F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

U N I T E D S T A T E S O F A M E R I C A , P laintiff-Appellee

,

v.

R O O S E V E L T A

N D E R S O N , J R ., Defendant-Appellant

. No. 12-10344

D.C. No. 5:09-cr-01015-EJ D-1

OPI NI ON

A ppeal from the United States District Court for the Northern District of California Edward J . Davila, District J udg e, Presiding

Arg ued and Submitted J une 11, 2013—San F rancisco, California Submission vacated J uly

15, 2013 Resubmitted December 12, 2013

F iled December 19, 2013

B efore: F erdinand F

. F ernandez and Consuelo M. Callahan Circuit J udg es, and Sarah S. Vance, Chief District J udg e. *

Opinion by

J udg e Callahan

* T h e Ho n orab le Sara h S

. V a n c e , C h ief District J u d g e f o r th e U .S. District Co u rt f

o r th e Eastern D istrict o f L o u isian a, sittin g b y d esig n atio n

.U N I T E D S T A T E S V

. A

N D E R S O N 2

SUMMARY * *

Crim inal Law

The p anel affirme d a conviction for criminal copy rig ht infring ement, but vacated the restitution order and remanded.

The panel held that a jury instruction on willfulness was fl a w e d but did not rise to the level of plain error, and that evidence o f uncharg ed acts was properly admitted as intrinsic to the charg e d conduct.

The p anel held that the district court erred in f ai l ing to award restitut i o n reflecting the victim’s actual loss, which consisted o f the victim’s lost profits on sales of authentic copies that would h ave taken place if not for the defendant’s conduct. The panel remanded for the district c o urt to reconsider restitution on an open record.

COUNSEL

J ohn J

. J ordan (arg

ued), Sa n F rancisco, California, for Defendant-Appellant.

Melinda Haag
, United States Attorney ; B arbara J

. V alliere, Assistant United States Attorney
, Chief, Appellate D ivision; Susan B. G r ay ( arg ued), Assistant U nited States Attorney
, San F rancisco, California, for Plaintiff-Appellee.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.U N I T E D S T A T E S V

. A

N D E R S O N 3

OP INION

CAL L A HAN, Circuit J udg e:

Roosevelt Anderson, J r., appeals his conviction for

c r i m i n a l c o p y r i g h t i n f r i n g e m e n t u n d er 1 7 U

. S

. C

. § 506(a)(1)(A) and 18 U.S.C. § 2319 ( b )(1). Anderson
conten d s that the district court erred: (1) by g iving an incorrect jury instruction on willfulness; (2) by allowing the
g overnment to introduce ev i dence o f uncharg ed acts o f infring ement; and (3) in calculating restitution. Apply ing the willfulness standard for c r iminal copy rig h t cases as recently clarified in United States v. Liu
, 7 31 F .3d 982 (9th Cir. 2013), we conclude that the jury instruction w as flawed but did not rise to the level of p lain error. We also find that the evidence of uncharg ed a cts w as properly admitted as intrinsic to the charg ed conduct, and a ccording ly

, we affirm Anderson’s conviction. Nonetheless, consistent wit h United States v

. Fair
, 699 F .3d 508 (D.C. Cir. 2012), and United States v

. Chalupnik

, 514 F

. 3 d 7 4 8 ( 8th Cir. 2008)

, we conclude that the district court e rred in failing to award restitution reflecting the victim’s actual loss, which cons i s ted of the victim’s lost profits o n sales of authentic c opie s t hat would have taken place if not for Anderson’s c o n duct. Consequently

, we vacate the restitution order and remand to the district court to reconsider restitution on an open record.

I

Anderson was a L a s Veg as cab d r i ver who also dabbled in photog raphy and e lectronics repair. At some po int, he dec i d e d to start selling software. He initially considered contacting Adobe Sy stems, I nc. (“Adobe”) to see if he could work out a “financial deal” with it. L a c king any funding forU N I T E D S T A T E S V

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N D E R S O N 4

such a deal, however

, he decided to take an “alternative”
route. Using the moniker “ Money w orld123,” Anderson beg an a “one-man” operation selling A dobe software online throug h the price c omparison w ebsite Priceg rabber, while handling p ay

ments throug h the G oog le Checkout processing service. He also adverti s ed software on his own website, Anderson9000.com.

The d i scs containing the software A nderson sold were

co n sumer-g rade “burned” discs with g eneric labels. Anderson’s adve r

t i s e m e n t s and the documents accompany ing the discs referred to the software as “full” o r “ complete”

“ OEM” (meaning “orig inal equipment manufacturer”) products. The accompany ing docum e n t s also indicated that Money world123 would ma k e “ plug -ins” (i.e., optional

s o f t w a r e u p g r a d e s p r o v i d i n g i m p r o v e d s o f t w a r e functionality

) a vailable to the customer if the customer would
rate Money

w o r l d123 on Priceg rabber. The discs also contained a “ terms and conditions” doc u m en t, which stated that the software was only to be u sed for “archival purposes”

or as a “backup” copy

. The terms a nd co n d i t i o n s were not printed out for the customers, however, a n d the customers could (and did) install the software without viewing them.

I n order to activate leg itimate Adobe software, a customer must enter a 24-dig it serial number (or “p r oduct key ”) provide d b y Adobe which it g enerates using an alg orithm. The software first confirms that the number is in th e c o r rect format and then confirms that it is a v alid number with Adobe. However, counterfeiters can use “key g enerators” to create serial numbers t h a t match Adobe’s alg orithm a nd disable or by

p ass the f

unction requiring the software to confirm that the number i s v a lid. Anderson’s software was packag ed with serial numbers written in permanent marker.U N I T E D S T A T E S V

. A

N D E R S O N 5

B a sed in part on the inauthentic appearance of the product, two customers c ontacted And er s o n and demanded refunds. One bluntly told A nderson: “You a r e pirating software and marketing it as if y ou are not d oing something illeg al. I have no doubt that this is not new software and that
y ou are not operating under leg al means.” Anderson provided the requested refunds.

Anderson’s operation eventuall y attracted Adobe’s attention. An Adobe inves t i gator purchased a copy o f Photoshop CS3 Ex tended f rom Anderson using Priceg rabber and Goog le Checkout. The investig ator p u rchased the software, which had a retail price of $999, from Anderson for $262.90, i ncluding shipping and handling

. Adobe then contacted Christopher Morris, a U .S. Postal I n s p ector, w ho subpoenaed r ecords from Priceg rabber and Goog le, as well a s records from email addresses related to the Priceg rabber a nd Goog le accounts. Morris eventually concluded t h a t Anderson controlled the accounts. The records showed that Anderson had sold 2 0 9 copies of Photoshop CS3 and 30 copies o f Photoshop CS3 Ex tended from F ebruary 2 008 throug h F ebruary 2009. D u r ing that time period, A nderson made
approx imately

350 total software sales, totaling $70,551.

Morris subsequently f

ound Anderson9000.com a nd
arrang ed a purchase of A dobe F ireworks after ex chang ing voicemails with an individual identify ing hims e l f as “J

. ” Morris paid $131, including sh i p p i n g and handling

, for the product, whic h h ad a retail price of $299. Surveillance

cameras c aptured imag es of Anderson checking th e post office box listed as the return address.

Morris subsequently set up a nother sa l e using the same process and arrested Anderson. Anderson then consented toU N I T E D S T A T E S V

. A

N D E R S O N 6

a s e a r c h of the rental car that he drove to the p ost office. I n the car, Morris found a number of blank discs, two copies o f Photoshop CS3, various discs with Adobe plug -ins, a key
g enerator disc, and discs with v arious other Adobe prog r a ms.

Anders o n was subsequently charg ed w ith criminal
copy rig ht infring ement based on h is sales of Photoshop CS3 and Photoshop CS3 Ex tended. At trial, Anderson a dmitted to selling the software but ex plained that, b ased on his internet research, he believed that OEMs were companies t h a t r e sell other companies’ products unde r their own n ames, and that “OEM” r eferred to backup copies. H e said that h e pulled the information for the terms and conditions from the Copy rig ht A c t ( specifically

, 17 U.S.C. § § 106, 117 1 ) and from oth e r websites selling OE M software. He ex plained that he provided customers with serial numbers u sing a k e y g enerator because customers frequently misplace their origi n a l serial numbers.

1 In relev an t p art, § 1 1 7 (a) p ro v id es:

No tw ith s tan d in g th e p ro v isio n s o f sectio n 1 0 6
, it is n o t

an in f rin g em en t f

o r th e o w n er o f a co p y o f a co m p u ter p ro g ram to m ak e o r au th o rize th e m ak in g o f an o th er

co py o r ad ap tatio n o f t

h at co m p u ter pro g ram p ro v i ded

. . . (2 ) t h a t su ch n ew co p y o r ad ap tatio n is f o r arch iv al
p u rp o s es o n ly an d t

h at all arch i v al co p ies are d estro y ed in th e ev en t th at co n t in

u ed p o s s essio n

o f th e co m p u ter p ro g ram sh o u l d cease to b e rig h tf u l.

T h e statu te f

u rth er p ro v i d es th at an y c o p i es m ad e in su ch a m an n er m ay

o n ly b e “ leased , so ld , o r o th erw ise tran sf erred , alo n g w i th th e co p y f ro m

w h ich s u ch co pies w ere p rep ared

, . . . a s p art o f th e lease, sale, o r o th er tran sf er o f all rig h ts in

th e p ro g ram .” § 1 1 7 (b ).U N I T E D S T A T E S V

. A

N D E R S O N 7

Anderson conceded that he did not mention that the software was for backup o r archival purposes on Priceg rabber and Anderson9000.com. He also conceded that he continued
to sell the software even after his c u stomers told him that it looked illeg al. He was also aware that some customers were installing the software and using it, as opposed to m e rely retaining it f

or backup purposes, but he did not chang e his practices. Seve r al customers testified that they would not have purchased Anderson’s software if they had k n o w n it could be used only

for backup purposes.

A r epre sentative f

rom Adobe testified that there w as no market for b ackup c opies o f Adobe software a nd that Adobe does not a u t h o r iz e any one to make backup copies for
customers. H e said that in an OEM deal, Adobe sells a copy of software at a discounted rate to a h ardware purchaser. He said that OEM software is not sold separately from a piece o f hardware a

nd “OEM” does not r efer to b a c k u p copies. He confirmed that the copy of CS3 Ex tended that the investig ator purchased and the copy of F ireworks tha t Morris purchased from Anderson were u nauthoriz ed. H e a lso stated that Adobe had no relationship with Anderson and did not authoriz e him to sell its products.

After a f our-day t rial, the jury found A nderson g uilty

. The district court sentenced him to 24 months o f imprisonment and two y ears of supervised release. I t f urther ordered him to pay a $100 special assessment an d $247,144 in restitution to Adobe. Anderson now appeals, and we have jurisdiction pursuant to 28 U.S.C. § 1291.U N I T E D S T A T E S V

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N D E R S O N 8

I I

Anderson first co ntends that the district court erred because its jury instruction o n the criminal copy r ig ht willfulness standard improperly sug g e sted that the jury could

c onvict him even if he did not have the specific int e n t t o violate the law.

A

Prior to trial, both p artie s submitted proposed jury instructions. The g overnment’s set o f proposed instructions included the following instruction, titled “W illfully

– Defined”:

The g overnment must prove that the def e n dant willfully infring ed a copy rig hted work. An infring ement was willful when (1) the defendant eng ag e d i n acts that infring ed the copy rig hts, and ( 2) knew that those a ctions
may infring e the copy

rig hts [ or acted with reckless disreg ard for, or willful blindness to the copy rig ht holder’s rig hts]

. 2

Among other supporting a uthorities, the g overnment c ited the Ninth Circuit Manual of Model Civil Jury Instructions § 17.27 (2007). Anderson proposed the following c ompeting

ex p lanation of “willful” infring ement:

A copy rig ht is proven to be infring ed “willfully ” w hen the defendant voluntarily

2 T h e b rack eted lan g u ag e ap p ears as it d i d in th e g o v ern m en t’ s p ro po s ed in stru ctio n

.U N I T E D S T A T E S V

. A

N D E R S O N 9

and intentionally violated a known leg al duty

. [ United States v

. Moran
, 7 57 F

. Supp. 1046, 1050–51 (D. Neb. 1991) (citing Cheek v

. United States
, 498 U.S. 192, 201 (1991)).] T o find h im g uilty

, y ou must find Mr. Anderso n acted with a motive to violate that which the
statute protects; something more is r equired
t h a n the doing of the act proscribed by the
statute. [ Screws v. United S tates , 325 U.S. 91, 101 (1945).] I nfring ement of a copy rig ht held by Adobe r equires a f inding that Mr. Anderson acted with the purpose of d e priving Adobe of t h e interest protected by its
copy rig ht. [ United S

tates v. Heilman

, 614 F .2d 1133, 1137 (1 980); accord Screws
, 325 U.S. at 101.] Mr. Anderson must have known his actions constituted a copy rig ht infring ement in order for y ou to find he acted “willfully .” [ Peer Int’l Corp. v. Paus a Records, Inc.
, 909 F .2d 1332, 1335 & n.3 (9th Cir. 1990).] I f y ou find that Mr. Anderson did
not know his actions were infring ing the rig hts o f Adobe, then y o u must find him not g uilty

. 3

A n d e r s o n o b

j ected to the g overnment’s instruc t i o n , n o t i n g that there was no model instruction and that the g overnment

was relying on c ivil a

uthority

. The g overnment a rg u ed that Anderson’s instruction was “ not an accurate statement of the requireme n t of willfulness.” I n p articular, the g overnment

3 In an ex p l an ato ry sectio n o f h i s su b m issio n , A n derso n p ro v i ded th e b rack eted case ci t a t i o n s f o r t h e co u rt’ s ref

eren ce b u t d id n ot s u g g est in co rp o ratin g th em i n to th e b od y o f th e in stru ctio n to b e g iv en to th e j u ry

.U N I T E D S T A T E S V

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N D E R S O N 10

indicated that it was concerned that A n derson’s instruction added a dditional undefined elements, such as “motive,” “known leg al duty ,” and “purpose.” I t arg u e d t hat its instruction accurately s t a t e d the law, “which is that the def e n d a n t knew what he was doing would violate Adobe’s
copy rig ht.”

The court found that Anderson’s instructio n d id seek to add additional factors that were likely irrelevant. I t proposed adding the last two sentences of Anderson’s instruction to the end of the g ove r n m e nt’s instruction. Anderson’s counsel then stated: “Okay

, I ’ll accept that.” The g overnment ag reed
t h a t t h e penultimate sentence was “an accurate statement o f the g overnment’s b urden” but arg ued that the last sentence

was unnecessary and mig ht lead to confusion about what the jury had to find. The court ag reed that t h e l ast sentence would be left out of the instruction and left for the p arties to address at closing arg ument. Anderson’s counsel responded, “Okay

. ” The court asked Anderson’s c ounsel if he wanted the sentence a s a stand-alone instruction, b ut he responded: “As much as I would love to have a s t a n d-alone instruction, it makes sense to keep it with th e willfully defined.” The parties also ag reed t h a t the bracketed lang uag e in the
g overnment’s instruction r e g arding r ecklessness and willful b lindness was not necessary based on the e vidence in the record.

The final instruction, as read to the jury , was:

The g overnment must prove that the defendant willfully in f

r ing ed a copy

rig hted work. An infring ement was willful when the defen d a nt eng ag ed in acts that infring ed theU N I T E D S T A T E S V

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N D E R S O N 11

c o p y rig hts and knew those a ctions may infring e the copy

r ig hts.

Mr. Anderson must have kno w n his

a ct i o n s s u b s t i t u t e d [ s i c 4 ] a c o p y r i gh t infring ement in order for y ou to find he acted willfully

.

Th e district court asked both parties if they objected to the reading of the instructions, and both responded, “No.” W r itten copies of the instr u c t i o ns were also provided to the jury

.

On the second day of del i b e r at ions, the jury sent a n ote stating : “A juror has l o o k ed at the word willful[ ] in a dictionary and shared that i t means deliberate. Please advise. ” I n r e s ponse, the c o u rt sent a note back pursuant to the p arties’ ag r eement indicating that t h e j u rors were instructed not to do any research and refe r r i n g them to the willfulness instruction. Twenty minutes l ater, the jury indicated that it had reached a unanimous verdict.

B

Anderson contends t h a t: (1) de n ovo review applies; (2) the d istrict court improperly rejected his p roposed willfulness instruction and adopted an instruction that misstated the law; and (3) the error affected the jury ’s verdict.

4 T h e co u rt o b v i o u sly m ean t “ co n stitu ted .” F ro m t

h e reco rd

, w e can n o t d eterm in e w

h eth er th is w as a tran scrip tio n erro r o r th e j u d g e m issp ok e

w h en read in g th e in stru ctio n s.U N I T E D S T A T E S V

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N D E R S O N 12

1

The parties dispute whether a de novo or plain error standard of review applie s h ere. W e g enerally r eview whether a jury instruction omits or misstates an element of a crime on a de novo basis. United States v. Kilbride

, 584 F .3d 1 240, 1247 (9th Cir. 2009). “However, in the absen c e o f a timely objection to the jury

instructions, we review for plain

er r o r

. ” Id. ( internal quotation marks omitted). I n order to find plain error, we m u s t “ f ind (1) an error that is ( 2) plain and (3) a ffects substantial r ig hts.” Id. Even where these

c onditions are met, however, “we may only ex e rcise o u r d i s c r e t ion to correct the error if it seriously affects the fairness

, i n t e gr ity or public reputation of judicial proceeding s.” Id.

Under F ederal Rule of Criminal Procedure 30(d), a “party who object s to any portion of the instructions or to a failure
to g ive a requested instruction must inform the c o u r t of the specific o bjection and the g rounds for the objection before the j u ry retires to d eliberate.” W e have held that Rule 3 0 “requires a defendant to state w i t h a d equate specificity the
g rounds for an objection to a jury instruction before the jury retires, and that a d e f

e n d ant’s mere proposal of an alternate instruction does not satisfy Rule 3 0’s standard o f specificity

. ” United States v. Hofus

, 598 F .3d 1171, 1175 (9th Cir. 2010) (internal quotation marks o m itted). An o bjection to an instruction on a different g round is not sufficient to preserve de novo revie w. See United States v. Peterson
, 538 F .3d 1064, 1071 (9th Cir. 2008).

Here, Anderson submitted an alternative willfulness instruction that the court larg ely rejected. However, after the
court discussed the issue with counsel, Anderson’s attor n eyU N I T E D S T A T E S V

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N D E R S O N 13

said: “Okay

, I ’ll ac c e p t that.” Moreover, despite h aving multiple opportunities to do so, Anderson’s a ttorney did not specifically object to the cour t ’s formulation of the final willfulness instructio n , which was a combination of the
g overnment’s instruction and A n d e r s o n ’ s i n s t r u c tion. I ndeed, rather than objecting

, Anderson’s attorney ex plicitly acquiesced to it. According ly , plain error review applies. 5

2

Under 17 U.S.C. § 506(a)(1)(A), a p erson is g uilty o f criminal copy

rig ht infring e ment if h e or she “willfully ” infring es a copy

rig ht for the purpose of commer c i al advantag e or private financial g ain. W e do not have a model instruction ex plaining the “ willfulness” requirement in criminal copy

rig ht infring ement c ases. However, we recently
set forth the relevant standards in U n i t e d States v. Liu
, 731 F .3d 982 (9th Cir. 2013). 6

I n Liu
, the district court had instruct e d t he jury that the defendant could be c onvicted of willf u l infring ement if he “without authoriz a tion d uplicated, reprod

u c e d or sold the
copy rig ht belong ing to the owners of the works” and that “an

a c t i s done ‘willfully ’ if the act is d o ne knowing ly a n d

5 Ev en if w e ig n o red co u n sel’ s accep tan ce o f t h e co m b in ed in stru ctio n , d e n o v o rev iew w o u ld o n ly ap p ly to th e d istrict co u rt’ s d ecisio n t o rej ect A n d erso n ’ s w illf

u ln ess in stru c t i o n

. P lain erro r rev iew w o u ld still ap p ly
to th e d istrict co u rt’ s f

o rm u latio n o f th e f in al in stru ctio n

.

6 T h e decisio n i n Liu w as issu ed af ter w e h eard arg u m en t in th is case. W e su b seq u en tly g ran ted th e p arties’ j o in t req u est to p ro v id e s u p p l e m en t al b rief in g “ ad dressin g th e ef

f ect o f th is co u rt’ s d ecisio n in Li u o n t h e q u estio n o f w

h eth er th e d istrict co u

rt’ s in stru ctio n s p ro p erly

ch arg ed th e j u ry o n th e elem en t o f

w illf u ln ess.”U N I T E D S T A T E S V

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N D E R S O N 14

intentionally

, not throug h ig norance, mistake or accident.” Id. at 988 ( a lteration and internal quotation marks omitted). The district cour t f

a i led to incorporate an ag reed-upon i n struction that would have provided that “evidenc e o f reproduction or distribution of a copy r ig hted work, b y itself, shall not be sufficient to establish willful infring emen t o f a copy rig ht.” Id. a t 987–88 (alteration a n d internal quotation marks om i t t e d). W e r eviewed the instructions de novo because the c ourt failed to provide the defendant w ith an opportunity

to object. Id. at 988.

W e held that “will f

ully ” as used in § 506(a) “connotes a ‘voluntary

, intentional violation o f a known leg al duty .’” Id.
at 990 (quoting Cheek

, 498 U .S. at 201). W e noted that t he key distinction between civil and criminal copy r ig ht liability is t h a t c ivil liability r equires the g eneral intent to copy , whereas c riminal liability requires the s p ecific intent to violate the law. Id. at 989–90. We according ly found that the district court had erred and that the error was not h a r m l e s s

. Id. at 992–93; see also United S tates v. W ise
, 550 F

. 2d 1180, 1194 (9th Cir. 1977) (sug g esting that th e government must prove “an act intentionally done i n v i olation of the law” to establish willfulness).

T hus, in order to satisfy the willfulness requirement, a defendant must have k

nown that the c opy ing was illeg al. The parties do not ser i o u s l y dispute this proposition. Rather, Anderson c laims that the court ’ s instruction was erroneous because it indicated that Anderson was g uilty if he knew his actions “may infring e the copy r ig hts” and “[ m] ore is r equired than just Anderson knowing his actions may be illeg al.”

The g overnment’s orig inal instruction in this case appeared to be based on commentary to a prior version of theU N I T E D S T A T E S V

. A

N D E R S O N 15

model civil instruction for “W illful I nfring ement.” 7 The commentary stated: “An infring e ment was will f u l w h en the defendant eng ag ed in acts that i n fring e d the copy rig ht, a nd knew that those actions m ay i n fr ing e the copy rig ht.” Ninth C ircuit Manual of Model Civil J ury Instructions 20.25 c m t

. (2001) ( emphasis added). At the time of Anderson’s prosecution, this commentary h ad been superseded by a new instruction that no long er used the word “may .” Ninth Circuit Manual of M

odel Civil Jury Instructions 17.27 (20 07). The commentary in the 2007 e dition a cknowledg ed that the earlier version “sug g ested lang uag e f or a willful inf

ri n g ement instruction that merely required that a d efendant have knowledg e that its a ctions ‘may influence’ th e p l aintiff’s
copy rig ht.” Id. cmt. The g overnment cited the 2007 edition of the Manual but relied on the superseded lang uag e from the 2001 edition. I t is unclear to us why the g overnment based its proposed instruction on the older version of the instruction.

3

“I n g eneral, a party is entitled to a n i n s truction to help it
prove its theory o f the case

. . . . ” United St a t e s v

. H eredia

, 4 8 3 F .3d 913, 922 ( 9th Cir. 2007) (en banc). T h i s entitlement, however, “is n o t u nlimited.” United States v

. Doe
, 705 F

. 3d 1134, 1144 ( 9 t h C ir. 2013). A district court may properly reject a misleading o r confusing instruction. See Hammer v. Gross
, 9 32 F .2d 8 42, 849 (9th Cir. 1 991). “I n

7 A lth ou g h w illf

u ln ess is n o t req u ired to estab lish civ il liab ility

, i t d oes p lay a ro le in civ il co p y

rig h t litig ati o n

. W h e r e p ro v en , it can s u b j ect a civ i l d ef en d an t to an in creased aw ard o f statu t o ry d am ag es u n der th e A ct. § 5 0 4 ( c)(2 ). W e h av e p rev io u sly accep ted “ th e g en eral p rin cip le in

co p y rig h t l aw o f lo o k in g to civ il au th ority f o r g u id an ce in crim in al cases.” W ise , 5 5 0 F.3 d at 1 1 8 8 n .1 4

.U N I T E D S T A T E S V

. A

N D E R S O N 16

reviewing jury in s t r uctions, the relevant inquiry is whether the instructions a s a whole are misleading or inadequate to g uide the jury ’s deliberation.” United States v. Chao Fan Xu
, 706 F .3d 965, 985 (9th Cir. 2 0 1 3) (internal quotation marks omitted).

The district court rejected Anderson’s proposed instruction b ecause it soug h t to add addit i o n a l elements a nd had the potential t o create confusion. Althoug h e ach individual statement in Anderson’s instruction had support in the cas e l a w, the combination of the statements was, at the
very least, ineloquent and would have l i k e ly created confusion a mong persons w ithout leg al training

. The district
court r easonably distilled Anderson’s proposed instruction to its fundamental point.

Anderson’s real objection is to the use of the w ord “ may ” in the sentence of the instruction indic ating that the
g overnment had to prove that he must ha v e k n o w n that his “actions may infring e the copy rig h ts.” He failed to o bject to this lang uag e a

nd this failure was likely material g iven that the g overnment ag reed during the con f er ence that it had to show that A nderson knew he was infring ing Adobe’s
copy rig ht in order to establish willfulness.

The word “may ” is vag ue and renders the first sentence o f
t h e i nstruction incorrect to the ex tent that it sug g ests th at Anderson could be convicted with o u t k nowing that he was violating Adobe’s rig hts. I ndeed, it would not be enoug h for the g overnment to show only that he knew that there was a possibility that his actions w ere illeg al. N onetheless, error is only plain where it is “clear a nd obvious.” Kilbride

, 584 F .3d
at 1 255. T he parties a

n d the court did not perceive any issueU N I T E D S T A T E S V

. A

N D E R S O N 17

with the phrasing of the sentence despite parsing the lang uag e very carefully

. Notably

, al t h o u g h the g overnment did not pursue recklessness or willful b l i n d ness theories, those are valid theories for satisfy ing the intent e lement in this contex t. See W ash. Shoe Co. v. A-Z S

p or t i n g G oods, Inc.
, 704 F .3d 668, 674 (9th Cir. 20 12). Under those theories, the willfulness requirement is satisfied where there is a showing t h a t the defendant recklessly disreg arded “the hig h probability that it

was infring ing plaintiffs’ copy rig hts.” Id. (internal quotation mark s a n d citation omitted). Thus, the defendant’s actions could be willful even if the defendant only knew that the
copy ing “may be illeg al” b ut did not know th a t i t w as to a certainty

. Consequently

, the instruction was arg uably correct in that technical sense. N onetheless, we do not endorse the instruction, as without further ex planation, it w as imprecise
at the very least. I mprecision, however, is not the equivalent of clear and obvious error.

More sig nificantly

, when viewed i n its entirety

, the instruction w as not misleading or i n adequate. Althoug h the word “may ” rendered the f ir s t h alf o f the instruction vag ue, the last sentence ex plicitl y r equired the jury to find that A n d e r s o n k n e w h i s ac t i o n s c o n s t i t u t e d c o p y r i g h t infring ement for the jury

to convict. I ndeed, this standard is
arg uably more string e nt than what Liu requires, as it r equired the jury to fin d t h a t he specifically knew that his actions constituted “ copy

rig h t infring ement” in order to convict, rather than the m o r e g eneraliz ed k nowledg e that h e wasU N I T E D S T A T E S V

. A

N D E R S O N 18

violating a leg al d

u t y

. 8 This lang uag e materially disting uishes this case from Liu
, where the district cou rt essentially instructed t h e j ury that it could convict the defendant as long as it f

ound that he had the g e neral intent to copy

. Althoug h the district court may have misspoken when

r e a ding the instruction to the jury

, it directed the jury to the written copies of the instructions that w ere pr o v i ded to the jury immediately before t h e jury announced that it h ad reached the verdict.

Moreover, any error did not affect substantial rig hts or the fairness, integ rity or p ublic reputation of the proceeding s. I n contex t, it is apparent that there was no mis u n d erstanding about the meaning of the instruction. The g overnment referred to the last sentence of the instruction in its closing
arg ument, asking : “ did the d efendant know t h a t his actions constituted copy

rig ht infring emen t ? Of course he knew.” Defense counsel also invoked the c o r rect standard, stating

8 In d eed

, in an alo g o u s c o n t ex ts, w e h av e f o u n d th at a sp ecif

ic in ten t req u irem en t o n ly req u i red th at t h e def en d an t k n ow th at h is o r h er co n d u ct

w as u n law f

u l rath er th an th at h e o r sh e w as v io latin g a sp ecif i c statu to ry

o r reg u lato ry p ro v isio n

. S ee Un ited S ta tes v. Mo u sa vi
, 6 0 4 F

. 3 d 1 0 8 4
, 1 0 9 4 (9 th Cir. 2 0 1 0 ) (“ [W ]e co n clu d e th at ‘w i l l f u ln ess’ u n d er [th e In tern atio n al Eco n o m ic Em erg en cy P o w ers A ct] req u i res th e g o v ern m en t to p ro v e b ey o n d a reaso n ab le d o ub t t h at th e d ef en d an t acted w i th k n o w l ed g e ‘ th at h is co n d u ct w as u n law f u l ,’ b u t n o t th at th e d ef

en d an t w as

aw are o f a sp ecif

ic licen sin g req u irem en t.” (citatio n o m itt e d ) ) ; Un ited S ta tes v. Ea sterd

a y , 5 6 4 F .3 d 10 0 4, 1 0 0 6 (9 th Cir. 2 0 0 9 ) (“ [I]f y o u k n o w th at y o u o w e tax es an d y ou d o n o t p ay

th em , y o u

h av e acted w illf

u lly .”). T h e f ollo w in g i n stru ctio n , ref

eren ced i n U

n ited S ta tes v. Cro ss , 8 1 6 F.2 d 2 9 7 (7 th Cir. 19 8 7 ), th u s accu rately states th e law : “ th e w o r[d ] ‘ w illf u lly ’

as u sed i n th e statu te m ean s th e act w as co m m itted b y a d e f

en d an t

v o lu n t arily

, w ith k

n o w led g e th at it w as p ro h ib ited b y law

, an d w i t h t h e p u rp o s e o f v io latin g t h e l a w , an d n o t b y m istak e, accid en t o r i n g o o d f aith .” Id

. at 3 0 0 (alteratio n

m ark s o m itted ).U N I T E D S T A T E S V

. A

N D E R S O N 19

that Anderson “must h ave known his a ctions constituted a copy rig ht infring ement in o rder for y ou to f i n d h e acted willfully .” There was also overwhelming ev i d e nce that Anderson acted with the r equisite knowledg e that his actions

were unlawful, including h is admissions that he: (a) only resorted to selling un a uthoriz ed software after d etermining that he d id not have the resources to pursue a leg itimate deal with Adobe; (b) had b een told by his customers that w hat he

was doing w as i l l eg a l, but continued to do it; and (c) knew that his customers were not using the d i s c s for backup
purposes.

Thus, evalua t i ng the instructions as a whole, a ny error

was neither “clear and o bvious” nor substantial or prejudicial. Consequently

, the district court’s w illfulness instruction did not constitute plain error.

I I I

Prior to trial, Anderson filed a motion i n l imine seeking
to p reclude the g o vernment from introducing “uncharg ed but alleg edly improper c onduct,” including ev i d e nce that: (1) Morris purchased a copy of Adobe F ireworks from Anderson; and ( 2) Anderson possessed o ther discs containing Adobe software. He arg ued that the evidence was n o t admissible under F ederal Rule of Evidence 404(b) as intrinsic evidence of the crime, and a l t e r n a tively

, that it should be ex cluded under Rule 403. The district court d enied the motion, finding that the evidence was “intrinsic” to A nderson’s “ business model,” completed a

n ex p lana t i o n of Anderson’s conduct a nd business plan, and was not u n f airly prejudicial. AndersonU N I T E D S T A T E S V

. A

N D E R S O N 20

contends that the district court erred. 9 “W e review a district court’s e videntiary ruling s fo r a n abuse of discretion and its interpretation of the Federal Rules of Evidence de novo.” United States v. W

a ter s , 6 2 7 F .3d 3 45, 351–52 (9th Cir. 2010) (emphasis omitted).

A

“Other act” evidence that is “inex tricably inte r twined” with a charg e d offense is ind e p e n d ently admissible and is

ex e mpt from the requirements of Rule 404(b). U nited States

v. Dorsey
, 677 F

. 3d 944, 951 (9th Cir. 2012); accord F e d. R. Evid. 404(b) advisory committee’s notes (stat i n g that Rule 404(b)’s r equirements do “ n ot ex tend to evidence of acts which are ‘intrinsic’ to the charg ed offense”). Such intrinsic evidence includes evidence c o n stituting “a part of the transaction that se rves as the b asis for the criminal charg e.” Dorsey
, 6 77 F

. 3d a t 9 51 (internal quotation m a r ks omitted). W e have found, for ex am ple, that contemporaneous uncharg e d drug transactions may be admissible on this basis. United States v

. Vizcarra-Martinez
, 66 F .3d 1 006, 1012 (9th Ci r

. 1995). This is because Rule 404(b) does not a pply “when offenses committed as part of a s i ng le criminal episode become other acts simply because th e defendant is indicted for less than a ll of his a c tions.” Id. (internal quotation marks omitted). A transaction that is far removed in time from the charg ed transaction, however, cannot be considered “a p art of” the charg ed transaction. See United States v. DeGeorge , 380 F

. 3d 1203, 1220 (9th Cir. 2004).

9 On ap p eal, A n d erso n d o es n ot ch allen g e th e ev id en ce th at th e d i scs h e

so ld co n tain ed p lu g

- in s, o r th at h e p o ssessed th e k ey g en erato r.U N I T E D S T A T E S V

. A

N D E R S O N 21

I ntrinsic evidence, however, a lso includes evidence that is “necessary to p ermit the prosecutor to offer a coherent a nd comprehensible story reg arding the c ommissi o n of the crime.” Dorsey
, 677 F

. 3 d at 951 (alteration and internal quotation marks omitted). This is because “[ t] he jury cannot be ex pected to make its d e cision in a void – without knowledg e of the ti m e , p l a ce, and circumstances of the acts which f o r m the basis of the charg e.” Vizcarra-Martinez
, 66 F .3d a t 1 013 ( orig inal alteration marks and quotation marks o mitted). This includes c ircums tantial evidence

ex p l ai n ing the g eneral nature of a defendant’s business activity and providing a contex t in w hich t h e transactions at issue took p lace. United S tates v. King
, 200 F .3d 1207, 1215 (9th Cir. 1999). W here the evidence, however, is not part o f the charg ed transaction and the prosecution would encounter little difficulty in presenting the evidence relevant to its case ag ainst the defendant without it, th e evidence is not admissible as being intrinsic to the charg ed offense. See id.

Here, the F ireworks sale, which occurred six months a fter the charg ed c onduct took p lace, is a rg uably too far removed in time to constitute a part of t h e c h arg ed transaction. 1 0 Nonetheless, the evidence of both the F ireworks sale and the Adobe prog ra m s that Anderson possessed when he was

a r rested do help e x plain Anderson’s business operations, including his manufacturing proc ess. Anderson arg u es that the g overnment’s case w as “complete” without this evidence and that it was unnecessary

. Ho w ever, the larg er and more sophisticated his operation was, the more likely it was that he

1 0 T h e Firew o rk s sale w as n ot ch arg eab le o n th e sam e b asis as th e o th er sales b ecau se 1 8 U.S.C. § 2 3 1 9(b )(1 ) req u ires rep ro d u ctio n o r distrib u tio n

o f a m in i m

u m o f ten co p ies to su

b j ect an in d iv id u al to a sen ten ce o f u p to f iv e y ears o f

im p riso n m en t.U N I T E D S T A T E S V

. A

N D E R S O N 22

knew what he was d o i n g was illeg a l. Moreover, the F ireworks sale also ex plained the circumstances leading u p to his arrest, where the g overnment obtained ad d i t i o n al evidence that A nderson is not disputing

, including the blank discs, key
g enerator disc, and plug -ins disc. Consequently

, the evidence

was intrinsic to the charg e d conduct in that it was reasonably

n ecessary for the prosecution to tell a clear a n d comprehensible story

.

B

A district court has d iscretion to ex c l u d e otherwise

r e levant evidence under Rule 403 “if its probative value is substantially outweig hed b y the d a n g e r of unfair prejudic e, confusion of the issues, or misleading the jury

, or b y considerations of undue delay

, wast e o f time, or needless presentation of cumulative evidence.” W a t er s , 627 F .3d at 353 (quoting F ed. R. Evid. 403). “ Unfai r p rejudice” is an “undue tendency to sug g est decision on a n improper basis, commonly

, thoug h not n ecessarily

, a n emotional one.” United S tates v. Hankey

, 203 F .3d 1 160, 1172 (9th Cir. 2 000) (quoting F ed. R. Evid. 403 advisory committee’s note). The Rule “requires that the probative v a l u e of the evidence be compared to the articulated reasons for ex clusion and permits

ex c lusion only if one or more of those reasons ‘substantially outweig h’ the probative value.” Id.

The e vidence h ere was n ot u nfair l y prejudicial. I t was very similar to the c harg ed conduct. I t was probative because it showed the scale of Anderson’s operations and c onduct. Nonetheless, it was not particularly damning in lig h t of all the other evidence directl y relating to the charg ed conduct. Consequently

, any pre

j u d ice was fairly insig nificant. Moreover, it was not the ty p e o f “ bad act” evidence thatU N I T E D S T A T E S V

. A

N D E R S O N 23

would sug g est that the jury should decide t h e c a se on an improper emotional basis. Unlike evidence of drug sales, for

ex a mple, evidence of software sales does not have a strong prejudicial impact because there is nothing inherently wrong with selling software, which i s u s u a l l y sold leg ally

. I n any event, the district court did not abuse its discretion by finding that the evidence was not unfairly prejudicial.

I V

The district c ourt found that Adobe w a s the victim o f Anderson’s crime a

nd calculated restitution by multiply ing the number of copies Anderson sold by Adobe’s retail price. Anderson claims that the district court erred, arg uing that the
court should have: (a) used the price he charg ed his customers because they were the real victims and Adobe’s loss is speculative; (b) used Adobe’s lost profits instead of its retail price because lost profit is a more accurate measure of actual loss; and (c) d iscounted the amount o f r estitution by the number of r eturns. “W e review the leg alit y o f a restitution order, including the district court’s v a l uation method, de novo.” United States v. Y eung , 6 7 2 F. 3 d 594, 600 (9th Cir. 2012). W e review the amount for abuse of discretion if “the order is within the statutory bounds.” Id. (internal quotation

m a r k s o mitted). We review the district court’s “factual finding s supporting an order of restitution for clear error.” Id.

A

The presentence report recommended calculating the loss
at “ a t least $247,144,” representing Anderson’s total Priceg rabber sales mul tiplied by the retail value of the authoriz ed software. The loss calculation was relevant both
to Anderson’s Sentencing Gui d e lines’ calculation and theU N I T E D S T A T E S V

. A

N D E R S O N 24

a m ount of restitution. Anderson o bjected to using the ret a i l value o f Adobe’s software (as opposed to the p rice he charg ed) and arg ued that he should receive credit for returns. The g overnment ag r eed w it h t h e presentence report but eventually conceded that A n d e r son should g et credit for the returned software in the a mount o f Anderson’s price. Anderson’s counsel arg ued that a n y returns should be offset at Adobe’s retail price if that was the price b eing used to set the amount of the loss. I n response to A nderson’s arg uments, the probation o fficer noted that Anderson’s conduct affected Adobe i n o t her way s, c ausing it to spend additional time on customer support and causing damag e to its reputation.

The district c ourt found that the loss amount ex ceeded $200,000, pursuant to the Guidelines commentary , subjecting Anderson to a sentencing enhancemen t under U.S.S.G. § 2B 5

. 3 note 2(A)(i). The court then imposed restitution i n the amount o f $247,144, specifically declining to offset the returns because “the victim in this case is really Adobe.”

B

Under t h e Mandatory V ictims Restitution A ct (“MVRA”), 18 U .S.C. § 3663A, “a court must order a defendant to make restitution to a victim of certain specified offenses wi t hout considering the defendant’s economic circumstances.” Y

eung , 672 F .3d at 600. “The MVRA defines the word ‘victim’ as ‘a person d i re c tly a nd
prox imately harmed as a result of the commission of an offense for which restitution may be ordered.’” Id. (quoting § 3663A(a)(2)). The g oal o f restitution under the MVRA is
to make the v ictim whole. Id. a t 600–01. Consequently

, any award is limited to the v ictim’s “actual losses.” United States

v. Fu Sheng Kuo
, 620 F

. 3d 1 1 5 8
, 1 1 65–66 ( 9th Cir. 2010).U N I T E D S T A T E S V

. A

N D E R S O N 25

According ly

, “the district court may not order restitution to reflect D efendants’ i l l

- g otten g ains.” Id. at 1166. The
g overnment has the burden of p roving the amount of the loss by a preponderance of the evidence. Y eung , 672 F .3d at 601 (citing § 3664(e)).

W e m ay uphold a r estitution order “where the distric t court fails to make pertinent factual finding s

. . . when the basis of the district court’s calculations is clear.” Id. at 604. I ndeed, the MVRA affords the district court a deg ree o f flex ibility in assessing the victim’s actual losses; nonetheless, “the district court ma y u t iliz e only evidence that p ossesses sufficient indicia of reliabilit y t o support its probable
accuracy .” United States v

. W aknine

, 543 F .3d 546, 557 (9th Cir. 2008) (alteration and quotation marks omitted). Additionally

, a district court should not rely on its calculation of the loss under the Sentencing Guidelines to determine the
amount of restitution as the two meas u r e s serve different
purposes and utiliz e different calculation methods. United States v. Gossi
, 608 F

. 3d 574, 580–82 (9th Cir. 2 010) (“Sentencing

, unlike r estitution, focuse s on the criminal defendant.

. . . Restitution clearly focu ses on the victim
, not the individual defendant.”). “[ R] emand is appropriate where the restitution award lacks an adequate e videntiary basis a nd the district cour t fa i l ed to ex plain its reasoning .” Y e ung , 672 F .3d at 602.

Anderson relies on United States v. Chalupnik

, 514 F .3d 7 4 8 ( 8 t h Cir. 2008). I n that case, the defendant was a p o s t office janitor who h ad taken thousands of undeliverable CDs and D V D s o r ig inally sent by B MG and sold them to used

r e c ord stores. Id. at 750. The d istrict court impo s e d restitution in the amount of the defe n d a nt’s g r oss revenues. Id. at 751. The Eig hth C i r c u i t a g reed that B MG could be aU N I T E D S T A T E S V

. A

N D E R S O N 26

victim even thoug h it was not the owner of the copy rig hts a nd mig ht not be able to sue the defendant f or copy rig ht i n f r i ng ement. Id. a t 7 5 3–54. However, the court rejec t e d district c ourt’s use of the d efendant’s “ill-g otten g a ins” as the

measure for B MG’s loss b ecause any loss was suffered b y the market of retailers, in a d d i t ion to B MG and the copy rig ht

owners. Id. at 754–55. The court also noted that “for g oods held by a merchant for sale, lost profits rather than lost sales

revenues are the proper measure of ‘act u al loss.’” Id. a t 755. Moreover, the court stated that any calculation of lost sales o r lost profits may not be “based entirely upon speculation.” Id. (internal quotation marks omitted).

The parties also cite the D.C. Circuit’s recent d ecision in United States v. Fair
, 699 F

. 3d 508 (D.C. Cir. 2012). L i ke the present case, Fair involved a d e f e n d ant who was convicted o f sellin g illeg al copies of A dobe software. Id. at 510. T he district court ordered the defendant to pay restitution corresponding to his infring ing sales. Id. at 511–12. Reviewing the case law, the D .C. Circuit ex p lained:

I n cases involving copy

rig h t infring ement a

nd fraudulent sale s , the victim’s actual loss ty pically equates to the p r ofit the victim lost

on the sales that were diverted from the victim

as a result of the d efendant’s infring ing sales. Under this lost-profits on diverted-sa les theory

, the g overnment must offer sufficient evidence to e stablish both th e p rofit marg in
per sale and the numbe r o f sales lost. I f the record does not demonstrate that the counterfeit g oods ever reached the market, o r that their introductio n to the market in fact “thwarte d ” a ctual sales o f the victim’sU N I T E D S T A T E S V

. A

N D E R S O N 27

product, courts have held that n o a ctual loss

can be shown and restitution ther efore is inappropriate. I n this reg ard, the actual loss to the displaced (authent i c) seller is the profit l o s t from the displaced sales – not the retai l value of the g oods that would have been sold. The g r oss proceeds that the defendant collects from infring ing sales are similarly an i nappropriate g a

ug e of the victim’s l o s t profits.

Id. at 514 ( citations o m i t t ed). The court also rejected the relia nce on lost opportunity sales w here there “was no evidentiary b asis on which t h e d istrict court could find that had [ the defendant’s] customers not p urchased pirated Adobe software from him a t a g reatly r e d u ced price, all or any portion of them would have purchased full-priced versions from A dobe.” Id. at 515. A ccording ly

, the court v acated the district court’s restitution order. Id. at 518. 1 1

Consistent with our own restitution precedents, as well a s Chalupnik and Fair
, we hold that res t i t u t i on in a criminal
copy rig ht c ase must reflect the victim’s actual losses, not the

11 S ee also U n ited Sta tes v. Hu d

so n , 4 8 3 F.3 d 70 7
, 7 1 0 (1 0 th Cir. 20 0 7) (ex p ressin g s k ep ticism o f th e su g ge s t io n th at a p u rch aser o f d isco u n ted

co u n terf eit so f tw are w ou ld b e w illin g to p u rch ase au th en tic s o ft w a re at f u ll p rice); Un ited S ta tes v. Beyd o u n , 4 6 9 F.3 d 10 2 , 1 08 (5 th C ir. 20 0 6) (co n clu d i n g t

h at th ere co u ld b e n o actu al lo ss f o r in au th e nt i c i t e m s th at

w ere n ev er so l d an d th at th e p ro p er m easu re o f lo ss w as t h e l e g i tim ate sellers’ lo st n et p ro f

it rath er t h an lo st g ro ss pro c e e d s); Un i t ed S ta tes v. Do ve , 5 8 5 F. Su

p p

. 2 d 8 6 5
, 8 7 2

– 73 (W .D. Va. 2 0 0 8 ) (rej ectin g restitu tio n

c a l c u latio n s based o n to tal rev en u e, as op p osed to lo st p ro f its, a n d

assu m p tio n s th at each o f th e d ef en dan t’ s i lleg al tran sf

ers resu l ted in a l ost sale to th e v ictim s).U N I T E D S T A T E S V

. A

N D E R S O N 28

d e f e n d a n t’s g ain. I n most cases, that will consist of th e copy rig ht owner’s lost profits on sales that would have taken place i f n o t for the infring ing conduct. Moreover, the fact that a c onsumer purchased an infring ing copy at a g reatly reduced price is not sufficien t , a l one, to establish that the

consumer would have p u rchased an a u thentic copy at full price.

Here, the district c ourt properly concluded that Adobe

was the p r imary victim of Anderson’s crime. I n h i s b r i ef, Anderson sug g ested that this was e rror, but at oral arg ument, Anderson’s counsel essentially conceded that Adobe was a victim. I ndeed, u n like the victim in Chalupn i k

, Adobe was the copy rig ht owner, n ot a mere r e t a i ler, and thus it was entitled to c ompensation for e ach lost sale. That d oes not necessarily mean, however, that Adobe was the sole victim. To the ex tent that Anderson’s c onduc t directly caused his
customers to suffer actual, quantifiable losses, they may also be victims under the MVRA. Cf. Chalupnik

, 514 F. 3 d at 753–54.

Anderson is correct to the ex tent that he sug g ests that the district court e rred in calculating restitution. Here, the district
court appeared to rely on the Sentencing Guidelines loss calculation in se t t i n g the a mount of restitution. The court also r ejected the parties’ sug g estion that restitution should reflect discounts for any r e t u r n e d products. There was evidence i n t h e record that Adobe suffered other losses, including time spent on customer support and a loss o f
g oodwill, a

nd the district court may h ave refused to apply the discount for returns as a prox y for these losses. A lthoug h the district court’s sentiment is u nderstandable, the MVRA requires more precision. A “back-of-the-envelope” approach simply w il l not do. See United States v. Innarelli

, 524 F .3dU N I T E D S T A T E S V

. A

N D E R S O N 29

286, 294 (1st Cir

. 2 0 0 8 ) (remanding to the district court to

r e c o n s i d e r s e v e r a l p o s s i b l e e r r o r s i n i t s “ r o u g h
approx imation” of the victims’ losses). Consequently

, on this basis alone, the district court’s loss c alculation was

erroneous. 1 2

Althoug h the issue was not raised before the district court, the di s t rict court also erred in using the full r etail price a s opposed to lost profits to calculate the actual loss. Moreover, the district court did not co n s ider whether purchasers o f Anderson’s discounted s o f tware would have, in fact, purchased full price authentic software if A n derson’s software had not been available. These are clear and obvious

errors because th e y are inconsistent with the statutory requirements. The er r ors affected substantial rig hts a nd the fundamental fairness of the proceeding g iv e n that they may have vastly inflated the r estitution in ex cess of Adobe’s actual losses. See Y

eung , 672 F .3d at 602 (citing c ases for the proposition that it is plain error to award restitution in e x cess of the victim’s actual losses); Fu Sheng Kuo
, 620 F .3d at 1165 (determining that the district court plainly erred where

we could not determine whether the amount of res t i t u t i on

ex c e ede d t h e victim’s actual losses under its incorrect calculation method).

12 W e ex p ress n o v iew as t o w h eth er tim e sp en t o n cu sto m er su p po rt an d

a lo ss o f g o o d w ill can co n stitu te actu al lo s s u

n der th e MVRA
, b u

t w e n o te th at t h e issu e is n o t f

ree f ro m d o u b t

. S ee C ath arin e M. Go od w in

, Fed era l Crimin a l Restitu t io n § 6 :2 2 (2 0 13 ) (“ [T ]h e lo ss m u st b e tan g ib le, actu al,

o r ‘ o u t- o f

- p o ck et.’ It can n o t i n clu d e in tan g ib le asp ects o f h arm th at are

so m etim es in clu d ed in civ il d am ag es o r Gu i d elin es sen ten cin g , s u c h as in ten d ed h arm , risk o f h arm , o p p o rtu n ity co sts, o r sp ecu l ativ e h arm .” (citatio n s o m itted )).U N I T E D S T A T E S V

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W e nonetheless a c knowledg e th a t t h e district court did
not have the b e n e f

i t of the Fair decision or our g uidance in this specific c ontex t. According ly

, we “vacate the restitution

o r d e r and remand the case to the district court on an o p e n record to allow for the r e c alculation of restitution.” F u Sheng Kuo
, 620 F .3d at 1166. Any r estitution awarded to Adobe for lost sales may only reflect Adobe’s lost profits for sales that were actually

diverted. 1 3

V

W e recog n iz e that o ur application of Liu in t h i s c a se arrives a t a different r esult than we reached in that case. That is so because the facts of t h i s case are materially different from those in Liu . I n Liu
, the district c ourt f ailed to g ive the parties’ ag reed-upon instruction and essentially told the jury that it could convict the defend a n t i f i t found that he intentionally made the c opies. Here, althoug h the instruction in this case was imperfect, the district court crafted the instruction in consultation with the p ar t ies and with the acquiescence of Anderson’s c ounse l

. F urthermore, it required th e j u r y to find that Anderson knew he was infring ing Adobe’s copy r ig ht in order t o convict him. Consequently

, there was no p l a i n error. Similarly

, because the e vidence of Anderson’s uncharg ed activities was intrinsic
to the c harg ed conduct and was n o t u n duly prejudicial, the district court did not err in admitting the evidence.

13 A lth o u g h A n d erso n d o es n o t raise th e issu e on ap p eal, w e n o te th at th e d istrict co u rt w as co rrect to rej ect h is su g g estio n th at th e p ro p er v alu atio n

m eth o d w as th e am o u n t th at h e ch arg ed h is cu sto m ers. S ee Fu S h en g Ku o , 6 2 0 F.3 d at 1 16 6

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W e f urther r ecog n i z e t h at a

pply ing the MVRA can be complex and somewhat burdensome. The MVRA requires restitution for certain v ictims but also requires some precision wh e n calculating r estitution. Speculation and roug h justice

are not permitted. See Innarelli

, 524 F .3d a t 2 9 4. N o netheless, ex act precision is n ot r equired and district courts do have a deg ree of flex ibility in accounting fo r a victim’s complete losses; thus, a “reasonable estim ate” will suffice. Goodwin, supra , § 7:4. Ultimat e l y , h owever, it is the
g overnment’s burden to establish that the victim suffered an actual loss in a quantifiable amount. Where the alleg ed loss is not quantifiable to any deg ree o f c e rtainty

, the
g overnment’s b urden has not been satisfied, and no rest i tution should b e ordered. Cf. 18 U .S.C. § 3 6 6 A (c)(3)(B ). A s we had not previously set forth these standards in this contex t, the district court understa n d a b ly f ailed to apply them. According ly

, w e vacate the restitution or d e r a nd remand to the district court for recalculation of restitution.

A F F I R M E D , I N P A R T , V A C A T E D A N D REMANDED, IN P ART.