AMENDMENT 704
Amendment: The amendment to §2B5.3, effective September 12, 2006 (see Appendix C amendment 682), is repromulgated with the following changes:
Section 2B5.3(b)(3) is amended by inserting "(A)" before "offense involved" and by inserting "; or (B) defendant was convicted under 17 U.S.C. §§ 1201 and 1204 for trafficking in circumvention devices" after "items".
The Commentary to §2B5.3 captioned "Statutory Provisions" is amended by inserting "§" after "17 U.S.C. §"; and by inserting ", 1201, 1204" after "506(a)".
The Commentary to §2B5.3 captioned "Application Notes" is amended in Note 1 by inserting after "Definitions.—For purposes of this guideline:" the following paragraph:
"‘Circumvention devices’ are devices used to perform the activity described in 17 U.S.C. §§ 1201(a)(3)(A) and 1201(b)(2)(A).".
The Commentary to §2B5.3 captioned "Application Notes" is amended in Note 2(A) by adding at the end the following:
"(vii) A case under 18 U.S.C. § 2318 or § 2320 that involves a counterfeit label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case, hangtag, documentation, or packaging of any type or nature (I) that has not been affixed to, or does not enclose or accompany a good or service; and (II) which, had it been so used, would appear to a reasonably informed purchaser to be affixed to, enclosing or accompanying an identifiable, genuine good or service. In such a case, the ‘infringed item’ is the identifiable, genuine good or service.
(viii) A case under 17 U.S.C. §§ 1201 and 1204 in which the defendant used a circumvention device. In such an offense, the ‘retail value of the infringed item’ is the price the user would have paid to access lawfully the copyrighted work, and the ‘infringed item’ is the accessed work.".
The Commentary to §2B5.3 captioned "Application Notes" is amended in Note 3 by striking "shall" and inserting "may".
The Commentary to §2B5.3 captioned "Application Notes" is amended in Note 4 by striking "Upward" before "Departure"; by inserting "or overstates" after "understates"; and by striking "an upward" each place it appears and inserting "a"; and by adding at the end the following:
"(C) The method used to calculate the infringement amount is based upon a formula or extrapolation that results in an estimated amount that may substantially exceed the actual pecuniary harm to the copyright or trademark owner.".
Appendix A (Statutory Index) is amended by inserting after the line referenced to 17 U.S.C. § 506(a) the following new lines:
"17 U.S.C. § 1201 2B5.3
17 U.S.C. § 1204 2B5.3".
Reason for Amendment: This amendment re-promulgates as permanent the temporary, emergency amendment (effective Sept. 12, 2006) that implemented the emergency directive in section 1(c) of the Stop Counterfeiting in Manufactured Goods Act, Pub. L. 109–181 (2006). The directive, which required the Commission to promulgate an amendment under emergency amendment authority by September 12, 2006, instructs the Commission to "review, and if appropriate, amend the Federal sentencing guidelines and policy statements applicable to persons convicted of any offense under section 2318 or 2320 of title 18, United States Code."
In carrying out [the directive], the United States Sentencing Commission shall determine whether the definition of "infringement amount" set forth in application note 2 of section 2B5.3 of the Federal sentencing guidelines is adequate to address situations in which the defendant has been convicted of one of the offenses [under section 2318 or 2320 of title 18, United States Code,] and the item in which the defendant trafficked was not an infringing item but rather was intended to facilitate infringement, such as an anti-circumvention device, or the item in which the defendant trafficked was infringing and also was intended to facilitate infringement in another good or service, such as a counterfeit label, documentation, or packaging, taking into account cases such as U.S. v. Sung, 87 F.3d 194 (7th Cir. 1996).
The amendment adds subdivision (vii) to Application Note 2(A) of §2B5.3 (Criminal Infringement of Copyright or Trademark) to provide that the infringement amount is based on the retail value of the infringed item in a case under 18 U.S.C. § 2318 or § 2320 that involves a counterfeit label, patch, sticker, wrapper, badge, emblem, medallion, charm, box, container, can, case, hangtag, documentation, or packaging of any type or nature (i) that has not been affixed to, or does not enclose or accompany a good or service; and (ii) which, had it been so used, would appear to a reasonably informed purchaser to be affixed to, enclosing or accompanying an identifiable, genuine good or service. In such a case, the "infringed item" is the identifiable, genuine good or service.
In addition to re-promulgating the emergency amendment, the amendment responds to the directive by addressing violations of 17 U.S.C. §§ 1201 and 1204 involving circumvention devices. The amendment addresses circumvention devices in two ways. First, the amendment adds an application note regarding the determination of the infringement amount in cases under 17 U.S.C. §§ 1201 and 1204 in which the defendant used a circumvention device and thus obtained unauthorized access to a copyrighted work. Such an offense would involve an identifiable copyrighted work. Accordingly, consistent with the existing rules in §2B5.3, the "retail value of the infringed item" would be used for purposes of determining the infringement amount. The amendment adds subsection (viii) to Application Note 2(A), and explains that the "retail value of the infringed item" is the price the user would have paid to access lawfully the copyrighted work, and the "infringed item" is the accessed work. If the defendant violated 17 U.S.C. §§ 1201 and 1204 by conduct that did not include use of a circumvention device, Application Note 2(B) would apply by default. Thus, as it does in any case not otherwise covered by Application Note 2(A), the infringement amount would be determined by reference to the value of the infringing item, which in these cases would be the circumvention device.
Second, the amendment expands the sentencing enhancement in §2B5.3(b)(3) to include convictions under 17 U.S.C. §§ 1201 and 1204 for trafficking in circumvention devices. Prior to the amendment, §2B5.3(b)(3) provided a two-level enhancement and a minimum offense level of 12 for cases involving the manufacture, importation, or uploading of infringing items. The purpose of the enhancement in §2B5.3(b)(3) is to provide greater punishment for defendants who put infringing items into the stream of commerce in a manner that enables others to infringe the copyright or trademark. The Commission determined that trafficking in circumvention devices similarly enables others to infringe a copyright and warrants greater punishment.
The amendment also strikes language in Application Note 3 mandating an adjustment under §3B1.3 (Abuse of Position of Trust or Use of Special Skill) in every case in which the defendant de-encrypted or otherwise circumvented a technological security measure to gain initial access to an infringed item. Instead, the note indicates that application of the adjustment may be appropriate in such a case because the Commission determined that not every case involving de-encryption or circumvention requires the level of skill contemplated by the special skill adjustment.
Finally, the amendment modifies Application Note 4 to address downward departures. The addition of this language recognizes that in some instances the method for calculating the infringement amount may be based on a formula or extrapolation that overstates the actual pecuniary harm to the copyright or trademark owner. This language is analogous to departure language in §2B1.1 (Larceny, Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations of the United States) and thus promotes consistency between these two economic crime guidelines.
Effective Date: The effective date of this amendment is November 1, 2007.