Copyright InfringementFourth Element --
Commercial Advantage or Private Financial Gain
In addition to demonstrating willfulness, the government must
prove that the defendant engaged in an act of infringement "for purposes
of commercial advantage or private financial gain." 17 U.S.C. §
506(a). Emphasis should be placed on the word "purpose," because it is
not necessary to prove that any profit was realized. See
United States v. Taxe, 380 F. Supp. 1010, 1018 (C.D.Cal. 1974),
aff'd, 540 F.2d 961 (9th Cir. 1976), cert. denied, 429
U.S. 1040 (1977). The drafting committee's purpose in retaining this
requirement has been to exclude from criminal liability those
individuals who willfully infringe copyrights solely for their own
personal use. H.R. Rep. No. 997, 102 Cong., 2d Sess. 5 (1992). Evidence
of discrete monetary transactions (i.e., the selling of infringing goods
for a particular price) provides the clearest evidence of financial
gain, but such direct evidence should not be a prerequisite to
prosecution. Such a stringent requirement would ignore the plain wording
of the statute, which requires only the showing of commercial or
It is a common misconception that if infringers fail to charge
subscribers a monetary fee for infringing copies, they cannot be held to
have engaged in criminal copyright infringement. It is the position of
the Department that the term "for purposes of commercial advantage or
private financial gain" does not require the payment in money for the
infringing works, but includes payment by trading anything of value for
them. Thus, when "bartering" (i.e., the practice of exchanging
infringing works for other infringing works) results in the unauthorized
dissemination of substantial amounts of infringing product without
recompense to the copyright holders, prosecution appears to be fully
consistent with the purposes of the criminal copyright statute.
The following letter, dated May 24, 1994, discusses the position
of the Department regarding the element of commercial advantage or
private financial gain.
May 24, 1994
Re: Criminal Copyright Infringement: Element of CommercialAdvantage
or Private Financial Gain
Dear Mr. Revell:
As you are aware, in order to constitute a criminal violation,
copyright infringement must be performed "willfully and for purposes of
commercial advantage or private financial gain." 17 U.S.C. § 506(a).
Your office recently asked this Section for an interpretation of this
element as applied to violations committed through the use of electronic
bulletin board systems (BBSs). We accordingly sent to SA Michael Morris,
under separate cover, materials bearing on the issue from the Software
Publishers Association's prosecution manual and from a preliminary draft
of this Section's revised prosecution manual.
In response to your follow-up request of May 23, 1994, this
Section has had a brief opportunity to examine whether there must exist
a one-to-one relationship between a payment made for infringing goods
and each unit of product received in order to meet the requirements of
the statute. We conclude, based on a preliminary review of pertinent
case law, the legislative history of successive revisions to copyright
act, and other published works on the subject, that while such
transactions certainly satisfy the statutory requirement of commercial
purpose, they are not necessary conditions upon which violations must be
predicated. That is, the government need not show such one-to-one
correspondence in every instance, nor need it conclusively establish
even that profits were realized.[FN3] Rather, the government need only
show that acts of infringement were done "for purposes of commercial
advantage or private financial gain," 17 U.S.C. § 506(a), and such
commercial purpose can be shown, for example, through course of dealing
or through expressed or implied intent of the parties.[FN4]
FN3. In United States v. Cross, 816 F.2d 297 (7th Cir.
1987), the court affirmed the conviction, under 17 U.S.C. § 506(a)
and 18 U.S.C. § 2319, of an employee of the defendant corporation,
over her assertions that she was a mere employee rather than an owner.
The court held that:
A conviction under 17 U.S.C. § 506(a) does not require that a
defendant actually realize either a commercial advantage or private
financial gain. It is only necessary that the activity be for the
purpose of financial gain or benefit.
Id. at 301 (emphasis added) (citing United States v.
Moore, 604 F.2d 1228, 1235 (9th Cir. 1979)).
FN4. See 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) ("An employee
identified specific tapes made in bulk under appellant's direction as
reproduced for local and out of state sale. The appellant sold pirate
tapes, solicited wholesale customers, and shipped large quantities of
tapes out of state. This evidence is sufficient to show that the tapes
produced were made with the intention to make a profit. It is not
necessary that he actually made a profit. The only requirement is that
he engaged in business 'to hopefully or possibly make a profit.'")
(citing United States v. Wise, 550 F.2d 1180, 1195 (9th Cir.
1977); United States v. Moore, 604 F.2d 1228 (9th Cir. 1979)).
Similar reasoning had been invoked by the courts in the
Wise and Moore cases, under the predecessor statute to 17
U.S.C. § 506(a), to refute defendants' assertions that they failed
to profit from the transactions at issue. See Moore, 604
F.2d at 1235 ("[I]t is irrelevant whether there was an exchange for
value as long as there existed the hope of some pecuniary gain. The
testimony at trial met this test. The Government witness who received
the tape testified that [defendant] had given it to him because he had
told [defendant] that he intended to buy the tape but that he had first
wanted to check the tape.").
It would, of course, be beneficial for investigators to collect
all available evidence tending to show that a bulletin board service
under investigation charged subscribers for access to the copyrighted
software it contains. Such evidence may, in some limited instances, take
the form of a one-for-one transaction of software for cash. It is far
more likely, however, in the bulletin board context, that such exchanges
take the form of a one-time "subscriber fee" arrangement, whereby the
operator of the bulletin board system grants subscribers access to areas
of the board that contain copyrighted software, but only after
subscribers have paid for or have agreed to pay a monetary fee.
So-called "bartering" schemes can also be indicative of the
requisite commercial purpose. In bartering schemes, access to
copyrighted software is granted to subscribers only after they
themselves have provided to BBS operators an established number of
copyrighted programs. Generally, system operators (or "sysops") use
software acquired in such a manner to attract new subscribers to their
bulletin board system. The system operators may then proceed either to
collect subscriber fees from these new subscribers, or use the
cumulative contributions of software to develop their own private
software collections. In either case, system operators receive either
direct financial gain in the form of cash from new subscribers, or
indirect financial gain in the form of software contributions that
effectively obviate the need for them to expend resources to collect new
software releases. Any of these forms of distribution, in our view, tend
to show that a subject under investigation engaged in the reproduction
or distribution of copyrighted software, and did so "for purposes
of commercial advantage or private financial gain" as required by
While our review has not been comprehensive, it nonetheless
tends to show that courts are willing to consider a wide variety of
sources of evidence bearing on the issue of commercial purpose, and are
generally willing to draw reasonable inferences therefrom. We see no
reason why such sources of evidence would not be considered in the
context of violations committed through the use of computer bulletin
board systems. This reading of this statutory element has been
informally and anecdotally confirmed by legal experts for trade
associations such as the Motion Picture Association of America, the
Software Publisher's Association, and the Business Software Alliance.
Finally, we note in support of this position that a number of
cases have been successfully prosecuted as criminal copyright
infringements that have relied on a theory of bartering in the bulletin
board context. We cite, for example, United States of America v.
Michael John Gilbert, No. 5:93-CR-005-C, (N.D. Tx. Jan. 28, 1993)
(disposition), a case successfully prosecuted in the Northern District
of Texas by Assistant United States Attorney William B. Mateja.
We thank you for your inquiry, and remain available to offer
clarification or additional assistance.
MARY C. SPEARING
[cited in Criminal Resource Manual 1853; USAM 9-71.001]