Court Opinion

ID: 6353097
Source: CourtListenerOpinion
Date Created: 2022-06-23 20:00:22.322313+00
Date Added: 2024-06-11T09:13:54.080632
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 21-1023

                     UNITED STATES OF AMERICA,

                            Appellee,

                                 v.

                         DOUGLAS GORDON,

                      Defendant, Appellant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF MAINE

         [Hon. John A. Woodcock Jr., U.S. District Judge]

                                Before

               Lynch and Kayatta, Circuit Judges,
                 and Woodlock,* District Judge.

     Stephen C. Smith for appellant.

     Darcie N. McElwee, United States Attorney, with whom Benjamin
M. Block, Assistant U.S. Attorney, was on brief for appellee.

                          June 23, 2022

     *    Of   the   District    of      Massachusetts,   sitting   by
designation.
               WOODLOCK,      District   Judge.       The   appellant,      Douglas

Gordon, a film buff since childhood, turned his youthful avocation

into a criminal vocation when he systematically and deceptively

sold counterfeit DVDs of movies without copyright authorization.

               A federal jury found Mr. Gordon guilty of two counts for

his criminal copyright infringement and one count of mail fraud

for his scheme of deceptive marketing. He was sentenced to thirty-

six months of imprisonment on the two copyright counts and sixty

months    on    the    mail   fraud   count,    the   sentences   to   be    served

concurrently as to each count.           Mr. Gordon does not challenge his

mail fraud conviction.

               On this appeal, he argues nevertheless that 1) the

verdict should be vacated because the evidence did not show he

willfully       committed       copyright      violations,    and/or        in   the

alternative, 2) that his sentence must be adjusted because of

alleged errors in the district court's loss calculation.                    We find

these arguments unavailing and affirm.

                                  I. BACKGROUND

     A.        Facts

               From the evidence presented at trial, a reasonable jury

could find the following facts.

               During the period of criminal activity alleged in the

superseding indictment on which he was tried — from about January

                                         -2-
21, 2014 to January 20191 — Mr. Gordon ran Edge Video, a small

chain of video stores, and several websites to sell and rent films,

including       findrareDVDs.com,       lostmoviesfound.com,            and

lostmoviefinder.com. These websites sold DVDs of movies not widely

available for sale by making copies that Mr. Gordon and his

employees — or a third-party company, at Mr. Gordon's direction —

derived from "master" DVDs, which were in turn copied from VHS

tapes.

            Customers and copyright holders were unhappy about these

commercial activities and made that known to Mr. Gordon.                His

employees routinely heard complaints — which they forwarded to

him— from customers who believed they would receive a legitimate

DVD, not a duplicate disc, or found the DVDs did not work or were

of   low-quality.    One   employee   said   she   heard   "hundreds"    of

complaints and another said complaints came "[a]lmost daily."           The

Better Business Bureau forwarded numerous customer complaints to

Mr. Gordon.     Copyright holders also sent him cease-and-desist

emails upon their discovery of the reproductions.

      1   The counts in the superseding indictment alleged
overlapping time periods of criminal activity. Count 1, the first
copyright count, alleged a period "beginning on or about January
21, 2014 and continuing to about June 3, 2014."      Count 2, the
second copyright count, alleged a period "beginning on or about
July 12, 2016 and continuing to about December 30, 2016." Count
3, the mail fraud count, alleged a scheme to defraud "[f]rom about
April, 2014 to about January, 2019."

                                 -3-
            State and federal authorities investigated, beginning

their inquiries even before the period of criminal conduct alleged

in the superseding indictment. First, the Maine Attorney General's

Office on August 10, 2012, sent a demand letter to findrareDVDs.com

and Edge Video that asked for documents related to "unfair and

deceptive    acts   and   practices    .    .   .   and   possible       copyright

violations."      Maine's Attorney General referred the case to the

federal government thereafter when Mr. Gordon failed to comply

with the demand letter.

            The ensuing federal investigation uncovered hundreds of

orders for DVDs, over two hundred complaints from customers, and

multiple    cease-and-desist     emails.        A   search   of    Mr.    Gordon's

residence on August 4, 2015 turned up DVD duplicators, computers,

master discs, copies of discs to be mailed out (with the FBI

copyright warning removed from films), and mail addressed to

findrareDVDs.com.     The federal government sent Mr. Gordon a target

letter on the same date as the search, notifying him that he was

under investigation for "mail fraud, wire fraud, and criminal

infringement of movies protected by copyright."

            Despite the complaints,         the investigations, and            the

letters    from   state   and   federal     authorities,     Mr.     Gordon   was

undeterred.       An associate testified that Mr. Gordon continued

copying movies months after the August 2015 search.                  The Motion

Picture Association, a movie studio trade organization, bought a

                                      -4-
movie from lostmoviesfound.com in December 2016 and received what

it described as a counterfeit copy.     The Association then sent Mr.

Gordon a cease-and-desist letter, noting his actions were illegal

under federal law.

           Mr. Gordon doubled down by employing an out-of-state

vendor to conceal his operations.      Starting in March 2017, he had

Kunaki, a Nevada company, take over copying and mailing DVDs.      He

told an associate that, were federal investigators to search his

home again, "they [wouldn't] find anything and they [wouldn't] be

able to take this away from [him]."       Kunaki would later suspend

Mr. Gordon's accounts, first in early December 2018 due to a

complaint from a purchaser that a disc was "pirated," and then

several weeks later after a federal agent contacted the company.

           A second search of Mr. Gordon's residence on May 10,

2017, again found a DVD duplicator, computers, DVDs, VHS tapes,

order     forms,   and   mail   sent     to   findrareDVDs.com    and

lostmoviesfound.com.     The seized computers showed a user had

visited copyright.gov and retrieved copyright certificates.        A

user had also, between August 2015 and June 2016, searched for

information on copyright infringement and defenses.

     B.    Charges and Trial

           In the operative charging document, the superseding

indictment handed down on April 17, 2019, Mr. Gordon was charged

with two counts of criminal copyright infringement, in violation

                                -5-
of 17 U.S.C. § 506(a)(1)(B) and 18 U.S.C. §§ 2319(a), 2319(c)(1)

and 2, and one count of mail fraud, in violation of 18 U.S.C.

§§ 1341 and 2.2   A jury found Mr. Gordon guilty of all three counts.

          At trial, Mr. Gordon contended his actions were not

willful because he believed that his sales were permitted based on

the DVDs' status as orphan works and on the fair use doctrine.    As

to orphan works, Mr. Gordon testified that he believed that if the

owner of content no longer existed, he was free to reproduce it,

since "there would be no damages if there's no copyright holder."

As to fair use, Mr. Gordon testified he believed after considering

the matter that his reproductions were permissible.     He testified

he would primarily consider whether the movie was ever on DVD — if

not, he might sell it, because he assumed any sales could not

affect the DVD market.   And he further testified he would consider

whether the movie was old enough to "have an educational value to

society," which, in his view, would weigh in favor of fair use.

          As to the copyright counts, the jury was instructed that

they needed to find, among other things, "that Mr. Gordon infringed

the copyright willfully."    The jury was told that to act willfully

"mean[t] to act voluntarily and intelligently and with the specific

     2    The copyright counts in the superseding indictment were
identical to the copyright counts brought in the original
indictment handed down on January 17, 2019.          The original
indictment charged only copyright violations. The mail fraud count
was added in the superseding indictment.

                                 -6-
intent that the underlying crime be committed, that is to say,

with bad purpose, either to disobey or disregard the law, not to

act by ignorance, accident, or mistake."3    Further, the jury was

told that "Mr. Gordon's actions could be willful even if he only

knew that the copying may be illegal, but did not know that it was

to a certainty."   The jury was told "[t]he willfulness requirement

[could] also be satisfied if there [was] a showing that Mr. Gordon

deliberately disregarded a high probability that he was infringing

copyrights."

          In addition to the instruction on willfulness, the jury

received instructions on fair use and orphan works.   The district

court told the jury that "United States copyright law does not

recognize the concept of an orphan work."   For fair use, the jury

was told that if it found "the elements of a copyright violation

beyond a reasonable doubt," Mr. Gordon needed to show that "his

use was more likely fair use than not," based on a preponderance

of the evidence.     Mr. Gordon does not challenge any of these

instructions.

     3    We note our decision in United States v. Beltran merely
assumed without deciding that specific intent is required by the
willfulness element of a criminal copyright infringement charge.
503 F.3d 1, 2 (1st Cir. 2007); see also United States v. Liu, 731
F.3d 982, 989-90 (9th Cir. 2013). This case does not raise any
question concerning that issue because there is no challenge to
the instructions presented here.

                                -7-
       C.   Sentencing

            The presentence report prepared by the Probation Office

performed two loss calculations, one for the copyright counts and

one for the mail fraud count based on deceptive marketing.             For

both    calculations,    the   presentence     report   relied    on   the

government's records submitted at trial and found a value of

$638,659.60 for each calculation.            The report noted that in

copyright cases it is preferable to rely on the retail value of

the infringed items.     See U.S.S.G. § 2B5.3 n.2(A)(v).         Although

the movies at issue in the report were not sold commercially — as

a result of which no direct retail price point was available — the

report found Mr. Gordon sold DVDs for close to or more than the

average price of a DVD for a feature film at the time.           Thus, the

report found the $638,659.60 figure applicable, as a sum based on

Mr. Gordon's proceeds.

            The presentence report then grouped the three counts

together for purposes of the offense level guideline calculation,

because the counts "involve[d] two or more acts or transactions

connected by a common criminal objective or constituting part of

a common scheme or plan," and for the additional reason that "the

offense level [was] determined largely on the basis of the total

amount of harm or loss."       See U.S.S.G. §§ 3D1.2(b) and (d).        To

calculate the total offense level for the group, the report started

by considering what the offense levels would be separately for the

                                  -8-
mail fraud count and for the copyright counts.              The mail fraud

count had a base offense level of seven, U.S.S.G. § 2B1.1(a)(1),

and the copyright counts both had a base offense level of eight,

U.S.S.G. § 2B5.3(a).       The $638,659.60 loss value meant a fourteen-

level increase over the base level for all counts, because that

loss amount fell in the range between $550,000 and $1,500,000.

See U.S.S.G. §§ 2B1.1(b)(1)(H) and 2B5.3(b)(1).            Ultimately, the

mail fraud count produced the highest total offense level — 31,

compared to 30 for the copyright counts — due to other specific

offense characteristics4 not relevant for the copyright counts;

consequently, the report found the total offense level for mail

fraud applicable.       See U.S.S.G. § 3D1.3(a).

            At   his    sentencing    hearing,    Mr.   Gordon   made    three

objections to the loss calculation in the presentence report.

First, he argued the sales included in the calculation were too

speculative.           Second,   he   contested    "whether      sales   from

findrareDVDs.com and lostmoviesfound.com were part of the same

course of conduct as the offense of conviction."            See U.S.S.G. §

3D1.2(b).    Third, he said the calculations of loss incorrectly

included some legitimate sales.

     4    These    additional   offense    characteristics,    only
applicable for mail fraud, concerned the victim count, see U.S.S.G.
§ 2B1.1(b)(2)(A)(i), and Mr. Gordon's decision to relocate the
scheme to another jurisdiction to evade detection, see U.S.S.G. §
2B1.1(b)(10)(A).

                                      -9-
          The district court rejected those arguments and adopted

the loss calculations in the presentence report.            Relying on a

government affidavit mirroring the records presented at trial and

used in the presentence report, the district court found the

$638,659.60 loss figure supported.      Relying upon United States v.

Pennue, 770 F.3d 985 (1st Cir. 2014), the district court concluded

sales in this figure were all part of the same course of conduct.

The district court further found that even if some sales included

within the loss calculation figure were "legitimate," there would

not be nearly enough proceeds from "legitimate" sales to lower the

loss amount below $550,000, the threshold triggering the fourteen-

level increase.    Accordingly, the district court grounded its

guideline calculation on the presentence report loss analysis.

          Based   on   this   loss   analysis,   together    with   other

guideline factors considered, Mr. Gordon's total offense level was

determined to be 31 and, because he had no criminal history, the

resultant guideline range was 108 to 135 months.5           See U.S.S.G.

ch. 5, pt. A (sentencing table).        Mr. Gordon was sentenced to

concurrent prison terms of thirty-six months for the copyright

counts and sixty months for the mail fraud count.

     5    Had sentencing been based exclusively on the copyright
counts, Mr. Gordon's offense level would have been 30, one level
lower than his offense level for the mail fraud. An offense level
of 30, combined with Mr. Gordon's lack of criminal history, would
have resulted in a guideline range of 97 to 112 months.       See
U.S.S.G. ch. 5, pt. A (sentencing table).

                                 -10-
     D.     Arguments on Appeal

            Mr. Gordon filed a timely notice of appeal on January 6,

2021.     He presses two arguments on appeal, neither of which were

presented    to   the   trial   court.    First,    he   says    there    was

insufficient evidence for the jury to find that his copyright

infringements were willful.       Second, he says the district court

erred in its guideline loss calculation in two ways.            He contends

(a) the district court was wrong to account for sales of movies

for which the government did not submit copyright certificates,

and (b) the district court failed to account for refunds that he

gave to dissatisfied customers.

                                II. MERITS

     A.     Sufficiency of the Evidence

            Because Mr. Gordon did not present a Rule 29 motion at

the close of the government's case nor after his presentation of

evidence, and he did not move for judgment of acquittal after the

jury's verdict, we review his challenge to the sufficiency of the

evidence for clear and gross injustice.            See United States v.

Hernández-Román, 981 F.3d 138, 143 (1st Cir. 2020).                 In this

connection, "[t]here can be no clear and gross injustice if the

evidence, scrutinized in the light most congenial with the verdict,

can support a finding of guilt beyond a reasonable doubt."               Id.

            Mr. Gordon's challenge centers on whether the evidence

showed he willfully committed copyright violations.             "[W]hen used

                                   -11-
in the criminal context, a 'willful' act is one undertaken with a

'bad purpose.'"        Bryan v. United States, 524 U.S. 184, 191-92

(1998) (footnote omitted).           That is, "in order to establish a

'willful' violation of a statute, 'the Government must prove that

the defendant acted with knowledge that his conduct was unlawful.'"

Id. (quoting Ratzlaf v. United States, 510 U.S. 135, 137 (1994)).

Guilty knowledge can be inferred based on the defendant's disregard

of warning signs "sufficient to put a reasonably prudent person on

inquiry notice."       United States v. Singh, 222 F.3d 6, 11 (1st Cir.

2000).       This standard aligns with the jury instructions given at

Mr. Gordon's trial,         and Mr. Gordon does not challenge those

instructions,       only    the   sufficiency      of    the    evidence     as    to

willfulness.

              There is overwhelming evidence that Mr. Gordon could be

found not merely to have deliberately closed his eyes to the

illegality of his conduct.           More fundamentally, the jury could

easily have found that he acted with actual knowledge that his

conduct was illegal.

              As a filmmaker, Mr. Gordon took care to mark his own

work   for     copyright    protection.      In    fact,   he    described    to    a

colleague how to seek copyright protection, the reasons for doing

so,    and    the   risks   for   filmmakers      in   using    copyrighted       work

belonging to others.        In the course of selling copied DVDs — from

which he stripped the FBI copyright warnings used in the originals

                                      -12-
— he received complaints from copyright holders.                Mr. Gordon

persisted in his activities even while knowing he was under

investigation    by   the   Maine   Attorney   General   and   the   federal

government.      With this record, a rational jury could readily

conclude beyond a reasonable doubt that Mr. Gordon acted willfully.

          Mr. Gordon says that he considered the potential illegal

nature of his actions and that he did his best to obey the law by

following his understanding of the concepts of "orphan works" and

of fair use.      But those arguments wither in the light generated

by the many warning signs demonstrating his knowledge that he was

breaking the law.     We are tasked with construing the facts in the

light most favorable to the jury's guilty verdict.             With that in

mind, even if we could discern some plausibility to Mr. Gordon's

arguments, there is more than sufficient evidence for the jury to

have found a willful intent.

          Mr. Gordon testified at trial about why he believed his

actions were legal.         The jury understandably did not choose to

credit his testimony.        Moreover, the jury heard an abundance of

evidence summarily recounted here that included a demonstration

that Mr. Gordon continued to copy movies after receiving multiple

warnings from copyright owners and being under state and federal

investigation.     It was well within the bounds of reason for the

jury, having weighed Mr. Gordon's contentions against the record,

to find his actions willful.

                                    -13-
     B.   Loss Calculation

          We find it helpful for clarity of analysis to divide the

defendant's loss calculation contentions into three categories.

Here we conduct review for plain error. 6        Plain error review

requires us to determine "(1) that an error occurred (2) which was

clear or obvious and which not only (3) affected the defendant's

substantial rights, but also (4) seriously impaired the fairness,

integrity, or public reputation of judicial proceedings."    United

States v. Madsen, 809 F.3d 712, 717 (1st Cir. 2016) (citation and

internal quotation marks omitted).    This is a "heavy burden."

United States v. Pérez-Rodríguez, 13 F.4th 1, 16 (1st Cir. 2021).

"Appellate review of federal criminal sentences is characterized

by a frank recognition of the substantial discretion vested in a

sentencing court."   United States v. Flores-Machicote, 706 F.3d

16, 20 (1st Cir. 2013).

          1. Certificates.   Mr. Gordon testified at trial that,

for all movies on his websites, he checked copyright.gov and found

they were registered for copyright protection.    The district court

had no occasion to explore the validity of the copyrights through

considerations of certificates at sentencing because Mr. Gordon

     6    The government argues that Mr. Gordon waived his
guideline claims.   Given our disposition of the merits of the
issues in this case, we need not address the government's waiver
argument.

                              -14-
did not raise the certificate issue until appeal.7    The district

court reasonably relied on Mr. Gordon's testimony to find by a

preponderance of the evidence that all movies in the calculation

were copyright-protected.   See U.S.S.G. § 6A1.3(a) (allowing for

flexibility in evidence considered by sentencing judge).

          2. Reasonable Estimation.   More broadly, we also see no

error with respect to the submission of certificates because the

district court carefully explained why the government's estimates

were reasonably reliable and why the sales were all part of the

same course of conduct.   The court noted some sales were possibly

"legitimate" but that any such sales could not have been enough to

reduce the loss calculation from $638,659.60 to below $550,000,

the threshold for the fourteen-level increase from the base offense

level.   See § 2B1.1 cmt. n. 3(C) ("The [district] court need only

make a reasonable estimate of the loss.").      There was nothing

unduly speculative in the district court's explanation of loss.

We see no error in the district judge's loss calculation, even if

based on copyright infringement alone.

     7 We note that we held some fifteen years ago that
registration evidenced by a certificate is not required to
establish a criminal copyright violation. Beltran, 503 F.3d at 2
(holding, in the alternative, that Section 411 of the Copyright
Act of 1976, codified at 17 U.S.C. "appears to govern only civil
infringement suits"). We are aware of no developments since then
that would prompt us to suggest reconsideration of that holding.

                               -15-
           3.   Refunds.   Mr.    Gordon   suggests   that   the   loss

calculation failed to account for refunds that he sometimes gave

to dissatisfied customers.       The guidelines contain a call for

leniency where a defendant has returned money received through

criminal actions.   See U.S.S.G. § 2B1.1 cmt. n. 3(E)(i).

           The comment in the guidelines that Mr. Gordon cites says

that a loss calculation "shall be reduced by" the sum of:

     The money returned, and the fair market value of the
     property returned and the services rendered, by the
     defendant or other persons acting jointly with the
     defendant, to the victim before the offense was
     detected. The time of detection of the offense is the
     earlier of (I) the time the offense was discovered by a
     victim or government agency; or (II) the time the
     defendant knew or reasonably should have known that the
     offense was detected or about to be detected by a victim
     or government agency.

U.S.S.G. § 2B1.1 cmt. n. 3(E)(i) (emphasis added).

           This comment makes plain that Mr. Gordon's argument goes

nowhere.   The loss calculation only included sales from after

January 21, 2014, the beginning of the period of the criminal

activity specified in the superseding indictment.      Mr. Gordon can

only claim the benefit of refunds he gave before the point at which

his offenses were detected, a point defined as when either the

government or a victim detected the offenses or when a defendant

"knew or reasonably should have known the offense[s] were detected"

– whichever was earlier.   Id.; United States v. Maisonet-González,

785 F.3d 757, 763 (1st Cir. 2015).

                                 -16-
          It was indisputably known to Mr. Gordon that his offenses

had been detected by August 2012 — over a year before the time

covered by the loss calculation — when the Maine Attorney General's

Office sent him a demand letter.         At that point, customers who

would qualify as victims had already complained — hence the state

investigation — and the Maine Attorney General had reason to

believe he was violating the law — hence the notice in the demand

letter.   The demand letter put Mr. Gordon himself on notice that

the offenses had been detected.        Refunds made after that date are

not entitled to leniency.       We see no merit then to Mr. Gordon's

contention that the loss calculation failed to account for any

relevant refunds.

                           III. CONCLUSION

          Because   we   find    Mr.   Gordon's   arguments   on   appeal

unavailing, we affirm the judgment of the district court.

                                  -17-