Intellectual Property in the Criminal Realminns.innsofcourt.org/media/177126/01-14-2018_-_ip... ·...

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Intellectual Property in the Criminal Realm

Q. Todd Dickinson Intellectual Property American Inn of Court

January 14, 2019

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The unauthorized reproduction or distribution of a copyrighted work is illegal. Criminal copyright infringement, including infringement without monetary gain, is investigated by

the FBI and is punishable by fines and federal imprisonment. 2

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Basis for Federal Criminal Liability

• Copyright Infringement• Trafficking in Counterfeit Trademarks,

Service Marks, and Certification Marks• Theft of Commercial Trade Secrets• Digital Millennium Copyright Act• Counterfeit and Illicit Labels, Counterfeit

Documentation and Packaging• Patent

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Criminal Copyright Infringement 17 USC § 506 and 18 USC § 2319

1. Willful infringement “for purposes of commercial advantage or private financial gains,” 17 USC §506(a)(1)(A)

2. Willful infringement by “the reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000,” 17 USC § 506(a)(1)(B).

3. Willful infringement “by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person know or should have known that the work was intended for commercial distribution,” 17 USC § 506(a)(1)(C).

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• Copyright attaches at moment creative work is fixed in a tangible medium.

• Registration with Copyright Office may be necessary for copyright owner to enforce rights in courts.

• Registration of work is not required for criminal enforcement.

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• Penalties– Felony

• Reserved for infringing reproduction and distribution• First-time – 3-5 year maximum sentence and a $250,000 fine

or twice the monetary gain or loss• Repeat – same fine and twice the jail time

– Misdemeanor • In any other case where defendant profited or intended to

profit including performance rights and digital audio transmission or government cannot prove exact volume or value

• up to one year imprisonment and a $100,000 fine or twice the monetary gain or loss

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Trafficking in Counterfeit Marks18 USC § 2320

Four offenses –

1.traffics in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services,

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2. traffics in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive,

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3. traffics in goods or services knowing that such good or service is a counterfeit military good or service the use, malfunction, or failure of which is likely to cause serious bodily injury or death, the disclosure of classified information, impairment of combat operations, or other significant harm to a combat operation, a member of the Armed Forces, or to national security, or

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4. traffics in a counterfeit drug.

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Elements to be proven ((a)(1)-(3))–

1. The defendant intentionally trafficked or attempted or conspired to traffic in goods or service (or labels, documentation or packaging for goods or services); and

2. The defendant knowingly used a counterfeit mark on or in connection with those goods or services, or a counterfeit mark was applied to labels, documentation, or packaging for those goods or services.

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• Selling just one counterfeit item can be a felony. United States v. Foote, 413 F.3d 1240, 1246 (10th Cir. 2005)

• Contrast with criminal copyright thresholds (“1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000”).

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• Penalties– Counterfeit goods or services or labels

• first offense– Individual - up to 10 years prison and a $2 million fine– Organization - up to $5 million fine

• repeat offense– Individual - up to 20 years prison and a $5 million fine – Organization - up to $15 million for organizational defendants

– counterfeit military goods or services and counterfeit drugs• First offense

– Individual - up to 20 years prison and a fine of up to $5 million fine– Organization - up to $15 million

• Repeat offense– Individual - up to 30 years prison and a fine of up to $15 million fine– Organization - up to $30 million

– Knowingly or recklessly causes or attempts to cause serious bodily harm or death by violation

• Individual - up to 20 years prison (life imprisonment in case of death) and a $5 million fine• Organization - up to $15 million

– Restitution– Forfeiture

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Theft of Commercial Trade Secrets18 USC §§ 1831-1839

• Congress expressly criminalized the theft of trade secrets with passage of the Economic Espionage Act of 1996 (EEA)

• Prior to EEA, criminal liability was based on– Unauthorized disclosure of government information,

including trade secrets, by a government employee– Interstate transportation of stolen property, including

trade secrets– Use of mail or wire communications in a fraud

scheme to obtain confidential business information

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EEA criminalizes two types of trade secret misappropriation

1. economic espionage; theft of a trade secret to benefit a foreign government, instrumentality, or agent

2. trade secret theft; commercial theft of trade secrets carried our for economic advantage, whether or not it benefits a foreign government, instrumentality, or agent

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• Civil cases are relevant

The EEA’s definition of a ‘trade secret’ is similar to that found in a numberof state civil statutes and the Uniform Trade Secrets Act (‘UTSA’), a model ordinance which permits civil actions for the misappropriation of trade secrets. There are, though, several critical differences which serve to broaden the EEA’s scope.

United States v. Hsu, 155 F.3d 189, 196 (3rd Cir. 1996)

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• Penalties– Individuals

• Economic espionage - 15 years’ imprisonment and a fine of $5 million• Trade secret theft - 10 years’ imprisonment and a fine of $250,000 or twice

the monetary gain or loss, or both– Organizations

• Economic espionage - up to $10 million for violating § 1831• Trade secret theft - up to $5 million for violating § 1832

– Forfeiture of any article made or trafficked, any property used to commit the crime, any property or proceeds derived from the crime

– Restitution

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Digital Millennium Copyright Act17 USC § 1201-1205

DMCA enacted in 1998. Includes prohibitions relating to

1. the circumvention of copyright protection systems (§1201)

2. the integrity of copyright management information (§1202)

Criminal enforcement has largely focused on violations of the anti-circumvention and anti-trafficking prohibitions in § 1201

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• Differences between the DMCA and traditional copyright law– Copyright law focused on “direct” infringement

of a copyrighted work– DMCA focuses largely on the facilitation of

infringement through circumvention tools and services primarily designed or produced to circumvent an access control or a copy control

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Section 1201 contains three prohibitions –

1. prohibits “circumvent[ing] a technological measure that effectively controls access to a work protected under this [copyright] title”

2. prohibits the manufacture of or trafficking in products or technology designed to circumvent a technological measure that controls access to a copyrighted work

3. prohibits the manufacture of or trafficking in products or technology designed to circumvent measures that protect a copyright owner’s rights under the Copyright Act

Criminal violation occurs when violation of 1-3 is for economic advantage or private financial gain

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• Penalties– First time - 5 years prison, a $500,000 fine or

twice the monetary gain or loss, or both prison and a fine

– Repeat - 10 years prison, a $1 million fine or twice the monetary gain or loss, or both prison and a fine

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Counterfeit and Illicit Labels, Counterfeit Documentation and

Packaging - 18 USC § 2318• Section 2318 regulates items that accompany

certain classes of copyrighted works– originally addressed counterfeit labels for sound

recordings– now prohibits trafficking in counterfeit labels for

movies, music, software, copies of literary, pictorial, graphic, or sculptural works, or works of visual art, or labels designed to be used with documentation and packaging for any of these types of works

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Packaging - 18 USC § 2318• Counterfeits are unauthorized copies of works

that are made to appear legitimate• Counterfeit labels include those made when

counterfeiters have simulated ‘genuine’ labels that have not previously existed

• Counterfeit labels include an “illicit” label, which is a “genuine certificate, licensing document, registration card, or similar labeling component” documentation and packaging for any of these types of works 28


Packaging - 18 USC § 2318• Penalties

– Fines• Individual – up to $250,000• Organization – up to $500,000• or twice the offense’s pecuniary gain or loss

– Imprisonment – up to 5 years– Restitution– Forfeiture

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Patents• Forgery of Letters Patent – 18 USC § 497

– falsely makes, forges, counterfeits, or alters any letters patent granted or purporting to have been granted by the President of the United States

– passes, utters, or publishes, or attempts to pass, utter, or publish as genuine, any such letters patent, knowing the same to be forged, counterfeited or falsely altered

– no published opinions dealing with this offense

• False Patent Marking – 35 USC § 292– covers statement about issued patent or pending application– per article fine; America Invents Act eliminated qui tam remedy

• Infringement of a patent - no prosecution for Interstate Transportation or Receipt of Stolen Property (18 USC § 2314)– See Dowling v. United States, 473 U.S. 207, 227 (1985)

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Basis for State Criminal Liability• Trademark Counterfeiting

– 18 Pa.C.S. § 4119 (revised in 2010)– Prior statute found unconstitutional because it criminalized the

use of “any items bearing an unauthorized reproduction of terms or words used by a person to identify that person’s goods or services … including the use of words on a sign praising or protesting any entity with a trademarked name” Commonwealth of Pennsylvania v. Omar A. Omar; Commonwealth of Pennsylvania v. Daniel J. O’Connor, 2009 Pa. LEXIS 2104 (Pa. Oct. 5, 2009)

• Uniform Trade Secrets Act (UTSA) - 18 Pa.C.S. § 5301 et seq.

• Federal Preemption as to copyrights and patents

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Low Level of Criminal Trademark Prosecution

Stated reasons include:• insufficient level of penalties• insufficient resources to enforce the law• insufficient level of intelligence sharing

among law enforcement agencies

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Interplay between criminal and civil actions

• Do statements made in a civil proceeding support criminal charges?

• Statements made in a criminal proceeding will be used in a civil proceeding.– Eli Lilly and Company v. John Derek Gitmed, No. 16-

cv-168 (E.D. Cal. Nov. 1, 2017) (“Plaintiff requests that the Court take judicial notice of the plea agreement signed by Defendant Pollino and entered into the record in his criminal case.”) (Defendant pled guilty to trafficking in counterfeit goods – Cialis – in violation of 18 USC § 2320).

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Intellectual Property in the Criminal Realm

Q. Todd Dickinson Intellectual Property American Inn of Court

January 14, 2019

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Intellectual Property in the Criminal Realminns.innsofcourt.org/media/177126/01-14-2018_-_ip... ·...

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