Source: https://www.ussc.gov/federal-register-notice-and-request-public-comment-notice-public-hearing
Timestamp: 2019-04-20 19:29:02+00:00

Document:
ACTION: Notice of: (1) proposed options for promulgating a temporary, emergency guideline amendment revising the guideline for offenses involving electronic copyright infringement; and (2) intent to re-promulgate as a permanent amendment to the sentencing guidelines the temporary emergency guideline amendment relating to telemarketing fraud offenses. Request for Comment. Notice of public hearing.
SUMMARY: (1) The Commission is preparing to promulgate a temporary, emergency guideline amendment to §2B5.3 (Criminal Infringement of Copyright or Trademark) and accompanying commentary to implement the directive contained in section 2(g) of the No Electronic Theft (NET) Act of 1997. This notice sets forth three options for implementing that directive.
The proposed amendment is presented in one of two formats. First, the amendment is proposed as specific revisions to guideline §2B5.3 and accompanying commentary. Bracketed text within a proposed amendment indicates a heightened interest on the Commission's part for comment and suggestions for alternative policy choices; for example, a proposed enhancement of  levels indicates that the Commission is considering, and invites comment on, alternative policy choices regarding the appropriate level of enhancement. Similarly, a bracketed specific offense characteristic means that the Commission invites comment on whether the provision is appropriate as a specific offense characteristic, or whether it should be considered as a departure factor, or not at all. Second, the Commission has highlighted certain issues for comment and invites suggestions for how the Commission should respond to those issues.
Recently, Congress clarified the Commission's emergency amendment authority to implement the directive in the NET Act. The Commission must implement that directive within 120 days of the enactment of the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 (not later than April 6, 2000).
(2) The Commission proposes to make permanent the temporary, emergency guideline amendment to §2F1.1 (Fraud and Deceit) and §3A1.1 (Hate Crime Motivation or Vulnerable Victim) promulgated by the Commission in September 1998. This emergency amendment was issued to implement section 6 of the Telemarketing Fraud Prevention Act of 1998. The Commission proposes to re-promulgate as a permanent amendment the temporary emergency telemarketing fraud amendment without change.
DATES: (1) The NET Act temporary, emergency amendment.--Comment on the proposed amendment should be received by the Commission not later than January 26, 2000. After considering any public comment, the Commission plans to promulgate a temporary emergency amendment not later than April 6, 2000. (2) The telemarketing fraud amendment.--Comment on the proposed re-promulgation of the telemarketing fraud amendment should be received not later than March 10, 2000. (3) Public hearing.--The Commission has scheduled a public hearing for March 23, 2000, at the Thurgood Marshall Federal Judiciary Building, One Columbus Circle, N.E., Washington, D.C. 20002-8002 (time to be announced). The scope of the hearing is expected to include the proposed re-promulgation of the telemarketing fraud amendment described herein and any other permanent amendments that may be proposed for action in this amendment cycle ending May 1. (The Commission may promulgate a temporary, emergency guideline amendment to implement the NET Act before the public hearing on March 23.) A person who desires to testify at the public hearing should notify Michael Courlander, Public Affairs Officer, at (202) 502-4590 not later than March 10, 2000. Written testimony for the hearing must be received by the Commission not later than March 16, 2000. Submission of written testimony is a requirement for testifying at the public hearing.
ADDRESSES: Send comments to: United States Sentencing Commission, One Columbus Circle, N.E., Suite 2-500 South, Washington, DC 20002-8002, Attention: Public Information-Public Comment.
SUPPLEMENTARY INFORMATION: Reports and other additional information pertaining to the proposed amendments described in this notice may be accessed through the Commission's website at www.ussc.gov.
AUTHORITY: 28 U.S.C. § 994(a), (o), (p), (x); USSC Rules of Practice and Procedure 4.3, 4.4.
1. Synopsis of Proposed Amendment: The No Electronic Theft (NET) Act of 1997, Pub. L. 105-147, directs the Commission to: (1) ensure that the applicable guideline range for a crime committed against intellectual property (including offenses set forth at section 506(a) of title 17, United States Code, and sections 2319, 2319A, and 2320 of title 18, United States Code) is sufficiently stringent to deter such a crime; and (2) ensure that the guidelines provide for consideration of the retail value and quantity of the items with respect to which the intellectual property offense was committed.
The NET Act gave the Commission emergency authority to promulgate temporary amendments necessary to implement the Act's directives. The recently enacted Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 requires the Commission to promulgate the emergency amendments within 120 days after the date of the enactment of that Act, i.e., by April 6, 2000.
Option 1 provides the most direct and straightforward manner for implementing the directive to provide for consideration of the retail value of the infringed item. Option 1 amends the copyright and trademark infringement guideline to provide a sentencing enhancement based on a calculation of the retail value of the infringed item multiplied by the quantity of infringing items for all copyright and trademark offenses. As presented, it does not incorporate any additional enhancements or adjustments for aggravating or mitigating factors, nor does it propose any change in the base offense level (although this, too, could be made a part of that option).
An arguable disadvantage of Option 1 is that it likely would overstate the pecuniary harm caused to copyright and trademark owners in the majority of cases currently sentenced under the guideline because it presumes: (1) a one-to-one correlation between the sale of infringing items and the displaced sale of legitimate infringed items, which is unlikely in most cases, and (2) that the pecuniary harm resulting from each lost sale is equal to the retail value of the infringed item. Proposed Application Note 3 would address substantial overstatement of pecuniary harm through an invited downward departure provision. That proposed application note would also provide an upward departure provision for cases in which the pecuniary harm is substantially understated.
(1) (A) Except as provided in subdivision (B), if the retail value of the infringed items multiplied by the quantity of infringing items exceeded $2,000, increase by the number of levels from the table in §2F1.1 (Fraud and Deceit) corresponding to that amount.
(B) If (i) the defendant was convicted of an offense under 18 U.S.C. § 2319A; and (ii) the retail value of the infringing items multiplied by the quantity of infringing items exceeded $2,000, increase by the number of levels from the table in §2F1.1 (Fraud and Deceit) corresponding to that amount.
Statutory Provisions: 17 U.S.C. § 506(a); 18 U.S.C. §§ 2318-2320, 2511. For additional statutory provision(s), see Appendix A (Statutory Index).
'Infringed items' means the copyrighted or trademarked items with respect to which the crime against intellectual property was committed.
'Infringing items' means the items that violate the copyright or trademark laws (not the legitimate items that are infringed upon).
Background: Subsection (b)(1) implements section 2(g) of the No Electronic Theft (NET) Act of 1997, which directs the Commission to ensure that the guidelines provide for consideration of the retail value and quantity of the items with respect to which the intellectual property offense was committed.
Section 2511 of title 18, United States Code, as amended by the Electronic Communications Act of 1986, prohibits the interception of satellite transmission for purposes of direct or indirect commercial advantage or private financial gain. Such violations are similar to copyright offenses and are therefore covered by this guideline.".
Option 2 is a revised proposal submitted by the Department of Justice in August 1998 in response to the Commission's May 1998 Federal Register notice (see 63 Fed. Reg. 28202 (1998)) and has not previously been published in the Federal Register. Like Option 1, Option 2 amends the copyright and trademark infringement guideline to provide an enhancement based on a calculation of the retail value of the infringed items multiplied by the quantity of infringing items for all copyright and trademark offenses (except offenses involving a copyright violation of 18 U.S.C. § 2319A, for which there is no infringed item). In contrast to Option 1, the Department proposed a 2-level reduction in offense level (but not less than offense level 6) for offenses involving infringing goods with a price less than 10% of the average retail price of the infringed item. According to the Department of Justice, this downward adjustment is proposed to address the likelihood that "relying on the price of the infringed-upon item may lead to an inappropriately high economic harm calculation where there is a dramatic price differential between the genuine and illegal products." The Commission has bracketed options for this reduction that would provide a 2-level downward adjustment for cases in which the price of the infringing item is [10%] [20%] [30%] [40%] [50%] of the retail price of the infringed item.
In addition, Option 2 includes adjustments for two aggravating factors and one mitigating factor. It provides a 2-level increase for offenses involving "online electronic infringement," and a 2-level increase for offenses involving a "reasonably foreseeable risk to public health or safety," with a minimum offense level of level 13. It also provides a 2-level decrease (but not less than offense level 6) if the offense was not committed for purposes of commercial advantage or private financial gain.
(1) Except as provided in subsection (2), if the infringed value exceeded $2,000, increase by the number of levels from the monetary table in §2F1.1 (Fraud and Deceit) corresponding to that value.
(2) If (A) the offense involved a copyright violation under 19 U.S.C. § 2319A; and (B) the infringing value exceeded $2,000, increase by the number of levels from the monetary table in §2F1.1 corresponding to that value.
(3) If the offense involved online electronic infringement, increase by 2 levels.
(4) If (A) the offense was not committed for commercial purpose or private financial gain, or (B) subsection (1) applies and the offense involved greatly discounted merchandise, decrease by 2 levels, but not below level 6.
(5) If the offense involved a reasonably foreseeable risk to public health or safety, increase by 2 levels. If the resulting offense level is less than level , increase to level .
'Infringed value' means the average retail price of the infringed-upon item multiplied by the number of the infringing items. Average retail price of the infringed-upon item means the average price in the retail market at the time of the offense, which may be different from the Manufacturer's Suggested Retail Price. In cases involving the interception of a communication in violation of 18 U.S.C. § 2511, the infringed value means the price the user would have paid if that communication had been obtained lawfully.
'Infringing value' means the price of the infringing item multiplied by the number of infringing items.
'Greatly Discounted Merchandise' means infringing goods whose price is less than [10%][20%][30%][40%][50%] of the average retail price of the infringed-upon item.
'Online Electronic Infringement' includes the unlawful producing, reproducing, distributing, selling, performing, or trafficking in copyrighted or trademarked articles or services via an electronic bulletin board, a worldwide web site or any online facility.
'Commercial advantage or private financial gain' includes receipt, or expectation of receipt, of anything of value, including the receipt of other protected works or products.
2. In some cases a 2-level enhancement may not reflect the seriousness of the risk to public health or safety. In such cases, an upward departure may be warranted.
Background: This guideline treats copyright and trademark violations much like fraud. The enhancements in subsections (b)(1) and (2) are intended as an approximate determination of the aggregate pecuniary harm resulting from trafficking in goods or services that violate the copyright or trademark laws. The reduction in subsection (b)(4) for greatly discounted merchandise is appropriate because in such cases there is some reduced likelihood of loss of legitimate sales.
The Electronic Communications Privacy Act of 1986 prohibits the interception of satellite transmission for purposes of direct or indirect commercial advantage or private financial gain. Such violations are similar to copyright offenses and are therefore covered by this guideline.".
Like Options 1 and 2, Option 3 amends the copyright and trademark infringement guideline to provide for consideration of the retail value of the infringed item in all copyright and trademark cases, but that value ultimately might not be used in every case. For some cases, the retail value of the infringing item is used to calculate the monetary adjustment because that value is the more accurate measure of the pecuniary harm to the intellectual property owner for those cases.
Option 3 directs the court to use the retail value of the infringed item multiplied by the quantity of infringing items in any case in which: (1) the quality and performance of the infringing item are identical to, or substantially indistinguishable from, the infringed item; (2) the retail value of the infringing item is difficult or impossible to determine; or (3) the offense involves the illegal interception of a satellite cable transmission in violation of 18 U.S.C. § 2511; or any other case in which the government provides sufficient information to demonstrate that the retail value of the infringed item provides a more accurate assessment of pecuniary harm to the copyright or trademark owner than the retail value of the infringing item. The court would use the retail value of the infringing item multiplied by the quantity of infringing items (the calculation that currently exists in §2B5.3) for all other copyright and trademark offenses.
Option 3 implements the second directive of the NET Act (to provide for consideration of the retail value of the infringed item) by permitting the government to show, for any intellectual property offense, that such value is the more accurate assessment of lost sales to the intellectual property owner than is the use of the retail value of the infringing item. An arguable advantage of Option 3 over Options 1 and 2 is that, by using the retail value of the infringing item in some cases, such as those involving obviously inferior counterfeited goods, it reduces the likelihood that the pecuniary harm would be overstated when the sale of a counterfeit item is not likely to displace the sale of a legitimate item on a one-to-one basis.
Option 3 also presents a number of enhancements and adjustments that, as mentioned above, take into account aggravating and mitigating factors that may be present in an infringement case. For ease and clarity of presentation, they are presented for the most part as specific offense characteristics. However, there is an issue for comment following Option 3 that addresses whether the Commission should adopt these as departure provisions, or not at all.
1. Increase the base offense level from level 6 to level 8. A 2-level increase in the base offense level would bring the infringement guideline more in line with the fraud guideline, §2F1.1. Both guidelines have a base of offense level of level 6; however, the fraud guideline contains a 2-level enhancement for more than minimal planning, which applies in the great majority of fraud offenses. A similar enhancement does not exist in the infringement guideline, but, based on a review of cases sentenced under the guideline, if a more than minimal planning enhancement did exist, it similarly would apply in the majority of infringement cases. Thus, the majority of fraud offenses effectively start at an offense level of level 8, whereas infringement cases start at an offense level of level 6.
2. Provide an enhancement of 2 offense levels (or suggested upward departure) if the infringing item was distributed by the offender before the copyright or trademark owner commercially released the infringed item. If the infringing item is a close substitute for the infringed item, the harm is exacerbated by denying the copyright or trademark owner the front end of the market. If the infringing item is substantially inferior, the harm is exacerbated by damaging the reputation of the copyright or trademark owner.
3. Provide an enhancement of 2 offense levels (or suggested upward departure) if purchasers of the infringing item were deceived to believe that they were purchasing the legitimate infringed item. This enhancement takes into account harm to the consumer who is actually deceived, over and above the harm to the copyright or trademark owner. However, this enhancement may present significant proof problems. An attempt to ameliorate those problems by lowering the standard for triggering the enhancement to something less than actual deception, such as the reasonable likelihood of deception, risks promulgating an enhancement that is triggered merely by an element of the offense (see 18 U.S.C. § 2320(e)).
4. Provide a downward adjustment of 2 offense levels, but not less than the base offense level, (or suggested downward departure) if the offense was not committed for commercial advantage or private financial gain. This proposed adjustment is identical to one included in Option 2 and takes into account the different statutory penalty structures established for these offenses by the NET Act. The Commission has been unable to determine the frequency with which such a downward adjustment would apply because the statutory change criminalizing such conduct was enacted in December 1997, and has formed the basis for a very limited number of prosecutions.
5. Provide an enhancement of 2 offense levels (and a minimum offense level of level 12) if the offense involved the manufacture, importation, or uploading of infringing items. The uploading prong is somewhat similar to the 2-level enhancement proposed in Option 2 for online electronic infringement. The Commission estimates that this enhancement would apply in approximately 60% of the cases currently sentenced under §2B5.3. Defendants who manufacture, import, or upload infringing items arguably are more culpable because they initially place infringing items in the stream of commerce, thereby enabling many others to infringe the copyright or trademark.
6. Provide an enhancement of 2 offense levels [and minimum offense level of level 13 as proposed in Option 2] (or suggested upward departure ) if the offense involved the conscious or reckless risk of serious bodily injury. The Commission's review of cases sentenced under the guideline suggests that this enhancement rarely would apply, which might argue for taking this factor into account as a departure provision, if at all.
7. Provide an application note that expressly provides that §3B1.3 (Abuse of Position of Trust or Use of Special Skill) will apply if the defendant engaged in de-encryption or circumvented some other technological security measure in order to gain initial access to copyrighted material. Alternatively, the Commission could suggest an upward departure or specific offense characteristic for such cases. As stated in the background commentary to §3B1.3, persons who use a special skill to facilitate or commit a crime generally are viewed as more culpable. Based on the Commission's review of cases sentenced under the copyright and trademark infringement guideline, it is anticipated that this adjustment rarely would be applied.
(1) If the infringement amount exceeded $2,000, increase by the number of levels from the table in §2F1.1 (Fraud and Deceit) corresponding to that amount.
'Commercial advantage or private financial gain' means the receipt, or expectation of receipt, of anything of value, including other protected works.
'Infringed item' means the copyrighted or trademarked item with respect to which the crime against intellectual property was committed.
'Infringement amount' means the approximate pecuniary harm to the copyright or trademark owner caused by the offense.
'Infringing item' means the item that violates the copyright or trademark laws.
'Uploading' means making an infringing item available by electronic means with the intent to enable other persons to download or otherwise copy, or have access to, the infringing item.
2. Determination of Infringement Amount.--This note applies to the determination of the infringement amount for purposes of subsection (b)(1).
(i) The quality and performance of the infringing item are identical to, or substantially indistinguishable from, the infringed item.
(ii) The retail value of the infringing item is (I) difficult to determine without unduly complicating or prolonging the sentencing proceeding; or (II) impossible to determine.
(iv) The government provides sufficient information to demonstrate that the retail value of the infringed item provides a more accurate assessment of the pecuniary harm to the copyright or trademark owner than does the retail value of the infringing item.
(B) Use of Retail Value of Infringing Item.--The infringement amount is the retail value of the infringing item, multiplied by the number of infringing items, in any case not covered by subdivision (A) of this Application Note, including a case involving the unlawful recording of a musical performance in violation of 18 U.S.C. § 2319A.
(C) Determination of Infringement Amount in Cases Involving a Variety of Infringing Items.--In a case involving a variety of infringing items, the infringement amount is the sum of all calculations made for those items under subdivisions (A) and (B). For example, if the defendant sold both counterfeit videotapes that are identical in quality to the infringed videotapes and obviously inferior counterfeit handbags, the infringement amount, for purposes of subsection (b)(1), is the sum of the infringement amount calculated with respect to the counterfeit videotapes under subdivision (A)(i) (i.e., the quantity of the infringing videotapes multiplied by the retail value of the infringed videotapes) and the infringement amount calculated with respect to the counterfeit handbags under subdivision (B) (i.e., the quantity of the infringing handbags multiplied by the retail value of the infringing handbags).
(D) Determination of Retail Value.--For purposes of this Application Note, the 'retail value' of an infringed item or an infringing item usually is the retail price of that item in the market in which it is sold.
3. Pre-Release Infringement.--Subsection (b)(2) applies to the distribution of an infringing item before the infringed item is commercially released by the copyright or trademark owner. For example, if the defendant unlawfully videotaped a film at a movie theater, then distributed copies of that videotape before lawful copies of the film were commercially available in videotape form, the enhancement will apply.
4. Manufacturing, Importing, and Uploading Enhancement.--With respect to uploading, subsection (b)(5) applies only to uploading with the intent to enable other persons to download or otherwise copy, or have access to, the infringing item. For example, this subsection applies in the case of illegally uploading copyrighted software to an Internet site, but it does not apply in the case of downloading or installing that software on a hard drive on the defendant's personal computer.
5. Application of §3B1.3.--If the defendant engaged in de-encryption or circumvented some other technological security measure in order to gain initial access to an infringed item, an adjustment under §3B1.3 (Abuse of Position of Trust or Use of Special Skill) will apply.
Background: This guideline treats copyright and trademark violations much like theft and fraud. 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 guidelines, the infringement amount in subsection (b)(1) serves as a principal factor in determining the offense level for intellectual property offenses.
Subsection (b)(1) implements section 2(g) of the No Electronic Theft (NET) Act by using the retail value of the infringed items, multiplied by the number of infringing items, to determine the pecuniary harm for cases in which use of the retail value of the infringed item is a reasonable estimate of that harm. For cases referred to in Application Note 2(B), the Commission determined that use of the retail value of the infringed item would overstate the pecuniary harm or otherwise be impracticable or inappropriate. In these types of cases, use of the retail value of the infringing item, multiplied by the number of those items, is a more reasonable estimate of the resulting pecuniary harm.
Issue for Comment: The Commission has bracketed specific offense characteristics (b)(2) through (b)(6) in Option 3 to indicate that any or all of these factors, or any combination thereof, could form the basis for an enhancement. The Commission specifically invites comments on which, if any, of these specific offense characteristics, or combination of these specific offense characteristics, should be incorporated into the guideline. The Commission also specifically invites comment on whether, if the Commission were to adopt either Option 1 or Option 2, any or all of these specific offense characteristics, or any combination of these specific offense characteristics, should be incorporated into the adopted Option.
The Commission also invites comment on whether, as an alternative to proposed specific offense characteristics (b)(2) through (b)(6), the factors which form the bases for those specific offense characteristics should be expressed as bases for departure from the guideline range.
2. Synopsis of Proposed Amendment: This amendment proposes to re-promulgate as a permanent amendment the emergency telemarketing fraud amendment adopted by the Commission on September 23, 1998. It implements the directives to the Commission in section 6 of the Telemarketing Fraud Prevention Act of 1998, Pub. L. 105-184 (the "Act"), but in a somewhat broader form than that required by the directives.
The Act directs the Commission to provide for "substantially increased penalties" for telemarketing fraud offenses. It also more specifically requires that the guidelines provide "an additional appropriate sentencing enhancement, if the offense involved sophisticated means, including but not limited to sophisticated concealment efforts, such as perpetrating the offense from outside the United States," and "an additional appropriate sentencing enhancement for cases in which a large number of vulnerable victims, including but not limited to [telemarketing fraud victims over age 55], are affected by a fraudulent scheme or schemes."
This amendment responds to the directives by building upon the amendments to the fraud guideline, §2F1.1, that were submitted to Congress on May 1, 1998. (See Amendment 577 in USSC Guidelines Manual, Appendix C Supplement.) The May 1, 1998 amendments added a specific offense characteristic for "mass-marketing." Under that amendment, the definition of "mass-marketing" would include, but not be limited to, telemarketing fraud. The May 1, 1998 amendments also added a specific offense characteristic for sophisticated concealment.
This amendment broadens the "sophisticated concealment" enhancement to cover "sophisticated means" of executing or concealing a fraud offense. In addition, the amendment increases the enhancement under the vulnerable victim guideline, §3A1.1, for offenses that impact a large number of vulnerable victims.
In designing enhancements that may apply more broadly than the Act's above-stated directives minimally require, the Commission acts consistently with other directives in the Act (e.g., section 6(c)(4) (requiring the Commission to ensure that its implementing amendments are reasonably consistent with other relevant directives to the Commission and other parts of the sentencing guidelines)) and with its basic mandate in sections 991 and 994 of title 28, United States Code (e.g., 28 U.S.C. § 991(b)(1)(B) (requiring sentencing policies that avoid unwarranted disparities among similarly situated defendants)).

References: §2
 §2
 §2
 §3
 § 994
 §2
 § 2319
 §2
 § 506
 § 2319
 §2
 § 2319
 §2
 § 2511
 § 2511
 §2
 §2
 § 2320
 §2
 §3
 §3
 §2
 § 2319
 §3
 §3
 §2
 §3
 § 991