UNITED STATES OF AMERICA v. DAVID LaMACCHIA
CRIMINAL ACTION NO. 94-10092-RGS
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS
871 F. Supp. 535; 1994 U.S. Dist. LEXIS 18602; 33
U.S.P.Q.2D (BNA) 1978; Copy. L. Rep. (CCH) P27,344
December 28, 1994, Decided
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION TO DISMISS
December 28, 1994
STEARNS, D.J.
This case presents the issue of whether new wine can be poured into an old
bottle. The facts, as seen in the light most favorable to the government, are
these. The defendant, David LaMacchia, is a twenty-one year old student at the
Massachusetts Institute of Technology (MIT). LaMacchia, a computer hacker, used
MIT's computer network to gain entree to the Internet. Using pseudonyms and an
encrypted address, LaMacchia set up an electronic bulletin board which he named
Cynosure. n1 He encouraged his correspondents to upload popular software
applications (Excel 5.0 and WordPerfect 6.0) and computer games (Sim City 2000).
These he transferred to a second encrypted address (Cynosure II) where they
could be downloaded by other users with access to the Cynosure password.
Although LaMacchia was at pains to impress the need for circumspection on the
part of his subscribers, the worldwide traffic generated by the offer of free
software attracted the notice of university and federal authorities.
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n1 The allusion is presumably to the North Star, a faithful astronomical
reference point for mariners.
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On April 7, 1994, a federal grand jury returned a one count indictment
charging LaMacchia with conspiring with "persons unknown" to violate 18 U.S.C. §
1343, the wire fraud statute. According to the indictment, LaMacchia devised a
scheme to defraud that had as its object the facilitation "on an international
scale" of the "illegal copying and distribution of copyrighted software" without
payment of licensing fees and royalties to software manufacturers and vendors.
The indictment alleges that LaMacchia's scheme [*537] caused losses of more
than one million dollars to software copyright holders. The indictment does not
allege that LaMacchia sought or derived any personal benefit from the scheme to
defraud.
On September 30, 1994, the defendant brought a motion to dismiss, arguing
that the government had improperly resorted to the wire fraud statute as a
copyright enforcement tool in defiance of the Supreme Court's decision in
Dowling v. United States, 473 U.S. 207, 87 L. Ed. 2d 152, 105 S. Ct. 3127
(1985). The government argues that Dowling is a narrower case than LaMacchia
would have it, [**3] and holds only that copyright infringement does not
satisfy the physical "taking" requirement of the National Stolen Property Act,
18 U.S.C. § 2314.
THE DOWLING DECISION
Paul Edmond Dowling was convicted of conspiracy, interstate transportation of
stolen property [ITSP], copyright violations and mail fraud in the Central
District of California. Dowling and his co-conspirators sold bootleg Elvis
Presley recordings by soliciting catalogue orders from post office boxes in
Glendale, California. The infringing recordings were shipped in interstate
commerce to Maryland and Florida. The eight ITSP counts on which Dowling was
convicted involved thousands of phonograph albums. "Each album contained
performances of copyrighted musical compositions for the use of which no
licenses had been obtained nor royalties paid . . . ." Dowling, supra at 212.
Dowling appealed his convictions (except those involving copyright
infringement). The Ninth Circuit Court of Appeals affirmed. "The [Ninth Circuit]
reasoned that the rights of copyright owners in their protected property were
indistinguishable from [**4] ownership interests in other types of property and
were equally deserving of protection under the [stolen property] statute." Id.
The Supreme Court granted certiorari only as to Dowling's convictions for
interstate transportation of stolen property. n2 The Court, in an opinion by
Justice Blackmun, held that a copyrighted musical composition impressed on a
bootleg phonograph record is not property that is "stolen, converted, or taken
by fraud" within the meaning of the Stolen Property Act. Justice Blackmun
emphasized that cases prosecuted under § 2314 had traditionally involved
"physical 'goods, wares [or] merchandise.'" The statute "seems clearly to
contemplate a physical identity between the items unlawfully obtained and those
eventually transported, and hence some prior physical taking of the subject
goods." Id. at 216. In Dowling's case there was no evidence "that Dowling
wrongfully came by the phonorecords actually shipped or the physical materials
from which they were made." Dowling, supra at 214.
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n2 The Court observed a split among the Circuits concerning the
applicability of 18 U.S.C. § 2314 to the interstate transportation of infringing
articles.
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Justice Blackmun felt compelled, however, to answer the government's argument
that the unauthorized use of the underlying musical compositions was itself
sufficient to render the offending phonorecords property "stolen, converted or
taken by fraud."
The Government's theory here would make theft, conversion, or fraud
equivalent to wrongful appropriation of statutorily protected rights
in copyright. The copyright owner, however, holds no ordinary chattel.
A copyright, like other intellectual property, comprises a series of
carefully defined and carefully delimited interests to which the law
affords correspondingly exact protections. Id. at 216.
A copyright, as Justice Blackmun explained, is unlike an ordinary chattel
because the holder does not acquire exclusive dominion over the thing owned. The
limited nature of the property interest conferred by copyright stems from an
overriding First Amendment concern for the free dissemination of ideas. "The
primary objective of copyright is not to reward the labor of authors, but 'to
promote the Progress of Science and useful Arts.' Art. I, § 8, cl. 8." Feist
Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 349, 113 L. Ed.
2d 358, 111 S. Ct. 1282 (1991). [**6] Data General [*538] Corp v Grumman
Systems Support, 36 F.3d 1147, 1187 (1st Cir. 1994) (same). Justice Blackmun
offered the "fair use" doctrine (17 U.S.C. § 107) and the statutory scheme of
compulsory licensing of musical compositions (17 U.S.C. § 115) as examples of
ways in which the property rights of a copyright holder are circumscribed by the
Copyright Act. n3 Dowling, supra at 217.
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n3 Another example is the finite duration of a copyright. See 17 U.S.C. §
302.
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It follows that interference with copyright does not easily equate
with theft, conversion or fraud. The Copyright Act even employs a
separate term of art to define one who misappropriates a copyright:
"Anyone who violates any of the exclusive rights of the copyright
owner," that is, anyone who trespasses into his exclusive domain by
using or authorizing the use [**7] of the copyrighted work in one of
the five ways set forth in the statute, "is an infringer of the
copyright." There is no dispute in this case that Dowling's
unauthorized inclusion on his bootleg albums of performances of
copyrighted compositions constituted infringement of those copyrights.
It is less clear, however, that the taking that occurs when an
infringer arrogates the use of another's protected work comfortably
fits the terms associated with physical removal employed by § 2314.
The infringer invades a statutorily defined province guaranteed to the
copyright holder alone. But he does not assume physical control over
the copyright; nor does he wholly deprive its owner of its use. While
one may colloquially like infringement with some general notion of
wrongful appropriation, infringement plainly implicates a more complex
set of property interests than does run-of-the-mill theft, conversion,
or fraud. As a result, it fits but awkwardly with the language
Congress chose - "stolen, converted or taken by fraud" - to describe
the sorts of goods whose interstate shipment § 2314 makes criminal.
Id at 217-218 (citations omitted).
[**8]
The ITSP statute, Justice Blackmun observed, had its roots in efforts by
Congress to supplement the efforts of state authorities frustrated by
jurisdictional problems arising from the transportation of stolen property
across state lines. Id. at 219-220.
No such need for supplemental federal action has ever existed,
however, with respect to copyright infringement, for the obvious
reason that Congress always has had the bestowed authority to
legislate directly in this area. . . . Given that power, it is
implausible to suppose that Congress intended to combat the problem of
copyright infringement by the circuitous route hypothesized by the
government. . . . In sum, the premise of § 2314 -- the need to fill
with federal action an enforcement chasm created by limited state
jurisdiction -- simply does not apply to the conduct the Government
seeks to reach here. Id at 220-221.
A review of the evolution of criminal penalties in the Copyright Act led
Justice Blackmun to observe that:
"The history of the criminal infringement provisions of the Copyright
Act reveals [**9] a good deal of care on Congress' part before
subjecting copyright infringement to serious criminal penalties. . . .
In stark contrast, the Government's theory of this case presupposes a
congressional decision to bring the felony provisions of § 2314, which
make available the comparatively light fine of not more than $ 10,000
but the relatively harsh term of imprisonment of up to 10 years, to
bear on the distribution of a sufficient quantity of any infringing
goods simply because of the presence here of a factor--interstate
transportation--not otherwise though relevant to copyright law. The
Government thereby presumes congressional adoption of an indirect but
blunderbuss solution to a problem treated with precision when
considered directly. Id. at 225-226.
Finally, noting that the government's expansive reading of the Stolen
Property Act would have the unsettling effect of criminalizing a broad range of
conduct involving copyright and other intellectual property that had been
historically regulated by the civil laws, [*539] Justice Blackmun concluded
that "the deliberation with which Congress over the last decade has addressed
[**10] the problem of copyright infringement for profit, as well as the
precision with which it has chosen to apply criminal penalties in this area,
demonstrates anew the wisdom of leaving it to the legislature to define crime
and prescribe penalties. Here, the language of § 2314 does not 'plainly and
unmistakably' cover petitioner Dowling's conduct." Id at 228 (footnote omitted).
Dowling's ITSP convictions were reversed.
THE COPYRIGHT LAW
Article I, § 8, cl. 8 of the U.S. Constitution grants Congress the exclusive
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." Thus "the remedies for infringement 'are only those
prescribed by Congress.'" Sony Corporation of America v. Universal City Studios,
Inc., 464 U.S. 417, 431, 78 L. Ed. 2d 574, 104 S. Ct. 774 (1984) (quoting
Thompson v. Hubbard, 131 U.S. 123, 151, 33 L. Ed. 76, 9 S. Ct. 710 (1889)).
Since 1897, when criminal copyright [**11] infringement was first introduced
into U.S. copyright law, n4 the concept differentiating criminal from civil
copyright violations has been that the infringement must be pursued for purposes
of commercial exploitation.
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n4 Act of January 6, 1897, ch. 4, 29 Stat. 481-482.
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Until 1909, "the crime of copyright infringement was . . . limited to
unlawful performances and representation of copyrighted dramatic and musical
compositions." Saunders, Criminal Copyright Infringement and the Copyright
Felony Act, 71 Denv. U.L. Rev. 671, 673 (1994). The 1897 Act defined the mens
rea of criminal copyright infringement as conduct that is "willfull" and
undertaken "for profit," a definition that remained unaltered until the general
revision of the Copyright Act in 1976.
In 1909, the Copyright Act was revised to extend misdemeanor criminal
sanctions to infringement of all copyrighted material with the exception of
sound recordings. Copyright Act of 1909, ch. 320, 33 stat 1075-1082. The 1909
amendments [**12] also made criminal the knowing and willful aiding and
abetting of another's infringing activities. Performers and producers of musical
recordings were not protected under the 1909 Act, and composers were given the
exclusive rights to license only the first recording of their musical works.
After that, a compulsory licensing provision allowed anyone to record and
distribute the work so long as a two cent per copy royalty was paid to the
original composer. Id. §§ 1(e), 25(e).
The framework set out by the 1909 Act remained in effect until 1971, when the
growth of the recording industry following the musical revolution of the 1960's
brought the problem of unauthorized reproduction and sale of musical works to
Congress' attention. See H.R. Rep. No. 487, 92d Cong., 1st Sess. 2 (1971). In
response, Congress passed the Sound Recording Act of 1971, which addressed the
perceived flaw in the 1909 Act by granting sound recordings full copyright
protection, including criminal penalties for profit motivated infringement. In
1976, Congress revamped the Copyright Act by eliminating the crime of aiding and
abetting copyright infringement. It also eased the mens rea requirement for
criminal [**13] copyright infringement by eliminating the burden of proving
that an infringer acted "for profit," requiring instead only that the
infringement be conducted "willfully and for purposes of commercial advantage or
private financial gain." 17 U.S.C. § 506(a). Criminal infringement under the
1976 Act was a misdemeanor except in the case of repeat offenders (who could be
sentenced to a maximum of two years and a fine of $ 50,000).
After lobbying by the Motion Picture Association and the Recording Industry
Association, Congress increased the penalties for criminal infringement in 1982.
Act of May 24, 1982, Pub. L. No. 97-180, 97th Cong., 2d Sess., 96 Stat. 91.
Certain types of first-time criminal infringement were punishable as felonies
depending on the time period involved and the number of copies reproduced or
distributed. n5 [*540] See 18 U.S.C. § 2319. The mens rea element, however,
remained unchanged, requiring proof of "commercial advantage or private
financial gain." 17 U.S.C. § 506(a). Most criminal infringements remained
misdemeanor offenses despite the new penalty structure. [**14]
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n5 While the offense of criminal copyright infringement remained defined by
17 U.S.C. § 506(a), the penalties were moved to a new freestanding statute, 18
U.S.C. § 2319.
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In the decade following the 1982 revisions to the Copyright Act, the home
computing and software industry underwent a period of explosive growth
paralleling the expansion in the 1960's and 1970's of the recording and motion
picture industries. In 1992, the Software Publishers Association reported in
testimony to the Subcommittee on Intellectual Property and Judicial
Administration of the House Committee on the Judiciary that software
manufacturers were losing $ 2.4 billion in revenues annually as a result of
software piracy. "Rather than adopting a piecemeal approach to copyright
legislation and simply adding computer programs to audiovisual works, and sound
recordings to the list of works whose infringement can give rise to felony
penalties under [18 U.S.C.] § 2319," Congress [**15] passed the Copyright
Felony Act. n6 Saunders, supra, at 680. The Act amended § 2319 by extending its
felony provisions to the criminal infringement of all copyrighted works
including computer software. n7 The mens rea for criminal infringement remained
unchanged, requiring prosecutors to prove that the defendant infringed a
copyright "willfully and for purpose of commercial advantage or private
financial gain." 17 U.S.C. § 506(a). n8
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n6 Pub. L. No. 102-561 [S. 893] (October 28, 1992) (enacted after
amendment). This is not to say that Congress had been inattentive to the needs
of the emerging software industry. In 1980, Congress added "computer program" to
the list of definitions of works protected under the copyright statute. See 17
U.S.C. § 101. The Computer Software Rental Amendments Act of 1990 gave further
protection to holders of software copyrights, although declining to subject
violators to the criminal penalties of 17 U.S.C. § 506 and 18 U.S.C. § 2319. See
17 U.S.C. § 109(b)(4). [**16]
n7 The Report that accompanied the Senate version of the bill declared that
"the only defense against [software] piracy is the copyright law." S. Rep. No.
268, 102d Cong., 2d Sess. (1992) (emphasis added).
n8 As Senator Hatch, the Senate sponsor of the Act noted, "the copying must
be undertaken to make money, and even incidental financial benefits that might
accrue as a result of the copying should not contravene the law where the
achievement of those benefits [was] not the motivation behind the copying." 138
Cong. Rec. S. 17958-17959 (October 8, 1992).
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DISCUSSION
The wire fraud statute, 18 U.S.C. § 1343 was enacted in 1952. In its
entirety, the statute reads as follows:
Whoever, having devised or intending to devise any scheme or artifice
to defraud, or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises, transmits or
causes to be transmitted by means of wire, radio, or television
communication in interstate or foreign commerce, any writings, signs,
signals, pictures, or sounds for the purpose [**17] of executing such
scheme or artifice, shall be fined not more than $ 1,000 or imprisoned
not more than five years, or both. If the violation affects a
financial institution, such person shall be fined not more than $
1,000,000 or imprisoned not more than 30 years, or both.
The wire fraud statute was enacted to cure a jurisdictional defect that
Congress perceived was created by the growth of radio and television as
commercial media. In its report to the House of Representatives, the Committee
on the Judiciary explained:
The measure in amended form . . . creates a new, but relatively
isolated area of criminal conduct consisting of the execution of a
scheme to defraud or to obtain money or property by means of false or
fraudulent pretenses, representations, or promises transmitted in
writings, signs, pictures, or sounds via interstate wire or radio
communications (which includes the medium of television). . . . The
rapid growth of interstate communications facilities, [*541]
particularly those of radio and television, has given rise to a
variety of fraudulent activities on the part of unscrupulous persons
which are not within the reach of existing mail fraud laws, but which
are carried [**18] out in complete reliance upon the use of wire and
radio facilities and without resort to the mails. . . . Even in those
cases of radio fraud where the mails have played a role, it is
sometimes difficult to prove the use of the mails to the satisfaction
of the court, and so prosecutions often fail. Because of the greater
facility in proving the use of radio, this bill if enacted might often
rescue a prosecution which would otherwise be defeated on
technicalities.
H.R. Rep. No. 388, 82d Cong., 1st Sess. 102 (1951).
As the legislative history makes clear, the wire fraud statute was intended
to complement the mail fraud statute by giving federal prosecutors jurisdiction
over frauds involving the use of interstate (or foreign) wire transmissions. n9
Thus what can be prosecuted as a scheme to defraud under the mail fraud statute
(18 U.S.C. § 1341) is equally susceptible to punishment under § 1343 so long as
the jurisdictional element is met. Carpenter v. United States, 484 U.S. 19, 25
n.6, 98 L. Ed. 2d 275, 108 S. Ct. 316 (1987). McEvoy Travel Bureau, Inc. v.
Heritage Travel, Inc., 904 F.2d 786, 791 n.8 (1st Cir. 1990). [**19] The
concomitancy of the two statutes underlies the government's argument that
significance should be read into the fact that the limited grant of certiorari
in Dowling left Dowling's convictions for mail fraud undisturbed.
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n9 The "interstate" limitation was inserted into the statute both out of
jurisdictional concerns and to "avoid intrusion on the police power of the
States." H.R. Rep. No. 388, supra, at 3. The police power of the States, of
course, does not extend to the regulation of copyright, leading one to doubt, as
defendant points out, that the statute was enacted to supplement state efforts
to police copyright infringement. Defendant's Memorandum, at 18.
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A scheme to defraud is the defining concept of the mail and wire fraud
statutes. Because of the conjunctive use of the word "or" in the statutory
phrase "any scheme or artifice to defraud, or for obtaining money or property by
false or fraudulent pretenses, representations, or promises," the federal courts
(encouraged by prosecutors) have essentially [**20] bifurcated mail and wire
fraud into two separate offenses; the first, the devising of a scheme to
defraud, the second, the devising of a scheme to obtain money or property by
false pretenses. While the latter crime comports with common law notions of
fraud, "the phrase, 'a scheme to defraud' came to prohibit a plan, that is, to
forbid a state of mind, rather than physical conduct." Moohr, Mail Fraud and the
Intangible Rights Doctrine: Someone to Watch Over Us, 31 Harv. J. on Legis. 153,
161 (1994).
The incarnation of mail fraud as an inchoate crime has its most celebrated
expression in federal prosecutions of state and local public officials accused
of depriving citizens of their intangible right to honest public service in
violation of their fiduciary duty to disclose conflicts of interest. n10 See
United States v. Mandel, 591 F.2d 1347, 1360-1362 (4th Cir. 1979). Because of
the so-called "intangible rights doctrine," mail fraud and its sister offense,
wire fraud, have become the federal prosecutor's weapon of choice. "Mail fraud .
. . has been expanded to the point that a fiduciary, agent, or employee commits
an offense when, through a material [**21] deception or a failure to disclose,
a beneficiary, principal or employer suffers even an intangible, constructed
detriment." Moohr, supra, 31 Harv. J. On Legis. at 163. Wire fraud offers an
especially pleasing feature from the government's perspective that is
particularly relevant to LaMacchia's case. Unlike the criminal copyright
statute, 17 U.S.C. § 506(a), the mail and wire fraud statutes do not require
that a defendant be shown to [*542] have sought to personally profit from the
scheme to defraud. See United States v. Silvano, 812 F.2d 754, 759-760 (1st Cir.
1987).
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n10 The origins and contours of the intangible rights doctrine (and the
short-lived effort of the Supreme Court to reground the mail fraud statute in
traditional concepts of property, see McNally v. United States, 483 U.S. 350, 97
L. Ed. 2d 292, 107 S. Ct. 2875 (1987)) are capably portrayed in Moohr, supra, 31
Harv. J. on Legis at 158-170. The doctrine has been applied with similar effect
to schemes arising in a commercial context. See United States v. George, 477
F.2d 508 (7th Cir. 1973) (commercial kickbacks, employee's duty to disclose).
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While it is true, as LaMacchia contends, that the denial of a writ of
certiorari "imports no expression upon the merits of the case," United States v.
Carver, 260 U.S. 482, 490, 67 L. Ed. 361, 43 S. Ct. 181 (1923), the more
interesting issue is whether the Ninth Circuit's mail fraud analysis (the
significant portions of which the Supreme Court left intact) is applicable to
the facts of his case.
Dowling brought himself within the orbit of the mail fraud statute by mailing
catalogues advertising his bootleg phonograph records. So, too, the government
argues, LaMacchia subjected himself to the wire fraud statute by advertising
infringing software via computer transmissions. The government in Dowling (as
here) did not argue any more than jurisdictional significance for Dowling's
mailings, that is, the mailings themselves did not make any false or misleading
representations. They did, however, serve as an obvious means of furthering
Dowling's scheme to defraud. See Schmuck v. United States, 489 U.S. 705,
710-711, 103 L. Ed. 2d 734, 109 S. Ct. 1443 (1989).
The [**23] Ninth Circuit nonetheless focused on the fact that Dowling had
"concealed his activities from the copyright holders with the intent to deprive
them of their royalties." 739 F.2d at 1449. "It is settled in this Circuit that
a scheme to defraud need not be an active misrepresentation. A nondisclosure or
concealment may serve as a basis for the fraudulent scheme." Id. at 1448. See
also United States v. Silvano, supra, 812 F.2d at 759 (same). The Ninth Circuit
rejected Dowling's argument that non-disclosure can serve as the basis of a
scheme to defraud only when a defendant has a fiduciary duty to make an
affirmative disclosure. It also rejected the government's contention that "the
presence of illegal conduct alone may constitute the basis of the 'fraud'
element." 739 F.2d at 1449. "Rather, we conclude that a non-disclosure can only
serve as a basis for a fraudulent scheme when there exists an independent duty
that has been breached by the person so charged." Id. This duty, the Ninth
Circuit noted, could be fiduciary in nature, or it could "derive from an
independent explicit statutory duty created [**24] by legislative enactment."
Id. In Dowling's case, the duty located by the Ninth Circuit was the duty
implicit in the compulsory licensing scheme of the Copyright Act, 17 U.S.C. §
115, which requires vendors to notify copyright owners of the intention to
manufacture and distribute infringing records
In conclusion, we stress that the narrowness of our holding permits
nondisclosures to form the basis of a scheme to defraud only when
there exists an independent duty (either fiduciary or derived from an
explicit and independent statutory requirement) and such a duty has
been breached. To hold otherwise that illegal conduct alone may
constitute the basis of the fraud element of a mail fraud conviction
would have the potential of bringing almost any illegal act within the
province of the mail fraud statute.
739 F.2d at 1450.
The difficulties in applying the Ninth Circuit's Dowling analysis to support
a wire fraud prosecution in LaMacchia's case are three. First, no fiduciary
relationship existed between LaMacchia and the manufacturers whose software
copyrights he allegedly infringed. Second, there is no independent [**25]
statutory duty of disclosure like the one that snared Dowling because there is
no software equivalent to the compulsory licensing scheme. n11 Third, even were
I to accept the argument made by the government in Dowling, that illegal conduct
alone may suffice to satisfy the fraud element of [§ 1343], the holding would
not cover LaMacchia's case for the simple reason that what LaMacchia is [*543]
alleged to have done is not criminal conduct under § 506(a) of the Copyright
Act. n12
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n11 In Cooper v. United States, 639 F. Supp. 176, 180 (M.D. Fla. 1986),
cited by the government, the petitioners did not raise the sufficiency of the
allegation of a scheme to defraud, but rather the possibility that the jury
might have perceived the interstate transportation of the pirated cassette tapes
as the gravamen of the scheme, a theory indisputably precluded by the Supreme
Court's Dowling decision.
n12 I do not believe that the Ninth Circuit's mail fraud analysis survives
Dowling in any event, as I will explain. Dowling, I note, did not contest his
conviction for criminal violations of § 506(a) of the Copyright Act.
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The government's second and more plausible argument relies on the
unobjectionable proposition "that [the] enactment of particularized federal
interest statutes does not oust a more general interstate commerce statute from
application." Government's Memorandum at 11. The government cites a number of
areas of specialized federal law where the mail and wire fraud statutes have
been held to remain viable enforcement tools. This same argument, however, did
not impress Justice Blackmun in Dowling, as none of the cases cited there (as
here) "involved copyright law specifically or intellectual property in general."
Dowling, supra at 218 n.8. n13 The government also points to 18 U.S.C. § 2319
(a), which provides that "whoever violates section 506(a). . . of title 17 shall
be punished as provided in subsection (b) of this section and such penalties
shall be in addition to any other provisions of title 17 or any other law." The
government emphasizes the last four words of the statute without apparently
noticing the first four. LaMacchia is not alleged to have violated section
506(a). See also [**27] Dowling, supra at 225 n.18 ("In the absence of any such
indication [that Congress intended to approve the use of § 2314 in a copyright
prosecution], we decline to read the general language appended to § 2319(a)
impliedly to validate extension of § 2314 in a manner otherwise unsupported by
its language and purpose"). Finally, the government cites Carpenter v. United
States, 484 U.S. 19, 98 L. Ed. 2d 275, 108 S. Ct. 316 (1987), which holds that
intangible as well as tangible property interests are protected by the mail and
wire fraud statutes. "Absolutely nothing in [Carpenter]," the government argues,
"distinguishes intangible rights to copy, distribute and license computer
software from other intangible property interests. . . ." Government's
Memorandum at 13. But see United States v. Riggs, 739 F. Supp. 414, 422-423
(N.D. Ill. 1990) ("As Dowling . . . recognized, the copyright holder owns only a
bundle of intangible rights which can be infringed, but not stolen or converted.
The owner of confidential, proprietary business [**28] information, in
contrast, possesses something which has clearly been recognized as an item of
property").
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n13 The suggestion that the felony provisions of the wire fraud statute were
enacted with the punishment of copyright infringement in mind in somewhat
difficult to accept when one remembers that in 1952 the Copyright Act authorized
only misdemeanor prosecutions, a circumstance that continued until 1982. Equally
difficult to accept is the idea that Congress has in some fashion acquiesced by
silence to the utilization of mail and wire fraud as copyright enforcement
tools. One need only contrast the infrequent and, with exception of the
Congressional reaction to McNally, technical amendments to the mail and wire
fraud statutes with Congress' exhaustive attention to developments affecting
copyright law.
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The issue thus is whether the "bundle of rights" conferred by copyright is
unique and distinguishable from the indisputably broad range of property
interests protected by the mail and wire fraud statutes. I [**29] find it
difficult, if not impossible, to read Dowling as saying anything but that it is.
n14 "A copyright, like other intellectual property, comprises a series of
carefully defined and carefully delimited interests to which the law affords
correspondingly exact protections." Dowling, supra at 216. If, as the government
contends, Dowling stands for nothing more than the proposition that one cannot
equate copyright infringement with a "physical taking" for purposes of the
Stolen Property Act, n15 it is difficult to explain why Justice Blackmun devoted
[*544] the bulk of his opinion to the issue of "whether the history and purpose
of § 2314 evince a plain congressional intention to reach interstate shipments
of goods infringing copyrights." Dowling, supra at 218. n16 Nor can one explain
why the same analysis should not be applied to the mail and wire fraud statutes,
which like the Stolen Property Act, were enacted to fill enforcement gaps in
state and federal law. Why is it not true of mail and wire fraud, as it is of
ITSP, that "no such need for supplemental federal [**30] action has ever
existed . . . for the obvious reason that Congress always has had the bestowed
authority to legislate directly in this area [of copyright infringement]"?
Dowling, supra at 220. Finally, why would not the government's position here
produce the same pernicious result that Justice Blackmun warned of in Dowling,
of permitting the government to subvert the carefully calculated penalties of
the Copyright Act by selectively bringing some prosecutions under the more
generous penalties of the mail and wire fraud statutes? n17
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n14 The government strenuously disagrees with me on this point. However,
even the dissenters in Dowling (Justice Powell and White) saw the issue framed
by the majority no differently than I do. As Justice Powell characterizes the
opinion: "The Court holds today that 18 U.S.C. § 2314 does not apply to this
case because the rights of a copyright holder are 'different' from the rights of
owners of other kinds of property." Dowling, supra at 229 (Powell, J.,
dissenting) [**31]
n15 See Government's Memorandum at 8.
n16 The government's suggestion "that the legislative history of copyright
protection serves only to provide 'additional reason to hesitate before
extending § 2314 to cover the interstate shipments in this case'," and that
Dowling simply held that "'Congress has not spoken with the requisite clarity,'"
seem to me equally applicable to the analysis of § 1343. Government's Memorandum
at 8 (quoting Dowling, supra at 221, 229).
n17 For example, a first offender who reproduces fewer than ten copies of a
computer software program in a one hundred and eighty day period is subject to a
maximum punishment of one year imprisonment. 18 U.S.C. § 2314(b)(3). The same
prosecution under the wire fraud statute would entail a maximum prison sentence
of five years. As defendant also notes, use of the wire fraud statute to punish
criminal copyright infringement would override the shorter three year statute of
limitations of the Copyright Act.
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What the government is [**32] seeking to do is to punish conduct that
reasonable people might agree deserves the sanctions of the criminal law. But as
Justice Blackmun observed in Dowling, copyright is an area in which Congress has
chosen to tread cautiously, relying "chiefly . . . on an array of civil remedies
to provide copyright holders protection against infringement," while mandating
"studiously graded penalties" in those instances where Congress has concluded
that the deterrent effect of criminal sanctions are required. Dowling, supra at
221, 225. "This step-by-step, carefully considered approach is consistent with
Congress' traditional sensitivity to the special concerns implicated by the
copyright laws." Id at 225. Indeed, the responsiveness of Congress to the impact
of new technology on the law of copyright, limned earlier in this opinion,
confirms Justice Blackmun's conviction of "the wisdom of leaving it to the
legislature to define crime and prescribe penalties." Dowling, supra at 228.
"The judiciary's reluctance [**33] to expand the protections afforded
by the copyright without explicit legislative guidance is a recurring
theme. Sound policy, as well as history, supports our consistent
deference to Congress when major technological innovations alter the
market for copyrighted materials. Congress has the institutional
authority and the institutional ability to accommodate fully the
varied permutations of competing interests that are inevitably
implicated by such new technology."
Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 431,
78 L. Ed. 2d 574, 104 S. Ct. 774 (1984) (citations omitted).
While the government's objective is a laudable one, particularly when the
facts alleged in this case are considered, its interpretation of the wire fraud
statute would serve to criminalize the conduct of not only persons like
LaMacchia, but also the myriad of home computer users who succumb to the
temptation to copy even a single software program for private use. It is not
clear that making criminals of a large number of consumers of computer software
is a result that even the software industry would consider desirable. [**34]
n18
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n18 In 1992, in hearings before the House Judiciary Subcommittee on
Intellectual Property and Judicial Administration, the Vice-President and
General Counsel of the Computer & Communications Industry Association testified
as follows: "There are millions of people with personal computers to make
copies. That is exactly one of the reasons I think you want to be very careful.
You do not want to be accidentally taking a large percentage of the American
people, either small business or citizens, into the gray area of criminal law."
Hearing on S. 893 (August 12, 1992) at p. 65.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
[*545] In sum, I agree with Professor Nimmer that:
The Dowling decision establishes that Congress has finely calibrated
the reach of criminal liability [in the Copyright Act], and therefore
absent clear indication of Congressional intent, the criminal laws of
the United States do not reach copyright-related conduct. Thus
copyright prosecutions should be limited to Section 506 of the Act,
and other incidental statutes that explicitly refer to [**35]
copyright and copyrighted works.
3 Nimmer on Copyright, § 15.05 at 15-20 (1993). See also 2 Goldstein, Copyright,
§ 11.4.2.2. at 304 n.67 (1989) ("Although the Court did not directly rule on
whether the mail fraud statute encompassed the infringing conduct, its reasoning
with respect to the Stolen Property Act, 18 U.S.C. § 2314, suggests that it
would have treated the mail fraud statute similarly.")
Accordingly, I rule that the decision of the Supreme Court in Dowling v.
United States precludes LaMacchia's prosecution for criminal copyright
infringement under the wire fraud statute. n19
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n19 The issue presented in this case is one of infringement only.
Infringement is a technical concept describing interference with the statutorily
defined rights of a copyright holder. A scheme or artifice to defraud, the
object of which was to fraudulently obtain possession of the copyright itself
would, I believe, be clearly punishable under the mail and wire fraud statutes.
See Dowling, supra at 217 ("[The infringer] does not assume physical control
over the copyright, nor does he wholly deprive the owner of its use").
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This is not, of course, to suggest that there is anything edifying about what
LaMacchia is alleged to have done. If the indictment is to be believed, one
might at best describe his actions as heedlessly irresponsible, and at worst as
nihilistic, self-indulgent, and lacking in any fundamental sense of values.
Criminal as well as civil penalties should probably attach to willful, multiple
infringements of copyrighted software even absent a commercial motive on the
part of the infringer. One can envision ways that the copyright law could be
modified to permit such prosecution. But, "'it is the legislature, not the Court
which is to define a crime, and ordain its punishment.'" Dowling, supra at 214
(quoting United States v Wiltberger, 18 U.S. 76, 5 Wheat. 76, 95, 5 L. Ed. 37
(1820)).
ORDER
For the foregoing reasons, defendant LaMacchia's motion to dismiss is
ALLOWED.
SO ORDERED.
Richard G. Stearns
UNITED STATES DISTRICT JUDGE