By: Jason B. Freeman, JD, CPA
Contributing Authors: Bryce Couch, Jessica Lee, Alexandra Duncan, and Vrinda Bhuta
This CLE paper explores criminal intellectual property violations. There are a wide range of potentially applicable statutory provisions. Part One broadly discusses criminal copyright infringement, focusing on 17 U.S.C. Section 506 and 18 U.S.C. Section 2319. Part Two explores the Trademark Copyright Act, as well as its relation to its civil law counterpart, the Lanham Act, and its evolution since 1984. Part Three explores the theft of trade secrets, both those illegally obtained for the benefit of a foreign government, instrumentality, or agent and those merely sold for profit. Part Four explores the enactment of the Digital Millennium Copyright Act—a 1998 bill that responded to the increasing prevalence of web-based technology—highlighting the anti-circumvention and anti-trafficking measures necessary to prevent internet piracy. Part Five explores counterfeit and illicit labels, as well as counterfeit documentation and packaging, in the context of certain classes of copyrighted works under 18 U.S.C. § 2318. Part Six explores the sentencing guidelines for copyright claims under U.S.S.G. Section 2B5.3 and EEA claims under US.S.G. Section 2B1.1.
Criminal Copyright Infringement
I. Introduction: History and Purpose
The Constitution gave Congress the power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”[1] Under this provision, Congress promulgated a variety of statutes intended to preserve rights associated with copyrights.[2] This body of law grants copyright holders a variety of exclusive rights: (1) reproduction of the work; (2) preparation of derivative works based upon the original copyrighted work; (3) public distribution; (4) public performance of literary, musical, dramatic, choreographic, and mixed audiovisual works; (5) public display of the aforementioned types of works; and (6) performance of sound recordings by means of digital auto transmission.[3] Copyright law also governs the infringement of these rights. Although most of the case law stemming from copyright is civil in nature, the government can and does institute copyright cases.[4] Nonetheless, civil cases often provide informative judicial authority with regard to criminal actions.[5]
This subsection provides an overview of Section 506 and Section 2319, the provisions that establish the basis of criminal copyright infringement. Notably, section 506(a) criminalizes willful copyright infringement while section 2319 imposes penalties for such willful infringement. After analyzing these provisions and the elements of felony copyright infringement, this subsection concludes with a brief discussion of potential defenses in criminal copyright proceedings.
II. Elements of Felony & Misdemeanor Infringement
Criminal copyright law protects the exclusive rights of copyright holders outlined at the beginning of this subsection. A person who willfully infringes upon a copyright may be punished pursuant to Section 2319 when the infringement was committed: (1) for the purpose of commercial advantage or private financial gain;[6] (2) by the reproduction or distribution of a copyrighted work totaling more than $1,000 within a 180-day period; and (3) by making a work prepared for commercial distribution accessible via a computer network when the individual knew or should have known of the intended commercial purpose of said work.[7] The Government may pursue either felony or misdemeanor copyright infringement.[8]
To establish felony copyright infringement, the burden falls on the Government to show that: (1) a valid copyright exists; (2) the defendant infringed the copyright; (3) the defendant acted willfully in doing so; and (4) the infringement entailed reproduction or distribution.[9] With regard to the last requirement, it is a violation to reproduce or distribute at least ten copies of a copyrighted work valued at more than $2,500.[10] It is also a felony to distribute copies prepared for commercial distribution, to make such copies publicly accessible, and to act when one knows or should know that the work is being prepared for commercial distribution.[11]
On the other hand, to establish misdemeanor copyright infringement, the Government must show that: (1) a valid copyright exists; (2) the defendant infringed the copyright; (3) the defendant acted willfully in doing so; and (4) the infringement was committed via reproduction or distribution.[12] A misdemeanor charge is appropriate when a defendant (a) acted with the purpose of commercial advantage or financial gain[13] or (b) reproduced or distributed one or more works valued at more than $1,000 within a 180-day period.[14] Misdemeanor charges also apply to unlawful use of digital audio transmission and infringement on the exclusive performance right.[15]
a. Valid Copyright
A copyright only protects original works fixed in a tangible medium or expression. These works are independently created by the author and possess some minimal degree of creativity.[16] Additionally, copyright protects a particular form of expression rather than an underlying idea itself, so a copyrightable work must be fixed in some tangiblemedium.[17] Generally, a certificate of registration within five years will constitute prima facie evidence of a copyright, and the production of such registration shifts the burden of proof to the defendant to challenge its validity.[18] It should be noted that the Copyright Act does not expressly require a certificate of registration to merit copyright protection, but a registration typically is a prerequisite to certain statutory remedies, such as criminal actions.[19]
b. Infringed by the Defendant
Criminal enforcement focuses on infringement upon the rights established in Section 106.[20] Most often, however, criminal actions entail infringement upon the reproduction and distribution rights.[21] These violations are often the most serious infringements and give rise to the most significant penalties under criminal law.[22] In assessing whether an infringement occurred, it is important to consider whether the specific act in question falls within the purview of the statutory exceptions to the exclusive rights afforded by a copyright.[23]
c. Willfully
It is insufficient for the Government to demonstrate general intent.[24] Instead, the Government must prove that an individual acted with the intent to violate a known legal duty.[25] To meet this mens rea requirement, it is not necessary for the Government to put forward direct evidence of the mental state. The Government discharges this obligation by proving that the individual acted with a reckless disregard of a copyright holder’s rights.
Notably, there is a split in authority as to whether the willful requirement applies to the act of copying the work or infringing on the copyright.[26] The majority of courts adopt the higher standard, requiring an intention to violate a known duty.[27] However, some courts adopt a lower standard, requiring an intent to conduct the infringing activities without knowledge that the actions constitute infringement.[28]
d. For Purposes of Commercial Advantage or Private Financial Gain
A defendant acts for the purpose of commercial advantage or private financial gain when the defendant seeks a profit, financial or otherwise.[29] The focus of this inquiry is not whether or not a profit is actually obtained but whether a profit is intended.[30]
Historically, the law required proof of an individual’s intent to secure commercial advantage or private financial gain in criminal copyright prosecutions.[31] However, over time, this requirement shifted to promote the intended purpose of copyright law and to respond to substantial changes in the technological landscape.[32] Now, the Government generally demonstrates willful infringement exceeding particular monetary and numerical thresholds.[33] If the Government establishes a purpose of commercial advantage or private financial gain, it increases the maximum statutory sentence, increases the guideline sentencing range, and decreases the viability of the fair use defense.[34]
III. Section 2319 Penalties
If the Government successfully establishes a violation of Section 506, the question becomes, what penalties attach under section 2319? Under this provision, the Government may seek felony or misdemeanor penalties. A felony charge applies when a defendant infringes upon the rights of reproduction or distribution in the quantity and values stated by statute. By contrast, a misdemeanor penalty applies if a defendant fails to meet the numeric and monetary thresholds or if the defendant infringed on rights other than reproduction or distribution.
IV. Defenses
There are a variety of defenses for criminal copyright infringement cases. The Department of Justice’s Prosecuting Intellectual Property Crimes manual recognizes, these potential defenses as follows: Statute of Limitations, Jurisdiction, Venue, The First Sale Doctrine, Fair Use, and “Archival Exception” for Computer Software. This section highlights serval of these defenses.
a. Statute of Limitations
Under Section 507, there is a five-year statute of limitations for criminal copyright.[35] Previously, the limitations period was three years.[36]
b. Jurisdiction
Copyright law has no extraterritorial effect.[37] In other words, U.S. law cannot be invoked nor can U.S. courts provide relief when the infringing act occurs entirely outside the United States.
c. The First Sale Doctrine
Another possible defense is the First Sale Doctrine, embodied in 17 U.S.C. § 109. Once a copyright holder authorizes the use of a specific copy by one person, the copyright holder then cannot control how the copy is subsequently sold or transferred.[38] In other words, the subsequent purchaser may further distribute or dispose of a copy without permission.[39] Notably, this defense only applies to distribution; the first sale doctrine does not grant a subsequent purchaser the right to make additional copies.[40]
Trafficking In Counterfeit Trademarks, Service Marks, and Certification Marks
I. Introduction: History and Purpose
In the United States, trademarks, service marks, certification marks, and collective marks are protected not only by civil law pursuant to the Lanham Act, but also by criminal law pursuant to the Trademark Counterfeiting Act, 18 U.S.C. § 2320.[41] It is intended to protect both businesses and consumers who rely on such marks to buy and sell various goods and services.[42]
On one hand, 18 U.S.C. § 2320 encourages businesses to control the quality of their goods and services and invest in their brands by penalizing those who earn profits by taking advantage of the reputations, research and development, and advertising efforts of other businesses.[43] 18 U.S.C. § 2320 considers it to be a form of corporate identity theft and penalizes those who divert sales from or devalue the reputations of such businesses.[44]
On the other hand, 18 U.S.C. § 2320 also encourages consumers to rely on the marks of business brands by penalizing those who attempt to mislead consumers into purchasing counterfeit goods or services.[45] It also provides consumer protection against the various health or safety risks that may arise as a result of the misrepresentation of genuine goods and services.[46]
18 U.S.C. § 2320 has gone through major changes since its passage in 1984. For example, the Stop Counterfeiting in Manufactured Goods Act and the Protecting American Goods and Services Act of 2005 expanded the definition of “trafficking” under 18 U.S.C. § 2320 to include trafficking in labels and packaging bearing counterfeit marks, even when such labels are not joined to actual goods.[47] Similarly, the Prioritizing Resources and Organization for Intellectual Property Act enhanced penalties under 18 U.S.C. § 2320(b)(2) for knowingly or recklessly causing or attempting to cause serious bodily injury or death.[48] It also prohibits transshipment or exportation of goods or services under 18 U.S.C. § 2320(i) and brings the forfeiture provision in line with the restitution provision under 18 U.S.C. § 2320(c).[49] In addition, the National Defense Authorization Act for Fiscal Year 2012 and the Food and Drug Administration Safety and Innovation Act increased penalties for certain offenses, such as those related to counterfeit military goods, counterfeit drugs, and conspiracy.[50]
II. Elements: 18 U.S.C. § 2320
In order to assert a criminal offense claim under 18 U.S.C. § 2320, the government must prove the following elements:
- Defendant intentionally trafficked, attempted, or conspired to traffic in goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging;
- Defendant knowingly used or applied a counterfeit mark, which is likely to cause mistake, confusion, or deception, on or in connection with such goods, services, labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging; and
- It is a counterfeit mark pursuant to 18 U.S.C. § 2320(f).[51]
It is a felony to sell even one counterfeit good or service, and there is no corresponding misdemeanor provision.[52]Furthermore, 18 U.S.C. § 2320 is a general intent crime.[53] Pursuant to 18 U.S.C. § 2320(f), a mark may be considered counterfeit if the government can prove the following:
- It was not genuine or authentic;
- It was identical to or substantially indistinguishable from a genuine mark owned by another; and
- It was used in connection with the type of goods or services for which the protected mark was registered.[54]
In addition, the government must be able to prove the following about the genuine mark:
- It was registered on the principal register in the United States Patent and Trademark Office; and
- It was in use by the holder of the mark or its licensee.[55]
Congress relied heavily on the “concepts and definitions of the Lanham Act” when writing 18 U.S.C. § 2320.[56] In fact, Congress advised on several occasions that 18 U.S.C. § 2320 should be interpreted in light of the Lanham Act, stating, “No conduct will be criminalized by this act that does not constitute trademark infringement under the Lanham Act,” and incorporated the Lanham Act’s various defenses and limitations on remedies into 18 U.S.C. § 2320 as well.[57]For these reasons, courts often refer to civil opinions under the Lanham Act when analyzing criminal cases under 18 U.S.C. § 2320, though the latter is often construed more narrowly.[58]
III. Defenses
However, there are many defenses specific to 18 U.S.C. § 2320 as well, such as the authorized-use defense, the repackaging genuine goods defense, the statute of limitations defense, and the vagueness defense.
a. Authorized-Use Defense
In some cases, an otherwise authorized manufacturer or producer makes and sells “overrun” goods and services on the side without the mark holder or licensor’s knowledge or approval.[59]Such goods and services are not considered counterfeit under 18 U.S.C. § 2320(f)(1)(B), provided that they are produced during the time authorized by the license as well.[60]
In exchange, licensees may not use the authorized-use defense to join genuine or overrun labels to counterfeit goods or services.[61] It is well settled that a genuine or authentic mark immediately becomes counterfeit when it is used in connection with a counterfeit good or service.[62] Similarly, the authorized-use defense is inapplicable if the licensee produces a good or service that she was not authorized to produce.[63]
In other cases, an otherwise authorized manufacturer or producer imports “gray market goods,” or “parallel imports”; that is, “trademarked goods and services legitimately manufactured and sold overseas, and then [illegally] imported into the United States.”[64] Such goods are also not considered counterfeit under 18 U.S.C. § 2320(f)(1)(B).[65]
b. Repackaging Genuine Goods Defense
In more extreme cases, a person or organization may mislead the public or bring harm to the mark holder’s goodwill by repackaging genuine goods.[66] If so, the repackaging is criminal.[67] For example, individuals may be prosecuted under 18 U.S.C. § 2320 for repackaging genuine drugs with reproduced trademarks if they led customers into believing that foreign versions of a drug were domestic and approved by the United States Food and Drug Administration.[68]However, the person or organization may not be prosecuted under 18 U.S.C. § 2320, even if the person or organization repackaged genuine goods with reproduced trademarks, if they did not confuse the public in the process.[69]
c. Statute of Limitations Defense
18 U.S.C. § 2320 has no specified statute of limitations period, so it is subject to the general five-year limitations period for all non-capital federal crimes not expressly provided for by law.[70] However, it has been argued that the limitations period under 18 U.S.C. § 2320 should be limited to the shorter period under the Lanham Act.[71]
d. Vagueness Defense
For the most part, vagueness defenses under the Fifth Amendment have been rejected.[72] For example, in United States v. McEvoy, 820 F.2d 1170 (11th Cir. 1987), the Eleventh Circuit rejected the claim that 18 U.S.C. § 2320 is unconstitutionally vague on its face. Similarly, in United States v. Lam, 677 F.3d 190, 201-03 (4th Cir. 2012), the Fourth Circuit rejected the claim that 18 U.S.C. § 2320 is unconstitutionally vague because of the phrase “substantially indistinguishable.”
IV. Special Issues
a. High-Quality and Low-Quality Counterfeits
It is generally of little relevance to the government under 18 U.S.C. § 2320 that the counterfeit good is of too low or high quality to deceive any consumers.[73] Instead, the purpose of the statute is to give businesses the “right to control the quality of the goods manufactured and sold” under the mark and that the “actual quality of the goods is irrelevant; it is the control of quality that a trademark holder is entitled to maintain.”[74]
b. Scope of 18 U.S.C. § 2320
18 U.S.C. § 2320 also extends to genuine marks applied to genuine products in a manner that misrepresents the genuine product’s quality, as well as to genuine marks applied to counterfeit goods and services.[75] On the other hand, “reverse passing-off,” or selling the good of another business as one’s own, is not a crime under 18 U.S.C. § 2320, since it does not involve the use of a counterfeit mark as defined in 18 U.S.C. § 2320(f).[76]
V. Penalties
a. Fines and Imprisonment
For first offenses, the maximum penalty is up to two million dollars in fines and ten years imprisonment for an individual and up to five million dollars in fines for an organization.[77] For second and subsequent offenses, the maximum penalty is up to five million dollars in fines and twenty years imprisonment for an individual and up to fifteen million dollars in fines for an organization.[78]
Enhanced penalties may be applicable under 18 U.S.C. § 2320(b)(2) for those who knowingly or recklessly cause or attempt to cause serious bodily harm or death.[79] In the case of a serious bodily injury, for example, an individual may be subject to up to five million dollars in fines and twenty years imprisonment for an individual and up to fifteen million dollars in fines for an organization.[80] In the case of death, however, an individual may even be subject to life imprisonment.[81]
Enhanced penalties may also be applicable to those cases involving counterfeit military goods or services, as well as counterfeit drugs.[82] For first offenses, the maximum penalty is up to five million dollars in fines and twenty years imprisonment for individuals and up to fifteen million dollars in fines for organizations.[83] For second and subsequent offenses, the maximum penalty is up to fifteen million dollars in fines and thirty years imprisonment for an individual and up to thirty million dollars in fines for organizations.[84]
b. Restitution
Restitution is calculated by analyzing “the actual amount [of infringing goods] placed into commerce and sold.”[85] In particular, goods that are not actually sold may not be included in the restitution calculation, since the purpose of restitution is to compensate victims for only actual losses.[86] Pursuant to 18 U.S.C. § 2320, mark holders are required to use the ® symbol, or the words, “Registered in U.S. Patent and Trademark Office” or “Re. U.S. Pat. & Tm. Off.,” to give the public actual notice of their proper registration.[87] If not, mark holders may be barred from recovering lost profits or other damages under 15 U.S.C. § 1111, even though the licensee may still be liable under 18 U.S.C. § 2320.[88]
VI. Other Charges to Consider
In the alternative, prosecutors may also consider the following charges as well:
- Conspiracy and aiding-and-abetting under 18 U.S.C. §§ 2, 371;
- Mail and wire fraud under 18 U.S.C. §§ 1341, 1343;
- Copyright infringement under 17 U.S.C. § 506 and 18 U.S.C. § 2319;
- Trafficking in counterfeit labels, illicit labels, or counterfeit documentation or packaging under 18 U.S.C. § 2318;
- Trafficking in misbranded food, drugs, and cosmetics under 21 U.S.C. §§ 331(a), 333, 343, 352, 362, and 841(a)(2); and
- Tampering with consumer products under 18 U.S.C. § 1365.[89]
Theft of Commercial Trade Secrets
I. Generally
The Economic Espionage Act (EEA), codified in 18 U.S.C. § 1831-1839, makes the theft or trafficking in trade secrets for foreign governments, instrumentalities, or agents a criminal act. The act was first introduced following the sudden rise in IP theft after the Cold War.[90] Prior to the passage of the EEA, the only federal statute that directly prohibited economic espionage was the Trade Secrets Act, 18 U.S.C. § 1905, which forbid the unauthorized disclosure of confidential government information, including trade secrets, by a government employee. The Trade Secrets Act, however, does not apply to private sector employees and thus was unsuccessful in addressing or remedying the issue more broadly.[91] The EEA was amended in 2016 by the Defend Trade Secrets Act (DTSA), which created a federal private cause of action for trade secret misappropriation[92] and underscored Congress’s desire to align closely with the Uniform Trade Secrets Act.[93] Though the DTSA was enacted as part of the EEA, many regard it as a separate statute. The main body of the EEA is unchanged by the amendments and establishes two prosecutable offenses regarding the theft of trade secrets.[94]
a. Theft Benefitting a Foreign Government | Section 1831
The first offense is addressed by 18 U.S.C. § 1831. Section 1831 addresses “economic espionage,” which arises when the theft in question benefits a foreign government, foreign instrumentality, or foreign agent.[95] To prove economic espionage under 18 U.S.C. § 1831, the government must prove the defendant knew or intended that the offense would benefit a foreign government, foreign instrumentality, or foreign agent.[96] Economic espionage prosecutions under Section 1831 require express approval from the Attorney General, the Deputy Attorney General, or the Assistant Attorney General of the Criminal Division.[97] If a foreign instrumentality element does not exist or cannot be proved, the government may still establish a violation of 18 U.S.C. § 1832 by proving three additional elements.
b. Theft of Commercial Trade Secrets | Section 1832
Section 1832, the second offense, punishes the commercial theft of trade secrets carried out for economic advantage—whether or not it benefits a foreign government, instrumentality, or agent.[98] This offense is more general, applies to both foreign and domestic trade secret disputes, and carries a ten-year maximum term of imprisonment.[99] Section 1832 contains three additional limitations not found in § 1831.[100] First, a defendant charged under section 1832 must intend to convert a trade secret “to the economic benefit of anyone other than the owner thereof,” which includes the defendant himself.[101] Second, section 1832 states that the defendant must intend or know that the offense will injure an owner of the trade secret—a restriction not found in Section 1831. Finally, unlike section 1831, section 1832 also requires that the trade secret be “related to or included in a product that is produced for or placed in interstate or foreign commerce.”[102]
Sections 1831 and 1832 both require the government to prove beyond a reasonable doubt three elements: (1) the defendant misappropriated information (or conspired or attempted to do so); (2) the defendant knew or believed this information was proprietary and that they had no claim to it; and (3) the information was in fact a trade secret (unless the crime charged is a conspiracy or an attempt).[103]
II. Elements of a Trade Secret
A threshold question under both sections of the EEA is whether the information qualifies as a trade secret. Under 18 U.S.C. § 1839(3) the EEA defines “trade secret” to mean:
All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
The statute’s legislative history counsels a broad interpretation of this definition.[104] The key attribute of a trade secret is that the information must not be “generally known to,” or “readily ascertainable through proper means by,” the public.[105] To this point, a trade secret’s owner must take reasonable measures under the circumstances to keep the information confidential.[106] A trade secret does not lose its protection under the EEA, however, if it is temporarily, accidentally, or illicitly released to the public, provided it does not become “generally known” or “readily ascertainable through proper means.”[107] After determining if the information is a trade secret, the court then assess whether the owner undertook reasonable measures under the circumstances to keep the information confidential.
a. Standard of Secrecy
The measure of secret keeping is frequently a threshold issue and is also a question of fact. Courts have repeatedly held that the required standard is not one of absolute secrecy.[108] Security measures, such as locked rooms, security guards, and document destruction methods, in addition to confidentiality procedures, such as confidentiality agreements and document labeling, are often considered reasonable measures.[109] In addition, for circumstances where sufficient measures were taken but the secret was leaked by an insider there is a 2-level adjustment for abuse of a position of trust under U.S.S.G. § 3B1.3, which is further explored below.[110]
b. Independent Economic Value
Finally, to qualify as a trade secret, the item must have independent economic value.[111] Although the EEA does not require any specific level of value, it must be proven that the trade secret in question has some independent economic value.[112] Economic value “speaks to the value of the information to either the owner or a competitor; any information which protects the owner’s competitive edge or advantage.”[113] Economic value can be derived from the market, the cost of the item, or even the defendant’s acknowledgement that the secret is valuable.[114]
III. Defenses
The most common defense to EEA charges is that the information does not qualify as a trade secret by failing to meet any one of the elements explored above.[115] Defendants also correctly assert that the government bears the burden of proving, beyond a reasonable doubt, that the trade secret derived economic value from not being generally known to the public through proper means.[116] What counts as disclosure, however, is nuanced and varied and generally requires the assistance of expert witnesses.[117] It should be noted that the defense of legal impossibility has largely been rejected by courts in EEA prosecutions.[118] Likewise, several defendants have challenged the EEA on grounds that it is vague or otherwise unconstitutional and, thus far, all such challenges have been rejected.[119]
The next defense also operates as an essential element of the offense—the defendant’s intent to convert the trade secret.[120] This defense is rooted in Congress’ stated purpose to differentiate between trade secrets, which are the subject matter of the EEA, and a person’s general skills and knowledge.[121] The EEA does not cover reverse engineering, parallel development, or ‘soft skills’ gained while employed.[122] Although legislators eliminated language providing that general knowledge, skills, and experience are not “trade secrets,”[123] it is clear that Congress did not intend the definition of a trade secret to be so broad as to prohibit lawful competition such as the use of general skills or lawful parallel development of a similar product.[124] As such, other common defenses to EEA charges are the parallel development defense (that the defendant independently, through its own effort, developed the same information without access to trade secrets) and the reverse engineering defense (that the defendant legally discovered the information by taking apart something that was legally acquired to determine how it works, or was made or manufactured).[125]
IV. Future of the EEA
A proposal to amend the EEA was introduced in the Senate in late April of 2021. The ‘Safeguarding Educational Institutions, Colleges, Universities, and Research Entities from China’s Attempts to Misappropriate Property of the United States Act of 2021’ (or the ‘SECURE CAMPUS Act of 2021’) proposes to secure the research enterprise of the United States from the Chinese Communist Party, and for other purposes.[126] One of the proposals includes an amendment to Section 1839(1) by:
(1) inserting ‘education, research,’ after ‘commercial,’; and
(2) inserting ‘or otherwise incorporated or substantially located in or composed of citizens of countries subject to compulsory political or governmental representation within corporate leadership’ after ‘foreign government’.”
The bill was read twice and referred to the Committee on Foreign Relations.[127]
Digital Millennium Copyright Act
I. Background & History of the Act
The rise of the Internet posed a series of challenges to existing copyright law. Intending to address substantive copyright issues arising in the virtual landscape, Congress passed the Digital Millennium Copyright Act (DMCA) in 1998.[128] The DMCA served as U.S. implementation of two World Intellectual Property Organization (WIPO) treaties signed in 1996: WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.[129] These treaties prohibited breaking the security measures taken by copyright holders to protect digital content from unauthorized uses.[130] By enacting the DMCA, Congress sought to “protect[] copyrighted works from piracy and promot[e] electronic commerce.”[131]
Generally, the DMCA enacted specific prohibitions that regulated the circumvention of copyright protect systems[132] and addressed the integrity of copyright management systems.[133] Under the DMCA, criminal enforcement primarily addresses violations of the anti-circumvention and anti-trafficking component of Section 1201.
II. 17 U.S.C. § 1201: Circumvention of Copyright Protection Systems
Section 1201 is one of the most important provisions of the DMCA. Section 1201(a)(1)(A) notably prohibits the circumvention of access control.[134] So, for example, this provision prohibits the decryption of protective measures on CDs or DVDs so that it can be accessed on other devices.[135] Additionally, Section 1201 prohibits the manufacture or trafficking in devices or technology that enables an individual to circumvent the security measures intended to affect access to a protected a work.[136] Finally, section 1201 prohibits the manufacture or trafficking in devices or technology designed to circumvent the protection of a copyright owner’s rights.[137] Violations of these provisions can result in civil actions under section 1203[138] or criminal prosecution under section 1204,[139] discussed below.
III. 17 U.S.C. § 1202: Integrity of Copyright Management Information
Unlike Section 1201’s focus on copyright protection systems, section 1202 focuses on copyright management information. This section prohibits knowingly falsifying, removing, or altering copyright management information. Further, it prohibits intentionally facilitating the infringement of management information[140] or facilitating the infringement by distributing copies where the copyright information has been removed.[141] Subsection (c) defines copyright management information to include: the title and other information identifying the work; the name of, and other identifying information about, the author of the work; the name of, and other identifying information about, the copyright owner of the work; terms and conditions of the work; identifying numbers or symbols referring to such information; and more.[142]
IV. Elements of the Key Provisions
a. Circumventing Access Controls: 17 U.S.C. §§ 1201(a)(1), 1204
To establish a violation by circumventing access controls, the Government must show that the defendant (1) willfully (2) circumvented (3) a technological measure that effectively controls access (4) to a copyrighted work (5) for commercial advantage or private financial gain.[143]
b. Trafficking in Access Control Circumvention Tools and Services: 17 U.S.C. §§ 1201(a)(2), 1204
To establish a violation by trafficking access control circumvention tools and services, the Government must show that a defendant willfully manufactured or trafficked in a technology, product, service, or part thereof.[144] This product must either (a) be primarily designed or produced for the purpose of, (b) only have limited commercially significant purposes or use other than, or (c) be marketed with knowledge of the item’s use in circumventing an access control without authorization from the copyright owner for commercial advantage or private financial gain.[145]
c. Trafficking in Tools, Devices, and Services to Circumvent Copy Controls: 17 U.S.C. §§ 1201(b)(1), 1204
To establish a violation by trafficking in tools, devices, and services to aid the circumvention of copy controls, the Government must show that an individual willfully manufactured or tracked in a technology, product, service, or part thereof.[146] Similar to Section 1201(a)(2), the item must either (a) be primarily designed or produced for the purpose of, (b) have limited commercially significant purpose or use other than, or (c) marketed with the knowledge of the item’s use for circumvention.[147] However, for Section 1201(b)(1), the item must be used to circumvent the protection afforded by a technological measure designed to protect the rights of the copyright owner for commercial advantage or private gain.[148]
d. 17 U.S.C. § 1202
Although criminal enforcement of section 1202 is rare, it is possible if the Government demonstrates that the defendant violated the provision willfully and for purposes of commercial advantage or private financial gain.[149]
V. 17 U.S.C. § 1203: Civil Remedies
Under Section 1203, the DMCA allows those suffering an injury because of a Section 1201 or 1202 violation to bring a civil action in an appropriate United States district court.[150] If a civil action is brought, a court may: grant temporary and permanent injunctions; order the impounding of any device that the court has reasonable cause to believe was involved in the violation; award damages; allow the recovery of costs by or against a party other than the United States or an officer thereof; award attorney’s fees; and order remedial modification or destruction of a device involved in the violation.[151] Under Subsection (c), a person liable for a violation is liable for either the actual damages and additional profits of the violator or statutory damages.[152]
VI. 17 U.S.C. § 1204: Criminal Offenses & Penalties
Section 1204 outlines the potential penalties for criminal violations of the DMCA provisions if an individual violates Section 1201 or 1202 willfully and for purposes of commercial advantage or private financial gain.[153] This enforcement excludes nonprofit libraries, archives, educational institutions, and public broadcasting entities, as defined under Section 118(f).[154] Under this section, criminal violation carries a maximum penalty of five years’ imprisonment, a $500,000 fine or twice the monetary gain or loss, or both imprisonment and a fine.[155] These penalties apply for first time criminal violations. For subsequent offenses, the criminal punishment increases: ten years’ imprisonment, a $1 million fine or twice the monetary gain or loss, or both imprisonment and a fine.[156]
VII. Possible Defenses
There are a variety of defenses possible for a DMCA action. The Department of Justice’s Prosecuting Intellectual Property Crimes manual highlights these possible defenses, exceptions, and exemptions. These have included: Statute of Limitations, Librarian of Congress Regulations, Certain Non-Profit Entities, Information Security Exemption, Reverse Engineering and Interoperability of Computer Programs, Encryption Research, Restricting Minors’ Access to the Internet, Protection of Personally Identifying Information, Security Testing, and challenges to the constitutionality of the DMCA.[157] This section highlights a few of these available arguments.
a. Statute of Limitations
Under Section 1204(c), the statute of limitations for the DMCA is five years.[158] A criminal proceeding may not be brought beyond this period.[159]
b. Exemption for Non-Profit Entities
There is an exemption from criminal prosecution for nonprofit libraries, archives, educational institutions, and public broadcasting entities under Section 1204(b).[160] Similarly, there is a more limited exemption under Section 1201(d).[161] This provision, however, omits public broadcasting entities.[162]
c. Exemption for Information Security
Under Section 1201(e), Congress enacted a narrow exemption intended to permit law enforcement to disable technical security measures to ensure that government computer systems are secure from hacking.[163] Section 1201(e) does not prohibit acts of “any lawfully authorized investigative, protective, information security, or intelligence activity of an officer, agent or employee . . . carried out in order to identify and address the vulnerabilities of a government computer, computer system, or computer network.”[164]
Counterfeit and Illicit Labels, Counterfeit Documentation and Packaging
I. Introduction: History and Purpose
Similar to the Copyright Act, 18 U.S.C. § 2318 is a criminal statute that protects creative works ofindividuals and organizations from those who knowingly traffic in counterfeit or illicit labels, or counterfeit documentation and packaging for certain classes of copyrighted works.[165] 18 U.S.C. § 2318, however, is not a pure copyright statute and provides protections that vary from those provided by the Copyright Act, or even 18 U.S.C. § 2320.[166]
For example, even though counterfeit and illicit labels, as well as counterfeit documentation and packaging, commonly exhibit counterfeit trademarks,18 U.S.C. § 2318 gives no attention to the counterfeit trademarks themselves.[167]Similarly, 18 U.S.C. § 2320 penalizes the trafficking of labels and labeling components bearing counterfeit trademarks in connection with any type of good of service, but 18 U.S.C. § 2318 penalizes only counterfeit labels in connection with particular copyrighted works.[168]
Originally, 18 U.S.C. § 2318 covered only counterfeit labels for phonorecords. Later, Congress expanded its scope in 2004 to cover counterfeit labels, documentation, and packaging for movies; music; software; copies of literary, pictorial, graphic, or sculptural works; works of visual arts; and labels designed to be used with documentation and packaging for any of the enumerated classes of copyrighted works.[169] In 2006, Congress again expanded 18 U.S.C. § 2318 to cover “illicit labels,” or “genuine certificate[s], licensing document[s], registration card[s], or similar labeling component[s]” distributed or intended for distribution without the owner’s permission.[170]
II. Elements: 18 U.S.C. § 2318
In order to successfully assert a criminal offense claim under 18 U.S.C. § 2318, the government must prove the following elements:
- Defendant knowingly trafficked in labels affixed to, enclosing, or accompanying, or designed to be affixed to, enclose, or accompany a phonorecord; a copy of a computer program; a copy of a motion picture or other audiovisual work; a copy of a literary work; a copy of a pictorial, graphic, or sculptural work; a work of visual art; documentation or packaging; or counterfeit documentation or packaging.
- Either the documentation or the packaging was counterfeit, or the labels were counterfeit or illicit; and
- Federal jurisdiction is satisfied because one or more of the following is satisfied:
- Such offense occurred in special maritime territories or other areas of special jurisdiction of the United States;
- Such offense used or intended to use the mail or a facility of interstate or foreign commerce;
- Such counterfeit or illicit labels were affixed to, enclosed, or accompanied copyrighted materials, or were designed to; or
- Such documentation or packaging is copyrighted.[171]
III. Defenses
a. Statute of Limitations Defense
18 U.S.C. § 2318 has no specified statute of limitations period, so it is subject to the general five-year limitations period for all non-capital federal crimes not expressly provided for by law.[172]
b. First-Sale Defense
Even though the first-sale defense is often a valid defense against copyright infringement charges under 17 U.S.C. § 109, it is generally rejected in the context of 18 U.S.C. § 2318.[173]
IV. Special Issues
a. Electronic Copies of Labels, Documentation, or Packaging
18 U.S.C. § 2318 may also be applied in limited circumstances to those cases where either the original or the counterfeit or illicit copies are electronic or digital in form.[174] In particular, the phrase, “in physical form,” as used in 18 U.S.C. § 2318(b)(5), is inapplicable to labels, documentation, and packaging that are only available in electronic or digital form.[175] However, 18 U.S.C. § 2318 is less clear regarding similar electronic or digital labels, documentation, and packaging uploaded onto physical items, such as CD-ROMs.[176]
b. Advantages of Charging a § 2318 Offense
18 U.S.C. § 2318 is generally popular because the mens rea and minimum threshold for illegal conduct are lower than those of the Copyright Act.[177] Likewise, the standard of proof is often lower than other criminal trademark charges that require proof that the marks used on the counterfeit or illicit labels are identical to or substantially indistinguishable from registered marks with the United States Patent and Trademark Office.[178]
a. Fines and Imprisonment
For all offenses, the maximum penalty is up to $250,000 in fines and five years imprisonment for an individual and up to $500,000 in fines for an organization.[179] In the alternative, the individual or organization may be fined twice the offense’s pecuniary gain or loss without limit.[180]
b. Restitution
Restitution is calculated by analyzing “the actual amount [of infringing goods] placed into commerce and sold.”[181] In particular, goods that are not actually sold may not be included in the restitution calculation, since the purpose of restitution is to compensate victims for only actual losses.[182]
In the alternative, prosecutors may also consider the following charges as well:
- Copyright infringement under 17 U.S.C. § 506 and 18 U.S.C. § 2319;
- Trademark counterfeiting under 18 U.S.C. § 2320;
- Mail or wire fraud under 18 U.S.C. §§ 1341, 1343;
- Racketeer Influenced and Corrupt Organizations (RICO) under 18 U.S.C. §§ 1961-68; and
- Bootleg sound recordings and music videos of live musical performances under 18 U.S.C. § 2319A.[183]
I. Offenses Involving: Copyright (Including Bootleg Music, Camcorded Movies, and the Unauthorized Use of Satellite, Radio, and Cable Communications), Trademark, Counterfeit Labeling, and the DMCA.
Most intellectual property offenses are calculated and sentenced under U.S.S.G. Section 2B5.3. Offenses involving; Copyright, Bootleg Music, Camcorded Movies, and the Unauthorized Use of Satellite, Radio, and Cable Communications, Trademark, Counterfeit Labeling, and the DMCA all included. Section 2B5.3 was adopted with the initial set of guidelines in 1987 and largely retained its original form until amended, effective May 1, 2000, in response to the No Electronic Theft Act of 1997.[184] The May 2000 amendments increased the base offense level and increased the number and type of special offense characteristics to include not only the infringement amount, but also characteristics for manufacturing, uploading, or importing infringing items; for infringement not committed for commercial advantage or private financial gain; and for risk of serious bodily injury or possession of a dangerous weapon in connection with the offense.[185] The base offense level under the EEA is eight, which, like all base offense levels, is designed to “reflect a minimal, general harm caused by the offense.”[186] It incorporates the “more than minimal planning” conduct that the Commission determined was present in the majority of offenses sentenced under this guideline.[187]
a. Calculating the Infringement Amount | General
Under U.S.S.G. § 2B5.3(b)(1), the base offense level is adjusted according to the “infringement amount,” an estimate of the magnitude of infringement. Thus, the infringement amount tends to be the most significant factor in the calculation of a sentence.[188] The infringement amount is generally calculated by multiplying the retail value of the infringed item by the number of infringing items.[189] If the court cannot determine the number of infringing items, the court need only make a reasonable estimate of the infringement amount using any relevant information, including financial records.[190]“Infringed item” means the copyrighted or trademarked item with respect to which the crime against intellectual property was committed.[191] “Infringing item” means the item that violates the copyright or trademark laws.[192] The “retail value” of an infringed item or an infringing item is the retail price of that item in the market in which it is sold.[193] If the infringement amount is $2,500 or less, there is no offense level increase.[194] If the infringement amount exceeds $2,500 but is less than $6,500 the level increases by one.[195] In the case that the amount exceeds $6,500 the base level offense is increased by the number of levels from the table in Section.[196]
b. Infringement Amount | Counterfeit Goods and Labels
For offenses of trafficking in counterfeit goods and labels, the infringement amount should include all items the defendant acquired because the term “traffic” is defined to include obtaining control over an infringing item with the “intent to ... transport, transfer, or otherwise dispose of” it.[197] This applies equally if the defendant is convicted of attempting or conspiring to traffic in counterfeit goods.[198] In cases which involve counterfeit labels that have not been affixed to, or packaging that does not actually enclose or accompany, a good or service, the infringing items counted should be the labels and packaging which, “had [they] been so used, would appear to a reasonably informed purchaser to be affixed to, enclosing or accompanying an identifiable, genuine good or service.”[199]
c. Infringement Amount | Bootleg and Camcord
Bootlegging and camcording statutes also criminalize the production of infringing items, regardless of actual distribution.[200] Distribution of a copyrighted item before it is legally available to the consumer is more serious than the distribution of already available items and, as of October 2005, includes an added two-level enhancement for offenses that involve the display, performance, publication, reproduction, or distribution of a work being prepared for commercial distribution.[201]
II. Offenses Involving the Economic Espionage Act (EEA)
U.S.S.G. § 2B1.1 is the primary applicable Guideline for the Economic Espionage Act, except for attempts and conspiracies.[202] The choice of U.S.S.G. § 2B1.1 instead of U.S.S.G. § 2B5.3 likely reflects the idea that EEA offenses are primarily about stolen property rather than infringement.[203] Subsection (b)(14) of U.S.S.G. § 2B1.1 addresses offenses involving the misappropriation of a trade secret when the defendant knew or intended either (A) that the trade secret would be transported or transmitted out of the United States, which results in an increase by two levels,[204] or (B) that the offense would benefit a foreign government, foreign instrumentality, or foreign agent, which results in an increase by four levels and sets a minimum resulting offense level of fourteen.[205]
a. Additional Penalties | Abuse of Position of Trust or Use of Special Skill
Trade secret offenses committed by corporate insiders often deserve a two-level adjustment for abuse of a position of trust under U.S.S.G. § 3B1.3. “Public or private trust” refers to a position of public or private trust characterized by professional or managerial discretion (i.e., substantial discretionary judgment that is ordinarily given considerable deference) and the position of trust “contributed in some significant way to facilitating the commission or concealment of the offense.”[206] A defendant can receive the enhancements for abuse of a position of trust and sophisticated means simultaneously, but adjustment may not be employed if an abuse of trust or skill is included in the base offense level or specific offense characteristic.[207] If the adjustment is based upon an abuse of a position of trust, it may be employed in addition to an adjustment under § 3B1.1 (Aggravating Role); if the adjustment is based solely on the use of a special skill, it may not be employed in addition to an adjustment under § 3B1.1 (Aggravating Role). “Special skill” refers to a skill not possessed by members of the general public and usually requiring substantial education, training or licensing. Examples would include pilots, lawyers, doctors, accountants, chemists, and demolition experts.[208]
b. Additional Penalties | Sophisticated Means
If the offense involved sophisticated means, then the offense level is increased by two levels and if the resulting offense is less than twelve, it must be increased to twelve.[209] “Sophisticated means” is defined as “especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense,” which includes “hiding assets or transactions,” among other things.[210] The sophisticated means enhancement often applies to trade secret offenses committed by corporate insiders who have the need and opportunity to take extensive precautions to shield their actions from their employer.[211] A defendant can receive the adjustment for sophisticated means in addition to the adjustment for use of a special skill under U.S.S.G. § 3B1.3.[212]
c. EEA | Calculating Loss
The defendant’s sentence in an EEA offense is largely calculated by the value of the lost property. Under U.S.S.G. § 2B1.1(b)(1) the offense level increases according to the amount of the loss. Guideline Section 2B1.1 outlines a number of methods for calculating loss but, regardless of the method chosen, the court “need only make a reasonable estimate of the loss” and not be absolutely certain or precise.[213] The resulting loss figure is “the greater of actual loss or intended loss.”[214] “Actual loss” means the reasonably foreseeable pecuniary harm that resulted from the offense.[215]“Intended loss” means the pecuniary harm that the defendant purposely sought to inflict; and includes intended pecuniary harm that would have been impossible or unlikely to occur.[216] Many factors complicate forming a reasonable estimate such as whether; the defendant paid anything for the secret, the defendant was paid anything for the secret, the defendant used the secret, the defendant used the secret and made money from its use, the victim’s sales decreased, increased, or increased at a lower rate than if the misappropriation had not occurred, and other such situations.[217] Loss calculations are often complicated and are only made more so by the fact that, by definition, trade secrets lack an open market price or value for the court to use as a reference or basis. Given the variety of scenarios, evidence available, and broad principles of valuing trade secrets, the DOJ recommends that prosecutors, agents, and courts be pragmatic about choosing which method to use so long as it is equitable, appropriately punitive, and supported by the evidence.[218]
i. Calculating Loss | Criminal Cases
Most federal criminal decisions calculate loss by using the trade secret’s development costs.[219] Some, however, have measured loss with respect to trade secrets via pecuniary loss.[220]
ii. Calculating Loss | Civil Cases
Civil cases often compute the trade secret’s market value with either the victim’s loss or the defendant’s gain.[221] The focus in civil cases, however, is usually upon the defendant’s gain, with most civil courts noting that if the victim’s loss were the only appropriate measure of damages, a defendant accused of stealing trade secrets could not be punished if they had not yet used the information to the owner’s detriment.[222] The Uniform Trade Secrets Act also provides that damages may be based on a “reasonable royalty” much like with patent infringement.
[1] U.S. Const. art. 1, § 8, cl. 8.
[2] Office of Legal Educ. Exec. Off. Of U.S. Att’ys., Prosecuting Intellectual Property Crimes 10 (4th ed. 2013).
[3] 17 U.S.C. § 106(1)–(6).
[4] Office of Legal Educ., supra note 2, at 11.
[5] Id. (citing United States v. Wise, 550 F.2d 1180, 1188 n.14 (9th Cir. 1977) (“[T]he general principle in copyright law of looking to civil authority for guidance in criminal cases.”)).
[6] 17 U.S.C. § 101 (defining financial gain as the “receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works”).
[7] 17 U.S.C. § 506.
[8] Copyright Law, Dep’t of Just., https://www.justice.gov/jm/jm-9-71000-copyright-law (last updated January 2020).
[9] Office of Legal Educ., supra note 2, at 16.
[10] 18 U.S.C. § 2319(b)(1).
[11] 17 U.S.C. § 506(a)(1).
[12] Office of Legal Educ., supra note 2, at 59–60.
[13] Id. at 60 (citing 17 U.S.C. § 506(a)(1)(A), 18 U.S.C. § 2319(b)(3)).
[14] Id. (citing 17 U.S.C. § 506(a)(1)(B), 18 U.S.C. 2319(c)(3)).
[15] Id.
[16] Id. at 18.
[17] 17 U.S.C. § 102(b).
[18] 17 U.S.C. § 410(c).
[19] Office of Legal Educ., supra note 2, at 21.
[20] See 17 U.S.C. § 106(1)–(6).
[21] Office of Legal Educ., supra note 2, at 34.
[22] Id.
[23] See, e.g., 17 U.S.C. §§ 107–122.
[24] Office of Legal Educ., supra note 2, at 26 (citing 143 Cong. Rec. 26,420-21 (1997)).
[25] 143 Cong. Rec. 26,420 (1997) (“‘Willful’ ought to mean the intent to violate a known legal duty.’”).
[26] Office of Legal Educ., supra note 2, at 28–29.
[27] See, e.g., United States v. Sherman, 576 F.2d 292, 297 (10th Cir. 1978).
[28] See, e.g., United States v. Backer, 134 F.2d 533, 535 (2d Cir. 1943).
[29] Office of Legal Educ., supra note 2, at 57.
[30] 17 U.S.C. § 101.
[31]Office of Legal Educ., supra note 2, at 55.
[32] Id. At 55–56.
[33] Id. at 56.
[34] Id.
[35] 17 U.S.C. § 507(a).
[36] Office of Legal Educ., supra note 2, at 60.
[37] Id. at 61.
[38] Id. at 63–64.
[39] Id. at 64.
[40] Id.
[41] Office of Legal Educ., supra note 2, at 89.
[42] Id.
[43] Id. at 90.
[44] Id.
[45] Id. at 93.
[46] Id.
[47] The Stop Counterfeiting in Manufactured Goods Act, Pub. L. No. 109-181, § 1, 120 Stat. 285, 285-88 (2006); The Protecting American Goods and Services Act of 2005, Pub. L. No. 109-181, § 2, 120 Stat. 285, 288 (2006).
[48] The Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act, Pub. L. No. 110-403, 122 Stat. 4256, 4261-63 (2008).
[49] Id.
[50] The National Defense Authorization Act (NDAA) for Fiscal Year 2012, Pub. L. No. 112-81, 125 Stat. 1298 (2011), H.R. 1540, S. 1867; The Food and Drug Administration Safety and Innovation Act (FDASIA), Pub. L. No. 112-144, 126 Stat. 993, S. 3197.
[51] The Trademark Counterfeiting Act, 18 U.S.C. § 2320.
[52] United States v. Foote, 413 F.3d 1240, 1246 (10th Cir. 2005).
[53] United States v. Baker, 807 F.2d 427, 429 (5th Cir. 1986); United States v. Gantos, 817 F.2d 41, 42-43 (8th Cir. 1987).
[54] 18 U.S.C. § 2320(f).
[55] Id.
[56] See H.R. Rep. No. 98-977, at 4-5 (1984).
[57] See Joint Statement on Trademark Counterfeiting Legislation, 130 Cong. Rec. 31,675 (1984).
[58] United States v. Torkington, 812 F.2d 1347, 1352 (11th Cir. 1987); United States v. Giles, 213 F.3d 1247, 1249-50 (10th Cir. 2000).
[59] Office of Legal Educ., supra note 2, at 130.
[60] Id.
[61] Id. at 131.
[62] Id.
[63] Id.
[64] Id. at 133.
[65] Id.
[66] Id. at 134.
[67] Id.
[68] United States v. Milstein, 401 F.3d 53, 62-63 (2d Cir. 2005).
[69] United States v. Hanafy, 302 F.3d 485 (5th Cir. 2002).
[70] The Trademark Counterfeiting Act, 18 U.S.C. § 2320; 18 U.S.C. § 3282(a).
[71] See United States v. Foote, 413 F.3d 1240, 1247 (10th Cir. 2005)
[72] See United States v. Bohai Trading Co., 45 F.3d 577 (1st Cir. 1995); United States v. Hon, 904 F.2d 803 (2d Cir. 1990); United States v. Diallo, 476 F. Supp. 2d 497 (W.D. Pa. 2007), aff’d, 575 F.3d 252 (3d Cir.), cert. denied, 130 S. Ct. 813 (2009).
[73] See United States v. Farmer, 370 F.3d 435 (4th Cir. 2004); United States v. Gonzalez, 630 F. Supp. 894, 896 (S.D. Fla.1986).
[74] Id.
[75] Office of Legal Educ., supra note 2, at 141.
[76] Id.
[77] 18 U.S.C. § 2320(b).
[78] Id.
[79] 18 U.S.C. § 2320(b)(2).
[80] Id.
[81] Id.
[82] 18 U.S.C. § 2320(b)(3).
[83] Id.
[84] Id.
[85] United States v. Beydoun, 469 F.3d 102, 108 (5th Cir. 2006).
[86] Id.
[87] 18 U.S.C. § 2320(f).
[88] United States v. Sung, 51 F.3d 92, 93-94 (7th Cir. 1995).
[89] Office of Legal Educ., supra note 2, at 151–53.
[90] United States v. Hsu, 155 F.3d 189, 194 (3d Cir. 1998) (citing Richard J. Heffernan & Dan T. Swartwood, Trends in Intellectual Property Loss 4, 15 (1996) (Government spies migrated to the private sector following the Cold War and by 1996 it was estimated as much as $24 billion in trade secrets was being stolen and sold each year.)
[91] Hsu, 155 F.3d at 194 n.5 (3d Cir. 1998); see also United States v. Yang, 281 F.3d 534, 543 (6th Cir. 2002) (noting “the purpose of the EEA was to provide a comprehensive tool for law enforcement personnel to use to fight theft of trade secrets”).
[92] Defend Trade Secrets Act § 2(e); 18 U.S.C. § 1833(b)(1).
[93] 18 U.S.C. § 1831-1839; S. Rep. No. 114-220, at 14 (2016) (Prior to the DTSA’s enactment, private causes of action for trade secret misappropriation were solely a matter of state law, which in a vast majority of states was based on the Uniform Trade Secret Act (UTSA)).
[94] 18 U.S.C. § 1831-1832.
[95] 18 U.S.C. § 1832(a) (as amended by the Theft of Trade Secrets Clarification Act, Pub. L. No. 112-236, § 2, 126 Stat. 1627 (2012)) (‘Theft’ is defined to mean “(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; (2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information; (3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization.”)
[96] 18 U.S.C. § 1832(a).
[97] 18 U.S.C. § 1831; USAM 9-2.400, 9-59.000.
[98] 18 U.S.C. § 1832(a).
[99] Id.
[100] Hsu, 155 F.3d at 195.
[101] Id.
[102] Id. at 196
[103] See 18 U.S.C. §§ 1831(a), 1832(a).
[104] See H.R. Rep. No. 104-788, at 12 (1996), reprinted in 1996 U.S.C.C.A.N. 4021, 4031.
[105] See APPENDIX P2. Economic Espionage Act (18 U.S.C.A. § 1839(3)) (As Amended May 11, 2016 by the Defend Trade Secrets Act of 2016- See Appendix P3, infra), 4 Trade Secrets Law Appendix P2. (Congress passed the Defend Trade Secrets Act (“DTSA”) in 2016 which supplements the EEA by creating a private civil cause of action for trade secret misappropriation.)
[106] 18 U.S.C. § 1839(3).
[107] 18 U.S.C. § 1839(3)(B).
[108] U.S. v. Genovese, 409 F. Supp. 2d 253 (S.D. N.Y. 2005).
[109] United States v. Chung, 659 F.3d 815, 825 (9th Cir. 2011).
[110] See United States v. Ratliff, 376 Fed. Appx. 830, 836-41 (10th Cir. 2010); cf. United States v. Straus, 188 F.3d 520, 1999 WL 565502, at *5 (10th Cir. 1999) (holding that abuse-of-trust and more-than-minimal-planning enhancements, the latter in a predecessor to U.S.S.G. § 2B1.1(b)(10)(C), can be applied to same conduct simultaneously).
[111] 18 U.S.C. § 1839(3)(B).
[112] 18 U.S.C. § 1831.
[113] US West Communications, Inc. v. Office of Consumer Advocate, 498 N.W.2d 711, 714 (Iowa 1993) (citations omitted).
[114] U.S. v. Genovese, 409 F. Supp. 2d 253, 257 (S.D. N.Y. 2005).
[115] United States v. Shiah, SA CR 06-92 DOC, 2008 WL 11230384, at *19 (C.D. Cal. Feb. 19, 2008) (Defendant argued that the trade secret’s owner failed to take reasonable measures to protect the secrecy of the information at issue.)
[116] 18 U.S.C. §§ 1831(a), 1832(a).
[117] Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1291 (11th Cir. 2003); Mixing Equip. Co. v. Philadelphia Gear, Inc., 436 F.2d 1308, 1311 n.2 (3d Cir. 1971) (holding that industrial mixing equipment charts and graphs lost trade secret status through publication in trade journals); DVD Copy Control Ass’n Inc. v. Bunner, 10 Cal. Rptr. 3d 185, 194 (Cal. Ct. App. 2004) (If the Internet posting causes the information to fall into the public domain, a person who republishes the IV. Theft of Commercial Trade Secrets 197 information is not guilty of misappropriating a trade secret, even if he knew that the information was originally acquired by improper means); Hsu, 155 F.3d at 199 (Information does not lose its status as a trade secret if the government discloses it to the defendant as “bait” during a sting operation).
[118] Hsu, 155 F.3d at 195.
[119] Hsu, 155 F.3d at 195; United States v. Yang, 281 F.3d 534, 544 n.2 (6th Cir. 2002); United States v. Kumrei, 258 F.3d 535, 539 (6th Cir. 2001).
[120] Id. at *24.
[121] Hsu, 155 F.3d at 196–97.
[122] Id.
[123] 142 Cong. Rec. S12,213 (daily ed. Oct. 2, 1996) (Managers’ Statement).
[124] See, e.g., Id. at S12,212 (noting that “[t]his legislation does not in any way prohibit companies, manufacturers, or inventors from using their skills, knowledge and experience to solve a problem or invent a product that they know someone else is working on”); see also Lawrence Pedowitz & Carol Miller, Protecting Your Client Under the Economic Espionage Act, BUSINESS CRIMES BULLETIN, available in Lexis-Nexis (Legal News) (“The EEA does not apply to individuals who seek to capitalize on their lawfully developed knowledge, skills or abilities. Employees who change employers or start their own company cannot be prosecuted solely because they were exposed to a trade secret while employed.”).
[125] Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974).
[126] 117th CONGRESS, 1st Session, 117th CONGRESS, 1st Session.
[127] Id.
[128] The Digital Millennium Copyright Act of 1998, U.S. Copyright Off., https://www.copyright.gov/legislation/dmca.pdf (last accessed June 25, 2021).
[129] Id.
[130] Office of Legal Educ., supra note 2, at 233.
[131] Id. at 234.
[132] 17 U.S.C. § 1201.
[133] 17 U.S.C. § 1202.
[134] 17 U.S.C. § 1201(a)(1)(A).
[135] Legal Overview of Section 1201, U.S. Copyright Off.,https://cdn.loc.gov/copyright/1201/1201_background_transcript.pdf (last accessed June 25, 2021).
[136] 17 U.S.C. § 1201(a)(2).
[137] 17 U.S.C. § 1201(b).
[138] 17 U.S.C. § 1203.
[139] 17 U.S.C. § 1204.
[140] 17 U.S.C. §§ 1202(a)(2), (b)(2).
[141] 17 U.S.C. § 1202(b)(3).
[142] 17 U.S.C. § 1202(c).
[143] Office of Legal Educ., supra note 2, at 241.
[144] Id. at 253.
[145] Id.
[146] Id. at 258.
[147] Id.
[148] Id.
[149] Id. at 263.
[150] 17 U.S.C. § 1203.
[151] 17 U.S.C. § 1703(b)(1)–(6).
[152] 17 U.S.C. § 1703(c).
[153] 17 U.S.C. § 1204(a).
[154] 17 U.S.C. § 1204(b).
[155] 17 U.S.C. § 1204(a)(1).
[156] 17 U.S.C. § 1205(a)(2).
[157] Id. at 263–79 (2013).
[158] 17 U.S.C. § 1204(c).
[159] Id.
[160] 17 U.S.C. § 1204(b).
[161] Office of Legal Educ., supra note 2, at 264. See 17 U.S.C. § 1201(d).
[162] Office of Legal Educ., supra note 2, at 264.
[163] Id.
[164] 17 U.S.C. § 1201(e).
[165] Office of Legal Educ., supra note 2, at 281.
[166] Id.
[167] Id.
[168] Id.
[169] Id. at 281–82.
[170] Id.
[171] 18 U.S.C. § 2318.
[172] The Trademark Counterfeiting Act, 18 U.S.C. § 2318; 18 U.S.C. § 3282(a).
[173] See United States v. Harrison, 534 F.3d 1371, 1373 (11th Cir. 2008).
[174] Office of Legal Educ., supra note 2, at 290-91.
[175] Id.
[176] Id.
[177] Office of Legal Educ., supra note 2, at 291-92.
[178] Id.
[179] 18 U.S.C. § 2318(a).
[180] 18 U.S.C. § 3571(a)-(d).
[181] Beydoun, 469 F.3d at 108.
[182] Id.
[183] Office of Legal Educ., supra note 2, at 295-96.
[184] Pub. L. No. 105–147, 111 Stat. 2678; USSG App C, amend. 590 (effective May 1, 2000).
[185] See U.S.S.G. App. C (Amendments 590, 593).
[186] Id. (if prior is deleted this is referencing: U.S.S.G. App. C (Amendments 590, 593).
[187] Id. at 593.
[188] See § 2B5.3(b)(1).
[189] See U.S.S.G. § 2B5.3 cmt. n.2(A),(B).
[190] U.S.S.G. 2B5.3 (n.2(E))
[191] U.S.S.G. 2B5.3(n. 1).
[192] Id.
[193] U.S.S.G. 2B5.3 (n.2(C)).
[194] Id. * § 2B5.3(b)(1).
[195]U.S.S.G. § 2B5.3(b)(1)(A).
[196] U.S.S.G. 2B5.3(b)(1)(B).
[197] 18 U.S.C. §§ 2320(f)(5), 2318(b)(2).
[198] See 18 U.S.C. § 2320(a).
[199] U.S.S.G. § 2B5.3, cmt. n.2(A)(vii); 18 U.S.C. § 2318; 18 U.S.C. § 2320.
[200] See 18 U.S.C. §§ 2319A(a)(1), 2319B(a).
[201] U.S.S.G. App. C (Amendment 675, 687).
[202] An EEA attempt or conspiracy is sentenced under U.S.S.G. Section 2X1.1. 2B1.1 which uses 2B1.1’s basic calculation and then decreases the base offense level by three.
[203] Office of Legal Educ., supra note 2, at 333.
[204] U.S.S.G. 2B1.1(b)(14)(A)
[205] U.S.S.G. 2B1.1(b)(14)(B)
[206] U.S.S.G. 3B1.3
[207] Id.; See United States v. Ratliff, 376 Fed. Appx. 830, 836-41 (10th Cir. 2010).
[208] U.S.S.G. 3B1.3.
[209] U.S.S.G. § 2B1(b)(10)(C).
[210] Id. at n.8(B).
[211] See United States v. Ojemon, 465 Fed. Appx. 69, 71- 72 (2d Cir. 2012); United States v. Rice, 52 F.3d 843, 851 (10th Cir. 1995); United States v. Minneman, 143 F.3d 274, 283 (7th Cir. 1998).
[212] See Ojemon, 465 Fed. Appx. at 71- 72.
[213] U.S.S.G. § 2B1.1 at n.3(C).
[214] U.S.S.G. 2B1.1 at n.3(A).
[215] Id. at cmt. n.3(A)(i); See also United States v. Wilkinson, 590 F.3d 259 at 268 (4th Cir. 2010).
[216] U.S.S.G. 2B1.1 at n.3(A)(ii).
[217] Office of Legal Educ., supra note 2, at 333–35.
[218]Id.
[219] Salsbury Labs., Inc. v. Merieux Labs., Inc., 908 F.2d 706, 714-15 (11th Cir. 1990) (holding that research and development costs for misappropriated vaccine were a proper factor to determine damages); University Computing Co. v. Lykes–Youngstown Corp., 504 F.2d 518, 536 (5th Cir.1974) (damages for misappropriation of trade secrets are measured by the value of the secret to the defendant “where the secret has not been destroyed and where the plaintiff is unable to prove specific injury”); United States v. Ameri, 412 F.3d 893 (8th Cir. 2005) (the Eighth Circuit affirmed the trial court’s loss estimate, which appears to be the development costs times the number of copies the defendant made);
[220] Wilkinson, 590 F.3d at 268. (Based on the plain language of the Guidelines’ definition of ‘Actual Loss’ in USSG § 2B1.1, comment. (n.3(A)(i))).
[221] Vermont Microsystems, Inc. v. Autodesk Inc., 138 F.3d 449, 452 (2d Cir. 1998) (base the trade secret’s market value on the victim’s loss or the defendant’s gain, depending on which measure appears to be more reliable or greater given the particular circumstances of the theft.)
[222] University Computing, 504 F.2d at 536 (holding that damages for misappropriation of trade secrets are measured by the value of the secret to the defendant “where the [trade] secret has not been destroyed and where the plaintiff is unable to prove specific injury”); Salisbury Labs., 908 F.2d at 714 (ruling that under Georgia’s UTSA, damages for misappropriation of trade secrets should be based on the defendant’s gain).
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