico, but the government could not prove that the

defendant had copied the source code onto the victim’s diskettes

or that he possessed any of the victim’s tangible property. Brown,

925 F.2d at 1305-09. The Tenth Circuit held that 18

U.S.C. § 2314 did not cover “[p]urely intellectual property,” such

as the source code appropriated by the defendant: “It can be

represented physically, such as through writing on a page, but the

underlying, intellectual property itself, remains intangible” and

thus “cannot constitute goods, wares, merchandise, securities or

moneys which have been stolen, converted or taken within the

meaning of §§ 2314 or 2315.” Id. at 1307-08. In reaching its

decision, the court relied on Dowling v. United States, 473 U.S.

207 (1985), which held that property that is “stolen” only in the

sense that it is copyright infringing does not fall under the ITSP

Act. See also supra Chapter II.F. (discussing application of

Dowling to charging 18 U.S.C. § 2314 for intellectual property

crimes).

The Second Circuit reached the opposite result in United States

v. Bottone, 365 F.2d 389 (2d Cir. 1966), which pre-dates

Dowling. The defendants in Bottone removed papers describing

manufacturing processes from their place of employment and

made copies outside the office. They returned the originals and

then transported the copies in interstate commerce. In upholding

defendants’ convictions under 18 U.S.C. § 2314, Judge Friendly

stated that:

when the physical form of the stolen goods is secondary in

every respect to the matter recorded in them, the

transformation of the information in the stolen papers into a

tangible object never possessed by the original owner should

be deemed immaterial. It would offend common sense to hold

that these defendants fall outside the statute simply because,

in efforts to avoid detection, their confederates were at pains

to restore the original papers to [their employer] and

transport only copies or notes, although an oversight would

have brought them within it. 

365 F.2d at 393-94. 

More recent cases have adopted similar reasoning, notwithstanding

Dowling and Brown, approving of ITSP prosecutions for theft of
IV. Theft of Commercial Trade Secrets 181

intangible property by intangible means. See, e.g., United States v. Kwan,

No. 02 CR.241 (DAB), 2003 WL 21180401, *3 (S.D.N.Y. 2003)

(denying the defendant's motion to dismiss, because in determining what

would be considered “goods, wares, or merchandise,” the Second Circuit

“long considered stolen items’ commercial nature to be more significant

than their tangibility.”); United States v. Farraj, 142 F. Supp. 2d 484, 488

(S.D.N.Y. 2001) (“The text of § 2314 makes no distinction between

tangible and intangible property, or between electronic and other manner

of transfer across state lines.”); United States v. Riggs, 739 F. Supp. 414,

420-21 (N.D. Ill. 1990) (rejecting defendant’s “disingenuous argument

that he merely transferred electronic impulses [albeit impulses containing

computerized text files belonging to Bell South] across state lines. This

court sees no reason to hold differently simply because [defendant] stored

the information inside computers instead of printing it out on paper. In

either case, the information is in a transferrable, accessible, even salable

form.”).

• State and local charges. Many states have laws that specifically

address the theft of information. If a state lacks a specific tradesecret law, its general theft statutes may apply.
183

V.

Digital Millennium

Copyright Act—

17 U.S.C. §§ 1201-1205

V.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

V.A.1. DMCA's Background and Purpose . . . . . . . . . . . . . . . 185

V.A.2. Key Concepts: Access Controls vs. Copy Controls,

Circumvention vs. Trafficking . . . . . . . . . . . . . . . . . . 186

V.A.2.a. Access Controls vs. Copy/Use Controls . . . . . . . 187

V.A.2.b. Circumvention vs. Trafficking in Circumvention 

Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

V.A.3. Differences Between the DMCA and Traditional 

Copyright Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

V.A.4. Other DMCA Sections That Do Not Concern Prosecutors

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

V.B. Elements of the Anti-Circumvention and Anti-Trafficking

Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

V.B.1. Circumventing Access Controls— 17 U.S.C. §§ 1201(a)(1)

and 1204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

V.B.1.a. Circumventing . . . . . . . . . . . . . . . . . . . . . . . . . . 193

V.B.1.b. Technological Measures That Effectively Control Access

(“Access Control”) . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

V.B.1.c. To a Copyrighted Work . . . . . . . . . . . . . . . . . . . 197

V.B.1.d. How Congress Intended the Anti-Circumvention

Prohibition to Apply . . . . . . . . . . . . . . . . . . . . . . . . . 197

V.B.1.e. Regulatory Exemptions to Liability Under § 1201(a)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

V.B.2. Trafficking in Access Control Circumvention Tools and

Services—17 U.S.C. §§ 1201(a)(2) and 1204 . . . . . . 200
184 Prosecuting Intellectual Property Crimes

V.B.2.a. Trafficking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

V.B.2.b. In a Technology, Product, Service, or Part Thereof

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

V.B.2.c. Purpose or Marketing of Circumvention Technology

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

V.B.2.c.1. Primarily Designed or Produced . . . . . . . . 203

V.B.2.c.2. Limited Commercially Significant Purpose Other

Than Circumvention . . . . . . . . . . . . . . . . . . . . . . 204

V.B.2.c.3. Knowingly Marketed for Circumvention . . 204

V.B.3. Trafficking in Tools, Devices, and Services to Circumvent

Copy Controls—17 U.S.C. §§ 1201(b)(1) and 1204 . 205

V.B.3.a. Circumventing . . . . . . . . . . . . . . . . . . . . . . . . . . 206

V.B.3.b. Technological Measure That Effectively Protects a Right

of a Copyright Owner Under This Title (“Copy Control”) 206

V.B.4. Alternate § 1201(b) Action—Trafficking in Certain Analog

Videocassette Recorders and Camcorders . . . . . . . . . 208

V.B.5. Falsifying, Altering, or Removing Copyright Management

Information—17 U.S.C. § 1202 . . . . . . . . . . . . . . . . . 208

V.C. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

V.C.1. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . 209

V.C.2. Librarian of Congress Regulations . . . . . . . . . . . . . . . 210

V.C.3. Certain Nonprofit Entities . . . . . . . . . . . . . . . . . . . . . 210

V.C.4. Information Security Exemption . . . . . . . . . . . . . . . . 210

V.C.5. Reverse Engineering and Interoperability of Computer

Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

V.C.6. Encryption Research . . . . . . . . . . . . . . . . . . . . . . . . . 213

V.C.7. Restricting Minors' Access to Internet . . . . . . . . . . . . . 215

V.C.8. Protection of Personally Identifying Information . . . . 215

V.C.9. Security Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

V.C.10. Constitutionality of the DMCA . . . . . . . . . . . . . . . . 216
V. Digital Millennium Copyright Act 185

V.C.10.a. Congress's Constitutional Authority to Enact § 1201 of

the DMCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

V.C.10.b. The First Amendment . . . . . . . . . . . . . . . . . . . 219

V.C.10.b.i. Facial Challenges . . . . . . . . . . . . . . . . . . . 219

V.C.10.b.ii. “As Applied” Challenges . . . . . . . . . . . . . 220

V.C.10.c. Vagueness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

V.C.10.d. Fair Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223

V.D. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

V.A. Introduction

V.A.1. DMCA's Background and Purpose

With the advent of digital media and the Internet as a means to

distribute such media, large-scale digital copying and distribution of

copyrighted material became easy and inexpensive. In response to this

development, and to prevent large-scale piracy of digital content over the

Internet, in 1997 the World Intellectual Property Organization (WIPO)

responded with two treaties, the Copyright Treaty, and the Performances

and Phonograms Treaty, to prohibit pirates from defeating the digital

locks that copyright owners use to protect their digital content from

unauthorized access or copying. Specifically, Article 11 of the WIPO

Copyright Treaty prescribes that contracting states 

shall provide adequate legal protection and effective legal remedies

against the circumvention of effective technological measures that are

used by authors in connection with the exercise of their rights under

this Treaty or the Berne Convention and that restricts acts, in respect

of their works, which are not authorized by the authors concerned or

permitted by law.

See WIPO Copyright Treaty, Apr. 12, 1997, S. Treaty Doc. No. 105-17,

art. 11 (1997); WIPO Performances and Phonograms Treaty, Apr. 12,

1997, S. Treaty Doc. No. 105-17, art. 18 (1997) (same with respect to

performers or producers of phonograms). The United States signed these

treaties on April 12, 1997, and ratified them on October 21, 1998. See

144 Cong. Rec. 27,708 (1998) (Resolution of Ratification of Treaties). 

To implement these treaties, Congress enacted Title I of the Digital

Millennium Copyright Act (DMCA) on October 28, 1998, with the twin
186 Prosecuting Intellectual Property Crimes

goals of protecting copyrighted works from piracy and promoting

electronic commerce. See H.R. Rep. No. 105-551 (II), at 23 (1998); S.

Rep. No. 105-190, at 8 (1998); see also Universal City Studios, Inc. v.

Corley, 273 F.3d 429, 454 (2d Cir. 2001); United States v. Elcom, Ltd.,

203 F. Supp. 2d 1111, 1129-30 (N.D. Cal. 2002). Congress accomplished

these goals by enacting prohibitions relating to the circumvention of

copyright protection systems as set forth in 17 U.S.C. § 1201, and the

integrity of copyright management information pursuant to 17 U.S.C.

§ 1202. 

Criminal enforcement has largely focused on violations of the anticircumvention and anti-trafficking prohibitions in 17 U.S.C. § 1201, and

thus these are the main focus of this chapter. For a more complete

discussion of the provisions that protect the integrity of copyright

management information, as set forth in 17 U.S.C. § 1202, see Section

V.B.5. of this Chapter.

V.A.2. Key Concepts: Access Controls vs. Copy Controls,

Circumvention vs. Trafficking

Section 1201 contains three prohibitions. First, it prohibits

“circumvent[ing] a technological measure that effectively controls access

to a work protected under this [copyright] title.” 17 U.S.C.

§ 1201(a)(1)(A). Second, it prohibits the manufacture of or trafficking in

products or technology designed to circumvent a technological measure

that controls access to a copyrighted work. 17 U.S.C. § 1201(a)(2). Third,

it prohibits the manufacture of or trafficking in products or technology

designed to circumvent measures that protect a copyright owner's rights

under the Copyright Act. 17 U.S.C. § 1201(b). As noted more fully in

Section V.C. of this Chapter, the DMCA provides several exceptions.

Title I of the DMCA creates a separate private right of action on

behalf of “[a]ny person injured by a violation of section 1201 or 1202” in

federal district court. 17 U.S.C. § 1203(a). These prohibitions are

criminally enforceable against any person who violates them “willfully and

for purposes of commercial advantage or private financial gain,” excluding

nonprofit libraries, archives, educational institutions, and public

broadcasting entities as defined by 17 U.S.C. § 118(f). 17 U.S.C.

§ 1204(a), (b). (At this writing, the reference to § 118(g) at § 1204(b) has

not been amended to indicate the provision's current location at § 118(f).)

Although civil actions do not require the claimant to establish that a

DMCA violation was “willful” or for “commercial advantage or private

financial gain,” the substantive law defining violations of §§ 1201 or 1202
V. Digital Millennium Copyright Act 187

is generally the same for both criminal and civil actions. Thus, published

decisions relating to whether a violation of these DMCA sections has

occurred in civil cases are instructive in criminal cases.

V.A.2.a. Access Controls vs. Copy/Use Controls

To understand the technical requirements of the DMCA's criminal

prohibitions, it is first important to understand what technology the

DMCA generally applies to, and what the DMCA outlaws. Congress

intended Title I of the DMCA to apply to copyrighted works that are in

digital format and thus could easily and inexpensively be accessed,

reproduced, and distributed over the Internet without the copyright

owner's authorization. The DMCA therefore applies to what one might

call a “digital lock”—a technological measure that copyright owners use

to control who may see, hear, or use copyrighted works stored in digital

form. These digital locks are commonly called either “access controls” or

“copy controls,” depending on what function the digital lock is designed

to control. 

The DMCA states that a digital lock, or “technological measure” (as

the DMCA refers to such locks), constitutes an access control “if the

measure, in the ordinary course of its operation, requires the application

of information, or a process or a treatment, with the authority of the

copyright owner, to gain access to the work.” 17 U.S.C. § 1201(a)(3)(B).

Thus, as the name suggests, an access control prevents users from

accessing a copyrighted work without the author's permission. For

example, a technology that permits access to a newspaper article on an

Internet Web site only by those who pay a fee or have a password would

be considered an access control. See S. Rep. No. 105-190, at 11-12

(1998). In this example, the author (i.e., copyright owner) uses such fees

or password requirements as access controls that allow the author to

distinguish between those who have the author's permission to read the

online article from those who do not. If a user does not pay the fee or

enter the password, then the user cannot lawfully read the article or

otherwise access it. 

The DMCA also prescribes that a digital lock constitutes a copy

control “if the measure, in the ordinary course of its operation, prevents,

restricts, or otherwise limits the exercise of a right of a copyright owner

under this title.” 17 U.S.C. § 1201(b)(2)(B). The rights of a copyright

owner include the exclusive rights to reproduce the copyrighted work, to

prepare derivative works based upon the copyrighted work, to distribute

copies by sale or otherwise, to perform the copyrighted work publicly, and

to display the copyrighted work publicly. 17 U.S.C. § 106. In other words,
188 Prosecuting Intellectual Property Crimes

such a digital lock prevents someone from making an infringing use of a

copyrighted work after the user has already accessed the work. See S. Rep.

No. 105-190, at 11-12 (1998); Universal City Studios, Inc. v. Corley, 273

F.3d 429, 441 (2d Cir. 2001). Although some courts will refer to such

digital locks as “usage controls” because such locks conceivably seek to

control all infringing uses, in practice, these digital locks typically control

unauthorized copying of the work—hence the name “copy control.” 

To illustrate an example of a copy control, consider again the online

newspaper article referenced above. A technological measure on an

Internet Web site that permits a user to read (i.e., access) the online

article but prevents the viewer from making a copy of the article once it

is accessed would be a copy control. See S. Rep. No. 105-190, at 11-12

(1998). Thus, access and copy controls are different kinds of digital locks

that are each designed to perform different functions. Whereas an access

control blocks access to the copyrighted work—such as a device that

permits access to an article on an Internet Web site only by those who

pay a fee or have a password—a copy control protects the copyright

itself—such as a device on the same Web site that prevents the viewer

from copying the article once it is accessed. 

Although the DMCA's distinction between an “access control” and a

“copy control” appears straightforward in principle, courts are not always

consistent in how they characterize a particular protection technology. For

example, in the 1990s, the DVD industry developed the Content

Scramble System (CSS)—an encryption scheme incorporated into DVDs

that employs an algorithm configured by a set of “keys” to encrypt a

DVD's contents. For a DVD player to display a movie on a DVD encoded

with CSS, the DVD player must have the “player keys” and the algorithm

from the copyright owner. The Second Circuit characterized this CSS

technology as an “access control” because a DVD player with the proper

player keys and algorithm from the copyright owner “can display the

movie on a television or a computer screen, but does not give a viewer the

ability to use the copy function of the computer to copy the movie or to

manipulate the digital content.” Corley, 273 F.3d at 437. A district court

in the Northern District of California, however, viewed the same

technology as both an access control and a copy control. 321 Studios v.

Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1095 (N.D.

Cal. 2004). Accordingly, prosecutors should be careful how they

characterize technological controls as access or copy controls, and in some

instances it may even be advisable for prosecutors to characterize a

particular copyright protection system as both.
V. Digital Millennium Copyright Act 189

V.A.2.b. Circumvention vs. Trafficking in Circumvention Tools

Section 1201(a) of the DMCA proscribes two kinds of conduct

regarding access controls: 1) circumvention of access controls, 17 U.S.C.

§ 1201(a)(1), and 2) trafficking in technology primarily designed to

facilitate circumvention of access controls, 17 U.S.C. § 1201(a)(2). Both

of these prohibitions relating to access controls are discussed more fully

in Sections V.B.1. and V.B.2. of this Chapter.

Unlike § 1201(a), however, Congress did not ban the act of

circumventing copy controls. Instead, § 1201(b) only prohibits trafficking

in technology primarily designed to facilitate the circumvention of copy

controls. 17 U.S.C. § 1201(b)(1). Congress expressly chose not to prohibit

the circumvention of copy controls in the DMCA because circumventing

a copy control is essentially an act of copyright infringement that is

already covered by copyright law. S. Rep. No. 105-190, at 12 (1998).

Thus, § 1201(a)(1) (the “anti-circumvention provision”) prohibits the

actual use of circumvention technology to obtain access to a copyrighted

work without the copyright owner's authority. In contrast, §§ 1201(a)(2)

and 1201(b)(1) (the “anti-trafficking provisions”) focus on the trafficking

in circumvention technology, regardless of whether such technology

ultimately leads a third party to circumvent an access or copy control. See

Davidson & Assocs. v. Jung, 422 F.3d 630, 640 (8th Cir. 2005); Corley,

273 F.3d at 440-41. And with respect to the anti-trafficking provisions,

“although both sections prohibit trafficking in a circumvention

technology, the focus of § 1201(a)(2) is circumvention of technologies

designed to prevent access to a work, and the focus of § 1201(b)(1) is

circumvention of technologies designed to permit access to a work but

prevent copying of the work or some other act that infringes a copyright.”

Davidson, 422 F.3d at 640 (emphasis in original). 

The following chart illustrates the distinction: 

Access Copy

Circumventing § 1201(a)(1) No DMCA violation, but

potential copyright violation:

17 U.S.C. § 506;

18 U.S.C. § 2319

Trafficking § 1201(a)(2) § 1201(b)(1)
190 Prosecuting Intellectual Property Crimes

V.A.3. Differences Between the DMCA and Traditional

Copyright Law

Whereas copyright law focuses on “direct” infringement of a

copyrighted work, the DMCA focuses largely on the facilitation of

infringement through circumvention tools and services primarily designed

or produced to circumvent an access or copy control. In other words, the

DMCA represents a shift in focus from infringement to the tools of

infringers. 

Before the DMCA was enacted, copyright law had only a limited

application to the manufacture or trafficking of tools designed to facilitate

copyright infringement. In 1984, the Supreme Court held that “the sale

of copying equipment, like the sale of other articles of commerce, does not

constitute contributory infringement if the product is widely used for

legitimate, unobjectionable purposes. Indeed, it need merely be capable

of substantial noninfringing uses.” Sony v. Universal City Studios, 464

U.S. 417, 442 (1984). Under this standard, a copy control circumvention

tool would not violate copyright law if it were “widely used for

legitimate ... purposes” or were merely “capable of substantial

noninfringing uses.” Id.

The DMCA shifts the focus from determining whether the

downstream use of equipment will be used for infringement, to

determining whether it was primarily designed to circumvent an access or

copy control—even if such equipment were ultimately capable of

substantial noninfringing uses. See 17 U.S.C. § 1201(a)(2)(A), (b)(1)(A).

For example, with respect to software primarily designed to circumvent

copy controls on DVDs, courts have held “that legal downstream use of

the copyrighted material by customers is not a defense to the software

manufacturer's violation of the provisions of § 1201(b)(1).” 321 Studios

v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1097-98

(N.D. Cal. 2004). Thus, although trafficking in circumvention technology

that is capable of substantial noninfringing uses may not constitute

copyright infringement, it may still violate the DMCA if such technology

is primarily designed to circumvent access or copy controls. See

RealNetworks, Inc. v. Streambox, Inc., No. 2:99CV02070, 2000 WL

127311, at *7 (W.D. Wash. Jan. 18, 2000).

The DMCA also added a new prohibition against circumventing

access controls, even if such circumvention does not constitute copyright

infringement. 17 U.S.C. § 1201(a)(1)(A). Prior to the DMCA, “the

conduct of circumvention [of access controls] was never before made

unlawful.” S. Rep. No. 105-190, at 12 (1998); cf. Chamberlain Group,
V. Digital Millennium Copyright Act 191

Inc. v. Skylink Techs., Inc., 381 F.3d 1178, 1195-96 (Fed. Cir. 2004). By

the same token, the DMCA does not contain a parallel prohibition against

the use—infringing or otherwise—of copyrighted works once a user has

access to the work. United States v. Elcom, 203 F. Supp. 2d 1111, 1121

(N.D. Cal. 2002) (holding that “circumventing use restrictions is not

unlawful” under the DMCA); cf. S. Rep. No. 105-190, at 12 (1998)

(“The copyright law has long forbidden copyright infringements, so no

new prohibition was necessary.”). 

Although the DMCA “targets the circumvention of digital walls

guarding copyrighted material (and trafficking in circumvention tools),

[it] does not concern itself with the use of those materials after

circumvention has occurred.” Universal City Studios, Inc. v. Corley, 273

F.3d 429, 443 (2d Cir. 2001); cf. 321 Studios, 307 F. Supp. 2d at 1097

(holding that “the downstream uses of the [circumvention] software by

the customers of 321 [the manufacturer], whether legal or illegal, are not

relevant to determining whether 321 itself is violating [the DMCA]”). At

the same time, the DMCA also cautions that “[n]othing in this section

shall affect rights, remedies, limitations, or defenses to copyright

infringement, including fair use, under this title.” 17 U.S.C. § 1201(c)(1);

Elcom, 203 F. Supp. 2d at 1120 (“Congress did not ban the act of

circumventing the use restrictions ... because it sought to preserve the fair

use rights of persons who had lawfully acquired a work”). Thus, a criminal

defendant who has violated the DMCA by circumventing an access

control has not necessarily infringed a copyrighted work under copyright

law. Accordingly, prosecutors must apply traditional copyright law instead

of the DMCA to prosecute infringing uses of copyrighted works, including

the circumvention of copy controls. By the same token, to demonstrate

a violation of the DMCA, prosecutors need not establish copyright

infringement, nor even an intent to infringe copyrights.

In addition, unlike in a civil copyright claim, a victim's failure to

register its copyrighted work is not a bar to a DMCA action. See Section

V.B.1.c. of this Chapter.

V.A.4. Other DMCA Sections That Do Not Concern Prosecutors

Of the DMCA's five titles, the only one that need concern prosecutors

is Title I, which was codified at 17 U.S.C. §§ 1201-1205. The remaining

four titles concern neither criminal prosecutions nor those provisions of

the WIPO treaties that the DMCA was originally designed to implement.

Title II concerns the liability of Internet service providers for copyright

infringement over their networks. It amended the copyright code by

enacting a new § 512, which gives Internet service providers some
192 Prosecuting Intellectual Property Crimes

immunity in return for certain business practices, and requires them to

obey certain civil subpoenas to identify subscribers alleged to have

committed infringement. Section 512 does not, however, authorize

criminal subpoenas for the same purpose. 

Title III of the DMCA clarifies that a lawful owner or lessee of a

computer may authorize an unaffiliated service provider to activate the

computer to service its hardware components. Title IV of the DMCA

mandates a study of distance learning; permits libraries and archives to

use the latest technology to preserve deteriorating manuscripts and other

works; and permits transmitting organizations to engage in ephemeral

reproductions, even if they need to violate the newly-added anticircumvention features in the process. Finally, Title V of the DMCA

extends the scope of the Copyright Act's protection to boat hulls.

For purposes of this manual, all references to the DMCA concern

Title I unless the context demands otherwise.

V.B. Elements of the Anti-Circumvention

and Anti-Trafficking Provisions

V.B.1. Circumventing Access Controls—17 U.S.C. §§ 1201(a)(1)

and 1204

The DMCA prohibits “circumvent[ing] a technological measure that

effectively controls access to a work protected under this [copyright]

title.” 17 U.S.C. § 1201(a)(1)(A). To prove a violation of 17 U.S.C.

§§ 1201(a)(1) and 1204, the government must establish that the

defendant

1. willfully 

2. circumvented 

3. a technological measure that effectively controls access (i.e., an

access control) 

4. to a copyrighted work 

5. for commercial advantage or private financial gain. 

For purposes of the DMCA, prosecutors may look to the law of copyright

infringement for guidance regarding the “willfully” element and the

“commercial advantage” element. See Chapter II of this Manual.
V. Digital Millennium Copyright Act 193

Two recent cases from the Federal Circuit have read an additional

element into § 1201(a) offenses, holding that the unauthorized access

must also infringe or facilitate infringing a right protected by the

Copyright Act to establish violations of 17 U.S.C. § 1201(a)(1) and

(a)(2). Storage Technology Corp. v. Custom Hardware Eng'g &

Consulting, Inc. (“StorageTek”), 421 F.3d 1307, 1318 (Fed. Cir. 2005)

(quoting Chamberlain Group, Inc. v. Skylink Techs., Inc., 381 F.3d 1178,

1203 (Fed. Cir. 2004)). Although the results in Chamberlain and

StorageTek are consistent with Congress's intent that § 1201(a) apply to

measures controlling access to copyrighted works in digital form (see

Section V.B.1.d. of this Chapter), the courts reached those results using

a flawed analysis. Neither the DMCA's plain language nor its legislative

history permits circumvention of access controls or trafficking in access or

copy control circumvention devices to enable a fair use, as opposed to an

infringing use. The government has consistently argued that the DMCA

prohibits the manufacture and trafficking in all circumvention tools, even

those designed to facilitate fair use. See Section V.C.10.d. of this Chapter.

Additionally, unlike the regional circuits, the Federal Circuit does not

have the authority to develop a body of case law on copyright law that is

independent of the regional circuits. StorageTek, 421 F.3d at 1311;

Chamberlain, 381 F.3d at 1181. Accordingly, until a regional circuit

adopts the StorageTek-Chamberlain position regarding the additional

element to a § 1201(a) offense, prosecutors should oppose any attempts

to cite these decisions as meaningful precedent. If a defendant does

attempt to rely on these decisions, prosecutors are encouraged to contact

CCIPS at (202) 514-1026 for sample briefs and other guidance to oppose

them.

V.B.1.a. Circumventing

To “circumvent” an access control “means to descramble a scrambled

work, to decrypt an encrypted work, or otherwise to avoid, bypass,

remove, deactivate, or impair a technological measure, without the

authority of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A). Thus, to

establish this element, the government first must prove that the defendant

1) bypassed a technological measure, and 2) did so without the authority

of the copyright owner. 

“Circumvention requires either descrambling, decrypting, avoiding,

bypassing, removing, deactivating or impairing a technological measure

qua technological measure.” I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire

Info. Sys., Inc., 307 F. Supp. 2d 521, 532 (S.D.N.Y. 2004); see also

Egilman v. Keller & Heckman, 401 F. Supp. 2d 105, 113 (D.D.C. 2005)

(same); Universal City Studios, Inc. v. Corley, 273 F.3d 429, 443 (2d Cir.
194 Prosecuting Intellectual Property Crimes

2001). In other words, circumvention of an access control occurs when

someone bypasses the technological measure's gatekeeping capacity,

thereby precluding the copyright owner from determining which users

have permission to access the digital copyrighted work and which do not.

I.M.S., 307 F. Supp. 2d at 532.

For example, in Corley, the Second Circuit characterized CSS, the

scheme for encrypting digital movies stored on DVDs, as an access control

similar to “a lock on a homeowner's door, a combination of a safe, or a

security device attached to a store's products.” Corley, 273 F.3d at 452-

53. A licensed DVD player would be, in this metaphor, the homeowner's

key to the door. Id. The court held that defendant's computer program,

called “DeCSS,” circumvented CSS because it decrypted the CSS

algorithm to enable “anyone to gain access to a DVD movie without using

a [licensed] DVD player.” Id. at 453. DeCSS functions “like a skeleton

key that can open a locked door, a combination that can open a safe, or

a device that can neutralize a security device attached to a store's

products.” Id. Thus, using DeCSS to play a DVD on an unlicensed player

circumvents an access control because it undermines the copyright owner's

ability to control who can access the DVD movie. Id.

Circumvention does not occur, however, by properly using the

technological measure's gatekeeping capacity without the copyright

owner's permission. Egilman, 401 F. Supp. 2d at 113 (holding that the

definition of circumvention is missing “any reference to 'use' of a

technological measure without the authority of the copyright owner”); see

also I.M.S., 307 F. Supp. 2d at 533 (“Whatever the impropriety of

defendant's conduct, the DMCA and the anti-circumvention provision at

issue do not target this sort of activity.”). Using CSS as an example, a

defendant does not circumvent a DVD's access control, CSS, by merely

borrowing another person's licensed DVD player to view the DVD, even

if the defendant did not receive permission from the owner of the licensed

DVD player to “borrow” the player. No circumvention has occurred

because the defendant would not have bypassed CSS. In fact, he would

have viewed the DVD exactly as the copyright owner had intended—by

using a licensed DVD player. Courts have similarly held that a defendant

who without authorization uses a valid password to access a passwordprotected website containing copyrighted works does not engage in

circumvention because the defendant used an authorized password rather

than disabled the access control (here, the password protection

mechanism). See Egilman, 401 F. Supp. 2d at 113-14; I.M.S., 307 F.

Supp. 2d at 531-33. In this example, other charges might be available if

the defendant obtained information from a protected computer. I.M.S.,
V. Digital Millennium Copyright Act 195

307 F. Supp. 2d at 524-26 (discussing possible violation of the Computer

Fraud and Abuse Act, 18 U.S.C. § 1030(a)). 

In addition, for there to be a circumvention pursuant to

§ 1201(a)(3)(A), the circumvention must occur “without the authority of

the copyright owner.” 17 U.S.C. § 1201(a)(3)(A). A defendant who

decrypts or avoids an access control measure with the copyright owner's

authority has not committed a “circumvention” within the meaning of the

statute.

The fact that a purchaser has the right to use a purchased product

does not mean that the copyright owner has authorized the purchaser to

circumvent the product's access controls. For instance, a purchaser of a

CSS-encrypted DVD movie clearly has the “authority of the copyright

owner” to view the DVD but does not necessarily have the authority to

view it on any platform capable of decrypting the DVD. 321 Studios v.

Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1096 (N.D.

Cal. 2004) (holding “that the purchase of a DVD does not give to the

purchaser the authority of the copyright holder to decrypt CSS”). See also

Davidson & Assocs. v. Jung, 422 F.3d 630, 641 (8th Cir. 2005) (holding

that purchasers of interactive gaming software had permission to use the

game but lacked the copyright owner's permission to circumvent the

encryption measure controlling access to the game's interactive mode).

Thus, purchasers of products containing copyrighted works—by virtue of

that purchase alone—do not necessarily have the copyright owner's

permission to circumvent a technological measure controlling access to the

copyrighted work. 

V.B.1.b. Technological Measures That Effectively Control

Access (“Access Control”)

As already noted, 17 U.S.C. § 1201(a) concerns technological

measures designed to prevent access to a copyrighted work—technology

typically referred to as “access controls.” A technological measure does not

constitute an access control under the DMCA unless it “effectively

controls access to a work.” 17 U.S.C. § 1201(a)(1)(A). “[A] technological

measure 'effectively controls access to a [copyrighted] work' if the

measure, in the ordinary course of its operation, requires the application

of information, or a process or a treatment, with the authority of the

copyright owner, to gain access to the work.” 17 U.S.C. § 1201(a)(3)(B).

An access control “effectively controls access to a work” if its ordinary

function and operation is to control access to a copyrighted work's

expression, regardless of whether or not the control is a strong means of

protection. See, e.g., 321 Studios, 307 F. Supp. 2d at 1095.
196 Prosecuting Intellectual Property Crimes

Significantly, courts have rejected the argument that the meaning of

the term “effectively” is based on how successful the technological

measure is in controlling access to a copyrighted work. See, e.g., id.

(holding that the fact that the CSS decryption keys permitting access to

DVDs were “widely available on the internet [sic]” did not affect whether

CSS was “effective” under the DMCA). For example, protection

“measures based on encryption or scrambling 'effectively control' access

to copyrighted works, although it is well known that what may be

encrypted or scrambled often may be decrypted or unscrambled.”

Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 318

(S.D.N.Y. 2000) (footnote omitted), aff'd sub nom. Universal City

Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001). Equating

“effectively” with “successfully” “would limit the application of the statute

to access control measures that thwart circumvention, but withhold

protection for those measures that can be circumvented” and

consequently “offer protection where none is needed” while

“withhold[ing] protection precisely where protection is essential.” Id; see

also Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 522,

549 (6th Cir. 2004) (“A precondition for DMCA liability is not the

creation of an impervious shield to the copyrighted work .... Otherwise,

the DMCA would apply only when it is not needed.”) (internal citations

omitted). 

Although the DMCA does not define “access,” at least one court has

held that controlling access to a copyrighted work means controlling

access to the expression (e.g., controlling the ability to see or to read the

actual text of a copyrighted computer program, hear a copyrighted song,

or watch a copyrighted movie) contained in a copyrighted work. Lexmark,

387 F.3d at 547 (holding that an authentication sequence that prevented

“access” to a copyrighted computer program on a printer cartridge chip by

preventing the printer from functioning and the program from executing

did not “control[] access” under the DMCA because the copyrighted

work's expression (the computer program) was nonetheless “freely

readable”). In the context of a computer program, the Sixth Circuit held

that an access control under the DMCA must control access to the

program's copyrighted expression—i.e., control the ability to see or to read

the program's code. Id. at 548. On the other hand, a technological

measure that controls only the function of a copyrighted computer

program but leaves the code freely readable is not an access control under

the DMCA. Compare id. (holding that there is no precedent deeming a

control measure as one that “effectively controls access” under the DMCA

“where the [purported] access-control measure left the literal code or text
V. Digital Millennium Copyright Act 197

of the computer program or data freely readable”) with Agfa Monotype

Corp. v. Adobe Sys., Inc., 404 F. Supp. 2d 1030, 1036 (N.D. Ill. 2005)

(holding that font embedding bits are not technological measures that

“effectively control access” because they “have been available for free

download from the Internet” and are “not secret or undisclosed.

Embedding bits are not encrypted, scrambled or authenticated, and

software applications ... need not enter a password or authorization

sequence to obtain access to the embedding bits or the specification for

the” font), and Davidson, 422 F.3d at 641 (holding that a technological

measure that controlled access to a computer program's expression that

otherwise “was not freely available” “without acts of reverse engineering”

constituted an “access control” under the DMCA). 

V.B.1.c. To a Copyrighted Work

The access control also must have controlled access to a copyrighted

work. See 17 U.S.C. § 1201(a)(1)(A), (2)(A)-(C) (referring repeatedly to

“a work protected under this title [17]”). The protection of a copyrighted

work is an essential element. See S. Rep. No. 105-190, at 28-29 (1998).

The DMCA's anti-circumvention prohibition does not apply to someone

who circumvents access controls to a work in the public domain, like a

book of Shakespeare, because such a protection measure controls access

to a work that is not copyrighted. Cf. United States v. Elcom Ltd., 203 F.

Supp. 2d 1111, 1131-32 (N.D. Cal. 2002).

A victim's failure to register its copyrighted work is not a bar to a

DMCA action. See I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info.

Sys., Inc., 307 F. Supp. 2d 521, 531 n.9 (S.D.N.Y. 2004); Medical Broad.

Co. v. Flaiz, No. Civ.A. 02-8554, 2003 WL 22838094, at *3 (E.D. Pa.

Nov. 25, 2003) (finding that “[w]hile a copyright registration is a

prerequisite under 17 U.S.C. § 411(a) for an action for [civil] copyright

infringement, claims under the DMCA ... are simply not copyright

infringement claims and are separate and distinct from the latter”)

(citation omitted).

V.B.1.d. How Congress Intended the Anti-Circumvention

Prohibition to Apply

Courts have acknowledged that, on its face, § 1201(a)(1) prescribes

that one unlawfully circumvents an access control even where the ultimate

goal of such circumvention is fair use of a copyrighted work. See, e.g.,

Reimerdes, 111 F. Supp. 2d at 304 (holding that an unlawful

circumvention of a technological measure can occur even though

“[t]echnological access control measures have the capacity to prevent fair
198 Prosecuting Intellectual Property Crimes

uses of copyrighted works as well as foul”). Although Congress was

concerned that the DMCA's anti-circumvention prohibition could be

applied to prevent circumvention of access controls for legitimate fair

uses, Congress concluded that strong restrictions on circumvention of

access control measures were essential to encourage digital works because

otherwise such works could be pirated and distributed over the Internet

too easily. See Lexmark, 387 F.3d at 549. 

For this reason, courts will strictly apply § 1201(a) to copyrighted

expression stored in a digital format whereby, for instance, executing

encrypted computer code containing the copyrighted expression actually

generates the visual and audio manifestation of protected expression.

Lexmark, 387 F.3d at 548 (holding that Congress intended § 1201(a) to

apply where executing “encoded data on CDs translates into music and

on DVDs into motion pictures, while the program commands in software

for video games or computers translate into some other visual and audio

manifestation”); see also 321 Studios, 307 F. Supp. 2d at 1095 (movies

on DVDs protected by an encryption algorithm (CSS) cannot be watched

without a DVD player that contains an access key decrypting CSS);

Davidson, 422 F.3d at 641 (encrypted algorithm on computer game

prevented unauthorized interactive use of computer game online); Pearl

Inv., LLC v. Standard I/O, Inc., 257 F. Supp. 2d 326, 349 (D. Me. 2003)

(“encrypted, password-protected virtual private network” prevented

unauthorized access to copyrighted computer software); Sony Computer

Entm't Am., Inc. v. Gamemasters, 87 F. Supp. 2d 976, 981 (N.D. Cal.

1999) (game console prevented unauthorized operation of video games);

RealNetworks, Civ. No. 2:99CV02070, 2000 WL 127311, at *3

(authentication sequence prevented unauthorized access to streaming

“copyrighted digital works” online). 

On the other hand, Congress did not intend the DMCA to apply (and

courts are less likely to apply it) where executing a copyrighted computer

program creates no protectable expression (as it would for a work in

digital form), but instead results in an output that is purely functional.

See, e.g., Lexmark, 387 F.3d at 548 (holding that a computer chip on a

replacement printer cartridge that emulates an authentication sequence

executing a copyrighted code on a manufacturer's printer cartridge did not

violate § 1201(a) because executing the code merely controls printer

functions such as “paper feeding,” “paper movement,” and “motor

control” and therefore “is not a conduit to protectable expression”);

Chamberlain Group, Inc. v. Skylink Techs., Inc., 381 F.3d 1178, 1204

(Fed. Cir. 2004) (holding that use of a transmitter to emulate a

copyrighted computer code in a garage door opener did not violate
V. Digital Millennium Copyright Act 199

§ 1201(a) because executing the code merely performed the function of

opening the garage door). 

Accordingly, prosecutors should bear in mind that courts are more

inclined to rule that a defendant violated § 1201(a) if his conduct

occurred in a context to which Congress intended the statute to

apply—i.e., when it involves an access control that protects access to

copyrighted expression stored in digital form. For questions on this often

technical point, prosecutors may wish to consult CCIPS at (202) 514-

1026.

V.B.1.e. Regulatory Exemptions to Liability Under

§ 1201(a)(1)

Before prosecuting a charge of unlawful access control circumvention,

§ 1201(a)(1)(A), prosecutors should confirm whether the defendant's

actions fall within the Librarian of Congress's latest regulatory

exemptions.

Because Congress was concerned that the DMCA's prohibitions

against circumventing access controls might affect citizens' noninfringing

uses of works in unforeseeable and adverse ways, Congress created a

recurring rulemaking proceeding to begin two years after the DMCA's

enactment and every three years thereafter. 17 U.S.C. § 1201(a)(1)(C),

(D). Specifically, the DMCA provides that its prohibition on access

circumvention itself, 17 U.S.C. § 1201(a)(1)(A), will not apply to users

control of certain types of works if, upon the recommendation of the

Register of Copyrights, the Librarian of Congress concludes that the

ability of those users “to make noninfringing uses of [a] particular class of

work[]” is “likely to be ... adversely affected” by the prohibition. 17

U.S.C. § 1201(a)(1)(B). The statute makes clear, however, that any

exceptions to § 1201(a)(1)(A) adopted by the Librarian of Congress are

not defenses to violations of the anti-trafficking provisions contained in

§§ 1201(a)(2) and 1201(b). See 17 U.S.C. § 1201(a)(1)(E).

The current exemptions, effective from October 28, 2003, until

October 27, 2006, are

• compilations containing lists of blocked Web sites intended to

prevent access to domains, Web sites, or portions of Web sites

(but not lists of Internet locations blocked by software designed

to protect against damage to computers, such as firewalls and

antivirus software, or software designed to prevent receipt of

unwanted e-mail, such as anti-spam software).
200 Prosecuting Intellectual Property Crimes

• computer programs protected by dongles—security or copy

protection devices for commercial microcomputer programs—that

prevent access due to malfunction or damage and which are

obsolete.

• “computer programs and video games distributed in formats that

have become obsolete and th[at] require[] original media or

hardware as a condition of access.”

• “literary works distributed in e-book format when all existing

e-book editions of the work (including digital text editions made

available by authorized entities) contain access controls that

prevent the enabling of the e-book's read-aloud function and that

prevent the enabling of screen readers to render the text into a

'specialized format.'”

See 37 C.F.R. § 201.40 (2003). The next rulemaking will occur in 2006.

V.B.2. Trafficking in Access Control Circumvention Tools and

Services—17 U.S.C. §§ 1201(a)(2) and 1204

In addition to prohibiting the circumvention of access controls, the

DMCA also prohibits the manufacture of, or trafficking in, any

technology that circumvents access controls without the copyright owner's

permission. 17 U.S.C. § 1201(a)(2). To prove a violation of 17 U.S.C.

§§ 1201(a)(2) and 1204, the government must establish that the

defendant 

1. willfully 

2. manufactured or trafficked in 

3. a technology, product, service, or part thereof 

4. that either:

a. is primarily designed or produced for the purpose of

b. “has only limited commercially significant purpose or use

other than” or 

c. “is marketed by that person or another acting in concert with

that person with that person's knowledge for use in” 

5. circumventing an access control without authorization from the

copyright owner

6. for commercial advantage or private financial gain. 
V. Digital Millennium Copyright Act 201

For purposes of the DMCA, prosecutors may look to the law of

copyright infringement for guidance regarding the “willfully” element and

the “commercial advantage” element, discussed in Chapter II of this

Manual. For a complete discussion of establishing the element regarding

circumventing an access control, see Sections V.B.1.a.-e. of this Chapter.

The Federal Circuit's additional element for establishing a violation of

§ 1201(a)(2)—that the unauthorized access must also infringe or facilitate

infringing a right protected by the Copyright Act—is discussed in Section

V.B.1.

V.B.2.a. Trafficking

Section 1201(a)(2) states that “[n]o person shall manufacture,

import, offer to the public, provide, or otherwise traffic in” a technology

or service that unlawfully circumvents an access control. To “traffic” in

such technology means to engage either in dealings in that technology or

service or in conduct that necessarily involves awareness of the nature of

the subject of the trafficking. Universal City Studios, Inc. v. Reimerdes,

111 F. Supp. 2d 294, 325 (S.D.N.Y. 2000). To “provide” technology

means to make it available or to furnish it. Id. The phrase “or otherwise

traffic in” modifies and gives meaning to the words “offer” and “provide.”

Id. Thus, “the anti-trafficking provision of the DMCA is implicated where

one presents, holds out or makes a circumvention technology or device

available, knowing its nature, for the purpose of allowing others to acquire

it.” Id. This standard for “trafficking,” therefore, hinges on evaluating the

trafficker's purpose for making the circumvention technology available.

See id. at 341 n.257 (“In evaluating purpose, courts will look at all

relevant circumstances.”). Significantly, however, the government need

not prove “an intent to cause harm” to establish the trafficking element.

Cf. Universal City Studios, Inc. v. Corley, 273 F.3d 429, 457 (2d Cir.

2001).

This standard is particularly helpful for determining whether a

defendant has trafficked online in unlawful circumvention technology. For

example, courts may view a defendant's trafficking to include offering

circumvention technology for download over the Internet, or posting links

to Web sites that automatically download such technology when a user

is transferred by hyperlink, where the purpose of such linking is to allow

others to acquire the circumvention technology. See, e.g., Reimerdes, 111

F. Supp. 2d at 325, 341 n.257 (holding that offering and providing for

download a computer program to circumvent DVD access controls for the

purpose of disseminating the program satisfies trafficking element of

§ 1201(a)(2)). In addition, at least one court has found that posting a

hyperlink to web pages “that display nothing more than the
202 Prosecuting Intellectual Property Crimes

[circumventing] code or present the user only with the choice of

commencing a download of [the code] and no other content” also

constitutes “trafficking” under the DMCA because the defendant's express

purpose in linking to these web pages was to disseminate the

circumventing technology. Id. at 325. 

In contrast, posting a link to a web page that happens to include,

among other content, a hyperlink for downloading (or transferring to a

page for downloading) a circumvention program would not, alone,

constitute “trafficking” in the program “regardless of purpose or the

manner in which the link was described.” Id.; see also id. at 341 n.257 (“A

site that deep links to a page containing only [the circumventing program]

located on a site that contains a broad range of other content, all other

things being equal, would more likely be found to have linked for the

purpose of disseminating [the program] than if it merely links to the

home page of the linked-to site.”). This result is consistent with the

general principle that a website owner cannot be held responsible for all

the content of the sites to which it provides links. Id. at 325 n.180

(quotation omitted). Thus, posting a link (or “linking”) to a

circumvention program could constitute “trafficking” if the person linking

to the program 1) knew that the program is on the linked-to site; 2) knew

that the program constituted unlawful circumvention technology; and 3)

posted the link for the purpose of disseminating that technology. See id.

at 325, 341.

V.B.2.b. In a Technology, Product, Service, or Part Thereof

Section 1201(a)(2) prohibits trafficking “in any technology, product,

service, device, component, or part thereof” that unlawfully circumvents

access controls. This language is “all-encompassing: it includes any tool,

no matter its form, that is primarily designed or produced to circumvent

technological protection.” United States v. Elcom, 203 F. Supp. 2d 1111,

1123 (N.D. Cal. 2002). This element is not limited to conventional

devices but instead includes “any technology,” including computer code

and other software, capable of unlawful circumvention. Reimerdes, 111

F. Supp. 2d at 317 & n.135. In addition, the government satisfies this

element even if only one “part” or feature of the defendant's technology

unlawfully circumvents access controls. See 321 Studios v. Metro

Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1098 (N.D. Cal.

2004). 
V. Digital Millennium Copyright Act 203

V.B.2.c. Purpose or Marketing of Circumvention Technology

Section 1201(a)(2) prohibits trafficking in technology that unlawfully

circumvents access controls and either “is primarily designed or produced

for th[at] purpose,” “has only limited commercially significant purpose or

use other than” such purpose; or is knowingly marketed for such purpose.

17 U.S.C. § 1201(a)(2)(A)-(C). Thus, “only one of the[se] three

enumerated conditions must be met” to satisfy this element. See 321

Studios, 307 F. Supp. 2d at 1094. And, as noted elsewhere, the fact that

a particular circumvention technology is capable of substantial

noninfringing uses is not a defense to trafficking in technology that

circumvents access controls and violates one of the three conditions

enumerated in § 1201(a)(2)(A)-(C). See RealNetworks, Inc. v. Streambox,

Inc., No. 2:99CV02070, 2000 WL 127311, at *8 (W.D. Wash. Jan. 18,

2000).

V.B.2.c.1. Primarily Designed or Produced

Trafficking in circumvention technology violates § 1201(a)(2)(A)

where its “primary purpose” is to circumvent technological measures

controlling access to, for example, copyrighted video games (Davidson &

Assocs. v. Jung, 422 F.3d 630, 641 (8th Cir. 2005); Sony Computer

Entm't Am., Inc. v. Gamemasters, 87 F. Supp. 2d 976, 987 (N.D. Cal.

1999)), copyrighted streaming video or music content (Streambox, No.

2:99CV02070, 2000 WL 127311, at *7-*8), and copyrighted movies

encrypted onto DVDs (Universal City Studios, Inc. v. Reimerdes, 111 F.

Supp. 2d 294, 318-19 (S.D.N.Y. 2000); 321 Studios v. Metro Goldwyn

Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1098 (N.D. Cal. 2004)). 

Whether a technology's “primary purpose” is to circumvent an access

control is determined by the circumvention technology's primary function,

not the trafficker's subjective purpose. The defendant's subjective motive

may, however, affect whether his conduct falls within one of the DMCA's

statutory exceptions. See Section V.C. of this Chapter. 

In Reimerdes, which concerned the CSS DVD-encryption scheme, the

court found that “(1) CSS is a technological means that effectively

controls access to plaintiffs' copyrighted works, (2) the one and only

function of [the defendant's program] is to circumvent CSS, and (3)

defendants offered and provided [the program] by posting it on their web

site.” Reimerdes, 111 F. Supp. 2d at 319. The court held that it was

“perfectly obvious” that the program “was designed primarily to

circumvent CSS.” Id. at 318. Defendants argued that their program was

not created for the “purpose” of pirating copyrighted movies, but rather

to allow purchasers of DVDs to play them on unlicensed DVD players
204 Prosecuting Intellectual Property Crimes

running the Linux operating system. Id. at 319. As the court held,

however, “whether the development of a Linux DVD player motivated

those who wrote [the program] is immaterial to the question” of whether

the defendants “violated the anti-trafficking provision[s] of the DMCA.”

Id. The trafficking “of the program is the prohibited conduct—and it is

prohibited irrespective of why the program was written.” Id.

V.B.2.c.2. Limited Commercially Significant Purpose Other

Than Circumvention

Whether a technology has only limited commercially significant

purpose other than circumvention is a separate inquiry from whether its

primary purpose was to circumvent, and it requires a fact-specific inquiry

that often hinges on whether the circumvention technology is “free and

available.” Some courts, however, have ruled that a particular technology

“is primarily designed or produced for the purpose of circumventing”

access controls (§ 1201(a)(2)(A)) and also “has only limited commercially

significant purpose” other than such circumvention (§ 1201(a)(2)(B)).

See, e.g., Davidson, 422 F. 3d at 641 (holding that defendant's

circumvention technology “had limited commercial purpose because its

sole purpose was ... circumventing [the] technological measures

controlling access to Battle.net and the [computer] games”); Streambox,

No. 2:99CV02070, 2000 WL 127311, at *8 (holding that defendant

violated §§ 1201(a)(2)(A) and (a)(2)(B) by trafficking in circumvention

technology that had “no significant commercial purpose other than to

enable users to access and record protected content”). However, at least

one court suggested that whether a defendant violates § 1201(a)(2)(B) “is

a question of fact for a jury to decide,” even where the court otherwise

finds that the defendant has violated § 1201(a)(2)(A). 321 Studios, 307

F. Supp. 2d at 1098.

V.B.2.c.3. Knowingly Marketed for Circumvention

When accused of having marketed technology for use in

circumventing access controls in violation of § 1201(a)(2)(C), defendants

have raised First Amendment defenses—particularly where only a part of

a product circumvents access controls—contending that marketing the

product may include dissemination of information about the product's

other, legal attributes. Although a more complete discussion analyzing the

DMCA's validity under the First Amendment is discussed in Section

V.C.10.b. of this Chapter, it is worth noting here that “the First

Amendment does not protect commercial speech that involves illegal

activity,” even if that commercial speech is merely instructions for
V. Digital Millennium Copyright Act 205

violating the law. 321 Studios, 307 F. Supp. 2d at 1098-99 (citing Florida

Bar v. Went For It, Inc., 515 U.S. 618, 623-24 (1995)); see also Corley,

273 F.3d at 447 (citing United States v. Raymond, 228 F.3d 804, 815

(7th Cir. 2000) (holding that “First Amendment does not protect

instructions for violating the tax laws”)). Thus, knowingly marketing

technology for use in circumventing access controls in violation of

§ 1201(a)(2)(C) constitutes illegal activity, and hence, unprotected

speech. 321 Studios, 307 F. Supp. 2d at 1099 (“[A]s 321 markets its

software for use in circumventing CSS, this Court finds that 321's DVD

copying software is in violation of the marketing provisions of

§§ 1201(a)(2) and (b)(1).”).

V.B.3. Trafficking in Tools, Devices, and Services to Circumvent

Copy Controls—17 U.S.C. §§ 1201(b)(1) and 1204

As noted above, the DMCA prohibits the manufacture or trafficking

in any technology that circumvents copy controls without the copyright

owner's permission. 17 U.S.C. § 1201(b)(1). To prove a violation of 17

U.S.C. §§ 1201(b)(1) and 1204, the government must establish that the

defendant 

1. willfully 

2. manufactured or trafficked in 

3. a technology, product, service, or part thereof 

4. that either:

a. “is primarily designed or produced for the purpose of” 

b. “has only limited commercially significant purpose or use

other than” or 

c. “is marketed by that person or another acting in concert with

that person with that person's knowledge for use in” 

5. “circumventing” 

6. “protection afforded by a technological measure that effectively

protects a right of a copyright owner under this title in a work or

a portion thereof” 

7. “for commercial advantage or private financial gain.”

See 17 U.S.C. §§ 1201(a)(2)(A)-(C), 1204. For purposes of the DMCA,

prosecutors may look to the law of copyright infringement for guidance

regarding the “willfully” element and the “commercial advantage”

element. See Chapter II of this Manual. In addition, because the second,
206 Prosecuting Intellectual Property Crimes

third, and fourth elements of a § 1201(b) violation operate in the same

way as do the comparable elements of a § 1201(a) violation, a complete

discussion of those elements may be found in Sections V.B.1. and V.B.2.

of this Chapter.

V.B.3.a. Circumventing

To “circumvent protection afforded by a technological measure,” as

set forth in 17 U.S.C. § 1201(b), “means avoiding, bypassing, removing,

deactivating, or otherwise impairing a technological measure.” 17 U.S.C.

§ 1201(b)(2)(A). To establish this element, the government must show

that the defendant trafficked in technology allowing the end user to

bypass a copy or use control that “effectively protects the right of a

copyright owner.” 17 U.S.C. § 1201(b)(1), (b)(2)(B). Courts have found

that the following technologies circumvent copy controls: (1) a computer

program that removes user restrictions from an “ebook” to make such files

“readily copyable” and “easily distributed electronically,” United States

v. Elcom, 203 F. Supp. 2d 1111, 1118-19 (N.D. Cal. 2002);

(2) technology that bypasses copy controls intended to prevent the

copying of streaming copyrighted content, RealNetworks, Inc. v.

Streambox, Inc., No. 2:99CV02070, 2000 WL 127311, at *6-*8 (W.D.

Wash. Jan. 18, 2000); and (3) technology that bypasses a scheme

intended to “control copying of [encrypted] DVDs,” 321 Studios v.

Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1097 (N.D.

Cal. 2004). Further, at least one court has held that an unlicensed DVD

player that can bypass a DVD's access and copy controls unlawfully

“avoids and bypasses” (i.e., circumvents) the DVD's copy control

pursuant to § 1201(b)(2)(A). Id. at 1098.

V.B.3.b. Technological Measure That Effectively Protects a

Right of a Copyright Owner Under This Title (“Copy Control”)

“[A] technological measure 'effectively protects a right of a copyright

owner under this title' if the measure, in the ordinary course of its

operation, prevents, restricts, or otherwise limits the exercise of a right of

a copyright owner under this title.” 17 U.S.C. § 1201(b)(2)(B). The

“rights of a copyright owner” include all the exclusive rights set forth in

17 U.S.C. § 106: the rights to reproduce the copyrighted work, to prepare

derivative works based upon the copyrighted work, to distribute copies by

sale or otherwise, to perform the copyrighted work publicly, and to

display the copyrighted work publicly. Elcom, 203 F. Supp. 2d at 1124.

Thus, a technological measure “effectively protects the right of a copyright

owner if, in the ordinary course of its operation, it prevents, limits or
V. Digital Millennium Copyright Act 207

otherwise restricts the exercise of any of the rights set forth in [§] 106.”

See id. at 1124; Agfa Monotype Corp. v. Adobe Sys., Inc., 404 F. Supp.

2d 1030, 1039 (N.D. Ill. 2005) (holding that computer font embedding

bits do not protect the rights of a copyright owner where “[s]uch

embedding bits do not prevent copying, and a computer program can

simply proceed to copy the ... [f]ont data regardless of the setting of the

bit”). 

Notably, the government has successfully taken the position that

although fair use normally limits a copyright owner's right to claim

infringement, § 1201(b)(1) nonetheless prohibits trafficking in all tools

that circumvent copy controls, even if such tools circumvent copy

protections for the purpose of facilitating fair uses of a copyrighted work.

See, e.g., Elcom, 203 F. Supp. 2d at 1124 (“Nothing within the express

language would permit trafficking in devices designed to bypass use

restrictions in order to enable a fair use, as opposed to an infringing

use.”). Hence, § 1201(b)(1) bans trafficking in all tools that are primarily

designed or produced for the purpose of circumventing copy controls,

regardless of whether the downstream use of such tools is infringing or

not. See id. “It is the technology itself at issue, not the uses to which the

copyrighted material may be put.” 321 Studios, 307 F. Supp. 2d at 1097.

This is consistent with Congress's intent in enacting the DMCA:

“Congress did not ban the act of circumventing the use restrictions.

Instead, Congress banned only the trafficking in and marketing of devices

primarily designed to circumvent the use restriction protective

technologies. Congress did not prohibit the act of circumvention because

it sought to preserve the fair use rights of persons who had lawfully

acquired a work.” Elcom, 203 F. Supp. 2d at 1120 (emphasis omitted);

see also Universal City Studios, Inc. v. Corley, 273 F.3d 429, 443 (2d Cir.

2001) (“[T]he DMCA targets the circumvention of digital walls guarding

copyrighted material (and trafficking in circumvention tools), but does

not concern itself with the use of those materials after circumvention has

occurred.”) (emphasis and citations omitted). 

Accordingly, while it is not unlawful to circumvent a copy or usage

control for the purpose of engaging in fair use, it is unlawful under

§ 1201(b)(1) to traffic in tools that allow fair use circumvention. Elcom,

203 F. Supp. 2d at 1125. Further, “legal downstream use of the

copyrighted material by customers is not a defense to the software

manufacturer's violation of the provisions of § 1201(b)(1).” 321 Studios,

307 F. Supp. 2d at 1097-98. 
208 Prosecuting Intellectual Property Crimes

V.B.4. Alternate § 1201(b) Action—Trafficking in Certain Analog

Videocassette Recorders and Camcorders

Congress's decision to include a prohibition regarding analog

technology may be a non sequitur in an act entitled the “Digital

Millennium Copyright Act.” Nonetheless, § 1201(k)(5) of the DMCA

prescribes that any violation of 17 U.S.C. § 1201(k)(1) regarding copy

controls on certain analog recording devices “shall be treated as a violation

of” § 1201(b)(1). Section 1201(k)(1)(A) proscribes trafficking in any

VHS, Beta, or 8mm format analog video cassette recorder or 8mm analog

video cassette camcorder unless such recorder or camcorder “conforms to

the automatic gain control copy control technology.” 17 U.S.C.

§ 1201(k)(1)(A)(i)-(iv). The same prohibition applies to any “analog

video cassette recorder that records using an NTSC format video input.”

17 U.S.C. § 1201(k)(1)(A)(v). Section 1201(k)(1)(B) also prohibits

trafficking in any VHS or 8mm format analog video cassette recorder if

the recorder's design (previously conforming with § 1201(k)(1)(A)) was

modified to no longer conform with automatic gain control copy

technology. 17 U.S.C. § 1201(k)(1)(B)(i). Similarly, the DMCA prohibits

trafficking in such an analog video cassette recorder if it “previously

conformed to the four-line colorstripe copy control technology” but was

later modified so that it “no longer conforms to such technology.” 17

U.S.C. § 1201(k)(1)(B)(ii). In addition, the DMCA requires

“manufacturers that have not previously manufactured or sold VHS [or

8mm] format analog video cassette recorder[s] to conform to the four-line

colorstripe copy control technology.” Id.

Notably, § 1201(k) does not (1) require analog camcorders to

conform to the automatic gain control copy control technology for video

signals received through a camera lens; (2) apply to the manufacture or

trafficking in any “professional analog video cassette recorder;” or

(3) apply to transactions involving “any previously owned analog video

cassette recorder” that had been both legally manufactured and sold when

new and also not later modified to violate § 1201(k). 17 U.S.C.

§ 1201(k)(3)(A)-(C).

V.B.5. Falsifying, Altering, or Removing Copyright Management

Information—17 U.S.C. § 1202

Section 1202 prohibits anyone from knowingly falsifying, removing,

or altering “copyright management information”—such as a copyrighted

work's title, copyright notice, or author—with the intent to induce,

enable, facilitate, or conceal infringement. 17 U.S.C. § 1202(a)(1), (b)(1),
V. Digital Millennium Copyright Act 209

(c) (defining “copyright management information”). Section 1202 further

prohibits intentionally facilitating infringement by knowingly distributing

or importing for distribution (1) false copyright management information

or (2) copyright management information knowing that such information

has been removed or altered without authority. 17 U.S.C. § 1202(a)(2),

(b)(2). Finally, § 1202 prohibits anyone from intentionally facilitating

infringement by distributing, importing for distribution, or publicly

performing copyrighted works, copies of works, or phonorecords knowing

that their copyright management information has been removed or altered

without authority. 17 U.S.C. § 1202(b)(3). 

Thus, while § 1201 primarily targets circumvention devices and

technology, “Section 1202 imposes liability for specified acts. It does not

address the question of liability for persons who manufacture devices or

provide services.” H.R. Rep. No. 105-551 (I), at 22 (1998). Like § 1201,

however, to establish a criminal violation of § 1202, the government must

prove two elements in addition to those in the statute itself—that the

defendant violated § 1202 both (1) willfully and (2) for purposes of

commercial advantage or private gain. 17 U.S.C. § 1204(a).

Criminal enforcement of § 1202 of the DMCA is rare, and

prosecutors are encouraged to contact CCIPS at (202) 514-1026 for

guidance when considering a charge under this provision.

V.C. Defenses

The DMCA provides for several statutory defenses, exceptions, and

even “exemptions” to the anti-circumventing and anti-trafficking

prohibitions set forth in 17 U.S.C. § 1201. As the following discussion

demonstrates, these defenses do not apply uniformly to the anticircumvention (§ 1201(a)(1)(A)) and anti-trafficking provisions

(§ 1201(a)(2), (b)).

V.C.1. Statute of Limitations

Section 1204(c) of the DMCA states that “[n]o criminal proceeding

shall be brought under this section unless such proceeding is commenced

within 5 years after the cause of action arose.” 17 U.S.C. § 1204(c).
210 Prosecuting Intellectual Property Crimes

V.C.2. Librarian of Congress Regulations

The Librarian of Congress promulgates regulatory exemptions every

three years that apply only to § 1201(a)(1)(A)'s prohibitions against

circumventing access controls. See Section V.B.1.e. of this Chapter.

V.C.3. Certain Nonprofit Entities

Section 1204(b) exempts from criminal prosecution all nonprofit

libraries, archives, educational institutions, or public broadcasting entities

as defined by 17 U.S.C. § 118(f). See also 17 U.S.C. § 1201(d) (listing

other entities). The exception set forth in § 1201(d) for nonprofit

libraries, archives, and educational institutions is not as broad as the

exemption from criminal prosecution for the same group of entities set

forth in § 1204(b), because the latter (1) also includes “public

broadcasting entities” and (2) precludes prosecution for the anticircumvention and the anti-trafficking violations of § 1201.

V.C.4. Information Security Exemption

 “[A]ny lawfully authorized investigative, protective, information

security, or intelligence activity of an officer, agent, or employee” or

contractor of the federal government or a state government is exempt

from all three of § 1201's prohibitions for information security work on

“a government computer, computer system, or computer network.” 17

U.S.C. § 1201(e). Congress intended that the term “computer system”

would have the same meaning in § 1201(e) as it does in the Computer

Security Act. H.R. Conf. Rep. No. 105-796, at 66 (1998), reprinted in

1998 U.S.C.C.A.N. 639, 643.

This exemption is narrower than it might first appear. Congress

intended this exemption to permit law enforcement to lawfully disable

technological protection measures protecting copyrighted works (e.g.,

measures protecting access to copyrighted computer software) to probe

internal government computer systems to ensure that they are not

vulnerable to hacking. Id. at 65. Thus, “information security” consists of

“activities carried out in order to identify and address the vulnerabilities

of a government computer, computer system, or computer network.” 17

U.S.C. § 1201(e) (emphasis added); see also id. at 66.
V. Digital Millennium Copyright Act 211

V.C.5. Reverse Engineering and Interoperability of Computer

Programs

Section 1201(f) contains three reverse engineering or

“interoperability” defenses for individuals using circumvention technology

“for the sole purpose of trying to achieve 'interoperability'” of computer

programs through reverse engineering. Davidson & Assocs. v. Jung, 422

F.3d 630, 641-42 (8th Cir. 2005). Note that at least one court has held

that reverse engineering can satisfy the statutory fair use exception.

Bowers v. Baystate Techs., Inc., 320 F.3d 1317, 1325 (Fed. Cir. 2003).

The key term for these defenses, “interoperability,” “means the ability

of computer programs to exchange information, and of such programs

mutually to use the information which has been exchanged.” 17 U.S.C.

§ 1201(f)(4). The scope of these exemptions is expressly limited to

“computer programs” and does not authorize circumvention of access

controls that protect other classes of copyrighted works, such as movies.

Universal City Studios, Inc. v. Reimerdes, 82 F. Supp. 2d 211, 218

(S.D.N.Y. 2000).

The first interoperability defense allows a person “who has lawfully

obtained the right to use a copy of a computer program ... for the sole

purpose of identifying and analyzing those elements of the program that

are necessary to achieve interoperability of an independently created

computer program with other programs, and that have not previously

been readily available to th[at] person” to circumvent an access control

without violating the DMCA's anti-circumvention prohibition set forth in

§ 1201(a)(1)(A). 17 U.S.C. § 1201(f)(1). By definition, this exemption

does not apply to one who obtains a copy of the computer program

illegally. 

Second, § 1201(f)(2) exempts violations of the DMCA's antitrafficking provisions (§ 1201(a)(2), (b)) for those who “develop and

employ technological means” that are “necessary” to enable

interoperability. Despite the statute's express requirement that this

defense only applies “if such means are necessary to achieve such

interoperability,” 17 U.S.C. § 1201(f)(2), at least one court has held that

“the statute is silent about the degree to which the 'technological means'

must be necessary, if indeed they must be necessary at all, for

interoperability.” Lexmark Int'l, Inc. v. Static Control Components, Inc.,

387 F.3d 522, 551 (6th Cir. 2004).

Third, § 1201(f)(3) authorizes one who acquires information through

§ 1201(f)(1) to make this information and the technical means permitted

under § 1201(f)(2) available to others “solely for the purpose of enabling
212 Prosecuting Intellectual Property Crimes

interoperability of an independently created computer program with other

programs.” 17 U.S.C. § 1201(f)(3). Significantly, § 1201(f)(3) “permits

information acquired through reverse engineering to be made available to

others only by the person who acquired the information.” Universal City

Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 320 (S.D.N.Y. 2000)

(emphasis added). Consequently, one court disallowed this defense

because, inter alia, the defendants “did not do any reverse engineering

[themselves]. They simply took [the program] off someone else's web site

and posted it on their own.” Id.

None of these defenses apply if the defendant's conduct also

constituted copyright infringement or, in the case of the third defense,

otherwise “violate[d] applicable law.” See 17 U.S.C. § 1201(f)(1)-(3); see

also Lexmark, 387 F.3d at 551 (holding that defendant, which produced

a computer chip that allowed a remanufactured printer cartridge to

interoperate with another's originally manufactured printer, did not

commit infringement because the computer program that defendant had

copied from plaintiff was not copyrighted).

To establish a violation of the anti-trafficking provisions, prosecutors

need not establish that the defendant's motive for manufacturing or

trafficking in a circumvention tool was to infringe or to permit or

encourage others to infringe. See Reimerdes, 111 F. Supp. 2d at 319. In

contrast, to determine whether defendants meet the interoperability

exemption, prosecutors must determine whether the defendant's motive

for developing or trafficking the technological means for circumventing an

access or copy control was “solely for the purpose” of achieving or

enabling interoperability. Id. at 320.

Courts strictly apply the requirement that circumvention and

dissemination occur “solely for the purpose” of achieving interoperability

and not to facilitate copyright infringement. For example, one court has

held that circumventing a copyrighted computer game's access controls for

the purpose of developing and disseminating a copy or “emulator” that

was essentially identical to the original but lacked the original's access

control, “constituted more than enabling interoperability” under

§ 1201(f)(1) and “extended into the realm of copyright infringement.”

Davidson & Assoc. Inc. v. Internet Gateway, Inc., 334 F. Supp. 2d 1164,

1185-86 (E.D. Mo. 2004) (“The defendants' purpose in developing the

bnetd server was to avoid the anti-circumvention restrictions of the game

and to avoid the restricted access to Battle.net. Thus, the sole purpose of

the [] emulator was not to enable interoperability.”), aff'd, 422 F.3d at

642 (“Appellant's circumvention in this case constitutes infringement.”);
V. Digital Millennium Copyright Act 213

cf. Reimerdes, 111 F. Supp. 2d at 320 (holding that the purpose of [the

defendant's program] was simply to decrypt DVD access controls and not,

as defendants claimed, to achieve interoperability between computers

running Linux operating system because [the program] also could be used

to decrypt and play DVDs on unlicensed players running the Windows

operating system). In addition, where the development (or distribution to

the public) of circumvention technology itself constitutes copyright

infringement, the DMCA expressly precludes reliance on § 1201(f)(2) and

(3). See id. (holding that “[t]he right to make the information available

extends only to dissemination 'solely for the purpose' of achieving

interoperability as defined by the statute. It does not apply to public

dissemination of means of circumvention”) (footnote omitted).

Moreover, legislative history suggests that the “independently created

[computer] program” referenced in this exemption must not infringe the

original computer program and instead must be “a new and original

work.” H.R. Rep. No. 105-551 (II), at 42 (1998). Thus, if the defendant's

functionally equivalent computer program is “new and original” only

insofar as it lacks the original's access controls, then the defendant has not

created an “independently created computer program.” Davidson, 334 F.

Supp. 2d at 1185, aff'd, 422 F.3d at 642. If, on the other hand, the

defendant's program actually performs functions that the original program

did not, courts are more inclined to find that defendants have satisfied the

“independently created computer program” requirement. Lexmark, 387

F.3d at 550 (holding that even though remanufacturer's toner cartridge

chip contained “exact copies” of original manufacturer's computer

program, it was nonetheless an “independently created computer

program” because it “contain[s] other functional computer programs

beyond the copied” original program). The independent program need not

have already existed before the defendant reverse-engineered the original

program. Id. at 550-51 (holding that “nothing in the statute precludes

simultaneous creation of an interoperability device and another computer

program” so long as it is “'independently' created”).

V.C.6. Encryption Research

Certain encryption research is exempted from liability under

§ 1201(a) (but not from § 1201(b)). Reimerdes, 111 F. Supp. 2d at 321

n.154. For purposes of this exemption, “encryption research” consists of

“activities necessary to identify and analyze flaws and vulnerabilities of

encryption technologies applied to copyrighted works, if these activities

are conducted to advance the state of knowledge in the field of encryption

technology or to assist in the development of encryption products.” 17

U.S.C. § 1201(g)(1)(A). The phrase, “encryption technologies,” “means
214 Prosecuting Intellectual Property Crimes

the scrambling and descrambling of information using mathematical

formulas or algorithms.” 17 U.S.C. § 1201(g)(1)(B). 

The first encryption research exemption is that it is not a violation of

the anti-circumvention provision (§ 1201(a)(1)(A)) where a defendant

“circumvent[s] a technological measure as applied to a copy, phonorecord,

performance, or display of a published work in the course of an act of

good faith encryption research if” four conditions are satisfied: (1) he

“lawfully obtained” the applicable encrypted published work; (2) the

circumvention “is necessary to conduct such encryption research;” (3) he

“made a good faith effort to obtain authorization before the

circumvention;” and (4) the circumvention does not constitute copyright

infringement “or a violation of applicable law,” including the Computer

Fraud Abuse Act of 1986, 18 U.S.C. § 1030. 17 U.S.C. § 1201(g)(2).

To determine whether a defendant qualifies for this exemption, courts

consider the following non-exclusive factors: (1) whether the results of the

putative encryption research are disseminated in a manner designed to

advance the state of knowledge of encryption technology versus

facilitation of copyright infringement; (2) whether the person in question

is engaged in legitimate study of or work in encryption; and (3) whether

the results of the research are communicated in a timely fashion to the

copyright owner. 17 U.S.C. § 1201(g)(3).

The second encryption research exemption is that a defendant does

not violate the access control anti-trafficking provision (§ 1201(a)(2)) for

developing and distributing tools, such as software, that are needed to

conduct permissible encryption research as described in the first

encryption research exemption in § 1201(g)(2). 17 U.S.C. § 1201(g)(4);

H.R. Rep. No. 105-551 (II), at 44 (1998). This exemption essentially

frees an encryption researcher to cooperate with other researchers, and it

also allows one researcher to provide the technological means for such

research to another to verify the research results. Id.

It is not a violation of § 1201(a)(2) for a person to (1) “develop and

employ technological means to circumvent a technological measure for the

sole purpose of that person performing the acts of good faith encryption

research described in” § 1201(g)(2) and (2) “provide the technological

means to another person with whom he is or she is working

collaboratively” for the purpose of either conducting good faith

encryption research or having another person verify such research as

described in § 1201(g)(2). 17 U.S.C. § 1201(g)(4). 
V. Digital Millennium Copyright Act 215

This exemption is quite complex and has been relied upon

infrequently in reported decisions. For a report on the early effects of this

exemption (or lack thereof) on encryption research and on protection of

content owners against unauthorized access of their encrypted

copyrighted works, see the “Report to Congress: Joint Study of Section

1201(g) of The Digital Millennium Copyright Act” prepared by the U.S.

Copyright Office and the National Telecommunications and Information

Administration of the Department of Commerce pursuant to

§ 1201(g)(5), available at http://www.copyright.gov/reports/studies/

dmca_report.html.

V.C.7. Restricting Minors' Access to the Internet

Section 1201(h) creates a discretionary exception, giving the court

discretion to waive violations of §§ 1201(a)(1)(A) and 1201(a)(2) so that

those prohibitions are not applied in a way that “inadvertently make[s]

it unlawful for parents to protect their children from pornography and

other inappropriate material available on the Internet, or have unintended

legal consequences for manufacturers of products designed solely to

enable parents to protect their children.” H.R. Rep. No. 105-551 (II), at

45 (1998). Specifically, § 1201(h) authorizes the court to “consider the

necessity for its intended and actual incorporation in a technology,

product, service, or device, which (1) does not itself violate the provisions

of this title; and (2) has the sole purpose to prevent the access of minors

to material on the Internet.” 17 U.S.C. § 1201(h). Congress was

concerned that if Internet filtering tools are developed in the future that

incorporate a part or component that circumvent access controls to a

copyrighted work “solely in order to provide a parent with the

information necessary to ascertain whether that material is appropriate for

his or her child, this provision authorizes a court to take into

consideration the necessity for incorporating such part or component in

a suit alleging a violation of section 1201(a).” S. Rep. No. 105-190, at 14

(1998).

To date, no reported case has applied this discretionary exception.

V.C.8. Protection of Personally Identifying Information

Section 1201(i)(1) states that it is not a violation of § 1201(a)(1)(A)

to circumvent an access control for the purpose of disabling files that

collect personally identifiable information like “'cookie files'—which are

automatically deposited on hard drives of computers of users who visit

World Wide Web sites.” Id. at 18. However, if a copyright owner

conspicuously discloses that its access control also contains personal data
216 Prosecuting Intellectual Property Crimes

gathering capability, and if the consumer is given the ability to effectively

prohibit that gathering or dissemination of personal information, then this

exception does not apply and no circumvention is permitted. H.R. Rep.

No. 105-551 (II), at 45 (1998). Further, if the copyright owner

conspicuously discloses that neither the access control nor the work it

protects collect personally identifying information, then no circumvention

is permitted. 17 U.S.C. § 1201(i)(2). Note that this exception does not

apply to the anti-trafficking prohibitions.

V.C.9. Security Testing

A person who engages in good faith “security testing” does not violate

§ 1201(a). 17 U.S.C. § 1201(j). “Security testing” consists of “accessing

a computer, computer system, or computer network, solely for the

purpose of good faith testing, investigating, or correcting, a security flaw

or vulnerability, with the authorization of the owner or operator of such

computer, computer system, or computer network.” 17 U.S.C.

§ 1201(j)(1). Without such authorization, a defendant cannot qualify for

this exemption. Reimerdes, 111 F. Supp. 2d at 321. A defendant engaging

in security testing does not violate § 1201(a)(1)(A) so long as such testing

does not constitute copyright infringement nor a violation of other

applicable law such as the Computer Fraud and Abuse Act of 1986. 17

U.S.C. § 1201(j)(2). In evaluating this exemption, the DMCA requires a

court to consider whether the information derived from the security

testing (1) “was used solely to promote the security of the owner or

operator of [or shared directly with the developer of] such computer,

computer system or computer network, or” (2) “was used or maintained

in a manner that does not facilitate copyright infringement” or a violation

of other applicable law. 17 U.S.C. § 1201(j)(3).

Likewise, a defendant does not violate § 1201(a)(2) for trafficking in

a “technological means for the sole purpose of performing the acts of

security testing” if the testing does not “otherwise violate section (a)(2).”

17 U.S.C. § 1201(j)(4). 

V.C.10. Constitutionality of the DMCA

Civil and criminal defendants have repeatedly challenged the

constitutionality of Title I of the DMCA, particularly 17 U.S.C.

§§ 1201(a)(2) and 1201(b). Defendants have repeatedly challenged

Congress's authority, for example, to enact the DMCA pursuant to the

Commerce Clause and Intellectual Property Clause. None of these

challenges has yet prevailed. 
V. Digital Millennium Copyright Act 217

V.C.10.a. Congress's Constitutional Authority to Enact § 1201

of the DMCA

Congress enacted § 1201 pursuant to its authority under the

Commerce Clause. See U.S. Const., art. I, § 8, cl. 3; H.R. Rep. No. 105-

551 (II), at 22, 35 (1998). Federal courts have uniformly upheld this

authority. See, e.g., United States v. Elcom, 203 F. Supp. 2d 1111, 1138

(N.D. Cal. 2002) (“Congress plainly has the power to enact the DMCA

under the Commerce Clause.”); 321 Studios v. Metro Goldwyn Mayer

Studios, Inc., 307 F. Supp. 2d 1085, 1103 (N.D. Cal. 2004) (same).

Article I, Section 8, Clause 3 of the Constitution delegates to Congress

the power “[t]o regulate Commerce with foreign Nations, and among the

several States, and with the Indian Tribes.” Congress does not exceed its

Commerce Clause authority where a rational basis exists “for concluding

that a regulated activity sufficiently affected interstate commerce.” United

States v. Lopez, 514 U.S. 549, 558 (1995) (citations omitted). The

DMCA prohibits circumventing access controls and the trafficking in

technology that facilitates circumvention of access or copy controls—the

type of conduct that has a substantial effect on commerce between the

states and commerce with foreign nations. See 321 Studios, 307 F. Supp.

2d at 1103. Congress created the DMCA's anti-trafficking prohibitions to

directly regulate specific items moving in commerce (circumvention

technology) and to protect channels of interstate commerce, including

electronic commerce. H.R. Rep. No. 105-551(II), at 22 (1998). Most

significantly, to the extent that circumvention devices enable criminals to

engage in piracy by unlawfully copying and distributing copyrighted

works, the sale of such devices has a direct effect on suppressing the

market for legitimate copies of the works. See 321 Studios, 307 F. Supp.

2d at 1103. Accordingly, Congress had a rational basis for concluding that

§ 1201 regulates activity that substantially affects interstate commerce

and therefore acted within its authority under the Commerce Clause. See

Elcom, 203 F. Supp. 2d at 1138. 

Courts have similarly rejected the argument that the DMCA violates

the Intellectual Property Clause. The Commerce Clause authorizes

Congress to enact legislation that protects intellectual property rights,

even where the Intellectual Property Clause alone does not provide

sufficient authority for such legislation. Federal courts have long

recognized that while each of the powers of Congress is alternative to all

of the others, “what cannot be done under one of them may very well be

doable under another.” United States v. Moghadam, 175 F.3d 1269,

1277 (11th Cir. 1999). Congress may thus use the Commerce Clause as

a basis for legislating within a context contemplated by another section of

the Constitution (like the Intellectual Property Clause) so long as
218 Prosecuting Intellectual Property Crimes

Congress does not override an otherwise existing Constitutional

limitation. Id. (holding the criminal anti-bootlegging statute, 18 U.S.C.

§ 2319A, valid under the Commerce Clause even if it is beyond Congress's

authority under the Intellectual Property Clause); compare Heart of

Atlanta Motel v. United States, 379 U.S. 241 (1964) (upholding public

accommodation provisions of the Civil Rights Act of 1964 as valid under

the Commerce Clause despite the fact that the Act may have reached

beyond Congress's authority under the Fourteenth Amendment) and

South Dakota v. Dole, 483 U.S. 203, 207 (1987) (holding that Congress

could rely on the Spending Clause to impose restrictions that would

otherwise exceed Congress's power) with Railway Labor Executives' Ass'n

v. Gibbons, 455 U.S. 457 (1982) (striking down act by Congress under

Commerce Clause that violated Bankruptcy Clause's uniformity

requirement). Further, the Intellectual Property Clause “itself is stated in

positive terms, and does not imply any negative pregnant” that would

suggest “a ceiling on Congress's ability to legislate pursuant to other

grants.” Moghadam, 175 F.3d at 1280 (discussing constitutionality of the

criminal anti-bootlegging statute, 18 U.S.C. § 2319A). Moreover,

“[e]xtending quasi-copyright protection also furthers the purpose of the

Copyright Clause to promote the progress of the useful arts.” Id.

The DMCA's enactment pursuant to the Commerce Clause was valid

because it “is not fundamentally inconsistent with” the purpose of the

Intellectual Property Clause. Elcom, 203 F. Supp. 2d at 1139-41. Indeed,

“Congress viewed the DMCA as 'paracopyright' legislation that could be

enacted under the Commerce Clause.” Id. at 1140. Moreover, protecting

copyright owners' rights against unlawful piracy by preventing trafficking

in tools that would enable widespread piracy and unlawful infringement

(i.e., circumvention tools) is consistent with the Intellectual Property

Clause's grant to Congress of the power to “'promote the useful arts and

sciences' by granting exclusive rights to authors in their writings.” Id.

Specifically, courts have rejected the common argument that the

DMCA's ban on the sale of circumvention tools violates the Intellectual

Property Clause's “limited Times” prohibition. That argument is based on

the false premise that the DMCA has the effect of allowing publishers to

claim copyright-like protection in copyrighted works, even after they pass

into the public domain. Prosecutors should vigorously oppose this flawed

argument. Nothing in the DMCA permits a copyright owner to prevent

his work from entering the public domain, despite the expiration of the

copyright. Id. at 1141. As discussed in the copyright chapter, the essence

of copyright is the legally enforceable exclusive right to reproduce and

distribute copies of an original work of authorship, to make derivative
V. Digital Millennium Copyright Act 219

works, and to perform the work publicly for a limited time. See supra

Chapter II; see also Elcom, 203 F. Supp. 2d at 1141; 17 U.S.C. §§ 106,

302, 303. When a copyright expires, so does any protectable intellectual

property right in a work's expression. Elcom, 203 F. Supp. 2d at 1141.

Upon expiration, the user may copy, quote, or republish the expression

without any legally enforceable restriction on the use of the expression. Id.

“Nothing within the DMCA grants any rights to anyone in any public

domain work. A public domain work remains in the public domain[,] and

any person may make use of the public domain work for any purpose.”

321 Studios, 307 F. Supp. 2d at 1104 (internal quotation marks and

citation omitted). Accordingly, the DMCA does not extend any copyright

protections beyond the statutory copyright term merely by prohibiting the

trafficking in or marketing of circumvention technology. Id. 

V.C.10.b. The First Amendment

Criminal and civil DMCA defendants have raised both facial and “as

applied” First Amendment challenges. Although federal courts have

uniformly rejected such challenges, defendants continue to raise them in

part because the overbreadth and “as applied” First Amendment tests

each can include a fact-dependent component. 

V.C.10.b.i. Facial Challenges

Facial First Amendment challenges to § 1201—typically alleging that

the statute is unconstitutionally overbroad—fail for at least two reasons.

First, the DMCA does not expressly proscribe spoken words or patently

expressive or communicative conduct. See Roulette v. City of Seattle, 97

F.3d 300, 303 (9th Cir. 1996). “[A] facial freedom of speech attack must

fail unless, at a minimum, the challenged statute is directed narrowly and

specifically at expression or conduct commonly associated with

expression.” Id. at 305 (citations, and internal quotation marks omitted);

see also Virginia v. Hicks, 539 U.S. 113, 123 (2003).

Section 1201 of the DMCA, “[b]y its terms,” is not directed at

expression or conduct associated with expression. Elcom, 203 F. Supp. 2d

at 1133. Instead, § 1201 is a law of general application focused on the

circumvention of access controls and the trafficking in circumvention

tools; § 1201's prohibitions are not focused on speech. Id.; see also

Anderson v. Nidorf, 26 F.3d 100, 103-04 (9th Cir. 1994) (holding that

California's anti-piracy statute is not subject to facial challenge because,

inter alia, the statute focused upon infringement for commercial

advantage or private financial gain). Accordingly, on this basis alone, “an
220 Prosecuting Intellectual Property Crimes

overbreadth facial challenge [to § 1201] is not available.” Elcom, 203 F.

Supp. 2d at 1133. 

Second, even were the DMCA directed at spoken words or expressive

conduct—which no court has yet held—such a finding would be

insufficient to establish overbreadth as a matter of law. The defendant

would still have to independently establish that the DMCA is written so

broadly that it infringes unacceptably on the First Amendment rights of

third parties. City Council v. Taxpayers for Vincent, 466 U.S. 789, 798-

99 (1984). The overbreadth doctrine “is, manifestly, strong medicine,” to

be employed “sparingly and only as a last resort.” Broadrick v. Oklahoma,

413 U.S. 601, 613 (1973). For this reason, a statute will be declared

facially unconstitutional for overbreadth only if the court finds a realistic

danger that the statute itself will significantly compromise recognized

First Amendment protections of parties not before the court. See New

York State Club Ass'n, Inc. v. City of New York, 487 U.S. 1, 11 (1988).

The DMCA neither compromises a recognized First Amendment

protection of third parties, nor is there a realistic danger that such a

compromise would occur. Moreover, § 1201's “plainly legitimate sweep”

targets circumvention of access controls and the manufacture or

trafficking in circumvention technology, not speech. Thus, it is highly

unlikely that defendants could establish the facts necessary to claim that

§ 1201 is overbroad. See Elcom, 203 F. Supp. 2d at 1133.

V.C.10.b.ii. “As Applied” Challenges

First Amendment “as applied” challenges to § 1201 necessarily vary

according to the technology at issue in each defendant's particular case.

DMCA defendants have often alleged that the DMCA violates the First

Amendment when applied to circumvention technology in the form of

computer code. Although it is arguable whether computer object code

constitutes speech, every federal court that has held that computer code

is speech has nonetheless ruled that the anti-trafficking provisions do not

violate the First Amendment under an intermediate scrutiny standard

because the DMCA (1) is content-neutral; (2) furthers important

governmental interests in promoting electronic commerce and protecting

the rights of copyright owners; and (3) is sufficiently tailored to achieve

these objectives without unduly burdening free speech. See, e.g., Elcom,

203 F. Supp. 2d at 1126-28 (applying United States v. O'Brien, 391 U.S.

367, 376 (1968) (“When 'speech' and 'nonspeech' elements are combined

in the same course of conduct, a sufficiently important governmental
V. Digital Millennium Copyright Act 221

interest in regulating the nonspeech element can justify incidental

limitations on First Amendment freedoms.”)).

The DMCA's anti-trafficking provisions are content neutral. See

Universal City Studios, Inc. v. Corley, 273 F.3d 429, 454 (2d Cir. 2001)

(§ 1201(a)(2)); 321 Studios, 307 F. Supp. 2d at 1100 (§§ 1201(a)(2) and

1201(b)); Elcom, 203 F. Supp. 2d at 1128-29 (§ 1201(b)). The principal

inquiry in determining whether a statute is content neutral is whether the

government has adopted a regulation of speech because of agreement or

disagreement with the message it conveys. Turner Broad. Sys., Inc. v.

FCC, 512 U.S. 622, 642 (1994). The government's purpose is the

controlling measure. Ward v. Rock Against Racism, 491 U.S. 781, 791

(1989).

By this measure, the DMCA's anti-trafficking provisions are clearly

content-neutral. Congress intended the DMCA to target the non-speech,

functional components of circumvention technology, Corley, 273 F.3d at

454, not to “stifle[] speech on account of its message.” Turner, 512 U.S.

at 641. The DMCA is not a content-based statute that would require

strict scrutiny under the First Amendment. See 321 Studios, 307 F. Supp.

2d at 1100. In fact, “[t]he reason that Congress enacted the antitrafficking provision of the DMCA had nothing to do with suppressing

particular ideas of computer programmers and everything to do with

functionality.” Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d

294, 329 (S.D.N.Y. 2000). 

Ultimately, the DMCA is not concerned with whatever capacity

circumvention technology might have for conveying information to a

person, and that capacity is what arguably creates the speech component

of, for example, decrypting computer code. See Corley, 273 F.3d at 454.

The DMCA would apply to such code solely because of its capacity to

decrypt, for instance, an access control. Id. “That functional capability is

not speech within the meaning of the First Amendment.” Id.

A statute that is content neutral is subject to intermediate scrutiny

and hence satisfies the First Amendment “if it furthers an important or

substantial government interest; if the government interest is unrelated to

the suppression of free expression; and if the incidental restriction on

alleged First Amendment freedoms is no greater than is essential to the

furtherance of that interest.” Turner, 512 U.S. at 662 (quotation and

citation omitted). The government's interest in preventing unauthorized

copying of copyrighted works and promoting electronic commerce are

unquestionably substantial. See H.R. Rep. No. 105-551 (II), at 23

(1998); Elcom, 203 F. Supp. 2d at 1129-30; Corley, 273 F.3d at 454.

Congress enacted the DMCA after evaluating a great deal of evidence
222 Prosecuting Intellectual Property Crimes

establishing that copyright and intellectual property piracy are endemic,

especially digital piracy. See S. Rep. No. 105-190, at 8 (1998). Thus, by

prohibiting circumvention of access controls and the trafficking in

circumvention technology, “the DMCA does not burden substantially

more speech than is necessary to achieve the government's asserted goals

of promoting electronic commerce, protecting copyrights, and preventing

electronic piracy.” See 321 Studios, 307 F. Supp. 2d at 1103 (internal

quotation marks and citation omitted).

Finally, courts have uniformly found that the DMCA's anti-trafficking

provisions meet the Supreme Court's narrow tailoring requirement that a

content-neutral regulation of speech promote a substantial government

interest that would be achieved less effectively absent the regulation. See

id. at 1101. The DMCA's numerous exceptions (see Section V.C. of this

Chapter) further demonstrate that Congress narrowly tailored the statute

to balance, for instance, the needs of law enforcement, computer

programmers, encryption researchers, and computer security specialists

against the problems created by circumvention technology. See 17 U.S.C.

§§ 1201(e)-(g), (j); Elcom, 203 F. Supp. 2d at 1130-31.

V.C.10.c. Vagueness

Courts have also rejected challenges to the DMCA under the Fifth

Amendment on vagueness grounds. Vagueness may invalidate a statute if

the statute either (1) fails to provide the kind of notice that will enable

ordinary people to understand what conduct it prohibits, or (2) authorizes

or encourages arbitrary and discriminatory enforcement. City of Chicago

v. Morales, 527 U.S. 41, 56 (1999). Defendants typically argue that the

DMCA is vague or otherwise infirm because it bans only those

circumvention tools that are primarily designed to circumvent access or

copy controls to enable copyright infringement, not those enabling fair

uses. See, e.g., Elcom, 203 F. Supp. 2d at 1122. This issue has arisen with

respect to § 1201(b), which prohibits trafficking in any copy control

circumvention technology. Id. at 1124. 

Courts have held, however, that the DMCA is not unconstitutionally

vague, because it imposes a blanket ban on all circumvention tools

regardless of whether the ultimate purpose for their use is fair or

infringing. Id. “Congress thus recognized that most uses of tools to

circumvent copy restrictions would be for unlawful infringement purposes

rather than for fair use purposes and sought to ban all circumvention tools

that 'can be used' to bypass or avoid copy restrictions.” Id. at 1125

(quoting S. Rep. No. 105-190, at 29-30). Moreover, Congress's intent to
V. Digital Millennium Copyright Act 223

preserve fair use, see § 1201(c), is not inconsistent with a ban on

trafficking in circumvention technologies, even those that could be used

for fair use purposes rather than infringement. Id. Although the DMCA

may make certain fair uses in digital works more difficult, the DMCA

does not eliminate fair use and in fact expressly permits it. See id.; 17

U.S.C. § 1201(c)(1). “Thus, while it is not unlawful to circumvent for the

purpose of engaging in fair use, it is unlawful to traffic in tools that allow

fair use circumvention.” Elcom, 203 F. Supp. 2d at 1125. Further, because

the DMCA prohibits the trafficking of all circumvention tools, Congress

need not expressly tie the use of the tool to an unlawful purpose (as may

be required, for instance, in a multi-use device context). Id. Accordingly,

the DMCA, “as written, allows a person to conform his or her conduct to

a comprehensible standard and is thus not unconstitutionally vague.” Id.

(citation omitted).

V.C.10.d. Fair Use

For a more detailed explanation of the fair use doctrine, see Section

II.C.5. of this Manual.

Defendants typically style their fair use defense to a DMCA violation

as an “as applied” First Amendment challenge. For example, traffickers

have raised fair use challenges “as applied” to the First Amendment rights

of third-party purchasers of the trafficker's circumvention tools. This type

of fair use defense fails for at least three reasons. First, the challengers

usually lack standing. “[A] person to whom a statute may constitutionally

be applied will not be heard to challenge that statute on the ground that

it may conceivably be applied unconstitutionally to others, in other

situations not before the Court.” Broadrick v. Oklahoma, 413 U.S. 601,

610 (1973). Those who traffic in circumvention tools that they do not use

cannot assert a fair use defense because they are not engaging in any

use—fair or infringing—of a copyrighted work. Simply put, traffickers lack

standing to challenge the DMCA's constitutionality based on its

application to the traffickers' customers.

Second, even a purchaser who could have standing because he did use

a copyrighted work cannot rely on the fair use defense, because the

DMCA does not present an issue of infringement. Fair use is an

affirmative defense to copyright infringement, something that the user can

accomplish only after he has first circumvented a work's copy controls.

See, e.g., Elcom, 203 F. Supp. 2d at 1121. The DMCA “targets the

circumvention of digital walls guarding copyrighted material (and

trafficking in circumvention tools), [it] does not concern itself with the

use of those materials after circumvention has occurred.” Corley, 273 F.3d
224 Prosecuting Intellectual Property Crimes

at 443. Thus, the DMCA's anti-trafficking provisions are not concerned

with purchasers' downstream use of circumvention tools. See Corley, 273

F.3d at 442; 321 Studios, 307 F. Supp. 2d at 1097-98.

Third, no court has held that the fair use doctrine is a categorical

constitutional requirement. Corley, 273 F.3d at 458 (“[T]he Supreme

Court has never held that fair use is constitutionally required.”). Fair use

is a judicially-created doctrine. Reimerdes, 111 F. Supp. 2d at 321. Fair

use existed only at common law until Congress codified it in the 1976

Copyright Act at 17 U.S.C. § 107, in order to maintain the common-law

status quo. See H.R. Rep. No. 94-1476, at 66 (1976), reprinted in 1976

U.S.C.C.A.N. 5659, 5680.

The fact that the fair use doctrine accommodates First Amendment

protections—i.e., that certain fair uses may also be protected under the

First Amendment, cf. Eldred v. Ashcroft, 537 U.S. 186, 218-20 (2003);

Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 560

(1985)—does not make the fair use doctrine and the First Amendment

categorically coextensive. See Elcom, 203 F. Supp. 2d at 1134 n.4 (“There

is no direct authority for the proposition that the doctrine of fair use is

coextensive with the First Amendment, such that 'fair use' is a First

Amendment right”).

Most significantly, courts have rejected “the proposition that fair use,

as protected by the Copyright Act, much less the Constitution, guarantees

copying by the optimum method or in the identical format of the

original.” Corley, 273 F.3d at 459. Fair use of copyrighted digital works

is still possible under the DMCA, even though copying of such works may

prove more difficult. 321 Studios, 307 F. Supp. 2d at 1102.

In addition, the DMCA does not place an impermissible financial

burden on fair users' First Amendment rights. Courts have found that this

“financial burden” argument “is both an overstatement of the extent of

the fair use doctrine and a misstatement of First Amendment law.” Id. A

statute's financial burden on a speaker renders the statute

unconstitutional only if such burden was placed on the speaker because

of the speech's content, not because of the speaker's desire to make the

speech. Id. (citations omitted). Section 1201 of the DMCA does not

eliminate fair use nor prevent anyone from engaging in traditional

methods of fair use such as “quoting from a work or comparing texts for

the purpose of study or criticism.” Elcom, 203 F. Supp. 2d at 1134.

Finally, courts have rejected the argument that the DMCA impairs an

alleged First Amendment fair use right to access non-copyrighted works
V. Digital Millennium Copyright Act 225

in the public domain, because the DMCA permits authors to use access

and copy controls to protect non-copyrighted works and copyrighted

works alike. See, e.g., 321 Studios, 307 F. Supp. 2d at 1102; Elcom, 203

F. Supp. 2d at 1134. Neither the DMCA nor the presence of access or

copy controls affect whether or not a work is in the public domain. 321

Studios, 307 F. Supp. 2d at 1102.

V.D. Penalties

For the first criminal violation of Title I of the DMCA (§§ 1201,

1202), the maximum penalty is five years' imprisonment, a $500,000 fine,

or both. 17 U.S.C. § 1204. For subsequent offenses, each of those

punishments can be doubled. Id. For a more complete discussion of

sentencing issues, see Chapter VIII of this Manual.
227

VI.

Counterfeit and Illicit Labels,

Counterfeit Documentation and

Packaging—18 U.S.C. § 2318

VI.A. Distinguished from Trademark and Copyright Statutes . . 228

VI.B. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

VI.B.1. The Defendant Acted “Knowingly” . . . . . . . . . . . . . . 230

VI.B.2. The Defendant Trafficked . . . . . . . . . . . . . . . . . . . . . 231

VI.B.3. Trafficking in Labels Affixed to, Enclosing, or Accompanying

(or Designed to be Affixed to, Enclose, or Accompany) a

Phonorecord, Computer Program, Motion Picture or Other

Audiovisual Work, Literary, Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or Documentation or

Packaging for Such Works (i.e., Trafficked Either in

Documentation or Packaging for

Such Works Itself, or in Labels for Such Documentation

or Packaging) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

VI.B.4. The Labels, Documentation, or Packaging Materials Are

Counterfeit or Illicit . . . . . . . . . . . . . . . . . . . . . . . . . 234

VI.B.5. Federal Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 236

VI.B.6. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

VI.C. Defenses: Statute of Limitations . . . . . . . . . . . . . . . . . . . 237

VI.D. Special Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

VI.D.1. Electronic Copies of Labels, Documentation, or 

Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

VI.D.2. Advantages of Charging a § 2318 Offense . . . . . . . . 239

VI.E. Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

VI.E.1. Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

VI.E.2. Imprisonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
228 Prosecuting Intellectual Property Crimes

VI.E.3. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

VI.E.4. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

VI.E.5. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . 240

VI.E.5.a. Retail Value of Copyrighted Goods vs. Counterfeit

Labels, Documentation, and Packaging . . . . . . . . . . . 240

VI.E.5.b. Number of Infringing Copyrighted Goods vs.

Number of Labels, Documents, or Packaging Items . . 242

VI.F. Other Charges to Consider . . . . . . . . . . . . . . . . . . . . . . . . 242

VI.A. Distinguished from Trademark and

Copyright Statutes

Creative works can be protected by criminal laws other than the

Copyright Act. The most important of these is 18 U.S.C. § 2318, which

criminalizes knowingly trafficking in counterfeit or illicit labels and

counterfeit documentation and packaging for copyrighted works.

Although § 2318 regulates items that accompany copyrighted works, it is

not a pure copyright statute, and its protections differ in scope from those

afforded by the Copyright Act.

Section 2318 also differs from civil and criminal trademark law.

Although counterfeit and illicit labels, documentation, and packaging

often bear counterfeit trademarks, the use of a counterfeit trademark is

not necessarily an element of a § 2318 charge. And although the

counterfeit marks statute, 18 U.S.C. § 2320, criminalizes the use of

counterfeit labels that bear counterfeit trademarks, § 2320 covers

counterfeit labels that accompany any kind of trademarked product or

service, and not just the types of copyrighted works covered by § 2318.

Several important amendments to § 2318 went into effect on

December 23, 2004 and March 16, 2006. See Sections VI.B.2, VI.B.3,

and VI.E.5.a. of this Chapter. As a result of the 2004 amendments,

§ 2318 now covers counterfeit labels not only for movies, music, and

software, but for other types of copyrighted works as well, namely, copies

of literary, pictorial, graphic, or sculptural works, works of visual art, and

documentation and packaging for any of the enumerated classes of

copyrighted works. 18 U.S.C. § 2318(a)(1). The 2004 amendments also

expanded § 2318 to cover counterfeit documentation and packaging itself

for the newly-added classes of works. 18 U.S.C. § 2318(a)(2). The section
VI. Counterfeit Labels, Documentation, Packaging 229

also now covers the new category of illicit labels, which are “genuine

certificate[s], licensing document[s], registration card[s], or similar

labeling component[s]” that the copyright owner would normally use to

verify that a work is noninfringing (that is, legitimate), but which are

distributed or intended for distribution without the owner’s permission,

presumably to facilitate infringement. 18 U.S.C. § 2318(b)(4). The 2006

amendments expanded the definition of “traffic” to include a wider

variety of profit-oriented conduct, and directed the Sentencing

Commission to study the guidelines concerning labels, with guideline

amendments expected later in 2006. See Sections VI.B.2. and VI.E.5.a.

of this Chapter.

Sample indictments and jury instructions are provided in Appendix

F of this Manual.

VI.B. Elements

To obtain a conviction under 18 U.S.C. § 2318, the government must

prove five elements:

1. The defendant acted knowingly

2. The defendant trafficked

3. In labels affixed to, enclosing, or accompanying (or designed to be

affixed to, enclose, or accompany) a phonorecord, computer

program, motion picture or other audiovisual work, literary,

pictorial, graphic, or sculptural work, or work of visual art, or

documentation or packaging for such works (i.e., trafficked either

in documentation or packaging for such works itself, or in labels

for such documentation or packaging)

4. The documentation or packaging were counterfeit, or the labels

were counterfeit or illicit

5. Federal jurisdiction is satisfied because:

a. the offense occurred in special maritime territories or other

areas of special jurisdiction of the United States;

b. the offense used or intended to use the mail or a facility of

interstate or foreign commerce;

c. the counterfeit or illicit labels were affixed to, enclosed, or

accompanied copyrighted materials (or were designed to); or
230 Prosecuting Intellectual Property Crimes

d. the documentation or packaging is copyrighted. 

These elements are reviewed in detail in the following Sections.

VI.B.1. The Defendant Acted “Knowingly” 

Section 2318 is a general intent crime. The government must prove

first that the defendant acted “knowingly.” This is less difficult than

proving that the defendant acted willfully, as with criminal copyright

cases, in which the government often must prove that the defendant knew

that he acted illegally (see the discussion of the “willful” standard in

criminal copyright infringement cases in Chapter II of this Manual).

Proving knowledge under § 2318 only requires proof that the defendant

knew that he was taking the actions described in the statute. See Bryan

v. United States, 524 U.S. 184, 193 (1998) (firearms offense)

(“‘[K]nowingly’ merely requires proof of knowledge of the facts that

constitute the offense.”).

The government need not prove that the defendant acted with

fraudulent intent in § 2318 cases involving counterfeit labels. Congress

eliminated that element in 1982, believing that such proof was

“superfluous” because the government must already prove that the

defendant knew his labels were counterfeit. S. Rep. No. 97-274, at 9

(1981), reprinted in 1982 U.S.C.C.A.N. 127, 135 (“In other words, it

would be difficult to conceive of a situation in which one could traffic in

articles knowing that they are counterfeit without intending to defraud

the purchaser.”) It is less clear whether, and to what extent, a requirement

of fraudulent intent may be assumed in cases involving illicit labels, but

the statute does not expressly require such proof.

What, then, must the government prove that the defendant knew?

Clearly, the government must prove the defendant knowingly trafficked

in labels, documentation, or packaging, but this will generally be easy to

show.

The crux is to prove that the defendant knew that the labels,

documentation, or packaging in which he trafficked were counterfeit or

illicit, as the case may be. See, e.g., United States v. Dixon, No. 84-5287,

1985 U.S. App. LEXIS 27076, at *9 (4th Cir. Aug. 12, 1985).

It may also suffice to prove that the defendant was willfully blind to

the fact that the items trafficked were counterfeit or illicit. Although no

published cases specify that the government may satisfy § 2318 through

proof of willful blindness (also known as “conscious avoidance” or

deliberate ignorance), courts have held that proving willful blindness

generally suffices to prove knowledge in criminal cases. See United States
VI. Counterfeit Labels, Documentation, Packaging 231

v. Jewell, 532 F.2d 697, 699-705 (9th Cir.) (discussing the history and use

of “deliberate ignorance” instructions); see also Deborah Sprenger,

Propriety of Instruction of Jury on “Conscious Avoidance” of Knowledge

of Nature of Substance or Transaction in Prosecution for Possession or

Distribution of Drugs, 109 A.L.R. Fed. 710 § 2[a] (2005). “The

knowledge element of a crime such as the one charged here may be

satisfied upon a showing beyond a reasonable doubt that a defendant had

actual knowledge or deliberately closed his eyes to what otherwise would

have been obvious to him concerning the fact in question.” See United

States v. Brodie, 403 F.3d 123, 148 (3d Cir. 2005) (internal quotation

marks and citation omitted) (Trading with the Enemy Act of 1917 and

Cuban Assets Control Regulations violations). Willful blindness goes

beyond negligence: the defendant himself must have been “objectively

aware of the high probability of the fact in question, and not merely that

a reasonable man would have been aware of the probability.” Id. (internal

quotation marks and citation omitted).

The government need not prove that the defendant knew that the

jurisdictional elements listed in § 2318(c) fit his conduct, such as that the

computer program to which he had affixed his counterfeit labels was

copyrighted. See Section VI.B.5. of this Chapter.

VI.B.2. The Defendant Trafficked 

In the second element of a § 2318 offense, the government must

prove that the defendant trafficked in labels, documentation, or

packaging. This element was significantly changed on March 16, 2006 by

the Protecting American Goods and Services Act of 2005, Pub. L. No.

109-181, § 2, 120 Stat. 285, 288 (March 16, 2006).

Before the March 16, 2006 amendments, “traffic” was statutorily

defined within § 2318 to mean “to transport, transfer or otherwise dispose

of, to another, as consideration for anything of value or to make or obtain

control of with intent to so transport, transfer or dispose of.” 18 U.S.C.

§ 2318(b)(2). Congress defined “traffic” specifically to exclude individuals

who knowingly acquire counterfeit labels or other articles solely for

personal use. See S. Rep. No. 97-274, at 9 (1981), reprinted in 1982

U.S.C.C.A.N. 127, 135. This definition was identical to the definition of

“traffic” in 18 U.S.C. § 2320(e)(2) (“Trafficking in counterfeit goods or

services”)—before that definition was also changed in the 2006 act—with

the same issues concerning what qualified as “consideration” and what did

not, as well as the issues concerning possession with intent to traffic.

See Section III.B.3.b. of this Manual.
232 Prosecuting Intellectual Property Crimes

The March 16, 2006 amendments made the parallels between the two

statutes’ definition of “traffic” more explicit. For cases arising from

conduct on or after that date, the definition of “traffic” in § 2318(b)(2)

has been amended to read, “the term ‘traffic’ has the same meaning as in

section 2320(e) of this title [18].” Protecting American Goods and

Services Act of 2005, § 2(c)(2), 120 Stat. at 288 (amending 18 U.S.C.

§ 2318(b)(2)). As is discussed in Section III.B.3.b. of this Manual, these

amendments deal with the issues concerning consideration and possession

with intent to traffic.

Prosecutors should therefore consult Section III.B.3.b., which covers

the counterfeit marks crime in 18 U.S.C. § 2320, for a discussion of how

the traffic element operated before and after the March 16, 2006

amendments. The only differences to be noted are that § 2320 punishes

attempts whereas § 2318 does not, and therefore any discussion of

attempted trafficking with regard to § 2320 may not apply to § 2318. On

the other hand, the definition of “traffic” in both statutes now includes

so many acts that are preparatory to distributing contraband—such as

making it, obtaining it, and possessing it with intent to traffic—that the

omission of an attempt provision in § 2318 should not prevent the

government from otherwise pursuing deserving cases. Thus, labels seized

during the search of a counterfeiting operation may constitute part of the

indicted conduct, whether or not the labels had yet been affixed to the

works or transferred to distributors or customers.

VI.B.3. Trafficking in Labels Affixed to, Enclosing, or

Accompanying (or Designed to be Affixed to, Enclose, or

Accompany) a Phonorecord, Computer Program, Motion

Picture or Other Audiovisual Work, Literary, Pictorial,

Graphic, or Sculptural Work, or Work of Visual Art, or

Documentation or Packaging for Such Works (i.e.,

Trafficked Either in Documentation or Packaging for Such

Works Itself, or in Labels for Such Documentation or

Packaging)

 Before 2004, § 2318 prohibited trafficking in counterfeit labels

designed to be affixed to phonorecords, copies of computer programs,

motion pictures and audiovisual works, and counterfeit documentation

and packaging for computer programs. In 2004, Congress extended

§ 2318 substantially as part of the Intellectual Property Protection and

Courts Amendment Act of 2004, Pub. L. No. 108-482, 118 Stat. 3912

(Dec. 23, 2004).
VI. Counterfeit Labels, Documentation, Packaging 233

In the third element of a § 2318 offense, the government must prove

that the labels in which the defendant trafficked were affixed to,

enclosing, or accompanying—or designed to be affixed to, enclose, or

accompany—phonorecords, motion pictures or other audiovisual works,

computer software, literary, pictorial, graphic, or sculptural works, or

works of visual art. See 18 U.S.C. § 2318(a)(1), (b)(3) (defining the

classes of copyrighted works); 17 U.S.C. §§ 101, 102 (same).

Alternatively, the government may show that the defendant trafficked in

documentation or packaging for one of the enumerated class of works, or

labels affixed or designed to be affixed to copyrighted documentation and

packaging. See 18 U.S.C. § 2318(a)(1)-(2), (b)(5).

The types of copyrighted works covered by the statute has expanded

significantly over the past several years. Before 2004, 18 U.S.C. § 2318

applied only to labels for movies, music, and software, and to

documentation and packaging only for computer software. The provisions

governing computer software had only been added in 1996. Amendments

in 2004 now expressly include labels, documentation, and packaging for

phonorecords, motion pictures or other audiovisual works, computer

software, literary, pictorial, graphic, or sculptural works, and works of

visual art. See 18 U.S.C. § 2318(a)(1), (b)(5).

The 2004 amendments also changed slightly the actual or intended

physical proximity of the labels and the copyrighted works for which they

are intended. Before the 2004 amendments, § 2318 covered labels that

had been “affixed or designed to be affixed to” certain works. 18 U.S.C.

§ 2318(a) (2003). “[D]esigned to be affixed” was included to cover

counterfeit labels that had not actually been attached to a work: it was

added to the statute to close a “loophole” in which some counterfeiters

had shipped only unattached labels. See S. Rep. No. 97-274, at 9 (1981),

reprinted in 1982 U.S.C.C.A.N. 127, 135. The physical nexus grew even

broader with the 2004 amendments, which expanded “affixed or designed

to be affixed” to “affixed to, enclosing, or accompanying, or designed to

be affixed to, enclose, or accompany.” 18 U.S.C. § 2318(a)(1). Despite

this expansion, some physical nexus between the labels and copyrighted

works—whether actual or intended—is still required.

Documentation and packaging still need only be “for” the enumerated

classes of copyrighted works. 18 U.S.C. § 2318(b)(5). Given the context,

the word “for” appears to have roughly the same meaning for

documentation and packaging that “affixed to, enclosing, or

accompanying, or designed to be affixed to, enclose, or accompany” has

for labels. Thus, some physical nexus with copyrighted works—whether

actual or intended—is required for documentation and packaging as well.
234 Prosecuting Intellectual Property Crimes

For a discussion of whether § 2318 applies to labels, documentation,

and packaging in electronic form, see Section VI.D.1. of this Chapter.

VI.B.4. The Labels, Documentation, or Packaging Materials Are

Counterfeit or Illicit 

In the fourth element, the government must prove that the packaging

or documentation are “counterfeit” or that the labels are “counterfeit” or

“illicit.” See 18 U.S.C. § 2318(a)(1)-(2).

“Counterfeit” is defined as something “that appears to be genuine, but

is not.” 18 U.S.C. § 2318(b)(1), (b)(6). Counterfeit is distinct from

“bootlegged” or “pirated”: counterfeits are unauthorized copies of works

that are made to appear legitimate, whereas bootlegged recordings or

pirated items do not pretend to be legitimate. See United States v. Shultz,

482 F.2d 1179, 1180 (6th Cir. 1973) (“Counterfeit tapes are tapes which

are represented to be genuine articles of particular record companies

when, in truth, they are not. The process includes reproducing the tape

itself and also the recognized label of another record company. A bootleg

tape is a reproduction of someone else's recording or recordings marketed

under a different label.”). See also 18 U.S.C. § 2319A (addressing the

unauthorized recording and trafficking of live musical performances, also

known as “bootlegging”), and Chapter II of this Manual.

Counterfeit labels include those made when “counterfeiters have

simulated ‘genuine’ labels that have not previously existed,” insofar as

these simulated labels share the same basic criminal purpose as any

counterfeit product—to defraud the consumer, the manufacturer, and

society by trading off the product’s apparent authenticity. See S. Rep. No.

97-274, at 9 (1981), reprinted in 1982 U.S.C.C.A.N. 127, 135. “For

example, cases have arisen where a counterfeiter has produced packages

and distributed videotapes of a film which have never been released in

that form to the public. The term ‘counterfeit label’ includes such

simulated labels.” Id. Except for the Shultz case, supra, the extent to

which such simulated labels are counterfeit for purposes of § 2318 has

rarely been addressed in the courts. Prosecutors handling cases involving

simulated labels may find it helpful to consult with the Computer Crime

and Intellectual Property Section at (202) 514-1026.

An “illicit” label, generally speaking, is a “genuine certificate, licensing

document, registration card, or similar labeling component” intended for

use with one of the enumerated classes of copyrighted works, that a

defendant distributed or used without the work it was intended to

accompany or falsely altered to indicate broader rights than originally

intended. 18 U.S.C. § 2318(b)(4). Although § 2318 was amended to
VI. Counterfeit Labels, Documentation, Packaging 235

cover “illicit” labels on December 23, 2004, as of this writing there are no

reported cases that involve illicit labels. For now, therefore, we must rely

solely on the statute. Specifically, an “illicit” label is one that is:

(A) used by the copyright owner to verify that [a copyrighted work of

the type enumerated above] is not counterfeit or infringing of any

copyright; and

(B) that is, without the authorization of the copyright owner [either]

(i) distributed or intended for distribution not in connection with

the copy, phonorecord, or work of visual art to which such

labeling component was intended to be affixed by the respective

copyright owner; or

(ii) in connection with a genuine certificate or licensing

document, knowingly falsified in order to designate a higher

number of licensed users or copies than authorized by the

copyright owner, unless that certificate or document is used by

the copyright owner solely for the purpose of monitoring or

tracking the copyright owner's distribution channel and not for

the purpose of verifying that a copy or phonorecord is

noninfringing.

18 U.S.C. § 2318(b)(4). Under subsection (A), an illicit label may include

any of a broad category of labeling components, such as most types of

identifying labels, particularly those that include trademarks, seals,

holograms, watermarks, or other marks intended to show that a product

is genuine. Although it is not clear from the statute’s text and legislative

history, presumably the definition does not include generic labels, such as

packing slips, that merely identify a particular work, but which the

copyright holder did not intend to certify the work’s authenticity.

Subsection (B) identifies two situations in which a labeling

component is “illicit.” First, a labeling component is illicit when it is

distributed, without the copyright holder’s permission, apart from the

original copyrighted item that the copyright owner intended the labeling

component to accompany. For example, individual “licensing packs” for

software that contain various labels, certificates of authenticity, and

documentation and packaging would be deemed illicit if they were sold

without the original media they were intended to accompany, or were sold

with a pirated copy of the media.

Second, a genuine labeling component is illicit when a genuine

certificate of authenticity or similar licensing document has been

knowingly falsified to indicate a higher number of authorized users or
236 Prosecuting Intellectual Property Crimes

copies. For example, business software often comes in multi-user license

packs that contain a single copy of the software itself on CD-ROM and

a license that permits the software to be run for a certain number of users.

If the licensing document for a ten-user license pack were knowingly

falsified to indicate authorization for 100 users, the falsified licensing

document would be illicit.

VI.B.5. Federal Jurisdiction 

The final element of § 2318 requires the government to establish

federal jurisdiction over the offense by proving any one of the following

circumstances:

• The offense occurred in a special maritime, territorial, or aircraft

jurisdiction of the United States, § 2318(c)(1)

• Use of or intent to use the mail or facilities of interstate or foreign

commerce in the commission of the offense, § 2318(c)(2)

• In the case of a counterfeit or illicit label, the label was affixed,

enclosed or accompanying or designed to be affixed, enclosed or

to accompany certain copyrighted works or a copy of these works:

a phonorecord of a copyrighted sound recording or musical work;

a computer program; a literary work; a pictorial, graphic or

sculptural work; a work of visual art; or copyrighted

documentation or packaging, § 2318(c)(3)

• In the case of counterfeit documentation or packaging, the

documentation or packaging itself was copyrighted, § 2318(c)(4)

In practice, the most likely basis for jurisdiction will be copyright.

However, even when the works are copyrighted, prosecutors may

nevertheless find it easier to establish another basis for jurisdiction: a

copyright may be more burdensome to prove or an alternative basis may

be relatively clear. See Chapter II of this Manual, which discusses how to

prove the existence of a copyright.

The jurisdictional element in § 2318(c)(3) for counterfeit or illicit

labels that accompany certain classes of works is worded unusually. It

allows jurisdiction if the labels were affixed or designed to be affixed to

copies of sound recordings, musical works, computer programs, motion

pictures, audiovisual works, or documentation and packaging, if those

items were “copyrighted.” It also allows jurisdiction if the labels were

affixed or designed to be affixed to literary works, pictorial, graphic or

sculptural works, or works or visual art, but does not indicate that these

items must have been “copyrighted.” Compare § 2318(c)(3)(A)-(C), (G),
VI. Counterfeit Labels, Documentation, Packaging 237

with § 2318(c)(3)(D)-(F). However, these latter classes of works are

subject to copyright protection, and § 2318 intends these terms to have

the same meaning as in the copyright code. See 17 U.S.C. § 102; 18

U.S.C. § 2318(b)(3). Therefore, Congress’s omission of the word

“copyrighted” from § 2318(c)(3)(D)-(F) was probably unintended, and

copyright should be read as an element of these jurisdictional bases.

The government need not prove the defendant knew that his actions

fell within the federal jurisdiction elements set forth in 18 U.S.C.

§ 2318(c). Thus, it is unnecessary to prove, for example, that the

defendant knew that the copy of the computer program to which his

counterfeit labels were affixed was copyrighted (see Section VI.B.1. of this

Chapter). Cf. United States v. Feola, 420 U.S. 671, 676 n.9 (1975)

(“[T]he existence of the fact that confers federal jurisdiction need not be

one in the mind of the actor at the time he perpetrates the act made

criminal by the federal statute.”); United States v. X-Citement Video,

Inc., 513 U.S. 64, 73 n.3 (1994) (affirming Feola as applied to strictly

jurisdictional facts); United States v. Yermain, 468 U.S. 63, 68-70 (1984)

(holding that the plain language of 18 U.S.C. § 1001, which is worded

similarly to § 2318(a), indicates that Congress did not intend “knowingly

and willingly” to apply to jurisdictional element).

VI.B.6. Venue

The proper venue for a § 2318 prosecution is addressed by general

principles governing venue in criminal cases. Particular attention should

be paid to offenses that involve the use of the mail or transportation in

interstate or foreign commerce, which will occur in most § 2318 offenses.

VI.C. Defenses: Statute of Limitations

Because § 2318 does not contain a specific statute of limitations, the

general five-year statute of limitations for non-capital offenses applies. See

18 U.S.C. § 3282.
238 Prosecuting Intellectual Property Crimes

VI.D. Special Issues

VI.D.1. Electronic Copies of Labels, Documentation, or

Packaging

Although a typical case under § 2318 generally involves labels,

documentation, or packaging in some sort of physical form, such as an

adhesive decal, a cardboard box, or a manual printed on paper, § 2318

might also be applied in certain cases when either the “original” or

“legitimate” items, or the “counterfeit” or “illicit” copies, or both, are in

electronic or digital form. However, such circumstances are limited.

Section 2318(b)(5) defines documentation and packaging as items which

are “in physical form,” which would not prohibit trafficking in

unauthorized copies of electronic documentation or manuals, when the

original or legitimate versions are only available in electronic form, e.g.,

for download over the Internet. It is unclear whether the term “in physical

form” would include a digitally-formatted manual tangibly embodied on

a CD-ROM. Conduct involving unauthorized electronic copies of a

physical version of a documentation or packaging (such as image files

scanned from a paper manual or box), or of documentation that is

legitimately distributed on a CD-ROM, nevertheless may implicate

§ 2318, either as evidence of a substantive violation of the trafficking

provision, or as an act that aids or abets such trafficking or furthers a

conspiracy to traffic.

The House Report to the 2004 amendments also makes clear that

§ 2318’s criminal provisions do not apply to “electronic transmission” of

“genuine” licensing components, documentation, or packaging. See H.R.

Rep. No. 108-600, at 4 (2004) (stating that the amendments “shall not

be construed to apply ... in any case, to the electronic transmission of a

genuine certificate, licensing document, registration card, similar labeling

component, or documentation or packaging.”). This language suggests

that the unauthorized electronic distribution of labeling components that

are purely electronic in their original or legitimate form, such as electronic

signatures or watermarks, does not constitute criminal trafficking under

§ 2318 (although such conduct may violate other criminal statutes).

However, the statute is silent as to whether § 2318 applies to the

electronic transmission of labeling components that are not “genuine,”

suggesting that it would be a criminal violation of § 2318 to traffic in

electronic files that contain unauthorized copies of labeling components,

where the original or legitimate labeling components were in physical form

(e.g., trafficking in digital image files that contain a convincing

reproduction of label decals or product packaging, such as would be
VI. Counterfeit Labels, Documentation, Packaging 239

suitable for printing additional counterfeit copies of the labels or

packaging). Nevertheless, as of this writing, there is little case law in this

area, and the extent to which § 2318 may be applied in situations

involving electronic labeling components remains somewhat unclear.

VI.D.2. Advantages of Charging a § 2318 Offense 

A § 2318 charge may be an appropriate adjunct or alternative charge

when the situation involves copyright or trademark infringement. In many

cases, the § 2318 charge may even be preferable. The mens rea

(knowledge) and minimum threshold of illegal conduct (none) are both

lower than the mens rea required in criminal copyright charges

(willfulness) and the monetary and numerical thresholds for many

criminal copyright charges. See Chapter II of this Manual. The standard

of proof may also be lower than for criminal trademark charges, which

require proof that any trademarks used on the counterfeit or illicit

labeling are identical to or substantially indistinguishable from one

registered with the U.S. Patent and Trademark Office. See Chapter III.

VI.E. Penalties

Section 2318(a) provides for a fine or imprisonment or both, as well

as forfeiture. Restitution is also available.

VI.E.1. Fines 

Under § 2318(a), a defendant may be “fined under this title [18],”

which is an indirect reference to 18 U.S.C. § 3571 (“Sentence of fine”).

Under 18 U.S.C. § 3571, an individual can be fined up to $250,000 and

an organization can be fined up to $500,000, or either can be fined twice

the offense’s pecuniary gain or loss, without limit. 18 U.S.C. § 3571(a)-

(d).

VI.E.2. Imprisonment 

The maximum term of imprisonment is five years. 18 U.S.C.

§ 2318(a).

VI.E.3. Restitution 

Although § 2318 does not mention restitution, 18 U.S.C. § 3663A

provides for mandatory restitution to victims of certain crimes, including

crimes against property in Title 18, of which § 2318 is one. 18 U.S.C.
240 Prosecuting Intellectual Property Crimes

§ 3663A(c)(1)(A)(ii). Section 5E1.1 of the U.S. Sentencing Guidelines

Manual also provides for restitution in cases where there is an identifiable

victim and restitution is authorized under 18 U.S.C. § 3663A. Courts

have affirmed restitution orders for convictions under § 2318. See United

States v. Chay, 281 F.3d 682, 686 (7th Cir. 2002) (holding that an 18

U.S.C. § 2318(a) offense is “a crime against property covered by the

Mandatory Victim Restitution Act (MVRA), 18 U.S.C. § 3663A” and

affirming an order of $49,941.02 in restitution); United States v. Elouri,

62 Fed. Appx. 556 (5th Cir. 2003) (affirming an order on procedural

grounds of $136,050 in restitution for a violation of § 2318). For more on

restitution, see Chapter VIII of this Manual. 

VI.E.4. Forfeiture

When a person is convicted under § 2318, the court must order the

forfeiture and destruction or other disposition of all counterfeit or illicit

labels, any items that these labels were affixed to or intended to be affixed

to, and any equipment, device, or material used to create these labels. See

18 U.S.C. § 2318(d). For more on forfeiture, see Chapter VIII of this

Manual.

VI.E.5. Sentencing Guidelines

Section 2B5.3 is the applicable sentencing guideline. See Chapter VIII

of this Manual. Section 2318 offenses in particular often raise issues

about how to evaluate the retail value and the number of infringing items

on which to base the infringement amount.

VI.E.5.a. Retail Value of Copyrighted Goods vs. Counterfeit

Labels, Documentation, and Packaging

The retail value may depend on whether the defendant’s labels,

documentation, and packaging were enclosed, affixed to, or accompanied

the materials for which they were intended. If so, the infringement

amount is calculated as usual, based on the retail value of the infringed

(genuine) or infringing (counterfeit) copyrighted material as Application

Note 2 to U.S.S.G. § 2B5.2 directs. See Chapter VIII of this Manual. If

not, then determining an infringement amount for unattached labels,

packaging, or documentation—standing alone—may be more complicated.

On March 16, 2006, the Stop Counterfeiting in Manufactured Goods

Act directed the Sentencing Commission to address how the infringement

amount should be calculated for offenses involving labels, documentation,

and packaging, such as 18 U.S.C. § 2318, that are not attached to or

accompanying copyrighted works. See Pub. L. No. 109-181, § 1, 120 Stat.
VI. Counterfeit Labels, Documentation, Packaging 241

285 (March 16, 2006). Guideline clarifications pursuant to this directive

are expected later in 2006, after this Manual goes to print.

Until the guidelines are clarified, at least one past decision indicates

that unattached labels, documentation, and packaging be based on the

retail value of the labels, documentation, or packaging themselves. In

United States v. Bao, 189 F.3d 860, 862-63 (9th Cir. 1999), the

government seized 5,000 counterfeit manuals for software and counterfeit

packaging materials such as CD-ROM inserts and product registration

cards in Bao’s print shop. After Bao’s conviction under § 2318 for

trafficking in counterfeit software manuals, the district court sentenced

him based on a retail value of $50 per manual, the black market value of

the software plus a manual. The court’s theory was that the manual had

no value apart from the software. Id. at 862-63, 867. The Ninth Circuit

vacated the sentence, holding that the manuals’ retail value should have

been $12 apiece, the retail value of other comparable genuine manuals the

victim sold separate from software. Id. at 866-67. In other words, the

appropriate retail value was that of the counterfeit documentation, not

the thing the documentation was to accompany.

The court might have used the $50 value of the software plus a

manual had there been evidence that Bao understood the conspiracy to

extend beyond counterfeit manuals to counterfeit software. Id. at 867 n.3.

This logic may therefore apply in future cases when the counterfeit or

illicit labels, documentation, or packaging have no retail value separate

from the infringing copyrighted material, such as labels of Microsoft

trademark that could be applied to Microsoft software. Cf. U.S. v. Guerra,

293 F.3d 1279, 1292 (11th Cir. 2002) (§ 2320 case holding that “[t]he

value of the bands and labels is inextricably intertwined with that of the

completed product, as the value of the counterfeit cigars derives primarily

from the degree to which the bands and labels bear marks that are

indistinguishable from the genuine marks. Thus, the district court did not

err by considering ‘infringing items’ to be cigars rather than labels.”).

The December 2004 amendments to § 2318 prohibiting traffic in

“illicit” labels may also present some novel sentencing issues. Because

“illicit” labels are genuine labels that are used beyond the authorized

scope of the copyright holder, it may be difficult to determine the

infringement value of illicit labels that have not actually been affixed to,

enclosed with, or accompanied the copyrighted material. Since illicit labels

are genuine and not counterfeit, should the retail value of the genuine

label always be used to determine the infringement amount for sentencing

purposes? It is not clear, particularly because there are no reported cases

addressing trafficking in illicit labels. But the addition of illicit labels to
242 Prosecuting Intellectual Property Crimes

§ 2318 does blur the distinction between infringing (fake) and infringed

(genuine) retail value for sentencing purposes.

VI.E.5.b. Number of Infringing Copyrighted Goods vs. Number

of Labels, Documents, or Packaging Items

Just as the retail value might depend on how many products the

defendant had completed or could have completed readily, so might the

number of infringing items. Two appellate courts have ruled that “the

number of infringing items should correspond to the number of completed

or nearly completed counterfeit goods.” U.S. v. Guerra, 293 F.3d 1279,

1293 (11th Cir. 2002) (citing United States v. Sung, 51 F.3d 92 (7th Cir.

1995), appeal after remand, 87 F.3d 194 (7th Cir. 1996), on remand to,

940 F. Supp. 172 (N.D. Ill. 1996), rev’g trial court on other grounds, 114

F.3d 1192 (1997)). In both these cases, the number of infringing items

was held to be not the number of infringing labels or packaging items, but

rather the lower number of goods to which the labels or packaging had

been or could readily have been attached. See id. However, both these

cases concerned sentencing under the counterfeit trademark crime, 18

U.S.C. § 2320, not the counterfeit label crime in § 2318. It is difficult to

predict how these issues will be resolved in § 2318 prosecutions, in which

the focus is not the completed counterfeit product—as in § 2320

cases—but rather the counterfeit label, documentation, or packaging.

VI.F. Other Charges to Consider

When confronted with a case that implicates counterfeit or illicit

labels or counterfeit documentation or packaging, prosecutors may want

to consider the following crimes for charges in addition to 18 U.S.C.

§ 2318 or in lieu of such charges if § 2318's elements cannot be met:

• Copyright infringement, 17 U.S.C. § 506, 18 U.S.C. § 2319, for

any infringement of the underlying copyrighted goods. See, e.g.,

United States v. Cohen, 946 F.2d 430, 433-34 (6th Cir. 1991)

(affirming conviction under 18 U.S.C. §§ 2318-2319 for

duplicating and distributing copyrighted movies). A conspiracy or

aiding-and-abetting theory will sometimes be necessary. See

Chapter II of this Manual.

• Trademark counterfeiting, 18 U.S.C. § 2320, because labels,

documentation, and packaging for copyrighted works often carry

counterfeit reproductions of federally registered trademarks. See,

e.g., United States v. Hernandez, 952 F.2d 1110, 1113-14 (9th
VI. Counterfeit Labels, Documentation, Packaging 243

Cir. 1991) (affirming conviction under 18 U.S.C. §§ 2318-2320

for counterfeit audio cassettes and audio cassette labels). See

Chapter III of this Manual.

• Mail or wire fraud, 18 U.S.C. §§ 1341, 1343, for schemes that

involve the use of the mails or wire, as long as there is a scheme

to defraud. Cf. United States v. Shultz, 482 F.2d 1179, 1180

(6th Cir. 1973) (upholding convictions for mail fraud and

counterfeit labels under an earlier version of § 2318, for causing

the transportation of a counterfeit stereo tape cartridge recording

in interstate commerce with forged or counterfeit label). The

theory of fraud cannot be merely that the media was copyrighted,

but rather that the defendant must have intended to defraud

either his immediate purchaser or other downstream purchasers.

See Section II.F. of this Manual.

• Racketeer Influenced and Corrupt Organizations (RICO), 18

U.S.C. §§ 1961-1968, because § 2318 violations serve as RICO

predicate acts. See § 1961(1)(B). RICO charges must be approved

by the Department’s Organized Crime and Racketeering Section,

which can be reached at (202) 514-3594.

• Bootleg sound recordings and music videos of live musical

performances, 18 U.S.C. § 2319A. See Section II.F. of this

Manual.
245

VII.

Patent

VII.A. Overview of Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245

VII.B. Forgery of Letters Patent—18 U.S.C. § 497 . . . . . . . . . . . 247

VII.C. False Marking of Patent—35 U.S.C. § 292 . . . . . . . . . . . 247

VII.D. No Prosecution for Interstate Transportation or Receipt of Stolen

Property—18 U.S.C. §§ 2314, 2315 . . . . . . . . . . . . . . . . . 250

VII.A. Overview of Patent

Unlike copyright and trademark infringement, there are no criminal

penalties for committing patent infringement. Dowling v. United States,

473 U.S. 207, 227 (1985) (noting that "[d]espite its undoubted power to

do so," Congress has not provided criminal penalties for patent

infringement). Congress instead has relied on provisions affording owners

a civil cause of action for patent infringement. Id. at 227 n.19. As set

forth more fully below, however, Congress has provided for two criminal

provisions relating to patents: forgery of letters patent, and false marking

of patents.

As a threshold matter, it is worth revisiting the differences between

patents and copyrights. Patent rights are available to anyone who invents

"any new and useful process, machine, manufacture, or composition of

matter, or any new or useful improvement thereof." 35 U.S.C. § 101. A

patent grants an inventor the right to exclude others from making, using,

offering for sale, or selling devices that embody the patented invention.

See 35 U.S.C. § 271(a); Eldred v. Ashcroft, 537 U.S. 190, 216 (2003).

The federal government's authority to grant patents stems from U.S.

Const. art. I, § 8, known as the Intellectual Property or Copyright and

Patent Clause, which authorizes Congress to enact statutes that "promote

the Progress of Science and useful Arts, by securing for limited Times to

Authors and Inventors the exclusive Right to their respective Writings and

Discoveries." Congress first exercised this authority to grant patents in

1790, when Congress empowered the federal government to issue letters

patent. Act of Apr. 10, 1790, ch. 7, § 1, 1 Stat. 109. Like their modern

counterparts, "letters patent" contain a short title of the invention and a

"grant" to the patent owner ("patentee"), and his or her heirs or assigns, of

the right to exclude others from making, using, offering for sale, or selling
246 Prosecuting Intellectual Property Crimes

the invention throughout the United States or importing the invention

into the United States. See Eldred, 537 U.S. at 216; 35 U.S.C.

§ 154(a)(1). Currently, a patent grant lasts for a term beginning on the

date the U.S. Patent and Trademark Office issues the patent and ending

20 years from the date on which the patentee filed his or her application

for a patent grant. 35 U.S.C. § 154(a)(2).

Although patents and copyrights share a common constitutional

source (and the concomitant requirement that these exclusive rights are

for "limited times"), they differ in several meaningful respects. First,

copyrights grant an author the right to exclude certain uses of the author's

expression of an idea contained in an "original work of authorship,"

whereas patents grant an author the right to exclude others from making,

using, and selling devices or processes that embody the claimed invention.

Second, in exchange for granting the patentee this right to exclude, the

patentee must publicly disclose the invention. Eldred, 537 U.S. at 216.

"For the author seeking copyright protection, in contrast, disclosure is the

desired objective, not something exacted from the author in exchange for

the copyright." Id. at 216. Third, a copyright gives the holder no

monopoly on any knowledge or idea; a reader of an author's writing may

make full use of any fact or idea acquired by reading the writing. See 17

U.S.C. § 102(b). A patent, on the other hand, gives the patentee a

monopoly on his invention to prevent the full use by others of the

knowledge embodied in the patent. Eldred, 537 U.S. at 217.

It is also worth considering the difference between a patent and a

trade secret. The first difference is naturally that trade secret information

is protected only if it is secret (see Section IV.B.3.a.v. of this Manual),

whereas a patent is protected even after disclosure. During the patent

process, a trade secret contained in a patent application may lose its tradesecret protection through disclosure only to gain patent protection. (See

Section IV.B.3.a.vi. of this Manual). Second, a patent gives its owner an

exclusive right to his invention, even against another who discovered the

patented invention independently, whereas a trade secret, like a copyright,

gives its owner no protection against independent discovery. Confold Pac.,

Inc. v. Polaris Indus., 433 F.3d 952, 958-59 (7th Cir. 2006) (Posner, J.).
VII. Patent 247

VII.B. Forgery of Letters Patent—

18 U.S.C. § 497 

18 U.S.C. § 497 prohibits forging "letters patent" (described above),

as well as knowingly passing off counterfeit letters patent: 

Whoever falsely makes, forges, counterfeits, or alters any letters

patent granted or purporting to have been granted by the President

of the United States; or Whoever passes, utters, or publishes, or

attempts to pass, utter, or publish as genuine, any such letters patent,

knowing the same to be forged, counterfeited or falsely altered—Shall

be fined under this title or imprisoned not more than ten years, or

both.

As of this writing, no published opinions reported an applicable

offense under this provision.

VII.C. False Marking of Patent—

35 U.S.C. § 292

To protect patent holders and the public, Congress enacted the false

marking provision, 35 U.S.C. § 292, which provides for both criminal and

civil actions against a defendant for false marking. Section 292 creates a

financial punishment for three types of improper marking: (1)

representing that an article is patented when the patent is in fact held by

another; (2) marking as patented an article that is not patented; and (3)

falsely claiming that a patent application has been made or is pending.

Congress prohibits false marking in part because a properly marked

patented article provides the public with "a ready means of discerning the

status of intellectual property embodied in an article of manufacture or

design." Bonito Boats, Inc. v. Adkins, 489 U.S. 141, 162 (1989). This is

consistent with federal patent policy, which recognizes an "important

public interest in permitting full and free competition in the use of ideas

which are in reality a part of the public domain." Lear, Inc. v. Adkins, 395

U.S. 653, 670 (1969). False marking harms that public interest because

it "misleads the public into believing that a patentee controls the article

in question (as well as like articles), externalizes the risk of error in the

determination, placing it on the public rather than the manufacturer or

seller of the article, and increases the cost to the public of ascertaining

whether a patentee in fact controls the intellectual property embodied in
248 Prosecuting Intellectual Property Crimes

an article." Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347, 1356-

57 (Fed. Cir. 2005) (footnote omitted).

Section 292(a)'s first prohibition protects patent holders by

prohibiting an individual, without a patent holder's consent, from marking

or using in advertising for a product:

the words "patent," "patentee," or the like, with the intent of

counterfeiting or imitating the mark of the patentee, or of deceiving

the public and inducing them to believe that the thing was made,

offered for sale, sold, or imported into the United States by or with

the consent of the patentee. 

35 U.S.C. § 292(a). 

Section 292(a)'s second and third paragraphs protect the public from

false or misleading patent claims. The second paragraph prohibits

individuals from marking or using in advertising the word "patent" in

connection with any "unpatented article" for the purpose of deceiving the

public. Clontech, 406 F.3d at 1352. For § 292 to apply, the mismarked

article must "actually exist" and "be completed." Lang v. Pacific Marine &

Supply Co., 895 F.2d 761, 765 (Fed. Cir. 1990). Although not defined in

the statute, courts have held that the phrase "unpatented article" means

that "the article in question is not covered by at least one claim of each

patent with which the article is marked. Thus, in order to determine if an

article is 'unpatented' for purposes of section 292, it must be first

determined whether the claims of a patent cover the article in question."

Clontech, 406 F.3d at 1352. Furthermore, "the omission of 'applicable

patents' from a label listing patents purporting to cover the contents of a

box of course cannot, in itself, be a violation of the false marking statute."

Arcadia Mach. & Tool v. Sturm, Ruger & Co., 786 F.2d 1124, 1125 (Fed.

Cir. 1986) (emphasis in original); cf. Genlyte Thomas Group LLC v.

National Servs. Indus., 262 F. Supp. 2d 753, 756 (W.D. Ky. 2003)

(noting that courts consistently find no violation of § 292 "by a patentee

who marks patented articles with more patents than actually cover the

item") (internal citations and quotations omitted). 

In the same vein as § 292(a)'s second paragraph, the third paragraph

prohibits individuals from marking or using in advertising the words

"patent applied for" or "patent pending" for the purpose of deceiving the

public when a patent application has neither been made nor is pending.

35 U.S.C. § 292(a).

Section 292(a) imposes a fine of not more than $500 for every

criminal offense. 35 U.S.C. § 292(a). Because it is a criminal fine for an

infraction, that fine is increased by 18 U.S.C. § 3571 to a maximum of
VII. Patent 249

$5,000 for individuals ($10,000 for corporations) or twice the monetary

gain or loss. See 18 U.S.C. § 3571(b)(2), (b)(7), (c)(2), (c)(7), (d).

Section 292(b) also provides for a civil qui tam remedy, which enables

any person to sue for the statutory penalty and retain one-half of the

recovery, leaving the other half "to the use of the United States." 35

U.S.C. § 292(b); Boyd v. Schildkraudt Giftware Corp., 936 F.2d 76, 79

(2d Cir. 1991); Filmon Process Corp. v. Spell-Right Corp., 404 F.2d

1351, 1355 (D.C. Cir. 1968) (holding that "§ 292(b), while penal, is not

a criminal statute"). "The patentee is given this remedy to protect his

patent position, and as a practical matter, the patentee is the only likely

enforcer of it, as recovery requires proof that the statements were made

without his consent." Filmon, 404 F.2d at 1355.

Although criminal prosecutions pursuant to § 292 are rare, several

reported private enforcement actions provide helpful authority for

interpreting the false marking statute in criminal cases. Consistent with

the express language of the statute, courts have held that 35 U.S.C.

§ 292(a) requires the government to prove that the defendant intended

to deceive or counterfeit. See Arcadia, 786 F.2d at 1125 (affirming

holding that false marking statute was not violated where there was no

evidence of intent to deceive). Thus, accidental or unintentional

mismarking is not a violation. London v. Everett H. Dunbar Corp., 179

F. 506, 510 (1st Cir. 1910) (holding that interpreting patent claims is not

an exact science, and hence where one "has an honest, though mistaken,

belief that upon a proper construction of the patent it covers the article

which he marks," the requisite intent to deceive would not be shown);

Brose v. Sears, Roebuck & Co., 455 F.2d 763, 768-69 (5th Cir. 1972)

(same).

By the same token, a defendant's "mere assertion" that he did not

intend to deceive will not allow him to escape statutory liability when he

knew of falsehood. Clontech, 406 F.3d at 1352, 1353 n.2 (noting that

"the inference of intent to deceive cannot be defeated with blind

assertions of good faith where the patentee has knowledge of

mismarking"). "Intent to deceive is a state of mind arising when a party

acts with sufficient knowledge that what it is saying is not so and

consequently that the recipient of its saying will be misled into thinking

that the statement is true." Id. at 1352 (citing Seven Cases v. United

States, 239 U.S. 510, 517-18 (1916)). Using "objective standards," the

prosecution may establish the requisite intent to deceive where the

government proves both (1) the fact of misrepresentation and that (2) the

party making it had knowledge of its falsity. See id. (citing Norton v.

Curtiss, 433 F.2d 779, 795-96 (C.C.P.A. 1970)). "Where the article
250 Prosecuting Intellectual Property Crimes

marked is obviously very remote from the patent referred to in

justification of the marking, this difference alone may be sufficient to

show an intention to deceive; but where the difference is slight, and the

question of the breadth of the invention or of the claims is so close as to

permit of an honest difference of opinion," then proof of such intent is

more difficult. London, 179 F. at 510. Hence, to show knowledge of the

misrepresentation, the government must show beyond a reasonable doubt

that the articles in question were in fact mismarked, and that defendant

did not have a reasonable belief that the articles were properly marked

(i.e., covered by a patent or patent application). Cf. Clontech, 406 F.3d

at 1352-53.

VII.D. No Prosecution for Interstate

Transportation or Receipt of Stolen

Property—18 U.S.C. §§ 2314, 2315

The interstate transportation of stolen property statute, 18 U.S.C.

§ 2314, does not allow prosecution of a person for the interstate

distribution of patent-infringing goods when the only theory for the

property's being stolen is that it infringes a patent. See Dowling v. United

States, 473 U.S. 207, 227 (1985) (dicta). The same dicta would likely

apply to the interstate receipt of stolen property (18 U.S.C. § 2315).
251

VIII.

Penalties, Restitution,

and Forfeiture

VIII.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

VIII.B. Statutory Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

VIII.C. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

VIII.C.1. Offenses Involving Copyright (Including Bootleg Music,

Camcorded Movies, and the Unauthorized Use of

Satellite, Radio, and Cable Communications),

Trademark, Counterfeit Labeling, and the DMCA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255

VIII.C.1.a. Applicable Guideline is § 2B5.3 . . . . . . . . . . . 255

VIII.C.1.b. Base Offense Level . . . . . . . . . . . . . . . . . . . . . 257

VIII.C.1.c. Adjust the Offense Level According to the

“Infringement Amount”—U.S.S.G. § 2B5.3(b)(1) . . . 257

VIII.C.1.c.i. Formula . . . . . . . . . . . . . . . . . . . . . . . . . 257

VIII.C.1.c.ii. Number of Infringing Items . . . . . . . . . 258

VIII.C.1.c.iii. Retail Value . . . . . . . . . . . . . . . . . . . . . 259

VIII.C.1.c.iv. Determining Amounts and Values—Reasonable

Estimates Allowed . . . . . . . . . . . . . . . . . . . . . . . . 263

VIII.C.1.c.v. Cross-Reference to Loss Table in

U.S.S.G. § 2B1.1 . . . . . . . . . . . . . . . . . . . . . . . . . 264

VIII.C.1.d. Pre-release Piracy Increases the Offense Level

by 2—U.S.S.G. § 2B5.3(b)(2) . . . . . . . . . . . . . . . . . . 265

VIII.C.1.e. Manufacturing, Importing, or Uploading Infringing

Items Increases the Offense Level by 2— 

U.S.S.G. § 2B5.3(b)(3) [before October 24, 2005: 

§ 2B5.3(b)(2)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
252 Prosecuting Intellectual Property Crimes

VIII.C.1.f. Offense Not Committed for Commercial Advantage or

Private Financial Gain Reduces the Offense Level by

2—U.S.S.G. § 2B5.3(b)(4) [before October 24, 2005:

§ 2B5.3(b)(3)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

VIII.C.1.g. Offense Involving Risk of Serious Bodily Injury or

Possession of a Dangerous Weapon Increases the Offense

Level by 2—U.S.S.G. § 2B5.3(b)(5) [before October 24,

2005: § 2B5.3(b)(4)] . . . . . . . . . . . . . . . . . . . . . . . . . 268

VIII.C.1.h. Decryption or Circumvention of Access Controls

Increases the Offense Level—U.S.S.G. § 3B1.3 . . . . . 268

VIII.C.1.i. Upward Adjustment for Harm to Copyright or MarkOwner's Reputation, Connection with Organized Crime, or

Other Unspecified Grounds . . . . . . . . . . . . . . . . . . . . 269

VIII.C.1.j. Vulnerable Victims—U.S.S.G. § 3A1.1(b) . . . 269

VIII.C.1.k. No Downward Departure for the Victim's

Participation in Prosecution . . . . . . . . . . . . . . . . . . . . 269

VIII.C.2. Offenses Involving the Economic Espionage Act . 270

VIII.C.2.a. Applicable Guideline is § 2B1.1, Except for Attempts

and Conspiracies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

VIII.C.2.b. Base Offense Level—U.S.S.G. § 2B1.1(a) . . . 270

VIII.C.2.c. Loss—U.S.S.G. § 2B1.1(b)(1) . . . . . . . . . . . . 270

VIII.C.2.c.i. Use Greater of Actual or Intended Loss . 271

VIII.C.2.c.ii. Reasonable Estimates Acceptable . . . . . 271

VIII.C.2.c.iii. Methods of Calculating Loss . . . . . . . . 271

VIII.C.2.d. Intent to Benefit a Foreign Government,

Instrumentality, or Agent—U.S.S.G. § 2B1.1(b)(5) . . 277

VIII.C.2.e. Sophisticated Means—U.S.S.G. § 2B1.1(b)(9)(C)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

VIII.C.2.f. Upward Departure Considerations— U.S.S.G. § 2B1.1

cmt. n.19(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278

VIII.C.2.g. Downward Departure Considerations—

U.S.S.G. § 2B1.1 cmt. n.19(C) . . . . . . . . . . . . . . . . . 278

VIII.C.2.h. Abuse of a Position of Trust—U.S.S.G. § 3B1.3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
VIII. Penalties, Restitution, and Forfeiture 253

VIII.C.2.i. Use of Special Skill—U.S.S.G. § 3B1.3 . . . . . . 279

VIII.C.2.j. No Downward Departure for Victim's Participation in

Developing the Case . . . . . . . . . . . . . . . . . . . . . . . . . . 279

VIII.D. Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

VIII.D.1. Restitution is Available—and Often Required—in

Intellectual Property Prosecutions . . . . . . . . . . . . 280

VIII.D.2. Victims Include Owners of Intellectual Property and

Consumers Who Were Defrauded . . . . . . . . . . . . 284

VIII.D.3. Determining a Restitution Figure . . . . . . . . . . . . . 288

VIII.E. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

VIII.E.1. Property Subject to Forfeiture . . . . . . . . . . . . . . . 293

VIII.E.2. Overview of Forfeiture Procedures . . . . . . . . . . . . 294

VIII.E.2.a. Administrative Forfeiture Proceedings . . . . . . 294

VIII.E.2.b. Civil and Criminal Proceedings . . . . . . . . . . . 295

VIII.E.2.c. Table of Forfeiture Provisions Arranged by 

Criminal IP Statute . . . . . . . . . . . . . . . . . . . . . . . . . . 295

VIII.E.3. Choosing a Forfeiture Procedure . . . . . . . . . . . . . 299

VIII.E.4. Civil Forfeiture in IP Matters . . . . . . . . . . . . . . . . 300

VIII.E.4.a. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

VIII.E.4.b. Infringing Items, Other Contraband, and Facilitating

Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301

VIII.E.4.c. Innocent Owner Defense . . . . . . . . . . . . . . . . 302

VIII.E.4.d. Victims' Ability to Forfeit Property . . . . . . . . 302

VIII.E.5. Criminal Forfeiture in IP Matters . . . . . . . . . . . . 303

VIII.E.5.a. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

VIII.E.5.b. Infringing Items, Other Contraband, and Facilitating

Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
254 Prosecuting Intellectual Property Crimes

VIII.A. Introduction

This Chapter discusses the penalties for intellectual property crime,

concentrating on the sentencing guidelines, restitution, and forfeiture.

This Chapter does not address the sentencing issues raised by former

Attorney General John Ashcroft's September 23, 2003 Memorandum on

Department Policies and Procedures Concerning Charging Criminal

Offenses, Disposition of Charges, and Sentencing, available at

http://www.usdoj.gov/opa/pr/2003/September/03_ag_516.htm, which

instructs that “federal prosecutors must charge and pursue the most

serious, readily provable offense or offenses that are supported by the

facts of the case, except as authorized by an Assistant Attorney General,

United States Attorney, or designated supervisory attorney in the limited

circumstances described below.” For more on charging decisions,

prosecutors should consult the Attorney General's Memorandum, and also

Chapter IX of this Manual, which specifically addresses charging decisions

in intellectual property cases.

VIII.B. Statutory Penalties

The maximum statutory penalties for intellectual property crimes are

addressed in the chapters on the respective substantive laws and are

summarized in Appendix I.

VIII.C. Sentencing Guidelines

This subsection addresses the interpretation and application of the

United States Sentencing Guidelines (“U.S.S.G.”) in intellectual property

prosecutions, primarily § 2B1.1 for Economic Espionage Act cases,

§ 2B5.3 for all other intellectual property offenses, and § 3B1.3 for crimes

in which the defendant abused a position of trust or used a special skill.

This subsection should be read in conjunction with the sections covering

penalties in the chapters that present the substantive offenses, as well as

with the chapter on victims' rights.

This Manual does not address the issues raised by United States v.

Booker, 543 U.S. 220 (2005), in which the Supreme Court held that the

United States Sentencing Guidelines must be considered at sentencing

but are only advisory. As with other crimes, prosecutors should generally

continue to seek sentences within the guidelines range in intellectual
VIII. Penalties, Restitution, and Forfeiture 255

property prosecutions because they are presumptively reasonable.

Memorandum from Assistant Attorney General Christopher A. Wray,

Guidance Regarding the Application of United States v. Booker and

United States v. Fanfan, 2005 WL 50108 (Jan. 12, 2005), to Pending

Cases, at 5 (Jan. 19, 2005). The intellectual property guidelines have been

intricately fashioned through amendment and re-amendment, often

incorporating and reacting to court decisions. For general guidance on this

issue, prosecutors should consult Deputy Attorney General James B.

Comey's January 28th, 2005 Memorandum on Department Policies and

Procedures Concerning Sentencing, which directs that“federal prosecutors

must actively seek sentences within the range established by the

Sentencing Guidelines in all but extraordinary cases.”

For assistance with any sentencing issues specific to intellectual

property crimes, please call CCIPS at (202) 514-1026 for assistance. 

VIII.C.1. Offenses Involving Copyright (Including Bootleg Music,

Camcorded Movies, and the Unauthorized Use of

Satellite, Radio, and Cable Communications),

Trademark, Counterfeit Labeling, and the DMCA

VIII.C.1.a. Applicable Guideline is § 2B5.3

U.S.S.G. § 2B5.3 governs sentencing for the following offenses: 

• Criminal copyright infringement, 17 U.S.C. § 506, 18 U.S.C.

§ 2319

• Criminal violations of the Digital Millennium Copyright Act, 17

U.S.C. § 1204

• Trafficking in counterfeit labels, illicit labels, and counterfeit

documentation or packaging, 18 U.S.C. § 2318

• Trafficking bootleg audio and video recordings of live musical

performances, 18 U.S.C. § 2319A

• Unauthorized recording of motion pictures in a movie theater, 18

U.S.C. § 2319B

• Trafficking in counterfeit trademarked, service-marked, or

certification-marked goods, services, and labels, documentation,

and packaging for goods and services, 18 U.S.C. § 2320

• Unauthorized reception of cable and satellite service, 47 U.S.C.

§§ 553(b)(2), 605 and 18 U.S.C. § 2511
256 Prosecuting Intellectual Property Crimes

The guidelines' Statutory Index, U.S.S.G. App. A, refers these statutes to

U.S.S.G. § 2B5.3.

The one exception is the Digital Millennium Copyright Act, which is

not listed in the guidelines' index at all. A statute not listed in this index

should be sentenced under “the most analogous guideline.” U.S.S.G.

§§ 1B1.2(a), 2X5.1. In DMCA cases, the most analogous guideline is

§ 2B5.3. The DMCA was intended to safeguard the copyright protections

for copyrighted works, and copyright crimes are sentenced under § 2B5.3.

Moreover, § 2B5.3 implicitly refers to the DMCA in an application note

that requires an adjustment for use of a special skill under U.S.S.G.

§ 3B1.3 “[i]f the defendant de-encrypted or otherwise circumvented a

technological security measure to gain initial access to an infringed item.”

U.S.S.G. § 2B5.3 cmt. n.3 (2005). Although the DMCA and U.S.S.G.

§ 2B5.3 are not a perfect fit, they are the best match under the current

guidelines.

Section 2B5.3 has been amended a number of times. It was amended

on May 1, 2000, to “ensure that the applicable guideline range for a

defendant convicted of a crime against intellectual property” would be

“sufficiently stringent to deter such a crime and to adequately reflect”

consideration of “the retail value and quantity of the items with respect

to which the crime against intellectual property was committed.” No

Electronic Theft (NET) Act of 1997, Pub. L. No. 105-147, § 2(g), 111

Stat. 2678 (1997). Among other things, the May 2000 amendments

increased the applicable base offense level from 6 to 8 and increased the

number and type of special offense characteristics to include not only the

infringement amount, but also characteristics for manufacturing,

uploading, or importing infringing items; for infringement not committed

for commercial advantage or private financial gain; and for risk of serious

bodily injury or possession of a dangerous weapon in connection with the

offense. See U.S.S.G. App. C (Amendments 590, 593). Section 2B5.3 was

amended again effective October 24, 2005, adding a new specific offense

characteristic (2) addressing infringement of pre-release works,

renumbering offense characteristics (2)-(4) as offense characteristics (3)-

(5), clarifying the definition of uploading for technical purposes, and

clarifying that the court can estimate the infringement amount using any

relevant information. See U.S.S.G. App. C (Amendment 675).

As of this writing, U.S.S.G. § 2B5.3 is likely to be amended again

during 2006 pursuant to the Stop Counterfeiting in Manufactured Goods

Act, Pub. L. No. 109-181, § 1, 120 Stat. 285, 287-88 (Mar. 16, 2006). It

asks the Sentencing Commission to explore how the guideline should

account for items that facilitate infringement such as counterfeit labels
VIII. Penalties, Restitution, and Forfeiture 257

and DMCA circumvention devices. See also Section III.E.5. of this

Manual.

As is discussed in Section VIII.C.2. of this Chapter, the Economic

Espionage Act is sentenced under U.S.S.G. § 2B1.1.

VIII.C.1.b. Base Offense Level

U.S.S.G. § 2B5.3's base offense level is currently 8, up from a base

offense level of 6 for offenses committed before May 1, 2000. See

U.S.S.G. App. C (Amendments 590, 593). The base offense level was

raised from 6 to 8 to reflect that “the vast majority” of intellectual

property offenses involve more than minimal planning. Id.

VIII.C.1.c. Adjust the Offense Level According to the

“Infringement Amount”—U.S.S.G. § 2B5.3(b)(1)

Under U.S.S.G. § 2B5.3(b)(1), the base offense level is then adjusted

according to the “infringement amount,” an estimate of the magnitude of

infringement. “Similar to the sentences for theft and fraud offenses, the

sentences for defendants convicted of intellectual property offenses should

reflect the nature and magnitude of the pecuniary harm caused by their

crimes. Accordingly, similar to the loss enhancement in the theft and

fraud guideline, the infringement amount in subsection (b)(1) serves as

a principal factor in determining the offense level for intellectual property

offenses.” U.S.S.G. § 2B5.3 cmt. backg'd. The mechanics of calculating

the infringement amount are covered in U.S.S.G. § 2B5.3 cmt. n.2.

VIII.C.1.c.i. Formula

The infringement amount is generally calculated by multiplying the

number of infringing goods by the goods' retail value. See U.S.S.G.

§ 2B5.3 cmt. n.2(A),(B).

If the defendant infringed a variety of items, the infringement amount

is the sum of the individual infringement amounts for each type of item.

Id. cmt. n.2(D). The infringement amount for each type of item is

calculated independently of the others, including whether the retail value

should be that of an infringing (counterfeit) item or an infringed

(legitimate) item. Id. See Section VIII.C.1.c.iii. of this Chapter. The

individual infringement amounts are then aggregated into a total

infringement amount, which is then plugged into the loss table in

U.S.S.G. § 2B1.1. See Section VIII.C.1.c.v. of this Chapter.
258 Prosecuting Intellectual Property Crimes

VIII.C.1.c.ii. Number of Infringing Items

The number of infringing items can be easy to calculate. Victims or

their representatives can often help verify the number when the number

depends on whether an item's copyright or trademark has been registered.

For a list of industry associations that represent victims, consult Appendix

G of this Manual. When the number of infringing items is difficult or

impossible to calculate, however, reasonable estimates are allowed. See

Section VIII.C.1.c.iv. of this Chapter.

In determining the number of infringing items, the biggest questions

are often whether or to what extent to include items that are incomplete,

such as items in the process of production, or that merely facilitate

infringement, such as labels and packaging. These questions are discussed

at length in Sections III.E.5. (sentencing issues concerning counterfeit

marks) and VI.E.5. (sentencing issues concerning counterfeit and illicit

labels, documentation, and packaging for copyrighted works) of this

Manual. They are also likely to be addressed in upcoming guideline

amendments that will be considered after this Manual is published mid2006.

A recurring question is whether the infringement amount should

include all the infringing items that the defendant acquired or only those

that he provided to another, such as a customer or co-conspirator. If

trafficking is an element of the crime, then the infringement amount

should include all items the defendant acquired because the intellectual

property crimes define trafficking to include obtaining control over the

infringing product with the intent to transport, transfer, or dispose of it.

See United States v. DeFreitas, No. 98 CR. 1004(RWS), 2000 WL

763850, at *1 (S.D.N.Y. June 13, 2000) (trademark case), aff'd on other

grounds, 8 Fed. Appx. 58 (2d Cir. 2001). The infringement amount

should also include all the items the defendant acquired if he is convicted

of an attempt, id., or conspiracy. In such cases, the infringement amount

should include all infringing items in the defendant's inventory, plus all

infringing items that had been transferred out of inventory.

Determining the number of infringing items in a DMCA case can be

a challenge because a defendant can violate the DMCA without engaging

in any infringement. See Chapter V of this Manual. The guideline and its

commentary give no help. Because these issues are complex and are also

likely to be addressed in guidelines amendments that will be considered

after this Manual is published in 2006, prosecutors are encouraged to

consult CCIPS for guidance at (202) 514-1026.
VIII. Penalties, Restitution, and Forfeiture 259

VIII.C.1.c.iii. Retail Value

The major issues with determining the retail value are what to do

when the items have not been fully manufactured, how to value items that

facilitate infringement, which market should be used for reference, and

whether to use the value of a counterfeit or a legitimate item. These

questions are addressed below.

• Incompletely Manufactured Items 

How to value items whose manufacture is incomplete is treated in

Sections III.E.5. and VI.E.5. of this Manual.

• Items that Facilitate Infringement Such as Labels and DMCA

Circumvention Devices

How to value items that do not infringe but instead enable

infringement—such as counterfeit labels, packaging, and documentation,

as well as DMCA-violating circumvention devices—raises complex issues.

These issues include whether to use the value of the item that facilitates

infringement (such as the label or circumvention device) or the item that

would be infringed, and how to value items that could facilitate the

infringement of a variety of items that have disparate prices (such as

clothing labels that could be attached to low-priced children's clothing or

high-priced men's suits or ladies' dresses). These issues are discussed

briefly in Sections III.E.5. and VI.E.5. of this Manual, and are also likely

to be addressed in upcoming guideline amendments that will be

considered after this Manual is published in 2006.

• Choosing the Correct Market

“[T]he 'retail value' of an infringed item or an infringing item is the

retail price of that item in the market in which it is sold.” U.S.S.G.

§ 2B5.3 cmt. n.2(C). To define the relevant market in which the items are

sold, the government should focus on the market's geographic location,

whether it exists on the Internet or in real-world storefronts, and whether

it is sold in a legitimate market or a black market.

• Infringing/Counterfeit vs. Infringed/Authentic Retail Values

Infringing items often trade for much less than authentic items. Using

the retail value of one rather than the other can easily mean the difference

between months and years in prison, if not between prison and probation.

Consequently, whether to use the retail value of counterfeits or authentic

items is often the predominant issue at sentencing.

The general rule of fitting the punishment to the harm applies to

selecting the retail value. Intellectual property crimes create four basic
260 Prosecuting Intellectual Property Crimes

types of harm: (1) the fraud on consumers who were tricked into buying

something inauthentic (at the defendant's prices), (2) the legitimate

income that rights-holders lost (at legitimate prices) when consumers

mistakenly bought the defendant's items, (3) the rights-holders' inability

to control the use of their property, whether consumers were defrauded

or not, and (4) the defendant's unjust enrichment (at the defendant's

prices) by using the rights-holder's intellectual property unlawfully.

To value these harms, the law simplified the inquiry into whether the

defendant caused or was likely to have caused the victim to lose sales or

not. If so, the maximum measure of harm is the victim's lost sales, which

are valued at the victim's own prices. If not, the maximum measure of

harm is the defendant's gain, which is valued at what the defendant took

in, at his own prices. And if the counterfeit price was hard to determine,

then the harm should be computed at the legitimate item's price for ease

of calculation.

The guidelines, however, originally directed courts to account for

these harms by using only the retail value of infringing (counterfeit) items.

See U.S.S.G. § 2B5.3(b)(1) & cmt. n.1 & backg'd (1998). But this

presented some difficulties when the counterfeit items had been

distributed for free, such as pirated software and music that was freely

available over the Internet, which would have resulted in an infringement

amount of $0. Nor did the Guidelines explain how to calculate the retail

value of the infringing items when that value was difficult to determine:

whereas the retail value of legitimate items is easily measured, the retail

value of counterfeit items is not always obvious.

Notwithstanding the original guidelines' silence as to a legitimate

item's retail value, the courts recognized its relevance in a variety of

circumstances. The Second Circuit clarified that high-quality fakes should

be valued at the retail price and lower-quality fakes should be valued at

the counterfeit price. See United States v. Larracuente, 952 F.2d 672,

674-75 (2d Cir. 1992). Other courts recognized that a genuine item's

price could help determine a counterfeit item's retail value when it

otherwise was difficult to determine. See United States v. Slater, 348 F.3d

666, 670 (7th Cir. 2003) (refusing to assess zero value to free software

distributed over the Internet because courts “need only make a reasonable

estimate of the loss, given the available information”); United States v.

Bao, 189 F.3d 860, 866-67 (9th Cir. 1999) (stating that the retail value

of genuine merchandise is relevant as a ceiling for the retail value of

infringing items); United States v. Cho, 136 F.3d 982, 985 (5th Cir.

1998) (stating that it is “not clear error for the district court to rely on the

retail value of genuine items [to assess] the retail value of the [counterfeit]
VIII. Penalties, Restitution, and Forfeiture 261

items,” particularly when it is difficult to calculate the counterfeits' price);

United States v. Kim, 963 F.2d 65, 69 (5th Cir. 1992) (holding that

evidence of genuine items' retail value was relevant to the retail value for

the counterfeits in absence of other evidence of counterfeits' value);

United States v. DeFreitas, No. 98 CR. 1004 (RWS), 2000 WL 763850,

at *2 (S.D.N.Y. June 13, 2000). In fact, the Slater, Bao, Kim and

DeFreitas courts ultimately relied on the retail price of the infringed

(legitimate) goods, even though the former guideline's plain language

referred only to the retail value of the infringing (counterfeit)

merchandise.

On May 1, 2000, the sentencing guidelines caught up to the case-law

by concentrating on the harm the defendant caused, whether he displaced

the victim's legitimate sales, and how hard it is to calculate the

counterfeit's value. See U.S.S.G. App. C (Amendments 590, 593).

Application Note 2(A) to U.S.S.G. § 2B5.3 now instructs the court to use

the retail value of an authentic item if any one of the following situations

applies:

• The infringing item “is, or appears to a reasonably informed

purchaser to be, identical or substantially equivalent to the

infringed item,” U.S.S.G. cmt. n.2(A)(i)(I)

Differences in appearance and quality therefore matter if they could

be ascertained by “a reasonably informed purchaser.” An infringing item

that could fool only an uninformed purchaser would be valued at the

counterfeit retail value.

• The infringing item is a digital or electronic reproduction, id.

cmt. n.2(A)(i)(II)

For digital or electronic reproductions, use the retail value of an

authentic item regardless of whether they appear authentic to a

reasonably informed purchaser or not. A counterfeit movie DVD with an

obviously counterfeit label would be valued at the authentic item's retail

value, even though nobody would be confused into mistaking the

counterfeit for an authentic DVD. The Commission's theory is likely that

a digital or electronic reproduction is a perfect substitute for the real

thing, whether its outer trappings look legitimate or not. The guideline

does not distinguish between types of digital reproduction, such as when

the digital or electronic reproduction is not a perfect substitute because

its quality was degraded, as with a camcorded movie or a musical song

that has been reproduced at a lower sampling rate than CD quality.
262 Prosecuting Intellectual Property Crimes

• The counterfeit was sold at 75% or more of the authentic

item's retail price, id. cmt. n.2(A)(ii)

Again, the Commission likely reasoned that counterfeits sold at less

than 75% of the authentic item's retail price are unlikely to fool

consumers, or that consumers who would pay less than 75% of the

authentic retail price would be unlikely to pay full price even if given the

chance to do so.

• The counterfeit's retail value “is difficult or impossible to

determine without unduly complicating or prolonging the

sentencing proceeding,” id. cmt. n.2(A)(iii)

As is discussed in Section VIII.C.1.c.iv. of this Chapter, reasonable

estimates of the counterfeit and authentic retail prices are acceptable, but

speculative guesses or overly time-consuming calculations are not.

• The offense involved illegal interception of satellite cable

signals in violation of 18 U.S.C. § 2511, where “the 'retail value

of the infringed item' is the price the user of the transmission

would have paid to lawfully receive that transmission, and the

'infringed item' is the satellite transmission rather than the

intercepting device,” id. cmt. n.2(A)(iv)

Presumably this rule would also apply to the illegal interception of

cable and satellite service under statutes other than 18 U.S.C. § 2511,

such as 47 U.S.C. §§ 553(b)(2), 605 and 17 U.S.C. § 1204.

• The retail value of the authentic good is a better approximation

of the harm than the value of the counterfeit, id. cmt.

n.2(A)(v); or

• “The offense involves the display, performance, publication,

reproduction, or distribution of a work being prepared for

commercial distribution. In a case involving such an offense,

the 'retail value of the infringed [authentic] item' is the value of

that item upon its initial commercial distribution,” id. cmt.

n.2(A)(vi)

This is part of the Sentencing Commission's solution to the so-called

“pre-release problem”—that is, how to value an infringing copyrighted

work whose infringement occurred before the rights-holder put the

authentic work on the market itself. Confronted with widely diverging

estimates of the harm caused by pre-release piracy, the Commission

determined that a pre-release work's retail value should equal its

anticipated legitimate retail value, but that a 2-point upward adjustment

should be added for all pre-release offenses. See U.S.S.G. § 2B5.3(b)(2).
VIII. Penalties, Restitution, and Forfeiture 263

See also Section VIII.C.1.d. of this Chapter. Both these provisions were

added on October 24, 2005. U.S.S.G. App. C (Amendment 675).

If any one of the above situations applies, the retail value is that of

the infringed (legitimate) item.

If none of these situations apply, the retail value is that of the

(infringing) counterfeit item. See U.S.S.G. § 2B5.3 cmt. n.2(B) & backg'd;

id. App. C (Amendment 593). This includes cases involving the unlawful

recording of a musical performance in violation of 18 U.S.C. § 2319A.

U.S.S.G. § 2B5.3 cmt. n.2(B).

VIII.C.1.c.iv. Determining Amounts and Values—Reasonable

Estimates Allowed

How to determine the infringing or infringed item's retail value? Any

relevant source of information is appropriate. Actual prices are preferable,

such as prices determined from the defendant's price list, prices charged

during undercover buys, or actual retail prices for specific items in the

legitimate manufacturer's catalogue. Approximations may be necessary,

however, and they may include estimations of the average counterfeit

prices in the market or region as determined by experts, or the average

retail price for a product line in the manufacturer's catalogue.

The same rule goes for determining the number of infringing items:

actual counts are preferable, but approximations are appropriate.

The courts allowed approximations of the infringement amount even

before the guidelines did so explicitly. See United States v. Foote, 413

F.3d 1240, 1251 (10th Cir. 2005) (allowing analysis of defendant's bank

records to aid in determining infringement amount); United States v.

Slater, 348 F.3d 666, 670 (7th Cir. 2003) (confirming that district courts

have “considerable leeway in assessing the retail value of the infringing

items” and that courts “need only make a reasonable estimate of the loss,

given the available information,” citing the former U.S.S.G. § 2F1.1, now

replaced by § 2B1.1); United States v. Kim, 963 F.2d 65, 69-70 (5th Cir.

1992) (analogizing to fraud guideline for principle that reasonable

estimates are acceptable).

Now, however, U.S.S.G. § 2B5.3 explicitly states that reasonable

estimates are acceptable. On October 24, 2005, Application Note 2(E) to

U.S.S.G. § 2B5.3 clarified as follows:

(E) Indeterminate Number of Infringing Items.—In a case in

which the court cannot determine the number of infringing items,

the court need only make a reasonable estimate of the
264 Prosecuting Intellectual Property Crimes

infringement amount using any relevant information, including

financial records.

See U.S.S.G. App. C (Amendment 675). The reference to financial

records is likely an incorporation of the holding in Foote.

Although statistical precision is preferable, it is not necessary. For

example, in a case that turned on whether the 3,947 infringing pieces of

computer software on a server were functioning or nonfunctioning, the

FBI tested 71 programs and found that 94% were functioning. United

States v. Rothberg, No. 00 CR 85, 2002 WL 171963, at *4 (N.D. Ill. Feb.

4, 2002), aff'd on other grounds, 348 F.3d 666 (7th Cir. 2003). To

calculate the total number of functioning programs, the court multiplied

the percentage from the sample (94%) by the total number of programs

(3,947). Id. The court acknowledged that “the selection of the 71

programs was not random,” but found that the selection was nevertheless

“a reasonable basis for determining an estimate.” Id.

Whatever estimates the parties offer, however, the parties must

explain how their estimate was calculated and why. In Rothberg, supra,

the government first estimated the number of functioning programs based

on a mathematical function it claimed derived from “information

regarding [data] transmission error rates [the government] obtained from

companies that maintain telephone lines.” Id. at *3. The court rejected

this estimate because the government had not explained how it “had

derived the calculation or why it should be considered a reasonable basis

for estimating the number of functioning programs.” Id.

Although U.S.S.G. § 2B5.3 speaks only of estimating the number of

infringing items, there is no reason to believe that it abrogates earlier law

allowing the estimation of retail values. E.g., Slater, supra; United States

v. Foote, No. C.R.A. 00-20091-01-KHV, 2003 WL 22466158, at *6 (D.

Kan. July 31, 2003) (estimating infringement amount from trademark

counterfeiting by subtracting legitimate income from bank deposits, and

further discounting by the percentage of sales attributable to noninfringing items), aff'd, 413 F.3d 1240, 1251-52 (10th Cir. 2005).

VIII.C.1.c.v. Cross-Reference to Loss Table in U.S.S.G. § 2B1.1

Once calculated, the infringement amount sets the scope of the

enhancement in U.S.S.G. § 2B5.3(b)(1):

• An infringement amount below or up to $2,000 results in no

increase;
VIII. Penalties, Restitution, and Forfeiture 265

• An infringement amount above $2,000 and up to $5,000 results

in a 1-level increase; and

• An infringement amount above $5,000 increases the offense level

according to the loss table in U.S.S.G. § 2B1.1(b)(1) (Theft,

Embezzlement, Receipt of Stolen Property, Property Destruction,

and Offenses Involving Fraud or Deceit).

When consulting U.S.S.G. § 2B1.1, look only to the loss table in

subsection (b)(1); other portions of that guideline—including the base

offense level, other offense enhancements, and the commentary—are

inapplicable. See U.S.S.G. § 1B1.5(b)(2). Moreover, U.S.S.G.

§ 2B5.3(b)(1)'s citation to the loss table in U.S.S.G. § 2B1.1 does not

mean that the infringement amount should equal the victim's loss. Rather,

the infringement amount approximates the victim's loss, but need not

equal it. See U.S. v. Cho, 136 F.3d 982 (5th Cir. 1998); see also U.S.S.G.

App. C (Amendments 590, 593) (discussing infringement amount as

similar to loss and an approximation of harm). On this technical point,

United States v. Sung, 51 F.3d 92, 95 (7th Cir. 1995) is technically

incorrect when it confuses the infringement amount with the loss

incurred. Although the infringement amount is often characterized as

describing the “loss” to the victim, it is not necessary for the government

to show that the copyright owner suffered any actual pecuniary loss. See

U.S. v. Powell, 139 Fed. Appx. 545 (4th Cir. July 19, 2005) (applying

2003 Guidelines, finding enhancement under § 2B1.1 table based on

infringement amount of more than $250,000 was proper even though the

victim suffered no pecuniary loss; sentence vacated and remanded on

other grounds) (unpublished opinion).

VIII.C.1.d. Pre-release Piracy Increases the Offense Level

by 2—U.S.S.G. § 2B5.3(b)(2)

Distribution of a copyrighted item before it is legally available to the

consumer is more serious than the distribution of already available items.

U.S.S.G. App. C (Amendment 675). Consequently, effective October 24,

2005, the Sentencing Commission added a 2-level enhancement for

offenses that involve the display, performance, publication, reproduction,

or distribution of a work being prepared for commercial distribution. See

U.S.S.G. § 2B5.3(b)(2). A “work being prepared for commercial

distribution” has the meaning given in 17 U.S.C.§ 506(a)(3). U.S.S.G.

§ 2B5.3 cmt. n.1. See also Chapter II of this Manual.

The 2-level increase for pre-release piracy applies not only to the

online pre-release offense set forth in 17 U.S.C. § 506(a)(1)(C) (which by

definition involves pre-release piracy over publicly-accessible computer
266 Prosecuting Intellectual Property Crimes

networks), but also to any copyright crimes under § 506(a)(1)(A) or (B)

that involve pre-release piracy done through any other medium, such as

a § 506(a)(1)(A) conviction for selling pirated pre-release movie DVDs.

VIII.C.1.e. Manufacturing, Importing, or Uploading Infringing

Items Increases the Offense Level by 2—U.S.S.G.

§ 2B5.3(b)(3) [before October 24, 2005: § 2B5.3(b)(2)]

The offense level is increased by 2 levels if the offense involves the

“manufacture, importation, or uploading of infringing items.” U.S.S.G.

§ 2B5.3(b)(3). (Before the October 24, 2005 amendments, this provision

was numbered § 2B5.3(b)(2). See U.S.S.G. App. C (Amendment 675).)

If, after applying § 2B5.3(a), (b)(1), (b)(2), and the 2-level increase in

(b)(3), the offense level is less than 12, then it must be increased to 12.

U.S.S.G. § 2B5.3(b)(3).

This upward adjustment reflects the need to punish those who

introduce infringing goods into the stream of commerce. U.S.S.G. App.

C (Amendments 590, 593). 

Uploading is particularly troublesome because it not only introduces

infringing items into the stream of commerce, but also enables further

infringement of the works. U.S.S.G. App. C (Amendments 590, 593).

“'Uploading' means making an infringing item available on the Internet or

a similar electronic bulletin board with the intent to enable other persons

to (A) download or otherwise copy the infringing item; or (B) have access

to the infringing item, including by storing the infringing item in an

openly shared file.” U.S.S.G. § 2B5.3 cmt. n.1 (Oct. 24, 2005). Uploading

does not include merely downloading or installing an infringing item on

a hard drive on a defendant's personal computer, unless the defendant

places the infringing item in an openly shared file. Id. (Before the October

24, 2005 amendments, “uploading” was defined in § 2B5.3's first and

third application notes. The 2005 amendments consolidated the

definition into the first application note and clarified the circumstances

in which loading a file onto a computer hard drive constitutes uploading.

The amendment made no substantive change, however. See U.S.S.G. App.

C (Amendment 675).)

Manufacturing and importing infringing items are also singled out for

a 2-level increase because those actions introduce infringing items into the

stream of commerce. U.S.S.G. § 2B5.3 App. C (Amendments 590, 593).

Although the guidelines do not define “manufacturing,” the important

distinction is between manufacturing (which gets the 2-level increase) and

mere distribution and trafficking (which do not unless they involved
VIII. Penalties, Restitution, and Forfeiture 267

importation or uploading). In the case of counterfeit trademarked goods,

manufacturing should include not only producing the item, but also

applying a counterfeit label to it, since an item does not become

counterfeit until a counterfeit label is used in conjunction with it.

Manufacturing should encompass not only the production of

counterfeit trademarked hard goods, but also the performance of

counterfeit service-marked services and the production and reproduction

of pirated copyrighted works under 17 U.S.C. § 506; counterfeit labels

under 18 U.S.C. § 2318; bootleg music recordings under 17 U.S.C.

§ 2319A; camcorded movies under 18 U.S.C. § 2319B; and illegal

circumvention devices under 17 U.S.C. § 1204.

If a defendant conspired with or aided and abetted another person

who manufactured, uploaded, or imported infringing items, the defendant

can qualify for this 2-level increase even if he did none of these things

himself. The increase is triggered by whether the offense involved

manufacturing, importation, or uploading, not whether the defendant

performed these tasks. See U.S.S.G. § 2B5.3(b)(3) (“If the offense

involved the manufacture, importation, or uploading ...”) (emphasis

added); U.S.S.G. § Ch. 2 (Introductory Commentary) (“Chapter Two

pertains to offense conduct.”).

VIII.C.1.f. Offense Not Committed for Commercial

Advantage or Private Financial Gain Reduces the Offense

Level by 2—U.S.S.G. § 2B5.3(b)(4) 

[before October 24, 2005: § 2B5.3(b)(3)]

The fourth offense characteristic, located in guideline § 2B5.3(b)(4),

decreases the offense level by 2 levels if the offense was not committed for

commercial advantage or private financial gain, but the resulting offense

level cannot be less than 8. (This characteristic was renumbered from

§ 2B5.3(b)(3) to 2B5.3(b)(4) in the October 24, 2005 amendments. See

U.S.S.G. App. C (Amendments 590, 593, 675).)

The defendant bears the burden of proving that he is entitled to this

offense characteristic, because it is structured as a decrease rather than an

increase. See generally United States v. Ameline, 409 F.3d 1073, 1086

(9th Cir. 2005) (en banc); United States v. Dinges, 917 F.2d 1133, 1135

(8th Cir. 1990); United States v. Kirk, 894 F.2d 1162, 1164 (10th Cir.

1990); United States v. Urrego-Linares, 879 F.2d 1234, 1238-39 (4th Cir.

1989).

For a complete discussion of what qualifies as conduct done for the

purposes of commercial advantage or private financial gain, see Section
268 Prosecuting Intellectual Property Crimes

II.B.4. of this Manual (copyright). The interpretation of commercial

advantage and private financial gain in copyright cases applies equally to

U.S.S.G. § 2B5.3 for any type of intellectual property crime because the

statutory and guidelines definitions are nearly identical. Compare

U.S.S.G. § 2B5.3 cmt. n.1 (defining terms) with 17 U.S.C. § 101 (same).

VIII.C.1.g. Offense Involving Risk of Serious Bodily Injury or

Possession of a Dangerous Weapon Increases the Offense Level

by 2—U.S.S.G. § 2B5.3(b)(5) [before October 24, 2005:

§ 2B5.3(b)(4)]

If the offense involved conscious or reckless risk of serious bodily

injury or possession of a dangerous weapon, the offense level is increased

by 2. U.S.S.G. § 2B5.3(b)(5). If the resulting offense level is less than 13,

then it must be increased to level 13. See, e.g., United States v. Maloney,

85 Fed. Appx. 252 (2d Cir. 2004) (applying 2-level enhancement for

possession of a dangerous weapon in connection with conviction under 18

U.S.C. § 2318(a),(c)(3) and § 2, even though defendant was acquitted at

trial of a felon-in-possession of a firearm charge).

This enhancement was partially motivated by the health and safety

risks from counterfeit consumer products such as counterfeit batteries,

airplane parts, and pharmaceuticals. See U.S.S.G. App. C (Amendments

590, 593). The October 24, 2005 amendments renumbered this

enhancement from U.S.S.G. § 2B5.3(b)(4) to § 2B5.3(b)(5). Id.

(Amendment 675).

VIII.C.1.h. Decryption or Circumvention of Access Controls

Increases the Offense Level—U.S.S.G. § 3B1.3

The 2-level enhancement for use of a special skill under U.S.S.G.

§ 3B1.3 “shall apply” if the defendant decrypted or circumvented access

controls. U.S.S.G. § 2B5.3 cmt. n.3 (emphasis added) (formerly n.4,

before the Oct. 24, 2005 amendments, see U.S.S.G. App. C (Amendment

675)).

Because the note quoted above refers only to the circumvention of

access controls, it is unclear whether the special skill enhancement must

also apply to decrypting or circumventing copy controls. There is no

policy-related reason to treat access and copy controls differently at

sentencing. In fact, U.S.S.G. § 3B1.3 applies to any defendant who

commits an intellectual property crime while using a special skill. See

Section VIII.C.2.i. of this Chapter for a more detailed description of what

constitutes a special skill.
VIII. Penalties, Restitution, and Forfeiture 269

This enhancement may not be assessed for use of a special skill if the

adjustment under U.S.S.G. § 3B1.1 (Aggravating Role) is also assessed.

See U.S.S.G. § 3B1.3.

VIII.C.1.i. Upward Adjustment for Harm to Copyright or

Mark-Owner's Reputation, Connection with Organized Crime,

or Other Unspecified Grounds

The fourth application note for § 2B5.3 (formerly application note 5,

before the October 24, 2005 amendments) states that an upward

departure may be warranted if the offense level determined under § 2B5.3

“substantially understates the seriousness of the offense,” such as when

the offense substantially harmed the victim's reputation in a way that is

otherwise unaccounted for, including in calculating the infringement

amount, and when the offense was in connection with or in furtherance

of a national or international organized criminal enterprise. U.S.S.G.

§ 2B5.3 cmt. n.4; id. App. C (Amendments 590, 593).These two examples

are not, however, exclusive.

VIII.C.1.j. Vulnerable Victims—U.S.S.G. § 3A1.1(b)

Intellectual property crime defendants are likely to qualify for an

upward adjustment under U.S.S.G. § 3A1.1(b) if they knew or should

have known that they were selling counterfeit products to vulnerable

victims. A prime example of this would be selling counterfeit

pharmaceuticals that are distributed or redistributed to sick patients. See

United States v. Milstein, 401 F.3d 53, 74 (2d Cir. 2005) (affirming

vulnerable victim adjustment for distributing counterfeit and misbranded

drugs “to doctors, pharmacists, and pharmaceutical wholesalers, knowing

that those customers would distribute the drugs to women with fertility

problems and to Parkinson's disease patients”).

VIII.C.1.k. No Downward Departure for the Victim's

Participation in Prosecution

The court may not depart downward on the ground that the victim

participated in the prosecution. In United States v. Yang, 281 F.3d 534

(6th Cir. 2002), cert. denied, 537 U.S. 1170 (2003), on appeal after new

sentencing hearing, 144 Fed. Appx. 521 (6th Cir. 2005), a prosecution for

theft of trade secret, mail fraud, wire fraud, and money laundering, the

trial court departed downward 14 levels on the ground that the victim

participated too much in the prosecution, specifically in calculating the

loss it suffered. The 6th Circuit reversed, concluding that “the victim's

participation in the prosecution is wholly irrelevant to either the
270 Prosecuting Intellectual Property Crimes

defendant's guilt or the nature or extent of his sentence,” and is therefore

not a permissible basis for a downward departure. Yang, 281 F.3d at 545,

546.

VIII.C.2. Offenses Involving the Economic Espionage Act

VIII.C.2.a. Applicable Guideline is § 2B1.1, Except for

Attempts and Conspiracies

Unlike most other intellectual property offenses, which are sentenced

under U.S.S.G. § 2B5.3, completed EEA offenses (both § 1831 and

§ 1832) are sentenced under U.S.S.G. § 2B1.1. See U.S.S.G. App. A. The

choice of U.S.S.G. § 2B1.1 instead of U.S.S.G. § 2B5.3 likely reflects the

idea that EEA offenses are primarily about stolen property rather than

infringement. The superficial difference between stealing and infringement

is that one physically dispossesses the victim of his property and the latter

does not. However, the EEA punishes those who steal trade secrets

without dispossessing the victim of his trade secret, and even after a trade

secret is physically stolen, the victim may still use the information itself.

The overlap between misappropriation and infringement therefore makes

U.S.S.G. § 2B1.1 an interesting fit for the EEA.

An EEA attempt or conspiracy is sentenced under U.S.S.G. § 2X1.1

(Conspiracies, Attempts, and Solicitations), which uses the offense level

calculated under U.S.S.G. § 2B1.1 and decreases the base offense level 3

levels “unless the defendant completed all the acts the defendant believed

necessary for successful completion of the substantive offense or the

circumstances demonstrate that the defendant was about to complete all

such acts but for apprehension or interruption by some similar event

beyond the defendant's control.” U.S.S.G. § 2X1.1(b)(1),(2). The 3-point

reduction will rarely apply in EEA attempt cases resulting from

undercover stings because in those operations the defendant has generally

completed all necessary acts short of the actual receipt of what the

defendant believed was a trade secret.

VIII.C.2.b. Base Offense Level—U.S.S.G. § 2B1.1(a)

The base offense level for a completed EEA crime is 6. U.S.S.G.

§ 2B1.1(a)(2).

VIII.C.2.c. Loss—U.S.S.G. § 2B1.1(b)(1)

The defendant's sentence is driven largely by the value of the

misappropriated property. Under U.S.S.G. § 2B1.1(b)(1), the offense level

increases according to the amount of the loss.
VIII. Penalties, Restitution, and Forfeiture 271

VIII.C.2.c.i. Use Greater of Actual or Intended Loss

This loss figure is “the greater of actual loss or intended loss.”

U.S.S.G. § 2B1.1 cmt. n.3(A). “Actual loss” is “the reasonably foreseeable

pecuniary harm that resulted from the offense,” whereas “intended loss (I)

means the pecuniary harm that was intended to result from the offense;

and (II) includes intended pecuniary harm that would have been

impossible or unlikely to occur (e.g., as in a government sting operation,

or an insurance fraud in which the claim exceeded the insured value).” Id.

cmt. n.3(A)(i-ii).

VIII.C.2.c.ii. Reasonable Estimates Acceptable

Whatever method is chosen to calculate loss, the government's

calculation need not be absolutely certain or precise. “The court need only

make a reasonable estimate of the loss.” U.S.S.G. § 2B1.1 cmt. n.3(C).

VIII.C.2.c.iii. Methods of Calculating Loss

Guideline § 2B1.1's application notes outline a number of general

methods for calculating the loss, many of which are included as methods

to estimate the loss:

• “[T]he reasonably foreseeable pecuniary harm that resulted from

the offense,” U.S.S.G. § 2B1.1 cmt. n.3(A)(i)

• “The fair market value of the property unlawfully taken or

destroyed or, if the fair market value is impractible to determine

or inadequately measures the harm, the cost to the victim of

replacing that property,” n.3(C)(i)

• “The cost of repairs to damaged property,” n.3(C)(ii)

• “The approximate number of victims multiplied by the average

loss to each victim,” n.3(C)(iii)

• “The reduction that resulted from the offense in the value of

equity securities or other corporate assets,” n.3(C)(iv)

• “More general factors, such as the scope and duration of the

offense and revenues generated by similar operations,” n.3(C)(v)

• “[T]he gain that resulted from the offense as an alternative

measure of loss[,] only if there is a loss but it reasonably cannot

be determined,” n.3(B)
272 Prosecuting Intellectual Property Crimes

In a trade secrets case, calculating the loss can be complicated. First,

consider the situations under which the defendant can be convicted: (a)

merely conspiring to misappropriate a trade secret that the victim has not

fully exploited to create a product; (b) receiving a trade secret, but not

using the trade secret; (c) stealing a trade secret at no cost; (d) stealing a

trade secret for an agreed-upon bribe; (e) receiving a trade secret and

using it to create a product that has not been completed; (f) receiving a

trade secret, using it to create a product, introducing the product, but not

yet selling it; (g) receiving a trade secret, using it to create a product, and

selling the product at a loss; (h) receiving the trade secret, using it, and

selling the product at a profit, while the victim continues to profit from

its own sales; and (i) receiving the trade secret, using it, and selling a

product that displaces the victim's sales. These situations do not exhaust

the possibilities. They illustrate, however, several complicating factors:

• whether the defendant paid anything for the secret

• whether the defendant was paid anything for the secret

• whether the defendant used the secret

• whether the defendant used the secret and made money from its

use and

• whether the victim's sales decreased, increased, or increased at a

lower rate than they would have had the misappropriation not

occurred

The final complicating factor is that trade secrets are, by definition, not

traded in an open market that allows the easy calculation of a trade

secret's price or value.

The variety of misappropriation scenarios, the variety of evidence

available, and the broad principles of valuing trade secrets in criminal and

civil law lead to one clear recommendation: prosecutors, agents, and

courts should consider the variety of methods by which a trade secret can

be valued, develop whatever evidence is reasonably available, and then be

pragmatic about choosing which method to use, as long as it is equitable,

appropriately punitive, and supported by the evidence. The cases bear this

out.

• Criminal Cases

Few reported federal criminal decisions describe how to value trade

secrets, but those that do tend to focus on the trade secret's research and

development costs. In United States v. Wilson, 900 F.2d 1350 (9th Cir.

1990), a mail fraud case, a research associate offered to sell financial and
VIII. Penalties, Restitution, and Forfeiture 273

research data from his employer, a biotechnology and pharmaceutical

firm, to a competitor. The defendant argued that the documents were

worth their fair market value: the $100,000 to $200,000 that the

competitor said it would have paid for them—the competitor worked with

law enforcement to set up a sting—or the $200,000 that the defendant

had said that he would sell them for. Id. at 1356. The Ninth Circuit,

however, noted its “refus[al] to require a strict market value approach in

determining the value of stolen goods,” because that approach “measures

only the gain to the defendant while virtually ignoring the harm suffered

by the victim.” Id. (citations omitted). Although the court acknowledged

that the buyer's and seller's prices were relevant, it held that the trial court

was entitled to value the documents at the victim's research and

development costs for the information contained in the documents,

especially because those costs indicate the intended loss to the victim. Id.

Those costs totaled $4 million, although the trial court generously

reduced the total by 75 percent, to $1 million, to give the defendant the

benefit of every doubt. Id. at 1355.

Similarly, in United States v. Ameri, 412 F.3d 893, 900 (8th Cir.

2005), an employee stole his employer's proprietary software, which the

evidence showed was at the heart of a $10 million contract, had no

verifiable fair market value because it was not available separately,

alternatively had a fair market value of $1 million per copy, and was

developed for about $700,000. Faced with these figures, the Eighth

Circuit affirmed the trial court's loss estimate of $1.4 million, which

appears to be the $700,000 in development costs times 2, the number of

copies the defendant made. Id. at 900-01.

Finally, United States v. Kwan, No. 02 CR. 241(DAB), 2003 WL

22973515 (S.D.N.Y. Dec. 17, 2003), considered whether “proprietary

hotel contact lists, hotel rate sheets, travel consortium contact lists, travel

consortium rate sheets, and cruise operator rate sheets”—all useful in the

travel industry—met the jurisdictional threshold for interstate

transportation of stolen property under 18 U.S.C. § 2314 by being worth

more than $5,000. Id. at *1. The court found most persuasive an

argument for a value over $5,000 based on the documents' cost of

production, which it estimated by noting the salary of people who created

the documents and the amount of time they would have spent gathering

the information and creating the documents. Id. at *9 & n.12. In all these

cases, the loss or market value was defined largely by development costs.

Some civil trade secret cases have measured the replacement cost

using the victim's research and development costs. See Salsbury Labs., Inc.

v. Merieux Labs., Inc., 908 F.2d 706, 714-15 (11th Cir. 1990) (holding
274 Prosecuting Intellectual Property Crimes

that research and development costs for misappropriated vaccine were a

proper factor to determine damages); cf. University Computing Co. v.

Lykes-Youngstown Corp., 504 F.2d 518, 538 (5th Cir. 1974) (holding

that development costs should be taken into consideration with a number

of factors, including “the commercial context in which the

misappropriation occurred”). But see Softel, Inc. v. Dragon Med. &

Scientific Communications, Inc., 118 F.3d 955, 969 (2d Cir. 1997)

(holding that it is usually appropriate to measure damages based on

development costs and importance of secret to plaintiff only after a

defendant completely destroys the value of the trade secret).

An interesting exception to using development costs to value trade

secrets is United States v. Pemberton, 904 F.2d 515 (9th Cir. 1990), in

which a legitimate buyer's price was selected. After the defendant was

convicted for receiving stolen property, namely technical landscape and

irrigation design drawings for a 450-acre commercial development, the

trial court had to select among valuation methods, including valuing the

drawings at what the drawings were purportedly worth to

defendant—zero; the $1,200 cost of the materials on which they were

drawn; the $65,000 cost of replacing the drawings in full; and the

$118,400 contract price for the drawings (80 percent of the full contract

price, given that the drawings were 80 percent complete when stolen). Id.

at 516 & n.1, 517. Without a price from an open market, since the

drawings were unique, the appellate court affirmed the trial court's choice

of the $118,400 contract price.

Why use the buyer's price in Pemberton rather than the development

costs, as had been done in the Wilson, Ameri, and Kwan cases? There

appear to be three differences. First, in Pemberton the buyer's price came

from a legitimate market transaction rather than a black-market

transaction that would have undervalued the property. Second, in

Pemberton, the buyer's price was apparently higher than the development

costs. Third, and this is related to the second point, in Pemberton the

drawings that were stolen likely could have been used for one project only,

the real estate development by the legitimate buyer, whereas the trade

secrets in Wilson, Ameri, and Kwan included general information that

could have been used over and over again by illegitimate buyers. Research

and development costs for a one-off project are likely to be less than the

legitimate buyer's price (since this is the only opportunity the trade-secret

holder can recover his overhead), whereas research and development costs

for a replicable product or service will likely exceed a legitimate buyer's

price (since the trade-secret holder can recover his overhead through

repeated sales). It may also be that the criminal cases are largely

consistent with civil cases' tendency when there is evidence for more than
VIII. Penalties, Restitution, and Forfeiture 275

one measure to “award that amount which is most beneficial to the

injured party.” 1 Richard Raysman & Peter Brown, Computer Law:

Drafting and Negotiating Forms § 6.03A (2005).

• Civil Cases

Prosecutors should also be aware of how civil cases measure losses

from trade secret misappropriation. See supra; cf. United States v. Olis,

429 F.3d 540, 546 (5th Cir. 2005) (holding that “[t]he loss guideline [in

U.S.S.G. § 2B1.1] is skeletal because it covers dozens of federal property

crimes,” and therefore “[t]he civil damage measure [for securities fraud]

should be the backdrop for criminal responsibility both because it

furnishes the standard of compensable injury for securities fraud victims

and because it is attuned to stock market complexities”).

Unfortunately, beyond reinforcing the criminal cases' use of research

and development costs, civil measures of damages provide little hard and

fast guidance. The Uniform Trade Secrets Act echoes the Sentencing

Guidelines' generalities:

Damages can include both the actual loss caused by misappropriation

and the unjust enrichment caused by misappropriation that is not

taken into account in computing actual loss. In lieu of damages

measured by any other methods, the damages caused by

misappropriation may be measured by imposition of liability for a

reasonable royalty for a misappropriator's unauthorized disclosure or

use of a trade secret. 

Uniform Trade Secrets Act § 3(a) (1985). In determining damages under

the Uniform Trade Secrets Act, courts base the trade secret's market value

on the victim's loss or the defendant's gain, depending on which measure

appears to be more reliable or greater given the particular circumstances

of the theft. See University Computing Co. v. Lykes-Youngstown Corp.,

504 F.2d 518 (5th Cir. 1974); Vermont Microsystems, Inc. v. Autodesk

Inc., 138 F.3d 449, 452 (2d Cir. 1998). With such broad principles, “the

general law as to the proper measure of damages in a trade secrets case is

far from uniform.” Telex Corp. v. International Bus. Machs. Corp., 510

F.2d 894, 930 (10th Cir. 1975) (concerning misappropriation of trade

secrets and confidential information relating to electronic data processing

systems).

As might be expected, civil cases use a variety of methods to value

trade secrets:

• the value placed on the trade secrets by the parties

• the victim's lost profits
276 Prosecuting Intellectual Property Crimes

• the defendant's realized profits

• the defendant's saved costs from misappropriation

• a reasonable royalty to the victim, when there was otherwise no

gain or loss

1 Richard Raysman & Peter Brown, Computer Law: Drafting and

Negotiating Forms § 6.03A (2005). When there is evidence for more than

one measure, “the court will frequently award that amount which is most

beneficial to the injured party.” Id.

Civil cases often note that if the victim's loss were the only

appropriate measure of damages, someone caught red-handed stealing

trade secrets could not be punished if he had not yet used the information

to the owner's detriment. As a result, in such circumstances most Uniform

Trade Secrets Act cases have computed the trade secret's market value by

focusing on the defendant's gain. See, e.g., University Computing, 504

F.2d at 536 (holding that damages for misappropriation of trade secrets

are measured by the value of the secret to the defendant “where the trade

secret has not been destroyed and where the plaintiff is unable to prove

specific injury”); Salisbury Labs., Inc. v. Merieux Labs., Inc., 908 F.2d

706, 714 (11th Cir. 1990) (ruling that under Georgia's UTSA, damages

for misappropriation of trade secrets should be based on the defendant's

gain). Under the more recent Federal Sentencing Guidelines, the court

may use a defendant's gain as a loss for the victim in certain

circumstances. See U.S.S.G. § 2B1.1 cmt. n.3(B) (2004).

A number of civil cases determine trade secrets' market value by

calculating a “reasonable royalty,” that is, the amount the thief would

have had to pay the victim in licensing or royalty fees had he legitimately

licensed the stolen technology. See, e.g., University Computing, 504 F.2d

at 537. When the defendant has not yet realized sufficient profit to

readily indicate the stolen information's market value, the preferred

estimate is the “reasonable royalty” (or “forced licensing”) measure. See

Uniform Trade Secrets Act § 3(a) (1985) (“In lieu of damages measured

by any other methods, the damages caused by misappropriation may be

measured by imposition of liability for a reasonable royalty for a

misappropriator's unauthorized disclosure or use of a trade secret.”); Vitro

Corp. v. Hall Chem. Co., 292 F.2d 678, 683 (6th Cir. 1961); see also

Vermont Microsystems, Inc. v. Autodesk, Inc., 138 F.3d 449, 450 (2d

Cir. 1998). Other federal cases using the “reasonable royalty” method

include Molex, Inc. v. Nolen, 759 F.2d 474 (5th Cir. 1985); University

Computing Co., 504 F.2d 518; Linkco, Inc. v. Fujitsu Ltd., 232 F. Supp.

2d 182, 186-87 (S.D.N.Y. 2002) (holding that a “reasonable royalty is the
VIII. Penalties, Restitution, and Forfeiture 277

best measure of damages in a case where the alleged thief made no

profits”); Carter Prods., Inc. v. Colgate-Palmolive Co., 214 F. Supp. 383

(D. Md. 1963).

 But calculating a reasonable royalty may prove more difficult and may

unduly prolong or complicate sentencing in cases where the defendant has

not yet manifested his intention to use the stolen technology and there is

no readily ascertainable benchmark for determining a reasonable royalty.

• Practical Guidance on Gathering Evidence

Because of the flexible nature of valuing trade secrets, prosecutors and

investigators should try to obtain the following types of evidence, if

available and applicable:

• the amount the defendant paid for the trade secret

• the amount for which the defendant sold or tried to sell the trade

secret

• the amount for which similar trade secret information sold in the

legitimate open market

• a reasonable royalty, based on what a willing buyer would pay a

willing seller for the technology in an arms-length transaction

• the trade secret owner's research and development costs; and

• the market price that the defendant actually received or paid in

exchange for the technology

VIII.C.2.d. Intent to Benefit a Foreign Government,

Instrumentality, or Agent—U.S.S.G. § 2B1.1(b)(5)

The offense level is increased two points if the defendant knew or

intended the offense to benefit a foreign government, foreign

instrumentality, or foreign agent. See U.S.S.G. § 2B1.1(b)(5).

VIII.C.2.e. Sophisticated Means—U.S.S.G. § 2B1.1(b)(9)(C)

If the offense involved “sophisticated means,” the offense level is

increased by 2 levels, and if the resulting offense is less than 12, it must

be increased to 12. U.S.S.G. § 2B1(b)(9)(C). “'[S]ophisticated means'

means especially complex or especially intricate offense conduct

pertaining to the execution or concealment of an offense,” which includes

“hiding assets or transactions,” among other things. Id. cmt. n.8(B).

The sophisticated means enhancement will often apply to trade secret

offenses, because these crimes are often committed by corporate insiders
278 Prosecuting Intellectual Property Crimes

who have the need and opportunity to take extensive precautions to

shield their actions from their employers. A defendant can receive the

adjustment for sophisticated means in addition to the adjustment for use

of a special skill under U.S.S.G. § 3B1.3. See United States v. Rice, 52

F.3d 843, 851 (10th Cir. 1995) (“The purpose of the special skill

enhancement is to punish those criminals who use their special talents to

commit crime. In contrast, the sophisticated means and more than

minimal planning enhancements [in predecessor guideline to § 2B1.1] are

designed to target criminals who engage in complicated criminal activity

because their actions are considered more blameworthy and deserving of

greater punishment than a perpetrator of a simple version of the crime.

We therefore see no double counting here.”); United States v. Olis, 429

F.3d 540, 549 (5th Cir. 2005); United States v. Minneman, 143 F.3d

274, 283 (7th Cir. 1998).

VIII.C.2.f. Upward Departure Considerations—

U.S.S.G. § 2B1.1 cmt. n.19(A)

A non-exhaustive list of factors in which an upward departure should

be considered is set forth in Application Note 19 to U.S.S.G. § 2B1.1.

The factors that are most likely to be relevant in a trade secret case are

intending, risking, and causing non-monetary harm, such as emotional

harm, because many EEA cases involve disgruntled employees or former

employees out for revenge. U.S.S.G. § 2B1.1 cmt. n.19(i),(ii).

VIII.C.2.g. Downward Departure Considerations—

U.S.S.G. § 2B1.1 cmt. n.19(C)

Application Note 19(C) to U.S.S.G. § 2B1.1 suggests that a

downward departure may be warranted if the offense level “substantially

overstates the seriousness of the offense.” EEA defendants are likely to

raise this as a basis for downward departure if the loss amount greatly

outweighs the amount of the actual or intended gain or loss, as sometimes

happens when the trade secret is valued by research and development

costs.

VIII.C.2.h. Abuse of a Position of Trust—U.S.S.G. § 3B1.3

Trade secret offenses committed by corporate insiders often deserve

the 2-level adjustment for abuse of a position of trust under U.S.S.G.

§ 3B1.3. The adjustment is appropriate when the defendant had

“professional or managerial discretion (i.e., substantial discretionary

judgment that is ordinarily given considerable deference)” and the

position of trust “contributed in some significant way to facilitating the
VIII. Penalties, Restitution, and Forfeiture 279

commission or concealment of the offense.” Id. cmt. n.1. A defendant can

receive the enhancements for abuse of a position of trust and

sophisticated means simultaneously. Cf. United States v. Straus, 188 F.3d

520, 1999 WL 565502, at *5 (10th Cir. 1999) (table) (holding that

abuse-of-trust and more-than-minimal-planning enhancements, the latter

in a predecessor to U.S.S.G. § 2B1.1(b)(9)(C), can be applied to same

conduct simultaneously).

VIII.C.2.i. Use of Special Skill—U.S.S.G. § 3B1.3

Trade secret defendants who use their specialized technical knowledge

to understand and use the misappropriated trade secret will often qualify

for an adjustment for use of a special skill under U.S.S.G. § 3B1.3. See,

e.g., United States v. Lange, 312 F.3d 263, 270 (7th Cir. 2002).

“'Special skill' refers to a skill not possessed by members of the general

public and usually requiring substantial education, training, or licensing.

Examples would include pilots, lawyers, doctors, accountants, chemists,

and demolition experts.” U.S.S.G. § 3B1.3 cmt. n.4. Special skill includes

any type of special skill, not just one gained through advanced education.

In Lange, it applied to a mechanical drafter, an EEA defendant who

committed his offense using his associate's degree in graphic design and

his ability to work with his former employer's engineering drawings in

AutoCAD. Lange, 312 F.3d at 270.

A defendant can receive the adjustment for use of a special skill in

addition to the adjustment for sophisticated means under U.S.S.G.

§ 2B1.1(b)(9)(C).

VIII.C.2.j. No Downward Departure for Victim's Participation

in Developing the Case 

As noted in Section VIII.C.1.k. of this Chapter, the court may not

depart downward on the ground that the victim participated in the

prosecution.

VIII.D. Restitution

“'The principle of restitution is an integral part of virtually every

formal system of criminal justice, of every culture and every time. It holds

that, whatever else the sanctioning power of society does to punish its

wrongdoers, it should also ensure that the wrongdoer is required to the

degree possible to restore the victim to his or her prior state of well-
280 Prosecuting Intellectual Property Crimes

being.'” Attorney General Guidelines on Victim and Witness Assistance,

Art. V.A. (Dep't of Justice May 2005) (emphasis added in original)

(quoting S. Rep. No. 104-179, at 12-13 (1996), reprinted in 1996

U.S.C.C.A.N. 924, 925-26). 

In intellectual property cases, there are two types of victim: the owner

of the intellectual property that was infringed or misappropriated, and any

consumer who was lured into purchasing the infringing goods by fraud.

Both types of victim usually qualify for restitution if they have suffered

a loss.

This section discusses restitution in intellectual property crimes. For

more detailed guidance on restitution principles and procedures,

prosecutors should consult the Attorney General Guidelines on Victim

and Witness Assistance, cited above, as well as the Prosecutor's Guide to

Criminal Monetary Penalties: Determination, Imposition and

Enforcement of Restitution, Fines & Other Monetary Impositions (Dep't

of Justice Office of Legal Education May 2003).

VIII.D.1. Restitution is Available—and Often Required—in

Intellectual Property Prosecutions

Most criminal intellectual property defendants must pay their victims

restitution.

Intellectual property offenses in Title 18 require restitution under the

Mandatory Victims Restitution Act of 1996 (“MVRA”), codified in part

at 18 U.S.C. § 3663A (“Mandatory restitution to victims of certain

crimes”). Under the MVRA, restitution is mandatory following any

“offense against property under [Title 18] ... including any offense

committed by fraud or deceit ... in which an identifiable victim or victims

suffered a pecuniary loss.” 18 U.S.C. § 3663A(c)(1)(A)(ii),(B). Intellectual

property crimes are offenses against property in two senses: some defraud

unwitting customers into paying money for infringing products, and all

involve intellectual property, which is property as much as any tangible

property. See, e.g., United States v. Carpenter, 484 U.S. 19, 26 (1987)

(stating that confidential information, another type of intangible

property, has “long been recognized as property”); United States v.

Trevino, 956 F.2d 276, 1992 WL 39028 (9th Cir. 1992) (table) (in

counterfeit trademark prosecution, affirming order of restitution to

nuclear power plant victim that had purchased counterfeit circuit

breakers). The few cases on point confirm that intellectual property

offenses are “offense[s] against property” for the purpose of § 3663A.

See United States v. Chay, 281 F.3d 682 (7th Cir. 2002) (noting that a

conviction under 18 U.S.C. § 2318(a) for trafficking in counterfeit
VIII. Penalties, Restitution, and Forfeiture 281

documents and packaging for computer programs was an “offense against

property” under 18 U.S.C. § 3663A and thus required mandatory

restitution); United States v. Hanna, No. 02 CR. B64-01, 2003 WL

22705133 (S.D.N.Y. Nov. 17, 2003) (stating that a conviction under 18

U.S.C. § 2320 for trafficking in counterfeit trademarked handbags and

other goods requires full restitution under 18 U.S.C. §§ 3663A, 3664).

See also United States v. Cho, 136 F.3d 982, 983 (5th Cir. 1998)

(mentioning restitution in trademark counterfeiting case); United States

v. Manzer, 69 F.3d 222, 229-30 (8th Cir. 1995) (upholding restitution

award of $2.7 million in mail fraud, wire fraud, and copyright

infringement prosecution for the sale of modification and cloning

packages for unauthorized decryption of premium channel satellite

broadcasts); United States v. Sung, 51 F.3d 92, 96 (7th Cir. 1995)

(mentioning restitution in trademark counterfeiting case); United States

v. Bohai Trading Co., 45 F.3d 577, 579 (1st Cir. 1995) (same—

restitution amount of $100,000); United States v. Hicks, 46 F.3d 1128,

1195 WL 20791, at *3 (4th Cir. 1995) (table) (upholding restitution

award in satellite decryption and copyright case).

These cases support the proposition that restitution is mandatory in

all Title 18 intellectual property offenses, including § 1831 (economic

espionage to benefit foreign government, instrumentality, or agent),

§ 1832 (general economic espionage), § 2318 (counterfeit and illicit labels

and counterfeit documentation and packaging for copyrighted works),

§ 2319 (copyright), § 2319B (camcorded movies), and § 2320 (goods,

services, labels, documentation, and packaging with counterfeit marks).

In addition, Congress recently made clear that restitution must be ordered

in appropriate § 2320 cases. See 18 U.S.C. § 2320(b)(4) (as amended by

the Stop Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-

181, § 1, 120 Stat. 285, 286 (enacted March 16, 2006)).

This list might also include violations of § 2319A (bootleg music and

music video recordings), but defendants might argue that those crimes are

not offenses against property on the ground that bootleg music and music

video recordings do not infringe copyrighted property, see Section II.F. of

this Manual (describing § 2319A's constitutional basis as the Commerce

Clause rather than the Intellectual Property Clause), or any other type of

property, and that any revenues from these offenses do not represent an

actual pecuniary harm to the victim because bootleg music and music

video recordings do not decrease artists' sales. Prosecutors may wish to

consult CCIPS at (202) 514-1026 to discuss restitution in § 2319A

convictions.
282 Prosecuting Intellectual Property Crimes

There are two principal exceptions to mandatory restitution provided

for in § 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.” 18 U.S.C. § 3663A(c)(3). Defendants can be expected to argue

for one or both of these exceptions in cases of online copyright piracy that

involve a large number of copyrighted works owned by a large number of

victims, in cases of retail counterfeit goods cases that were sold to a large

number of defrauded customers, and in trade secret cases that involve

complex issues of valuation. “This 'exception' was intended to be used

sparingly, and the court is expected to use every means available,

including a continuance of the restitution determination of up to 90 days,

if necessary, to identify as many victims and harms to those victims as

possible. 18 U.S.C. § 3664(d)(5); U.S. v. Grimes, 173 F.3d 634 (7th Cir.

1999).” Prosecutor's Guide to Criminal Monetary Penalties:

Determination, Imposition and Enforcement of Restitution, Fines &

Other Monetary Impositions 28 (Dep't of Justice Office of Legal

Education May 2003). Department policy also requires that “[w]hen this

exception does apply, the prosecutor should nevertheless seek restitution

for the benefit of the victims to the extent practicable,” Attorney General

Guidelines on Victim and Witness Assistance Art. V.F. (Dep't of Justice

May 2005) (emphasis added), such as by asking the court to order

restitution “for those victims and harms the court can identify,”

Prosecutor's Guide to Criminal Monetary Penalties at 30 (discussing

similar exception for discretionary restitution). How to ensure restitution

in such situations is addressed below in the discussion of how to set the

restitution amount.

Another possible exception to mandatory restitution may exist for

criminal trademark, service mark, and certification mark cases under 18

U.S.C. § 2320 in which the mark-holder neglected to use the ® symbol

(or other proper notice) and the defendant lacked actual notice that the

mark was registered. See Section III.E.3. of this Manual. In those cases,

however, even though restitution might not be awarded to the markholder, it should still be awarded to any customers of the defendant who

were defrauded into buying what they thought were authentic goods or

services. Id.

Although technically not an exception to the mandatory restitution

provisions in 18 U.S.C. § 3663A, there are two classes of intellectual

property crimes for which there is no mandatory restitution under

§ 3663A. The first class consists of those intellectual property offenses
VIII. Penalties, Restitution, and Forfeiture 283

located outside Title 18 of the United States Code. Mandatory restitution

applies only to an “offense against property under this title [18],” 18

U.S.C. § 3663A(c)(1)(A)(ii), which by definition excludes intellectual

property offenses located outside Title 18. These include violations of the

Digital Millennium Copyright Act, 17 U.S.C. § 1204, and the

unauthorized reception of cable and satellite service as prohibited by 47

U.S.C. §§ 553(b)(2), 605.

The second class consists of any intellectual property offenses located

in Title 18 that might be characterized as not being “offense[s] against

property.” § 3663A(c)(1)(A)(ii) (emphasis added). Examples might

include violations of 18 U.S.C. § 2319A (bootleg music and music video

recordings).

Fortunately, even in the cases discussed in the previous paragraphs,

there are other mechanisms to obtain restitution. For intellectual property

offenses that are located in Title 18 but are not offenses against property,

discretionary restitution is available under 18 U.S.C. § 3663(a)(1)(A). For

intellectual property offenses that are located outside Title 18, restitution

is available under a plea agreement. See 18 U.S.C. § 3663(a)(3). And,

finally, discretionary restitution can be ordered for any intellectual

property crime—in fact any crime at all, whether an intellectual property

crime or not, whether in Title 18 or not, and whether an offense against

property or not—as a condition of probation, or of supervised release after

imprisonment. See 18 U.S.C. §§ 3563(b)(2) (probation), 3583(d)

(supervised release). A good example of these principles is United States

v. Lexington Wholesale Co., 71 Fed. Appx. 507 (6th Cir. 2003)

(unpublished), in which a defendant was convicted for selling infant

formula repackaged with counterfeit trademarks and without an accurate

“use by” date, which resulted in one count for criminal trademark

violations under 18 U.S.C. § 2320 and one count for misbranded food or

drugs under Title 21. 71 Fed. Appx. at 508. The sentencing court imposed

restitution to the victim of the misbranding count only, which the

defendant argued was improper because restitution is authorized only for

offenses under Title 18, not Title 21. Id. The appellate court affirmed

restitution on the ground that it was authorized as a condition of

probation and also by the plea agreement. Id. at 508-09.

In deciding whether to award discretionary restitution, the court must

consider not only the victim's loss, but also the defendant's financial

resources. 18 U.S.C. § 3663(a)(1)(B)(i); see also § 3563(b)(2) (allowing

court to order restitution to a victim as a condition of probation “as []

reasonably necessary” and without regard to the limitations on restitution

in § 3663(a) and § 3663A(c)(1)(A)). Mandatory restitution requires full
284 Prosecuting Intellectual Property Crimes

restitution. Prosecutor's Guide to Criminal Monetary Penalties at 29-30.

There is, however, a presumption for full restitution, even in discretionary

restitution cases. Id. The Department's policy is to require full restitution

in discretionary cases (assuming the defendant's current or future

economic circumstances warrant it), but in discretionary cases to require

nominal payment if economic circumstances so warrant. Id. at 30.

In deciding whether to order discretionary restitution, the court

should also consider whether “the complication and prolongation of the

sentencing process ... outweighs the need to provide restitution.” 18

U.S.C. § 3663(a)(1)(B)(ii). Again, however, the Department advises that

“prosecutors should only ask the court to apply this provision narrowly,

i.e., only to whatever portion of restitution it may be applicable, and to

impose restitution for those victims and harms the court can identify.”

Prosecutor's Guide to Criminal Monetary Penalties at 30.

Department policy requires consideration of the availability of

restitution when making charging decisions, and to structure plea

agreements to provide restitution whenever possible. See Attorney

General Guidelines on Victim and Witness Assistance Arts. V.C.1.

(stating that “[w]hen exercising their discretion, prosecutors shall give due

consideration to the need to provide full restitution to the victims of

Federal criminal offenses,” among other charging considerations), V.D.1.-

.6. (plea agreements, including required provisions and supervisors' duties

for approval relating to restitution). If one of the charges would require

restitution, the plea agreement should require full restitution even if the

defendant pleads guilty to a charge that would not require restitution. Id.

VIII.D.2. Victims Include Owners of Intellectual Property and

Consumers Who Were Defrauded

Prosecutors should consider all victims who suffered a loss, from the

holder of the intellectual property to the direct purchaser and the ultimate

consumer of the infringing good.

Generally, the intellectual property rights-holder whose works were

infringed or misappropriated qualifies for restitution. This is clear in cases

involving copyrights, trademarks, and trade secrets. As noted in Section

VIII.D.1. of this Chapter, DMCA offenses do not qualify for mandatory

restitution. Moreover, the cases suggest that in DMCA or DMCA-like

cases, the company whose technological measures are circumvented is not

entitled to restitution unless the company also owns copyrighted works

that were infringed as a result of the circumvention. See United States v.

Oliver, No. 8:02CR3, 2005 WL 1691049, at *5 (D. Neb. July 18, 2005)

(“Even if Sony had made money as a result of the defendant's criminal
VIII. Penalties, Restitution, and Forfeiture 285

conduct [in modifying Sony Playstations to play pirated games in

violation of the DMCA], it simply does not negate the fact that the

defendant is guilty of violating Sony's copyright [by modifying the game

machines to play pirated Sony games].”); United States v. Hicks, 46 F.3d

1128, 1995 WL 20791, at *1 (4th Cir. Jan. 20, 1995) (table) (holding

that defendant convicted of selling modified satellite TV descrambling

devices in violation of 47 U.S.C. § 605(e)(4) was not liable for restitution

to descrambling device manufacturers because they had been fully

compensated when they originally sold their devices, but ordering

restitution to satellite service providers for what customers would have

paid for the additional channels they could receive because of the

defendant's modifications). Industry associations that represent

intellectual property rights-holders can, in some circumstances, help

identify rights-holders and receive and distribute the restitution to the

rights-holders.

Defrauded purchasers—if any—are entitled to restitution as well. See,

e.g., United States v. Trevino, 956 F.2d 276, 1992 WL 39028 (9th Cir.

1992) (table) (in counterfeit trademark prosecution, affirming order of

restitution to nuclear power plant victim that had purchased counterfeit

circuit breakers). A defendant who has defrauded a large number of

consumers can be expected to argue that restitution is not required

because the class of defrauded consumers is impracticably large or difficult

to identify. See 18 U.S.C. § 3663A(c)(3). There are procedures for

ordering restitution for victims who can be identified by name but cannot

presently be located at a particular address. See United States v.

Berardini, 112 F.3d 606, 609-12 (2d Cir. 1997).

Consumers who knew that they were purchasing counterfeits generally

do not qualify as victims, because they have not been harmed.

Distinguishing between consumers who were and were not defrauded may

be a challenge.

In determining whether an involved party qualifies as a victim for the

purpose of restitution, the court will distinguish between those harmed by

the defendant's relevant conduct and those harmed by the offense of

conviction. (The rest of this paragraph consists largely of excerpts from

the Prosecutor's Guide to Criminal Monetary Penalties: Determination,

Imposition and Enforcement of Restitution, Fines & Other Monetary

Impositions 32 (Dep't of Justice Office of Legal Education May 2003),

with minor edits.) The court is statutorily authorized to impose

restitution only to identifiable victims of the acts that are part of the

offense of conviction. In Hughey v. United States, 495 U.S. 411, 413

(1990), the Supreme Court held that the restitution statutes limit
286 Prosecuting Intellectual Property Crimes

restitution to “the loss caused by the specific conduct that is the basis of

the offense of conviction.” Restitution is not authorized for acts merely

related to the offense of conviction, such as acts that are within “relevant

conduct” under guideline sentencing (U.S.S.G. § 1B1.3), but are outside

the actual offense of conviction itself. Under the primary restitution

statutes, a victim is “a person directly and proximately harmed as a result

of the commission of an offense for which restitution may be ordered.” 18

U.S.C. §§ 3663A(a)(2), 3663(a)(2). Where the offense of conviction

includes a scheme, conspiracy, or pattern of criminal activity, however,

restitution can be imposed for the entire scheme, conspiracy, or pattern.

Therefore, prosecutors should charge such offenses to indicate the specific

nature and full extent of the acts that constitute the scheme, conspiracy,

or pattern of which the offense of conviction is involved, in order to

permit the broadest imposition of restitution.

If the acts for which restitution is sought cannot be tied together with

a scheme, pattern, or conspiracy, then the acts outside the offense of

conviction generally do not trigger restitution. Under this rule, restitution

is generally not triggered by one kind of act if the offense of conviction

describes another kind of act, even if the acts are logically related in

purpose or intent—for example, if the offense of conviction is possession

of stolen credit cards, some courts will not impose restitution for the

victims of the use of the cards. See, e.g., United States v. Blake, 81 F.3d

498 (4th Cir. 1996); United States v. Hayes, 32 F.3d 171 (5th Cir.

1994). However, some courts apply this rule more strictly than others. For

example, to determine the existence of a scheme and what acts it

included, some courts will consider the facts alleged in the indictment,

proven at trial, or admitted in the plea colloquy. See, e.g., United States

v. Jackson, 155 F.3d 942 (8th Cir. 1998); United States v. Ramirez, 196

F.3d 895 (8th Cir. 1999); United States v. Hughey (II), 147 F.3d 423,

438 (5th Cir. 1998) (suggesting that restitution might have been triggered

by acts not in the indictment had they been established by the trial

record). 

If no scheme, conspiracy, or pattern encompasses the acts for which

injured parties seek restitution, restitution will likely be limited in two

respects. First, a party who was injured solely by an act outside the offense

of conviction—such as a party whose losses were proved only as relevant

conduct—cannot obtain restitution. Second, a party who was injured by

the offense of conviction can obtain restitution only for the offense-ofconviction acts and not acts proved only as relevant conduct at

sentencing—even relevant conduct that counted towards the loss or

infringement amount; however, some courts may still allow restitution for

this type of relevant conduct if it is alleged in the indictment or proved at
VIII. Penalties, Restitution, and Forfeiture 287

trial, not just at sentencing. The exception to both these limitations is, of

course, restitution ordered pursuant to a stipulation in a plea agreement.

See 18 U.S.C. § 3663(a)(3).

Application of these principles to an intellectual property crime

occurred in United States v. Manzer, 69 F.3d 222 (8th Cir. 1995), in

which the court ordered $2.7 million in restitution from a defendant

convicted of mail fraud, wire fraud, and criminal copyright infringement

for trafficking in cloned computer chips. The cloned chips would allow

satellite descrambling devices to decrypt cable satellite signals without

authorization. The defendant objected to the $2.7 million restitution

award on the ground that it included sales not identified in the

indictment. Id. at 229-30. The Eighth Circuit disagreed, holding that the

mail and wire fraud counts alleged a scheme to defraud that

“encompass[ed] transactions beyond those alleged in the counts of

conviction,” including the sales not otherwise identified in the indictment.

Id. at 230 (citation and internal quotation marks omitted). Note that the

restitution might have been limited to the sales alleged the indictment if

the defendant had pleaded to or been convicted of only the copyright

charge.

There are several ways to help ensure that restitution is awarded for

harm caused. As part of any plea deal, the government should require the

defendant to plead to the counts that offer maximum restitution, or the

government should insist upon a comprehensive plea agreement that

provides restitution to the victims of relevant offense conduct (whether

the statutes or offenses of conviction provide for it or not). See 18 U.S.C.

§ 3663(a)(3) (allowing court to order restitution as provided in plea

agreement); Prosecutor's Guide to Criminal Monetary Penalties:

Determination, Imposition and Enforcement of Restitution, Fines &

Other Monetary Impositions 22-24 (Dep't of Justice Office of Legal

Education May 2003). 

At the beginning of the case, prosecutors should draft the indictment

to maximize restitution. Id. at 21. As the Executive Office for United

States Attorneys counsels:

Prosecutors should avoid the “scheme” restitution pitfalls by:

a) Charging offenses that involve the statutory elements of an

“intent to defraud” or “intent to deceive” in the traditional

wire/mail fraud (or conspiracy) format, where the scheme (or

conspiracy) is described in detail and incorporated by

reference into each specific act count; and
288 Prosecuting Intellectual Property Crimes

b) Making sure the dates alleged as the beginning and end of the

scheme or conspiracy include all acts in furtherance of the

scheme or conspiracy for which restitution should be

imposed.

Id. at 22. Moreover, “[s]imply tracking the statutory language of such

offenses does not clarify if the acts of conviction are part of a scheme, i.e.,

whether different kinds of acts make up a scheme to 'defraud' or 'deceive.'

Numerous restitution orders have been vacated in such cases due to

ambiguity of the 'scheme' issue.” Id. The same concerns apply to whether

acts in addition to those alleged as overt acts of a conspiracy can qualify

as part of the conspiracy for purposes of awarding restitution. The

Prosecutor's Guide to Criminal Monetary Penalties discusses specific ways

to structure restitution provisions in a plea agreement to maximize

restitution. Id. at 23-24.

VIII.D.3. Determining a Restitution Figure

Once the government has identified the people and entities who

might be classified as victims—consumers who were defrauded and

intellectual property rights-holders—the next question is how to calculate

what the victims are owed, if anything.

To begin with, as discussed in the prior section, the restitution award

must be based on the loss caused by the defendant's offense of conviction.

After determining which victims and transactions qualify for

restitution, the government must determine how the restitution should be

calculated. The most important principle is that restitution is intended to

make the victims whole by compensating them for their losses. See 18

U.S.C. §§ 3663(a)(1)(B)(i)(I), 3663A(b), 3664(a); U.S.S.G. § 5E1.1(a).

This principle has several consequences.

First, the restitution order should require the defendant to return any

of the victim's property that he took. See 18 U.S.C. §§ 3663(b)(1)(A),

3663A(b)(1)(A), 3664(f)(4)(A). This principle applies across all

intellectual property offenses:

• In trade secret offenses, the defendant should be required to

return the trade secret and any other items that he took from the

owner of the trade secret.

• In infringement cases, the defendant should be required to return

the money he accepted from the customers he defrauded (if

any—in some cases the customers knew that they were receiving

counterfeits). Although the defendant might argue that he is
VIII. Penalties, Restitution, and Forfeiture 289

entitled to offset the value of the goods the defrauded customers

received, often that value is next to nothing. Compare cf. United

States v. West Coast Aluminum Heat Treating Co., 265 F.3d

986, 992 (9th Cir. 2001) (“And, by reducing the loss calculation

to account for the partial benefit gained by the government, the

district court remained consistent with the rule that the victim's

loss should be offset by the victim's benefit.”) and United States

v. Matsumaru, 244 F.3d 1092, 1109 (9th Cir. 2001) (holding

that restitution of the purchase price for the business the victim

paid for and was promised but did not receive, must be offset by

the value of the van and business license he did receive) with

United States v. Angelica, 859 F.2d 1390, 1394 (9th Cir. 1988)

(affirming trial court's refusal to offset restitution award by value

of substitute property given to victims, because there was “no

abuse of discretion in the district court's decision to disregard the

value of the inexpensive garnets that were unwanted by the

victims and substituted for their diamonds as part of the

fraudulent scheme”) and United States v. Austin, 54 F.3d 394,

402 (7th Cir. 1995) (holding that “even if the [counterfeit or

misrepresented art] pieces Austin sold ... were not completely

worthless, $0 was the best estimate of their worth” for purposes

of calculating loss).

• In infringement cases—and perhaps trade secret cases as well—the

defendant should also compensate the intellectual property rightsholder victims for any sales that he diverted from them. See

United States v. Sung, 51 F.3d 92, 94 (7th Cir. 1995) (holding,

in criminal trademark prosecution, that “[r]estitution in a

criminal case is the counterpart to damages in civil litigation”). If

the defendant's conduct did not divert any sales from the victim,

then the victim is entitled to no restitution. See United States v.

Foote, No. CR.A. 00-20091-01-KHV, 2003 WL 22466158, at *7

(D. Kan. July 31, 2003) (refusing to award restitution to

trademark-holders because the government proposed no reliable

estimate of the victim's losses and citing cases for the need to

prove lost profits). A defendant is most likely to divert sales from

the victim when he has defrauded customers into thinking that

his product or service is authentic, although he may have a

counter-argument if his prices were sufficiently under the

authentic price that his customers would have been unlikely to

pay the victim the full price for the real thing. A consumer who

pays $20 for a high-quality (or even a low-quality) fake purse

might not have paid full price ($120 to $700) for the real purse,
290 Prosecuting Intellectual Property Crimes

and thus his purchase of the fake might not represent a lost sale

to the victim. Similarly, some computer users who download a

$60,000 engineering program for free from an infringing website

or peer-to-peer network may be “trophy hunters” who would not

have paid full price for an authorized copy, whereas other

downloaders may be businesspeople who would have paid full

price had the free download not been available. Restitution orders

should differentiate between these situations, to the extent

possible. Prosecutors might also try to introduce evidence

establishing that the availability of high-quality infringing works

affected the market for the victim's product. See Brooktree Corp.

v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1579 (Fed. Cir.

1992) (civil case upholding “actual damages” calculation based on

evidence that plaintiff had been forced to lower its prices as a

result of defendant's infringing activities).

• Restitution based on lost sales is not calculated by the defendant's

gain, but rather by the victim's loss. Foote, 2003 WL 22466158,

at *7. For example, in United States v. Martin, 64 Fed. Appx. 129

(10th Cir. 2003), the total value of the items infringed was

$1,143,395, but the restitution equaled only $395,000—the retail

value multiplied by the rights-holder's profit margin. Nevertheless,

the defendant has no right to have his own costs offset against his

gain. United States v. Chay, 281 F.3d 682, 686-87 (7th Cir.

2002).

• When the evidence of infringement consists of the defendant's

inventory of infringing product rather than his actual sales—and

the defendant therefore argues against any restitution for lack of

actual diverted sales—the government may argue that the

inventory is a reasonable estimate of the defendant's past sales.

This argument is likely to be most persuasive when the

defendant's inventory is counted after he has been in business for

a long time. Inventory is more likely to overstate past sales when

a business is just starting out, and to understate past sales when

the business has been successful and ongoing for a substantial

time.

• At least one court has held that restitution in a criminal

intellectual property case can be based on the amount of statutory

damages that the victim could have obtained from the defendant

in a civil case, but this was a case in which the statutory damages

likely understated the actual damages. See United States v.

Manzer, 69 F.3d 222, 229-30 (8th Cir. 1995) (upholding
VIII. Penalties, Restitution, and Forfeiture 291

restitution award in descrambler case of $2.7 million for 270

cloning devices based on minimum statutory damages of $10,000

per device, where victim provided loss figure of over $6.8 million).

Statutory damages are available in civil suits for a variety of

intellectual property violations. See e..g., 15 U.S.C. § 1117 (c)

(statutory damages of $500-$100,000 (up to $1 million if

infringement was willful) per counterfeit mark per type of goods

or services); 17 U.S.C. § 504(c) (statutory damages of $750-

$30,000 (up to $150,000 if infringement was willful) per

infringed work); 47 U.S.C. § 605(e)(3)(C)(i)(II) (statutory

damages of $10,000-$100,000 per violation). See also Roger D.

Blair & Thomas F. Cotter, An Economic Analysis of Damages

Rules in Intellectual Property Law, 39 Wm. & Mary L. Rev.

1585, 1651-72 (1998) (discussing economic theory of statutory

damages in copyright law).

• If the defendant earned a profit from his crime but the court finds

that restitution is too difficult to calculate, the court can

nevertheless take away the defendant's gain by imposing a fine in

the amount of his gain. See Foote, 2003 WL 22466158, at *7.

Second, the restitution order should compensate the victim for any

money spent to investigate the defendant's conduct, whether during the

victim's own investigation or while helping the government investigate

and prosecute. These costs often arise in intellectual property cases:

employers conduct internal investigations into their employees' theft of

trade secrets, and copyright and trademark-holders often hire private

investigators to monitor and investigate suspected infringers. The

mandatory and discretionary restitution statutes both authorize

restitution “for lost income and necessary child care, transportation, and

other expenses related to participation in the investigation or prosecution

of the offense or attendance at proceedings related to the offense.” 18

U.S.C. §§ 3663(b)(4), 3663A(b)(4). These provisions have been

interpreted to cover not only the victim's expenses in helping the

government, but also the costs of the victim's own investigation. See

United States v. Brown, 150 Fed. Appx. 575 (8th Cir. 2005) (per curiam)

(awarding restitution to victim company for staff investigation costs into

reconstructing and correcting financial records related to defendant's

embezzlement, where defendant contested proof of amount but not

whether investigative costs as a category are awardable); United States v.

Beaird, 145 Fed. Appx. 853 (5th Cir. 2005) (per curiam) (affirming

$200,000 award of restitution for attorney's fees and litigation expenses

associated with assisting the FBI's investigation), cert. denied, 126 S. Ct.

1382 (2006); United States v. Gordon, 393 F.3d 1044, 1049, 1056-57
292 Prosecuting Intellectual Property Crimes

(9th Cir. 2004) (discussing reimbursement of investigative costs in depth,

in case affirming $1,038,477 in restitution for costs of company's internal

investigation and responses to grand jury subpoenas), cert. denied, 126 S.

Ct. 472 (2005). See also United States v. Susel, 429 F.3d 782, 783 (8th

Cir. 2005) (per curiam) (affirming award of software company's

administrative and transportation expenses during participation in the

investigation and prosecution of the offense in criminal copyright case).

Third, in deciding whether to award discretionary restitution, the

court must consider not only the victim's loss, but also the defendant's

financial resources. 18 U.S.C. § 3663(a)(1)(B)(i); see also 18 U.S.C.

§ 3563(b)(2) (allowing court to order restitution to a victim as a

condition of probation “as [] reasonably necessary” and without regard to

the limitations on restitution in § 3663(a) and § 3663A(c)(1)(A)).

Mandatory restitution requires full restitution. Prosecutor's Guide to

Criminal Monetary Penalties at 29-30. There is, however, a presumption

for full restitution, even in discretionary restitution cases. Id. Department

policy requires full restitution in discretionary cases (assuming the

defendant's current or future economic circumstances warrant it), unless

economic circumstances warrant nominal payment. Id. at 30. In no case

shall the fact that a victim has received or is entitled to receive

compensation with respect to a loss from insurance or any other source be

considered in determining the amount of restitution. 18 U.S.C.

§ 3664(f)(1)(B).

Fourth, victims have an important role in helping to determine the

appropriate amount of restitution. The government must consult with

witnesses and the court to consider victims' evidence at sentencing. See

42 U.S.C. § 10607(c)(3)(G); Attorney General Guidelines for Victim and

Witness Assistance Art. IV.B.2.b(4) (May 4, 2005). See generally Chapter

X of this Manual (Victims). The criminal intellectual property statutes

similarly require the court to consider victims' evidence at sentencing.

See 18 U.S.C. §§ 2319(d), 2319A(d), 2319B(e), 2320(d). The presentence report must also include a verified assessment of victim impact

in every case. Fed. R. Crim. P. 32(d)(2)(B). Trade associations can be very

helpful in providing victim impact statements, particularly when an

offense involves a large quantity and variety of infringing products. See

the listing of intellectual property contacts in Appendix G of this Manual.
VIII. Penalties, Restitution, and Forfeiture 293

VIII.E. Forfeiture

In intellectual property (IP) crimes, forfeiture can serve several

important functions. Forfeiting infringing items removes them from the

stream of commerce so they cannot be sold or redistributed. Forfeiting the

tools and equipment that defendants use to commit IP crimes prevents

their being used to commit further IP crime. Forfeiting the proceeds of IP

crime—the revenues and profits—prevents their reinvestment in a

criminal enterprise. Finally, forfeiture can serve as a powerful deterrent.

Congress has passed many forfeiture laws that address specific crimes,

but in a manner that has created a complex web of forfeiture statutes. The

specific IP forfeiture provisions vary with the IP crime, yet the underlying

criminal IP statute will often not make it obvious which forfeiture

remedies—administrative, civil, or criminal—are available.

To make IP forfeiture more standard and intuitive, Congress passed

the Stop Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-

181, 120 Stat. 285 (enacted March 16, 2006) to expand the type of

property that can be forfeited and to clarify and standardize the

procedures for doing so. The Act, however, affects only counterfeit

trademark, service mark, and certification mark offenses in 18 U.S.C.

§ 2320. Consequently, the Administration has proposed similar

amendments to the forfeiture provisions for other IP offenses.

This Chapter is not a definitive guide to forfeiture law, but rather it

provides a basic overview of the forfeiture remedies available in IP crimes.

Due to the intricacies of forfeiture law (including both recent changes in

2006 and possible future revisions), prosecutors with questions

concerning forfeiture practice and procedure should contact the forfeiture

expert in their office or the Criminal Division's Asset Forfeiture and

Money Laundering Section at (202) 514-1263.

VIII.E.1. Property Subject to Forfeiture

Intellectual property crimes give rise to three general categories of

forfeitable property:

• Contraband items, which include infringing copyrighted copies

and phonorecords; goods, labels, documentation, and packaging

that bear counterfeit trademarks, service marks, or certification

marks; and unauthorized recordings of live musical performances.

See 49 U.S.C. § 80302(a)(6). These items are generally subject to

forfeiture.
294 Prosecuting Intellectual Property Crimes

• Proceeds derived from the commission of an IP offense. These are

also usually forfeitable. 

• Facilitating property, that is, property that was used to commit or

facilitate the IP offense, such as plates, molds or masters used to

produce copyright-infringing works; computers, tools, equipment,

and supplies used to produce counterfeit goods; and vehicles used

to traffic in any of the above. Forfeiture of facilitating property is

available in many cases, but its availability varies substantially

depending on the specific IP offense, the type of property, and

the type of forfeiture sought.

VIII.E.2. Overview of Forfeiture Procedures

There are three types of forfeiture procedures: administrative, civil,

and criminal. This section gives a brief overview and includes a table that

summarizes the types of forfeiture available for each kind of property,

organized by intellectual property offense.

VIII.E.2.a. Administrative Forfeiture Proceedings

Administrative forfeiture occurs when a law enforcement agency

forfeits property in an administrative, non-judicial matter. As with the

other types of forfeiture procedure, administrative forfeiture is available

only pursuant to a specific statute that authorizes such a procedure.

Administrative forfeiture commences once an agency seizes property and

then sends or publishes notice of the property seizure within the

prescribed deadlines. If nobody responds to the notice by filing a claim of

ownership claim within the allotted time, the property is forfeited without

involving a prosecutor or judge. If a claim is filed, the seizing agency must

either return the property or seek forfeiture through a judicial procedure.

Administrative forfeiture in IP offenses is usually limited to situations

that implicate the customs laws. For example, Immigration and Customs

Enforcement (ICE) may seize, forfeit, and destroy imported copyrightinfringing products administratively pursuant to 17 U.S.C. §§ 509(b)

and 603(c). ICE may also seize, forfeit, and destroy imported trademarkinfringing products administratively under 19 U.S.C. § 1526(e).

Administrative forfeiture may also be available for violations of 18 U.S.C.

§§ 2318 and 2319A. See 18 U.S.C. § 2318(e); 17 U.S.C. § 509; see also

18 U.S.C. § 981(d); 19 U.S.C. §§ 1607-09 (administrative forfeiture of

proceeds); 49 U.S.C. § 80304 (administrative forfeiture of facilitating

property).
VIII. Penalties, Restitution, and Forfeiture 295

Real property and personal property (other than monetary

instruments) that are worth more than $500,000 can never be forfeited

in an administrative proceeding. See 19 U.S.C. § 1607; 18 U.S.C. § 985.

VIII.E.2.b. Civil and Criminal Proceedings

Unlike administrative forfeiture proceedings, civil and criminal

forfeiture are judicial actions that require the involvement of prosecutors

and the courts.

Criminal forfeiture is an in personam proceeding that is executed as

part of a criminal 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. Criminal forfeiture cannot reach a third party's

property, even if the defendant used the third party's property to commit

the crime.

Whereas criminal forfeiture is an in personam action against the

defendant, civil forfeiture is an in rem action against the property itself.

This means that civil forfeiture proceedings can reach property regardless

of who owns it, if the government can prove that the property was derived

from or used to commit a crime. Civil forfeiture proceedings are not part

of a criminal case at all. The burden of proof is a preponderance of the

evidence, and civil forfeiture proceedings can dispose of property even

without a criminal conviction or the filing of any criminal charges.

VIII.E.2.c. Table of Forfeiture Provisions Arranged by Criminal

IP Statute

The following list indicates the types of forfeiture available for each

intellectual property offense. Note that administrative forfeiture is

generally available for vessels used to transport contraband items pursuant

to 49 U.S.C. § 80304. Note also that even where forfeiture of proceeds is

not provided for directly, it may be available indirectly through money

laundering statutes.

CRIMINAL COPYRIGHT INFRINGEMENT

Administrative Yes. 17 U.S.C. §§ 509(a) (forfeiture of

infringing goods) and (b) (applying

customs laws), 602-603 (specifically

prohibiting imports of infringing

copies). 18 U.S.C. § 981(d) (allowing

administrative forfeiture for proceeds
296 Prosecuting Intellectual Property Crimes

forfeitable civilly); 19 U.S.C. §§ 1595a,

1607-09.

Civil

Infringing Items Yes. 17 U.S.C. §§ 509(a), 602-603

(prohibiting imports).

Facilitating Property Yes. 17 U.S.C. § 509(a) (plates, molds,

masters and other equipment used to

make infringing copies).

Proceeds Yes. 18 U.S.C. § 981(a)(1)(C).

Criminal

Infringing Items Yes. 17 U.S.C. §§ 506(b), 602-603;

28 U.S.C. § 2461(c) (allowing criminal

forfeiture where property could be

seized civilly).

Facilitating Property Yes. 17 U.S.C. § 506(b);

28 U.S.C. § 2461.

Proceeds Yes. 18 U.S.C. § 981(a)(1)(C);

28 U.S.C. § 2461(c). 

DIGITAL MILLENNIUM COPYRIGHT ACT

Administrative No.

Civil None.

Criminal None.

ECONOMIC ESPIONAGE ACT (TRADE SECRET THEFT)

Administrative No.

Civil None.

Criminal

Facilitating Property Yes (discretionary).

18 U.S.C. § 1834(a)(2).

Proceeds Yes (mandatory).

18 U.S.C. § 1834(a)(1).
VIII. Penalties, Restitution, and Forfeiture 297

COUNTERFEIT/ILLICIT LABELS, DOCUMENTATION, AND PACKAGING FOR

COPYRIGHTED WORKS

Administrative Yes. 18 U.S.C. § 2318(e);

17 U.S.C. § 509(b);

18 U.S.C. § 981(d);

19 U.S.C. §§ 1595a (allowing seizure

and forfeiture by Customs), 1607-09.

Civil

Counterfeit/ Yes. 18 U.S.C. § 2318(e); 17 U.S.C.

Infringing Items § 509.

Facilitating Property Yes. 18 U.S.C. § 2318(e);

17 U.S.C. § 509.

Proceeds Yes. 18 U.S.C. §§ 981(a)(1)(C),

1956(c)(7).

Criminal

Counterfeit/ Yes (mandatory). 18 U.S.C. § 2318(d).

Infringing Items

Facilitating Property Yes (mandatory as to plates, molds,

masters, etc.; discretionary as to other

equipment). 18 U.S.C. § 2318(d).

Proceeds Yes. 18 U.S.C. §§ 981(a)(1)(C),

1956(c)(7); 28 U.S.C. § 2461(c). 

UNAUTHORIZED FIXATIONS OF LIVE MUSICAL PERFORMANCES

(“BOOTLEGGING”)

Administrative Yes. 18 U.S.C §§ 2319A(c), 981(d);

19 U.S.C. §§ 1595a, 1607-09.

Civil

Unauthorized Yes. 18 U.S.C. § 2319A(c). 

Recordings

Facilitating Property No.

Proceeds Yes. 18 U.S.C. § 981(a)(1)(C). 
298 Prosecuting Intellectual Property Crimes

Criminal

Unauthorized Yes (mandatory).

Recordings 18 U.S.C. § 2319A(b).

Facilitating Property Yes (mandatory for plates, molds,

masters, etc.; discretionary as to other

equipment). 18 U.S.C. § 2319A(b).

Proceeds Yes. 18 U.S.C. §§ 981(a)(1)(C),

1956(c)(7); 28 U.S.C. § 2461(c). 

UNAUTHORIZED RECORDING OF MOTION PICTURES (“CAMCORDING”)

Administrative No.

Civil None.

Criminal

Unauthorized Yes (mandatory).

Recordings 18 U.S.C. § 2319B(b).

Facilitating Property Yes (mandatory).

18 U.S.C. § 2319B(b).

Proceeds No.

GOODS, SERVICES, LABELS, DOCUMENTATION, AND PACKAGING WITH

COUNTERFEIT MARKS

***NOTE: 18 U.S.C. § 2320(b) was amended on March 16, 2006. The

table below reflects these amendments. The pre-amendment provision is

discussed and quoted in Sections VIII.E.4.b. and VIII.E.5. of this

Chapter.

Administrative Yes. 19 U.S.C. §§ 1595a, 1607-09;

18 U.S.C. § 981(d);

Civil

Counterfeit Items Yes. 18 U.S.C. § 2320(b)(1)(A).

Facilitating Property Yes. 18 U.S.C. § 2320(b)(1)(B).

Proceeds Yes. 18 U.S.C. §§ 981(a)(1)(C);

1956(c)(7); 28 U.S.C. § 2461(c). 
VIII. Penalties, Restitution, and Forfeiture 299

Criminal

Counterfeit Items Yes (mandatory).

18 U.S.C. § 2320(b)(3)(A).

Facilitating Property Yes (mandatory).

18 U.S.C. § 2320(b)(3)(A).

Proceeds Yes. 18 U.S.C. § 2320(b)(3)(A); or

alternatively:

18 U.S.C. §§ 981(a)(1)(C), 1956(c)(7);

28 U.S.C. § 2461(c).

VIII.E.3. Choosing a Forfeiture Procedure

Although the prosecutor may commence parallel civil and criminal

forfeiture cases to keep all avenues of forfeiture open, various factors may

affect which procedure is best to pursue:

• Substitute assets. In criminal proceedings, the court can enter a

money judgment against the defendant for the property's value or

can order the forfeiture of substitute assets if the property has

been dissipated or cannot be found.

• Burden of proof. In civil proceedings, the government need only

prove that a crime was committed and that the property derived

from or facilitated the crime by a preponderance of the evidence.

In criminal cases, the government must prove beyond a

reasonable doubt that a crime was committed and that the

defendant committed the crime, although the nexus between the

property and the offense need be proved only by a preponderance

of the evidence.

• Criminal conviction as a prerequisite. Civil forfeiture does not

require a conviction. This is especially important if the

government wants to forfeit the property of fugitives or

defendants who have died, or if the government can prove that

the property was involved in a crime but cannot prove the

wrongdoer's specific identity. Moreover, civil proceedings may be

brought against any property derived from either a specific

offense or from an illegal course of conduct, and therefore is not

limited to property involved in the offense(s) of conviction.

• Ownership of property. Criminal forfeiture reaches property only

if it is owned by the defendant. Civil forfeiture should be

considered if the prosecutor seeks to forfeit proceeds or

facilitation property that the defendant does not own.
300 Prosecuting Intellectual Property Crimes

• Discovery and disclosure obligations. Civil forfeiture, governed by

civil discovery rules, can result in early or unwanted disclosure of

information through traditional civil discovery mechanisms such

as interrogatories and depositions, and it is subject to stringent

deadlines.

• Attorneys' fees. If the government brings an unsuccessful action

for civil forfeiture, it may be liable for the owner's attorneys' fees.

• Efficiency. Administrative forfeiture is preferred whenever

available, as it can dispose of certain forfeiture matters quickly in

a non-judicial setting.

VIII.E.4. Civil Forfeiture in IP Matters

Civil forfeiture is available in some (though not all) intellectual

property offenses. It is available for property connected to criminal

copyright infringement, 18 U.S.C. § 2319; trafficking in counterfeit or

illicit labels or counterfeit documentation or packaging for copyrighted

works, 18 U.S.C. § 2318; unauthorized fixations of live musical

performances, 18 U.S.C. § 2319A; and trafficking in goods, services,

labels, documentation, or packaging with counterfeit marks,

18 U.S.C. § 2320. Civil forfeiture is not available if the property is only

connected to violations of the Digital Millennium Copyright Act,

17 U.S.C. § 1204, or the Economic Espionage Act, 18 U.S.C. §§ 1831,

1832. Again, the government need only prove that the crime was

committed; it need not convict a specific defendant of the crime.

VIII.E.4.a. Proceeds

The government can forfeit the proceeds of 18 U.S.C. §§ 2318, 2319,

2319A, and 2320 offenses in civil forfeiture proceedings. Under the Civil

Asset Forfeiture Reform Act of 2000 (“CAFRA”) amendments to

18 U.S.C. § 981(a)(1)(C), a general civil forfeiture statute, the

government can seek civil forfeiture of “[a]ny property, real or personal,

which constitutes or is derived from proceeds traceable to,” among other

things, any offense defined as a specified unlawful activity in the money

laundering provisions at 18 U.S.C. § 1956(c)(7). Specified unlawful

activities include criminal copyright infringement and trademark

counterfeiting, 18 U.S.C. § 1956(c)(7)(D) (citing 18 U.S.C. §§ 2319,

2320), as well as any offense listed as racketeering activity in

18 U.S.C. § 1961(1). Section 1961, in turn, lists not only §§ 2319 and

2320 violations, but also violations of 18 U.S.C. § 2318 (counterfeit

labels, documentation, and packaging for copyrighted works) and § 2319A
VIII. Penalties, Restitution, and Forfeiture 301

(bootleg musical recordings). Thus, civil forfeiture of proceeds is available

for violations of 18 U.S.C. §§ 2318, 2319, 2319A, and 2320.

VIII.E.4.b. Infringing Items, Other Contraband, and

Facilitating Property

Civil forfeiture of infringing and other contraband items, as well as

facilitating property, is also available for some IP offenses, but varies

greatly depending on the particular offense and property involved.

For some copyright and copyright-related offenses, Title 17 provides

for civil forfeiture of contraband such as infringing copies and certain

types of facilitating property. Civil forfeiture is available against property

that was manufactured or used in violation of the copyright laws,

17 U.S.C. § 509(a), specifically (a) infringing copies, or copies intended

for infringing use; and (b) the plates, masters, or other means used for

reproducing the infringing copies, as well as other devices for

manufacturing, reproducing, or assembling infringing copies. See, e.g.,

United States v. One Sharp Photocopier, Model SF-7750, 771 F. Supp.

980, 983 (D. Minn. 1991) (holding that the government was entitled to

forfeiture of copier used to produce infringing copies of a software

instruction manual); see also 17 U.S.C. § 509(b) (incorporating

administrative forfeiture provisions of Title 19 and the provisions relating

to in rem admiralty actions). Civil forfeiture is also available against

infringing articles or unauthorized fixations imported into the United

States, in some circumstances. See 17 U.S.C. §§ 602-603 (infringing

copies); 18 U.S.C. § 2319A (unauthorized fixations of live musical

performances).

For counterfeit trademark, service mark, and certification mark

offenses, the forfeiture provisions changed markedly in 2006. Before the

March 16, 2006 amendments, there was no civil forfeiture authority for

these cases except in the context of importation or proceeds under the

specified unlawful activity provisions discussed in above. However, the old

version of the statute, 18 U.S.C. § 2320, included a hybrid forfeiture

provision that used the civil preponderance-of-the-evidence standard but

applied only in a criminal prosecution. Before its amendment, § 2320(b)

provided that “[u]pon a determination by a preponderance of the

evidence that any articles in the possession of a defendant in a

prosecution under this section bear counterfeit marks, the United States

may obtain an order for the destruction of such articles.”

18 U.S.C. § 2320(b) (West 2005). Congress enacted this provision

because “[e]ven if the defendant is ultimately acquitted of the criminal

charge, there is no valid public policy reason to allow the defendant to
302 Prosecuting Intellectual Property Crimes

retain materials that are in fact counterfeit.” Joint Statement on

Trademark Counterfeiting Legislation, 130 Cong. Rec. 31,674 (1984).

See also United States v. Foote, 238 F. Supp. 2d 1271 (D. Kan. 2002).

This provision was revised considerably, however, by the Stop

Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181, 120

Stat. 285 (enacted March 16, 2006) to provide for civil forfeiture of

“[a]ny article bearing or consisting of a counterfeit mark used in

committing” a § 2320 violation, and “[a]ny property used, in any manner

or part, to commit or to facilitate the commission of” such a violation.

18 U.S.C. § 2320(b)(1).

VIII.E.4.c. Innocent Owner Defense

In most civil forfeiture actions, the innocent owner defense allows an

owner to challenge the forfeiture on the ground that he was unaware that

the property was being used for an illegal purpose, or took all reasonable

steps under the circumstances to stop it. See United States v. 2001

Honda Accord EX, 245 F. Supp. 2d 602 (M.D. Pa. 2003) (holding that

CAFRA preserved the rule that the burden of proof shifts to the claimant

to establish the innocent owner defense); United States v. 2526 Faxon

Avenue, 145 F. Supp. 2d 942 (W.D. Tenn. 2001) (holding that CAFRA

requires the claimant to prove the affirmative innocent owner defense by

a preponderance of the evidence). There are some exceptions, however,

most notably for importation offenses, and therefore prosecutors may

wish to consult with the Department's Asset Forfeiture and Money

Laundering Section at (202) 514-1263 if an innocent owner is likely to

submit a claim.

VIII.E.4.d. Victims' Ability to Forfeit Property

Note also that some IP rights-holders may obtain certain civil seizures

that can complicate the government's criminal prosecution, not to

mention its forfeiture proceedings. Mark-holders have an ex parte remedy

for seizing infringing products and manufacturing equipment.

15 U.S.C. §1116(d). Mark-holders may also petition the court for seizure

orders during a civil action against an infringer under 15 U.S.C. § 1114.

Authority for an ex parte seizure order is provided at 15

U.S.C. § 1116(d)(1)(A). Mark-holders who seek such an order must give

reasonable notice to the United States Attorney for the judicial district in

which the order is sought, after which the United States Attorney “may

participate in the proceedings arising under such application if such

proceedings may affect evidence of an offense against the United States.”

15 U.S.C. § 1116(d)(2). The mark-holder's application may be denied “if

the court determines that the public interest in a potential prosecution so
VIII. Penalties, Restitution, and Forfeiture 303

requires.” Id. If the mark-holder's application is granted, then the seizure

must be made by a federal, state, or local law enforcement officer. See

15 U.S.C. § 1116(d)(9).

Similar ex parte seizure remedies are available to rights-holders in

copyright and counterfeit or illicit labels cases. See 17 U.S.C. § 503;

18 U.S.C. § 2318(f).

Prosecutors may need to participate in these civil proceedings in order

to preserve evidence relevant to an incipient or ongoing criminal case, to

contest the issuance of an order, to preserve an ongoing investigation, or

to inform the mark-holder of his ability to initiate a parallel civil case to

seize, forfeit, and destroy equipment used to manufacture the counterfeit

trademark goods.

VIII.E.5. Criminal Forfeiture in IP Matters

As noted above, criminal forfeiture is an in personam action, and thus

is available only once a defendant has been convicted, and then it is

limited to property belonging to the defendant. See United States v.

Totaro, 345 F.3d 989, 995 (8th Cir. 2003) (holding that criminal

forfeiture is in personam, because if it allowed the forfeiture of a third

party's interest, the forfeiture would become an in rem action and the

third party could contest the forfeiture on more than ownership grounds);

United States v. O'Dell, 247 F.3d 655, 680 (6th Cir. 2001) (recognizing

that criminal forfeiture “entitles the government to forfeiture of a

convicted defendant's interests and nothing more”) (citation omitted);

United States v. Gilbert, 244 F.3d 888, 919 (11th Cir. 2001) (“Because

it seeks to penalize the defendant for his illegal activities, in personam

forfeiture reaches only that property, or portion thereof, owned by the

defendant.”) (citation omitted).

Even though criminal forfeiture is executed after conviction, the

government should plan for criminal forfeiture during the investigation

and at indictment. Pre-indictment seizure warrants can be used to seize

infringing items (whether or not they are the property of a target).

Moreover, the indictment should include separate forfeiture charges that

identify any property that is forfeitable pursuant to the charged offenses.

For forfeiture language to include in an indictment, prosecutors should

consult the forfeiture expert in their office or the Criminal Division's Asset

Forfeiture and Money Laundering Section.

Criminal forfeiture is available for at least some types of property in

cases involving the following criminal IP statutes: copyright,

17 U.S.C. § 506, 18 U.S.C. § 2319; trade secret theft, 18 U.S.C. § 1834;
304 Prosecuting Intellectual Property Crimes

trafficking in counterfeit or illicit labels or counterfeit documentation or

packaging for copyrighted works, 18 U.S.C. § 2318; trafficking in goods,

services, labels, documentation, or packaging with counterfeit marks,

18 U.S.C. § 2320; bootlegged recordings of live musical performances,

18 U.S.C. § 2319A; and movie camcording, 18 U.S.C. § 2319B.

Currently, there are no criminal forfeiture provisions for violations of the

Digital Millennium Copyright Act, 17 U.S.C. § 1204.

VIII.E.5.a. Proceeds

The government can obtain criminal forfeiture of IP crime proceeds

whenever those proceeds could be forfeited civilly: 18 U.S.C. §§ 2318,

2319, 2319A, and 2320. This is because CAFRA generally provided that

criminal forfeiture is available whenever civil forfeiture is available:

If a person is charged in a criminal case with a violation of an Act of

Congress for which the civil or criminal forfeiture of property is

authorized, the Government may include notice of the forfeiture in

the indictment or information pursuant to the Federal Rules of

Criminal Procedure. If the defendant is convicted of the offense giving

rise to the forfeiture, the court shall order the forfeiture of the

property as part of the sentence in the criminal case pursuant to the

Federal Rules of Criminal Procedure and section 3554 of title 18,

United States Code. The procedures in section 413 of the Controlled

Substances Act (21 U.S.C. § 853) apply to all stages of a criminal

forfeiture proceeding, except that subsection (d) of such section

applies only in cases in which the defendant is convicted of a violation

of such Act.

28 U.S.C. § 2461(c). As discussed above, the offenses for which civil

forfeiture is available are enumerated in 18 U.S.C. § 981, and include any

offense constituting “specifi ed unlawful activity” under

18 U.S.C. § 1956(c)(7), the money laundering statute. Section

1956(c)(7)'s list of “specified unlawful activity” includes, directly or

indirectly, violations of 18 U.S.C. §§ 2318, 2319, 2319A, and 2320.

Where a defendant has engaged in a monetary transaction involving

the proceeds of an intellectual property offense, “knowing that the

property involved in a financial transaction represents the proceeds of

some form of unlawful activity”—regardless of whether the crime is listed

in § 1956(c)(7)—the defendant may also be charged, and the proceeds

subject to forfeiture, under the money laundering statute directly. See

United States. v. Turner, 400 F.3d 491 (7th Cir. 2005) (holding that the

defendant need not know the actual source of the money, but only that

it came from “some illegal activity”); see also United States v. Khalil, No.
VIII. Penalties, Restitution, and Forfeiture 305

CR. A. 95-577-01, 1999 WL 455698 (E.D. Pa. June 30, 1999) (forfeiture

involving counterfeiting popular music).

In addition, for counterfeit marks cases, the Stop Counterfeiting in

Manufactured Goods Act (enacted March 16, 2006, discussed in Section

VIII.E.4. of this Chapter) amended 18 U.S.C. § 2320 to provide for

mandatory criminal forfeiture of proceeds (as well as other property). See

18 U.S.C. § 2320(b)(3)(A)(i) (as amended Mar. 16, 2006).

The Economic Espionage Act provides for mandatory criminal

forfeiture of the proceeds of a violation of 18 U.S.C. § 1831 or § 1832.

See 18 U.S.C. § 1834(a)(1).

VIII.E.5.b. Infringing Items, Other Contraband, and

Facilitating Property

Generally, criminal forfeiture is available against contraband items

involved in an IP offense—such as infringing items, unauthorized

recordings, and counterfeit labels or marks or articles bearing such

marks—and in some cases those items are subject to mandatory

destruction. Facilitating property is likewise subject to criminal forfeiture

in most cases, although such equipment generally need not be destroyed

and can instead be disposed of in other ways, such as at auction.

Copyright offenses are subject to mandatory forfeiture: “When any

person is convicted of a violation of subsection (a), 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.” 17 U.S.C. § 506(b).

Criminal forfeiture is likewise mandatory in offenses for camcording

and trafficking in counterfeit and illicit labels and counterfeit

documentation and packaging for copyrighted works. See

18 U.S.C. § 2318(d) (stating that the court must order “the forfeiture and

destruction or other disposition of all counterfeit labels or illicit labels and

all articles to which counterfeit labels or illicit labels have been affixed or

which were intended to have had such labels affixed, and of any

equipment, device, or material used to manufacture, reproduce, or

assemble the counterfeit labels or illicit labels”); 18 U.S.C. § 2319B(b)

(stating that upon conviction, the court “shall, in addition to any penalty

provided, order the forfeiture and destruction or other disposition of all

unauthorized copies of motion pictures or other audiovisual works
306 Prosecuting Intellectual Property Crimes

protected under title 17, or parts thereof, and any audiovisual recording

devices or other equipment used in connection with the offense”).

The “bootleg” statute, 18 U.S.C. § 2319A(b), contains a similar

forfeiture provision, requiring forfeiture and destruction of unauthorized

recordings. However, unlike the mandatory forfeiture of equipment

discussed above, the forfeiture of equipment used to reproduce

unauthorized recordings of live musical performances is left to the

discretion of the court, “taking into account the nature, scope, and

proportionality of the use of the equipment in the offense.” Compare

18 U.S.C. § 2319A(b) with 17 U.S.C. § 506(b).

For counterfeit marks cases, as noted above, until March 16, 2006,

the criminal statute contained an unusual criminal forfeiture provision

that allowed forfeiture of counterfeit goods upon a showing by a

preponderance of the evidence (within or related to a criminal case) that

the items bore counterfeit marks. See 18 U.S.C. § 2320(b) (West 2005).

See supra II.E.4. Under the recent revisions to the forfeiture provisions in

the Stop Counterfeiting in Manufactured Goods Act, 18 U.S.C. § 2320

now provides for mandatory forfeiture of “any article that bears or

consists of a counterfeit mark used in committing the offense” and any of

the defendant's property “used, or intended to be used, in any manner or

part, to commit, facilitate, aid, or abet the commission of the offense.”

18 U.S.C. § 2320(b)(3)(A). Any seized article bearing or consisting of a

counterfeit mark must be destroyed. 18 U.S.C. § 2320(b)(3)(B).

The Economic Espionage Act, governing theft of trade secrets,

provides for forfeiture of property used in facilitating the commission of

the offense, considering the nature, scope, and proportionality of the use

of the property in the offense. 18 U.S.C. § 1834(a)(2).
307

IX.

Charging

Decisions

IX.A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

IX.B. The Federal Interest in Intellectual Property Crimes . . . . 308

IX.B.1. Federal Law Enforcement Priorities . . . . . . . . . . . 308

IX.B.2. The Nature and Seriousness of the Offense . . . . . 309

IX.B.3. The Deterrent Effects of Prosecution . . . . . . . . . . 311

IX.B.4. The Individual's History of Criminal Offenses and

Civil Intellectual Property Violations . . . . . . . . . . 311

IX.B.5. The Individual's Willingness to Cooperate in the

Investigation or Prosecution of Others . . . . . . . . . 312

IX.C. Whether a Person is Subject to Prosecution in

Another Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

IX.D. The Adequacy of Alternative Non-Criminal Remedies . . . 313

IX.E. Special Considerations in Deciding Whether to Charge

Corporations and Other Business Organizations . . . . . . . 314

IX.A. Introduction

In determining whether to charge an intellectual property crime,

federal prosecutors should generally weigh the same considerations that

are weighed with respect to any other federal offense. The principal

resource is Chapter 9-27.000 of the United States Attorneys' Manual

(USAM) (“Principles of Federal Prosecution”). Ordinarily, the prosecutor

“should commence or recommend Federal prosecution if he/she believes

that the person's conduct constitutes a Federal offense and that the

admissible evidence will probably be sufficient to obtain and sustain a

conviction.” USAM 9-27.220.

This directive is not absolute. Even a provable case may be declined

in three situations: when prosecution would serve no substantial federal
308 Prosecuting Intellectual Property Crimes

interest; when the person is subject to effective prosecution in another

jurisdiction; and when there exists an adequate non-criminal alternative

to prosecution. Id. Broken down further, the relevant considerations

include:

• The federal interest in intellectual property crimes, which

includes:

• Federal law enforcement priorities.

• The nature and seriousness of the offense.

• The deterrent effect of prosecution.

• The individual's culpability in connection with the offense.

• The individual's criminal history.

• The individual's willingness to cooperate in the investigation

or prosecution of others.

• The probable sentence and other consequences of conviction.

• Whether the person is subject to prosecution in another

jurisdiction

• The adequacy of alternative non-criminal remedies

• Special considerations for deciding whether to charge

corporations

This chapter briefly discusses how some of these factors apply

specifically to intellectual property crimes.

IX.B. The Federal Interest in Intellectual

Property Crimes

In determining whether a particular prosecution would serve a

substantial federal interest, the prosecutor should weigh all relevant

factors. USAM 9-27.230. Several factors that have specific application to

intellectual property crimes are discussed below.

IX.B.1. Federal Law Enforcement Priorities

“[F]rom time to time the Department establishes national

investigative and prosecutorial priorities. These priorities are designed to

focus Federal law enforcement efforts on those matters within the Federal
IX. Charging Decisions 309

jurisdiction that are most deserving of Federal attention and are most

likely to be handled effectively at the Federal level.” USAM

9-27.230(B)(1) (comment).

Because of the importance of intellectual property to the national

economy and the scale of intellectual property theft, intellectual property

crime continues to be a law enforcement priority. Intellectual property

theft worldwide reportedly costs American companies $250 billion a year.

U.S. Department of Justice, Report of the Department of Justice's Task

Force on Intellectual Property 8 (Oct. 2004) (citing Office of the United

States Trade Representative). As a consequence, “the American economy

is losing hundreds of millions of dollars in tax revenues, wages, investment

dollars, as well as hundreds of thousands of jobs.” Id. The Justice

Department has therefore made the enforcement of intellectual property

laws a high priority. Id. at 13.

To meet this priority, the Department has trained a national network

of specialized prosecutors designated “Computer Hacking and Intellectual

Property (CHIP) Coordinators,” at least one of whom is located in each

of the nation's ninety-four United States Attorneys' Offices, with greater

numbers in the twenty-five CHIP units located in districts that experience

some of the highest concentrations of computer and intellectual property

crimes. See id. at 13.

At the national and international level, intellectual property

prosecutions are coordinated by the Department's Computer Crime and

Intellectual Property Section (CCIPS) in Washington, D.C. CCIPS can

help evaluate whether a particular intellectual property crime poses a

matter of federal priority. CCIPS can be reached at (202) 514-1026.

IX.B.2. The Nature and Seriousness of the Offense

As with other offenses, intellectual property crimes vary in their

nature and seriousness. It is therefore essential to consider each case on

its own facts.

The offense's nature and seriousness are indicated by the usual factors,

with special importance placed on threats to health or safety, the volume

of infringement, the amount of revenue and profit, the number of

participants, the involvement of organized crime, and the magnitude of

the victim's loss or potential loss, all of which are factored into the

sentencing guidelines. See U.S. Sentencing Guidelines Manual

§ 2B5.3(b)(1) & cmt. n.2(A) (2005) (volume of infringement and

likelihood that defendant's sales displaced the victim's); id. cmt. 4(A)
310 Prosecuting Intellectual Property Crimes

(substantial harm to victim's reputation); id. app. note 4(B) (involvement

of organized crime).

Other considerations that are more particular to intellectual property

offenses include the following:

• Federal criminal prosecution is most appropriate in the most

egregious cases. The criminal intellectual property statutes punish

only a subset of the conduct that is punishable under civil

intellectual property laws. Even then, the government must prove

its case beyond a reasonable doubt, including a high state of mens

rea.

• Limited federal resources should not be diverted to prosecute an

inconsequential case or a case in which the violation is only

technical. Even some branches of civil intellectual property law

recognize the maxim, “de minimis non curat lex.”

• Federal prosecution is most appropriate when the questions of

intellectual property law are most settled. Federal prosecutors

should, however, not hesitate to apply settled intellectual

property concepts in innovative ways to new schemes and new

technology.

• Victims have a broad range of civil remedies that include

restitution, damages, punitive or quasi-punitive damages,

injunctions, court costs, and attorneys' fees. See Section IX.D. of

this Chapter.

• The more strongly an intellectual property owner acts to protect

its rights, the stronger the interest in prosecution. Id.

• Many intellectual property offenses include multiple victims: not

only the owners of the intellectual property that was infringed,

but also customers who were defrauded. Both classes of victim

deserve protection, and one class's lack of interest in prosecution

should not countermand prosecution when the other class's

interest is strong.

• The sources or manufacturers of infringing goods and services are

generally more worthy of prosecution than distributors. Cf.

U.S.S.G. § 2B5.3(b)(3).

• Counterfeit goods or services that endanger the public's health or

safety deserve the highest consideration for prosecution. See

United States Department of Justice, Report of the Department

of Justice's Task Force on Intellectual Property 7-9 (Oct. 2004);

cf. U.S.S.G. § 2B5.3(b)(5) (adjusting offense level for
IX. Whether to Charge an Intellectual Property Crime 311

infringement offenses involving “conscious or reckless risk of

serious bodily injury or possession of a dangerous weapon in

connection with the offense” by 2 levels, with a minimum offense

level of 13).

IX.B.3. The Deterrent Effect of Prosecution

Some infringers are undeterred by civil liability. They treat civil

remedies as a cost of doing business and continue their infringement after

civil sanctions, albeit with different products or under a different

corporate guise. Criminal prosecution can better deter a persistent violator

from repeating his or her crime.

Criminal prosecution may also further general deterrence. Individuals

may commit intellectual property crimes not only because some are

relatively easy to commit, such as copying music, but also because they do

not fear prosecution. But one person's relatively small-scale violations, if

permitted to take place openly and notoriously, can lead others to believe

that such conduct is tolerated. While some counterfeiting or piracy

offenses may not result in provable direct loss to a victim, the widespread

commission of such crimes can devastate the value of intellectual property

rights in general. 

Criminal prosecution plays an important role in establishing the

public's understanding of what conduct is acceptable and what is not.

Vigorous prosecution changes the public's calculus. Put simply, more

individuals will be deterred from committing intellectual property offenses

if they believe they will be investigated and prosecuted.

IX.B.4. The Individual's History of Criminal Offenses and Civil

Intellectual Property Violations

Repeat criminal offenders are especially worthy of prosecution. See

USAM 9-27.230(B)(5) (comment). The repeat-offender provisions in the

intellectual property crime statutes and the United States Sentencing

Guidelines ensure that repeat offenders receive stiffer sentences.

In addition to the defendant's criminal history, it is also appropriate

to consider his or her history of civil intellectual property violations.

When infringers consider civil penalties merely a cost of doing business,

criminal enforcement is particularly appropriate. Sources for determining

the defendant's history of civil intellectual property offenses include civil

litigation records (which are often searchable online), the victim's legal

department and private investigators, and any state consumer protection

agencies to which consumers might have complained.
312 Prosecuting Intellectual Property Crimes

IX.B.5. The Individual's Willingness to Cooperate in the

Investigation or Prosecution of Others

As discussed in Section IX.B.2. of this Chapter, the sources of

counterfeit or pirated goods or services are especially worthy of

prosecution. Special consideration should be given to targets who are

willing to cooperate in an investigation that leads to a source's

prosecution.

This includes the prosecution of foreign sources. In recent years, the

Department of Justice has worked extensively with foreign law

enforcement agencies to investigate and prosecute foreign violators, both

by extraditing foreign violators to the United States and by coordinating

searches and prosecutions simultaneously in the United States and

abroad. CCIPS has regular contact with foreign prosecutors and law

enforcement agencies with an interest in intellectual property crime.

Therefore, for assistance in investigating or prosecuting offenses with an

international dimension, contact CCIPS at (202) 514-1026.

IX.C. Whether the Person is Subject to

Prosecution in Another Jurisdiction

The second situation in which a prosecutor may decline prosecution

despite having a provable case occurs when the putative defendant is

subject to effective prosecution in another jurisdiction. USAM 9-27.240.

Relevant to this inquiry is the strength of the other jurisdiction's interest

in prosecution; the other jurisdiction's ability and willingness to prosecute

effectively; the probable sentence or other consequences of conviction in

the other jurisdiction; and any other pertinent factors. Id.

The primary question will often not be whether the case could be

prosecuted by another U.S. Attorney's Office, but rather whether it could

be prosecuted by state or local authorities. USAM 9-27.240 (comment).

State or local law enforcement may be a viable alternative to federal

prosecution. Federal intellectual property laws generally do not preempt

state and local intellectual property laws. The only relevant area of

intellectual property in which there is broad federal preemption is

copyright infringement, but even in that area states have passed some

creative laws that indirectly criminalize traffic in some pirated works.

Compare 17 U.S.C. § 301 (copyright preemption), State v. Perry, 697

N.E.2d 624 (Ohio 1998) (holding that federal copyright law preempted

prosecution in case involving defendant's use of computer software on his
IX. Whether to Charge an Intellectual Property Crime 313

bulletin board), Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1212-

13 (9th Cir. 1998) (holding state law unfair competition claim preempted

where complaint expressly based the claim on rights granted by the

Copyright Act), and Kregos v. Associated Press, 3 F.3d 656, 666 (2d Cir.

1993) (holding state law unfair competition and misappropriation claims

preempted when based solely on the copying of protected expression in

forms), with Anderson v. Nidorf, 26 F.3d 100, 102 (9th Cir. 1994)

(holding California anti-piracy statute not preempted by federal copyright

laws in illegal sound recording case), State v. Awawdeh, 864 P.2d 965,

968 (Wash. Ct. App. 1994) (holding Washington statute not preempted

by federal copyright law in illegal sound recording case), and People v.

Borriello, 588 N.Y.S.2d 991, 996 (N.Y. App. Div. 1992) (holding New

York statute not preempted by Copyright Revision Act in illegal video

recording case).

IX.D. The Adequacy of Alternative

Non-Criminal Remedies

Department of Justice policy allows a prosecutor to decline criminal

prosecution in a situation that could be adequately addressed by noncriminal remedies. USAM 9-27.220. Almost every federal intellectual

property crime has an analogue in civil law—be it state or federal—and

those laws generally offer victims generous relief, such as injunctions,

restitution, damages, punitive and quasi-punitive damages, court costs,

attorneys' fees, and even ex parte seizure of a defendant's infringing

products. See 15 U.S.C. §§ 1114, 1116-1117 (trademark); 17

U.S.C. §§ 501-505 (copyright). Imported infringing merchandise can also

be subject to civil forfeiture and fines by United States Customs and

Border Protection. See, e.g., 19 U.S.C. § 1526(f) (trademark). The

availability and adequacy of these remedies should be carefully considered

when evaluating an intellectual property case.

The prosecutor should also consider whether existing civil remedies

have been or are likely to deter a particular defendant. For those

undeterred by civil suits and remedies, criminal prosecution may be more

appropriate. When the defendant has violated an earlier civil order,

however, civil or criminal penalties for contempt of court may be an

acceptable alternative to prosecution for criminal intellectual property

violations.
314 Prosecuting Intellectual Property Crimes

Finally, when the violator's conduct is persistent, unsafe, profitoriented, fraudulent, or physically invasive, civil remedies may not fully

capture the wrongfulness of the defendant's conduct. In such cases,

criminal prosecution may be preferred.

Although the government may prosecute even if the victim has not

exhausted its civil and administrative remedies, the government should

consider the victim's pursuit of alternative remedies. The putative

defendant's conduct in response should also be examined.

IX.E. Special Considerations in Deciding

Whether to Charge Corporations

and Other Business Organizations

Corporations and other business organizations are often used to

commit intellectual property crimes. The decision whether to charge a

business organization involves numerous considerations. Department of

Justice policy on such charging decisions is generally set forth in Criminal

Resource Manual 162, available at http://www.usdoj.gov/usao/eousa/

foia_reading_room/usam/title9/crm00162.htm (also known as the

“Thompson memo”). This memorandum's analysis applies to intellectual

property crimes in the same manner as to other crimes.
315

X.

Victims of Intellectual

Property Crimes—

Ethics and Obligations

X.A. Victims' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317

X.B. The Victim's Role in the Criminal Prosecution . . . . . . . . 319

X.B.1. Reporting an Intellectual Property Crime . . . . . . . . . 319

X.B.2. Ethical Concerns When the Criminal Prosecution Results in

an Advantage in a Civil Matter . . . . . . . . . . . . . . . . . 320

X.B.2.a. Victims Who Seek Advantage by Threats of

Criminal Prosecution . . . . . . . . . . . . . . . . . . . . . . . . . 320

X.B.2.b. Global Settlement Negotiations . . . . . . . . . . . . . 321

X.B.3. Parallel Civil Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . 322

X.B.3.a. Private Civil Remedies . . . . . . . . . . . . . . . . . . . . 323

X.B.3.b. Advantages and Disadvantages of Parallel Civil and

Criminal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 323

X.B.3.c. Stays and Protective Orders to Delay Civil Proceedings

During Criminal Prosecution . . . . . . . . . . . . . . . . . . . 325

X.C. Offers of Assistance From Victims and Related Parties . . 326

X.C.1. Gift Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

X.C.1.a. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 327
316 Prosecuting Intellectual Property Crimes

X.C.1.b. Distinction Between “Assistance” and “Gifts” . . 328

X.C.1.b.i. Assistance from Victims and Related Parties

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

X.C.1.b.ii. Private Investigators . . . . . . . . . . . . . . . . . 330

X.C.1.b.iii. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331

X.C.1.b.iv. Storage Costs in Counterfeit or Infringing

Products Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

X.C.1.b.v. Resources Donated for Ongoing Use by Law

Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

X.C.1.b.vi. Assistance from Private Third Parties . . . . 333

X.C.1.c. Departmental Procedures for the Solicitation and

Acceptance of Gifts and Assistance . . . . . . . . . . . . . . 335

X.C.1.c.i. Consultative Process for Acceptance of Assistance

and Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

X.C.1.c.ii. Solicitation of Gifts . . . . . . . . . . . . . . . . . . 335

X.C.1.c.iii. Acceptance of Gifts . . . . . . . . . . . . . . . . . 335

X.C.2. Professional Responsibility Issues . . . . . . . . . . . . . . . 337

X.C.3. Strategic and Case-Related Issues . . . . . . . . . . . . . . . 338

X.C.4. Help and Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

But justice, though due to the accused, is due to the accuser also....

We are to keep the balance true.

Justice Benjamin Cardozo, Snyder v. Massachusetts, 291 U.S. 97, 122

(1934). 

Many victims of intellectual property (“IP”) offenses are atypical, in

that they often have substantial resources to protect their rights by

investigating, pursuing, and deterring infringers independent of law

enforcement. For instance, businesses often pool their resources in
X. Victims 317

industry groups that undertake enforcement actions on their behalf. See

Appendix G (listing trademark and copyright organization contacts).

These groups sometimes investigate violations independently and refer the

results to law enforcement with a request to bring charges. They may even

seek to contribute resources to law enforcement agencies or multi-agency

task forces organized to focus on IP and other high-tech offenses.

Whether an IP victim can enforce its rights through civil or administrative

processes may influence whether criminal prosecution is warranted (see

Chapter IX of this Manual), and if so, what charges and strategy are

appropriate. The fact that IP rights-holders sometimes can address IP

crime on their own does not, however, diminish their rights under federal

law. 

Although corporate rights-holders are often the primary victims in

intellectual property offenses, consumers are victimized also. Some

consumers may be defrauded into mistakenly buying counterfeits, while

consumers who purchase authentic goods pay higher prices.

X.A. Victims' Rights

Beginning with the passage of the Victim and Witness Protection Act

of 1982, Pub. L. No. 97-291, 96 Stat. 1248 (1982), Congress has enacted

numerous statutes that protect victims' rights during the investigation,

prosecution, and sentencing stages of criminal prosecutions. Most

recently, Congress revised and recodified victims' rights laws in the Justice

for All Act of 2004, Pub. L. No. 108-405, 118 Stat. 2260 (2004).

Guidance for the implementation of the Justice for All Act can be found

in the revised Attorney General Guidelines for Victim and Witness

Assistance (May 2005) (“AG Guidelines”), which supersedes all earlier

versions, and can be found at http://www.usdoj.gov/olp/final.pdf.

Generally, the Justice for All Act requires Department of Justice

employees to make their best efforts to notify victims of the following

rights:

1. The right to be reasonably protected from the accused

2. The right to reasonable, accurate, and timely notice of any public

court proceeding, or any parole proceeding, involving the crime

or any release or escape of the accused

3. The right not to be excluded from any such public court

proceeding, unless the court, after receiving clear and convincing
318 Prosecuting Intellectual Property Crimes

evidence, determines that testimony by the victim would be

materially altered if the victim heard other testimony at that

proceeding

4. The right to be reasonably heard at any public proceeding in the

district court involving release, plea, sentencing, or any parole

proceeding

5. The reasonable right to confer with the attorney for the

government in the case

6. The right to full and timely restitution as provided in law

7. The right to legal proceedings free from unreasonable delay

8. The right to be treated with fairness and with respect for the

victim's dignity and privacy

See 18 U.S.C. § 3771(a), (c)(1); AG Guidelines, Art. I.B. Apart from these

enumerated rights, the prosecutor has an independent obligation under

the Act to advise the victim of his or her right to counsel in connection

with the rights established by the Act. See 18 U.S.C. § 3771(c)(2); AG

Guidelines, Art. I.C. 

The Act also creates several enforcement mechanisms. If the

government or a victim believes the victim's rights are being violated,

relief is possible by way of motion and ultimately a petition for writ of

mandamus in the Court of Appeals. See 18 U.S.C. § 3771(d)(3); AG

Guidelines, Art. II.D.1. If the victim's rights are violated, the Act does not

permit a motion for a new trial, but does provide for re-opening a plea or

sentence. 18 U.S.C. § 3771(d)(5). Finally, although the Act does not

authorize suits against government personnel, it requires the Department

to create an administrative authority within the Department to receive

and investigate complaints, and impose disciplinary sanctions for willful

or wanton non-compliance. See 18 U.S.C. § 3771(f)(2); AG Guidelines,

Art. I.D.2.; 28 C.F.R. § 45.10 (2005).

For purposes of enforcing these rights, the Justice for All Act defines

a victim as “a person directly and proximately harmed as a result of the

commission of a Federal offense or an offense in the District of

Columbia.” See 18 U.S.C. § 3771(e) (emphasis added); see also AG

Guidelines, Art. II.D.1. A victim may be an individual, a corporation,

company, association, firm, partnership, society, or joint stock company.

See 1 U.S.C. § 1 (defining “person”); AG Guidelines, Art. II.D.1. In

contrast, a “person whose injuries stem only indirectly from an offense is
X. Victims 319

not entitled to the rights or services described” above. AG Guidelines, Art.

II.E.2 (emphasis added). Accordingly, in considering whom to classify as

a victim, prosecutors may consider whether those who were injured during

the commission of a federal crime were indeed “directly and proximately

harmed” by the offense pursuant to 18 U.S.C.§ 3771(e), particularly in

cases where there are hundreds or even thousands of potential victims.

The Act's provision on “Multiple Crime Victims” is of particular

interest in cases involving the large-scale distribution of pirated digital

works over the Internet:

In a case where the court finds that the number of crime victims

makes it impracticable to accord all of the crime victims the rights

described in subsection (a), the court shall fashion a reasonable

procedure to give effect to this chapter that does not unduly

complicate or prolong the proceedings.

18 U.S.C. § 3771(d)(2); see also AG Guidelines, Art. II.G. For instance,

in an online software piracy prosecution with hundreds or thousands of

victims, it is often impractical for a prosecutor to notify all of the rightsholders. In such cases, the prosecutor should consider, at a minimum,

notifying and enlisting the assistance of any trade organizations that

represent multiple rights-holders. The prosecutor could then craft an

alternative procedure for informing such representatives (in lieu of

notifying all rights-holders) and move the court to approve it.

The Act states that “[n]othing in this chapter shall be construed to

impair the prosecutorial discretion of the Attorney General or any officer

under his direction.” 18 U.S.C. § 3771(d)(6). Congress clearly did not

intend the Act to be implemented in a way that hinders prosecutorial

discretion in addressing issues of victims' rights and notification.

The Act did not alter other provisions that protect victimized rightsholders. In all criminal prosecutions, a pre-sentence report must contain

verified information containing an assessment of the impact on any

individual against whom the offense has been committed. Fed. R. Crim.

P. 32(d)(2)(B). Additionally, most intellectual property statutes guarantee

victims (including producers and sellers of legitimate works, rightsholders, and their legal representatives) the right to submit a victim

impact statement identifying the extent and scope of their injury and loss

prior to sentencing. See 18 U.S.C. §§ 2319(e), 2319A(d), 2319B(e),

2320(d).
320 Prosecuting Intellectual Property Crimes

X.B. The Victim's Role in the Criminal

Prosecution

The fact that victims of IP crime have access to civil remedies raises

several issues during criminal prosecution.

X.B.1. Reporting an Intellectual Property Crime

The Department recommends that victims of intellectual property

crimes document all investigative steps, preserve evidence, and contact

law enforcement right away. See U.S. Department of Justice Report of the

Department of Justice's Task Force on Intellectual Property App. C (Oct.

2004). Victims can report intellectual property crimes using the referral

forms in this Manual at Appendix H.

X.B.2. Ethical Concerns When the Criminal Prosecution Results

in an Advantage in a Civil Matter

Like other victims of crime, IP rights-holders are often interested in

securing economic and other relief, but, unlike many other victims, rightsholders often have the resources to aggressively pursue that relief

themselves. Prosecutors are obligated by statute and policy to assist

victims in obtaining restitution and other remedies, but prosecutors are

also obligated to serve the public interest; occasionally, those interests

may be in tension. How concerned should the government be about IP

victims using the threat of criminal prosecution to advance their private

interests? And to what extent can the government offer a defendant

concessions in prosecution or sentencing in exchange for the defendant's

agreement to compensate the victim or mitigate the harm the defendant

has caused? 

X.B.2.a. Victims Who Seek Advantage by Threats of Criminal

Prosecution

It is commonplace for an IP-owner's attorney to send a merchant a

letter directing him to cease and desist sales of infringing merchandise. If

the merchant continues to infringe, the letter will be solid evidence of the

defendant's mens rea during any ensuing criminal case.
X. Victims 321

Sometimes the IP owner's letter will include an express or implied

threat to seek criminal prosecution should the merchant persist. The

extent to which a lawyer can ethically threaten to press criminal charges

to advance a civil cause of action is not clear. The lack of clarity stems in

part from a patchwork of ethical rules. The ABA's Model Code of

Professional Responsibility (1969, amended 1980) explicitly prohibited

strategic threats of prosecution: “A lawyer shall not present, participate in

presenting, or threaten to present criminal charges solely to obtain an

advantage in a civil matter.” Disciplinary Rule 7-105(A). The ABA's

Model Rules of Professional Conduct, adopted in 1983, omitted the rule

as “redundant or overbroad or both.” See ABA Formal Ethics Opinion 92-

363 (1992) (allowing a lawyer to use a threat of a criminal referral to

obtain advantage if the civil claim and criminal matter are related and

well-founded). Not all states have dropped the old rule, and some have

adopted other specific provisions addressing the issue. Compare Office of

Disciplinary Counsel v. King, 617 N.E.2d 676, 677 (Ohio 1993)

(disciplining a lawyer under the old rule for threatening to seek

prosecution unless opponent in property dispute paid disputed rent or

vacated the property) with Disciplinary Rule 7-105(A) (Or. 2003)

(allowing such threats “if, but only if, the lawyer reasonably believes the

charge to be true and if the purpose of the lawyer is to compel or induce

the person threatened to take reasonable action to make good the wrong

which is the subject of the charge”).

Whatever the implication for the victim's lawyer, there is nothing

unethical about the government's prosecuting the offender after such a

threat has been made. The victim's threat does not present a legal or

ethical obstacle for the prosecution. Instead, the concern for the

government prosecutor is a strategic one, to the extent that the threat

reflects on the victim's credibility or willingness to manipulate the

criminal justice system for private gain. The victim's conduct in this regard

is one factor among many to be considered in deciding whether to

prosecute.

X.B.2.b. Global Settlement Negotiations

Ethical questions arise when the prosecution, victim, and defendant

attempt to resolve all pending civil and criminal disputes in a global

settlement agreement. While the answers to these questions are not

entirely clear, there are some best practices that follow the guidelines cited

above, Department policy, and strategic concerns.
322 Prosecuting Intellectual Property Crimes

First, it is often the better practice for the prosecutor to defer to the

other parties to suggest a global disposition rather than be the first to

suggest it. By adopting this approach, the prosecutor is less likely to create

the appearance of overreaching:

[T]he government can neither be, nor seem to be, trading money for

relief or insulation from criminal prosecution or sentencing

consequences. Such a trade-off not only would undermine the

integrity of the prosecutorial process, but also raises formidable

fairness concerns, with wealthy defendants better able to reach global

settlements than poor ones.

* * *

Many prudent Assistant United States Attorneys consider global

settlements to have an appropriate and ethical role in resolving

parallel proceedings, but follow a rule of not introducing or suggesting

such a disposition. If opposing counsel raise[s] the issue, it may be

responded to and pursued by government attorneys in close

consultation with supervisors, and mindful of the ethics issues. 

U.S. Department of Justice, Federal Grand Jury Practice § 12.16 (Office

of Legal Education 2000) (concerning parallel proceedings and global

settlements).

Second, it is the better practice to limit the negotiations to matters of

criminal law. For example, as discussed in Section X.B.3.a. of this

Chapter, although some civil remedies will award a victim of IP theft with

treble damages, treble damages cannot be awarded under the criminal

restitution statutes. See 18 U.S.C. §§ 3663(b), 3663A(b), 3664(f)(1)(A).

See also Section VIII.D.3. of this Manual (discussing how to determine

restitution measures). However, the criminal statutes permit restitution

to be ordered “to the extent agreed to by the parties,” 18 U.S.C.

§ 3663(a)(3), and allow for the defendant to provide services in lieu of

money, 18 U.S.C. §§ 3663(a)(5), 3664(f)(4). Therefore, it is perfectly

appropriate for the government to require full restitution as a condition

of a plea agreement. See Sections VIII.D.1.-.2. of this Manual.

Clearly, the government may not use the threat of unsupported

charges to obtain advantage for a civil plaintiff. Model Rule of

Professional Conduct 3.8 prohibits a prosecutor from seeking charges that

the prosecutor knows are not supported by probable cause, and Rule 3.1

prohibits any advocate from asserting frivolous claims. Rule 4.1 requires

a lawyer to be truthful. Even a well-founded threat of criminal prosecution
X. Victims 323

may be unethical if intended merely to “embarrass, delay or burden a

third person.” Model Rules of Professional Conduct R. 4.4 (2003).

Finally, there is the strategic concern. A judge or jury might react

negatively if the victim or prosecutor appears to be threatening more

serious consequences in the criminal case as leverage in the civil

disposition. Although the prosecutor must at all times keep the victim

informed of the progress of the criminal case, including discussion of a

plea offer (see Section X.A. of this Chapter), it is ultimately the

prosecutor who must decide how, if at all, to attempt to resolve a criminal

case, including all issues of restitution to the victim.

X.B.3. Parallel Civil Suits

The civil and regulatory laws of the United States frequently overlap

with the criminal laws, creating the possibility of parallel civil and

criminal proceedings, either successive or simultaneous. In the

absence of substantial prejudice to the rights of the parties involved,

such parallel proceedings are unobjectionable under our jurisprudence.

Securities & Exch. Comm'n v. Dresser Indus., Inc., 628 F.2d 1368, 1374

(D.C. Cir. 1980) (en banc) (footnote omitted). The topic of parallel civil

suits is complex and largely beyond the scope of this Manual. For a more

extensive discussion of parallel proceedings, see U.S. Department of

Justice, Federal Grand Jury Practice ch. 12 (Office of Legal Education

2000). The following is a brief summary.

X.B.3.a. Private Civil Remedies

Victims of IP crimes have extraordinary enforcement mechanisms and

civil remedies against infringers. In civil actions, IP rights-holders can

recover damages, the defendant's profits, costs, attorney fees, and even

statutory damages, which can be punitive or quasi-punitive. See 15 U.S.C.

§ 1117 (trademark infringement damages); 17 U.S.C. §§ 504 (copyright

infringement), 505 (same), 1101 (bootlegged recordings of live musical

performances), 1203 (DMCA); 18 U.S.C. § 2318(f) (illicit labels and

counterfeit labels, documentation, and packaging for copyrighted works);

see also Getty Petroleum Corp. v. Island Transp. Corp., 862 F.2d 10, 13-

14 (2d Cir. 1988) (holding punitive damages unavailable for federal

trademark claims, but may be available for state infringement and unfair

competition claims). Civil remedies also include injunctive relief against
324 Prosecuting Intellectual Property Crimes

future infringement and seizure or impoundment of infringing goods. 15

U.S.C. §§ 1116, 1118 (trademark); 17 U.S.C. §§ 502 (copyright), 503

(same), 1101 (bootlegged recordings of live musical performances),

1203(b) (DMCA); 18 U.S.C. § 2318(f)(2)(A), (B) (illicit labels and

counterfeit labels, documentation, and packaging for copyrighted works).

Victims of trademark or copyright infringement can also seek the

private counterpart of a search warrant: an ex parte seizure order,

executed by law enforcement. 15 U.S.C. § 1116(d) (trademark); 17

U.S.C. § 503 (copyright); see Columbia Pictures Indus., Inc. v. Jasso, 927

F. Supp. 1075 (N.D. Ill. 1996) (sealed writ of seizure issued for pirated

videos); Time Warner Entm't Co. v. Does Nos. 1-2, 876 F. Supp. 407,

410 (E.D.N.Y. 1994) (recognizing availability of seizure order for

infringing goods, but denying the victims' ex parte request on Fourth

Amendment grounds because it called for execution by private

investigators and failed to describe the locations to be searched with

particularity). A party seeking civil seizure of goods with counterfeit

marks must first notify the United States Attorney to allow the

government's intervention should the seizure affect the public interest in

a criminal prosecution. 15 U.S.C. § 1116(d)(2).

Prosecutors should consider the availability and use of private civil

remedies in deciding whether to prosecute an infringer criminally. See

Section IX.D. of this Manual.

X.B.3.b. Advantages and Disadvantages of Parallel Civil and

Criminal Proceedings

If the government prosecutes a defendant who is also a party to a

pending civil case, the parallel proceedings raise their own set of issues:

Advantages

• The victim's private civil enforcement action brings additional

statutory and equitable remedies to bear on a defendant.

• The victim's allocation of resources to the investigation may

conserve government resources. Moreover, as discussed in Section

X.C. of this Chapter, the victim's independent reasons for

providing resources to advance the civil case may lessen the

appearance of any potential conflict of interest.
X. Victims 325

• In the civil case, the plaintiff victim can compel discovery, which

the prosecution can use and discuss with the victim without grand

jury secrecy or operational concerns.

• A civil case presents the defendant with a difficult Fifth

Amendment choice. If he submits to discovery, he may lock in his

story, provide leads, disclose strategy, or furnish false exculpatory

statements, all of which may assist the criminal prosecutor. If he

asserts his privilege against self-incrimination in the civil matter,

however, the jury in the civil case can be instructed that it may

draw an adverse inference from his silence. See, e.g., Baxter v.

Palmigiano, 425 U.S. 308, 318 (1976) (adverse inference from

silence permissible in prison disciplinary proceedings); ePlus

Tech., Inc. v. Aboud, 313 F.3d 166, 179 (4th Cir. 2002) (adverse

inference permissible in civil RICO fraud case); LaSalle Bank Lake

View v. Seguban, 54 F.3d 387, 390-91 (7th Cir. 1995) (same).

• A criminal conviction typically ends the civil case in the victim's

favor, either because the victim can rely on the criminal court's

restitution order, collateral estoppel will conclusively establish the

defendant's wrongdoing in the civil case, or the conviction simply

renders the defendant less willing to contest the civil case.

Disadvantages

• Given the availability of private, civil enforcement mechanisms,

the court may view the criminal prosecution as a waste of judicial

resources.

• The government loses control of a component of the

investigation. Actions taken by private counsel and investigators

for the civil case may not be in the criminal case's best interests.

• If the grand jury is used to gather evidence, secrecy concerns may

require criminal investigators to withhold material information

from the parties to the civil proceeding, although collecting

evidence outside the grand jury, such as through search warrants

or administrative subpoenas, may allow the government to share

information without breaching grand jury secrecy.

• The defendant can compel discovery in the civil case, which may

generate inconsistent witness statements and provide insight into
326 Prosecuting Intellectual Property Crimes

the prosecution's case. As a result, some prosecutors will seek to

stay the civil case while the criminal case proceeds.

X.B.3.c. Stays and Protective Orders to Delay Civil Proceedings

During Criminal Prosecution 

If the disadvantages of parallel proceedings outweigh the advantages,

the government may seek a protective order or a stay of the civil

proceedings. There is ample authority for issuing a stay or protective

order, especially when liberal civil discovery would allow a criminal target

or defendant to interfere with the investigation or bypass restrictions on

criminal discovery. See, e.g., Degen v. United States, 517 U.S. 820, 825-

26 (1996) (holding that a stay may be sought in parallel civil forfeiture

action); United States v. Stewart, 872 F.2d 957, 961-63 (10th Cir. 1989)

(holding that a court handling a criminal case may have authority under

Fed. R. Crim. P. 16(d) or 18 U.S.C. § 1514(a) to prevent parties in a

parallel civil case from abusing witnesses or discovery procedures);

Securities & Exch. Comm'n v. Dresser Indus., 628 F.2d 1368, 1376 n.20

(D.C. Cir. 1980) (en banc) (noting that the government may seek

postponement of the noncriminal proceeding to prevent the criminal

defendant from broadening his rights of criminal discovery against the

government); Campbell v. Eastland, 307 F.2d 478, 490 (5th Cir. 1962)

(holding that the public interest in criminal prosecution with limited

discovery outweighed civil litigant's right to prepare case promptly); see

also U.S. Department of Justice, Federal Grand Jury Practice § 12.14, at

407-10 (Office of Legal Education 2000).

In seeking a stay or protective order, the government should be

prepared to address the following factors: (1) the extent to which issues

in the criminal case overlap with those presented in the civil case; (2) the

status of the criminal matter, especially whether the civil defendant has

been indicted; (3) the interest of the plaintiff in proceeding expeditiously,

as weighed against the prejudice caused by the delay; (4) the private

interests of and burden on the defendant; (5) the interest of the court in

case management and judicial resources; (6) the interest of non-parties;

and (7) the public interest. See Benevolence Int'l Found. v. Ashcroft, 200

F. Supp. 2d 935, 938 (N.D. Ill. 2002); Trustees of the Plumbers and

Pipefitters Nat'l Pension Fund v. Transworld Mech., Inc., 886 F. Supp.

1134, 1139 (S.D.N.Y. 1995).
X. Victims 327

X.C. Offers of Assistance From Victims

and Related Parties

IP rights-holders frequently offer to provide resources to assist the

government with criminal investigations. Traditionally, law enforcement

agencies have routinely accepted assistance from victims and citizens

willing to do so in discharge of their civic duty. However, offers of

assistance in investigations and litigation have increased in scope, variety,

and monetary value. This prompted the Department of Justice's Task

Force on Intellectual Property to recommend that the Department issue

guidance on the acceptance of resources from victims, related parties, and

third parties. Accordingly, Deputy Attorney General Paul J. McNulty

issued a memorandum to all United States Attorneys and Component

Heads entitled “Guidance for Acceptance of Assistance and Gifts from

Private Parties for Use in Connection with Investigations and Litigation”

(May 2006). This subsection tracks the Deputy Attorney General's

memorandum closely and highlights some of the issues addressed therein.

The reader is advised to refer to the memorandum itself before deciding

on an appropriate response to an offer of resources. The reader should

also refer to Appendix J of this Manual, which examines a variety of

specific hypothetical offers of resources, such as private investigators

offering information; victims offering meeting space, expert witnesses,

purchase money to obtain counterfeit items, and storage space for seized

items; and unrelated parties offering forensic tools and analysis, facilities

from which to conduct an investigation, and expert witness services.

An offer of donated resources generally raises three issues. The first is

whether the donation of resources is permitted by laws, regulations, and

Department directives limiting the acceptance of gifts. This will usually

turn on whether the offered resources constitute a gift or the type of

assistance traditionally provided by victims of crime, their related parties,

and third parties. The second issue is whether the assistance is permitted

by the rules of professional conduct regardless of whether the offered

resources are considered to be gifts or assistance. The third issue is

whether the assistance will have an adverse impact on the prosecution,

even if permissible under gift restrictions and rules of professional

conduct. All three issues are addressed below.
328 Prosecuting Intellectual Property Crimes

X.C.1. Gift Issues

X.C.1.a. Applicable Law

The Attorney General has authority to “accept, hold, administer, and

use gifts, devises, and bequests of any property or services for the purpose

of aiding or facilitating the work of the Department of Justice.” 28 U.S.C.

§ 524(d)(1). Gifts of money (including money derived from property)

must be deposited in the Treasury for the benefit of the Department and

may be distributed by order of the Attorney General. 28 U.S.C.

§ 524(d)(2). 

In 1997, the Attorney General issued Department of Justice Order

2400.2, available at http://www.usdoj.gov/jmd/ethics/docs/doj-2400-2.htm,

which “sets forth the Department's policies and procedures regarding the

solicitation and acceptance of gifts, devises and bequests of property of all

kinds.” The Order states that no Departmental employee may solicit a gift

unless he or she has obtained the prior approval of the Attorney General

or the Deputy Attorney General. DOJ Order 2400.2 ¶ 3.a.(1).

Solicitations are rare and approved in only extraordinary circumstances.

In addition, the Assistant Attorney General for Administration

(AAG/A) has the exclusive authority to accept “gifts made to the

Department” or any component. Id. ¶ 3.b.(1). Before accepting any gift,

the AAG/A must consider: (1) whether the gift is appropriate for use; (2)

whether the conditions the donor has placed on acceptance or use, if any,

are “acceptable;” (3) whether any employee solicited the gift, and if so,

whether approval was obtained; and (4) whether acceptance is

“appropriate and advisable,” in light of conflict-of-interest and ethics

guidelines, including whether acceptance would “create the appearance of

impropriety.” Id. ¶ 3.b.(2). 

The AAG/A has delegated to component heads the authority to

determine whether to accept certain case-specific gifts from private parties

in criminal and civil investigations, prosecutions, and civil litigation that

have a value of $50,000 or less. The component head for U.S. Attorneys'

Offices is the Director of the Executive Office for United States Attorneys.

The component head may accept the first offer from a source up to

$50,000. A second or subsequent offer in the same fiscal year from the

same source must be submitted to the Assistant AAG/A for approval when

the value combined with the first gift exceeds $50,000. Gifts that are not

case-specific, gifts of cash, gifts valued above $50,000, and extraordinary

case-specific gifts continue to require approval by the AAG/A.
X. Victims 329

X.C.1.b. Distinction Between “Assistance” and “Gifts”

 Historically, the Department has distinguished a gift from traditional

forms of assistance provided by citizens during a criminal or civil

investigation, prosecution, or civil litigation. Matters that constitute

“assistance” are not gifts and, accordingly, are not subject to the

procedures applicable to gifts. If the offered resource constitutes

assistance, it may be accepted without approval, but if it is a gift, it

cannot be accepted without obtaining approval as described later in this

Chapter.

Law enforcement agencies routinely receive wide-ranging aid from

private parties in the investigation and prosecution of federal crimes. Such

aid has played an important and accepted role in the criminal process.

See, e.g., Commonwealth v. Ellis, 708 N.E.2d 644, 651 (Mass. 1999) (“It

is in the public interest that victims and others expend their time, efforts,

and resources to aid public prosecutors.”); see also Wilson v. Layne, 526

U.S. 603, 611-12 (1999) (noting that the use of third parties during the

execution of a warrant to identify stolen property “has long been approved

by this Court and our common-law tradition”). Victims and other private

parties are often in a unique position to provide information and other aid

in an investigation and litigation. Such private cooperation not only is

desirable, but often is critical to law enforcement and the government's

mission. In this vein, the vast majority of case-specific aid from private

parties, particularly from victims and related parties, constitutes assistance

and is not a gift.

A victim provides assistance when it offers services, equipment, or

logistical support that enhances the efficiency of the government's efforts

in relation to a case. Apart from cost savings, an offer of assistance

enhances the Department's efficiency when the offer gives an added

benefit that is unique because of the victim or related party's involvement.

Assistance generally will be distinguishable in some way from what the

Department could obtain through commercial obligations. For example,

use of a victim company's office space to conduct interviews of witnesses

constitutes assistance since that location provides accessibility to staff that

would not be possible in a hotel or other location. On the other hand, a

victim company's offer to Departmental employees of its fleet of cars for

local transportation, even if made in the course of a case, provides only a

convenience that is no different from what the Department would obtain

on the commercial rental market, and should not be accepted. 
330 Prosecuting Intellectual Property Crimes

X.C.1.b.i. Assistance from Victims and Related Parties

Aid provided by a victim will generally be classified as assistance,

rather than a gift. Examples of actions that constitute assistance when

provided by a victim include:

II. Providing factual or expert information in an investigation or fact

or expert testimony at trial

IV. Turning over the fruits of an internal investigation (e.g., collecting

and analyzing financial or transactional data)

VI. Consulting with law enforcement during the investigation (e.g.,

reviewing seized evidence to distinguish legitimate copyrighted

works from forgeries, identifying proprietary information in a

theft of trade secrets prosecution, or instructing professional staff

and contractors to respond to queries from Departmental

employees regarding technical subjects)

VIII. Permitting agents to use equipment, services or logistical

support in circumstances where such assistance provides a

unique benefit not available on the commercial market, such

as the use of office space for employee interviews, surveillance

or document review

X. Providing certain goods or services for use in the investigation or

a related undercover operation (e.g., a bank providing credit card

accounts in a credit card fraud investigation involving that bank)

Aid provided by a party that is related to the victim (“related party”)

will also generally constitute assistance. Related parties consist of those

parties that have a close association with the victim and a shared interest

with the victim in providing the particular assistance. Related parties can

include a victim's immediate family, an industry association, or agents or

contractors hired by the victim. For example, a computer security firm

hired by a victim to monitor its computer network would be a related

party in a case that involved the victim's computer network. 

In certain circumstances, an entity may be an “indirect victim” of a

crime and also be in a unique position to offer assistance. For example, an

owner of an apartment building would be an indirect victim of a tenant

who used his rental apartment to sell and deliver controlled substances.

In addition, a package delivery company that suspects use to transport

and deliver illegal goods is also an indirect victim. Aid offered by an

indirect victim generally will be considered assistance. For example, the
X. Victims 331

landlord described above provides assistance with free use of an apartment

for surveillance, as does the package delivery company when it provides

its truck and uniform for an undercover agent to make a controlled

delivery. However, depending on the value of the aid offered, and the

potential appearance of impropriety that correlates to the value of the

offer, an indirect victim's offer may cross the line from being permissible

assistance to a gift that requires specific consideration before acceptance.

For example, a landlord's offer of free use of an apartment for one year

that has a market value of $25,000 in rent constitutes a gift.

X.C.1.b.ii. Private Investigators

Corporate victims and trade associations often retain private

investigators to gather evidence to be used in a civil lawsuit or for referral

to law enforcement authorities. Private investigators are in the class of

“related parties” who may provide assistance to the Department.

Intellectual property owners often outsource security and investigative

responsibilities to other entities on an ongoing basis. In these cases

especially, private investigators regularly turn up evidence of criminality

and share it with law enforcement. Moreover, their investigative

responsibilities do not end with the referral to authorities, as their clients

expect them to continue to uncover evidence in related or separate

matters, especially when the infringement or theft is committed by

organized groups.

Several principles should guide the acceptance of assistance from

private investigators. First, prosecutors and agents should not direct or

advise an entity or individual in its private investigation before a referral

is made to law enforcement authorities. Apart from issues regarding the

acceptance of gifts versus assistance, activity by a private investigator may

be imputed to the government for Fourth Amendment, entrapment, or

other purposes, depending on the extent to which government officials

direct or control those activities. Second, prosecutors and agents may not

relinquish control of investigative responsibilities to private investigators

after the Department has initiated an investigation. Third, if the private

investigator continues (post-referral) to investigate the case or related

matters and turns up additional evidence or information, employees may

accept the continued assistance, but should be careful to avoid the

appearance of implicit approval or direction. In fact, attorneys and other

employees should evaluate whether the parallel private investigation

would interfere with the criminal matter and if so, whether the victim and
332 Prosecuting Intellectual Property Crimes

private investigator should be asked to immediately cease any further

investigation after the referral is made.

There may, however, be instances when a private investigator is in a

unique position to assist the Department. If the investigator's assistance

is within the scope of the work for which he was originally retained by the

victim, the government may accept his assistance while he remains

employed by the victim, and without payment from the Department. For

example, if a private investigator has developed expertise in identifying

the victim's property, or genuine products, he may assist in examining

materials to determine whether they have been stolen from the victim or

are counterfeit. If a private investigator made controlled buys of

counterfeit products from a suspect prior to referring the case to a federal

agency, and the Department believes a federally-supervised controlled

transaction is warranted, the private investigator may continue to assist

the Department at the victim's expense if his involvement is needed to

conduct the transaction and it is within the scope of the work for which

he was originally retained.

X.C.1.b.iii. Cash

A direct contribution of money to the government to help fund the

costs of law enforcement activities, either generally or in a particular case

or cases, will almost always be a gift, not assistance. The private funding

of federal law enforcement activities traditionally has not been considered

assistance, and such direct funding raises serious ethical and other

concerns, and would not be accepted by the Department. See, e.g., People

v. Eubanks, 927 P.2d 310 (Cal. 1996) (victim paying cost of experts

working for the district attorney's office created an actual conflict of

interest). But see Commonwealth v. Ellis, 708 N.E.2d 644 (Mass. 1999)

(funding of prosecution costs by insurance association permitted because

authorized by statute). To the extent cash is used for mission-related

functions, the Department may not augment its resources in this manner.

There is one exception to the principle that a direct contribution of

money is an impermissible gift. When the government serves as a conduit

for funds from the victim (or a related party) that are used for the

purchase of the victim's stolen property, the payment of ransom, or a

similar demand, the government's receipt of those funds does not

constitute a gift. Accordingly, when an IP victim or a related party

provides a Departmental employee funds to purchase the victim's stolen

property or pirated goods, the government is serving as a conduit for the
X. Victims 333

funds and the funds are considered assistance. In these circumstances, the

goods must be returned to the victim after completion of the government's

case. Similarly, the government serves as a conduit when it uses funds

from a victim or a related party to pay ransom or extortion on behalf of

the victim. The Department has an established practice of accepting funds

in these circumstances. 

X.C.1.b.iv. Storage Costs in Counterfeit or Infringing

Products Cases

A company that owns intellectual property has a significant

independent interest in keeping counterfeit or infringing goods out of the

stream of commerce. If federal law enforcement has seized offending

products, it is likely that the victim would seek to impound and destroy

the offending articles even if prosecution were declined. See 15 U.S.C.

§§ 1116(d)(1)(A) and 1118 (allowing for court-authorized seizure and

destruction of trademark-infringing articles at the rights holder's request);

17 U.S.C. § 503 (allowing court to authorize impoundment and

destruction of copyright-infringing articles and instrumentalities). When

a victim has sought a court's approval to seize and retain counterfeit or

infringing products and chooses to do so, the Department may accept the

offer of “assistance” to store offending articles that may also be relevant

to the Department's investigation. 

There also may be instances when the victim will not choose to seek

court approval of authority to retain and destroy illegal goods, yet offers

the Department free storage at its facilities or elsewhere during the

pendency of the Department's case. It generally is permissible to accept

such an offer. However, depending on the amount of time and space used

for storage, the company's offer to pay for storage may cross the line from

being permissible assistance to an impermissible gift if the market value

of the storage space is so exorbitant that continuing acceptance of free

storage could raise a question of an appearance of impropriety. In such

circumstances, a Department employee should consult with the assigned

attorney and the employee or attorney's Deputy Designated Agency

Ethics Official (DDAEO) before continuing to accept the free use of

storage space.
334 Prosecuting Intellectual Property Crimes

X.C.1.b.v. Resources Donated for Ongoing Use by Law

Enforcement

Resources provided by a victim or related party will generally be

considered to be a gift if its use is not restricted to the investigation(s) or

prosecution(s) in which the provider is a victim or related party. For

example, a package delivery company that gives the government free use

of one of its delivery trucks for an undercover operation to investigate the

hijacking of its trucks provides assistance. In contrast, the company's offer

to the government of free use of its trucks for any undercover operation,

regardless of the subject matter of the investigation, constitutes a gift.

Similarly, a computer company that provides computers for the

government to use in investigating and prosecuting the theft of trade

secrets from that company gives assistance. But if the company permits

the government to use those computers for additional purposes not

related to that case, either for continued use after its conclusion or for an

unrelated matter, the computers become a gift. 

As a general rule, “assistance” is provided by a victim or related party

for use in an investigation or litigation involving that person or entity.

However, there may be limited circumstances in which a third party

provides aid that is unique and not available on the open market in much

the same way as a victim or related party's assistance. For example, the

DEA and FBI have longstanding, ongoing relationships with private

package delivery companies that are akin to assistance. During an

investigation, the FBI and DEA sometimes execute controlled deliveries

of packages that contain illegal goods. Given safety, evidentiary, and other

concerns, an agent will use the company's truck and uniform rather than

have the package delivery company and its employee perform this task.

Of course, the delivery company uniforms and vehicles are not available

on the open market. Yet their appearance is what is expected by the

recipient, and it, therefore, provides the Department unique access to and

identification of the intended recipient. The agent (in the package

delivery uniform) may need to arrest the recipient of the package at the

time of delivery. Given these unique and multiple factors, this type of aid

is considered assistance.

X.C.1.b.vi. Assistance from Private Third Parties

The distinction between “assistance” and “gift” is also critical in cases

involving resources donated by a private third party—that is, any person

or entity that is neither a victim nor a related party. If the assistance
X. Victims 335

provided by the third party is uniquely necessary to provide relevant

information to the investigators, grand jury, judge, or jury, then it should

generally be treated as assistance. If not, then it should generally be

treated as a gift.

In many cases this determination will be simple. The most

fundamental and traditional types of aid that citizens have always

provided in criminal investigations and prosecutions—such as answering

agents' and prosecutors' questions, identifying suspects, and providing

factual information and testimony—constitute assistance. This includes

not only factual information gathered from individual citizens but also

information that corporations and others provide from their records and

databases. For example, an airline might provide information from

passenger manifests, or a credit history service might provide credit

information. Even though these activities may involve a cost to the third

party in terms of time, effort, and expense and may provide a material

benefit to the government, no one would suggest that such cooperation

constitutes a gift; it is simply one of the responsibilities of citizenship.

In dealing with assistance provided by third parties, it may be helpful

to consider whether the assistance could be obtained by compulsory

process. For example, if the information could be obtained by grand jury

subpoena without cost, it should not be considered to be a gift merely

because the cooperating third party elects to volunteer the required

information rather than be compelled by legal process to produce it.

The Department also may receive offers of free or reduced-fee

consultation and testimony by experts or consultants. Individuals may be

interested in sharing their expertise without a fee for a variety of reasons.

Some experts or consultants may see the opportunity to testify on behalf

of the United States, and be qualified as an expert, as a substantial benefit

to their curriculum vitae or resume. In addition, an expert may charge an

exorbitant market rate for his services to the general public that the

Department cannot afford, and therefore, the expert may offer services for

a reduced fee. 

The Department may accept free expert or consultative services under

its gift acceptance authority, 28 U.S.C. § 524(d), or 5 U.S.C. § 3109.

Both statutes provide separate mechanisms to accept these services.

Neither statute, however, obviates the necessity for Departmental

attorneys and staff to assess whether it is appropriate to accept the

services for free. The same issues that govern the propriety of acceptance

of items apply to the offer of consultative services and testimony. An

attorney in consultation with an agent or other employee and the
336 Prosecuting Intellectual Property Crimes

DDAEO must decide whether free expert services are appropriate to

accept, and whether the government's impartiality may or will be

questioned in these circumstances. 

For additional examples of what constitutes traditional assistance or

a gift, please refer to Appendix J, which examines a variety of specific

hypothetical offers of resources, such as private investigators offering

information; victims offering meeting space, expert witnesses, purchase

money to obtain counterfeit items, and storage space for seized items; and

unrelated parties offering forensic tools and analysis, facilities from which

to conduct an investigation, and expert witness services.

X.C.1.c. Departmental Procedures for the Solicitation and

Acceptance of Gifts and Assistance

X.C.1.c.i. Consultative Process for Acceptance of Assistance

and Gifts

A law enforcement officer or Departmental employee who receives

any offer of assistance by a victim, related party, or witness beyond

traditional assistance or access to company records should consult with

the AUSA or Main Justice attorney who is assigned to the case or, if none,

agency counsel, and the Deputy Designated Agency Ethics Official

(DDAEO) who provides advice either to the law enforcement officer (or

employee's) component or the attorney's office and component. The agent

or employee in consultation with the appropriate counsel and DDAEO

may determine that the offer is one of assistance (rather than a gift), and

acceptance is appropriate. Disagreement among employees regarding these

determinations should be submitted to the relevant component head(s)

or designee and the Departmental Ethics Office, Justice Management

Division (DEO) for resolution. Again, the component head for U.S.

Attorneys' Offices is the Director of the Executive Office for United States

Attorneys. 

X.C.1.c.ii. Solicitation of Gifts

No Department employee may solicit gifts or encourage the

solicitation of gifts to the Department unless the solicitation has been

approved in advance by the Attorney General or the Deputy Attorney

General. Solicitations will rarely be appropriate and accordingly, rarely

approved. There may, however, be unusual circumstances in which it
X. Victims 337

would be appropriate to solicit a gift to the Department in connection

with a particular investigation, prosecution, or litigation. In that instance,

the appropriate office first should consult with the DEO, and then present

the matter to the Office of the Deputy Attorney General for a

determination.

X.C.1.c.iii. Acceptance of Gifts

Any gift of goods or services accepted from a private party in

connection with a criminal or civil investigation, prosecution, or litigation

must be approved in accordance with procedures set forth below. Except

in extraordinary circumstances, that approval must be obtained before the

gift is accepted. If approval cannot be obtained before the gift is accepted,

approval must be obtained no later than seven days after acceptance. 

• Certain gifts may be accepted only by the AAG/A.

Only the AAG/A may approve acceptance of a gift of goods or services

that is valued in excess of $50,000. If a component or office is uncertain

whether a gift is valued in excess of $50,000, it may consult with the

Departmental Ethics Office, Justice Management Division, regarding the

reasonable value of the gift. If an office cannot determine adequately

whether a gift exceeds $50,000 in value, approval must be obtained from

the AAG/A.

The AAG/A also must approve gifts of cash and gifts that are not casespecific, including gifts that will be used by the Department for purposes

in addition to or after the conclusion of a particular investigation,

prosecution, or litigation. 

• The AAG/A has delegated his authority to accept gifts from

private parties for use by the Department in connection with a

criminal or civil investigation, prosecution, or litigation.

Component heads have been delegated authority to approve for their

components the acceptance of a gift from a private party to be used in

connection with a criminal or civil investigation, prosecution, or litigation

that is (1) case-specific and (2) has a value of $50,000 or less. Component

heads may further delegate this authority to one other individual at the

Deputy Assistant Attorney General (or equivalent) level within his or her

component. 
338 Prosecuting Intellectual Property Crimes

• Approval of acceptance must be coordinated among the

relevant offices.

If a law enforcement agent or other non-attorney employee receives

an offer of a gift, that employee must notify and consult with an attorney,

if any, who is assigned to the matter. The attorney, in conjunction with

his or her component head, will determine whether to accept the offer. If

no attorney has been assigned, the investigating component may decide

whether to accept the offer of the gift. If an attorney from more than one

office, Board, or Division is assigned a matter (e.g., an AUSA and attorney

in the Criminal Division), both relevant component heads (or designees)

must concur in the recommendation to accept a gift before it may be

accepted. Disagreement among component heads may be resolved, upon

request, by the AAG/A. 

Component heads must ensure that a Gift Donation Form and a Gift

Acceptance Form are completed for each gift acceptance approved by their

respective component. The completed forms must be forwarded to

Property Management Services, Facilities and Administration Services

Staff, Justice Management Division. 

Any questions regarding gift issues should be directed to the

Departmental Ethics Office, Justice Management Division.

X.C.2. Professional Responsibility Issues 

Several specific professional responsibility rules are implicated when

the government accepts either assistance or gifts from outside parties. For

ease of discussion, we refer here to the ABA Model Rules of Professional

Conduct, but note that a different set of professional conduct rules may

apply, depending on the circumstances of each case and the rules in the

attorney's state of licensure. 

First, a prosecutor represents the United States and has a duty of

confidentiality to that client. Rule 1.6(a) requires a lawyer to protect

confidential client information and prohibits disclosure of such

information unless impliedly authorized, or the client consents, or some

other enumerated exception applies. The prohibition applies to privileged

information, “matters communicated in confidence by the client [and]

also to all information relating to the representation, whatever its source.”

Rule 1.6 cmt. [3]. When an investigator is hired or paid for by a victim to

assist on a case and is working with government agents, the privately paid

investigator might naturally expect to obtain information from the
X. Victims 339

government in return for information he or she has disclosed to the

government. However, a prosecutor must limit disclosures made about the

case by him or herself and by the agents. See Rule 5.3(b), (c) (requiring

lawyer to take reasonable steps to ensure that the conduct of non-lawyer

assistants is compatible with the professional obligations of the lawyer and

will be held responsible for the noncompliance of non-lawyer assistants in

some circumstances). Some disclosures may be impliedly authorized,

while others would require the consent of the client; in most instances the

United States Attorney or the Assistant Attorney General (or his or her

designee) would provide the necessary consent for the United States. Of

course, there are other limits on sharing of confidential grand jury

information under Fed. R. Crim. P. 6(e). 

When a prosecutor plans to disclose confidential information to the

persons providing assistance or gifts, the attorney should seek written

agreement from the person that he or she will not use or disclose the

information except in relation to the case without the express written

consent of the appropriate official within the Department of Justice. Also,

the prosecutor should consider whether sharing privileged information

would waive the privilege.

The rules may require that assistance by third parties be disclosed to

the court and/or to the defense, either to ensure that all representations

to the court are accurate and complete, Rule 3.3 (candor toward the

tribunal), or to clarify when the assistance or gifts provided by a private

party might be seen as affecting the credibility of an important

government witness, Rule 3.8(d) (special responsibilities of a prosecutor).

Moreover, there may be conflict of interest issues to resolve under

Rule 1.7(a)(2), which recognizes that a lawyer may have a conflict of

interest if “there is a significant risk that the representation of one or

more clients will be materially limited by the lawyer's responsibilities to

. . . a third person or by a personal interest of the lawyer.” In these

circumstances, a lawyer may nevertheless represent the client if the client

gives informed written consent. The United States Attorney or the

Assistant Attorney General (or his or her designee) would have the

authority to provide consent to the attorney's work on a case

notwithstanding the conflict. One could imagine a scenario in which a

continuing relationship with a victim/witness who is providing assistance

in one case might raise concerns about the lawyer's representation of the

United States in that or another case, particularly one involving the

victim/witness.
340 Prosecuting Intellectual Property Crimes

Other professional conduct issues may arise because of assistance and

gifts provided to the government. Each issue will require individual

analysis, and questions may be directed to the Professional Responsibility

Officer (PRO) in each office or to the Department's Professional

Responsibility Advisory Office (PRAO).

X.C.3. Strategic and Case-Related Issues

Even if the resources offered by the victim or related parties are

acceptable under both gift laws and policies and the rules of professional

responsibility, an attorney must still consider whether accepting the

assistance will adversely affect the case. Just because it might be

permissible to accept an offer of either assistance or a gift does not make

it advisable to do so in all instances. Depending on the scope, nature, or

value of the assistance or gift, the public may question the Department's

impartiality. Assistance that is extensive, unusual, or is, in fact or

perception, of significant monetary value is more likely to raise questions

about the Department's impartiality and independence than assistance or

a gift that is more discreet, of modest value, and routine.

The government must exercise independent and impartial judgment

in the conduct of all criminal and civil matters. See Young v. United

States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 803 (1987) (“The United

States Attorney is the representative not of an ordinary party to a

controversy, but of a sovereignty whose obligation to govern impartially

is as compelling as its obligation to govern at all ....”) (quoting Berger v.

United States, 295 U.S. 78, 88 (1935)). When working with victims and

other private parties, a Departmental employee must be aware that an

entangled or intimate relationship with a private party can negatively

affect a matter and the standing or respect accorded the Department. For

example, a highly-paid, aggressive private investigator could be portrayed

as a bounty hunter willing to entrap a defendant. The government might

be portrayed as a pawn of wealthy corporate interests. The defense might

claim that the victim's investigators were agents of the government and

thereby seek to impute their conduct to the government for 4th

Amendment or entrapment purposes. The defense might seek to dismiss

the case based on a claim of prosecutorial misconduct or conflict of

interest. These questions or doubts can affect the Department's ability to

successfully prosecute or litigate a matter.

An employee should consider, among other things, whether the

offeror has an independent reason to offer the gift or assistance. Especially
X. Victims 341

in parallel civil and criminal investigations, the fact that the victim would

prefer to pay for expenses deemed important to the victim in pursuit of

its civil claim tends to reduce the likelihood that a conflict of interest will

be found. See Hambarian v. Superior Court, 44 P.3d 102, 109 (Cal.

2002) (finding no conflict presented by prosecution's use of a victimretained consultant hired by the victim to support an anticipated civil

suit). 

An employee also should consider who the donor is. If the donor is an

industry leader, the employee should avoid actions that appear to create

a competitive advantage for that entity. If the donor is a trade association

or combination of affected entities that is involved in ongoing monitoring

or investigation to protect the industry as a whole, the offer may be

considered more impartial. See Commonwealth v. Ellis, 708 N.E.2d 644,

649 (Mass. 1999) (holding that likelihood of influence on a prosecutor's

charging decisions is reduced when the resources are devoted to

investigating industry-related offenses rather than for the benefit of one

particular victim).

The acceptance of donated resources is most problematic for courts

when the resources are provided directly to the prosecutor or prosecutorial

entity. See People v. Eubanks, 927 P.2d 310, 322 (Cal. 1997) (holding

district attorney disqualified, and state attorney general substituted, after

victim paid an invoice submitted to the prosecutor for expert services,

among other expenses); cf. Young v. United States ex rel. Vuitton et Fils

S.A., 481 U.S. at 809 (holding that private counsel representing the

beneficiary of a court order cannot be appointed to prosecute the

defendant for violating the order). The less direct the benefit to the

prosecution, the less likely the defendant will be able to obtain relief. See

Marshall v. Jerrico, Inc., 446 U.S. 238 (1980) (finding no realistic

possibility that prospect of institutional benefit would unfairly influence

decision to impose civil penalties by a Department of Labor administrator

functioning as a prosecutor); Calderon v. Superior Court of California,

No. C97-1448 MJJ, 2001 WL 940904 (N.D. Cal. 2001) (finding victim's

contribution of resources to police investigation unlikely to influence

prosecutor's decisions). However, for the reasons discussed more fully

herein, although a court may distinguish when aid is offered directly to a

prosecutor or prosecutorial entity, as compared to an investigator or law

enforcement agent, this distinction is not determinative for purposes of

assessing whether the offer should be accepted in the first instance.

In addition, the Department's acceptance of a single, extraordinary

gift from a victim or related party may impact the public, or more

specifically, a jury's, perception of the Department's motivations and
342 Prosecuting Intellectual Property Crimes

activities. If it appears that the Department's actions are influenced

heavily by a private party, the Department's litigating posture and the

public's respect will be weakened. A jury may vote against the

Department's position because it perceives the Department is acting on

behalf of a private party rather than as a representative of the United

States' interests. In extreme cases, a court may conclude that the

Department's acceptance of a gift created a conflict of interest and

impaired the prosecutor's independence. Cf. Eubanks, 927 P.2d at 322.

Of course, the standard of appropriate behavior is not whether a matter

will be dismissed, but whether the appearance of impropriety or the lack

of independence outweighs the benefit of the proffered gift or assistance.

The Department, by its actions, must maintain the public's confidence in

and respect for the criminal process, and the Department's reputation for

fairness generally.

A Justice Department employee needs to balance the need for, or

importance of, the aid against any negative perception by a jury or the

public that can influence adversely a particular case. Employees should

evaluate whether the assistance or gift is likely to call into question their

independence and impartiality, or create an appearance of impropriety.

This analysis does not lend itself to clear or measured parameters. The

decision whether to accept assistance or a gift often can involve difficult

and nuanced issues. Given the potential ramifications, these decisions

should be made through the consultative process among law enforcement

personnel, other investigators, and attorneys before the matter is resolved.

The trial attorney is in the best position to assess these concerns, and he

must be consulted before any employee may accept an offer of resources.

The assigned attorney also should consult with an ethics officer to

determine whether the offer constitutes assistance or a gift that may be

accepted under the gift procedures, and the offer conforms with the rules

of professional responsibility.

X.C.4. Help and Advice

Each component (including each United States Attorney's Office) has

qualified specialists to provide guidance, including a Deputy Designated

Agency Ethics Official who can provide advice on gift and assistance

issues. The General Counsel's Office of the Executive Office for United

States Attorneys provides guidance to U.S. Attorneys' offices on matters

of government ethics, including recusal, outside employment and conflicts

of interest. The office number is (202) 514-4024. Department employees
X. Victims 343

also may seek guidance from the Departmental Ethics Office, Justice

Management Division. The office number is (202) 514-8196. 

For professional responsibility advice, an Assistant United States

Attorney should first consult his or her supervisor and office Professional

Responsibility Officer (PRO), who may then seek advice from the

Professional Responsibility Advisory Office, telephone number (202) 514-

3365.
343

Appendix A

Commonly Charged

Intellectual Property Crimes

This overview provides the elements, defenses, penalties, and

sentencing guideline sections concerning most of the intellectual property

crimes and alternative charges discussed in this Manual, as well as an

index indicating which section of the Manual that discusses each crime.

Trafficking in Counterfeit Trademarks, Service Marks, or

Certification Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

Criminal Copyright Infringement (Felony & Misdemeanor) . . . . 346

Unauthorized Recording of a Motion Picture (Camcording) . . . . 349

Trafficking in Illicit Labels or Counterfeit Labels, Documentation or

Packaging for Copyrighted Works . . . . . . . . . . . . . . . . . . . . . . . . 350

Trafficking in Recordings of Live Musical Performances (Bootlegging)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

Digital Millennium Copyright Act (Anti-Circumvention) . . . . . . . 352

Commercial Theft of Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . 354

Foreign Economic Espionage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

Unauthorized Access of a Computer . . . . . . . . . . . . . . . . . . . . . . . 357

Interstate Transportation, Sale, or Receipt of Stolen Property . . . 359

Mail and Wire Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360

Prohibition on Devices to Intercept Communications . . . . . . . . . 362

Unauthorized Reception of Cable Service . . . . . . . . . . . . . . . . . . 363

Trafficking in Satellite Decryption Devices . . . . . . . . . . . . . . . . . 364
344 Prosecuting Intellectual Property Crimes

Trafficking in Counterfeit Trademarks, Service Marks, or

Certification Marks

18 U.S.C. § 2320(a)

Chapter III

Elements

1. That the defendant trafficked, or attempted to traffic, in

[goods] [services]

[offenses committed on or after March 16, 2006, can

include labels, patches, stickers, wrappers, badges,

emblems, medallions, charms, boxes, containers, cans,

cases, hangtags, documentation, or packaging of any type

or nature]

2. That such trafficking, or attempt to traffic, was intentional;

3. That the defendant

[knowingly used a counterfeit mark on or in connection

with the [goods] [services]]

[offenses on or after March 16, 2006, can also include:

knew that counterfeit marks had been applied to the labels,

patches, stickers, wrappers, badges, emblems, medallions,

charms, boxes, containers, cans, cases, hangtags,

documentation, or packaging]

in which the defendant trafficked, or attempted to traffic; and

4. That the use of the counterfeit marks was likely to cause

confusion, to cause mistake, or to deceive

Counterfeit mark: “a spurious mark—(I) that is used in connection

with trafficking in any goods, services, labels, patches, stickers,

wrappers, badges, emblems, medallions, charms, boxes, containers,

cans, cases, hangtags, documentation, or packaging of any type or

nature; (ii) that is identical with, or substantially indistinguishable

from, a mark registered for those goods or services on the principal

register in the United States Patent and Trademark Office and in use,

whether or not the defendant knew such mark was so registered; (iii)

that is applied to or used in connection with the goods or services for
App A. Commonly Charged IP Crimes 345

which the mark is registered with the United States Patent and

Trademark Office, or is applied to or consists of a label patch, sticker,

wrapper, badge, emblem, medallion, charm, box, container, can, case,

hangtag, documentation, or packaging of any type or nature that is

designed, marketed, or otherwise intended to be used on or in

connection with the goods or services for which the mark is registered

in the United States Patent and Trademark Office; and (iv) the use of

which is likely to cause confusion, to cause mistake, or to deceive”

Defenses

Overrun goods: Had authorization but exceeded it (i.e., authorized to

make 1,000 copies but made 5,000) 

Gray market goods: Goods legitimately manufactured and sold overseas

and then imported into U.S. outside traditional distribution channels

Repackaging genuine goods: Genuine goods repackaged with genuine

marks or reproduced marks, with no intent to deceive or confuse

Statutory maximum penalties

First offense: 10 years' imprisonment and fine of $2,000,000 or twice

the gain/loss (individual); fine of $5,000,000 or twice the gain/loss

(organization)

Subsequent offense: 20 years' imprisonment and $5,000,000 fine or

twice the gain/loss (individual); $15,000,000 fine or twice the gain/loss

(organization)

Guideline section: United States Sentencing Guideline § 2B5.3
346 Prosecuting Intellectual Property Crimes

Criminal Copyright Infringement (Felony & Misdemeanor)

17 U.S.C. § 506(a) & 18 U.S.C. § 2319

Chapter II

Elements for prosecutions under subsections 506(a)(1)(A) and

(a)(1)(B)

1. That the works that the defendant is alleged to have

[reproduced] [distributed] were protected by copyright

2. That the defendant infringed the copyrights of the works by

[reproducing] [distributing to the public] one or more copies of

[each of] the copyrighted works

3. That the defendant willfully infringed the copyrights [and]

4. That the defendant, during a 180-day period, reproduced or

distributed ten (10) or more copies of one or more copyrighted

works which have a total retail value of more than $2,500

[and]

[5. [optional] That the act of infringement was for the purpose of

commercial advantage or private financial gain]

Elements for prosecutions under subsection 506(a)(1)(C)

1. That copyrights exist for the works that the defendant is

alleged to have distributed

2. That the defendant infringed the copyrights of the works by

distributing to the public one or more copies of [each of] the

copyrighted works

3. That the defendant willfully infringed the copyrights

4. That the works distributed by the defendant were being

prepared for commercial distribution

5. That the defendant knew or should have known that the works

were intended for commercial distribution [and]

6. That the defendant distributed the works by making them

available on a computer network accessible to members of the

public [and]
App A. Commonly Charged IP Crimes 347

[7. Optional: That the act of infringement was for the purpose of

commercial advantage or private financial gain]

Elements for Misdemeanor Copyright Infringement

Elements 1, 2 & 3 are the same as the base felony elements except that

any infringement of the copyright is covered, not just infringement by

reproduction or distribution.

4. The defendant infringed EITHER

(a) for purposes of commercial advantage or private financial

gain,(17 U.S.C.§ 506(a)(1)(A)(numbered § 506(a)(1) by the

Apr. 27, 2005 amendments) & 18 U.S.C. § 2319(b)(3)); OR

(b) by reproduction or distribution of one or more copyrighted

works with a total retail value of more than $1,000 within a

180-day period, (17 U.S.C. § 506(a)(1)(B) & 18

U.S.C. § 2319(c)(3)).

Defenses

First sale: The first purchaser and any subsequent purchaser of a

specific copy of a copyrighted work may sell, display (privately), or

dispose of their copy, but may not reproduce and distribute additional

copies made from that work.

Fair use: Allows otherwise infringing use of a work for purposes such as

(but not limited to) criticism, comment, news reporting, teaching

(including multiple copies for classroom use), scholarship, or research.

Archival exception for computer software: Owner of a copy of a

computer program may copy the program as necessary to use the

program or do machine maintenance or repair, and as an archival

backup, subject to certain limitations. 

Statutory maximum penalties

Section 506(a)(1)(A)

First offense: 5 years' imprisonment and fine of $250,000 or twice

the gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Subsequent offense: 10 years imprisonment and fine of $250,000

or twice the gain/loss (individual); fine of $500,000 or twice the

gain/loss (organization)
348 Prosecuting Intellectual Property Crimes

Section 506(a)(1)(B)

First offense: 3 years' imprisonment and fine of $250,000 or twice

the gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Subsequent offense: 6 years' imprisonment and fine of $250,000 or

twice the gain/loss (individual); fine of $500,000 or twice the

gain/loss (organization)

Section 506(a)(1)(C)

First offense: Same as § 506(a)(1)(A) if purpose was for commercial

advantage or private financial gain; if not, same as § 506(a)(1)(B)

Misdemeanor: 1 year's imprisonment and fine of $100,000 or twice the

gain/loss

Guideline section: United States Sentencing Guideline § 2B5.3
App A. Commonly Charged IP Crimes 349

Unauthorized Recording of a Motion Picture (Camcording)

18 U.S.C. § 2319B

Section II.F.

Elements

1. That the defendant used, or attempted to use, an audiovisual

recording device to transmit or make a copy of a motion

picture or other audiovisual work from a performance of such

work in a motion picture facility, specifically [describe use or

attempted use]

2. That such use, or attempted use of the device, was done

knowingly

3. That such use, or attempted use of the device, was without the

authorization of the copyright owner

4. That [describe motion picture or audiovisual work] is protected

by copyright

Statutory maximum penalties

First offense: 3 years' imprisonment and fine of $250,000 or twice the

gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Subsequent offense: 6 years' imprisonment and fine of $250,000 or

twice the gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Guideline section: United States Sentencing Guideline § 2B5.3
350 Prosecuting Intellectual Property Crimes

Trafficking in Illicit Labels or Counterfeit Labels, Documentation or

Packaging for Copyrighted Works

 18 U.S.C. § 2318

Chapter VI

Elements

1. That the defendant trafficked in

[labels affixed to/enclosing/accompanying/ designed to be

affixed to, to enclose, to accompany] [describe

work/documentation/ packaging;]

[documentation/packaging]

2. That the

[labels were counterfeit/illicit]

[documentation/packaging was counterfeit]

3. That the defendant acted knowingly

4. Federal jurisdiction is satisfied because:

the offense occurred in special maritime territories or other

areas of special jurisdiction of the United States;

the offense used or intended to use the mail or a facility of

interstate or foreign commerce;

the counterfeit or illicit labels were affixed to, enclosed, or

accompanied copyrighted materials (or were designed to);

or

the documentation or packaging is copyrighted.

Statutory maximum penalties: 5 years' imprisonment and fine of

$250,000 or twice the gain/loss (individual); fine of $500,000 or twice

the gain/loss (organization)

Guideline section: United States Sentencing Guideline § 2B5.3
App A. Commonly Charged IP Crimes 351
352 Prosecuting Intellectual Property Crimes

Trafficking in Recordings of Live Musical Performances (Bootlegging)

18 U.S.C. § 2319A

Section II.F.

Offense

Whoever, without the consent of the performer or performers

involved, knowingly and for purposes of commercial advantage or

private financial gain— 

(1) fixes the sounds or sounds and images of a live musical

performance in a copy or phonorecord, or reproduces copies or

phonorecords of such a performance from an unauthorized

fixation;

(2) transmits or otherwise communicates to the public the

sounds or sounds and images of a live musical performance; or

(3) distributes or offers to distribute, sells or offers to sell, rents

or offers to rent, or traffics in any copy or phonorecord fixed as

described in paragraph (1), regardless of whether the fixations

occurred in the United States.

Statutory maximum penalties

First offense: 5 years' imprisonment and fine of $250,000 or twice the

gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Second offense: 10 years' imprisonment and fine of $250,000 or twice

the gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Guideline section: United States Sentencing Guideline § 2B5.3
App A. Commonly Charged IP Crimes 353

Digital Millennium Copyright Act (Anti-Circumvention)

17 U.S.C. §§ 1201(a)(1)(A), 1204(a)

Section V.B.

Elements for Unauthorized Circumvention of Access Controls

1. The defendant acted willfully

2. The defendant circumvented a technological measure

3. The technological measure effectively controls access (i.e.,

access control)

4. The access control was to a copyrighted work

5. The act of circumvention was for the purpose of commercial

advantage or private financial gain

Defenses

Regulatory: The Librarian of Congress promulgates regulatory

exemptions every three years that apply only to § 1201(a)(1)(A)'s

prohibitions against circumventing access controls.

Certain nonprofit entities: Nonprofit libraries, archives, educational

institutions, or public broadcasting entities exempted from criminal

prosecution in many cases.

Information security: “[A]ny lawfully authorized investigative,

protective, information security, or intelligence activity of an officer,

agent, or employee” or contractor of the federal government or a state

government is exempt from all three of § 1201's prohibitions for

information security work on “government computer, computer

system, or computer network.”

Reverse engineering and interoperability of computer programs: Three

reverse engineering or “interoperability” defenses for individuals using

circumvention technology are provided by statute. These defenses are

limited to computer programs.

Encryption research: Activities necessary to identify and analyze flaws

and vulnerabilities of encryption technologies applied to copyrighted

works, if these activities are conducted to advance the state of

knowledge in the field of encryption technology or to assist in the

development of encryption products.
354 Prosecuting Intellectual Property Crimes

Restricting minors' access to internet: Courts may waive violations of

subsections 1201(a)(1)(A) and 1201(a)(2) to allow parents to protect

their children from inappropriate material available on the Internet, or

to prohibit manufacturers from producing products designed to enable

parents to protect their children.

Protection of personally identifying information: Circumventing an

access control to disable files that collect personally identifiable

information.

Security testing: No violation of § 1201(a)(1)(A) occurs if testing does

not constitute copyright infringement or a violation of other applicable

law such as the Computer Fraud and Abuse Act of 1986.

Statutory maximum penalties

First offense: 5 years' imprisonment and fine of $500,000 or twice the

gain/loss

Second offense: 10 years' imprisonment and $1,000,000 fine or twice

the gain/loss

Guideline Section: United States Sentencing Guideline § 2B5.3
App A. Commonly Charged IP Crimes 355

Commercial Theft of Trade Secrets 

18 U.S.C. § 1832

Chapter IV

Elements

1. The defendant misappropriated a trade secret from its owner

2. The defendant knew or had a firm belief that the

item/information was a trade secret

3. The item/information was in fact a trade secret (except in cases

of attempt or conspiracy)

4. The defendant intended to convert the trade secret to the

economic benefit of anyone other than the owner

5. The defendant intended or knew the theft would injure the

owner of the trade secret

6. The trade secret was related to or was included in a product

that was produced for or placed in interstate or foreign

commerce

Defenses

Parallel development: Others may discover information underlying a

trade secret through their own independent efforts.

Reverse engineering: Others may discover information underlying a

trade secret by taking a thing that incorporates the trade secret apart to

determine how it works or how it was made or manufactured.

Impossibility: Impossibility is no defense to charges of attempt or

conspiracy.

Advice of counsel: May negate mens rea.

Claim of right—public domain and proprietary rights: Mens rea might

be negated if defendant believed in good faith that he had a right to

use the information, either because it was in the public domain or

because it belonged to him.

Trade secret: All forms and types of financial, business, scientific,

technical, economic, or engineering information, if (A) the owner
356 Prosecuting Intellectual Property Crimes

thereof has taken reasonable measures to keep such information secret;

and (B) the information derives independent economic value, actual or

potential, from not being generally known to, and not being readily

ascertainable through proper means by, the public.

Secrecy: Courts required to take any action necessary to protect the

confidentiality of the trade secret during litigation.

Statutory maximum penalties: 10 years' imprisonment and fine of

$250,000 or twice the gain/loss (individual); $5,000,000 fine or twice

the gain/loss (organization)

Guideline section: United States Sentencing Guideline § 2B1.1
App A. Commonly Charged IP Crimes 357

Foreign Economic Espionage

18 U.S.C. § 1831

Chapter IV

Elements

1. The defendant misappropriated a trade secret from its owner

2. The defendant knew or had a firm belief that the

item/information was a trade secret

3. The item/information was in fact a trade secret (except in cases

of attempt or conspiracy)

4. The defendant intended or knew the theft would benefit any

foreign government, foreign instrumentality or foreign agent

Defenses: See Commercial Theft of Trade Secrets (18 U.S.C. § 1832).

Pre-Indictment Approval Required

Statutory maximum penalty: 15 years' imprisonment and fine of

$500,000 or twice the gain/loss (individual); $10,000,000 fine or twice

the gain/loss (organization)

Guideline section: United States Sentencing Guideline § 2B1.1
358 Prosecuting Intellectual Property Crimes

Unauthorized Access of a Computer 

18 U.S.C. § 1030(a)(2), (a)(4)

Section IV.F.

Offense under § 1030 (a)(2)—Unlawfully accessing or attempting to

access a computer to obtain information

Whoever intentionally accesses [or attempts to access] a computer

without authorization or exceeds authorized access, and thereby

obtains—

(A) information contained in a financial record of a financial

institution, or of a card issuer as defined in section 1602(n) of

title 15, or contained in a file of a consumer reporting agency

on a consumer, as such terms are defined in the Fair Credit

Reporting Act (15 U.S.C. 1681 et seq.)

(B) information from any department or agency of the United

States OR

(C) information from any protected computer if the conduct

involved an interstate or foreign communication ....

Enhancement pursuant to 18 U.S.C. § 1030(c)(2)(B)

(I) the offense was committed for purposes of commercial

advantage or private financial gain;

(ii) the offense was committed in furtherance of any criminal or

tortious act in violation of the Constitution or laws of the United

States or of any State; or

(iii) the value of the information obtained exceeds $5,000.

Statutory maximum penalty: 1 year's imprisonment and fine of

$100,000

Enhanced statutory maximum penalties: 5 years' imprisonment (second

offense: 10 years' imprisonment) and fine of $250,000 or twice the

gain/loss (individual); fine of $500,000 or twice the gain/loss

(organization)

Guideline section: United States Sentencing Guideline § 2B1.1
App A. Commonly Charged IP Crimes 359

Offense under § 1030 (a)(4) —Unlawfully accessing or attempting to

access a protected computer to further a fraud

Whoever knowingly and with intent to defraud, accesses [or

attempts to access] a protected computer without authorization, or

exceeds authorized access, and by means of such conduct furthers

the intended fraud and obtains anything of value, unless the object

of the fraud and the thing obtained consists only of the use of the

computer and the value of such use is not more than $5,000 in any

1-year period ....

Statutory maximum penalties: 5 years' imprisonment and fine of

$250,000 or twice the gain/loss (first offense), 10 years' imprisonment

and fine of $250,000 (second offense)

Guideline section: United States Sentencing Guideline § 2B1.1
365

Appendices B-F

Sample Indictments and

Jury Instructions

Appendix B. Copyright Infringement 

Appendix C. Trademark Counterfeiting 

Appendix D. Theft of Trade Secrets and Foreign Economic Espionage

Appendix E. Digital Millennium Copyright Act

Appendix F. Trafficking in Counterfeit or Illicit Labels and

Counterfeit Documentation and Packaging

Sample indictments and jury instructions for these offenses are

available on DOJNET at http://10.173.2.12/usao/eousa/ole/usabook

/ipma/appx.htm.
367

Appendix G

Intellectual Property

Contact List

1. Federal Law Enforcement Contacts

2. Federal International Contacts

3. Trademark Organization Contacts

4. Copyright Organization Contracts

1. Federal Law Enforcement Contacts

Computer Crime and Intellectual Property Section (CCIPS)

Criminal Division, U.S. Department of Justice

1301 New York Avenue NW, Suite 600

Washington, DC 20530

Tel: 202-514-1026

Fax: 202-514-6113

http://www.cybercrime.gov

http://www.usdoj.gov

Prosecution of, and guidance, support, resources, and materials for

prosecuting domestic and international criminal intellectual

property offenses; development of intellectual property

enforcement policy; and support and oversight of the federal

prosecution of intellectual property crimes.
368 Prosecuting Intellectual Property Crimes

National Intellectual Property Rights Coordination Center

U.S. Immigration and Customs Enforcement (ICE)

1300 Pennsylvania Avenue NW, Room 3.5A

Washington, DC 20229

http://www.ice.gov

Tel: 202-344-2410

Fax: 202-344-1920

E-mail: iprcenter@dhs.gov

Joint center to coordinate interagency efforts on criminal

intellectual property enforcement by ICE and the FBI.

Federal Bureau of Investigation

Cyber Crime Fraud Unit

Leslie Bryant - Chief

J. Edgar Hoover FBI Building

935 Pennsylvania Avenue NW

Washington, DC 20535

http://www.fbi.gov

Tel: 202-324-5613

Fax: 202-324-9197

E-mail: leslie.bryant@ic.fbi.gov

Responsible for all IPR and Internet fraud investigations; support

and oversight of the FBI's IPR enforcement program.

Department of Homeland Security (DHS)

Customs and Border Patrol (CBP)

1300 Pennsylvania Avenue NW
App G. Intellectual Property Contact List 369

Washington, DC 20229

http://www.cbp.gov/

• Office of Regulations and Rulings—IPR Branch

Tel: 202-572-8710

Fax: 202-572-8744

E-mail: hqiprbranch@dhs.gov

Develops and administers legal and policy components of

the agency's IPR enforcement program.

• IPR E-Recordation (IPRR) Application

E-mail: iprr.questions@dhs.gov

http://www.cbp.gov/xp/cgov/import/commercial_enforcement/ip

r/iprr_intro.xml

Online application for intellectual property owners to

record their trademarks and copyrights with CBP to protect

against the importation of infringing products.

• Office of Trade Relations

Tel: 202-344-1440

Fax: 202-344-1969

E-mail: traderelations@dhs.gov

http://www.cbp.gov/xp/cgov/toolbox/about/organization/comm_

staff_off/trade_relations.xml

Liaison between industry and Customs officials. Reviews

concerns voiced by individuals or trade groups and

furnishes recommendations to resolve justified complaints.
370 Prosecuting Intellectual Property Crimes

• Cyber Crime Center

Cyber Crimes Unit

1320 Random Hills Road, Suite 400

Fairfax, VA 22030

Tel: 703-293-8005

Fax: 703-293-9127

Investigates and coordinates investigation of Internet

crimes, including intellectual property rights violations.

U.S. Postal Inspection Service

Mail Fraud Group

475 L'Enfant Plaza SW, Room 3411

Washington, DC 20260

Tel: 202-268-4267

Fax: 202-268-7316

http://www.usps.com/postalinspectors/

Support and oversight of Postal Inspection Service's mail fraud

enforcement nationwide, including investigation of intellectual

property crimes committed by use of the mails.

Food and Drug Administration (FDA)

Office of Criminal Investigations

7500 Standish Place, Suite 250N

Rockville, MD 20855

Tel: 301-294-4030

Fax: 301-594-1971
App G. Intellectual Property Contact List 371

http://www.fda.gov/ora/

Support and oversight of FDA's enforcement of violations of laws

related to mislabeled foods, drugs, and cosmetics.

Consumer Product Safety Commission (CPSC)

4330 East West Highway

Bethesda, MD 20814

Tel: 301-504-7923; 800-638-2772

Fax: 301-504-0124

http://www.cpsc.gov

E-mail: info@cpsc.gov

Dennis Blasius

Special Assistant to the Deputy Director

Office of Compliance and Field Operations

U.S. Consumer Product Safety Commission

2331 Silvernail Road #24

Pewaukee, WI 53072

Tel: 262-650-1216

Fax: 262-650-1217

Cell: 414-899-8802

E-mail: dblasius@cpsc.gov

Has jurisdiction over approximately 15,000 types of consumer

products, including coffee makers, electrical cords, toys, baby seats

and cribs. Investigates leads into possible hazardous products;

develops voluntary standards with industry, issues and enforces

mandatory standards; and bans products if no feasible standard will

adequately protect the public.
372 Prosecuting Intellectual Property Crimes

National White Collar Crime Center (NW3C)

Internet Crime Complaint Center (IC3)

1 Huntington Way

Fairmont, WV 26554

Tel: 800-251-3221; 304-363-4312; complaint center: 800-251-7581

Fax: 304-363-9065

http://www.ic3.gov

Partnership between NW3C and FBI. Allows victims to report

fraud over the Internet; alerts authorities of suspected criminal or

civil violations; offers law enforcement and regulatory agencies a

central repository for complaints related to Internet fraud.

2. Federal International Contacts

U.S. Department of Justice

• International Coordinator in Each U.S. Attorney's Office

Office of International Affairs, Department of Justice

Tel.: 202-514-0000 

• Computer Crime & Intellectual Property Section

Tel.: 202-514-1026

• Office of International Affairs, Department of Justice

Legal Attache program

Tel.: 202-514-0000

• Office of Overseas Prosecutorial Development & Training

Resident Legal Advisor program

Tel.: 202-514-1323
App G. Intellectual Property Contact List 373

• Federal Bureau of Investigation Legal Attache Program

http://www.fbi.gov/contact/legat/legat.htm

State Department Information on Mutual Legal Assistance Treaties

http://travel.state.gov/law/info/judicial/judicial_690.html

U.S. Trade Representative's List of Nations that Fail to Provide

Adequate IP Protection

Annual Special 301 Report

http://ustr.gov/Trade_Sectors/Intellectual_Property/Section_Index.html

3. Trademark Organization Contacts

United States Patent and Trademark Office (USPTO)

Director of the USPTO

P.O. Box 1450

Alexandria, VA 22313-1450

Tel.: 800-786-9199

http://www.uspto.gov/

Provides information on obtaining certified copies of trademark

registration. To obtain a copy of a certified trademark registration:

• Office of Public Records

South Tower Building, 2nd Floor

2900 Crystal Drive

Arlington, VA 22202 

Tel.: 800-972-6382
374 Prosecuting Intellectual Property Crimes

Fax: 571-273-3250

http://www.uspto.gov

International Anti-Counterfeiting Coalition (IACC)

Niles Montan

President

1725 K Street NW, Suite 411

Washington, DC 20006

Tel.: 202-223-6667

Fax: 202-223-6668

http://www.iacc.org

Represents trademark industries affected by counterfeiting.

International Trademark Association (INTA)

Saisal Daudpota

External Relations Coordinator, Anti-Counterfeiting

655 Third Avenue, 10th Floor

New York, NY 10017-5617

Tel.: 212-642-1739

Fax: 212-768-7796

http://www.inta.org

Represents trademark owners in all industries.

4. Copyright Organization Contacts

Library of Congress Copyright Office
App G. Intellectual Property Contact List 375

Certifications & Documents

LM 402

101 Independence Avenue SW

Washington, DC 20559

Tel.: 202-707-6787

http://www.loc.gov/

Retains files of registered copyrights and unpublished works;

provides information on obtaining copies of copyright registrations.

The Independent Film & Television Alliance (I.F.T.A.)

Susan Cleary

Vice President & General Counsel

10850 Wilshire Boulevard, 9th Floor

Los Angeles, CA 90024-4321

Tel.: 310-446-1000

Fax: 310-446-1600

http://www.ifta-online.org/

Represents the independent motion picture and television industry.

Association of American Publishers (AAP)

Patricia L. Judd

Executive Director

International Copyright Enforcement and Trade Policy

50 F Street NW, 4th Floor

Washington, DC 20001

Tel.: 202-220-4541
376 Prosecuting Intellectual Property Crimes

Fax: 202-347-3690

http://www.publishers.org

Represents publishers of reference works; scientific medical,

technical, professional, and scholarly books and journals; and

classroom instructional and testing materials in print and electronic

formats.

Business Software Alliance (BSA)

John Wolfe

Director Internet Enforcement

1150 18th Street NW, Suite 700

Washington, DC 20036

Tel.: 202-872-5500; 202-872-5122

Fax: 202-872-5501

E-mail: johnw@bsa.org

http://www.bsa.org

Represents major software and e-commerce developers. Assists in

identifying and locating victims, identifying and valuing infringing

products; technical assistance with copyright and copyright

protection technologies; assists in obtaining copyright registration

certificates.

Entertainment Software Association (ESA)

Chun T. Wright

Senior Anti-Piracy Counsel

575 7th Street NW, Suite 300

Washington, DC 20004

Tel.: 202-223-2400 ext. 108
App G. Intellectual Property Contact List 377

Fax: 202-223-2401

E-mail: chun@theESA.com

New York office

Tel.: 917-522-3250

http://www.theESA.com

Represents companies that publish video and computer games for

video consoles, personal computers and the Internet. Assists in

identifying and locating victims, identifying and valuing infringing

products; technical assistance with copyright and copyright

protection technologies; assists in obtaining copyright registration

certificates.

International Intellectual Property Alliance (IIPA)

Steve Metalitz

Senior Vice President

1747 Pennsylvania Avenue NW, Suite 825

Washington, DC 20006-4637

Tel.: 202-833-4198

Fax: 202-872-0546

http://www.iipa.com

Coalition of seven U.S. associations working to improve

international copyright protection and enforcement.
378 Prosecuting Intellectual Property Crimes

International Intellectual Property Institute (IIPI)

Eric Garduno

Executive Director

1100 H Street NW, Suite 1100

Washington, DC 20005

Tel.: 202-544-6610

Fax: 202-478-1955

http://www.iipi.org

Organization dedicated to improving intellectual property systems

around the world. 

Intellectual Property Owners Association (IPO)

Mr. Dana Robert Colarulli

Government Relations and Legislative Counsel

1255 23rd Street NW, Suite 200

Washington, DC 20037

E-mail: dana@ipo.org

Tel.: 202-466-2396

Fax: 202-466-2893

http://www.ipo.org

E-mail: info@ipo.org

Represents owners of intellectual property.

Motion Picture Association of America (MPAA)

Mike Robinson

Director of U.S. Anti-Piracy
379

Appendix H

Victim Referral and

Witness Interview Forms

The forms on the following pages were first published in the

Department of Justice's Report of the Department of Justice's Task Force

on Intellectual Property (Oct. 2004), and are adapted below with minor

additions. The forms are useful as a checklist for prosecutors and

investigators to gather information from victims or for victims to fill out

on their own. There are two forms: one that can be used in copyright and

trademark/service mark/certification mark cases, and another that can be

used in trade secret cases. They can be adapted for use in other

intellectual property offenses as well, and are available in electronic format

on DOJNET at http://10.173.2.12/usao/eousa/ole/usabook/ipma/

appxh.wpd.

A. Checklist for Copyright Infringement

and Counterfeit Trademark/Service

Mark/Certification Mark Offenses

Background and Contact Information

1. Victim's Name: 

2. Primary Address: 

3. Nature of Business: 

4. Contact: 

Phone: Fax: 

E-mail: Pager/Mobile: 

Description of the Intellectual Property

5. Describe the copyrighted material or trademark/service

mark/certification mark (e.g., title of copyrighted work, identity of

logo), including any factors that make its infringement specially

problematic (e.g., pre-release piracy, threats to public health and

safety).
380 Prosecuting Intellectual Property Crimes

6. Is the work or mark registered with the U.S. Copyright Office or on

the principal register of the U.S. Patent and Trademark Office?

___ YES ___NO 

a. If so, please provide the following: 

i. Registration Date: 

ii. Registration Number: 

iii. Do you have a copy of the certificate of registration? 

iv. Has the work or mark been the subject of a previous civil or

criminal enforcement action? If so, please provide a general

description. 

b. If not, state if and when you intend to register.

7. What is the approximate retail value of the infringed work, good,

or service? 

Description of the Intellectual Property Crime

8. Describe how the theft or counterfeiting was discovered.

9. Do you have any examination reports of the infringing or

counterfeit goods? 

___YES ___NO

If so, please provide those reports to law enforcement.

10. Describe the scope of the infringing operation: 

a. Estimated quantity of illegal distribution:

b. Estimated value of illegal distribution:

b. Estimated time period of illegal distribution: 

c. Is the illegal distribution national or international? Which

states or countries?
App H. Victim and Witness Forms 381

11. Identify where the infringement or counterfeiting occurred, and

describe the location.

12. Identify the name(s) or location(s) of possible suspects, including

the following information: 

Name (Suspect #1): 

Phone number:

E-mail address:

Physical address:

Current employer, if known:

Reason for suspicion: 

Name (Suspect #2): 

Phone number:

E-mail address:

Physical address:

Current employer, if known:

Reason for suspicion: 

13. If the distribution of infringing or counterfeit goods involves the

Internet (e.g., World Wide Web, FTP, e-mail, chat rooms), identify

the following:

a. The type of Internet theft:

b. Internet address, including linking sites (domain name, URL,

IP address, e-mail):

c. Login or password for site:

d. Operators of site, if known:

14. If you have conducted an internal investigation into the theft or

counterfeiting activities, please describe any evidence acquired and

submit, if possible, any investigative reports:
382 Prosecuting Intellectual Property Crimes

Civil Enforcement Proceedings

15. Has a civil enforcement action been filed against the suspects

identified above? 

___YES ___NO 

a. If so, identify the following: 

i. Name of court and case number:

ii. Date of filing:

iii. Names of attorneys: 

iv. Status of case: 

b. If not, is a civil action contemplated? What type and when? 

16. Please provide any information concerning the suspected crime not

described above that you believe might assist law enforcement.

B. Checklist for Trade Secret Offenses

NOTE ON CONFIDENTIALITY: Federal law provides that courts

"shall enter such orders and take such action as may be necessary and

appropriate to preserve the confidentiality of trade secrets, consistent with

the requirements of the Federal Rules of Criminal and Civil Procedure,

the Federal Rules of Evidence, and all other applicable laws." 18 U.S.C. §

1835. Prosecutors utilizing any of the information set forth below will

generally request the court to enter an order to preserve the status of the

information as a trade secret and prevent its unnecessary and harmful

disclosure.

Background and Contact Information

1. Victim's Name: 

2. Primary Location and Address: 

3. Nature of Primary Business: 
App H. Victim and Witness Forms 383

4. Law Enforcement Contact: 

Phone: Fax: 

E-mail: Pager/Mobile: 

Description of the Trade Secret

5. Generally describe the trade secret (e.g., source code, formula,

technology, device).

Provide an estimated value of the trade secret identifying ONE of

the methods and indicating ONE of the ranges listed below: 

Estimated value Method

______________ Cost to develop the trade secret

______________ Acquisition cost (identify date and source

of acquisition)

______________ Fair market value if sold

Identify a person knowledgeable about valuation, including

that person's contact information.

General Physical Measures Taken to Protect the Trade Secret

6. Describe the general physical security precautions taken by the

company, such as fencing the perimeter of the premises, visitor

control systems, using alarming or self-locking doors or security

personnel. 

7. Has the company established physical barriers to prevent

unauthorized viewing or access to the trade secret, such as locked

storage facilities or "Authorized Personnel Only" signs at access

points? (See below if computer-stored trade secret.)

___YES ___NO 

8. Does the company require sign in/out procedures for access to and

return of trade secret materials?

___YES ___NO 
384 Prosecuting Intellectual Property Crimes

9. Are employees required to wear identification badges?

___YES ___ NO 

10. Does the company have a written security policy?

___YES ___NO 

a. How are employees advised of the security policy? 

b. Are employees required to sign a written acknowledgment of

the security policy?

___YES ___NO 

c. Identify the person most knowledgeable about matters relating

to the security policy, including title and contact information. 

11. How many employees have access to the trade secret? 

12. Was access to the trade secret limited to a "need to know" basis?

 ___YES ___NO

If so, describe how "need to know" was maintained in any ways not

identified elsewhere (e.g., closed meetings, splitting tasks between

employees and/or vendors to restrict knowledge, etc.):

Confidentiality and Non-Disclosure Agreements

13. Does the company enter into confidentiality and non-disclosure

agreements with employees and third parties concerning the trade

secret?

___YES ___NO 

14. Has the company established and distributed written

confidentiality policies to all employees?

___YES ___NO 

15. Does the company have a policy for advising company employees

regarding the company's trade secrets?

___YES ___NO 
App H. Victim and Witness Forms 385

Computer-Stored Trade Secrets

16. If the trade secret is computer source code or other

computer-stored information, how is access regulated (e.g., are

employees given unique user names, passwords, and computer

storage space, and was the information encrypted)? 

17. If the company stores the trade secret on a computer network, is

the network protected by a firewall?

___YES ___NO

18. Is remote access permitted into the computer network?

___YES ___NO

19. Is the trade secret maintained on a separate computer server?

___YES ____NO 

20. Does the company prohibit employees from bringing outside

computer programs or storage media to the premises?

___YES ___NO 

21. Does the company maintain electronic access records such as

computer logs? 

___YES ___NO 

Document Control

22. If the trade secret consists of documents, were they clearly marked

"CONFIDENTIAL" or "PROPRIETARY"?

___YES ___NO 

23. Describe the document control procedures employed by the

company, such as limiting access and sign in/out policies. 
386 Prosecuting Intellectual Property Crimes

24. Was there a written policy concerning document control

procedures?

___YES ___NO

If so, how were employees advised of it?

25. Identify the person most knowledgeable about the document

control procedures, including title and contact information. 

Employee Controls

26. Are new employees subject to a background investigation?

___YES ___NO 

27. Does the company hold "exit interviews" to remind departing

employees of their obligation not to disclose trade secrets?

___YES ___NO 

Description of the Theft of Trade Secret

28. Identify the name(s) or location(s) of possible suspects, including

the following information: 

Name (Suspect #1): 

Phone number:

E-mail address:

Physical address:

Employer:

Reason for suspicion:

Name (Suspect #2): 

Phone number:

E-mail address:

Physical address:

Employer:

Reason for suspicion:
App H. Victim and Witness Forms 387

29. Was the trade secret stolen to benefit a third party, such as a

competitor or another business?

___YES ___NO 

If so, identify that business and its location.

30. Do you have any information that the theft of trade secrets were

committed to benefit a foreign government or instrumentality of a

foreign government?

___YES ___NO 

If so, identify the foreign government or instrumentality and

describe that information. 

31. If the suspect is a current or former employee, describe all

confidentiality and non-disclosure agreements in effect. 

32. Identify any physical locations associated with the theft of trade

secret, such as where it may be currently stored or used.

33. If you have conducted an internal investigation into the theft or

counterfeiting activities, please describe any evidence acquired and

provide any investigative reports that you can.
388 Prosecuting Intellectual Property Crimes

Civil Enforcement Proceedings

34. Has a civil enforcement action been filed against the suspects

identified above? 

___YES ___NO 

a. If so, identify the following: 

i. Name of court and case number: 

ii. Date of filing: 

iii. Names of attorneys: 

iv. Status of case: 

b. If not, is a civil action contemplated? 

___YES ___NO 

What type and when? 

35. Please provide any information concerning the suspected crime not

described above that you believe might assist law enforcement. 
389

Appendix I

Maximum Statutory Penalties,

Forfeiture, and Restitution for

Intellectual Property Crimes

Fines are determined by the substantive criminal statutes in

conjunction with 18 U.S.C. § 3571 (“Sentence of fine”).The exact

forfeiture procedures for each criminal offense, and the types of property

those remedies reach, are listed in detail in Section VIII.E.2. of this

Manual. Restitution procedures are described in detail in Section VIII.D.

of this Manual.

Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

Copyright

Infringement

for Profit

(Felony)2

17 U.S.C.

§ 506(a)(1)(A)

(formerly

§ 506(a)(1))

18 U.S.C.

§ 2319(b)

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

390 Prosecuting Intellectual Property Crimes

Copyright

Large-Scale

Infringement,

No Profit

Motive (Felony)

17 U.S.C.

§ 506(a)(1)(B)

(formerly

§ 506(a)(2))

18 U.S.C.

§ 2319(c)

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

Copyright

Pre-Release

Distribution

Over a PubliclyAccessible

Computer

Network

17 U.S.C.

§ 506(a)(1)(C)

18 U.S.C.

§ 2319(d)

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

App I. Penalties and Restitution 391

Digital

Millennium

Copyright Act

(DMCA)

17 U.S.C.

§ 1204

• 5 years

• $500K or

twice the

gain/loss

(individuals &

organizations)

• Forfeiture–

none

• Restitution–

none to

circumvention

victims; possible

to copyright

victims

• 10 years

• $1M or twice

the gain/loss

(individuals &

organizations)

• Forfeiture–

none

• Restitution–

none to

circumvention

victims; possible

to copyright

victims

Economic

Espionage Act

(EEA)–

Trade Secret

Theft to Benefit

a Foreign

Government,

Instrumentality,

or Agent3

18 U.S.C.

§ 1831

• 15 years

• $500K or

twice the

gain/loss

(individuals)

• $10M or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory

Economic

Espionage Act

(EECA)–

Trade Secret

Theft for

Commercial

Purposes

18 U.S.C.

§ 1832

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $5M or twice

the gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

392 Prosecuting Intellectual Property Crimes

Counterfeit/

Illicit Labels

and Counterfeit

Documentation

and Packaging

for Copyrighted

Works

18 U.S.C.

§ 2318

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

Bootleg

Recordings of

Live Musical

Performances

18 U.S.C.

§ 2319A

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

unclear

• 10 years 

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

unclear

Camcording

18 U.S.C.

§ 2319B

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

App I. Penalties and Restitution 393

1. “Commercial purpose” here is used as a generic term applicable to

criminal intellectual property statutes that variously require the

government to prove either trafficking for “consideration”; commercial

advantage or private financial gain; or engaging in a transaction for

economic benefit. The terms of the specific statutes control.

2. The copyright crimes in 17 U.S.C. § 506(a)(1)(A) and (B) can also be

charged as misdemeanors in certain circumstances.

3. Technically, to prove economic espionage to benefit a foreign

government, instrumentality, or agent under 18 U.S.C. § 1831, the

government need not prove that the benefit was economic, but in practice

the benefit will often have economic consequences.

Counterfeit

Trademarks,

Service Marks,

and

Certification

Marks

18 U.S.C.

§ 2320

• 10 years

• $2M or twice

the gain/loss

(individuals)

• $5M or twice

the gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 20 years

• $5M or twice

the gain/loss

(individuals)

• $15M or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
App G. Intellectual Property Contact List 379

15503 Ventura Boulevard

Encino, CA 91436

Tel.: 818-995-6600 

Fax: 818-382-1795

Bill Shannon

Deputy Director U.S. Anti-Piracy

Tel.: 718-518-8800 ext. 108

Cell: 917-731-5783

http://www.mpaa.org

Represents the film and entertainment industry. Assists in

identifying and locating victims, identifying and valuing infringing

products; technical assistance with copyright and copyright

protection technologies; assists in obtaining copyright registration

certificates.

Recording Industry Association of America (RIAA)

Jonathan Whitehead

Senior Vice President, Online Copyright Protection

Anti-Piracy Unit

1330 Connecticut Avenue NW, Suite 300

Washington, DC 20036

Tel.: 202-857-9602

Fax: 202-775-7253

http://www.riaa.org
380 Prosecuting Intellectual Property Crimes

Represents the United States recording industry. Assists in

identifying and locating victims, identifying and valuing infringing

products; technical assistance with copyright and copyright

protection technologies; assists in obtaining copyright registration

certificates.

International Federation of the Phonographic Industry (IFPI)

Jeremy Banks

Vice President of Internet Anti-Piracy

IFPI Secretariat

54 Regent Street

London

W1B 5RE

United Kingdom

Tel.: 011-44-207-878-6804

E-mail: jeremy.banks@ifpi.org

http://www.ifpi.org/

Represents the worldwide recording industry's international

organizations, legal strategies, litigation, and public relations. Coordinates international strategies in anti-piracy enforcement,

technology, and lobbying of governments. IFPI and RIAA work

closely together. RIAA recommends contacting it before contacting

the IFPI. 

Software & Information Industry Association (SIIA)

1090 Vermont Avenue NW, 6th Floor

Washington, DC 20005-4095

Tel.: 202-289-7442

Fax: 202-289-7097
App G. Intellectual Property Contact List 381

http://www.siia.net

Keith Kupferschmid

Vice President, Intellectual Property Policy & Enforcement

Tel.: 202-789-4442

E-mail: keithk@siia.net

Jason Allen

Manager, Internet Anti-Piracy

Tel.: 202-789-4477

E-mail: jallen@siia.net

SIIA represents software companies and publishers of magazines,

books, newspapers, databases and other digital publications. SIIA's

mission is to protect, promote, and inform the software and content

industry. Assists in identifying and locating victims, identifying and

valuing infringing products; technical assistance with copyright and

copyright protection technologies; assists in obtaining copyright

registration certificates.
379

Appendix H

Victim Referral and

Witness Interview Forms

The forms on the following pages were first published in the

Department of Justice's Report of the Department of Justice's Task Force

on Intellectual Property (Oct. 2004), and are adapted below with minor

additions. The forms are useful as a checklist for prosecutors and

investigators to gather information from victims or for victims to fill out

on their own. There are two forms: one that can be used in copyright and

trademark/service mark/certification mark cases, and another that can be

used in trade secret cases. They can be adapted for use in other

intellectual property offenses as well, and are available in electronic format

on DOJNET at http://10.173.2.12/usao/eousa/ole/usabook/ipma/

appxh.wpd.

A. Checklist for Copyright Infringement

and Counterfeit Trademark/Service

Mark/Certification Mark Offenses

Background and Contact Information

1. Victim's Name: 

2. Primary Address: 

3. Nature of Business: 

4. Contact: 

Phone: Fax: 

E-mail: Pager/Mobile: 

Description of the Intellectual Property

5. Describe the copyrighted material or trademark/service

mark/certification mark (e.g., title of copyrighted work, identity of

logo), including any factors that make its infringement specially

problematic (e.g., pre-release piracy, threats to public health and

safety).
380 Prosecuting Intellectual Property Crimes

6. Is the work or mark registered with the U.S. Copyright Office or on

the principal register of the U.S. Patent and Trademark Office?

___ YES ___NO 

a. If so, please provide the following: 

i. Registration Date: 

ii. Registration Number: 

iii. Do you have a copy of the certificate of registration? 

iv. Has the work or mark been the subject of a previous civil or

criminal enforcement action? If so, please provide a general

description. 

b. If not, state if and when you intend to register.

7. What is the approximate retail value of the infringed work, good,

or service? 

Description of the Intellectual Property Crime

8. Describe how the theft or counterfeiting was discovered.

9. Do you have any examination reports of the infringing or

counterfeit goods? 

___YES ___NO

If so, please provide those reports to law enforcement.

10. Describe the scope of the infringing operation: 

a. Estimated quantity of illegal distribution:

b. Estimated value of illegal distribution:

b. Estimated time period of illegal distribution: 

c. Is the illegal distribution national or international? Which

states or countries?
App H. Victim and Witness Forms 381

11. Identify where the infringement or counterfeiting occurred, and

describe the location.

12. Identify the name(s) or location(s) of possible suspects, including

the following information: 

Name (Suspect #1): 

Phone number:

E-mail address:

Physical address:

Current employer, if known:

Reason for suspicion: 

Name (Suspect #2): 

Phone number:

E-mail address:

Physical address:

Current employer, if known:

Reason for suspicion: 

13. If the distribution of infringing or counterfeit goods involves the

Internet (e.g., World Wide Web, FTP, e-mail, chat rooms), identify

the following:

a. The type of Internet theft:

b. Internet address, including linking sites (domain name, URL,

IP address, e-mail):

c. Login or password for site:

d. Operators of site, if known:

14. If you have conducted an internal investigation into the theft or

counterfeiting activities, please describe any evidence acquired and

submit, if possible, any investigative reports:
382 Prosecuting Intellectual Property Crimes

Civil Enforcement Proceedings

15. Has a civil enforcement action been filed against the suspects

identified above? 

___YES ___NO 

a. If so, identify the following: 

i. Name of court and case number:

ii. Date of filing:

iii. Names of attorneys: 

iv. Status of case: 

b. If not, is a civil action contemplated? What type and when? 

16. Please provide any information concerning the suspected crime not

described above that you believe might assist law enforcement.

B. Checklist for Trade Secret Offenses

NOTE ON CONFIDENTIALITY: Federal law provides that courts

"shall enter such orders and take such action as may be necessary and

appropriate to preserve the confidentiality of trade secrets, consistent with

the requirements of the Federal Rules of Criminal and Civil Procedure,

the Federal Rules of Evidence, and all other applicable laws." 18 U.S.C. §

1835. Prosecutors utilizing any of the information set forth below will

generally request the court to enter an order to preserve the status of the

information as a trade secret and prevent its unnecessary and harmful

disclosure.

Background and Contact Information

1. Victim's Name: 

2. Primary Location and Address: 

3. Nature of Primary Business: 
App H. Victim and Witness Forms 383

4. Law Enforcement Contact: 

Phone: Fax: 

E-mail: Pager/Mobile: 

Description of the Trade Secret

5. Generally describe the trade secret (e.g., source code, formula,

technology, device).

Provide an estimated value of the trade secret identifying ONE of

the methods and indicating ONE of the ranges listed below: 

Estimated value Method

______________ Cost to develop the trade secret

______________ Acquisition cost (identify date and source

of acquisition)

______________ Fair market value if sold

Identify a person knowledgeable about valuation, including

that person's contact information.

General Physical Measures Taken to Protect the Trade Secret

6. Describe the general physical security precautions taken by the

company, such as fencing the perimeter of the premises, visitor

control systems, using alarming or self-locking doors or security

personnel. 

7. Has the company established physical barriers to prevent

unauthorized viewing or access to the trade secret, such as locked

storage facilities or "Authorized Personnel Only" signs at access

points? (See below if computer-stored trade secret.)

___YES ___NO 

8. Does the company require sign in/out procedures for access to and

return of trade secret materials?

___YES ___NO 
384 Prosecuting Intellectual Property Crimes

9. Are employees required to wear identification badges?

___YES ___ NO 

10. Does the company have a written security policy?

___YES ___NO 

a. How are employees advised of the security policy? 

b. Are employees required to sign a written acknowledgment of

the security policy?

___YES ___NO 

c. Identify the person most knowledgeable about matters relating

to the security policy, including title and contact information. 

11. How many employees have access to the trade secret? 

12. Was access to the trade secret limited to a "need to know" basis?

 ___YES ___NO

If so, describe how "need to know" was maintained in any ways not

identified elsewhere (e.g., closed meetings, splitting tasks between

employees and/or vendors to restrict knowledge, etc.):

Confidentiality and Non-Disclosure Agreements

13. Does the company enter into confidentiality and non-disclosure

agreements with employees and third parties concerning the trade

secret?

___YES ___NO 

14. Has the company established and distributed written

confidentiality policies to all employees?

___YES ___NO 

15. Does the company have a policy for advising company employees

regarding the company's trade secrets?

___YES ___NO 
App H. Victim and Witness Forms 385

Computer-Stored Trade Secrets

16. If the trade secret is computer source code or other

computer-stored information, how is access regulated (e.g., are

employees given unique user names, passwords, and computer

storage space, and was the information encrypted)? 

17. If the company stores the trade secret on a computer network, is

the network protected by a firewall?

___YES ___NO

18. Is remote access permitted into the computer network?

___YES ___NO

19. Is the trade secret maintained on a separate computer server?

___YES ____NO 

20. Does the company prohibit employees from bringing outside

computer programs or storage media to the premises?

___YES ___NO 

21. Does the company maintain electronic access records such as

computer logs? 

___YES ___NO 

Document Control

22. If the trade secret consists of documents, were they clearly marked

"CONFIDENTIAL" or "PROPRIETARY"?

___YES ___NO 

23. Describe the document control procedures employed by the

company, such as limiting access and sign in/out policies. 
386 Prosecuting Intellectual Property Crimes

24. Was there a written policy concerning document control

procedures?

___YES ___NO

If so, how were employees advised of it?

25. Identify the person most knowledgeable about the document

control procedures, including title and contact information. 

Employee Controls

26. Are new employees subject to a background investigation?

___YES ___NO 

27. Does the company hold "exit interviews" to remind departing

employees of their obligation not to disclose trade secrets?

___YES ___NO 

Description of the Theft of Trade Secret

28. Identify the name(s) or location(s) of possible suspects, including

the following information: 

Name (Suspect #1): 

Phone number:

E-mail address:

Physical address:

Employer:

Reason for suspicion:

Name (Suspect #2): 

Phone number:

E-mail address:

Physical address:

Employer:

Reason for suspicion:
App H. Victim and Witness Forms 387

29. Was the trade secret stolen to benefit a third party, such as a

competitor or another business?

___YES ___NO 

If so, identify that business and its location.

30. Do you have any information that the theft of trade secrets were

committed to benefit a foreign government or instrumentality of a

foreign government?

___YES ___NO 

If so, identify the foreign government or instrumentality and

describe that information. 

31. If the suspect is a current or former employee, describe all

confidentiality and non-disclosure agreements in effect. 

32. Identify any physical locations associated with the theft of trade

secret, such as where it may be currently stored or used.

33. If you have conducted an internal investigation into the theft or

counterfeiting activities, please describe any evidence acquired and

provide any investigative reports that you can.
388 Prosecuting Intellectual Property Crimes

Civil Enforcement Proceedings

34. Has a civil enforcement action been filed against the suspects

identified above? 

___YES ___NO 

a. If so, identify the following: 

i. Name of court and case number: 

ii. Date of filing: 

iii. Names of attorneys: 

iv. Status of case: 

b. If not, is a civil action contemplated? 

___YES ___NO 

What type and when? 

35. Please provide any information concerning the suspected crime not

described above that you believe might assist law enforcement. 
389

Appendix I

Maximum Statutory Penalties,

Forfeiture, and Restitution for

Intellectual Property Crimes

Fines are determined by the substantive criminal statutes in

conjunction with 18 U.S.C. § 3571 (“Sentence of fine”).The exact

forfeiture procedures for each criminal offense, and the types of property

those remedies reach, are listed in detail in Section VIII.E.2. of this

Manual. Restitution procedures are described in detail in Section VIII.D.

of this Manual.

Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

Copyright

Infringement

for Profit

(Felony)2

17 U.S.C.

§ 506(a)(1)(A)

(formerly

§ 506(a)(1))

18 U.S.C.

§ 2319(b)

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

390 Prosecuting Intellectual Property Crimes

Copyright

Large-Scale

Infringement,

No Profit

Motive (Felony)

17 U.S.C.

§ 506(a)(1)(B)

(formerly

§ 506(a)(2))

18 U.S.C.

§ 2319(c)

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

Copyright

Pre-Release

Distribution

Over a PubliclyAccessible

Computer

Network

17 U.S.C.

§ 506(a)(1)(C)

18 U.S.C.

§ 2319(d)

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

App I. Penalties and Restitution 391

Digital

Millennium

Copyright Act

(DMCA)

17 U.S.C.

§ 1204

• 5 years

• $500K or

twice the

gain/loss

(individuals &

organizations)

• Forfeiture–

none

• Restitution–

none to

circumvention

victims; possible

to copyright

victims

• 10 years

• $1M or twice

the gain/loss

(individuals &

organizations)

• Forfeiture–

none

• Restitution–

none to

circumvention

victims; possible

to copyright

victims

Economic

Espionage Act

(EEA)–

Trade Secret

Theft to Benefit

a Foreign

Government,

Instrumentality,

or Agent3

18 U.S.C.

§ 1831

• 15 years

• $500K or

twice the

gain/loss

(individuals)

• $10M or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory

Economic

Espionage Act

(EECA)–

Trade Secret

Theft for

Commercial

Purposes

18 U.S.C.

§ 1832

• 10 years

• $250K or

twice the

gain/loss

(individuals)

• $5M or twice

the gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

392 Prosecuting Intellectual Property Crimes

Counterfeit/

Illicit Labels

and Counterfeit

Documentation

and Packaging

for Copyrighted

Works

18 U.S.C.

§ 2318

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

Bootleg

Recordings of

Live Musical

Performances

18 U.S.C.

§ 2319A

• 5 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

unclear

• 10 years 

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

unclear

Camcording

18 U.S.C.

§ 2319B

• 3 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory

• 6 years

• $250K or

twice the

gain/loss

(individuals)

• $500K or

twice the

gain/loss

(organizations)

• Forfeiture–

crim. only

• Restitution–

mandatory
Commercial

Purpose1

- 1st Offense

Commercial

Purpose

- 2nd Offense

No Commercial

Purpose

- 1st Offense

No

Commercial

Purpose

- 2nd Offense

App I. Penalties and Restitution 393

1. “Commercial purpose” here is used as a generic term applicable to

criminal intellectual property statutes that variously require the

government to prove either trafficking for “consideration”; commercial

advantage or private financial gain; or engaging in a transaction for

economic benefit. The terms of the specific statutes control.

2. The copyright crimes in 17 U.S.C. § 506(a)(1)(A) and (B) can also be

charged as misdemeanors in certain circumstances.

3. Technically, to prove economic espionage to benefit a foreign

government, instrumentality, or agent under 18 U.S.C. § 1831, the

government need not prove that the benefit was economic, but in practice

the benefit will often have economic consequences.

Counterfeit

Trademarks,

Service Marks,

and

Certification

Marks

18 U.S.C.

§ 2320

• 10 years

• $2M or twice

the gain/loss

(individuals)

• $5M or twice

the gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory

• 20 years

• $5M or twice

the gain/loss

(individuals)

• $15M or

twice the

gain/loss

(organizations)

• Forfeiture–

civ. & crim.

• Restitution–

mandatory
395

Appendix J

Examples of Traditional Assistance

and Gifts to Law Enforcement

The examples below of what constitutes a gift or traditional assistance

to law enforcement are based on the examples included with a

memorandum issued by Deputy Attorney General Paul J. McNulty

entitled Guidance for Acceptance of Assistance and Gifts from Private

Parties for Use in Connection with Investigations and Litigation (May

2006). These examples highlight certain factors to consider and address

the consultative process that should be followed. Please note that not

every factor that should be considered has been identified below for each

scenario. The examples are provided to highlight certain elements, but do

not reflect the entire analysis.

1. Scenario: The Department has received information from a private

investigator who has an ongoing contract with a motion picture

association to investigate pirated and counterfeit goods, including

pirated movie DVDs. The investigator provides information regarding

websites and points of contact for persons/entities that may have a

connection to the counterfeit materials.

Analysis: This information constitutes traditional assistance; no

particular consultation is required before a Departmental employee

may accept this information.

Continuing Scenario: The Department has initiated its own

investigation based on the initial information provided by the

association's private investigator. After the Department's investigation

has begun, and without any further communications or direction from

an FBI agent or the Criminal Division attorney assigned to the

matter, the private investigator uncovers another source that appears

to be involved with the counterfeit materials. The investigator reports

this new information to the FBI agent. 

Analysis: This information also constitutes traditional assistance that

the FBI agent and attorney may accept. The attorney and agent may

need to consult with each other to determine whether the

investigator's efforts may interfere with the Department's activities,

and whether the investigator should be advised to alter his activities
396 Prosecuting Intellectual Property Crimes

in some manner in order to avoid any interference. Neither the agent

nor attorney should advise the investigator what types of evidence are

desired for the Department's investigation. 

2. Scenario: A nationwide retail giant has its own security force and has

spent considerable resources to set up its own forensics laboratory to

fight shoplifting and other crimes against the company. The local FBI

office is investigating a matter that has no connection to the retail

company. The FBI office, however, believes that the equipment at the

retail company's laboratory is superior to the Department's

capabilities for enhancing photographs for identification. The FBI

office solicits the retail giant for help, and the business readily agrees

to provide forensic assistance without charge. The enhanced

photograph allows the FBI to continue its investigation with greater

efficiency. 

Analysis: Initially, the FBI must obtain prior approval from the

Deputy Attorney General or the Attorney General before any

representative may contact the retail company to seek its services.

The free forensic services constitute a gift. Since the value of these

services is less than $50,000, the agent and attorney must seek the

component head's approval in order to accept these services for free.

In considering this offer, the component head must consider why the

Department is seeking outside forensics aid. The Department may

need a third party's gift because the Department does not own or have

at its disposal the same equipment. In addition, the time-sensitive

nature of the case might require immediate action, and the

Department might not gain access to such equipment with the same

speed as that offered as a gift. In this situation, with advance approval

of the solicitation the Department may accept the gift.

3. Scenario: Consider the same facts set forth in Scenario #2, but

assume that the retail giant informed the local FBI office that it had

a forensics laboratory with equipment capable of performing a variety

of functions, and that it was offering general access to its equipment

and staff for investigative purposes any time that the Department

determined the company's resources would benefit the Department.

Analysis: A retail giant's standing offer to allow the Department to use

its forensic facilities, whether for case-specific matters or general

investigative purposes, should be considered carefully. (Initially, this

company's offer does not trigger the same considerations set forth in

Scenario #2, where the Department solicited the gift.). As noted

above, there may be instances when private industry has forensic

resources that are not available to the Department, and the
App J. Traditional Assistance and Gifts 397

immediacy of the situation may warrant the Department's use of

outside resources. However, the decision to use a third party's services

is distinct from the decision to accept such services free of cost. In

deciding whether to accept the services for free, counsel should

consider whether there are any pending matters in the Department in

which the retail giant is a party or could be affected directly by a

particular matter. 

One-time gifts of free assistance may be permissible. However, it

is particularly important that the Department carefully scrutinize a

third party's offer to use its services for free on multiple occasions or

on a periodic basis for separate cases or matters (e.g., several times a

year). The Department should be circumspect in accepting more than

one gift from the same source within one fiscal year. 

Again, while the donor may have resources unavailable to the

Department, the Department should consider paying for the services

provided. Even if the full cost is difficult to assess, the Department

and a third party can identify a reasonable value for the unique

services provided. 

One reason for the Department's disinclination to accept multiple

offers from one source is that the costs of pursuing the Department's

mission must be fully identified and presented as part of its budget for

Congress to accept or reject. Accepting free services that are critical to

the Department's performance of its mission on a frequent or regular

basis masks the actual costs of its annual operations. Second, periodic

or regular acceptance of free services from an entity can raise an

appearance of a conflict of interest, particularly if any matter later

arises involving that donor. 

The component head may accept the first offer from a source up

to $50,000. A second or subsequent offer in the same fiscal year from

the same source must be submitted to the Assistant Attorney General

for Administration (AAG/A) for approval when the value combined

with the first gift exceeds $50,000.

4. Scenario: A corporation's products are being counterfeited and its

computer network has been infiltrated. The corporation has hired a

computer security firm to evaluate the extent of the computer breach

and to recommend modifications to its system. The corporation has

told Departmental attorneys and investigators that they may speak

with its employees and the computer security firm's personnel about

the breach, and utilize their expertise as necessary. The corporation

is paying for the computer security firm's services throughout the
398 Prosecuting Intellectual Property Crimes

Department's investigation, including time spent meeting with

Department employees. One computer firm employee has particular

proficiency in computer programming, and he would be an expert

witness in any litigation against the defendant to discuss the

unauthorized access and damage to the corporation's security and

computer privacy. The victim corporation also has provided office

space for Departmental employees to interview corporate staff and

the computer firm employees. 

Analysis: The corporation is a victim. The computer firm is a “related

party” because it is retained by the corporation. Access to both

companies' personnel during the investigation is traditional assistance

that does not warrant any formal approval process. The corporate and

security firm employees are in a unique position to provide useful

information on behalf of their employer/contractor. The agent and

attorney should consult with each other, and potentially with the

Professional Responsibility Officer (PRO) and the Deputy Designated

Agency Ethics Official (DDAEO), to determine the extent to which

they will accept the corporation's offers. Using corporate space for

interviews does not raise any particular concerns. The computer

security expert who assessed the damage to the corporation has

distinct advantages over another computer expert who was not

involved in the assessment. Despite this favorable position, the trial

attorney should determine whether the potential appearance of the

corporation's self-interest in paying for the expert witness' testimony

does not outweigh the benefit of this expert's testimony before

accepting the services.

5. Scenario: The DEA is investigating a suspect for selling and delivering

drugs from his apartment. In order to enhance its surveillance and

consistent with its investigative procedures, DEA wants to rent an

apartment in the building where the suspect lives. DEA approaches

the owner of the building and offers to pay market rent for an

apartment. The owner has a vacant apartment in a desirable location

to conduct surveillance in the building. The owner is supportive of the

DEA's efforts and offers the apartment to DEA for three months free

of charge. The fair market value of the vacant apartment is

$1,500/month.

Analysis: The owner is an indirect victim since the suspect's illegal

activities have an adverse affect on the owner's property. Offers of aid

from an indirect victim generally constitute assistance, although the

value of the offer may be such that it should be considered a gift.

Given the short time frame (three months) and the value involved
App J. Traditional Assistance and Gifts 399

($4,500), this offer constitutes assistance, and an agent in

consultation with an attorney may decide to accept the offer.

However, if the owner offered the DEA agent free use of the

apartment for nine months and that amount of time (or longer) was

necessary for a more complex investigation, the agent and attorney

should seek approval to accept the offer as a gift. Given that the

owner is taking the apartment off the market for an extended period

of time, the offer is more substantial than before, and higher-level

approval (by the component head for a gift) is warranted. There is no

clear line defining when assistance becomes a gift because of the

financial value or imposition involved. For offers that exceed three

months, an attorney should consult with the DDAEO to determine

whether the offer may be accepted as assistance, or considered a gift.

6. Scenario: The Criminal Division is investigating a highly technical

computer crimes case. A university professor has conducted research

in the narrow field at issue. A Criminal Division attorney contacted

the professor for general background information on this issue, saying

that the Department is willing to pay for his consultative services. The

professor is willing to provide advice, assistance, and testimony in

federal court for free. Although the professor has no prior experience

as a witness, the attorney intends to proffer the professor as an expert.

Analysis: The professor is a third party and he has offered the

attorney a gift. Assuming that the number of hours to prepare and

present testimony is limited, the value of the professor's services will

be below $50,000. Although the Department (and component's

budget) will always benefit from no-cost expert services, it is not

always appropriate to accept this type of offer. While the professor

will benefit professionally from his “expert” qualification, this

intangible benefit does not necessarily mean the Department should

avoid the costs of payment. The attorney should consult with the

PRO and DDAEO to determine the appropriate course of action. 

7. Scenario: The FBI is investigating the sale of counterfeit goods. The

corporate maker of the true product has offered to give the FBI

$1 million to purchase the counterfeit goods from an identified

broker. The FBI, in consultation with the local United States

Attorney's Office, accepts the offer, and makes arrangements with the

corporation to provide the $1 million. The counterfeit goods are

purchased. The corporation arranged for the goods to be transported

and stored in its warehouse pending its initiation of a civil proceeding.

Analysis: Because the Department is serving as the conduit for cash

to recover counterfeit materials, the Department may accept the
400 Prosecuting Intellectual Property Crimes

victim's offer of funds for this particular purpose. The agent should

seek approval from the AUSA prior to accepting the victim's funds.

Because the cost of storage to the company at its own facilities is

minimal, the Department may accept the company's offer to store the

goods at the victim's expense. 

8. Scenario: An industry leader in the computer field has developed a

software program that can meld various databases and enhance search

capabilities for the law enforcement community. The company has

offered this program to the Department. While it is not available for

sale to the public, the program (including the technical support to

assist its operations) is valued over $800,000. 

Analysis: Given the high value, this offer must be submitted to the

AAG/A for acceptance. Moreover, more concerns arise because this

program would enhance the Department's general capabilities, and

not just be used for a specific case investigation. Again, there are

appearance issues in accepting resources of such significant value from

an entity that may be the subject of Department action in another

arena. This type of offer also directly impacts the Department's

operations and mission. However, the company is also offering a

capability that is unparalleled. Given the magnitude of this offer,

high-level attention to determine whether this offer may be accepted

is warranted.
401

Index

ACCESS CONTROLS

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking

V.A.2.a. Access Controls vs. Copy/Use

Controls

V.A.2.b. Circumvention vs. Trafficking

in Circumvention Tools

V.A.3. Differences Between the DMCA

and Traditional Copyright Law

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204

V.B.1.a. Circumvented

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control")

V.B.1.c. To a Copyrighted Work

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204 

V.B.2.a. Trafficking 

V.B.2.b. In a Technology, Product,

Service, or Part Thereof 

V.B.2.c. Purpose or Marketing of

Circumvention Technology 

V.B.2.c.1. Primarily Designed or

Produced 

V.B.2.c.2. Limited Commercially

Significant Purpose Other Than

Circumvention 

V.B.2.c.3. Knowingly Marketed for

Circumvention 

V.C.2. Librarian of Congress

Regulations 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.6. Encryption Research 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

V.C.10.b.i. Facial Challenges 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

VIII.C.1.h. Decryption or

Circumvention of Access Controls

Increases the Offense Level—

U.S.S.G. § 3B1.3

ACCESSIBLE TO MEMBERS OF

THE PUBLIC

II.B. Elements 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.3.c.ii. Making the Work Available

on a Computer Network

Accessible to Members of the

Public

ACTUAL CONFUSION

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception

ACTUAL DISSEMINATION

II.B.3.a.ii. Distribution 

II.B.3.c.i. Distribution

ACTUAL LOSS

VIII.C.2.c.i. Use Greater of Actual or

Intended Loss 

VIII.C.2.c.iii. Methods of Calculating

Loss

ADMINISTRATIVE FORFEITURE

VIII.E.2.a. Administrative Forfeiture

Proceedings 

VIII.E.2.b. Civil and Criminal

Proceedings 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 
402 Prosecuting Intellectual Property Crimes

VIII.E.3. Choosing a Forfeiture

Procedure 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

see also FORFEITURE

ADVICE OF COUNSEL DEFENSE

IV.C.4. Advice of Counsel 

IV.C.5. Claim of Right—Public

Domain and Proprietary Rights 

see also IGNORANCE OF THE LAW

AFFIRMATIVE DEFENSES

II.B. Elements 

II.C.4.b. Affirmative Defense or Part of

the Government's Case-in-Chief? 

III.C.4. Lanham Act Defenses 

III.C.5. Statute of Limitations 

V.C.10.d. Fair Use

AFFIXED

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic 

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another 

VI.B. Elements 

VI.B.1. The Defendant Acted

"Knowingly" 

VI.B.2. The Defendant Trafficked 

VI.B.3. Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.B.5. Federal Jurisdiction 

VI.E.4. Forfeiture 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

AIDING OR ABETTING

II.C.4.d. Special Rules for Rental,

Lease, and Lending 

II.E.2. Sentencing Guidelines 

III.B.3.b.i. General Definition 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.e. Use of the Counterfeit Mark

"On or In Connection With"

Goods or Services 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.E.5. Sentencing Guidelines 

III.F. Other Charges to Consider 

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

ARCHIVAL EXCEPTION

II.A.6. The Rights Protected by

Copyright 

II.C.4.a. Operation of the Doctrine 

II.C.6. "Archival Exception" for

Computer Software—17 U.S.C.

§ 117

ATTORNEYS' FEES

II.A.5. When Copyright Protection

Begins and Ends 
Index 403

II.B.1.d.ii. Unpublished or Pre-Release

Works 

VIII.D.3. Determining a Restitution

Figure 

VIII.E.3. Choosing a Forfeiture

Procedure 

IX.B.2. The Nature and Seriousness of

the Offense 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X.B.3.a. Private Civil Remedies

AUDIOVISUAL RECORDING

DEVICE

II.E.2. Sentencing Guidelines 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

AUTHORIZED-USE DEFENSE

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.C.2. Authorized-Use Defense—

Gray Market Goods

AUTOMOBILE AND AIRLINE

PARTS

I.A. Why Is Intellectual Property

Enforcement Important?

BERNE CONVENTION

IMPLEMENTATION ACT OF 1988

(BCIA)

II.B.1.f. Copyright Notice 

V.A.1. DMCA's Background and

Purpose

BOAT HULLS

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors

BOOTLEGGING

I.A. Why Is Intellectual Property

Enforcement Important? 

II.E.2. Sentencing Guidelines 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4.a. Proceeds 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.B.3.a. Private Civil Remedies

BUSINESS ORGANIZATIONS

IV.B.4. Additional 18 U.S.C. § 1831

Element: Intent to Benefit a

Foreign Government, Foreign

Instrumentality, or Foreign Agent 

IX.E. Special Considerations in

Deciding Whether to Charge

Corporations and Other Business

Organizations

CABLE AND SATELLITE SERVICE

II.B.4.b. Legal Standard 

II.E.2. Sentencing Guidelines 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.iii. Retail Value 
404 Prosecuting Intellectual Property Crimes

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

CAMCORDING

II.E.2. Sentencing Guidelines 

II.F. Other Charges to Consider

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

CASH

II.B.2.a. Legal Standard 

X.C.1.a. Applicable Law 

X.C.1.b.iii. Cash 

X.C.1.c.iii. Acceptance of Gifts

CERTIFICATION MARKS

II.E.2. Sentencing Guidelines 

III. Trafficking In Counterfeit

Trademarks, Service Marks, and

Certification Marks—18 U.S.C.

§ 2320 

III.A.1. Overview of the Chapter 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.F. Other Charges to Consider 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E. Forfeiture 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property

CHILDREN

II.B.3.b.i. Generally 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

V.C.6. Encryption Research 

VIII.C.1.c.iii. Retail Value

CHIP UNITS

I.C. Why Criminal Enforcement? 

IX.B.1. Federal Law Enforcement

Priorities

CIRCUMVENTION

IV.C.6. The First Amendment 

V.A.1. DMCA's Background and

Purpose 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.A.2.b. Circumvention vs. Trafficking

in Circumvention Tools 

V.A.3. Differences Between the DMCA

and Traditional Copyright Law 

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors 

V.B. Elements of Anti-Circumvention

and Anti-Trafficking Provisions 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.c. To a Copyrighted Work 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204 

V.B.2.a. Trafficking 

V.B.2.b. In a Technology, Product,

Service, or Part Thereof 

V.B.2.c. Purpose or Marketing of

Circumvention Technology 

V.B.2.c.1. Primarily Designed or

Produced 

V.B.2.c.2. Limited Commercially

Significant Purpose Other Than

Circumvention 

V.B.2.c.3. Knowingly Marketed for

Circumvention 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 

V.B.3.a. Circumventing 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a
Index 405

Copyright Owner Under This

Title ("Copy Control") 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202 

V.C. Defenses 

V.C.2. Librarian of Congress

Regulations 

V.C.3. Certain Nonprofit Entities 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.6. Encryption Research 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

V.C.10.b.i. Facial Challenges 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

V.C.10.c. Vagueness 

V.C.10.d. Fair Use 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.C.1.h. Decryption or

Circumvention of Access Controls

Increases the Offense Level—

U.S.S.G. § 3B1.3 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

COLLECTIVE MARKS

III.A.1. Overview of the Chapter

COMMERCE CLAUSE

see INTERSTATE AND FOREIGN

COMMERCE

COMMERCIAL ADVANTAGE

see PURPOSES OF COMMERCIAL

ADVANTAGE OR PRIVATE

FINANCIAL GAIN

COMMERCIAL ECONOMIC

ESPIONAGE

see ECONOMIC ESPIONAGE

COMMERCIAL SPEECH

V.B.2.c.3. Knowingly Marketed for

Circumvention

COMPUTER CRIME

IV.F. Other Charges to Consider

V.C.6. Encryption Research

COMPUTER HACKING AND

INTELLECTUAL PROPERTY (CHIP)

COORDINATORS

see CHIP UNITS

COMPUTER NETWORKS

II. Criminal Copyright Infringement—

17 U.S.C. § 506 and 18 U.S.C.

§ 2319 

II.A.7. When Infringement is Criminal 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.3.c.i. Distribution 

II.B.3.c.ii. Making the Work Available

on a Computer Network

Accessible to Members of the

Public 

V.C.4. Information Security Exemption 

V.C.9. Security Testing 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1 

X.C.1.b.i. Assistance from Victims and

Related Parties

CONSCIOUS AVOIDANCE

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

VI.B.1. The Defendant Acted

"Knowingly"

CONSPIRACY

II.B.3.a.ii. Distribution 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.C.2. Jurisdiction 

II.C.3. Venue 

II.C.4.d. Special Rules for Rental,

Lease, and Lending 
406 Prosecuting Intellectual Property Crimes

II.E.2. Sentencing Guidelines 

III.B.3.b.i. General Definition 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

III.B.4.e. Use of the Counterfeit Mark

"On or In Connection With"

Goods or Services 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.B.6. Venue 

III.D.7. Units of Prosecution 

III.E.5. Sentencing Guidelines 

III.F. Other Charges to Consider 

IV.B.1. Overview 

IV.B.3. Elements Common to 18

U.S.C. §§ 1831, 1832 

IV.B.3.a.i. Generally 

IV.B.3.a.ii. Employee's General

Knowledge, Skill, or Abilities Not

Covered 

IV.B.3.a.vi. Disclosure's Effects 

IV.B.3.b.v. Mere Risk of

Misappropriation Not

Prosecutable, but Attempts and

Conspiracies Are 

IV.B.6. Attempts and Conspiracies,

Including the Impossibility

Defense 

IV.C.6. The First Amendment 

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.C.2.a. Applicable Guideline is

§ 2B1.1, Except for Attempts and

Conspiracies 

VIII.C.2.c.iii. Methods of Calculating

Loss 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

CONTRABAND

III.B.3.b.iii. Making and Obtaining

Counterfeits vs. Possession with

Intent to Traffic 

VI.B.2. The Defendant Trafficked 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

COOKIE FILES

V.C.6. Encryption Research

COPY CONTROLS

IV.B.3.a.vi. Disclosure's Effects 

IV.C.6. The First Amendment 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.A.2.b. Circumvention vs. Trafficking

in Circumvention Tools 

V.A.3. Differences Between the DMCA

and Traditional Copyright Law 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 

V.B.3.a. Circumventing 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 
Index 407

V.B.4. Alternate § 1201(b) Action—

Trafficking in Certain Analog

Videocassette Recorders and

Camcorders 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

V.C.10.c. Vagueness 

V.C.10.d. Fair Use 

VIII.C.1.h. Decryption or

Circumvention of Access Controls

Increases the Offense Level—

U.S.S.G. § 3B1.3

COPYRIGHT

see generally Chapter II

see also 

I.A. Why Is Intellectual Property

Enforcement Important? 

I.B. What Is Intellectual Property? 

I.C. Why Criminal Enforcement? 

III.B.3.b.i. General Definition 

III.B.4.c. The Genuine Mark Must Be

Federally Registered on the U.S.

Patent and Trademark Office's

Principal Register 

III.F. Other Charges to Consider 

IV.B.3.a.iv. Novelty 

IV.B.3.a.vi. Disclosure's Effects 

IV.C.2. Reverse Engineering 

IV.F. Other Possible Charges 

V. Digital Millennium Copyright Act—

17 U.S.C. §§ 1201-1205 

V.A.1. DMCA's Background and

Purpose 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.A.2.b. Circumvention vs. Trafficking

in Circumvention Tools 

V.A.3. Differences Between the DMCA

and Traditional Copyright Law 

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.c. To a Copyrighted Work 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204 

V.B.2.c.1. Primarily Designed or

Produced 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 

V.B.3.a. Circumventing 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 

V.B.4. Alternate § 1201(b) Action—

Trafficking in Certain Analog

Videocassette Recorders and

Camcorders 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202 

V.C.4. Information Security Exemption 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.6. Encryption Research 

V.C.9. Security Testing 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

V.C.10.c. Vagueness 

V.C.10.d. Fair Use 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B. Elements 

VI.B.1. The Defendant Acted

"Knowingly" 

VI.B.3.Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,
408 Prosecuting Intellectual Property Crimes

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.B.5. Federal Jurisdiction 

VI.D.2. Advantages of Charging a

§ 2318 Offense 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VI.E.5.b. Number of Infringing

Copyrighted Goods vs. Number of

Labels, Documents, or Packaging

Items 

VI.F. Other Criminal Charges to

Consider 

VII.A. Overview of Patent 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.C.1.f. Offenses Not Committed

for Commercial Advantage or

Private Financial Gain Reduces

the Offense Level by 2—U.S.S.G.

§ 2B5.3(b)(4) [before October 24,

2005: § 2B5.3(b)(3)] 

VIII.C.1.i. Upward Adjustment for

Harm to Copyright or

Mark-Owner's Reputation,

Connection with Organized

Crime, or Other Unspecified

Grounds 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.D.3. Determining a Restitution

Figure 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.2.a. Administrative Forfeiture

Proceedings 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.4.a. Proceeds 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.4.c.ii. Victims' Ability to Forfeit

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X. Victims of Intellectual Property

Crimes—Ethics and Obligations 

X.B.3.a. Private Civil Remedies 

X.C.1.b.i. Assistance from Victims and

Related Parties 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases

COPYRIGHT ACT OF 1976

II.A.4. Federal Preemption 

II.C.1. Statute of Limitations: 5 years
Index 409

COPYRIGHT MANAGEMENT

INFORMATION

II.E.2. Sentencing Guidelines 

V.A.1. DMCA's Background and

Purpose 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202

COPYRIGHT NOTICE

II.B.1.b. Copyrights vs. Registrations

vs. Certificates 

II.B.1.f. Copyright Notice 

II.B.2.b. Proof at Trial 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202

COPYRIGHT PROTECTION

SYSTEMS

V.A.1. DMCA's Background and

Purpose 

V.A.2.a. Access Controls vs. Copy/Use

Controls

COPYRIGHT TREATY

V.A.1. DMCA's Background and

Purpose

COPYRIGHTABILITY

II.B.1.a. Copyrightability 

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution

COST OF REPAIRS

VIII.C.2.c.iii. Methods of Calculating

Loss

COUNTERFEIT DOCUMENTATION

AND PACKAGING

see generally Chapters III and VI

see also

II.E.2. Sentencing Guidelines 

VIII.D.1. Restitution is Available— and

Often Required— in Intellectual

Property Prosecutions 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

COUNTERFEIT GOODS OR

SERVICES

I.A. Why Is Intellectual Property

Enforcement Important? 

II.B.4.b. Legal Standard 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.B.3.b.i. General Definition 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

III.B.6. Venue 

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.D.1. High-Quality and Low-Quality

Counterfeits 

III.D.2. Counterfeit Goods with

Genuine Trademarks 

III.D.7. Units of Prosecution 

VI.B.2. The Defendant Trafficked 

VI.E.5.b. Number of Infringing

Copyrighted Goods vs. Number of

Labels, Documents, or Packaging

Items 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

IX.B.2. The Nature and Seriousness of

the Offense

COUNTERFEIT LABELS

see generally Chapters III and VI

see also 

II.E.2. Sentencing Guidelines 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 
410 Prosecuting Intellectual Property Crimes

VIII.C.1.c.iii. Retail Value 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.E.4.a. Proceeds 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.B.3.a. Private Civil Remedies

COUNTERFEIT MARKS

see generally Chapter III

see also 

I.B. What Is Intellectual Property? 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B.2. The Defendant Trafficked 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.3. Determining a Restitution

Figure 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.a. Proceeds 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.B.3.a. Private Civil Remedies

COUNTERFEIT

PHARMACEUTICALS

VIII.C.1.j. Vulnerable Victims—

U.S.S.G. § 3A1.1(b)

COUNTERFEIT TRADEMARKS

see TRADEMARKS

CRIMINAL FORFEITURE

see FORFEITURE

CUSTOMER LISTS

IV.A. Introduction 

IV.B.3.a.i. Generally 

IV.B.3.a.viii. Independent Economic

Value

DE MINIMIS NON CURAT LEX

IX.B.2. The Nature and Seriousness of

the Offense

DECALS

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging

DECRYPTION

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

VIII.C.1.h. Decryption or

Circumvention of Access Controls

Increases the Offense Level—

U.S.S.G. § 3B1.3 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

see also ENCRYPTION

DEEP LINKS

V.B.2.a. Trafficking

DELIBERATE IGNORANCE

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

VI.B.1. The Defendant Acted

"Knowingly"

DEPOSITIONS

IV.B.3.a.iii. Specification of Trade

Secrets 

IV.D.2. Confidentiality and the Use of

Protective Orders 

VIII.E.3. Choosing a Forfeiture

Procedure

DERIVATIVE WORKS

I.B. What Is Intellectual Property? 
Index 411

II.A.6. The Rights Protected by

Copyright 

II.B.1.d.iii. Registration of Particular

Versions of a Work 

II.B.3. Infringement of the Copyright 

II.C.5. Fair Use 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA

DESTRUCTION

see FORFEITURE AND

DESTRUCTION 

DIGITAL AUDIO TRANSMISSION

II.A.6. The Rights Protected by

Copyright 

II.B.5. Misdemeanor Copyright

Infringement

DIGITAL IMAGE FILES

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging

DIGITAL LOCKS

V.A.1. DMCA's Background and

Purpose 

V.A.2.a. Access Controls vs. Copy/Use

Controls

DIGITAL MILLENNIUM

COPYRIGHT ACT (DMCA)

see generally Chapter V

see also 

II.B.3.a.ii. Distribution 

II.E.2. Sentencing Guidelines 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.c.iii. Retail Value 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.5. Criminal Forfeiture in IP

Matters 

X.B.3.a. Private Civil Remedies

DISCLOSING GOVERNMENT

TRADE SECRETS

IV.F. Other Possible Charges

DISCLOSURES TO THE

GOVERNMENT

IV.B.3.a.vi. Disclosure's Effects

DISTANCE LEARNING

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors

DMCA

see DIGITAL MILLENNIUM

COPYRIGHT ACT

DRUGS

see FOOD AND DRUG

ADMINISTRATION

DONATED RESOURCES

X.C. Offers of Assistance From Victims

and Related Parties 

X.C.3. Strategic and Case-Related

Issues

E-BOOKS

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1)

ECONOMIC ESPIONAGE

II.E.2. Sentencing Guidelines 

IV.A. Introduction 

IV.B. The Economic Espionage Act of

1996, 18 U.S.C. §§ 1831-1839 

IV.B.1. Overview 

IV.B.3.a.vi. Disclosure's Effects 

IV.B.3.b.ii. Memorization Included 

IV.B.5.a. Economic Benefit to a Third

Party 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 
412 Prosecuting Intellectual Property Crimes

IV.B.6. Attempts and Conspiracies,

Including the Impossibility

Defense 

IV.E.1.a. Imprisonment and Fines 

VIII.C. Sentencing Guidelines 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.2. Offenses Involving the

Economic Espionage Act 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.5.a. Proceeds 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

ECONOMIC ESPIONAGE

SPONSORED BY A FOREIGN

GOVERNMENT

IV.E.1.a. Imprisonment and Fines

ELECTRONIC TRANSMISSION OF

A GENUINE CERTIFICATE

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging

EMOTIONAL HARM

VIII.C.2.f. Upward Departure

Considerations—U.S.S.G. § 2B1.1

cmt. n.19(A)

EMULATORS

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs

ENCRYPTION

IV.A. Introduction 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.2.c.1. Primarily Designed or

Produced 

V.B.3.a. Circumventing 

V.C.6. Encryption Research 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

see also DECRYPTION

EPHEMERAL REPRODUCTIONS

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors

ETHICS

X. Victims of Intellectual Property

Crimes— Ethics and Obligations 

X.B.2. Ethical Concerns When the

Criminal Prosecution Results in

an Advantage in a Civil Matter 

X.B.2.a. Victims Who Seek Advantage

By Threats of Criminal

Prosecution 

X.B.2.b. Global Settlement

Negotiations 

X.C.1.a. Applicable Law 

X.C.1.b.iii. Cash 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases 

X.C.1.c.i. Consultative Process for

Acceptance of Assistance and Gifts 

X.C.1.c.iii. Acceptance of Gifts 

X.C.3. Strategic and Case-Related

Issues 

X.C.4. Help and Advice

EXPERT WITNESSES

IV.B.3.a.iii. Specification of Trade

Secrets 

IV.D.2. Confidentiality and the Use of

Protective Orders 

X.C. Offers of Assistance From Victims

and Related Parties 

X.C.1.b.vi. Assistance from Private

Third Parties

EXTRADITION

IX.B.5. The Individual's Willingness to

Cooperate in the Investigation or

Prosecution of Others

EXTRATERRITORIALITY

II.C.2. Jurisdiction 

IV.B.1. Overview 

IV.D.3. Extraterritoriality
Index 413

FAIR MARKET VALUE

VIII.C.2.c.iii. Methods of Calculating

Loss

FAIR USE

II.A.2. Legal Basis for Copyright and

Related Laws 

II.A.6. The Rights Protected by

Copyright 

II.B.2.a. Legal Standard 

II.B.3. Infringement of the Copyright 

II.B.3.a.i. Reproduction 

II.B.4.a. History 

II.C.5. Fair Use 

II.C.5.a. Unpublished Works 

II.C.5.b. Fair Use in Criminal Cases 

II.E.2. Sentencing Guidelines 

V.A.3. Differences Between the DMCA

and Traditional Copyright Law 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

V.C.10.c. Vagueness 

V.C.10.d. Fair Use

FALSE MARKING

VII.A. Overview of Patent 

VII.C. False Marking of Patent—35

U.S.C. § 292

FAMILY ENTERTAINMENT AND

COPYRIGHT ACT OF 2005

II.B. Elements 

II.B.1.c. New Procedure for

"Preregistration" 

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.E.2. Sentencing Guidelines

FDA

see FOOD AND DRUG

ADMINISTRATION

FEDERAL PREEMPTION

see PREEMPTION

FEDERAL REGISTRATION

see REGISTRATION 

FINANCIAL GAIN

II.A.7. When Infringement is Criminal 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.4. Additional Element for

Enhanced Sentence: Purpose of

Commercial Advantage or Private

Financial Gain 

II.B.4.a. History 

II.B.4.b. Legal Standard 

II.B.5. Misdemeanor Copyright

Infringement 

II.C.5.b. Fair Use in Criminal Cases 

II.E.1. Statutory Penalties 

II.E.2. Sentencing Guidelines 

III.B.3.b.i. General Definition 

III.B.3.b.iii. Making and Obtaining

Counterfeits vs. Possession with

Intent to Traffic 

IV.F. Other Possible Charges 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 
414 Prosecuting Intellectual Property Crimes

V.C.10.b.i. Facial Challenges 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.f. Offenses Not Committed

for Commercial Advantage or

Private Financial Gain Reduces

the Offense Level by 2—U.S.S.G.

§ 2B5.3(b)(4) [before October 24,

2005: § 2B5.3(b)(3)]

FIRST AMENDMENT

II.C.5. Fair Use 

IV.C.6. The First Amendment 

V.B.2.c.3. Knowingly Marketed for

Circumvention 

V.C.10.b. The First Amendment 

V.C.10.b.i. Facial Challenges 

V.C.10.b.ii. "As Applied" First

Amendment Challenges to the

DMCA 

V.C.10.d. Fair Use

FIRST SALE DOCTRINE

II.A.2. Legal Basis for Copyright and

Related Laws 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a.ii. Distribution 

II.C.4. The First Sale Doctrine—17

U.S.C. § 109 

II.C.4.a. Operation of the Doctrine 

II.C.4.b. Affirmative Defense or Part of

the Government's Case-in-Chief? 

II.C.4.c. Disproving First Sale at Trial 

II.C.4.d. Special Rules for Rental,

Lease, and Lending 

II.C.6. "Archival Exception" for

Computer Software—17 U.S.C.

§ 117

FIXED IN ANY TANGIBLE

MEDIUM OF EXPRESSION

see TANGIBLE MEDIUM

FONT EMBEDDING BITS

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control")

FOOD 

see MISBRANDED FOOD, DRUGS,

AND COSMETICS

FOOD AND DRUG

ADMINISTRATION (FDA)

III.F. Other Charges to Consider

FOREIGN AGENTS

IV.B.1. Overview 

IV.B.4. Additional 18 U.S.C. § 1831

Element: Intent to Benefit a

Foreign Government, Foreign

Instrumentality, or Foreign Agent 

VIII.C.2.d. Intent to Benefit a Foreign

Government, Instrumentality, or

Agent—U.S.S.G. § 2B1.1(b)(5)

FOREIGN COMMERCE

see INTERSTATE AND FOREIGN

COMMERCE

FOREIGN ECONOMIC ESPIONAGE

see ECONOMIC ESPIONAGE

FOREIGN GOVERNMENTS

I.B. What Is Intellectual Property? 

IV.B.1. Overview 

IV.B.4. Additional 18 U.S.C. § 1831

Element: Intent to Benefit a

Foreign Government, Foreign

Instrumentality, or Foreign Agent 

IV.E.1.a. Imprisonment and Fines 

VIII.C.2.d. Intent to Benefit a Foreign

Government, Instrumentality, or

Agent—U.S.S.G. § 2B1.1(b)(5) 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions

FOREIGN INSTRUMENTALITY

IV.B.1. Overview 

IV.B.4. Additional 18 U.S.C. § 1831

Element: Intent to Benefit a

Foreign Government, Foreign

Instrumentality, or Foreign Agent 

VIII.C.2.d. Intent to Benefit a Foreign

Government, Instrumentality, or

Agent—U.S.S.G. § 2B1.1(b)(5)

FOREIGN LAW ENFORCEMENT

AGENCIES

IX.B.5. The Individual's Willingness to

Cooperate in the Investigation or

Prosecution of Others
Index 415

FOREIGN VICTIMS

III.F. Other Charges to Consider

FOREIGN WORKS

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute

FORFEITURE

II.E.2. Sentencing Guidelines 

III.D.6. Storage Costs and Destruction 

III.E.4. Forfeiture 

IV.E.1.b. Criminal Forfeiture 

VI.E. Penalties 

VI.E.4. Forfeiture 

VIII. Penalties, Restitution, and

Forfeiture 

VIII.A. Introduction 

VIII.E. Forfeiture 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.2. Overview of Forfeiture

Procedures 

VIII.E.2.a. Administrative Forfeiture

Proceedings 

VIII.E.2.b. Civil and Criminal

Proceedings 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.3. Choosing a Forfeiture

Procedure 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.4.a. Proceeds 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.4.c.i. Generally 

VIII.E.4.c.ii. Victims' Ability to Forfeit

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.a. Proceeds 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X.B.3.c. Stays and Protective Orders to

Delay Civil Proceedings During

Criminal Prosecution 

see also ADMINISTRATIVE

FORFEITURE

FORFEITURE AND DESTRUCTION

II.E.2. Sentencing Guidelines 

VI.E.4. Forfeiture 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

GENERIC LABELS

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit

GIFTS

II.B.3.a.ii. Distribution 

III.C.3. Repackaging Genuine Goods 

X.C. Offers of Assistance From Victims

and Related Parties 

X.C.1. Gift Issues 

X.C.1.a. Applicable Law 

X.C.1.b. Distinction Between

"Assistance" and "Gifts" 

X.C.1.b.i. Assistance from Victims and

Related Parties 

X.C.1.b.ii. Private Investigators 

X.C.1.b.iii. Cash 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases 

X.C.1.b.v. Resources Donated for

Ongoing Use by Law Enforcement 

X.C.1.b.vi. Assistance from Private

Third Parties 

X.C.1.c. Departmental Procedures for

the Solicitation and Acceptance of

Gifts and Assistance 

X.C.1.c.i. Consultative Process for

Acceptance of Assistance and Gifts 

X.C.1.c.ii. Solicitation of Gifts 

X.C.1.c.iii. Acceptance of Gifts 

X.C.2. Professional Responsibility

Issues 

X.C.3. Strategic and Case-Related

Issues 

X.C.4. Help and Advice

GLOBAL SETTLEMENTS

see PARALLEL PROCEEDINGS

GOOD AND BAD FAITH

II.B.2.a. Legal Standard 

II.B.2.b. Proof at Trial 

II.C.5.b. Fair Use in Criminal Cases 

II.C.6. "Archival Exception" for

Computer Software—17 U.S.C.

§ 117 

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 
416 Prosecuting Intellectual Property Crimes

III.C.4. Lanham Act Defenses 

IV.C.4. Advice of Counsel 

IV.C.5. Claim of Right— Public

Domain and Proprietary Rights 

V.C.6. Encryption Research 

V.C.9. Security Testing 

VII.C. False Marking of Patent— 35

U.S.C. § 292

GOODS AND SERVICES

II.E.2. Sentencing Guidelines 

III.A.1. Overview of the Chapter 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.B.1. The Trademark Counterfeiting

Crime in General 

III.B.3.b.i. General Definition 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.e. Use of the Counterfeit Mark

"On or In Connection With"

Goods or Services 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.D.5. Mark-Holder's Failure to Use—

Symbol 

III.D.7. Units of Prosecution 

VI.B.2. The Defendant Trafficked 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

IX.B.2. The Nature and Seriousness of

the Offense

GOVERNMENT TRADE SECRETS

IV.F. Other Possible Charges

GRAY MARKET GOODS

III.C.2. Authorized-Use Defense—

Gray Market Goods

HOME PAGES

V.B.2.a. Trafficking

IGNORANCE OF THE LAW

II.B.2.a. Legal Standard 

IV.B.3.c. Knowledge

ILLICIT LABELS

see generally Chapter VI

see also 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.C.4.a. Operation of the Doctrine 

II.E.2. Sentencing Guidelines 

III.F. Other Charges to Consider 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.4.c.ii. Victims' Ability to Forfeit

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.B.3.a. Private Civil Remedies

IN PERSONAM

VIII.E.2.b. Civil and Criminal

Proceedings 

VIII.E.5. Criminal Forfeiture in IP

Matters

IN REM

VIII.E.2.b. Civil and Criminal

Proceedings 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters

IN USE

III.B.1. The Trademark Counterfeiting

Crime in General 

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic 
Index 417

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee

INAUTHENTIC LABELS AND

MARKS

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature]

INDEPENDENT ECONOMIC

VALUE

I.B. What Is Intellectual Property? 

IV.B.3.a.i. Generally 

IV.B.3.a.viii. Independent Economic

Value

INDICTMENTS

see Appendices B-F

see also

III.D.7. Units of Prosecution

INFORMATION SECURITY

V.C.4. Information Security Exemption

INJUNCTIONS

III.C.4. Lanham Act Defenses 

IV.B.1. Overview 

IV.C.6. The First Amendment 

IV.D.1. Civil Injunctive Relief for the

United States 

IX.B.2. The Nature and Seriousness of

the Offense 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X.B.3.a. Private Civil Remedies

INNOCENT OWNER DEFENSE

VIII.E.4.c. Innocent Owner Defense 

INTELLECTUAL CAPITAL

I.A. Why Is Intellectual Property

Enforcement Important?

INTELLECTUAL PROPERTY

CLAUSE

V.C.10. Constitutionality of the

DMCA 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions

INTELLECTUAL PROPERTY

PROTECTION AND COURTS

AMENDMENT ACT OF 2004

VI.B.3. Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

INTENT TO DECEIVE

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

III.C.3. Repackaging Genuine Goods 

VII.C. False Marking of Patent— 35

U.S.C. § 292 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

INTERLOCUTORY APPEAL

IV.D.2. Confidentiality and the Use of

Protective Orders

INTERNAL INVESTIGATIONS

VIII.D.3. Determining a Restitution

Figure 

X.C.1.b.i. Assistance from Victims and

Related Parties

INTERNET PIRACY

I.A. Why Is Intellectual Property

Enforcement Important? 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.4.a. History 

II.D. Special Issues
418 Prosecuting Intellectual Property Crimes

INTEROPERABILITY DEFENSE

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs

INTERSTATE AND FOREIGN

COMMERCE

II.A.2. Legal Basis for Copyright and

Related Laws 

II.E.2. Sentencing Guidelines 

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another 

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

IV.B.1. Overview 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

IV.C.6. The First Amendment 

IV.F. Other Possible Charges 

V.C.10. Constitutionality of the

DMCA 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

VI.B. Elements 

VI.B.5. Federal Jurisdiction 

VI.B.6. Venue 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E. Forfeiture 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases

INTERSTATE TRANSPORTATION

AND RECEIPT OF STOLEN

PROPERTY OR GOODS

II.E.2. Sentencing Guidelines 

IV.A. Introduction 

IV.F. Other Possible Charges 

VII.D. No Prosecution for Interstate

Transportation or Receipt of

Stolen Property—18 U.S.C.

§§ 2314, 2315 

VIII.C.2.c.iii. Methods of Calculating

Loss

JUDICIAL NOTICE

II.B.1.e. Proof of Copyright at Trial 

III.B.4.c. The Genuine Mark Must Be

Federally Registered on the U.S.

Patent and Trademark Office's

Principal Register

JURY INSTRUCTIONS

see APPENDICES B-F

JUSTICE FOR ALL ACT OF 2004

X.A. Victims' Rights

KNOWINGLY

II.B.2.a. Legal Standard 

II.E.2. Sentencing Guidelines 

III.B.1. The Trademark Counterfeiting

Crime in General 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4. The Defendant Used a

"Counterfeit Mark" On or In

Connection With Those Goods or

Services [after March 16, 2006: or

a Counterfeit Mark Was Applied

to Labels, Documentation, or

Packaging for Those Goods or

Services] 

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

III.D.7. Units of Prosecution 

IV.B.1. Overview 

IV.B.3.c. Knowledge 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

IV.C.6. The First Amendment 

IV.F. Other Possible Charges 

V.B.2.c. Purpose or Marketing of

Circumvention Technology 

V.B.2.c.3. Knowingly Marketed for

Circumvention 
Index 419

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B. Elements 

VI.B.1. The Defendant Acted

"Knowingly" 

VI.B.2. The Defendant Trafficked 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.B.5. Federal Jurisdiction 

VII.B. Forgery of Letters Patent—18

U.S.C. § 497

LANHAM ACT

see generally Chapter III

see also

I.B. What Is Intellectual Property? 

III.E.2. Imprisonment 

III.E.3. Restitution

LEGISLATIVE HISTORY

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute 

II.B.3.a.ii. Distribution 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.B.4.b. Legal Standard 

II.C.5.a. Unpublished Works 

II.E.2. Sentencing Guidelines 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.B.2. Relevance of Civil Trademark

Law in Criminal Cases 

III.B.3.a. Intentionally 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another 

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.C.3. Repackaging Genuine Goods 

III.C.4. Lanham Act Defenses 

IV.B.3.c. Knowledge 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

IV.B.6. Attempts and Conspiracies,

Including the Impossibility

Defense 

IV.C.1. Parallel Development 

IV.C.2. Reverse Engineering 

IV.E.1.b. Criminal Forfeiture 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit

LETTERS PATENT

VII.A. Overview of Patent 

VII.B. Forgery of Letters Patent—18

U.S.C. § 497

LIBRARIAN OF CONGRESS

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.C.2. Librarian of Congress

Regulations

LIBRARIES AND ARCHIVES

II.B.3.a.i. Reproduction 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors 

V.C.3. Certain Nonprofit Entities

LIKELIHOOD OF CONFUSION

III.B.4.b. The Counterfeit Mark Must

Be Identical to or
420 Prosecuting Intellectual Property Crimes

Indistinguishable from a Genuine

Mark Owned by Another 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception

LIMITED FEDERAL RESOURCES

IX.B.2. The Nature and Seriousness of

the Offense

LIMITED TIMES

II.A.1. What Copyright Law Protects 

II.A.2. Legal Basis for Copyright and

Related Laws 

II.C.4.c. Disproving First Sale at Trial 

II.E.2. Sentencing Guidelines 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

VII.A. Overview of Patent

LINUX

V.B.2.c.1. Primarily Designed or

Produced 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs

LIVE MUSICAL PERFORMANCES

II.E.2. Sentencing Guidelines 

III.F. Other Charges to Consider 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4. Civil Forfeiture in IP Matters 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.B.3.a. Private Civil Remedies

MAIL AND WIRE FRAUD

II.E.2. Sentencing Guidelines 

III.B.4.c. The Genuine Mark Must Be

Federally Registered on the U.S.

Patent and Trademark Office's

Principal Register 

III.F. Other Charges to Consider 

IV.F. Other Possible Charges 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1.k. No Downward Departure

for the Victim's Participation in

Prosecution 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

MAKING AVAILABLE

II.B. Elements 

II.B.3.a.ii. Distribution 

II.B.3.c.i. Distribution

MANDAMUS

IV.D.2. Confidentiality and the Use of

Protective Orders 

X.A. Victims' Rights

MANDATORY RESTITUTION

III.E.3. Restitution 

IV.E.1.b. Criminal Forfeiture 

VI.E.3. Restitution 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.D.3. Determining a Restitution

Figure 

see also RESTITUTION

MANDATORY VICTIMS

RESTITUTION ACT OF 1996

(MVRA)

IV.E.1.b. Criminal Forfeiture 

VI.E.3. Restitution 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VI.E.3. Restitution 

see also RESTITUTION

MARKET STRATEGIES

I.B. What Is Intellectual Property?

MINIMAL NOVELTY

IV.B.3.a.iv. Novelty
Index 421

MISAPPROPRIATION

IV.B.1. Overview 

IV.B.3.a.ii. Employee's General

Knowledge, Skill, or Abilities Not

Covered 

IV.B.3.a.iii. Specification of Trade

Secrets 

IV.B.3.a.vi. Disclosure's Effects 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

IV.B.3.b. Misappropriation 

IV.B.3.b.i. Types of Misappropriation 

IV.B.3.b.ii. Memorization Included 

IV.B.3.b.iii. Lack of Authorization 

IV.B.3.b.iv. Misappropriation of Only

Part of a Trade Secret 

IV.B.3.b.v. Mere Risk of

Misappropriation Not

Prosecutable, But Attempts and

Conspiracies Are 

IV.B.3.c. Knowledge 

IV.B.4. Additional 18 U.S.C. § 1831

Element: Intent to Benefit a

Foreign Government, Foreign

Instrumentality, or Foreign Agent 

IV.B.5.a. Economic Benefit to a Third

Party 

IV.B.5.b. Intent to Injure the Owner of

the Trade Secret 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

IV.B.6. Attempts and Conspiracies,

Including the Impossibility

Defense 

IV.C.1. Parallel Development 

IV.C.2. Reverse Engineering 

IV.C.4. Advice of Counsel 

IV.C.5. Claim of Right—Public

Domain and Proprietary Rights 

IV.C.6. The First Amendment 

IV.E.1.b. Criminal Forfeiture 

IV.F. Other Possible Charges 

VIII.C.2.a. Applicable Guideline is

§ 2B1.1, Except for Attempts and

Conspiracies 

VIII.C.2.c. Loss—U.S.S.G.

§ 2B1.1(b)(1) 

VIII.C.2.c.iii. Methods of Calculating

Loss 

VIII.C.2.i. Use of Special Skill—

U.S.S.G. § 3B1.3 

VIII.D. Restitution 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction

MISBRANDED FOOD, DRUGS,

AND COSMETICS

III.C.3. Repackaging Genuine Goods 

III.F. Other Charges to Consider 

VIII.C.1.j. Vulnerable Victims—

U.S.S.G. § 3A1.1(b) 

VIII.D.1. Restitution is Available— and

Often Required— in Intellectual

Property Prosecutions

MISLABELED WOOL, FUR, AND

TEXTILE FIBER PRODUCTS

III.F. Other Charges to Consider

MISMARKING

VII.C. False Marking of Patent—35

U.S.C. § 292

MISREPRESENTATION

II.E.2. Sentencing Guidelines 

III.A.1. Overview of the Chapter 

III.C.4. Lanham Act Defenses 

III.D.2. Counterfeit Goods with

Genuine Trademarks 

VII.C. False Marking of Patent—35

U.S.C. § 292 

VIII.D.3. Determining a Restitution

Figure

MONEY LAUNDERING

II.E.2. Sentencing Guidelines 

III.F. Other Charges to Consider 

VIII.C.1.k. No Downward Departure

for the Victim's Participation in

Prosecution 

VIII.E. Forfeiture 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.4.a. Proceeds 

VIII.E.4.c.i. Generally 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.a. Proceeds

MOTION FOR A NEW TRIAL

X.A. Victims' Rights

MOVIES AND MOTION PICTURES

I.B. What Is Intellectual Property? 
422 Prosecuting Intellectual Property Crimes

II.B.1.c. New Procedure for

"Preregistration" 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.a.i. Reproduction 

II.B.3.a.ii. Distribution 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.C.4.a. Operation of the Doctrine 

II.C.4.c. Disproving First Sale at Trial 

II.E.2. Sentencing Guidelines 

III.F. Other Charges to Consider 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.2.c.1. Primarily Designed or

Produced 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B. Elements 

VI.B.3.Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

VI.B.5. Federal Jurisdiction 

VI.F. Other Criminal Charges to

Consider 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.D.1. Restitution is Available— and

Often Required— in Intellectual

Property Prosecutions 

VIII.E.5. Criminal Forfeiture in IP 

Matters§ VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

MULTIPLE CRIME VICTIMS

X.A. Victims' Rights

NO ELECTRONIC THEFT (NET)

ACT

II.B. Elements 

II.B.2.a. Legal Standard 

II.B.4.a. History 

II.B.4.b. Legal Standard 

II.C.1. Statute of Limitations: 5 years

NONPROFIT USE

II.C.4.d. Special Rules for Rental,

Lease, and Lending 

II.C.5. Fair Use 

II.C.5.b. Fair Use in Criminal Cases 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.C.3. Certain Nonprofit Entities

NUMBER OF INFRINGING ITEMS

VI.E.5. Sentencing Guidelines 

VI.E.5.b. Number of Infringing

Copyrighted Goods vs. Number of

Labels, Documents, or Packaging

Items 
Index 423

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.c.iv. Determining Amounts

and Values—Reasonable

Estimates Allowed

OLYMPIC CHARTER ACT

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic 

III.D.8. Olympic Symbols

OLYMPIC SYMBOLS

III.B.4.c. The Genuine Mark Must Be

Federally Registered on the U.S.

Patent and Trademark Office's

Principal Register 

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

III.D.8. Olympic Symbols

ONLINE INFRINGEMENT OF

PRE-RELEASE WORKS

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution

ORIGINAL WORK FIXED IN A

TANGIBLE MEDIUM

see TANGIBLE MEDIUM

ORIGINAL WORK OF

AUTHORSHIP

II.B.1.b. Copyrights vs. Registrations

vs. Certificates 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

VII.A. Overview of Patent

OUTSOURCING

X.C.1.b.ii. Private Investigators

OVERBREADTH

V.C.10.b. The First Amendment 

V.C.10.b.i. Facial Challenges

OVERRUN GOODS

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.C.2. Authorized-Use Defense—

Gray Market Goods

PACKING SLIPS

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit

PARALLEL IMPORTS

III.C.2. Authorized-Use Defense—

Gray Market Goods

PARALLEL PROCEEDINGS

VIII.E.3. Choosing a Forfeiture

Procedure 

VIII.E.4.c.ii. Victims' Ability to Forfeit

Property 

X.B.2.b. Global Settlement

Negotiations 

X.B.3. Parallel Civil Suits 

X.B.3.b. Advantages and Disadvantages

of Parallel Civil and Criminal

Proceedings 

X.B.3.c. Stays and Protective Orders to

Delay Civil Proceedings During

Criminal Prosecution 

X.C.1.b.ii. Private Investigators 

X.C.3. Strategic and Case-Related

Issues

PAROLE PROCEEDINGS

X.A. Victims' Rights

PASSWORDS

II.B.3.c.ii. Making the Work Available

on a Computer Network

Accessible to Members of the

Public 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply
424 Prosecuting Intellectual Property Crimes

PATENT

see generally Chapter VII

see also 

I.A. Why Is Intellectual Property

Enforcement Important? 

I.B. What Is Intellectual Property? 

II.A.1. What Copyright Law Protects 

II.B.1.a.i. Original Work Fixed in a

Tangible Medium 

II.B.1.a.iii. Expression of an Idea vs.

Idea Itself 

IV.B.3.a.iv. Novelty 

IV.B.3.a.vi. Disclosure's Effects 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

IV.C.1. Parallel Development 

IV.C.2. Reverse Engineering

PATENT APPLICATIONS

IV.B.3.a.vi. Disclosure's Effects 

IV.B.5.c. Product Produced for or

Placed in Interstate or Foreign

Commerce 

VII.A. Overview of Patent 

VII.C. False Marking of Patent—35

U.S.C. § 292

PATENT APPLIED FOR

VII.C. False Marking of Patent—35

U.S.C. § 292

PATENT PENDING

VII.C. False Marking of Patent—35

U.S.C. § 292

PEER-TO-PEER FILE-TRADING

II.B.3.a.ii. Distribution 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, if the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.3.c.ii. Making the Work Available

on a Computer Network

Accessible to Members of the

Public 

II.B.4.b. Legal Standard 

II.C.5.b. Fair Use in Criminal Cases 

VIII.D.3. Determining a Restitution

Figure

PERFORMANCES AND

PHONOGRAMS TREATY

V.A.1. DMCA's Background and

Purpose

PHONORECORDS

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.a.i. Reproduction 

II.B.3.a.ii. Distribution 

II.B.3.b.i. Generally 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.C.4.a. Operation of the Doctrine 

II.C.4.d. Special Rules for Rental,

Lease, and Lending 

II.E.2. Sentencing Guidelines 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202 

V.C.6. Encryption Research 

VI.B. Elements 

VI.B.3.Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.B.5. Federal Jurisdiction 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

PLAIN ERROR

II.B.3.b.ii. Definition of "Retail Value"

in this Context
Index 425

PORNOGRAPHY

II.C.6. "Archival Exception" for

Computer Software—17 U.S.C.

§ 117 

V.C.6. Encryption Research

POST-SALE CONFUSION

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception

PRE-RELEASE PIRACY

II.B. Elements 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.D. Special Issues 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1

PREEMPTION

II.A.4. Federal Preemption 

II.B.3.a.ii. Distribution 

II.E.2. Sentencing Guidelines 

III.C.3. Repackaging Genuine Goods 

IV.F. Other Possible Charges 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction

PREREGISTRATION

II.B.1.c. New Procedure for

"Preregistration" 

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

see also REGISTRATION

PRESCRIPTION DRUGS

I.A. Why Is Intellectual Property

Enforcement Important? 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks

PRINCIPLES OF FEDERAL

PROSECUTION

IX.A. Introduction

PRIOR APPROVALS

III.F. Other Charges to Consider 

IV.D.2. Confidentiality and the Use of

Protective Orders 

IV.D.4. Department of Justice

Oversight 

X.C.1.a. Applicable Law

PRIVATE FINANCIAL GAIN

see PURPOSES OF COMMERCIAL

ADVANTAGE OR PRIVATE

FINANCIAL GAIN

PRIVATE INVESTIGATORS

VIII.D.3. Determining a Restitution

Figure 

IX.B.4. The Individual's History of

Criminal Offenses and Civil

Intellectual Property Violations 

X.B.3.a. Private Civil Remedies 

X.C. Offers of Assistance From Victims

and Related Parties 

X.C.1.b.ii. Private Investigators 

X.C.1.b.vi. Assistance from Private

Third Parties 

X.C.3. Strategic and Case-Related

Issues

PRODUCT TAMPERING

see TAMPERING

PROSECUTORIAL PRIORITIES

IX.B.1. Federal Law Enforcement

Priorities

PROTECTING AMERICAN GOODS

AND SERVICES ACT OF 2005

III.A.1. Overview of the Chapter 

III.B.3.b.i. General Definition 

VI.B.2. The Defendant Trafficked

PROTECTIVE ORDERS

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

IV.D.2. Confidentiality and the Use of

Protective Orders 

X.B.3.c. Stays and Protective Orders to

Delay Civil Proceedings During

Criminal Prosecution

PUBLIC COURT PROCEEDING

X.A. Victims' Rights

PUBLIC DISTRIBUTION

II.A.6. The Rights Protected by

Copyright
426 Prosecuting Intellectual Property Crimes

PUBLIC DOMAIN

II.B.1.f. Copyright Notice 

IV.B.3.a.v. Secrecy 

IV.B.3.a.vi. Disclosure's Effects 

IV.C.5. Claim of Right—Public

Domain and Proprietary Rights 

IV.D.2. Confidentiality and the Use of

Protective Orders 

V.B.1.c. To a Copyrighted Work 

V.C.10.a. Congress's Constitutional

Authority to Enact § 1201 of the

DMCA 

V.C.10.d. Fair Use 

VII.C. False Marking of Patent—35

U.S.C. § 292

PUBLIC PERFORMANCE

I.B. What Is Intellectual Property? 

II.A.6. The Rights Protected by

Copyright 

II.B.3. Infringement of the Copyright 

II.B.3.a.ii. Distribution

PUBLIC HEALTH AND SAFETY

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

IX.B.2. The Nature and Seriousness of

the Offense

PUBLICALLY ACCESSIBLE

COMPUTER NETWORK

see ACCESSIBLE TO THE GENERAL

PUBLIC

PURPOSES OF COMMERCIAL

ADVANTAGE OR PRIVATE

FINANCIAL GAIN

II.A.7. When Infringement is Criminal 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.4. Additional Element for

Enhanced Sentence: Purpose of

Commercial Advantage or Private

Financial Gain 

II.B.4.a. History 

II.B.4.b. Legal Standard 

II.B.5. Misdemeanor Copyright

Infringement 

II.C.5.b. Fair Use in Criminal Cases 

II.E.1. Statutory Penalties 

II.E.2. Sentencing Guidelines 

III.B.3.b.i. General Definition 

III.B.3.b.iii. Making and Obtaining

Counterfeits vs. Possession with

Intent to Traffic 

IV.B.5.b. Intent to Injure the Owner of

the Trade Secret 

IV.F. Other Possible Charges 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 

V.B.5. Falsifying, Altering, or

Removing Copyright Management

Information—17 U.S.C. § 1202 

V.C.10.b.i. Facial Challenges 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.f. Offenses Not Committed

for Commercial Advantage or

Private Financial Gain Reduces

the Offense Level by 2—U.S.S.G.

§ 2B5.3(b)(4) [before October 24,

2005: § 2B5.3(b)(3)]

QUI TAM

VII.C. False Marking of Patent—35

U.S.C. § 292

QUID PRO QUO

III.B.3.b.i. General Definition

RACKETEER INFLUENCED AND

CORRUPT ORGANIZATIONS

(RICO)

II.E.2. Sentencing Guidelines 

III.F. Other Charges to Consider 

VI.F. Other Criminal Charges to

Consider 

VIII.E.4.a. Proceeds 

X.B.3.b. Advantages and Disadvantages

of Parallel Civil and Criminal

Proceedings

READ-ALOUD

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1)
Index 427

READILY ASCERTAINABLE BY THE

PUBLIC

IV.B.3.a.v. Secrecy 

IV.B.3.a.viii. Independent Economic

Value

REASONABLE MEASURES

IV.B.3.a.i. Generally 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

IV.C.6. The First Amendment

REASONABLE ROYALTY

VIII.C.2.c.iii. Methods of Calculating

Loss

REASONABLY FORESEEABLE

PECUNIARY HARM

VIII.C.2.c.i. Use Greater of Actual or

Intended Loss 

VIII.C.2.c.iii. Methods of Calculating

Loss

RECKLESS DISREGARD

II.B.2.a. Legal Standard

REGISTER OF COPYRIGHTS

II.A.5. When Copyright Protection

Begins and Ends 

II.B.3.a.i. Reproduction 

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1)

REGISTRATION

II.A.5. When Copyright Protection

Begins and Ends 

II.B.1.b. Copyrights vs. Registrations

vs. Certificates 

II.B.1.c. New Procedure for

"Preregistration" 

II.B.1.d. Whether Registration or

Preregistration is Required to

Prosecute 

II.B.1.d.i. Liability for Infringement

Committed Prior to Registration 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.1.d.iii. Registration of Particular

Versions of a Work 

II.B.1.e. Proof of Copyright at Trial 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.D. Special Issues 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another 

III.B.4.c. The Genuine Mark Must Be

Federally Registered on the U.S.

Patent and Trademark Office's

Principal Register 

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.C.4. Lanham Act Defenses 

III.D.5. Mark-Holder's Failure to Use—

Symbol 

III.D.8. Olympic Symbols 

III.E.3. Restitution 

IV.B.3.a.vi. Disclosure's Effects 

V.B.1.c. To a Copyrighted Work 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.D.1. Electronic Copies of Labels,

Documentation, or Packaging 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

see also PREREGISTRATION

RELATED PARTIES

X.C. Offers of Assistance From Victims

and Related Parties 

X.C.1.b. Distinction Between

"Assistance" and "Gifts" 

X.C.1.b.i. Assistance from Victims and

Related Parties 

X.C.1.b.ii. Private Investigators 

X.C.1.b.iii. Cash 

X.C.1.b.v. Resources Donated for

Ongoing Use by Law Enforcement 
428 Prosecuting Intellectual Property Crimes

X.C.1.b.vi. Assistance from Private

Third Parties 

X.C.1.c.i. Consultative Process for

Acceptance of Assistance and Gifts 

X.C.3. Strategic and Case-Related

Issues

RENTAL OF SOFTWARE

II.B.3. Infringement of the Copyright

REPACKAGING OF AUTHENTIC

OR GENUINE GOODS

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic

 III.C.3. Repackaging Genuine Goods

REPEAT CRIMINAL OFFENDERS

IX.B.4. The Individual's History of

Criminal Offenses and Civil

Intellectual Property Violations

RESTITUTION

III.C.3. Repackaging Genuine Goods 

III.E.3. Restitution 

IV.E.1.b. Criminal Forfeiture 

VI.E. Penalties 

VI.E.3. Restitution 

VIII. Penalties, Restitution, and

Forfeiture 

VIII.A. Introduction 

VIII.D. Restitution 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.D.3. Determining a Restitution

Figure 

IX.B.2. The Nature and Seriousness of

the Offense 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X.A. Victims' Rights 

X.B.2. Ethical Concerns When the

Criminal Prosecution Results in

an Advantage in a Civil Matter 

X.B.2.b. Global Settlement

Negotiations 

X.B.3.b. Advantages and Disadvantages

of Parallel Civil and Criminal

Proceedings 

see also MANDATORY

RESTITUTION, MANDATORY

VICTIMS RESTITUTION ACT OF

1996

RETAIL VALUE

II.A.7. When Infringement is Criminal 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.b. Infringement of at Least 10

Copies of 1 or More Copyrighted

Works With a Total Retail Value

Exceeding $2,500 Within a

180-Day Period 

II.B.3.b.i. Generally 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.B.5. Misdemeanor Copyright

Infringement 

III.E.5. Sentencing Guidelines 

VI.E.5. Sentencing Guidelines 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VI.E.5.b. Number of Infringing

Copyrighted Goods vs. Number of

Labels, Documents, or Packaging

Items 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.i. Formula 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.iv. Determining Amounts

and Values—Reasonable

Estimates Allowed 

VIII.D.3. Determining a Restitution

Figure

REVERSE ENGINEERING

I.B. What Is Intellectual Property? 

II.B.3.b.i. Generally 

IV.C.2. Reverse Engineering 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.C.5. Reverse Engineering and

Interoperability of Computer

Programs

REVERSE PASSING-OFF

III.D.4. Selling Another's Trademarked

Goods As One's Own (Reverse

Passing-Off)
Index 429

RICO

see RACKETEER INFLUENCED AND

CORRUPT ORGANIZATIONS

SATELLITE SERVICE

see CABLE AND SATELLITE

SERVICE

SECRECY

IV.B.1. Overview 

IV.B.3.a.v. Secrecy 

IV.B.3.a.vi. Disclosure's Effects 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

X.B.3.b. Advantages and Disadvantages

of Parallel Civil and Criminal

Proceedings

SECURITY TESTING

V.C.9. Security Testing

SENTENCING GUIDELINES

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.4.a. History 

II.E.2. Sentencing Guidelines 

III.E.3. Restitution 

III.E.5. Sentencing Guidelines 

IV.E.2. Sentencing Guidelines 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.E.3. Restitution 

VI.E.5. Sentencing Guidelines 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VIII.A. Introduction 

VIII.C. Sentencing Guidelines 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c. Adjust the Offense Level

According to the "Infringement

Amount"—U.S.S.G. § 2B5.3(b)(1) 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.iv. Determining Amounts

and Values—Reasonable

Estimates Allowed 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.C.1.f. Offenses Not Committed

for Commercial Advantage or

Private Financial Gain Reduces

the Offense Level by 2—U.S.S.G.

§ 2B5.3(b)(4) [before October 24,

2005: § 2B5.3(b)(3)] 

VIII.C.2.a. Applicable Guideline is

§ 2B1.1, Except for Attempts and

Conspiracies 

VIII.C.2.c.iii. Methods of Calculating

Loss 

VIII.C.2.e. Sophisticated Means—

U.S.S.G. § 2B1.1(b)(9)(C) 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

IX.B.2. The Nature and Seriousness of

the Offense 

IX.B.4. The Individual's History of

Criminal Offenses and Civil

Intellectual Property Violations

SERVICE MARKS

I.B. What Is Intellectual Property? 

II.E.2. Sentencing Guidelines 

III. Trafficking In Counterfeit

Trademarks, Service Marks, and

Certification Marks—18 U.S.C.

§ 2320 

III.A.1. Overview of the Chapter 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.F. Other Charges to Consider 

VIII.E. Forfeiture 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property

SHAM USE

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee

SHORT PHRASES

II.A.1. What Copyright Law Protects 

II.B.1.a.ii. Short Phrases Are Not

Copyrightable

SIDEWALK STANDS

I.A. Why Is Intellectual Property

Enforcement Important?
430 Prosecuting Intellectual Property Crimes

SIMILARITY OF DESIGN

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception

SOFTWARE

I.B. What Is Intellectual Property? 

II.A.6. The Rights Protected by

Copyright 

II.B.1.c. New Procedure for

"Preregistration" 

II.B.1.d.iii. Registration of Particular

Versions of a Work 

II.B.2.b. Proof at Trial 

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.a.ii. Distribution 

II.B.3.b.ii. Definition of "Retail Value"

in this Context 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.B.4.b. Legal Standard 

II.C.4.a. Operation of the Doctrine 

II.C.6. "Archival Exception" for

Computer Software—17 U.S.C.

§ 117 

III.E.5. Sentencing Guidelines 

III.F. Other Charges to Consider 

IV.B.3.a.i. Generally 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

IV.C.2. Reverse Engineering 

IV.F. Other Possible Charges 

V.A.3. Differences Between the DMCA

and Traditional Copyright Law 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.B.2.b. In a Technology, Product,

Service, or Part Thereof 

V.B.2.c.3. Knowingly Marketed for

Circumvention 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 

V.C.4. Information Security Exemption 

V.C.6. Encryption Research 

VI.A. Distinguished from Trademark

and Copyright Statutes 

VI.B.3.Trafficking in Labels Affixed to,

Enclosing, or Accompanying (or

Designed to be Affixed to,

Enclose, or Accompany) a

Phonorecord, Computer Program,

Motion Picture or other

Audiovisual Work, Literary,

Pictorial, Graphic, or Sculptural

Work, or Work of Visual Art, or

Documentation or Packaging for

Such Works (i.e., Trafficked

Either in Documentation or

Packaging for Such Works Itself,

or in Labels for Such

Documentation or Packaging)

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.iv. Determining Amounts

and Values—Reasonable

Estimates Allowed 

VIII.C.2.c.iii. Methods of Calculating

Loss 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction 

X.A. Victims' Rights

SOLICITATION OF GIFTS

see GIFTS

SOPHISTICATED MEANS

VIII.C.2.e. Sophisticated Means—

U.S.S.G. § 2B1.1(b)(9)(C) 

VIII.C.2.h. Abuse of a Position of

Trust—U.S.S.G. § 3B1.3 

VIII.C.2.i. Use of Special Skill—

U.S.S.G. § 3B1.3

SOUND RECORDINGS

I.B. What Is Intellectual Property? 

II.A.4. Federal Preemption 

II.A.6. The Rights Protected by

Copyright 

II.B.1.c. New Procedure for

"Preregistration" 
Index 431

II.B.3. Infringement of the Copyright 

II.B.3.a. Infringement by Reproduction

or Distribution 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

II.C.3. Venue 

II.C.4.d. Special Rules for Rental,

Lease, and Lending 

VI.B.5. Federal Jurisdiction 

VI.F. Other Criminal Charges to

Consider 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction

SPECIAL SKILL

VIII.C. Sentencing Guidelines 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.h. Decryption or

Circumvention of Access Controls

Increases the Offense Level—

U.S.S.G. § 3B1.3 

VIII.C.2.e. Sophisticated Means—

U.S.S.G. § 2B1.1(b)(9)(C) 

VIII.C.2.i. Use of Special Skill—

U.S.S.G. § 3B1.3

SPECIALIZED FORMAT

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1)

SPECIFIED UNLAWFUL ACTIVITY

(SUA)

II.E.2. Sentencing Guidelines 

VIII.E.4.a. Proceeds 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5.a. Proceeds 

see also MONEY LAUNDERING

SPURIOUS MARKS

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic 

III.B.4.b. The Counterfeit Mark Must

Be Identical to or

Indistinguishable from a Genuine

Mark Owned by Another

STATE AND LOCAL

IV.F. Other Possible Charges 

IX.C. Whether the Person is Subject to

Prosecution in Another

Jurisdiction

STATUTES OF LIMITATIONS

II.B.1.d. Whether Registration or

Preregistration is Required to Prosecute

II.C.1. Statute of Limitations: 5 years 

III.B.3.b.iii. Making and Obtaining

Counterfeits vs. Possession with

Intent to Traffic 

III.C.4. Lanham Act Defenses 

III.C.5. Statute of Limitations 

V.C.1. Statute of Limitations 

VI.C. Defenses—Statute of Limitations 

STATUTORY DAMAGES

II.A.5. When Copyright Protection

Begins and Ends 

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.2.a. Legal Standard 

VIII.D.3. Determining a Restitution

Figure 

X.B.3.a. Private Civil Remedies

STAYS

X.B.3.b. Advantages and Disadvantages

of Parallel Civil and Criminal

Proceedings 

X.B.3.c. Stays and Protective Orders to

Delay Civil Proceedings During

Criminal Prosecution

STING OPERATIONS

IV.B.3.a.vi. Disclosure's Effects 

IV.C.6. The First Amendment 

IV.D.2. Confidentiality and the Use of

Protective Orders 

VIII.C.2.c.i. Use Greater of Actual or

Intended Loss

STIPULATIONS

II.B.1.e. Proof of Copyright at Trial 

IV.D.2. Confidentiality and the Use of

Protective Orders 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

STOP COUNTERFEITING IN

MANUFACTURED GOODS ACT

I.A. Why Is Intellectual Property

Enforcement Important? 

III.A.1. Overview of the Chapter 

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.B.1. The Trademark Counterfeiting

Crime in General 
432 Prosecuting Intellectual Property Crimes

III.B.3. Intentionally Trafficked or

Attempted to Traffic in Goods or

Services [after March 16, 2006: or

Labels, Documentation, or

Packaging for Goods or Services] 

III.B.3.c. Goods and Services [after

March 16, 2006: and Labels,

Patches, Stickers, Wrappers,

Badges, Emblems, Medallions,

Charms, Boxes, Containers, Cans,

Cases, Hangtags, Documentation,

or Packaging of Any Type or

Nature] 

III.B.4.a. Definition of Counterfeit

Mark Generally: Not Genuine or

Authentic 

III.B.4.e. Use of the Counterfeit Mark

"On or In Connection With"

Goods or Services 

III.B.4.f. The Counterfeit Mark Must

Have Been Used for the Same

Type of Goods or Services for

Which the Genuine Mark Was

Registered 

III.B.4.g. Likelihood of Confusion,

Mistake, or Deception 

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

III.C.1. Authorized-Use Defense:

Overrun Goods 

III.C.3. Repackaging Genuine Goods 

III.E.5. Sentencing Guidelines 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.E. Forfeiture 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.5.a. Proceeds 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property

STORAGE COSTS

III.D.6. Storage Costs and Destruction 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases

STUDIO OUT-TAKES

II.E.2. Sentencing Guidelines

SUA

see SPECIFIED ULAWFUL

ACTIVITY

SUBPOENAS

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors

SUBSTANTIAL STEP

IV.B.6. Attempts and Conspiracies,

Including the Impossibility

Defense

SUBSTANTIALLY OVERSTATES

THE SERIOUSNESS OF THE

OFFENSE

VIII.C.2.g. Downward Departure

Considerations—U.S.S.G. § 2B1.1

cmt. n.19(C)

TAMPERING WITH PRODUCTS

III.C.3. Repackaging Genuine Goods 

III.F. Other Charges to Consider 

IV.E.1.b. Criminal Forfeiture

TANGIBLE MEDIUM

I.B. What Is Intellectual Property? 

II.A.1. What Copyright Law Protects 

II.B.1.a. Copyrightability 

II.B.1.a.i. Original Work Fixed in a

Tangible Medium

TECHNICAL JOURNALS

IV.B.3.a.vi. Disclosure's Effects

TECHNOLOGICAL MEASURES

V.A.1. DMCA's Background and

Purpose 

V.A.2. Key Concepts: Access Controls

vs. Copy Controls, Circumvention

vs. Trafficking 

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.1. Circumventing Access Controls,

17 U.S.C. §§ 1201(a)(1) and

1204 

V.B.1.a. Circumvented 

V.B.1.b. Technological Measures That

Effectively Control Access (an

"Access Control") 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 
Index 433

V.B.2.c.1. Primarily Designed or

Produced 

V.B.2.c.2. Limited Commercially

Significant Purpose Other Than

Circumvention 

V.B.3. Trafficking in Tools, Devices,

and Services to Circumvent Copy

Controls—17 U.S.C.

§§ 1201(b)(1) and 1204 

V.B.3.a. Circumventing 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control") 

V.C.6. Encryption Research 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded

THE GREATER OF ACTUAL LOSS

OR INTENDED LOSS

VIII.C.2.c.i. Use Greater of Actual or

Intended Loss

THOMPSON MEMO

IX.E. Special Considerations in

Deciding Whether to Charge

Corporations and Other Business

Organizations

THREATS OF PROSECUTION

X.B.2.a. Victims Who Seek Advantage

By Threats of Criminal

Prosecution

TIMELY NOTICE OF ANY PUBLIC

COURT PROCEEDING

X.A. Victims' Rights

TRADE SECRETS

see generally Chapter IV

see also 

I.B. What Is Intellectual Property? 

I.C. Why Criminal Enforcement? 

II.A.1. What Copyright Law Protects 

II.B.1.a.iii. Expression of an Idea vs.

Idea Itself 

II.E.2. Sentencing Guidelines 

VII.A. Overview of Patent 

VIII.C.1.k. No Downward Departure

for the Victim's Participation in

Prosecution 

VIII.C.2.a. Applicable Guideline is

§ 2B1.1 Except for Attempts and

Conspiracies 

VIII.C.2.c.iii. Methods of Calculating

Loss 

VIII.C.2.e. Sophisticated Means—

U.S.S.G. § 2B1.1(b)(9)(C) 

VIII.C.2.f. Upward Departure

Considerations—U.S.S.G. § 2B1.1

cmt. n.19(A) 

VIII.C.2.g. Downward Departure

Considerations—U.S.S.G. § 2B1.1

cmt. n.19(C) 

VIII.C.2.h. Abuse of a Position of

Trust—U.S.S.G. § 3B1.3 

VIII.C.2.i. Use of Special Skill—

U.S.S.G. § 3B1.3 

VIII.D.1. Restitution is Available—and

Often Required—in Intellectual

Property Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.D.3. Determining a Restitution

Figure 

VIII.E.2.c. Table of Forfeiture

Provisions Arranged by Criminal

IP Statute 

VIII.E.5. Criminal Forfeiture in IP

Matters 

VIII.E.5.b. Infringing Items, Other

Contraband, and Facilitating

Property 

X.C.1.b.i. Assistance from Victims and

Related Parties 

X.C.1.b.v. Resources Donated for

Ongoing Use by Law Enforcement

TRADE SHOWS

IV.B.3.a.vi. Disclosure's Effects

TRADEMARK COUNTERFEITING

ACT OF 1984

III.A.2. Why Criminal Law Protects

Trademarks, Service Marks, and

Certification Marks 

III.B.1. The Trademark Counterfeiting

Crime in General

TRADEMARKS

see generally Chapter III

see also 

I.A. Why Is Intellectual Property

Enforcement Important? 

I.B. What Is Intellectual Property? 

I.C. Why Criminal Enforcement? 

II.A.1. What Copyright Law Protects 
434 Prosecuting Intellectual Property Crimes

II.B.1.a.ii. Short Phrases Are Not

Copyrightable 

II.C.3. Venue 

II.E.2. Sentencing Guidelines 

VI.A. Distinguished From Trademark

and Copyright Statutes 

VI.B.4. The Labels, Documentation, or

Packaging Materials are

Counterfeit or Illicit 

VI.D.2. Advantages of Charging a

§ 2318 Offense 

VI.E.5.a. Retail Value of Copyrighted

Goods vs. Counterfeit Labels,

Documentation, and Packaging 

VI.E.5.b. Number of Infringing

Copyrighted Goods vs. Number of

Labels, Documents, or Packaging

Items 

VI.F. Other Criminal Charges to

Consider 

VII.A. Overview of Patent 

VIII.C.1. Offenses Involving Copyright

(Including Bootleg Music,

Camcorded Movies, and the

Unauthorized Use of Satellite,

Radio, and Cable

Communications), Trademark,

Counterfeit Labeling, and the

DMCA 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.c.ii. Number of Infringing

Items 

VIII.C.1.c.iv. Determining Amounts

and Values—Reasonable

Estimates Allowed 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)] 

VIII.D.1. Restitution is

Available—and Often

Required—in Intellectual Property

Prosecutions 

VIII.D.2. Victims Include Owners of

Intellectual Property and

Consumers Who Were Defrauded 

VIII.D.3. Determining a Restitution

Figure 

VIII.E. Forfeiture 

VIII.E.1. Property Subject to Forfeiture 

VIII.E.2.a. Administrative Forfeiture

Proceedings 

VIII.E.4.a. Proceeds 

VIII.E.4.b. Infringing Items, Other

Contraband, and Facilitating

Property 

VIII.E.4.c.ii. Victims' Ability to Forfeit

Property 

IX.D. The Adequacy of Alternative

Non-Criminal Remedies 

X. Victims of Intellectual Property

Crimes— Ethics and Obligations 

X.B.3.a. Private Civil Remedies 

X.C.1.b.iv. Storage Costs in

Counterfeit or Infringing Products

Cases

TRAFFICKING IN ACCESS

CONTROL CIRCUMVENTION

TOOLS AND SERVICES

V.B.2. Trafficking in Access Control

Circumvention Tools and

Services—17 U.S.C.

§§ 1201(a)(2) and 1204

TREBLE DAMAGES

X.B.2.b. Global Settlement

Negotiations

UNAUTHORIZED DISCLOSURE OF

GOVERNMENT INFORMATION

IV.A. Introduction

UNIFORM TRADE SECRETS ACT

IV.A. Introduction 

IV.B.2. Relevance of Civil Cases 

IV.B.3.a.viii. Independent Economic

Value 

IV.C.6. The First Amendment 

VIII.C.2.c.iii. Methods of Calculating

Loss 

see also TRADE SECRETS

UNITS OF PROSECUTION

III.D.7. Units of Prosecution

UNPUBLISHED COPYRIGHTED

WORK

II.C.5.a. Unpublished Works

UPLOADING

II.B.3.a.ii. Distribution 

IV.B.3.b.i. Types of Misappropriation 

VIII.C.1.a. Applicable Guideline is

§ 2B5.3 

VIII.C.1.e. Manufacturing, Importing,

or Uploading Infringing Items
Index 435

Increases the Offense Level by 2—

U.S.S.G. § 2B5.3(b)(3) [Before

October 24, 2005: § 2B5.3(b)(2)]

USAGE CONTROLS

V.A.2.a. Access Controls vs. Copy/Use

Controls 

V.B.3.b. Technological Measure That

Effectively Protects a Right of a

Copyright Owner Under This

Title ("Copy Control")

see also COPY CONTROLS

USE IN COMMERCE

III.B.4.d. The Genuine Mark Must

Have Been in Use by the

Mark-Holder or Its Licensee 

see also INTERSTATE AND

FOREIGN COMMERCE

UTILITY PATENTS

I.B. What Is Intellectual Property?

VAGUENESS

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

III.C.1. Authorized-Use Defense:

Overrun Goods 

IV.B.3.a.vii. Reasonable Measures to

Maintain Secrecy 

IV.C.6. The First Amendment 

V.C.10.c. Vagueness

VENUE

II.C.3. Venue 

III.B.1. The Trademark Counterfeiting

Crime in General 

III.B.6. Venue 

III.C. Defenses 

VI.B.6. Venue

VICTIM AND WITNESS

PROTECTION ACT OF 1982

X.A. Victims' Rights

VICTIM'S PARTICIPATION

VIII.C.1.k. No Downward Departure

for the Victim's Participation in

Prosecution 

VIII.C.2.j. No Downward Departure

for Victim's Participation in

Developing the Case

VICTIMS' RIGHTS

II.B.2.a. Legal Standard 

X.A. Victims' Rights

VIDEO GAMES

II.B.1.d.ii. Unpublished or Pre-Release

Works 

II.B.3.a.i. Reproduction 

V.B.1.d. How Congress Intended the

Anti-Circumvention Prohibition

to Apply 

V.B.1.e. Regulatory Exemptions to

Liability under § 1201(a)(1) 

V.B.2.c.1. Primarily Designed or

Produced

VULNERABLE VICTIMS

VIII.C.1.j. Vulnerable Victims—

U.S.S.G. § 3A1.1(b)

WILLFUL BLINDNESS

III.B.5. The Defendant Used the

Counterfeit Mark "Knowingly" 

VI.B.1. The Defendant Acted

"Knowingly"

WORK BEING PREPARED FOR

COMMERCIAL DISTRIBUTION

II. Criminal Copyright Infringement—

17 U.S.C. § 506 and 18 U.S.C.

§ 2319 

II.A.7. When Infringement is Criminal 

II.B. Elements 

II.B.3. Infringement of the Copyright 

II.B.3.c. Distribution of a Work Being

Prepared for Commercial

Distribution, by Making It

Available on a Publicly-Accessible

Computer Network, If the

Defendant Knew or Should Have

Known the Work Was Intended

for Commercial Distribution 

II.B.3.c.iii. Work Being Prepared for

Commercial Distribution 

VIII.C.1.c.iii. Retail Value 

VIII.C.1.c.v. Cross-Reference to Loss

Table in U.S.S.G. § 2B1.1

WORKS MADE FOR HIRE

II.A.5. When Copyright Protection

Begins and Ends

WORLD INTELLECTUAL

PROPERTY ORGANIZATION

(WIPO)

V.A.1. DMCA's Background and

Purpose 

V.A.4. Other DMCA Sections That Do

Not Concern Prosecutors 
436 Prosecuting Intellectual Property Crimes

WRIT OF MANDAMUS

see MANDAMUS