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1841

Copyright Law—Prosecution Policy

DOJ LETTER OF OCTOBER 11, 1994

The following letter sets forth the policy of the Department on various issues related to the prosecution of individuals who infringe software copyrights:

U.S. Department of Justice
Criminal Division

October 11, 1994

Re:Criminal Prosecution of Copyright Infringement: Response to Letter of September 14, 1994

Dear Mr. Spanner:

On September 14, 1994, you sent to the Criminal Division a number of questions regarding the Department's efforts in prosecuting software copyright infringement. We understand that your inquiries are made in conjunction with your completion of an article for the American Bar Association's Criminal Justice magazine. We now write to clarify the Division's role in enforcing these criminal provisions, and to respond to your questions to the extent possible given that they have not arisen, to our knowledge, in the context of any particular case.

In your correspondence, you refer to the "updating of the prosecution guidelines regarding copyright infringement in the U.S. Attorney's Manual." The Department routinely revisits portions of the United States Attorneys' Manual--particularly after Congress acts to revise criminal statutes in a particular area (as it did in October 1992 with regard to penalties for criminal copyright infringement). In addition, the various litigating divisions of the Department of Justice routinely make available to United States Attorneys' Offices other documents to assist in the prosecution of violations of federal law.

For example, pending future revisions to the United States Attorneys' Manual, we are currently undertaking a substantial revision of the Criminal Division's intellectual property prosecution manual. This monograph was first published in January 1989, and thus could not have taken into account Congress' October 1992 changes to the criminal copyright scheme. The forthcoming revision is expected to address the recent changes to the criminal copyright scheme; possible applications of the trademark counterfeiting statute, 18 U.S.C. §  2320; charging and sentencing issues arising from the application of these laws; and issues relating to the successful enforcement of these laws in electronic environments. It should be noted, however, that the contents of this monograph are not intended to constitute "prosecution guidelines" in the sense you might envision. Rather, Criminal Division monographs attempt to provide prosecutors with discussions of the applicable law, Department of Justice Policy, and suggestions for preferred practice.[FN1]

    FN1. These documents routinely carry the disclaimer that they are not intended to confer any rights, privileges, or benefits to prospective or actual witnesses or defendants, and that they are not intended to carry the force of law or of United States Department of Justice directives. See United States v. Caceres, 440 U.S. 741 (1979). Many of these monographs carry disclaimers that encourage readers to refer to the United States Attorneys' Manual and to appropriate Department of Justice offices for matters of enforcement policy.

Criminal Division monographs differ from statements of policy that appear in the United States Attorneys' Manual insofar as revisions to the Manual "must first be issued as a bluesheet and reviewed by the Attorney General's Advisory Committee of U.S. Attorneys before being permanently incorporated into the text of the Manual." USAM 1-1.520; 1-1.521 [since renumbered to USAM 1-1.600]. Note, however, that even after publication in the United States Attorneys' Manual, these entries need not constitute "prosecution guidelines" in their strongest possible sense.

Each United States Attorney, acting within his or her own district, serves as the chief law enforcement officer for that district and, as such, has plenary authority with regard to federal criminal matters. The United States Attorneys' enumerated authority includes the authority, discretionary power, and responsibility to authorize and decline prosecutions. USAM 9-2.000. In arriving at a decision to authorize prosecutions, United States Attorneys are advised to consider the recommendations contained in each chapter of the United States Attorneys' Manual discussing substantive offenses, but these recommendations are, in the words of the Manual, "instructive only and not mandatory." USAM 9-2.030.

With that said, we will attempt to respond to your questions in a manner that reflects some of the statements and preferences reflected in our forthcoming monograph.

  1. You ask, "The threshold for felony prosecution of software infringement is very low -- 10 copies aggregating $2500 in value. Absent some aggravating circumstance, felony prosecution at so minimal a level would seem to be inappropriate -- especially for a first time offender. Will the guidelines discourage felony prosecutions below a certain level, and encourage misdemeanor prosecutions in such instances?"

    Congress has made felony penalties available to those who, "willfully and for purposes of commercial advantage or private financial gain," 17 U.S.C. § 506(a), reproduce or distribute, during any 180-day period, "at least 10 copies . . . of 1 or more copyrighted works, with a retail value of more than $2500." 18 U.S.C. § 2319(b)(1). The numerical threshold exists, according to the legislative history, to exclude from felony prosecution "children making copies for friends as well as other incidental copying of copyrighted works having a relatively low retail value." H.R. Rep. No. 997, 102 Cong., 2d Sess., at 6 (Oct. 3, 1992).

    A large number of federal criminal statutes, including many aimed at enforcement of laws against economic crime, carry no numerical or monetary thresholds. See, e.g., 18 U.S.C. §§ 1341, 1343 (mail and wire fraud). This fact does not prevent United States Attorneys, however, from exercising sound prosecutorial discretion in cases implicating these statutes. The Criminal Division's intellectual property prosecution manual will advocate a charging approach that takes into account a broad range of factors, including the total number of works (or marks) infringed; their retail value; the number of unauthorized copies of each work (or mark) reproduced or distributed; the dollar value of loss suffered by the victims of the offense; the specific nature of the violation (e.g., whether it involves counterfeiting, pirating or bootlegging); the amount of a defendant's investment in the infringement scheme; the extent to which civil remedies might prove effective; and whether the violation occurred in contravention of an existing court order. Accordingly, and as each case must be evaluated on its facts, the manual will not discourage felony prosecutions based solely on the number of unauthorized copies produced, the retail value of the works infringed, or the retail value of the infringing goods.

  2. You ask, "The legislative history quite clearly enunciates the principle that prosecutors should stay out of business disputes, such as where there is a licensing dispute (see, e.g., H. Rep. 102-997 and S. Rep. 102-268). Will the guidelines reflect that legislative intent?"

    We have combined our response to this question with our response to question 3, below.

  3. You ask, "The legislative history also disclaims the intent to impose criminal liability where civil liability is unclear. Examples include the Sega-Accolade litigation involving the legality of reverse engineering to assure compatibility with a competitor's product, and the Borland and Apple cases involving the protectability of a graphical user interface. Will it be the policy of the Department that prosecutors refrain from prosecuting where the copying is only debatably unlawful?"

    It is not the intent of the Criminal Division to advocate that prosecutors litigate novel issues of civil copyright infringement for purposes of obtaining criminal convictions. To a large extent, the criminal copyright scheme prevents this eventuality in at least two separate respects. In a criminal infringement case, the government must first prove that an act or acts of copyright infringement have occurred. "This prima facie case is determined by civil law." H.R. Rep. No. 997, 102 Cong., 2d Sess., at 4 (Oct. 3, 1992). The drafting committee did not intend to establish criminal liability "[i]n cases where civil liability is unclear--whether because the law is unsettled, or because a legitimate business dispute exists." Id. at 5. Neither do we.

    Second, the statutory scheme also requires that the government prove, as an element to any criminal violation--felony or misdemeanor--that the infringement has occurred "willfully and for purposes of commercial advantage or private financial gain." 17 U.S.C. § 506(a). "The requirement of a mens rea for criminal copyright infringement serves the important purpose of drawing a sharp distinction with civil copyright infringement . . . . The mens rea requirement serves to leave outside the reach of the criminal law losing parties in ordinary business disputes such as those involving reverse engineering of computer programs or contract disputes over the scope of licenses." H.R. Rep. No. 997, 102 Cong., 2d Sess., at 5 (Oct. 3, 1992) (footnotes omitted). We note, however, that the very notion of what constitutes an "ordinary business dispute" may be subject to rapid change, particularly in an area so closely tied to advancing technology and so prone to modification through legislative enactment or clarification through judicial pronouncement.

  4. You ask, "Several cases (e.g., U.S. v. Wise, 550 F.2d 1180, 1194; U.S. v. Cross, 816 F.2d 297, 300), as well as the legislative history acknowledge that proof of 'wilfulness' requires showing an intent to violate the law. This would militate against prosecution in cases of adaptation rather than direct copying, such as in the case of parody. Will the guidelines indicate that evidence of intent to violate the law should be evaluated in making the assessment whether or not to prosecute?

    The sufficiency of evidence bearing on each element of a federal criminal offense is routinely considered before charging decisions are made, and is considered by grand juries prior to the return of a federal indictment. Intent elements are often the most difficult to prove, as evidence of intent is quite often circumstantial. It is therefore prudent for federal prosecutors to consider carefully evidence bearing on the "willfulness" element, particularly in jurisdictions that construe "willfulness" to require the government to demonstrate a "voluntary, intentional violation of a known legal duty." See, e.g., United States v. Moran, 757 F. Supp. 1046, 1049 (D. Neb. 1991). Our revised intellectual property prosecution manual will encourage investigators and prosecutors to remain vigilant to evidence bearing on willful intent in whatever form such evidence might be found.

  5. You ask, "The criminal copyright statute requires proof of copying 'for purposes of commercial advantage or private financial gain.' This is always proved by evidence of a sale or other exchange of an infringing copy. Is the intent of the Department that felony prosecution be avoided where the copying is purely for private use and there is no sale or exchange?"

    The legislative history is clear that in order to establish criminal liability, the government must first prove an infringement, and must also prove that the infringement was done with the requisite means rea. "Unless both these requirements are met, no criminal liability--misdemeanor or felony--will lie, regardless of the number of unauthorized copies or phonorecords that have been reproduced or distributed." H.R. Rep. No. 997, 102 Cong., 2d Sess., at 5 (Oct. 3, 1992). This is not a matter of Department policy, but of Congressional mandate.[FN2]

      FN2. Your question, however, contains the presupposition that evidence of a commercial or financial purpose "is always proved by evidence of a sale or other exchange of an infringing copy." We believe that such a strong statement might require tempering in light of several cases in which the courts appeared to have found the requisite commercial or financial purpose to be implicit in the conduct of the parties as portrayed in the trial record. See, e.g., United States v. Cross, 816 F.2d 297, 301 (7th Cir. 1987) ("[W]e find that the presence of these seventeen second-generation videocassettes on [subject's] business premises may rationally give rise to the inference that they were maintained for commercial advantage or private financial gain."); United States v. Shabazz, 724 F.2d 1536, 1540 (11th Cir. 1984) (reciting evidence sufficient to show that pirated tapes "were made with the intention to make a profit").

  6. You ask, "Under the doctrine of imputation of knowledge of corporate employees to the corporation, where ten employees in ten different locations each made one illicit copy of software and the aggregate value was $2500 the corporation could be indicted. It would apparently not matter that each of the wayward employees did not know of the unlawful activities of the others under the doctrine enunciated in U.S. v. Bank of New England, 821 F.2d [844, 854 (1st Cir.), cert. denied, 484 U.S. 943 (1987)]. Is it the policy of the guidelines to discourage imputation of knowledge to establish wilfulness under the criminal copyright statute, since no individual would have the requisite criminal intent?"

Your question is subject to several interpretations. It is not entirely clear, for example, whether you envision each of the ten employees in your hypothetical to be engaged in non-criminal conduct (that is, copying without the requisite mens rea), or whether some or all of them are copying with the mens rea to constitute infringement actionable as a misdemeanor. Considerations such as these might well make a difference, as in the first instance, a Bank of New England-type rule might serve to establish felony liability where no criminal liability heretofore existed, whereas in the latter case, individual misdemeanors committed on behalf of the corporation would merely be aggregated to compose a more serious offense.

Facts such as these would obviously carry substantial weight in any charging decision, along with any and all evidence bearing on direct involvement by the corporation in either encouraging or discouraging such employee behavior. Prosecution of the corporation might prove appropriate, for example, if substantial evidence were to reveal that supervisory employees acting within the scope of their employment systematically encouraged other employees to reproduce or use illicitly reproduced or distributed software to further corporate ends. Prosecution of the corporation might be inappropriate if this reproduction or distribution were to occur despite genuine efforts of supervisory employees to deter such employee misconduct.

We thank you for your thoughtful inquiries, and for affording us an opportunity to respond to these important issues.

Sincerely,

Mary C. Spearing, Chief

Stevan D. Mitchell
Trial Attorney

[updated May 2009] [cited in USAM 9-71.001; USAM 9-71.010]